GREEN BAY, Wis., July 25, 2019 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $81 million, or $0.49 per common share for the quarter ended June 30, 2019. These amounts compare to net income available to common equity of $87 million, or $0.50 per common share for the quarter ended June 30, 2018. Year to date earnings were $0.99 per share compared to $0.90 per share in the same period last year.
"Our commercial and business lending remained strong in the second quarter and, as anticipated, our commercial real estate portfolio has returned to growth. Our results were also aided by improved fee income, driven by mortgage banking and capital markets fees," said President and CEO Philip B. Flynn. "We completed the Huntington Bank branch acquisition in June and expect these deposits, along with our efforts to reposition other funding sources, will result in stable to improving net interest margin for the balance of the year."
SECOND QUARTER 2019 SUMMARY (all comparisons to the second quarter of 2018)
- Average loans of $23.4 billion were up 2%, or $349 million
- Average deposits of $25.1 billion were up 6%, or $1.4 billion
- Net interest income of $214 million decreased $13 million, or 6%
- Net interest margin of 2.87% declined 15 basis points from 3.02%
- Provision for credit losses of $8 million increased $4 million
- Noninterest income of $96 million increased 3%, or $3 million
- Noninterest expense of $198 million was down 6%, or $13 million
- Income before income taxes was essentially unchanged
- During the quarter, the Company repurchased nearly 2 million shares, or $40 million, of common stock
- Total dividends paid per common share were $0.17, up 13%
- Return on average common equity Tier 1 decreased to 13.1% from 14.0%
1This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate the adequacy of earnings per common share, provide greater understanding of ongoing operations and enhance comparability of results with prior periods. See page 10 of the attached tables for a reconciliation of GAAP financial measures to non-GAAP financial measures which exclude acquisition related costs.
Loans
Second quarter 2019 average loans of $23.4 billion were up $349 million, or 2%, from the year ago quarter, and were up $251 million from the first quarter driven by increased commercial and business lending.
With respect to second quarter 2019 average balances by loan category:
- Commercial and business lending increased $925 million from the year ago quarter and increased $245 million from the first quarter to $8.6 billion. General commercial lending and power & utilities specialized lending drove the increase from the year ago quarter.
- Consumer lending decreased $1 million from the year ago quarter and decreased $8 million from the first quarter to $9.6 billion.
- Commercial real estate lending decreased $575 million from the year ago quarter to $5.1 billion. However, CRE increased $13 million from the first quarter as strong production outpaced paydown activity.
Investments
Second quarter 2019 average investment securities of $6.5 billion were managed lower by $549 million, or 8% from the year ago quarter, and were down $356 million compared to the first quarter as the company used its investment portfolio as a source of funds during the quarter and sought to reposition its investments for a stable to declining rate environment.
- Taxable securities decreased $995 million from the year ago quarter and decreased $455 million from the first quarter as lower yielding, primarily mortgage backed securities were sold. Losses realized on the sales were mitigated by gains on equity securities.
- Tax-exempt securities increased $446 million from the year ago quarter and increased $98 million from the first quarter.
Deposits
Second quarter 2019 average deposits of $25.1 billion were up $1.4 billion, or 6% from the year ago quarter and were up $525 million compared to the first quarter. During the quarter, the Company reduced its higher-cost deposits in anticipation of the approximately $730 million in lower-cost deposits received in the Huntington transaction in late June.
With respect to second quarter 2019 average balances by deposit category:
- Time deposits increased $979 million from the year ago quarter and increased $422 million from the first quarter to $3.5 billion.
- Savings increased $427 million from the year ago quarter and increased $221 million from the first quarter to $2.3 billion.
- Interest-bearing demand deposits increased $249 million from the year ago quarter and increased $245 million from the first quarter to $5.0 billion.
- Noninterest-bearing demand deposits decreased $42 million from the year ago quarter, but increased $107 million from the first quarter to $5.1 billion.
- Money market deposits decreased $72 million from the year ago quarter and decreased $270 million from the first quarter to $7.1 billion.
- Network transaction deposits decreased $106 million from the year ago quarter and decreased $200 million from the first quarter to $2.0 billion.
Net Interest Income and Net Interest Margin
Second quarter 2019 net interest income of $214 million was down 6%, or $13 million, while the net interest margin decreased 15 basis points to 2.87% from the year ago quarter, primarily due to lower prepayments and accretion related to the Bank Mutual acquisition. Second quarter 2019 net interest income decreased 1%, or $2 million, and the net interest margin decreased 3 basis points from the prior quarter, driven by compression in LIBOR rates.
- The average yield on total commercial loans for the second quarter of 2019 increased 19 basis points to 4.94% from the year ago quarter, but decreased 4 basis points from the prior quarter.
- The average cost of total interest-bearing deposits for the second quarter of 2019 increased 52 basis points to 1.35% from the year ago quarter and increased 5 basis points from the prior quarter.
- The net free funds benefit, which is the net margin increase from noninterest-bearing deposits, increased 9 basis points in the second quarter of 2019 compared to the year ago quarter and increased 1 basis point from the prior quarter.
Noninterest Income
Second quarter 2019 total noninterest income of $96 million increased $3 million from the year ago quarter and increased $5 million from the prior quarter.
With respect to second quarter 2019 noninterest income line items:
- Mortgage banking revenues were up $3 million from the year ago quarter and were up $5 million from the previous quarter.
- Capital markets fees were essentially unchanged from the year ago quarter but were up $2 million from the previous quarter.
- Insurance commissions and fees were down $1 million from the year ago quarter and were down $2 million from the previous quarter as timing of contingency fees enhanced results in the first quarter of 2019.
Noninterest Expense
Second quarter 2019 total noninterest expense of $198 million decreased 6%, or $13 million from the year ago quarter, but increased $6 million from the prior quarter. The year ago quarter included $7 million of Bank Mutual acquisition related costs while the current quarter and prior quarter included $4 million and $1 million of Huntington branch acquisition related costs, respectively.
With respect to second quarter 2019 noninterest expense line items:
- Personnel expense decreased $1 million from the year ago quarter, and increased $3 million from the prior quarter due primarily to severance costs and increased commissions expense.
- Occupancy expense decreased $1 million from the year ago quarter, and decreased $3 million from the prior quarter due primarily to lower snow removal expense.
- Technology expense increased $1 million from the year ago quarter and the prior quarter as the company continued to make investments to enhance its online and mobile product offerings.
- The Company's FDIC assessment decreased $4 million from the year ago quarter with the removal of the FDIC surcharge but increased $1 million from the prior quarter due to loan growth.
Taxes
The second quarter 2019 effective tax rate was 18% compared to 14% in the year ago quarter and 21% in the prior quarter. The lower effective tax rates in the current quarter and in the year ago quarter were due to one-time tax benefits; in the current quarter the Company contributed appreciated stock to its charitable trust and in the second quarters of 2018 and 2019 the Company received tax benefits from implementing tax planning strategies to maximize the positive impact of the Tax Cut and Jobs Act. Going forward, the company expects its tax rate to be approximately 21% for full-year 2019.
Credit
The second quarter 2019 provision for credit losses was $8 million, up from $4 million in the year ago quarter and up from $6 million in the prior quarter. With respect to second quarter 2019 credit quality:
- Potential problem loans of $166 million were down $76 million from both the year ago quarter and the prior quarter.
- Nonaccrual loans of $167 million were down $38 million from the year ago quarter, but were up $11 million from the prior quarter. The nonaccrual loans to total loans ratio was 0.72% in the second quarter, compared to 0.89% in the year ago quarter and 0.67% in the prior quarter.
- Other real estate owned (OREO) of $18 million was down $9 million from the year ago quarter, which was elevated due to pending Bank Mutual branch dispositions. OREO was up $6 million from the prior quarter due to the pending disposition of recently consolidated branches related to the Huntington branch acquisition.
- Net charge offs of $13 million were up $5 million from the year ago quarter and up $6 million from the prior quarter.
- The allowance for loan losses of $234 million was down $19 million from the year ago quarter and was down $1 million from the prior quarter. The allowance for loan losses to total loans ratio was 1.00% in the second quarter of 2019, compared to 1.10% in the year ago quarter, and 1.02% in the prior quarter.
Capital
The Company's capital position remains strong, with a CET1 capital ratio of 10.1% at June 30, 2019. The Company's capital ratios continue to be in excess of the Basel III "well-capitalized" regulatory benchmarks on a fully phased in basis.
During the quarter, the Company repurchased nearly 2 million shares, or $40 million, of common stock at an average price of $22.57 per share.
SECOND QUARTER 2019 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 25, 2019. 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 second quarter 2019 earnings call. The second quarter 2019 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 $33 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 more than 240 banking locations serving more than 120 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," "target," "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. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate the adequacy of earnings per common share, provide a greater understanding of ongoing operations and enhance comparability of results with prior periods.
Investor Contact:
Robb Timme, Senior Vice President, Director of Investor Relations
920-491-7059
Media Contact:
Jennifer Kaminski, Vice President, Public Relations Senior Manager
920-491-7576
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