GREEN BAY, Wis., April 17, 2014 /PRNewswire/ — Associated Banc-Corp (NASDAQ: ASBC) today reported net income to common shareholders of $44 million, or $0.27 per common share, for the quarter ended March 31, 2014.
“We are pleased with our solid results this quarter and remain optimistic about our long-term prospects. This quarter’s strong performance was driven by robust loan growth, particularly in our Commercial lines of business.” said President and CEO Philip B. Flynn. “In this environment, we remain focused on our strategies to enhance efficiency and manage expenses. We will continue to look for opportunities to deploy capital which are consistent with our commitment of building long-term shareholder value at Associated.”
HIGHLIGHTS
• Average loans grew $416 million or 3% from the fourth quarter
◦ Average total commercial loan balances grew a record $420 million, or 4% from the fourth quarter, and accounted for the majority of this quarter’s average loan growth
• Noninterest expenses of $168 million declined $12 million or 6% from the fourth quarter
• Net interest income of $165 million increased $7 million or 5% from the comparable year ago period
◦ Net interest income, net of interest recoveries, increased $1 million from the fourth quarter
• Pretax income of $66 million increased $4 million or 7% from the fourth quarter
• Credit quality continued to improve with net charge offs, nonaccrual loans, past due loans and potential problem loans all declining quarter over quarter
• During the first quarter, the Company repurchased $39 million, or approximately 2.3 million shares, of common stock at an average cost of $17.20 per share
• Return on Tier 1 common equity was 9.4% for the first quarter
• Capital ratios remain very strong with a Tier 1 common equity ratio of 11.20% at March 31, 2014
FIRST QUARTER 2014 FINANCIAL RESULTS
Loans
Average loans of $16.2 billion increased $416 million, or 3% from the fourth quarter, and have increased $716 million on average or 5%, from the year ago quarter. Record total commercial average loan growth of $420 million from the fourth quarter was attributed to increased line utilization, more origination activity, and fewer loan payoffs. Commercial and business lending average balances grew $249 million, or 4% on a linked-quarter basis. Commercial real estate lending average balances grew by $171 million, or 5% from the fourth quarter. Total average consumer loans were essentially flat compared to the prior quarter as the growth in residential mortgage average balances of $70 million was entirely offset by continued, but slower, run off in home equity and installment loan average balances of $73 million during the quarter.
Deposits
As anticipated, first quarter average deposits of $17.0 billion declined $891 million, or 5% compared to the fourth quarter and have declined $156 million, or 1%, from the year ago quarter. As part of the Company’s previously announced funding strategy to reduce collateralized municipal deposits and replace them with lower cost, longer term FHLB borrowings, average money market balances declined $576 million or 7% from the fourth quarter. Seasonal outflows led average checking balances to decline $243 million or 3% from the fourth quarter. Average time deposits continued to decline during the quarter, and have declined $335 million or 17% from the year ago quarter.
Net Interest Income and Net Interest Margin
First quarter net interest income of $165 million was down $2 million from the fourth quarter. However, net interest income, net of interest recoveries, actually increased $1 million from the fourth quarter. In addition, the first quarter had approximately $2 million less interest income due to the day count difference between the quarters.
First quarter net interest margin was 3.12%, a decrease of 11 basis points from the 3.23% reported in the fourth quarter. Asset yields declined 14 basis points from the fourth quarter. The first quarter had $4 million less in interest recoveries compared to the fourth quarter which accounted for approximately 7 basis points of the decline, with the remainder coming from continued loan yield compression. Liability cost management actions reduced total funding costs to 31 basis points, and total interest-bearing deposit costs to 19 basis points, for the first quarter.
Noninterest Income and Expense
Noninterest income for the first quarter was $74 million, down $2 million or 3% from the fourth quarter and down $8 million or 10% from the year ago quarter. The decrease from the year ago quarter was driven by an $11 million decline in net mortgage banking income as refinancing activity has drastically slowed. Mortgage banking income decreased $2 million from the prior quarter related to a decline in the gain on sales of mortgage loans. First quarter asset gains and losses declined $2 million from the prior quarter, primarily related to fourth quarter real estate gains. Core fee-based revenue was relatively flat compared to the prior quarter, as increases in insurance and brokerage commissions were offset by declines in service charges, trust service fees and other non-deposit fees.
Total noninterest expense for the quarter ended March 31, 2014 was $168 million, down $12 million from the fourth quarter. With the decline in expenses, the efficiency ratio improved to 69% for the first quarter. Personnel expense declined $4 million from the fourth quarter as the Company continues to reduce full time equivalent employees. Business development and advertising expenses declined by $3 million from the previous quarter, primarily related to increased brand advertising during the fourth quarter. Legal and professional fees declined $2 million from the prior quarter related to lower consultant expenses.
Taxes
First quarter income taxes of $21 million were up $7 million from the prior quarter reflecting the recognition of a $6 million tax benefit in the fourth quarter related to a settlement of a tax issue and the expiration of various statutes of limitations. The effective tax rate for the first quarter was 31%.
Credit
The Company reported another quarter of improving credit quality with nonaccrual loans down 4%, to $178 million compared to the fourth quarter, and down 21% from a year ago. The ratio of nonaccrual loans to total loans now stands at 1.08%.
Net charge offs of $5 million for the first quarter were flat from the fourth quarter.
The first quarter provision for credit losses was $5 million, compared to $2 million in the fourth quarter. The Company’s allowance for loan losses was $268 million, representing an allowance equal to 1.63% of loans and a coverage ratio of 151% of nonaccrual loans at March 31, 2014.
Capital Ratios
The Company’s capital position remains very strong, with a Tier 1 common equity ratio of 11.20% at March 31, 2014. The Company’s capital ratios continue to be well in excess of both current and proposed “well-capitalized” regulatory benchmarks.
FIRST QUARTER 2014 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 17, 2014. Interested parties can listen to the call live on the internet through the investor relations section of the company’s website, https://www.associatedbank.com/investor or by dialing 877-445-2557. 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 973-935-2959. Participants should ask the operator for the Associated Banc-Corp first quarter 2014 earnings call.
An audio archive of the webcast will be available on the company’s website at https://www.associatedbank.com/investor.
ABOUT ASSOCIATED BANC-CORP
Associated Banc-Corp (NASDAQ: ASBC) has total assets of $25 billion and is one of the top 50, publicly traded, U.S. bank holding companies. Headquartered in Green Bay, Wis., Associated is a leading Midwest banking franchise, offering a full range of financial products and services in 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.
