Associated Banc's CEO Discusses Q4 2012 Earnings Results - Earnings Call Transcript

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Associated Banc-Corp (ASBC)

Q4 2012 Earnings Call

January 17, 2013 5:00 pm ET

Executives

Philip B. Flynn – President, Chief Executive Officer & Director

Christopher J. Del Moral-Niles – Chief Financial Officer & Executive Vice President of the company and bank

Scott S. Hickey – Executive Vice President, Chief Credit Officer of the company and bank

Analyst

Scott R. Siefers – Sandler O’Neill & Partners, LP.

Christopher McGratty – Keefe, Bruyette & Woods

Emien Harmon – Jefferies & Co.

Dave Rochester – Deutsche Bank Securities

Ken Zerbe – Morgan Stanley

Jon Arfstrom – RBC Capital Markets

Matthew Clark – Credit Suisse

Terry Mcevoy – Oppenheimer & Co.

Steve [Sigerello] – UBS

Peyton Green – Stern, Agee & Leach

Mac Hodgson – SunTrust Robinson Humphrey

Presentation

Welcome to the Associated Banc-Corp’s fourth quarter 2012 earnings conference call. At this time all participants are in listen-only mode. We will be conducting a question and answer session at the end of this conference. Copies of the Slides that will be referenced during today’s call are available on the company’s website at Investor.AssociatedBanc.com. As a reminder, this conference call is being recorded.

During the course of the discussion today, Associated’s Management may make statements that constitute projections, expectations, beliefs, or similar forward-looking statements. Associated’s actual results could differ materially from the results anticipated or projected in any such forward-looking statements. Addition detailed information concerning the important factors that could cause Associated’s actual results to differ materially from the information discussed today is readily available on the SEC website in the risk factors section of Associated’s most recent Form 10K and on any subsequent SEC filings. These factors are incorporated herein by reference.

Following today’s presentation instructions will be given for the question and answer session. At this time I would like to turn the conference over to Philip Flynn, President and CEO for opening remarks.

Philip B. Flynn

Welcome to our fourth quarter earnings conference call. Joining me today are Chris Niles, our Chief Financial Officer and Scott Hickey, our Chief Credit Officer. Highlights for the fourth quarter are outlined on Slide Number Two. This quarter’s solid results were driven by strength across all of our businesses. In spite of the many uncertainties during the quarter our bankers remained focused on serving our customers and growing the franchise.

For the quarter we reported net income to common shareholders of $45 million or $0.26 a share and that compares to net income of $40 million or $0.23 a share a year ago. Return on tier one common equity for the quarter was 9.6% up from 9% a year ago. Loan balances increased by 3% during the quarter with the majority of growth coming from the commercial portfolios. Average deposits increased by 7% from the third quarter to $16.7 billion with period end non-interest bearing deposits growing by 10%.

Net interest income increased by $6 million compared to the last quarter and the increase included approximately $2 million of non-recurring interest income received during the quarter related to an income tax refund. Our net interest margin for the quarter was 332 basis points. Credit quality indicators continued to improve and we recorded a $3million provision for loan losses during the quarter, entirely driven by loan growth.

We increased the quarterly dividend 60% to $0.08 per share and we repurchased $30 million of common stock, or about two million shares at an average price of $12.70. Even after completing these capital actions, our tier one common equity ratio remains very strong at 11.58%.

For the full year on Slide Three we reported net income to common shareholders of $174 million or $1 per share, a significant increase from $0.66 per share in 2011. Return on tier one common equity for the full year was 9.5%, up from 6.7% last year. Total loan balances increased by $1.4 billion during 2012 representing 10% year-over-year loan growth. Net interest margin for 2012 increased to 330 basis points from 326 last year as we reduced our deposit and funding costs.

Credit quality indicators improved significantly with non-accrual loans 29% lower than a year ago. We’re proud of the progress the company has made on capital management as we redeemed all outstanding trust preferred securities, increased the dividend twice, and repurchased a total of $60 million of stock during 2012. We will continue to remain focused on effectively managing and deploying our capital in order to drive long term value for our shareholders.

Turning to Slide Four, over the past three years we’ve cleaned up the credit book, addressed regulatory matters, and embarked on a strategy to grow Associated in the markets we serve. We’ve made significant investments in people and systems in order to position the company for the future. This past year we saw some of the results from our investments and hard work as loan balances continued to grow at the top end of peers, credit continued to improve, we defended the margin in a low rate environment and we deployed capital through various actions in order to build value for our shareholders.

Looking to 2013, we believe that associated is very well positioned to focus on growth opportunities and to capitalize on market disruptions and win business from clients across our footprint. Given the current low rate environment, we’ll have to be very focused on defending the margin throughout the year and we’ll continue to look for and drive efficiencies in order to effectively manage expenses. We will also continue to look for ways to deploy capital in accretive value added transactions.

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