Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - ASSOCIATED BANC-CORP | asb03312018ex991.htm |
| 8-K - FORM 8-K - ASSOCIATED BANC-CORP | asb03312018form8-kpressrel.htm |
FIRST QUARTER 2018
EARNINGS PRESENTATION
April 19, 2018
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
▪ Insurance revenue up
$3 million
▪ Mortgage banking
revenue up $3 million
FIRST QUARTER 2018 UPDATE1
3
Balance
Sheet
Management
Fee
Businesses
Expense
Management
▪ $21 million of acquisition related
costs recorded in Q1
▪ $192 million of total other noninterest
expense
Capital
& Credit
Management
▪ Repurchased $26 million of stock at
$23.90/share
▪ Increased dividend to $0.15/share
▪ Zero credit loss provision
Net income available to common equity of $67 million, or $0.40 per common share
Bank Mutual Integration
Proceeding Well
Improving Fee
Revenue
Favorable Credit
Dynamics Expanding Bottom Line
▪ Earning assets up $1.8
billion, or 7%
▪ Average loans were up $1.2
billion, or 6%
▪ Average deposits were up
$1.4 billion, or 6%
or $0.50 per common share, excluding acquisition related costs2
1Unless otherwise noted, all comparisons are made with reference to fourth quarter 2017 results. First quarter 2018
results include Bank Mutual from the closing of the acquisition on February 1, 2018 through March 31, 2018.
2See slide 15 for a reconciliation of non-GAAP financial measures to GAAP financial measures.
($ in billions)
LOAN PORTFOLIO - QUARTERLY TRENDS1
$526
$464
$184
$90
$42
$37
$(25)
$(103)
4
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$1.4 $1.3 $1.3 $1.3 $1.4
$6.6 7.0 $7.3 $7.5
$8.0
$5.0 $5.0
$5.0 $4.9
$5.4
$7.2 $7.3
$7.3 $7.2
$7.3
$20.2 $20.6
$20.9 $20.9
$22.1
Average Net Loan Change (from 4Q 2017)Average Quarterly Loans
Home equity & other consumer
Commercial real estate
Residential mortgage
Commercial & business
Commercial Line Utilization
($ in millions)
Home equity & other consumer
Commercial real estate
Residential mortgage
Power & utilities
REIT
General commercial
Oil and gas
Mortgage warehouse
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
49% 50% 49% 48% 48%
61% 63%
66% 66% 66%
Commercial real estate Commercial & business
1First quarter 2018 includes Bank Mutual loans for two months, from 2/1/2018 through 3/31/2018.
DEPOSIT PORTFOLIO - QUARTERLY TRENDS1
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
92%
96%
94%
91%
96%
5
($ in billions)
Money
market
40%
Time Deposits
11%
Savings
7%
Noninterest
-bearing
demand
22%
Interest-
bearing
demand
20%
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$1.6 $1.8 $2.2 $2.4 $2.7
$1.5 $1.5 $1.5
$1.6 $1.7
$9.2 $9.1 $9.4 $8.7
$9.4
$4.3 $4.3 $4.3 $4.5
$4.7
$5.0 $4.9 $5.0 $5.1
$5.1
$21.5 $21.5
$22.4 $22.2
$23.7
Loan to Deposit Ratio
Deposit Mix – 1Q 2018 (Average)
Average Quarterly Deposits
Time deposits
Money market
Noninterest-bearing demand
Savings
Interest-bearing demand
1Note: First quarter 2018 includes Bank Mutual deposits for two months, from 2/1/2018 through 3/31/2018.
6
NET INTEREST INCOME AND MARGIN -
QUARTERLY TRENDS
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$179
$184 $188 $186
$203
$1
$180
$2
$190
$1
$187
$1
$6
$210
2.84% 2.83% 2.84%
2.79%
2.92%
Average Yields Net Interest Income & Net Interest Margin
($ in millions)
Other prepayments and interest recoveries2
Net interest income net of purchased loan
accretion, prepayments and interest recoveries
Net interest marginTotal commercial loans
Investments and other
Total residential mortgage loans
Total interest-bearing liabilities
<$1
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
3.52% 3.69%
3.93% 3.89%
4.34%
3.25% 3.23% 3.26% 3.18% 3.32%
2.39% 2.42% 2.40% 2.47% 2.44%
0.42% 0.51%
0.63% 0.65% 0.73%
0.52% 0.65%
0.77% 0.81% 0.90%
Total interest-bearing deposits
Bank Mutual acquisition related purchase loan
accretion, prepayments and other adjustments1
2Includes recognition of fees and costs upon repayment or refinancing other than Bank Mutual related.
1Includes $2 million of prepayments.and other adjustments.
$184
NET INTEREST INCOME WALKFORWARD
7
4Q 2017 Reported Net Interest Income and Margin $187 million 2.79%
+ Net loan and deposit growth (including Bank Mutual) + $10 million
+ Bank Mutual purchase loan related items + $6 million
Purchased loan accretion $4 million
Prepayments and other adjustments $2 million
+ Net changes in securities portfolio + $3 million
+ LIBOR - Fed Funds spread widening + $2 million
+ Other prepayments and net changes to other earning assets and liabilities + $2 million
1Q 2018 Net Interest Income and Margin $210 million 2.92%
NET INTEREST MARGIN OUTLOOK
8
1Q 2018 Reported Net Interest Margin 2.92%
Expected future margin impacts for 2018:
Full quarter effect of Bank Mutual purchase accretion 0 to +1 bp
Prepayments, interest recoveries and other adjustments (including Bank Mutual) (-1) to +1 bp
LIBOR - Fed Funds spread normalization (-1) to 0 bps
Expected benefit of two additional Fed rate increases +2 to +4 bps
Net 2018 projected net interest margin range 2.92%-2.98%
Mortgage banking, net
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$5 $5 $7 $3
$6
$4 $4
$5
$7
$5
$3 $4
$13 $7
$3
$13
$3
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$67 $67 $66 $69
$73
$80 $82
$86 $85
$90
NONINTEREST INCOME - QUARTERLY TRENDS
($ 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
Fee-based revenue1
9
Bank owned life insurance
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$38 $38 $37
$39
$43
$15
$18
$11
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
66% 67%
64%
67%
71%
65% 65%
63%
65%
70%
63%
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$107 $107 $108 $107 $118
$67
$174
$69
$176
$69
$177
$75
$182
$74
$21
$213
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
215 214 214 213
271
NONINTEREST EXPENSE - QUARTERLY TRENDS
($ IN MILLIONS)
1The 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 and to the efficiency ratio excluding acquisition related costs.
Efficiency Ratio1
Personnel Fully tax-equivalentFederal Reserve
10
Branch Count
Acquisition related costs
Excluding acquisition related costsAll other noninterest expenses
11
CREDIT QUALITY - QUARTERLY TRENDS
($ IN MILLIONS)
Potential Problem Loans Nonaccrual Loans
Net Charge Offs (Recoveries) Allowance to Total Loans / Oil and Gas Loans
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$78 $37 $39 $40 $40
$262
$340
$226
$263
$220
$259
$137
$177
$200
$42
$282
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$126 $118 $119 $132 $125
$134
$260
$114
$232
$92
$211
$77
$209
$69
$209
Oil and Gas Oil and Gas
Oil and Gas
Oil and Gas ALLL / Oil and Gas Loans
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
$6
$12
$8
$4
$1
$13
$3
$11 $11
$5
$9
Bank Mutual PCI1 loans
1Purchased credit-impaired loans
$15
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018
1.4% 1.4% 1.3% 1.3%
6.7%
5.4% 5.2%
4.5%
2.9%
1.1%
0.1%
ALLL / Loans
Bank Mutual related loans
Purchase Discounts2 / Loans
2Reflects net unaccreted purchase discount to loans
BANK MUTUAL UPDATE
Legal Closing and Expected
Conversion Date
12
▪ Closed February 1, 2018; issued approximately 19.5 million common
shares at 0.422 fixed exchange ratio
▪ Expected system conversion and branch consolidation: June 23, 2018
4Q 2018 Expected
Combined Expenses Run-Rate
Expected Total Acquisition
Related Costs Announced
Costs
Recorded Expected
($ in millions) 1Q 2018 2Q 2018 3Q 2018 Total
Change of control and severance $10 $7
$10 - $15 $1 - $5 $35 - $40Merger advisors and consultants $10 $4
Facilities and other $10 $5
Contract terminations $10 $5
Total $40 $21
Associated Bank (including Bank Mutual) $190 million - $195 million
Diversified Insurance Solutions $1 million - $2 million
Pro forma $191 million - $197 million
2018 OUTLOOK
Balance Sheet
Management
▪ 1%-2% quarterly loan growth for
the remainder of 2018
▪ Maintain Loan to Deposit ratio
under 100%
▪ Improving year over year NIM
trend
Fee
Businesses
▪ Improving year over year fee-
based revenues
▪ Approximately $365M - $375M
full year noninterest income
Expense
Management
▪ Approximately $825M
noninterest expense (including
Diversified Insurance
expenses)1
▪ Lower effective tax rate
(20%-22%)
Capital &
Credit
Management
▪ Continue to follow stated
corporate priorities for capital
deployment
▪ Provision expected to adjust with
changes to risk grade, other
indications of credit quality, and
loan volume
This outlook reflects a stable to improving economy and includes our expectation of two additional
interest rate increases in 2018. We may adjust our outlook if, and when, we have more clarity on any
one, or more, of these factors.
13
1Includes $40 million of expected acquisition related costs.
APPENDIX
15
RECONCILIATION AND DEFINITONS OF
NON-GAAP ITEMS
Efficiency Ratio 1Q18 4Q17 3Q17 2Q17 1Q17
Federal Reserve efficiency ratio 70.76 % 66.93 % 63.92 % 66.69 % 66.39 %
Fully tax-equivalent adjustment (0.66)% (1.30)% (1.21)% (1.30)% (1.30)%
Other intangible amortization (0.51)% (0.18)% (0.16)% (0.18)% (0.20)%
Fully tax-equivalent efficiency ratio1 69.60 % 65.45 % 62.55 % 65.21 % 64.89 %
Acquisition related costs adjustment (6.60)% — % — % — % — %
Fully tax-equivalent efficiency ratio, excluding acquisition related costs1 63.00 % 65.45 % 62.55 % 65.21 % 64.89 %
The efficiency ratio as defined by the Federal Reserve guidance is noninterest expense (which includes the provision for unfunded commitments) divided by the
sum of net interest income plus noninterest income, excluding investment securities gains / losses, net. The fully tax-equivalent efficiency ratio, which is a non-
GAAP financial measure, is noninterest expense (which includes the provision for unfunded commitments), excluding other intangible amortization, divided by the
sum of fully tax-equivalent net interest income plus noninterest income, excluding investment securities gains / losses, net. Management believes the fully tax-
equivalent efficiency ratio, which adjusts net interest income for the tax-favored status of certain loans and investment securities, to be the preferred industry
measurement as it enhances the comparability of net interest income arising from taxable and tax-exempt sources.
Fee-based Revenue ($ millions)1 1Q18 4Q17 3Q17 2Q17 1Q17
Insurance commissions and fees 23 19 20 21 22
Service charges and deposit account fees 16 16 16 16 16
Card-based and loan fees 13 14 13 14 13
Trust and asset management fees 13 13 13 12 12
Brokerage commissions and fees 7 7 4 4 4
Fee-based revenue $ 73 $ 69 $ 66 $ 67 $ 67
Other 17 16 20 15 13
Total noninterest income $ 90 $ 85 $ 86 $ 82 $ 80
Acquisition Related Costs
($ in millions, except per share data) Q1 2018
Q1 2018
per share data2
GAAP earnings $ 67 $ 0.40
Change of control and severance 7
Merger advisors and consultants 4
Facilities and other 5
Contract terminations 5
Total acquisition related costs $ 21
Less additional tax expense $ 5
Earnings, excluding acquisition related costs1 $ 83 $ 0.50
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.
2Earnings and per share data presented after tax.