Associated Banc-Corp Reports First Quarter Earnings of $0.35 per share

Earnings per share up 30% from prior year

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Apr 20, 2017, 16:15 ET

GREEN BAY, Wis., April 20, 2017 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) today reported net income available to common equity of $54 million, or $0.35 per common share for the quarter ended March 31, 2017. This compares to net income available to common equity of $40 million, or $0.27 per common share for the quarter ended March 31, 2016.

"The quarter's margin expansion coupled with higher residential mortgage and steady commercial real estate loan growth contributed to a 30% year over year increase in earnings per common share. We continued to show progress across our fee businesses while holding expenses flat. Year over year results were also supported by an improving credit environment." said President and CEO Philip B. Flynn. "We are in a good place - strongly positioned and fully committed to a path of continued disciplined growth. We look forward to delivering against our full year guidance."

FIRST QUARTER SUMMARY

Average loans of $20.1 billion grew $1.1 billion, or 6% from the year ago quarter
Average deposits of $21.5 billion grew $891 million, or 4% from the year ago quarter
Net interest income of $180 million increased $8 million, or 5% from the year ago quarter
Net interest margin of 2.84% improved from 2.81% in the year ago quarter
Provision for credit losses of $9 million decreased $11 million, or 55% from the year ago quarter
Noninterest income of $80 million reflected less investment gains from the year ago quarter
Noninterest expense was essentially flat at $174 million from the year ago quarter
Return on average common equity Tier 1 (CET1) was 10.6%
Total dividends per common share of $0.12 were up 9% from the year ago quarter
Capital ratios remain strong with a CET1 ratio of 9.9% at quarter end

FIRST QUARTER FINANCIAL RESULTS

Loans

First quarter average loans of $20.1 billion were up 6%, or $1.1 billion from the year ago quarter and were up $96 million from the fourth quarter.

With respect to first quarter average balances:

Commercial real estate lending increased 12%, or $530 million from the year ago quarter and grew $85 million from the fourth quarter to $5.0 billion.
Consumer lending increased 7%, or $541 million from the year ago quarter and grew $218 million from the fourth quarter to $7.9 billion.
Commercial and business lending increased 1%, or $78 million from the year ago quarter to $7.2 billion, but decreased $207 million from the fourth quarter, primarily driven by $200 million of lower mortgage warehouse activity.

Deposits

First quarter average deposits of $21.5 billion were up 4%, or $891 million from the year ago quarter and were down $277 million from the fourth quarter.

With respect to first quarter average balances:

Interest-bearing demand deposits increased 32%, or $1.0 billion from the year ago quarter and increased $111 million from the fourth quarter to $4.3 billion.
Savings and time deposits increased 5%, or $153 million from the year ago quarter and increased $67 million from the fourth quarter to $3.1 billion.
Noninterest-bearing demand deposits decreased 1%, or $31 million from the year ago quarter and decreased $328 million from the fourth quarter to $5.0 billion.
Money market deposits decreased 3%, or $263 million from the year ago quarter and decreased $127 million from the fourth quarter to $9.2 billion.

Net Interest Income and Net Interest Margin

Net interest income was up 5%, or $8 million from the year ago quarter, with net interest margin increasing 3 basis points. First quarter net interest income of $180 million was essentially flat from the fourth quarter as higher yields on loans offset the impact of two fewer days in the quarter. Net interest margin of 2.84% increased 4 basis points from the fourth quarter.

The average yield on total loans increased to 3.51% from 3.41% in the year ago quarter and increased from 3.40% in the prior quarter.
The average cost of interest-bearing deposits increased to 0.42% from 0.30% in the year ago quarter and increased from 0.33% in the prior quarter.

Noninterest Income

First quarter total noninterest income of $80 million was down 4%, or $3 million from the year ago quarter, reflecting less investment gains. As expected, total noninterest income was down 13%, or $12 million from the prior quarter, primarily related to a shift in the Company's mortgage retention strategy.

With respect to first quarter noninterest income line items:

Brokerage and annuity commissions were up 14% from the year ago quarter and 3% from the prior quarter primarily due to a stronger market backdrop.
Capital market fees were up 10% from the year ago quarter, but decreased $4 million from the fourth quarter primarily due to fewer customer hedging transactions, lower valuation gains, and lower loan syndication activity.
Mortgage banking was up 9% from the year ago quarter, but decreased $7 million from the prior quarter reflecting reduced settlements, the Company's increased retention of mortgages on balance sheet, and the Company's switch to fair value accounting for the mortgage pipeline.
Insurance commissions were up 1% from the year ago quarter and increased 20% from the prior quarter primarily related to seasonally higher property and casualty insurance revenues.
BOLI, asset gains, and investment securities gains were down from both the year ago and prior quarters.

Noninterest Expense

First quarter total noninterest expense of $174 million was essentially flat compared to the year ago quarter and decreased $5 million, or 3% from the prior quarter.

With respect to first quarter noninterest expense line items:

Personnel expense was up $3 million from the year ago quarter, but decreased 3% from the prior quarter reflecting increased severance in the fourth quarter.
Occupancy expense was up $1 million from the year ago quarter and was up 11% from the prior quarter primarily related to increased snow plowing and higher lease terminations and adjustments.
Business development and advertising decreased $2 million from the year ago quarter and decreased 7% from the prior quarter driven by a shift in strategy largely from television to digital advertising.
All other noninterest expense line items, collectively, decreased $2 million from the year ago quarter and decreased 6% from the prior quarter.

Taxes

First quarter income tax expense was $21 million with an effective tax rate of 27%, compared to $19 million and 31% in the year ago quarter, and $24 million and 30% in the prior quarter. The first quarter's lower effective tax rate was due to a change in accounting standards related to stock compensation which lowered income tax expense by $3 million. These tax effects are expected to be higher in the first quarter when the majority of the Company's restricted stock awards vest.

Credit

First quarter provision for credit losses of $9 million decreased $11 million from the year ago quarter and was down $6 million from the prior quarter.

Potential problem loans of $340 million were down $61 million from the year ago quarter and down $11 million from the prior quarter.
Nonaccrual loans of $260 million were down $26 million from the year ago quarter and down $15 million from the prior quarter. The nonaccrual loans to total loans ratio was 1.29% in the first quarter, compared to 1.49% in the year ago quarter, and 1.37% in the prior quarter.
First quarter net charge offs of $6 million were down $11 million from the year ago quarter and down $4 million from the prior quarter.
The allowance for loan losses of $283 million was up $5 million from the year ago quarter and was up $4 million from the prior quarter. The allowance for loan losses to total loans ratio was 1.40% in the first quarter, compared to 1.44% in the year ago quarter, and 1.39% in the prior quarter.
The allowance related to the oil and gas portfolio was $42 million at March 31, 2017 and represented 6.7% of total oil and gas loans.

Capital

The Company's capital position remains strong, with a CET1 ratio of 9.9% at March 31, 2017. The Company's capital ratios continue to be in excess of the Basel III "well-capitalized" regulatory benchmarks on a fully phased in basis.

FIRST QUARTER 2017 EARNINGS RELEASE CONFERENCE CALL

The Company will host a conference call for investors and analysts at 4:00 p.m. Central Time (CT) today, April 20, 2017. Interested parties can access the live webcast of the call through the Investor Relations section of the Company's website, http://investor.associatedbank.com. Parties may also dial into the call at 877-407-8037 (domestic) or 201-689-8037 (international) and request the Associated Banc-Corp first quarter 2017 earnings call. The first quarter 2017 financial tables with an accompanying slide presentation will be available on the Company's website just prior to the call. An audio archive of the webcast will be available on the Company's website approximately fifteen minutes after the call is over.

ABOUT ASSOCIATED BANC-CORP

Associated Banc-Corp (NYSE: ASB) has total assets of $29 billion and is one of the top 50 publicly traded U.S. bank holding companies. Headquartered in Green Bay, Wisconsin, Associated is a leading Midwest banking franchise, offering a full range of financial products and services from over 200 banking locations serving more than 100 communities throughout Wisconsin, Illinois and Minnesota, and commercial financial services in Indiana, Michigan, Missouri, Ohio, and Texas. Associated Bank, N.A. is an Equal Housing Lender, Equal Opportunity Lender and Member FDIC. More information about Associated Banc-Corp is available at www.associatedbank.com.

FORWARD LOOKING STATEMENTS

Statements made in this document which are not purely historical are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. This includes any statements regarding management's plans, objectives, or goals for future operations, products or services, and forecasts of its revenues, earnings, or other measures of performance. Such forward-looking statements may be identified by the use of words such as "believe," "expect," "anticipate," "plan," "estimate," "should," "will," "intend," "outlook," or similar expressions. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements. Factors which may cause actual results to differ materially from those contained in such forward-looking statements include those identified in the Company's most recent Form 10-K and subsequent SEC filings. Such factors are incorporated herein by reference.

NON-GAAP FINANCIAL MEASURES

This press release and related materials may contain references to measures which are not defined in generally accepted accounting principles ("GAAP"). Information concerning these non-GAAP financial measures can be found in the financial tables.

Investor Contact:
Jessica Vanden Heuvel, Vice President, Director of Investor Relations
920-491-7059

Media Contact:
Jennifer Kaminski, Vice President, Manager of Public Relations
920-491-7576

SOURCE Associated Banc-Corp