ASBC

Associated Banc-Corp (ASBC)

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Associated Banc-Corp (ASBC)

Q1 2010 Earnings Call

April 22, 2010; 5:00 pm ET

Executives

Philip Flynn - President, Chief Executive Officer

Joseph Selner - Chief Financial Officer, Executive

Scott Hickey - Chief Credit Officer

Analysts

Ken Zerbe - Morgan Stanley

John Arfstrom - RBC Capital Markets

Scott Siefers - Sandler O'Neill

Kenneth Usdin - Bank of America/Merrill Lynch

Anthony Davis - Stifel Nicolaus & Co

Erika Penala - UBS

Dennis Klaeser - Raymond James

Terry McEvoy - Oppenheimer & Co.

David Conrad - Keefe, Bruyette & Woods

Sherry Lansing - Alliancebernstein

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by, and welcome to Associated Banc Corp’s first quarter 2010 results conference call. My name is Alicia and I will be your operator today (Operator Instructions).

During the course of the discussing today, Associate’s management may make statements that constitute projections, executions, beliefs or similar forward-looking statements. Associated actually results could differ materials from the results anticipated or projected in any such forward-looking statements.

Additional detailed information concerning the important factors that could cause Associated’s actual results to differ materials from the information discussed today, is ready available on the SEC website, and the Risk Factors section of Associate’s most recent from 10-K and any subsequent from 10-Q. (Operator Instructions)

Now, I would like to turn the conference over to our hose Mr. Philip Flynn, President & CEO. Please go ahead sir.

Philip Flynn

Thank you, and welcome to our first quarter conference call. Joining me today are Joe Selner our CFO; and Scott Hickey our Chief Credit Officer. This afternoon I will provide you with more detail on our results for the quarter. I’ll also provide additional information about our loan portfolio, and steps we are taking to address our credit challenges.

As you saw in our release issued after the market closed today, we reported a net loss to common shareholders of $33.8 million or $0.20 per share for the first quarter ended March 31. This compares to a loss of a $180.6 million or $1.41 per share for the fourth quarter of ’09, a net income of $35.4 million or $0.28 for the same quarter a year ago.

First quarter results were impacted by our continuing efforts to address our credit challenges, particularly in the construction and commercial real-estate segments of the loan portfolio. We recorded credit related charges of $166 million, less that half of $405 million in the previous quarter.

As you know, we took a very hard look at our credit portfolio during the last quarter of ’09, and we took aggressive and appropriate actions to address our credit problems and move the company forward. On January 15 we completed a $500 million common stock offering, resulting in a net increase in the company’s equity capital or $478 million and an increase in our tangible common equity ratio by almost 2% to 7.73% at March 31.

Our tier one capital to total average assets ratio is 10.57%, and the total capital-to-rise related assets ratio is 18.15%. These ratio’s are now among the highest of any financial instruction in the company.

The successful capital raise positions our company well, and takes concerns about our capital adequacy off the table, as we continue to work thought our credit problems and focus on our strategy priorities.

I would now like to talk in more detail about the credit results we reported. The loan loss provision of $165 million exceeded net chare-offs by $2 million for the quarter. This resulted in an allowance for loan losses of $576 million, or $4.33% of total loans at March 31, compared to $4.06 at December 31, and $197 a year ago. Net charge-offs for the first quarter of 2010 were $163 million, compared to $234 million in the fourth quarter, and $58 million in the first quarter ’09.

Charge-off in the construction and commercial real estate loan categories were down significantly from the fourth quarter, but they remain at high levels. Charge-off’s of C&I loans continue to be lumpy. For the quarter, net chare-off of C&I loans were $64 million, up $21 million from the previous quarter, primarily due to the chare-off of two financial services related credits totaling about $30 million. Chare-off in the home equity and mortgage loan categories were down from elevated levels in the fourth quarter.

This quarter we reported the lowest level of net new non-performing loans that we’ve experienced during the past five quarters. Total non-performing loans increased to $88 million during the quarter, to $1.2 billion, but commercial, real estate and construction related non-performing loans increasing a $124 million, to $844 million form the prior quarter.

Non-performing loans in the C&I segment were down $54 million, while non-performing loans in other categories remain at about the same level as reported in the fourth quarter. Potential problem loans declined $228 million or 14% during the quarter to $1.4 billion, as the in flow of new potential problem loans slowed significantly to prior quarters. We saw a 60% decrease in new potential problem loans compared to the fourth quarter of ’09.

While a single quarter’s result don’t indicate a trend, we are encouraged by the decline in early stage delinquencies we experience. Loans, 30 to 89 days past due totaled $165 million at March 31, 31% lower than the fourth quarter and 33% lower than the first quarter of 2009. This level is the lowest the company has seen since the end of 2007.

The ratio of nonperforming loans to total loans increased to 9.1% in March 31, due in large part to an $830 million reduction of our loan portfolio. This compares to ratios of nonperforming loans to total loans of 794 at the close of ’09, and 2.84% a year ago.

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