UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
| Date of Report (Date of earliest event reported) | April 24, 2003 |
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| Associated Banc-Corp |
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| (Exact name of registrant as specified in its charter) |
| Wisconsin | 001-31343 | 39-1098068 |
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| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 1200 Hansen Road, Green Bay, Wisconsin | 54304 |
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| (Address of principal executive offices) | (Zip code) |
| Registrant’s telephone number, including area code | 920-491-7000 |
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| |
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| (Former name or former address, if changed since last report) |
Item 7. Financial Statements and Exhibits.
On April 17, 2003, Associated Banc-Corp released its first quarter earnings. Associated Banc-Corp is placing on file as Exhibit 99 a copy of the Company’s news release relating to its earnings.
(c) Exhibits.
Exhibit 99
Exhibit 99
| News Release | Contacts: Investors: Joseph B. Selner, Chief Financial Officer 920-491-7120 Media: Jon Drayna, Corporate Communications 920-491-7006 |
Associated 1st quarter earnings per diluted share up 10 percent
GREEN BAY, Wis. — April 17, 2003 — Associated Banc-Corp (NASDAQ: ASBC) earned $.77 per diluted share in the quarter that ended March 31, 2003, a 10 percent increase from $.70 per diluted share for the same period in 2002.
Return on average assets was 1.58 percent in the first quarter compared to 1.54 percent in the first quarter of 2002. Return on average equity was 18.36 percent compared to 18.46 percent in the year earlier quarter.
Net interest income increased to $127 million in the first quarter, up 8.5 percent from $117 million in the year-earlier period. The company’s net interest margin was 3.87 percent, down from 3.91 percent a year ago but unchanged from the previous quarter.
Total loans at the end of the first quarter 2003 were $10.3 billion, an increase of 5.3 percent compared to one year earlier. The growth occurred primarily in commercial loans, up $456 million, or 7.7 percent, and home equity loans, up $163 million, or 23.5 percent, while residential mortgage loans decreased $94 million, or 3.9 percent between the comparable first quarters. Since year-end 2002, commercial loans increased $87 million, or 5.6 percent annualized, and residential mortgage loans were down $106 million. The trend in residential mortgage loans reflects customers’ continued preference for fixed rate loans in this low rate environment. Associated sells the majority of its fixed rate mortgage loans into the secondary market but continues to service these loans.
Transaction deposit accounts (demand, savings, interest-bearing demand and money market accounts) were $5.8 billion, up 8.0 percent over first quarter of last year. Time deposits were $3.3 billion at March 31, 2002, compared to $3.8 billion last year, impacted by the lower interest rate environment and scheduled maturities. Total deposits were relatively unchanged at $9.1 billion for the first quarter of 2003 compared to $9.2 billion a year ago and $9.1 billion at year-end 2002.
The provision for loan losses was $13.0 million for first quarter 2003, compared to $14.6 million for the fourth quarter last year, and $11.3 million for the comparable quarter in 2002. The ratio of the allowance for loan losses was 1.66 percent of total loans at March 31, 2003, compared to 1.58 percent and 1.48 percent at Dec. 31 and March 31, 2002, respectively.
Associated’s credit quality showed modest improvement in the first quarter compared to Dec 31, 2002. Net chargeoffs for the first quarter of 2003 of $5.1 million, or 0.20 percent of average loans (annualized), were lower than net charge-offs of $7.4 million and $7.1 million in the fourth quarter of 2002 and the year-earlier quarter, respectively. Nonperforming loans were $94.7 million as of March 31, 2003, down from $99.3 million as of Dec. 31, 2002, but up from $71.7 million a year ago. Other real estate owned, which reflects property acquired by the bank due to default, was $12.9 million at March 31, 2003, bringing total nonperforming assets to 0.71 percent of total assets. The company expects asset quality to show improvement as the economy improves. However, many of the company’s commercial customers continue to be challenged in the current economic environment.
Noninterest income grew to $65.2 million for the first quarter, compared to $47.4 million in the same period in 2002. Noninterest income in first quarter 2002 includes only one month’s contribution from Signal Financial Corp., acquired on February 28, 2002. The continued strong activity in the mortgage and mortgage refinancing market generated $1.1 billion of mortgages for sale into the secondary market, up from $0.7 billion in the first quarter of 2002. Mortgage banking revenue of $26.1 million in the first quarter of 2003 was more than double that of the year-earlier period. Trust service fee income and retail commissions, together, declined $2.1 million as a result of continued weak stock market performance and investor uncertainty. Income in other areas posted strong gains. Service fee income from deposit accounts increased 19.5 percent year-over-year to $11.8 million, while credit card and other nondeposit fees increased 21.8 percent to $7.4 million.
Noninterest income for the first quarter of 2003 benefited from a credit card merchant processing sale and services agreement signed in March, 2003. The agreement resulted in $3.4 million of income in the first quarter of 2003, and calls for revenue sharing on new and existing merchant business over the life of the agreement.
As part of its continuing effort to provide a more complete range of financial services to its customers, Associated acquired CFG Insurance Services, Inc., one of the largest insurance agencies in the Twin Cities of Minnesota, on April 1, 2003. CFG has more than 2,500 business insurance clients in the Twin Cities, and complements Associated’s existing insurance agency, Associated Insurance Management Group, Inc. When combined, the agency is expected to rank among the top 60 insurance agencies in the United States. The acquisition of CFG will further leverage Associated’s banking opportunities in Minnesota, and eventually throughout Associated’s markets, and will help diversify Associated’s revenue stream.
Noninterest expenses remain a focus and were well controlled in the first quarter of 2003. Expenses in first quarter 2002 include only one month from Signal compared to a full quarter in 2003.
Noninterest expense grew by approximately $15.7 million, or 19.1 percent, compared to the first quarter of 2002, with more than half of the increase coming from higher mortgage servicing rights expense. While the strong mortgage refinance activity benefited mortgage banking income in the first quarter, it increased the prepayment speeds of Associated’s mortgage portfolio serviced for others, a key factor behind the valuation of mortgage servicing rights. Mortgage servicing rights expense increased by $8.7 million between the comparable quarters, which includes a $7.3 million addition to the valuation allowance. The mortgage servicing asset at March 31, 2003, represents 0.54 percent of the total $5.4 billion residential mortgage portfolio serviced for others.
During the first quarter of 2003, Associated repurchased 716,500 shares of common stock, with approximately 1.4 million shares remaining under existing board repurchase authorizations.
“We are pleased that the ongoing execution of our strategies continues to produce strong results. Priorities for 2003 are to sustain our customer focus and leverage our operating structure to provide continuing value to our shareholders,” Associated Banc-Corp Chairman, President and CEO Robert C. Gallagher said.
“Although our first quarter results are encouraging, our 2003 goal of 10 percent earnings per share growth is predicated on an improving economy, economic stimulus from Washington, moderate interest rate increases, and increased confidence among consumers and businesses. While we continue to look forward to these developments, expected improvements in the economy may take some time to materialize. We remain cautiously optimistic about our financial performance in 2003,” Gallagher said.
Yesterday, Associated announced that its Board of Directors named Paul S. Beideman president and chief executive officer of the corporation, replacing Gallagher, 64, who is stepping down as president and CEO. Gallagher will remain chairman of the Board.
Beideman, 53, comes to Associated from Philadelphia, where he most recently served as chairman of Mellon Financial Corp.’s Mid-Atlantic Region. He has 32 years of banking experience, the last 13 in senior executive positions with Mellon. He was a member of Mellon’s Senior Management Committee, and his background includes extensive experience in consumer and commercial banking. In addition, he has a wide range of experience in marketing, systems and operations, product development, and wealth management.
Associated will hold its Annual Shareholders’ Meeting at 11 a.m. CDT on April 23rd, at the Meyer Theatre in Green Bay. The event will be webcast live. To view the webcast, see the information at www.associatedbank.com/AboutAssociated/InvestorRelations/.
Associated Banc-Corp, headquartered in Green Bay, Wis., is a diversified multibank holding company with total assets of $15.1 billion. Associated has more than 200 banking offices serving more than 150 communities in Wisconsin, Illinois, and Minnesota. The company offers a full range of traditional banking services and a variety of other financial products and services. More information about Associated Banc-Corp is available at www.AssociatedBank.com.
Statements made in this document 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 descriptions of management’s plans, objectives, or goals for future operations, products or services, and forecasts of its revenues, earnings, or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements may be identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “should,” “will,” “intend,” or similar expressions. Outcomes related to such statements are subject to numerous risk factors and uncertainties including those listed in the company’s Annual Report filed on Form 10-K.
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Four pages of tables follow.
Consolidated Balance Sheets (Unaudited)
Associated Banc-Corp
March 31, December 31, March 31,
(in thousands) 2003 2002 % Change 2002 % Change
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Assets
Cash and due from banks $ 401,012 $ 430,691 (6.9%) $ 326,946 22.7%
Interest-bearing deposits in other
financial institutions 13,640 5,502 147.9% 6,028 126.3%
Federal funds sold and securities purchased
under agreements to resell 27,815 8,820 215.4% 76,140 (63.5%)
Securities available for sale, at fair value 3,379,000 3,362,669 0.5% 3,364,411 0.4%
Loans held for sale 374,053 305,836 22.3% 149,945 149.5%
Loans 10,275,469 10,303,225 (0.3%) 9,757,584 5.3%
Allowance for loan losses (170,391) (162,541) 4.8% (144,350) 18.0%
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Loans, net 10,105,078 10,140,684 (0.4%) 9,613,234 5.1%
Premises and equipment 132,234 132,713 (0.4%) 135,821 (2.6%)
Goodwill 212,112 212,112 0.0% 212,112 0.0%
Other intangible assets 38,251 41,565 (8.0%) 47,667 (19.8%)
Other assets 405,971 402,683 0.8% 395,847 2.6%
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Total assets $15,089,166 $15,043,275 0.3% $14,328,151 5.3%
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Liabilities and Stockholders’ Equity
Noninterest-bearing deposits $ 1,692,979 $ 1,773,699 (4.6%) $ 1,437,798 17.7%
Interest-bearing deposits, excluding Brokered CDs 7,158,605 7,117,503 0.6% 7,439,710 (3.8%)
Brokered CDs 208,650 233,650 (10.7%) 315,184 (33.8%)
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Total deposits 9,060,234 9,124,852 (0.7%) 9,192,692 (1.4%)
Short-term borrowings 2,422,631 2,389,607 1.4% 2,230,505 8.6%
Long-term debt 1,954,715 1,906,845 2.5% 1,477,855 32.3%
Company-obligated mandatorily redeemable
preferred securities 188,263 190,111 (1.0%) 11,000 N/M
Accrued expenses and other liabilities 177,457 159,677 11.1% 185,117 (4.1%)
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Total liabilities 13,803,300 13,771,092 0.2% 13,097,169 5.4%
Stockholders’ Equity
Preferred stock - - -
Common stock 748 755 (0.9%) 698 7.2%
Surplus 621,616 643,956 (3.5%) 421,570 47.5%
Retained earnings 637,781 607,944 4.9% 786,246 (18.9%)
Accumulated other comprehensive income 56,302 60,313 (6.7%) 48,966 15.0%
Treasury stock, at cost (30,581) (40,785) (25.0%) (26,498) 15.4%
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Total stockholders’ equity 1,285,866 1,272,183 1.1% 1,230,982 4.5%
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Total liabilities and stockholders’ equity $ 15,089,166 $ 15,043,275 0.3% $14,328,151 5.3%
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N/M - Not meaningful.
Consolidated Statements of Income (Unaudited)
Associated Banc-Corp
For The Three Months Ended,
-------------------------------
March 31,
(in thousands, except per share amounts) 2003 2002 %Change
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Interest Income
Interest and fees on loans $148,496 $151,349 (1.9%)
Interest and dividends on investment securities
and deposits with other financial institutions
Taxable 26,797 32,859 (18.4%)
Tax-exempt 10,055 9,980 0.8%
Interest on federal funds sold and securities
purchased under agreements to resell 35 118 (70.3%)
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Total interest income 185,383 194,306 (4.6%)
Interest Expense
Interest on deposits 31,990 48,229 (33.7%)
Interest on short-term borrowings 8,567 13,655 (37.3%)
Interest on long-term debt and capital securities 17,372 14,995 15.9%
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Total interest expense 57,929 76,879 (24.6%)
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Net Interest Income 127,454 117,427 8.5%
Provision for loan losses 12,960 11,251 15.2%
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Net interest income after provision for
loan losses 114,494 106,176 7.8%
Noninterest Income
Trust service fees 6,630 7,371 (10.1%)
Service charges on deposit accounts 11,811 9,880 19.5%
Mortgage banking 26,103 12,604 107.1%
Credit card and other nondeposit fees 7,396 6,072 21.8%
Retail commissions 3,303 4,616 (28.4%)
Bank owned life insurance income 3,391 3,270 3.7%
Asset sale gains, net 122 331 (63.1%)
Investment securities gains (losses), net (326) - N/M
Other 6,779 3,256 108.2%
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Total noninterest income 65,209 47,400 37.6%
Noninterest Expense
Personnel expense 50,235 44,994 11.6%
Occupancy 7,115 6,137 15.9%
Equipment 3,244 3,490 (7.0%)
Data processing 5,618 4,803 17.0%
Business development and advertising 3,363 3,446 (2.4%)
Stationery and supplies 1,679 2,044 (17.9%)
FDIC expense 366 372 (1.6%)
Mortgage servicing rights expense 11,598 2,897 300.3%
Other intangible amortization 350 464 (24.6%)
Loan expense 3,348 2,779 20.5%
Other 11,241 10,990 2.3%
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Total noninterest expense 98,157 82,416 19.1%
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Income before income taxes 81,546 71,160 14.6%
Income tax expense 23,553 19,698 19.6%
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Net Income $57,993 $51,462 12.7%
===============================
Earnings Per Share:
Basic $0.78 $0.70 11.4%
Diluted $0.77 $0.70 10.0%
Average Shares Outstanding:
Basic 74,252 73,142 1.5%
Diluted 74,974 74,042 1.3%
N/M - Not meaningful.
Selected Quarterly Information
Associated Banc-Corp
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(in thousands, except per share data) 1st Qtr 2003 4th Qtr 2002 3rd Qtr 2002 2nd Qtr 2002 1st Qtr 2002
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Summary of Operations
Interest income $185,383 $196,178 $199,765 $201,857 $194,306
Interest expense 57,929 66,465 71,407 76,089 76,879
Net interest income 127,454 129,713 128,358 125,768 117,427
Provision for loan losses 12,960 14,614 12,831 12,003 11,251
Net interest income after provision for loan 114,494 115,099 115,527 113,765 106,176
losses
Asset sale gains (losses), net 122 (373) 658 41 331
Investment securities gains (losses), net (326) (801) 374 - -
Noninterest income (excluding securities & asset 65,413 65,523 57,624 49,862 47,069
gains)
Noninterest expense 98,157 102,763 98,183 91,187 82,416
Income taxes 23,553 23,244 22,528 20,137 19,698
Net income 57,993 53,441 53,472 52,344 51,462
Taxable equivalent adjustment 6,277 5,981 5,991 6,037 6,063
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Per Common Share Data (1)
Net income:
Basic $0.78 $0.72 $0.71 $0.69 $0.70
Diluted 0.77 0.71 0.70 0.68 0.70
Dividends 0.31 0.31 0.31 0.31 0.28
Market Value:
High $35.22 $34.21 $36.96 $38.25 $35.29
Low 32.33 27.20 30.64 33.63 30.37
Close 32.33 33.94 31.73 37.71 34.57
Book value 17.41 17.13 17.03 16.84 16.23
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Performance Ratios (annualized)
Net interest margin (FTE) 3.87% 3.87% 3.96% 3.96% 3.91%
Return on average assets 1.58 1.42 1.47 1.47 1.54
Return on average equity 18.36 16.62 16.73 16.79 18.46
Return on tangible average equity (2) 22.19 20.11 20.28 20.42 21.12
Efficiency ratio (3) 49.29 51.07 51.14 50.19 48.32
Effective tax rate 28.88 30.31 29.64 27.78 27.68
Dividend payout ratio (basic) 39.74 43.06 43.66 44.93 40.26
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Average Balances
Assets $14,867,339 $14,901,747 $14,460,358 $14,273,232 $13,538,602
Earning assets 13,836,102 13,870,491 13,427,986 13,248,590 12,616,040
Interest-bearing liabilities 11,886,642 11,792,552 11,459,673 11,400,302 10,923,561
Loans 10,578,430 10,559,154 10,128,826 9,902,462 9,405,417
Deposits 8,901,441 8,934,668 8,947,047 9,081,434 8,683,879
Stockholders’ equity 1,280,950 1,275,914 1,268,355 1,250,748 1,130,714
Stockholders’ equity / assets 8.62% 8.56% 8.77% 8.76% 8.35%
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At Period End
Assets $15,089,166 $15,043,275 $15,044,702 $14,476,993 $14,328,151
Loans 10,275,469 10,303,225 10,086,510 9,882,669 9,757,584
Allowance for loan losses 170,391 162,541 155,288 148,733 144,350
Deposits 9,060,234 9,124,852 8,947,353 9,026,244 9,192,692
Stockholders’ equity 1,285,866 1,272,183 1,270,691 1,275,569 1,230,982
Stockholders’ equity / assets 8.52% 8.46% 8.45% 8.81% 8.59%
Goodwill and core deposit intangibles 221,004 221,354 221,963 222,539 223,173
Shares outstanding, end of period 73,870 74,281 74,598 75,746 75,849
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Credit Quality
Nonaccrual loans $90,384 $94,132 $93,250 $82,474 $63,626
Loans 90 or more days past due and still accruing 3,425 3,912 5,981 4,683 4,991
(4)
Restructured loans 844 1,258 1,110 115 3,097
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Total nonperforming loans 94,653 99,302 100,341 87,272 71,714
Other real estate owned 12,949 11,448 3,331 2,610 2,782
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Total nonperforming assets 107,602 110,750 103,672 89,882 74,496
=================================================================
Net charge offs 5,110 7,361 6,276 7,620 7,090
Allowance for loan losses / loans 1.66% 1.58% 1.54% 1.50% 1.48%
Allowance for loan losses / nonperforming loans 180.02 163.68 154.76 170.42 201.29
Nonperforming loans / total loans 0.92 0.96 0.99 0.88 0.73
Nonperforming assets / total assets 0.71 0.74 0.69 0.62 0.52
Net charge offs / average loans (annualized) 0.20 0.28 0.25 0.31 0.31
Year-to-date net charge offs / average loans 0.20 0.28 0.29 0.31 0.31
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(1) Per share data adjusted retroactively for stock splits and stock dividends.
(2) Return on tangible average equity = Net income divided by average stockholders’ equity less goodwill and core
deposit intangible assets.
(3) Efficiency ratio = Noninterest expense divided by sum of taxable equivalent net interest income plus
noninterest income, excluding investment securities gains, net, and asset sales gains, net.
(4) Does not include guaranteed student loans. Guaranteed student loans 90+ days past due and still accruing
totaled $17.4 million as of March 31, 2003.
Financial Summary and Comparison
Associated Banc-Corp
Three months ended
March 31,
-------------------------------------------------------
(in thousands, except per share data) 2003 2002 % Change
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Allowance for Loan Losses
Beginning balance $162,541 $128,204 26.8%
Balance related to acquisitions - 11,985 N/M
Provision for loan losses 12,960 11,251 15.2%
Charge offs (5,754) (7,985) (27.9%)
Recoveries 644 895 (28.0%)
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Net charge offs (5,110) (7,090) (27.9%)
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Ending Balance $170,391 $144,350 18.0%
==============================
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Performance Ratios (annualized)
Return on average assets 1.58% 1.54% 4 bp
Return on average equity 18.36 18.46 (10) bp
Return on tangible average equity (1) 22.19 21.12 107 bp
Efficiency ratio (2) 49.29 48.32 97 bp
Effective tax rate 28.88 27.68 120 bp
Dividend payout ratio (basic) 39.74 40.26 (52) bp
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Average Yield and Rate
Loans 5.65% 6.47% (82) bp
Investments and other 5.27% 6.07% (80) bp
Total earning assets 5.56% 6.37% (81) bp
Interest-bearing deposits, excluding brokered CDs 1.76% 2.68% (92) bp
Brokered CDs 1.91% 2.04% (13) bp
Wholesale funding 2.28% 3.24% (96) bp
Total interest-bearing liabilities 1.96% 2.84% (88) bp
Net interest margin 3.87% 3.91% (4) bp
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Period End Loan Composition March 31,
2003 2002
-------------------------------
Commercial, financial & agricultural $2,238,657 $2,162,954 3.5%
Real estate - construction 912,510 801,467 13.9%
Commercial real estate 3,188,907 2,920,865 9.2%
Lease financing 38,712 37,211 4.0%
-------------------------------
Commercial 6,378,786 5,922,497 7.7%
Residential mortgage 2,325,032 2,418,822 (3.9%)
Home equity 858,928 695,519 23.5%
-------------------------------
Residential real estate 3,183,960 3,114,341 2.2%
Consumer 712,723 720,746 (1.1%)
------------------------------
Total loans $10,275,469 $9,757,584 5.3%
==============================
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Period End Deposit Composition March 31,
2003 2002
-------------------------------
Demand $1,692,979 $1,437,798 17.7%
Savings 935,740 883,794 5.9%
Interest-bearing demand 1,540,757 989,519 55.7%
Money market 1,658,735 2,084,671 (20.4%)
Brokered CDs 208,650 315,184 (33.8%)
Other time deposits 3,023,373 3,481,726 (13.2%)
-------------------------------
Total deposits $9,060,234 $9,192,692 (1.4%)
===============================
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(1) Return on tangible average equity = Net income divided by average stockholders’ equity less goodwill and core deposit
intangible assets.
(2) Efficiency ratio = Noninterest expense divided by sum of taxable equivalent net interest income plus noninterest income,
excluding investment securities gains, net, and asset sales gains, net.
N/M = Not Meaningful
bp = basis points