Green Bay, Wis. –– October 15, 2015 –– Associated Banc-Corp (NYSE: ASB) today reported net income

available to common shareholders of $47 million, or $0.31 per common share, for the quarter ended

September 30, 2015. This compares to net income available to common shareholders of $48 million, or $0.31

per common share, for the quarter ended June 30, 2015.

 

According to the recently released FDIC 2015 U.S. Bank Branch Summary of Deposits Data, Associated was

the fastest growing bank operating in Wisconsin for the year ended June 30, 2015, based on deposit market

share.

 

“We have enjoyed strong deposit growth over the prior year and remarkable inflows during the third quarter.

We are pleased to have increased our market share in each of the states in our branch footprint. Our

continued focus on the customer experience has allowed us to gain market share in a competitive and

transforming industry,” said President and CEO Philip B. Flynn. “As we anticipated, commercial loan growth

slowed during the third quarter. Overall loan growth was supported by strong production in our residential

lending area and we remain on track to deliver high single digit loan growth for the year.”

 

HIGHLIGHTS

Average loans of $18.5 billion are up 8% from a year ago quarter

Average Total Consumer loans grew $231 million, or 3% from the second quarter

Average Total Commercial loans grew $34 million from the second quarter

Average deposits grew to a record $20.3 billion, up 14% from a year ago quarter

Average noninterest-bearing demand deposits grew $283 million, or 7% from the second quarter

Net interest income of $171 million increased $4 million, or 2% from the second quarter

Net interest margin of 2.82% reflects 1 basis point of compression

Noninterest income of $80 million reflects lower mortgage banking revenue and reduced insurance commissions

Noninterest expenses of $171 million decreased $5 million, or 3% from the second quarter

Return on average common equity Tier 1 was 10.2% for the third quarter

Capital ratios remain strong with a common equity Tier 1 ratio of 9.39% at September 30, 2015

 

THIRD QUARTER 2015 FINANCIAL RESULTS

Loans

Average loans of $18.5 billion increased $264 million, or 1% from the second quarter, and have increased $1.3

billion, or 8% from the year ago quarter. Total consumer average loans were up $231 million from the prior

quarter. Residential lending growth of $247 million was the largest contributor for the quarter. Commercial real

estate lending average balances grew $111 million, or 3% from the second quarter. Lower levels of general

commercial lending and mortgage warehouse borrowings contributed to commercial and business lending

average balances declining $78 million, or 1% from the second quarter.

 

Deposits

Average deposits of $20.3 billion were up $667 million, or 3% compared to the second quarter and have

increased $2.4 billion, or 14% from the year ago quarter. Money market average balances increased $436

million, or 5% from the second quarter. Total demand deposit average balances increased $231 million, or 3%

from the prior quarter. Savings average balances increased slightly from the second quarter. Time deposits

declined slightly during the quarter.

During the third quarter, the Company used deposit funding to repay over $1 billion of short and long term

advances borrowed from the Federal Home Loan Bank of Chicago.

 

Net Interest Income and Net Interest Margin

Net interest income of $171 million was up $4 million, or 2% from the second quarter and down $2 million from

the year ago quarter. Third quarter net interest margin was 2.82%, a decrease of 1 basis point from the

second quarter. The third quarter yield on earning assets declined 2 basis points to 3.13% from 3.15% in the

prior quarter. The decline is primarily attributable to yield compression in the investment portfolio. The third

quarter yield on loans of 3.38% was unchanged due to slower commercial growth and less new production

dilution to the margin. Third quarter deposit expense increased 1 basis point to 22 basis points while the

overall cost of funding was unchanged at 40 basis points from the prior quarter.

 

Noninterest Income

Noninterest income for the third quarter was $80 million, down $7 million or 8% from the second quarter and

up $5 million or 7% from the year ago quarter. In the third quarter, core fee-based revenues decreased

primarily due to $3 million of seasonally lower insurance commissions. Mortgage banking income also

decreased $3 million from the second quarter, primarily driven by a $5 million net change in the quarter-end

mark-to-market of the residential mortgage pipeline due to interest rate movements. Third quarter net

investment securities gains of $3 million were primarily related to the further restructuring of the Company’s

investment portfolio from Fannie Mae and Freddie Mac mortgage backed securities into Ginnie Mae securities.

Aggregate net asset and investment securities gains were flat quarter over quarter. The significant year over

year noninterest income increase is primarily attributable to a $4 million reserve for remediation of legacy debt

protection products booked in the third quarter of 2014.

 

Noninterest Expense

Total noninterest expense was $171 million, down $5 million or 3% from the second quarter, and down

modestly from the year ago quarter. In the third quarter, personnel expense decreased $2 million from the

prior quarter primarily due to lower severance expense. Technology expense decreased $2 million from the

second quarter related to the completion of several projects. Several other expense categories including

business development and advertising, foreclosure/OREO expense, loan expense, legal and professional fees,

and occupancy, were also down in the third quarter.

 

Taxes

Third quarter income taxes were $22 million, with an effective tax rate of 30%, compared to $22 million and an

effective tax rate of 31% in the prior quarter.

 

Credit

Net charge offs of $8 million were down $1 million from the second quarter, and up $5 million from the year

ago quarter. Potential problem loans increased to $264 million from $200 million in the second quarter, and

increased from $220 million in the prior year period, due to the migration of a small number of credits.

The third quarter provision for credit losses was $8 million, up $3 million from the prior quarter.

Nonaccrual loans of $147 million were down 8% compared to the second quarter, and down 20% from the

year ago quarter. The nonaccrual loans to total loans ratio improved to 0.80% in the third quarter, down from

0.88% in the prior quarter and down from 1.07% in the year ago quarter.

The Company’s allowance for loan losses of $263 million was up $1 million from the second quarter, and down

$4 million from the year ago quarter. The allowance for loan losses to total loans ratio declined modestly to

1.42% in the third quarter.

 

Capital Ratios

The Company’s capital position remains strong, with a common equity Tier 1 ratio of 9.39% at September 30,

2015.

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 2015 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 15, 2015. 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 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 third

quarter 2015 earnings call.

 

An audio archive of the webcast will be available on the company’s website at

http://investor.associatedbank.com approximately fifteen minutes after the call is over.