SECOND QUARTER SUMMARY
- Average loans of $19.6 billion grew $719 million, or 4% from the first quarter
- Total commercial lending accounted for 75% of average loan growth
- Average deposits of $20.3 billion declined $286 million, or 1% from the first quarter
- Net interest income of $177 million, up $5 million, or 3% from the first quarter
- Net interest margin of 2.81% was stable from the first quarter
- Provision for credit losses of $14 million, down $6 million from the first quarter
- Noninterest income of $82 million, down $1 million from the prior quarter
- Fee-based revenue of $67 million, up $2 million from the first quarter
- Noninterest expense of $174 million was flat from the first quarter
- Return on average common equity Tier 1 (CET1) was 9.9%
- Total dividends per common share of $0.11 in the quarter, up 10% from the year ago quarter
- Capital ratios remain strong with a CET1 ratio of 9.2% at quarter end
SECOND QUARTER RESULTS
Second quarter average loans of $19.6 billion increased $719 million from the first quarter, and have increased $1.5 billion from the year ago quarter.
With respect to second quarter average balances,
- Commercial and business lending grew $354 million from the first quarter to $7.5 billion, with growth driven by general commercial lending, mortgage warehouse, and power and utilities. Commercial and business lending increased $307 million, or 4%, from the year ago quarter.
- Commercial real estate lending grew $185 million from the first quarter to $4.7 billion. Commercial real estate lending has increased $505 million, or 12%, from the year ago quarter.
- Consumer lending grew $181 million from the first quarter to $7.5 billion, and increased $641 million, or 9%, from the year ago quarter.
Second quarter average deposits of $20.3 billion decreased $286 million from the first quarter, and have increased $663 million from the year ago quarter.
With respect to second quarter average balances,
- Noninterest-bearing demand deposits decreased modestly from the first quarter to $5.0 billion, and have grown $679 million, or 16%, from the year ago quarter.
- Interest-bearing demand deposits increased $420 million from the first quarter to $3.6 billion, and grew $390 million, or 12%, from the year ago quarter.
- Savings deposits increased $77 million from the first quarter to $1.4 billion, and have grown $92 million, or 7%, from the year ago quarter.
- Money market deposits declined $739 million from the first quarter to $8.7 billion, and have declined $409 million, or 4%, from the year ago quarter.
- Time deposits declined slightly from the first quarter to $1.5 billion, and have decreased $90 million, or 6%, from the year ago quarter.
Net Interest Income and Net Interest Margin
Second quarter net interest income of $177 million was up $5 million, or 3% from the first quarter and up $10 million, or 6% from the year ago quarter. Second quarter net interest margin of 2.81% was flat from the prior quarter and 2 basis points lower than the year ago quarter.
- Interest and fees on loans increased $3 million, or 2%, from the first quarter. This increase was partially offset by $1 million in lower interest income from investment securities.
- Interest expense on deposits declined modestly from the first quarter, partially attributable to lower rates paid on interest-bearing demand, savings, and time deposit balances.
- Interest on long-term funding decreased $3 million from the first quarter, driven by the retirement of $430 million of the Company's senior notes in February 2016.
Second quarter total noninterest income of $82 million was down $1 million, or 1% from the first quarter and down $4 million, or 5% from the year ago quarter.
- Fee-based revenue increased $2 million from the first quarter, due to increases across all categories including trust service fees, service charges on deposit accounts, card-based and other nondeposit fees, insurance commissions, and brokerage and annuity commissions.
- Mortgage banking income decreased modestly from the first quarter. While gain on sales benefitted from higher volumes of mortgage loans originated for sale during the period, these were offset by adverse fair value marks on the Company's pipeline and the mortgage servicing rights valuation; reflecting lower rates at quarter end.
- All remaining noninterest income categories, on a combined basis, were down $3 million from the prior quarter primarily related to lower bank owned life insurance income and lower asset gains in the second quarter.
Second quarter total noninterest expense of $174 million was flat from the first quarter, and down $2 million, or 1% from the year ago quarter.
- Lower business development and advertising, occupancy, foreclosure and OREO expense, and legal and professional fees contributed to a $3 million reduction in expenses from the first quarter.
- These savings were partially offset by $3 million in higher FDIC, personnel, and other expenses.
Second quarter income taxes were $21 million with an effective tax rate of 30%, compared to $19 million and 31% in the first quarter, and $22 million and 31% in the year ago quarter.
The provision for credit losses was $14 million in the second quarter, down $6 million from the prior quarter, primarily attributed to a change in estimate resulting from further segmentation of mortgage warehouse loans within our specialized lending business.
- Nonaccrual loans of $283 million were down $4 million from the first quarter. The nonaccrual loans to total loans ratio was 1.43% in the second quarter and was down from 1.49% in the prior quarter.
- Net charge offs of $21 million were up $4 million from the first quarter. Net charge offs in the second quarter were primarily attributable to oil and gas related charge offs of $19 million.
- Potential problem loans of $457 million were up $56 million from the first quarter, related to risk rating migration in the general commercial and oil and gas portfolios.
- The allowance for loan losses of $268 million was down $10 million from the first quarter. The allowance for loan losses to total loans was 1.35% in the second quarter, compared to 1.44% in the first quarter.
- The allowance related to the oil and gas portfolio was $42 million, down $7 million from March 31, 2016, and was flat to December 31, 2015. The allowance on this portfolio reflects year to date net charge offs of $32 million. The allowance represented 5.6% of total oil and gas loans at June 30, 2016, flat to 5.6% at December 31, 2015.
- The allowance for unfunded commitments of $27 million increased $3 million from the first quarter, driven by risk rating migration and new volumes.
The Company's capital position remains strong, with a common equity Tier 1 ratio of 9.2% at June 30, 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.
SECOND 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, July 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 second 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 second 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 $29 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.
Teresa Gutierrez, Senior Vice President, Director of Investor Relations
Jennifer Kaminski, Vice President, Manager of Public Relations
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SOURCE Associated Banc-Corp