Fitch Affirms Amcore Financial's IDR at 'BBB'; Outlook Stable.

CHICAGO -- Fitch affirms the long-term Issuer Default Ratings (IDRs) and short-term ratings of Amcore Financial, Inc. (AMFI) and its subsidiary Amcore Bank, N.A. at 'BBB' and 'F2'. The Rating Outlook is Stable. A complete list of ratings is included at the end of this release.

AMFI's ratings are based on a good market position in Rockford, IL, which enables the company to expand its footprint into newer, higher growth markets. AMFI's funding and capital profile are average. This is balanced by earnings performance that is under pressure and low in relation to its rating peer group. AMFI's asset quality has improved and stabilized but will likely still remain slightly less favorable than the average for its rating peer group.

Amcore's ratings and Outlook consider the recently authorized share repurchase program that is expected to compress core capital to lower levels, and could possibly increase parent company leverage. At the same time, changes made to financial management are expected to improve pricing discipline and earnings prospects. While improvement will be gradual, Fitch will monitor near-term performance for evidence that earnings improvement is reflective of management's strategic initiatives. If enduring, these changes should also improve the reliability of core earnings longer-term. Importantly, Fitch's view also incorporates the expectation that the asset quality picture will remain stable. The concentration in commercial real estate and prospects for slower growth, following rapid growth in new markets, heightens the need to remain vigilant on quality. Trends in nonperforming loans (NPLs) and reserve coverage of NPLs will become increasingly important, as reserves as a percent of loans has been declining, and core capital ratios are expected to decrease.

AMFI has also made significant progress in improving its compliance program by adding experienced staff and implementing monitoring improvements. However there still remains a degree of regulatory risk given the outstanding formal agreement with the OCC.

A Negative Rating action would likely result in the absence of any clear near-term improvement in core earnings and/or material deterioration in credit quality.

Amcore Financial, Inc.

-- Long-term IDR at 'BBB';

-- Short-term at 'F2';

-- Individual at 'B/C';

-- Support at '5'.

Amcore Bank, N.A.

-- Long-term IDR at 'BBB';

-- Long-term deposits at 'BBB+';

-- Short-term at 'F2';

-- Short-term deposits at 'F2';

-- Individual at 'B/C';

-- Support at '5'.

Amcore Capital Trust I

-- Preferred Stock at 'BBB-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.