Associated Banc-Corp Reports Third Quarter Earnings of $0.48 Per Common Share, or $0.49 Per Common Share Excluding $3 million in Acquisition Related Costs(1)

Earnings per share up 17% from the prior year

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Oct 18, 2018, 16:15 ET

GREEN BAY, Wis., Oct. 18, 2018 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $84 million, or $0.48 per common share for the quarter ended September 30, 2018. This compares to net income available to common equity of $63 million, or $0.41 per common share for the quarter ended September 30, 2017.

"Associated's customer deposit franchise continues to be strong. Data recently released by the FDIC shows that we grew our deposits 14% in Illinois and maintained our #3 ranking in Wisconsin with nearly 11% market share. Additionally, during the third quarter we saw robust deposit inflows from our municipal customers which allowed us to further reduce our higher cost network deposits." said President and CEO Philip B. Flynn. "We are also pleased with our year over year EPS growth. Our commercial and business lending portfolios had solid results and we continued to benefit from a benign credit environment that allowed us to further reduce our provision for credit loss."

THIRD QUARTER 2018 SUMMARY (all comparisons to the third quarter of 2017)

Average loans of $23.0 billion were up 10%, or $2.1 billion
Average deposits of $24.7 billion were up 10%, or $2.3 billion
Net interest income of $219 million increased $29 million, or 15%
Net interest margin of 2.92% improved 8 basis points from 2.84%
Provision for credit losses was negative $5 million, down from $5 million
Noninterest income of $88 million was up $2 million, or 3%
Noninterest expense of $204 million was up $27 million and included $2 million of acquisition related expenses
Income before income taxes was up 16%, or $15 million
During the quarter, the Company repurchased approximately 4 million shares, or $118 million, of common stock
Total dividends paid per common share were $0.15, up 25%

¹This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate the adequacy of earnings per common share, provide greater understanding of ongoing operations and enhance comparability of results with prior periods. See page 10 of the attached tables for a reconciliation of GAAP financial measures to non-GAAP financial measures which exclude acquisition related costs.

Loans

Third quarter 2018 average loans of $23.0 billion were up 10%, or $2.1 billion from the third quarter of 2017, and were essentially unchanged from the second quarter of 2018.

With respect to third quarter 2018 average balances by loan category:

Consumer lending increased $1.0 billion from the year ago quarter, and grew $12 million from the second quarter of 2018 to $9.6 billion.
Commercial and business lending increased $620 million from the year ago quarter and increased $242 million from the second quarter of 2018 to $7.9 billion. C&I loan growth was spread across all specialized lines of business and in the general commercial portfolio.
Commercial real estate lending increased $447 million from the third quarter of 2017, but decreased $285 million from the second quarter of 2018 to $5.4 billion.

Deposits

Third quarter 2018 average deposits of $24.7 billion were up $2.3 billion, or 10% from the year ago quarter, and were up $1.0 billion compared to the second quarter of 2018 due to seasonal inflows from municipal customers.

With respect to third quarter 2018 average balances by deposit category:

Interest-bearing demand deposits increased $995 million from the year ago quarter and increased $253 million from the second quarter of 2018 to $5.0 billion.
Money market deposits increased $929 million from the year ago quarter and increased $356 million from the second quarter of 2018 to $7.5 billion.
Time deposits increased $790 million from the year ago quarter and increased $413 million from the second quarter of 2018 to $3.0 billion.
Savings increased $356 million from the year ago quarter and increased $9 million from the second quarter of 2018 to $1.9 billion.
Noninterest-bearing demand deposits increased $319 million from the year ago quarter and increased $179 million from the second quarter of 2018 to $5.3 billion.
Network transaction deposits decreased $1.1 billion from the year ago quarter and decreased $161 million from the second quarter of 2018 to $2.0 billion.

Net Interest Income and Net Interest Margin

Third quarter 2018 net interest income of $219 million was up 15%, or $29 million, with the net interest margin increasing 8 basis points to 2.92% from the year ago quarter. Third quarter 2018 net interest income decreased 3%, or $7 million, with the net interest margin decreasing 10 basis points from the prior quarter.

The average yield on total commercial loans for the third quarter of 2018 increased 80 basis points to 4.73% from the year ago quarter, but decreased 2 basis points from the prior quarter.
The average cost of total interest-bearing deposits for the third quarter of 2018 increased 40 basis points to 1.03% from the year ago quarter and increased 20 basis points from the prior quarter.
The net free funds benefit, the benefit of holding noninterest-bearing demand deposits, increased 10 basis points in the third quarter of 2018 compared to the year ago quarter and increased 5 basis points from the prior quarter.

Noninterest Income

Third quarter 2018 total noninterest income of $88 million increased $2 million from the year ago quarter, but decreased $5 million from the prior quarter.

With respect to third quarter 2018 noninterest income line items:

Insurance commissions and fees were up $2 million from the year ago quarter, driven by the acquisitions of Diversified Insurance Solutions and Anderson Insurance, but were down $2 million from the prior quarter due to seasonal fluctuations of the employee benefits and property and casualty businesses.
Mortgage banking fees were down $3 million from the year ago quarter and down $2 million from the prior quarter due to lower sales and refinancing volumes in the underlying housing market.

Noninterest Expense

Third quarter 2018 total noninterest expense of $204 million increased 15%, or $27 million from the year ago quarter, but decreased $7 million from the prior quarter. Third quarter 2018 noninterest expense includes $2 million of Bank Mutual acquisition related costs.

With respect to third quarter 2018 noninterest expense line items:

Personnel expense increased $16 million from the year ago quarter, primarily driven by the additional cost of Bank Mutual staff. Personnel expense was essentially unchanged from the second quarter of 2018.
Technology expense increased $2 million from the year ago quarter, but decreased by $2 million from the prior quarter. The changes were largely driven by the additional cost of Bank Mutual operations.
Occupancy expense increased $2 million from the year ago quarter, with most of the increase coming from the additional expense of acquired Bank Mutual facilities. Occupancy expense was down slightly from the prior quarter.
Acquisition related costs decreased $5 million from the prior quarter.

Taxes

The third quarter 2018 effective tax rate was 21% compared to 31% in the year ago quarter. The decrease is primarily due to the Tax Cut and Jobs Act (TCJA) signed into law on December 22, 2017.

Credit

The third quarter provision for credit losses was negative $5 million, down from $5 million in the year ago quarter and down from $4 million in the prior quarter.

With respect to third quarter 2018 credit quality:

Potential problem loans of $236 million were down $22 million from the year ago quarter and were down $5 million from the prior quarter.
Nonaccrual loans of $154 million were down $56 million from the year ago quarter and were down $50 million from the prior quarter. The decrease was primarily driven by credit upgrades and payoffs. The nonaccrual loans to total loans ratio was 0.67% in the third quarter, compared to 1.01% in the year ago quarter, and 0.89% in the prior quarter.
Net charge offs of $12 million were up $2 million from the year ago quarter and were up $4 million from the prior quarter. Net oil and gas charge offs were $9 million in the third quarter.
The allowance for loan losses of $236 million was down $40 million from the year ago quarter and was down $16 million from the prior quarter. The allowance for loan losses to total loans ratio was 1.03% in the third quarter of 2018, compared to 1.32% in the year ago quarter, and 1.10% in the prior quarter.
The allowance related to the oil and gas portfolio was $10 million at September 30, 2018 and represented 1.4% of total oil and gas loans compared to 5.2% in the year ago quarter, and 2.5% in the prior quarter.

Capital

The Company's capital position remains strong, with a CET1 capital ratio of 10.4% at September 30, 2018. The Company's capital ratios continue to be in excess of the Basel III "well-capitalized" regulatory benchmarks on a fully phased in basis.

During the quarter, the Company repurchased approximately 4 million shares, or $118 million, of common stock, at an average price of $27.09 per share.

THIRD QUARTER 2018 EARNINGS RELEASE CONFERENCE CALL

The Company will host a conference call for investors and analysts at 4:00 p.m. Central Time (CT) today, October 18, 2018. 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 third quarter 2018 earnings call. The third quarter 2018 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 $33 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 more than 230 banking locations serving more than 110 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," "target," "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. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate the adequacy of earnings per common share, provide a greater understanding of ongoing operations and enhance comparability of results with prior periods.

Investor Contact:
Robb Timme, Vice President, Investor Relations
920-491-7059

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

SOURCE Associated Banc-Corp