Associated Banc-Corp Reports Third Quarter Earnings of $0.41 per share

Earnings per share up 21% from the prior year

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Oct 19, 2017, 16:15 ET

GREEN BAY, Wis., Oct. 19, 2017 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) today reported net income available to common equity of $63 million, or $0.41 per common share for the quarter ended September 30, 2017. This compares to net income available to common equity of $52 million, or $0.34 per common share for the quarter ended September 30, 2016.

"Associated continues to benefit from its strong customer deposit franchise. According to recently released FDIC 2017 Summary of Deposit data, Associated increased its deposit market share across its footprint and grew deposits by 10% in our Wisconsin market. Customer deposits and funding, excluding network deposits, increased by a net 8% from the prior year and funded all of our year-over-year growth," said President and CEO Philip B. Flynn. "The quarter further benefited from strong credit quality dynamics, lower provision, and improving efficiency. We remain committed to delivering year-over-year mid-single digit annual average loan growth, an improving net interest margin, and expense growth of less than 1%."

THIRD QUARTER SUMMARY (all comparisons to the year ago quarter)

Average loans of $20.9 billion grew $846 million, or 4%
Average deposits of $22.4 billion grew $1.0 billion, or 5%
Net interest income of $190 million increased $12 million, or 6%
Net interest margin of 2.84% improved 7 basis points from 2.77%
Provision for credit losses of $5 million was down from $21 million
Noninterest income of $86 million was down $9 million, reflecting lower mortgage banking income
Noninterest expense of $177 million increased $2 million, or 1%
During the quarter, the Company repurchased approximately 1.6 million shares, or $37 million, of common stock
Return on average common equity Tier 1 (CET1) improved to 11.7% from 10.5%
Total dividends per common share of $0.12 were up 9%

THIRD QUARTER FINANCIAL RESULTS

Loans

Year-to-date average loans were up 5% from the comparable period last year. Third quarter average loans of $20.9 billion were up $846 million, or 4% from the year ago quarter and were up $377 million, or 2% from the second quarter.

With respect to third quarter average balances by loan category:

Consumer lending increased $988 million from the year ago quarter driven by the Company's on balance sheet mortgage retention strategy and grew $371 million from the second quarter to $8.6 billion.
Commercial real estate lending increased $118 million from the year ago quarter driven by growth in construction lending and grew $9 million from the second quarter to $5.0 billion.
Commercial and business lending decreased $259 million from the year ago quarter to $7.3 billion, primarily due to lower mortgage warehouse line utilization and reduced oil and gas outstandings. This portfolio decreased $3 million from the prior quarter.

Deposits

Year-to-date average deposits were up 5% from the comparable period last year. Third quarter average deposits of $22.4 billion were up $1.0 billion, or 5% from the year ago quarter and were up $918 million, or 4% from the second quarter, reflecting seasonal patterns. The loan to deposit ratio was 94% at quarter-end. Network transaction deposits were down $1.1 billion, or 30% from the year ago quarter.

With respect to third quarter average balances by deposit category:

Savings and time deposits increased $732 million from the year ago quarter and increased $440 million from the second quarter to $3.7 billion, driven by seasonal inflows of public funds.
Money market deposits increased $279 million from the year ago quarter and increased $303 million from the second quarter to $9.4 billion.
Interest-bearing demand deposits increased $196 million from the year ago quarter and increased $75 million from the second quarter to $4.3 billion.
Noninterest-bearing demand deposits decreased $170 million from the year ago quarter, but increased $100 million from the second quarter to $5.0 billion.

Net Interest Income and Net Interest Margin

Net interest income of $190 million was up $12 million, or 6% from the year ago quarter, with net interest margin increasing 7 basis points, from 2.77% to 2.84% year-over-year. Third quarter net interest income increased $6 million, or 3% from the second quarter, with net interest margin modestly expanding.

The average yield on total loans increased 42 basis points to 3.77% from the year ago quarter and increased 15 basis points from the prior quarter.
The average cost of interest-bearing deposits increased 31 basis points to 0.63% from the year ago quarter and increased 12 basis points from the prior quarter.
The net free funds benefit, the benefit of holding noninterest-bearing demand deposits, increased to 17 basis points from 9 basis points in the year ago quarter and increased 3 basis points from the prior quarter.

Noninterest Income

Third quarter total noninterest income of $86 million decreased $9 million from the year ago quarter, reflecting lower mortgage banking activity. Noninterest income increased $3 million from the prior quarter.

With respect to third quarter noninterest income line items:

Mortgage banking decreased $12 million from the year ago quarter primarily due to lower portfolio loan sales that generated $9 million during the year ago quarter. Mortgage banking increased $2 million from the second quarter as we resumed our historical practice of originating loans for sale in the secondary market.
Bank owned life insurance income ("BOLI") was up $3 million from the year ago and prior quarters driven by increased policy payouts.

Noninterest Expense

Third quarter total noninterest expense of $177 million was up $2 million, or 1% from the year ago quarter and up $1 million from the second quarter. The efficiency ratio continued to improve year-over-year and quarter-over-quarter.

With respect to third quarter noninterest expense line items:

Occupancy expense was down $3 million from the year ago quarter and down $1 million from the prior quarter, primarily driven by the benefits from ongoing internal consolidation efforts.
Business development and advertising increased $3 million from the year ago quarter and was up $1 million from the prior quarter driven by the Company's expanded fall advertising campaigns.

Taxes

The 2017 year-to-date effective tax rate was 28% compared to 30% in the comparable period last year, reflecting a change in accounting standards related to stock compensation and a recent favorable tax court ruling.

Credit

The third quarter provision for credit losses of $5 million was down $16 million from the year ago quarter and down $7 million from the prior quarter.

Potential problem loans of $259 million were down $182 million from the year ago quarter and down $4 million from the prior quarter.
Nonaccrual loans of $211 million were down $79 million from the year ago quarter and down $21 million from the prior quarter. The nonaccrual loans to total loans ratio improved to 1.01% in the third quarter, compared to 1.46% in the year ago quarter, and 1.12% in the prior quarter.
Third quarter net charge offs of $11 million were down $8 million from the year ago quarter and down $2 million from the prior quarter.
The allowance for loan losses of $277 million was up $7 million from the year ago quarter and was down $5 million from the prior quarter. The allowance for loan losses to total loans ratio was 1.32% in the third quarter, compared to 1.36% in the year ago quarter, and 1.35% in the prior quarter.
The allowance related to the oil and gas portfolio was $30 million at September 30, 2017 and represented 5.2% of total oil and gas loans.

Capital

The Company's capital position remains strong, with a CET1 ratio of 9.9% at September 30, 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.

THIRD 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, October 19, 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 third quarter 2017 earnings call. The third 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 $30 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, Public Relations Senior Manager
920-491-7576

SOURCE Associated Banc-Corp