GREEN BAY, Wis. –– April 21, 2016 –– Associated Banc-Corp (NYSE: ASB) today reported net income available to common equity of $40 million, or $0.27 per common share, for the quarter ended March 31, 2016. This compares to net income available to common equity of $41 million, or $0.27 per common share, for the quarter ended December 31, 2015.
“We are encouraged by several positive trends within our core businesses in the first quarter. Strong commercial loan growth coupled with improving commercial lending rates contributed to higher net interest income. We also recognized record levels of insurance commissions,” said President and CEO Philip B. Flynn. “We continue to be expense disciplined as we manage through the current low interest rate environment and the energy price cycle. While pressures in the oil and gas portfolio contributed to an elevated provision, overall, the quarter benefited from higher revenues, lower expenses, and solid underlying trends.”
FIRST QUARTER SUMMARY
- Average loans of $18.9 billion grew $380 million, or 2% from the fourth quarter
- Total commercial lending accounted for 85% of average loan growth
- Average deposits of $20.6 billion declined slightly from the fourth quarter
- The loan to deposit ratio was 93%
- Net interest income of $172 million was slightly higher than the prior quarter, and up $4 million, or 2% from the year ago quarter
- Net interest margin was 2.81% compared to 2.82% in the fourth quarter
- Provision for credit losses of $20 million was flat from the fourth quarter; the allowance related to the oil and gas portfolio increased to 6.5%
- Noninterest income of $83 million was flat from the prior quarter
- Noninterest expenses of $174 million declined $2 million, or 1% from the prior quarter
- During the quarter, the Company repurchased $20 million of common stock
- Return on average CET1 was 8.6% and ROATCE was 8.7%
- Total dividends per common share of $0.11 in the quarter, were up 10% from the year ago quarter
- Capital ratios remain strong with a CET1 ratio of 9.3% at quarter end
FIRST QUARTER RESULTS
First quarter average loans of $18.9 billion increased $380 million from the fourth quarter and increased $1.1 billion from the year ago quarter.
With respect to first quarter average balances,
- Commercial and business lending grew $229 million from the fourth quarter to $7.1 billion, with growth driven by Power and Utilities and Real Estate Investment Trust lending. Commercial and business lending increased $128 million from the year ago quarter.
- Commercial real estate lending grew $96 million from the fourth quarter to $4.5 billion, with growth driven by real estate construction lending. Commercial real estate lending increased $367 million from the year ago quarter.
- Consumer lending grew $55 million from the fourth quarter to $7.3 billion, and increased $613 million from the year ago quarter.
First quarter average deposits of $20.6 billion were down $41 million from the fourth quarter and up $1.5 billion from the year ago quarter.
With respect to first quarter average balances,
- Noninterest-bearing demand deposits increased $29 million from the fourth quarter to $5.0 billion, and grew $670 million from the year ago quarter.
- Interest-bearing demand deposits increased $70 million from the fourth quarter to $3.2 billion, and grew modestly from the year ago quarter.
- Money market deposits declined $102 million from the fourth quarter to $9.4 billion, and have grown $779 million from the year ago quarter.
- Time deposits declined $47 million from the fourth quarter to $1.6 billion, and decreased $36 million from the year ago quarter.
- Savings deposits saw a modest increase from the fourth quarter to $1.4 billion, and have grown $90 million from the year ago quarter.
Net Interest Income and Net Interest Margin
First quarter net interest income of $172 million was modestly higher than the prior quarter and up $4 million, or 2% from the year ago quarter. First quarter net interest margin was 2.81%, a decrease of 1 basis point from the prior quarter and 8 basis points lower than the year ago quarter, reflecting the continued low interest rate environment.
- Interest and fees on loans increased $4 million, or 3% from the fourth quarter. This increase was partially offset by $1 million in lower interest income from investment securities and other sources.
- Interest expense on deposits increased $3 million from the fourth quarter, reflecting an 8 basis point increase in the cost of total interest-bearing deposits.
- Interest on short-term and long-term funding decreased by $1 million from the fourth quarter, primarily as a result of the Company’s retirement of $430 million of senior notes.
First quarter noninterest income of $83 million was flat from the fourth quarter and up $3 million, or 4% from the year ago quarter.
- Insurance commissions increased $3 million from the fourth quarter principally related to seasonally higher property and casualty insurance revenues.
- Mortgage banking income decreased $4 million from the fourth quarter, primarily driven by lower volumes and a negative change in the interest rate mark at quarter end.
- Other noninterest income benefited from higher bank owned life insurance income.
First quarter total noninterest expense was $174 million, down $2 million, or 1% from the fourth quarter and was flat from the year ago quarter. The efficiency ratio improved to 67% in the first quarter, compared to 69% in the prior quarter.
- Lower occupancy, loan expense, OREO, fraud-related and other costs contributed to a $5 million reduction in expenses from the fourth quarter.
- These savings were partially offset by $3 million in higher legal and professional fees, personnel expense and business development and advertising expenses.
First quarter income taxes were $19 million with an effective tax rate of 31%, compared to $22 million and 32% in the year ago period.
First quarter credit trends deteriorated, principally driven by risk rating migration in the Company’s oil and gas portfolio, with increases in the levels of potential problem loans, nonaccrual loans and net charge offs.
The provision for credit losses was $20 million in the first quarter, flat from the prior quarter and up $16 million from the year ago quarter. The provision in the first quarter was primarily attributable to oil and gas credits.
The Company’s allowance for loan losses was $277 million, up $3 million from the fourth quarter, and up $12 million from the year ago quarter. The allowance for loan losses to total loans was 1.44% in the first quarter, compared to 1.47% in the fourth quarter and 1.48% in the year ago quarter.
The allowance related to the oil and gas portfolio was $49 million, up $7 million from the fourth quarter, and up $22 million from the year ago quarter. The allowance represented 6.5% of total oil and gas loans at quarter end, compared to 5.6% at year end, and 3.5% at March 31, 2015.
During the first quarter, the Company repurchased $20 million of common stock, or approximately 1.2 million shares, at an average cost of $17.10 per share.
The Company’s capital position remains strong, with a common equity Tier 1 ratio of 9.3% at March 31, 2016. 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 2016 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 21, 2016. Interested parties can listen to the call live on the internet through the investor relations section of the Company's website, http://investor.associatedbank.com or by dialing 877-407-8037. The first quarter 2016 financial tables and an accompanying slide presentation for the call will be available on the Company's website just prior to the call. The number for international callers is 201-689-8037. Participants should ask the operator for the Associated Banc-Corp first quarter 2016 earnings 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 $28 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 contains 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.
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