Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - ASSOCIATED BANC-CORP | asb09302017ex991.htm |
| 8-K - FORM 8-K - ASSOCIATED BANC-CORP | asb09302017form8-kpressrel.htm |
THIRD QUARTER 2017
EARNINGS PRESENTATION
OCTOBER 19, 2017
Exhibit 99.2
DISCLAIMER
Important note regarding forward-looking statements:
Statements made in this presentation 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 Measures
This presentation includes certain non-GAAP financial measures. These non-GAAP measures are provided in addition
to, and not as substitutes for, measures of our financial performance determined in accordance with GAAP. Our
calculation of these non-GAAP measures may not be comparable to similarly titled measures of other companies due to
potential differences between companies in the method of calculation. As a result, the use of these non-GAAP measures
has limitations and should not be considered superior to, in isolation from, or as a substitute for, related GAAP measures.
Reconciliations of these non- GAAP financial measures to the most directly comparable GAAP financial measures can
be found at the end of this presentation.
2
1 – Unless otherwise noted, all comparative statements are made with reference to second quarter 2017 results.
THIRD QUARTER UPDATE1
3
Balance
Sheet
Management
▪ Average deposits were up $918
million, or 4%
▪ Network deposits were down
approximately $600 million
▪ On track to deliver mid-single digit
annual average loan growth
Fee
Businesses
▪ Noninterest income increased $3
million
▪ Mortgage banking income
increased $2 million
▪ Increased BOLI policy payouts
Expense
Management
▪ Noninterest expense increased $1
million
▪ YTD expenses are up less than 1%
from the comparable period last year
▪ On track to deliver less than 1%
expense growth year-over-year
(including Whitnell)
Capital
& Credit
Management
▪ Return on average common equity
Tier 1 (CET1) of 11.7%
▪ Repurchased 1.6 million common
shares at an average price of
$23.59
▪ Improving credit dynamics
Growing
Interest Income
Improving
Credit Dynamics
Continued Efficiency
Improvement
Expanding
Bottom Line
3Q 2017: Net income available to common equity of $63 million, or $0.41 per common share
Home equity &
other consumer
6%
Commercial &
business
35%
Residential
mortgage
35%
CRE
investor
16%Construction
8%
4
LOAN PORTFOLIO
$32
$30
$9
$5
$(11)
$(30)
$(40)
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$1.4 $1.3 $1.3 $1.3 $1.3
$6.3 $6.3 $6.6 $7.0 $7.3
$4.9 $4.9 $5.0
$5.0 $5.0
$7.6 $7.4 $7.2
$20.1
$7.3 $7.3
$20.9
($ in millions)
Average Net Loan Change (from 2Q 2017)Average Quarterly Loans
Home equity & other consumer
Commercial real estate
Residential mortgage
Power & utilities
Mortgage warehouse
REIT
($ in billions)
General commercial
Oil and gas
Home equity & other consumer
Commercial real estate
Residential mortgage
Commercial & business
Commercial: 59% Consumer: 41%
1 – On a combined basis, third quarter 2017 period end CRE Investor and Construction portfolios included $1.4 billion of multi-family balances and $1.2 billion of retail
balances. Within the $1.2 billion CRE retailer portfolio, our largest tenant exposure is 5%, spread over six loans, to a national investment grade grocer.
2 – Unsecured investment grade REITs, with retail tenant exposure, made up approximately $192 million, or 3%, of commercial and business lending average balances.
2
1
1
$20.5$20.1
Loan Mix – 3Q 2017 (Average)
$382
$20.0
5
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
91%
92% 92%
96%
94%
($ in billions)
Money
market
42%
Time Deposits
10%
Savings
7%
Noninterest
-bearing
demand
22%
Interest-
bearing
demand
19%
DEPOSIT PORTFOLIO
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$1.6 $1.6 $1.6 $1.8 $2.2
$1.4 $1.5 $1.5 $1.5
$1.5
$9.1 $9.3 $9.2 $9.1
$9.4
$4.2 $4.1 $4.3 $4.3
$4.3
$5.2 $5.3 $5.0 $4.9
$5.0
$22.4
Loan to Deposit Ratio
Deposit Mix – 3Q 2017 (Average)
Average Quarterly Deposits
Time deposits
Money market
Noninterest-bearing demand
Savings
Interest-bearing demand
$21.4 $21.7 $21.5 $21.5
6
NET INTEREST INCOME AND MARGIN
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$178 $178
$184
$1
$179
$2
$180
$1
$180 $2
$190
2.77%
2.80%
2.84% 2.83% 2.84%
Average Yields Net Interest Income & Net Interest Margin
($ in millions)
Interest recoveries, prepayment fees, & deferred fees
Net interest income net of interest recoveries,
prepayment fees, & deferred fees
Net interest margin
Total commercial loans
Investments and other
Total residential mortgage loans
Total interest-bearing liabilities
<$1
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
3.29% 3.36%
3.52%
3.69%
3.93%
3.15% 3.14% 3.25% 3.23%
3.26%
2.29% 2.25%
2.39% 2.42% 2.40%
0.41% 0.42% 0.52%
0.65%
0.77%
$179
$184
$188
Mortgage banking, net
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$12
$5 $5 $7
$7
$8
$4 $4
$5
$3
$3
$23
$3 $4
$13 $7
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$66 $63 $67 $67 $66
$95
$92
$80 $82
$86
NONINTEREST INCOME
($ IN MILLIONS)
1 – Fee-based revenue = A non-GAAP financial measure, is the sum of trust service fees, service charges on deposit accounts, card-based and other nondeposit fees,
insurance commissions, and brokerage and annuity commissions. Please refer to the appendix for a reconciliation of fee-based revenue to total noninterest income.
Trust, Insurance, and Brokerage Income
Capital market fees, net
Portfolio loan sales
Fee-based revenue1
$9
7
Bank owned life insurance
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$35 $34
$38 $38 $37
$9
$18
$11
$29
YTD 3Q13 YTD 3Q14 YTD 3Q15 YTD 3Q16 YTD 3Q17
70% 70% 70%
68%
66%68% 68% 68%
66%
64%
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$104 $107 $104 $105 $106
$175 $179 $174 $176 $177
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$15
$14
$15
$13
$12
NONINTEREST EXPENSE
($ IN MILLIONS)
1 – The efficiency ratio as defined by the Federal Reserve guidance is noninterest expense (which includes the provision for unfunded commitments) divided by the sum
of net interest income plus noninterest income, excluding investment securities gains / losses, net. The fully tax-equivalent efficiency ratio, which is a non-GAAP financial
measure, is noninterest expense (which includes the provision for unfunded commitments), excluding other intangible amortization, divided by the sum of fully tax-
equivalent net interest income plus noninterest income, excluding investment securities gains / losses, net. Please refer to the appendix for a reconciliation of the
Federal Reserve efficiency ratio to the fully tax-equivalent efficiency ratio.
Efficiency Ratio1
Personnel Fully tax-equivalentFederal Reserve
8
Occupancy Expense Trend
9
CREDIT QUALITY
($ IN MILLIONS)
Potential Problem Loans Nonaccrual Loans
Net Charge Offs (Recoveries) Allowance to Total Loans / Oil and Gas Loans
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$270 $276 $262 $226 $220
$171
$441
$75
$351
$78
$340
$37
$263
$39
$259
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$163 $128 $126 $118 $119
$127
$290
$147
$275
$134
$260
$114
$232
$92
$211
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
1.4% 1.4% 1.4% 1.4% 1.3%
5.5% 5.7%
6.7%
5.4% 5.2%
Oil and Gas Oil and Gas
Oil and Gas
ALLL / Total Loans
Oil and Gas ALLL / Oil and Gas Loans
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$(4)
$3 $3
$22
$18
$6
$9
$6 $12
$13
$8
$11
$1
2013 2014 2015 2016 LTM Sept
2017
$46 $48 $49 $47 $49
$15
$61
$16
$64
$15
$64
$16
$63
$17
$7
$73
2013 2014 2015 2016 Sept 2017
$7.4
$8.0 $7.7
$8.3
$9.2
$1.0
10
ATC
ASSET MANAGEMENT EXPANSION
Enhanced Big-Firm Financial Services With a Family Touch
Assets Under Management ("AUM") Trust Service Fees and Brokerage
and Annuity Commissions
($ in billions)
Whitnell
1 – Pro Forma Associated Trust Company (“ATC”), including Whitnell
2 – Pro Forma Associated Trust Company, including Whitnell, for the twelve months ended September 30, 2017
($ in millions)
1 2
> $10Bn
Trust service fees Whitnell
Brokerage & annuity commissions
• On October 2, 2017, we completed the acquisition of a wealth management organization, Whitnell & Co., an Oak
Brook, Illinois based, $1 billion AUM registered investment advisor, to further complement Associated’s investment
and asset management capabilities, especially in Chicago
• Whitnell’s 28 professionals provide affluent Mid-Western clients with a complete set of family office services
centered around wealth management and generational wealth transfer
– The acquisition adds a strong team to our existing Chicago-land private banking presence and introduces
new services and capabilities to Associated’s existing client base
– The acquisition increases both assets under management and related run-rate revenue by more than 10%
APPENDIX
12
OIL AND GAS UPDATE
Period End Loans by Credit Quality Oil and Gas Allowance
($ in millions) ($ in millions)
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
5.5% 5.7%
6.7%
5.4% 5.2%
$38 $38
$42
$33 $30
Total O&G Portfolio
As of September 30, 2017
# of credits $ of commitments $ of outstandings % of total loans
56 credits $917 million $577 million 3%
21 credits
38%
$423 million
46%
$227 million
39%
1%
Pass Potential Problem Loans Nonaccrual Oil and Gas Allowance
Oil and Gas Allowance / Oil and Gas Loans
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
$398 $446 $413 $450 $446
$171 $75 $78 $37 $39
$127
$696
$147
$668
$134
$625
$114
$601
$92
New Business Since
January 1, 2016
$577
13
3Q 2013 3Q 2014 3Q 2015 3Q 2016 3Q 2017
$2.2 $2.2 $3.2 $3.7 $2.6
$18.7
$21.1 $22.2
$22.6
12.1% 12.1%
15.6%
17.2%
11.7%
Network Transaction Deposits (NTD)
3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
0.05% 0.05% 0.05% 0.05% 0.06%
0.30% 0.31%
0.42%
0.52%
0.65%
0.78% 0.78% 0.79%
0.85%
0.97%
NETWORK TRANSACTION DEPOSITS
Deposits and Customer Funding Average Rates
($ in billions)
Wealth Managers
Quarter end September 30, 2017
Relationships Established Before
September 30, 2012
20
relationships ~$2.6 billion
~12%
of total deposits
13
relationships ~$2.0 billion
~75%
of network transaction deposits
Customer Funding
Customer Deposits1
Savings
Money Market without NTDTime Deposits
Network Transaction Deposits
Network Transaction Deposits as % of Total Deposits
1 – Total deposits excluding network transaction deposits
Money Market with NTD (As Reported)
$18.9
14
RECONCILIATION AND DEFINITONS OF
NON-GAAP ITEMS
Efficiency Ratio YTD 3Q13 YTD 3Q14 YTD 3Q15 YTD 3Q16 YTD 3Q17
Federal Reserve efficiency ratio 70.20 % 70.19 % 69.79 % 67.51 % 65.64 %
Fully tax-equivalent adjustment (1.44)% (1.35)% (1.38)% (1.32)% (1.27)%
Other intangible amortization (0.42)% (0.40)% (0.34)% (0.20)% (0.18)%
Fully tax-equivalent efficiency ratio 68.34 % 68.44 % 68.07 % 65.99 % 64.19 %
The efficiency ratio as defined by the Federal Reserve guidance is noninterest expense (which includes the provision for unfunded commitments)
divided by the sum of net interest income plus noninterest income, excluding investment securities gains / losses, net. The fully tax-equivalent
efficiency ratio, which is a non-GAAP financial measure, is noninterest expense (which includes the provision for unfunded commitments),
excluding other intangible amortization, divided by the sum of fully tax-equivalent net interest income plus noninterest income, excluding investment
securities gains / losses, net. Management believes the fully tax-equivalent efficiency ratio, which adjusts net interest income for the tax-favored
status of certain loans and investment securities, to be the preferred industry measurement as it enhances the comparability of net interest income
arising from taxable and tax-exempt sources.
Fee-based Revenue ($ millions) 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017
Trust service fees $ 12 $ 12 $ 12 $ 12 $ 13
Service charges on deposit accounts 18 16 16 16 16
Card-based and other nondeposit fees 13 13 13 14 13
Insurance commissions 19 18 22 21 20
Brokerage and annuity commissions 4 4 4 4 4
Fee-based revenue $ 66 $ 63 $ 67 $ 67 $ 66
Other 29 29 13 15 20
Total noninterest income $ 95 $ 92 $ 80 $ 82 $ 86