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Associated Banc-Corp (ASBC)

Q4 2011 Earnings Call

January 19, 2012 5:00 p.m. ET


Philip Flynn - President and CEO

Joseph Selner - EVP and CFO

Scott Hickey - EVP, Chief Credit Officer

Christopher Del Moral-Niles - EVP, Deputy Chief Financial Officer

Tim Sedabres - Vice President, Finance


Anthony Davis - Stifel Nicolaus & Co.

Jon Arfstrom - RBC Capital Markets

Dave Rochester - Deutsche Bank Securities

Ken Zerbe - Morgan Stanley

R. Scott Siefers - Sandler O'Neill & Partners LP

Chris McGratty - Keefe, Bruyette & Woods

Terry McEvoy - Oppenheimer & Co.

Erika Penala - Bank of America Merrill Lynch

Emlen Harmon – Jefferies & Company, Inc.

Maclovio Pina – Morningstar Equity

Tom Alonso - Macquarie

Mac Hodgson - SunTrust Robinson Humphrey



Good day ladies and gentlemen and welcome to the Associated Bank’s fourth quarter earnings release analyst call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions on how to participate will be given at that time. (Operator Instructions). And as a reminder, today’s conference call is being recorded.

Now I would like to turn the conference over to Tim Sedabres for some forward looking language.

Tim Sedabres

Good afternoon everyone and welcome to Associated’s fourth quarter 2011 conference call. My name is Tim Sedabres, vice president of finance for investor relations with Associated. Copies of the slides that will be referenced to today’s call are available on our website at

During the course of the discussion today, Associated management may make statements that constitute projections, expectations, beliefs, or similar forward-looking statement. Associated’s actual results could differ materially from the results anticipated or projected in any such forward-looking statement.

Additional 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 10-K and any subsequent Form 10-Q.

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 Phil Flynn, president and CEO for Associated for opening remarks.

Philip Flynn

Thanks Tim and thank you everybody and welcome to our fourth quarter conference call. So joining me today are Joe Selner, our CFO, Chris Niles, our Deputy CFO and Scott Hickey, our chief credit officer.

Today I will begin by reviewing our results for the quarter and full year and provide you with an update on the key drivers of our business and finally share our outlook for 2012.

Fourth quarter highlights are outlined on slide 2. We reported net income available to common shareholders of $40 million or $0.23 per share. This compares to net income of $34 million or $0.20 per share for the third quarter, a 17% increase.

We delivered another quarter of consistent loan growth with our loan portfolio growing 4% to $14 billion during the quarter. We continued to see solid growth from each of our major portfolios, which include commercial, commercial real estate and residential mortgage.

Net interest income from loans grew quarter over quarter while securities income continued to contract as we continued to fund loan growth through the run-off of the securities portfolio. Net interest margin for the quarter was 321 basis points, down just two basis points from the last quarter as compressing asset yields were largely mitigated by aggressive liability repricing.

We see continuing improvement in our credit metrics, including a 12% decline in nonaccrual loans this quarter. Nonaccrual loans of $357 million are at the lowest level in two years and now represent 2.5% of loans, down from 3% last quarter.

We recorded a provision for loan losses of just $1 million. And despite this reduced provision, our overall allowance for loan losses now covers more than 100% of our period end nonaccrual loans. And of course, our capital ratios remained very strong with a tier 1 common ratio of 12.24% and a total capital ratio of 15.53% at year end.

If you go to slide 3, you will see highlights from 2011. 2011 as we said was a year of transition for Associated as we continued to execute on our strategic plan to position the company for the future. And we accomplished many key milestones during the year.

In September, for example, we were pleased to have our MOU with the OCC terminated and fully repaid TARP without raising additional common equity. We consistently grew our loan book throughout the year with total loans growing 11% year over year and commercial and business loans growing 17% year over year.

In spite of the low interest rate environment, we increased the margin year over year. Credit quality improved considerably with nonaccruals down 38% and net charge-offs down 69% from a year ago.

Finally, we were pleased to deliver full year net earnings to our common shareholders of $115 million.

Turning to slide 4, you can see that over the past year, we’ve made considerable progress in increasing net income to shareholders on a quarterly basis with improvements of over $5 million per quarter in each period as we continue to remix our balance sheet and invest in our franchise.

On slides 5 and 6, you will see detail on our loan portfolio. The portfolio grew to $14 billion at December 31. This was up $528 million from September 30, representing a 4% quarter-over-quarter growth rate and an 11% year-over-year growth rate.

Fourth quarter loan growth was driven by net growth in commercial and business lending of $386 million, net growth in commercial real estate lending of $112 million. The retail and residential mortgage portfolios grew by a net $29 million during the quarter.

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