Amcore Financial Inc. of Rockford, Ill., is looking to two executives it hired last month to help it make the most of the branch building it has done over the past few years.
Kenneth E. Edge, the $5.3 billion-asset Amcore's chairman, president, and chief executive, said its cross-selling has not been effective enough.
But he said he expects that to change now that Amcore has named Richard Stiles executive vice president of its commercial banking group and Russell Campbell executive vice president for Amcore Investment Group.
Between them the two men have 50 years of experience in the Chicago market. Mr. Stiles was the senior vice president in the commercial banking group in Rosemont, Ill., for the $37.4 billion-asset Popular Inc. of San Juan, Puerto Rico.
Mr. Campbell was the president and CEO at ABN Amro Asset Management Holdings Inc., the investment management affiliate of the $73 billion-asset LaSalle Bank NA, Chicago.
Coming from larger companies, Mr. Stiles and Mr. Campbell "understand more about the nuances of generating profitable business as opposed to just generating volume," Mr. Edge said.
Generating volume has been Amcore's primary focus at the 29 net branches it has added since 2001. The problem with that approach, said Mr. Edge, is that the company often has to pay up for deposits and price loans more cheaply.
"When you do that, you don't always get that [business] at the best rates," he said.
Amcore has started pricing loans and deposits more competitively, but selling more products and services to customers is just as crucial to its future, Mr Edge said.
Amcore is mainly a commercial lender. Under Mr. Stiles the commercial team will be expected to try to secure more business from its borrowers, including their deposits and cash management business.
They will work closely with Mr. Campbell's team to try to sell more investment products to business owners, such as 401(k) plans, and will even to try to win borrowers' personal private-banking business.
Mr. Edge acknowledged that "Amcore hasn't been very good about … making team calls," and said he is counting on Mr. Stiles and Mr. Campbell to instill a different culture.
Amcore has recruited a number of executives from larger financial services companies recently.
In February of last year it hired Guy Francesconi as its general counsel. He was the general counsel for Merrill Lynch Capital and Merrill Lynch Business Financial Services in Chicago. That month it also hired a new chief financial officer, Donald H. Wilson, who was the senior vice president and corporate treasurer at the $54 billion-asset Marshall and Ilsley Corp. in Milwaukee.
Ben Crabtree, an analyst with Stifel, Nicolaus & Co. Inc. of Baltimore, said Amcore is "in a position to manage growth better. As they get bigger, they have people who have the experience of managing bigger banks."
Amcore's performance has been mixed compared with its peers', according to statistics from the Federal Deposit Insurance Corp.
In 2006 it had a return on equity of 12.71%, slightly above the average for all commercial banks with assets of $1 billion to $10 billion, but its return on assets was 0.94%, versus 1.35% on average for its peers. Its efficiency ratio was 63.68%, while the group average was 55.87%.
Amcore reported first-quarter earnings of $8.2 million, down 21% from the year-earlier quarter. Earnings per share fell 17%, to 35 cents. Earnings were in line with the average of analysts' expectations reported by Thomson Financial.
Mr. Edge attributed the declines primarily to one-time costs. Now the company can focus on profitability, he said.
"We had said '06 was going to be a transitional year," he said. "Some of the items spilled over into the first quarter."
"We've got the people in place and we've got the infrastructure in place," he said. "Now we need to hold the costs and grow the revenue with the capacity we have created over the past four to five years."
Amcore's one-time costs included a $2.3 million charge from the redemption of $40 million of trust-preferred securities, $1.3 million of employment expenses, and $443,00 for consulting work to upgrade its regulatory compliance programs.
The redemption of the trust-preferred securities was the last step in a balance-sheet restructuring aimed at reducing high-cost borrowings and getting rid of low-yielding securities.
In the fourth quarter the company sold $120 million of low-margin bonds, which raised the first-quarter net interest margin by 4 basis points, to 3.38%, Mr. Edge said. It plans to put that money into loans, but that will take time, he said. "You can't replace $120 million all at once."
Brian Martin, an analyst with Howe Barnes Hoefer & Arnett Inc. in Chicago, said the branch building, management changes, and balance-sheet restructuring put Amcore in a good position.
Now, he said, it has to prove it "can execute on this plan sooner rather than later. They need to ratchet the profitability numbers higher."
Mr. Crabtree agreed that Mr. Edge has increased Amcore's value and made sound changes.
"The jury is not out on whether it is going to be successful; the jury is out on how long it is going to take," Mr. Crabtree said.
