Associated reports Second Quarter Earnings of $0.15 per share
Net income to shareholders of $25.6 million, up 66% from the prior quarter
GREEN BAY, Wis. -- July 21, 2011 -- Associated Banc-Corp (NASDAQ: ASBC) today reported net income to common shareholders of $25.6 million, or $0.15 per common share, for the quarter ended June 30, 2011. This compared to net income to common shareholders of $15.4 million, or $0.09 per common share, for the quarter ended March 31, 2011, and a net loss to common shareholders of $10.2 million, or $0.06 per common share, for the quarter ended June 30, 2010.
"We are pleased with our performance this quarter as we continue to execute on our strategic priorities," said President and CEO Philip B. Flynn. "We are beginning to see results from the steps we are taking to drive loan growth and earnings expansion."
- Pre-tax income improved $13 million and net income to common shareholders improved $10 million from the prior quarter
- Total loans of $13.1 billion were up 3% from the prior quarter, with growth in all major segments of the portfolio
- C&I loans grew $230 million on a linked-quarter basis
- Commercial real estate and construction loans were up $50 million from the prior quarter
- Residential mortgages grew $156 million during the second quarter
- Total deposits and customer funding of $16.1 billion was up $184 million, with solid growth in interest-bearing checking, savings, and sweep account balances during the quarter
- Net interest margin for the second quarter was 3.29%
- Impact of first quarter debt offering was partially offset by a 5 basis point improvement in interest-bearing deposit costs
- Continued improvements in key credit metrics
- Nonaccrual loans of $468 million declined to the lowest level in six quarters
- Potential problem loans declined to $699 million, down 23% from $912 million for the first quarter
- Provision for loan losses of $16 million was down significantly from the prior quarter
- Net charge-offs of $45 million were down 17% from $53 million for the first quarter
SECOND QUARTER 2011 FINANCIAL RESULTS
At June 30, 2011, the Company's loan portfolio was $13.1 billion, up $434 million, or 3%, from $12.7 billion at March 31, 2011, and up $488 million, or 4%, from $12.6 billion a year ago. Commercial loans grew $277 million on a linked-quarter basis, with the most significant increase in the commercial and industrial (C&I) segment of the loan portfolio. C&I loans grew by $230 million, or 8%, from the prior quarter. Commercial real estate and construction loans grew by $50 million, or 1%, and the residential mortgage segment was up $156 million, or 6%, from the first quarter.
Deposits and Customer Funding
Total deposits and customer funding of $16.1 billion at the end of the second quarter was up 1% from $16.0 billion at the end of the first quarter. Total deposits were $14.1 billion at June 30, 2011, up slightly from $14.0 billion at March 31, 2011. The net deposit growth was primarily driven by a $176 million, or 10%, increase in interest-bearing demand deposits and a $34 million, or 4%, increase in savings deposits during the quarter. The Company continued to reduce noncustomer network and brokered transactions deposits which, in aggregate, declined by 10% from the prior quarter.
Net Interest Income and Net Interest Margin
Second quarter net interest income was $154 million, up modestly from the first quarter despite the low interest rate environment and the additional interest expense related to the $300 million debt offering issued in late March. Proceeds from the debt offering partially funded the Company's repurchase of $262.5 million of preferred shares issued under the TARP Capital Purchase Program (CPP). The net interest margin was 3.29%, down 3 basis points from the prior quarter, also reflecting the impact of the debt offering.
Noninterest Income and Expense
Noninterest income for the quarter ended June 30, 2011 was $65 million, down $7 million, or 10%, from $72 million for the first quarter of 2011. The linked-quarter decline in noninterest income was primarily driven by a $6 million reduction in the value of mortgage servicing rights, primarily due to a decline in mortgage rates during the quarter, and a $4 million valuation expense related to credit exposures on customer swaps.
Core fee-based revenue of $61 million for the quarter was relatively flat compared to the first quarter of 2011. The challenging economic environment, regulatory changes, and changes in checking products and customer behavior continued to have an impact on fee-based revenue during the second quarter.
Total noninterest expense for the quarter ended June 30, 2011 was $159 million, down $5 million, or 3%, from the first quarter. Personnel expense of $89 million for the second quarter remained relatively flat compared to the first quarter. Foreclosure/OREO costs were up $3 million from the prior quarter, offset by decreases in other expense categories, including a $3 million seasonal decline in occupancy expense and lower expenses related to unfunded commitments and litigation reserves of $3 million and $5 million, respectively.
On April 6, 2011, the Company used a portion of the net proceeds from the March debt offering to repurchase half of the $525 million the Company received under the CPP. The Company recorded a noncash charge of $5 million during the quarter for the partial repurchase of CPP preferred shares, which represented the difference between the unamortized cost of the repurchased preferred stock and the repurchase price. The Company will incur another $4 million noncash charge when it repurchases the balance of the CPP preferred shares.
Key Credit Metrics
The Company reported another quarter of improving credit metrics with nonaccrual loans of $468 million, down 4% from $488 million at March 31, 2011, and down 52% from $976 million at June 30, 2010. Total loans 30-89 days past due were $113 million, up $7 million, or 7%, from $106 million for the previous quarter, and down 24% from $149 million at June 30, 2010. Potential problem loans declined to $699 million, down 23% from $912 million for the first quarter, and down 45% from $1.3 billion a year ago.
Net charge-offs were $45 million for the second quarter, down 17% from $53 million for the first quarter of 2011, and down 58% from $105 million for the second quarter of 2010. The Company's allowance for loan losses was $426 million, down 6% from $454 million for the quarter ended March 31, 2011, and down 25% from $568 million at June 30, 2010.
For the second quarter, the provision for loan losses was $16 million, down significantly from $31 million for the first quarter of 2011, and $98 million for the second quarter of 2010. The allowance for loan losses coverage to nonaccrual loans was 91% at June 30, 2011 compared to 93% at the end of the first quarter and 58% a year ago.
The Company's capital position remains very strong, with a Tier 1 common ratio of 12.61% at June 30, 2011 compared to 12.65% at the end of the first quarter and 12.00% a year ago. The Company's capital ratios continue to be in excess of "well-capitalized" regulatory benchmarks, the highest regulatory capital level and also exceed the guidelines recently published by the Basel Committee and endorsed by U.S. regulatory agencies.
"Despite remaining cautious about the near term macro economic outlook, we believe that the investments we are making will produce a solid return for our shareholders," Flynn continued. "As previously mentioned, we expect to repurchase the remaining CPP preferred shares during the third or fourth quarter of this year."
SECOND QUARTER 2011 EARNINGS
RELEASE CONFERENCE CALL
The Company will host a conference call for investors and analysts at 4:00 p.m. Central Time (CT) today, July 21, 2011. 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 877-348-9354. The slide presentation for the call will be available on the company's website just prior to the call. The number for international callers is 253-237-1160. Participants should ask the operator for the Associated Banc-Corp second quarter 2011 earnings call, or conference ID number 75804403.
An audio archive of the webcast will be available on the company's website for one month following the call. A replay of the call will be available starting at 7:00 p.m. CT on July 21, 2011 through 11:00 p.m. CT on August 21, 2011 by dialing 800-642-1687 and entering the conference ID number 75804403. The replay number for international callers is 706-645-9291.
ABOUT ASSOCIATED BANC-CORP
Associated Banc-Corp (NASDAQ: ASBC) has total assets of $22 billion and is one of the top 50 financial services holding companies operating in the United States. Headquartered in Green Bay, Wis., Associated has approximately 270 banking locations serving more than 150 communities throughout Wisconsin, Illinois and Minnesota. The company offers a full range of banking services and other financial products and services. More information about Associated Banc-Corp is available at www.associatedbank.com.
FORWARD LOOKING STATEMENTS
Statements made in this document that 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. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements may be identified by the use of words such as "believe," "expect," "anticipate," "plan," "estimate," "should," "will," "intend," or similar expressions. Outcomes related to such statements are subject to numerous risk factors and uncertainties including those listed in the Company's most recent Annual Report filed on Form 10-K as updated by the Company's most recent Form 10-Q.
Janet L. Ford, Investor Relations Director
Autumn Latimore, Public Relations Director