News Release
CONTACTS:
Investors:
Joe Selner, Chief Financial Officer
920-491-7120
Media:
Jon Drayna, Corporate Communications
920-491-7006
Associated Banc-Corp 2004 earnings $2.25 per share, up 10 percent
GREEN BAY, Wis. - Jan. 20, 2005 - Associated Banc-Corp (Nasdaq: ASBC) earned $2.25 per diluted share in 2004, up 10 percent from 2003. Net income for 2004 was $258.3 million, up 13 percent from $228.7 million in 2003.
Associated’s acquisition of First Federal Capital Corp. on Oct. 29, 2004, affects comparisons to past periods, adding the balance sheet of a $4 billion thrift and two months of operations in 2004. Additionally, the acquisitions of Jabas Group, Inc., an employee benefits firm, on April 1, 2004, and of CFG Insurance Services, Inc., on April 1, 2003, also affect the comparison of retail commission income and noninterest expenses.
Net income for the fourth quarter of 2004 was $70.9 million, up 27 percent from $55.6 million in the fourth quarter of 2003. Fourth quarter earnings per diluted share were 57 cents, up 14 percent from the 50 cents per diluted share earned in the fourth quarter of 2003.
Return on average assets (ROA) and equity (ROE) for 2004 were 1.58 percent and 17.22 percent, respectively. This compares to ROA of 1.53 percent and ROE of 17.58 percent in 2003. Book value per share rose to $15.55 as of Dec. 31, 2004, up 27 percent compared to a year earlier.
Return on average tangible equity (which is a non-GAAP measure that excludes the average of goodwill and other intangible assets from average equity) was 22.11 percent for 2004 compared to 21.56 percent for 2003.
“We are pleased with our results in 2004, both organizationally and in terms of EPS growth, which is in line with our long-term goal,” said Paul S. Beideman, president and CEO of Associated Banc-Corp. “We have made investments in our people to improve customer service. We continue to make progress on our strategy to diversify revenue by optimizing performance across our businesses. In 2004 we overcame the industry-wide decline in mortgage banking revenue relative to 2003, and posted our seventh consecutive year of record earnings,” Beideman said.
Associated’s net interest income for 2004, which includes two months’ contribution from First Federal, was $552.6 million, up 8 percent from 2003‘s $510.8 million. Net interest margin for 2004 was 3.80 percent, compared to 3.84 percent for 2003.
For the fourth quarter of 2004 the net interest margin was 3.74 percent versus 3.81 percent for the comparable quarter of 2003, and down 2 basis points from the third quarter of 2004. While the Federal Reserve raised rates five times since mid-year 2004, the longer-term rates have increased at a slower pace. This flattening of the yield curve put downward pressure on the margin especially in the second half of 2004.
Period end loans at Dec. 31, 2004 were $13.9 billion, up 35 percent over year-end 2003. Excluding First Federal, total loans grew 8 percent, despite residential mortgage loans declining 2 percent. Commercial loans and home equity were strategically emphasized in 2004 and, excluding First Federal, grew 11 percent and 22 percent, respectively, between year-end 2004 and 2003, with strong momentum in the second half of the year.
The mix of loans at Dec. 31, 2004, including First Federal, was 59 percent commercial (versus 63 percent last year), 20 percent residential mortgage (versus 19 percent last year), 13 percent home equity (compared to 11 percent) and 8 percent installment loans (versus 7 percent last year).
Period end deposits at year-end 2004 were $12.8 billion, up 31 percent over the prior year end, with minimal shift in deposit mix. Excluding First Federal, deposits grew 3 percent.
In 2004 net charge-offs were $17.3 million or 0.15 percent of average loans, as compared to $31.7 million or 0.30 percent of average loans for 2003. Nonperforming loans at Dec. 31, 2004 were $115.0 million or 0.83 percent of loans, as compared to $121.5 million or 1.18 percent of loans a year ago. The provision for loan losses for 2004 was $14.7 million, compared to $46.8 million for 2003. The provision for loan losses was reduced given improved asset quality trends and the favorable resolution of problem credits in 2004.
The allowance for loan losses was $189.8 million, or 1.37 percent of total loans at Dec. 31, 2004, and covered 165 percent of nonperforming loans. At Dec. 31, 2003 the allowance was $177.6 million, or 1.73 percent of total loans, and covered 146 percent of nonperforming loans.
The comparison of noninterest income between 2004 and 2003 was affected by significantly less net mortgage banking income (down $33.2 million or 62 percent between 2004 and 2003). Secondary mortgage production was $1.6 billion for 2004, down 62 percent compared to 2003, influencing a $46.0 million or 55 percent decline in gross mortgage banking income between the years. Netted against gross mortgage banking income is mortgage servicing rights expense, which was down $12.8 million. The favorable change to this expense was due to slower loan prepayment speeds in 2004, a key valuation factor, increasing the recorded value of the mortgage servicing asset and requiring less valuation reserve. At Dec. 31, 2004, the net mortgage servicing rights asset represented 0.80 percent of the $9.5 billion mortgage portfolio serviced for others.
Noninterest income excluding net mortgage banking income was $189.9 million for 2004, up $26.5 million, or 16 percent, compared to $163.4 million for 2003. Retail commissions of $47.2 million led the increase, up $21.6 million compared to last year, predominantly from both organic and acquired growth in insurance revenues. Service charges on deposits of $56.2 million were up $5.8 million (12 percent), aided by fee increases in early 2004 and the addition of First Federal. Trust income of $31.8 million and credit card and other nondeposit fees of $26.2 million also grew, up $2.2 million (7 percent) and $2.5 million (11 percent), respectively, over last year.
Included in net investment securities losses for fourth quarter 2004 was an other-than-temporary impairment charge of $2.2 million taken on Associated’s holdings of FHLMC preferred stock securities (bringing their carrying value to $8.4 million), offset partially by gains on sales of Sallie Mae stock of $1.5 million.
Noninterest expenses were a critical focus during 2004 and remained well-controlled, rising $18.8 million or 5 percent year-over-year to $377.9 million, including the CFG, Jabas and First Federal acquisitions. Excluding only First Federal, noninterest expense for 2004 would have been approximately $359 million, unchanged from last year.
“Associated is well-positioned for sustained growth, through our diverse revenue sources. We now have the opportunity to leverage our increased distribution capacity as a result of the acquisition of First Federal. We are on track to consolidate the First Federal operating systems in February,” Beideman said.
He added, “We are confident that we can meet or exceed consensus earnings estimates for 2005, assuming a stable or growing economy. Positive loan growth momentum and anticipated rate increases by the Federal Reserve with a steepening of the yield curve are expected to improve net interest income. Full year contributions in 2005 from the Jabas and First Federal acquisitions will enhance the bottom line. We also expect to realize further cost efficiencies following our first quarter 2005 integration of First Federal into Associated.”
The company paid dividends of 98 cents per share in 2004, up from 89 cents in 2003, making 2004 Associated’s 34thconsecutive year of increasing dividends.
Associated repurchased approximately 1.1 million shares of its common stock in 2004 at an average cost of $30.43 per share during 2004, compared to 3.1 million shares at $24.11 average cost per share during 2003. Associated starts 2005 with authorizations to repurchase approximately 6 million shares.
Associated will host a conference call for investors and analysts at 3 p.m. CST today. The toll-free dial-in number is 877-654-5513. Participants should ask the operator for the Associated Banc-Corp earnings call, or for call ID number 3275588. A taped play-back of the call will be available through Feb. 3 by calling 800-642-1687.
Associated Banc-Corp, headquartered in Green Bay, Wis., is a diversified multibank holding company with total assets of $20.5 billion. Associated has more than 300 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 that 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. 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 to be filed on Form 10-K.
— 30 —
Seven pages of tables follow.
Consolidated Balance Sheets (Unaudited)
Associated Banc-Corp
December 31, December 31,
(in thousands) 2004 2003 % Change
- -------------------------------------------------------------------------------------------------------------------
Assets
Cash and due from banks $ 389,311 $ 389,140 0.0%
Interest-bearing deposits in other
financial institutions 13,321 7,434 79.2%
Federal funds sold and securities purchased
under agreements to resell 55,440 3,290 1585.1%
Securities available for sale, at fair value 4,815,344 3,773,784 27.6%
Loans held for sale 64,964 104,336 (37.7%)
Loans 13,881,887 10,291,810 34.9%
Allowance for loan losses (189,762) (177,622) 6.8%
--------------------------------------
Loans, net 13,692,125 10,114,188 35.4%
Premises and equipment 184,944 131,315 40.8%
Goodwill 685,378 224,388 205.4%
Intangible assets 119,440 63,509 88.1%
Other assets 499,869 436,510 14.5%
--------------------------------------
Total assets $ 20,520,136 $ 15,247,894 34.6%
======================================
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 2,347,611 $ 1,814,446 29.4%
Interest-bearing deposits, excluding Brokered CDs 10,077,069 7,813,267 29.0%
Brokered CDs 361,559 165,130 119.0%
--------------------------------------
Total deposits 12,786,239 9,792,843 30.6%
Short-term borrowings 2,926,716 1,928,876 51.7%
Long-term funding 2,604,540 2,034,160 28.0%
Accrued expenses and other liabilities 185,222 143,588 29.0%
--------------------------------------
Total liabilities 18,502,717 13,899,467 33.1%
Stockholders' Equity
Preferred stock - -
Common stock 1,300 734 77.1%
Surplus 1,127,205 575,975 95.7%
Retained earnings 858,847 724,356 18.6%
Accumulated other comprehensive income 41,205 52,089 (20.9%)
Deferred compensation (2,122) (1,981) 7.1%
Treasury stock, at cost (9,016) (2,746) 228.3%
--------------------------------------
--------------------------------------
Total stockholders' equity 2,017,419 1,348,427 49.6%
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Total liabilities and stockholders' equity $ 20,520,136 $ 15,247,894 34.6%
======================================
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Consolidated Statements of Income (Unaudited)
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- --------------------------------------------------------------------------------------------------------
Associated Banc-Corp
- --------------------------------------------------------------------------------------------------------
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For The Three Months Ended, For The Year Ended,
- --------------------------------------------------------------------------------------------------------
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December 31, December 31,
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(in thousands, except per share amounts) 2004 2003 % Change 2004 2003 % Change
- --------------------------------------------------------------------------------------------------------
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Interest Income
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Interest and fees on loans $ 179,612 $ 137,289 30.8% $ 594,702 $ 578,816 2.7%
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- --------------------------------------------------------------------------------------------------------
Interest and dividends on investment securities
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
and deposits with other financial institutions
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Taxable 37,631 29,194 28.9% 131,020 108,624 20.6%
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- --------------------------------------------------------------------------------------------------------
Tax-exempt 10,047 9,939 1.1% 40,804 39,761 2.6%
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- --------------------------------------------------------------------------------------------------------
Interest on federal funds sold and securities
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- --------------------------------------------------------------------------------------------------------
purchased under agreements to resell 260 36 622.2% 596 163 265.6%
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Total interest income 227,550 176,458 29.0% 767,122 727,364 5.5%
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Interest Expense
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Interest on deposits 36,835 29,247 25.9% 118,236 123,122 (4.0%)
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- --------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 14,898 5,390 176.4% 38,940 29,156 33.6%
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Interest on long-term funding 17,360 14,684 18.2% 57,319 64,324 (10.9%)
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Total interest expense 69,093 49,321 40.1% 214,495 216,602 (1.0%)
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- --------------------------------------------------------------------------------------------------------
Net Interest Income 158,457 127,137 24.6% 552,627 510,762 8.2%
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Provision for loan losses 3,603 9,603 (62.5%) 14,668 46,813 (68.7%)
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Net interest income after provision for
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
loan losses 154,854 117,534 31.8% 537,959 463,949 16.0%
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Noninterest Income
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- --------------------------------------------------------------------------------------------------------
Trust service fees 8,107 8,150 (0.5%) 31,791 29,577 7.5%
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Service charges on deposit accounts 16,943 12,735 33.0% 56,153 50,346 11.5%
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Mortgage banking, net 6,045 9,018 (33.0%) 20,331 53,484 (62.0%)
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Credit card and other nondeposit fees 8,183 5,646 44.9% 26,181 23,669 10.6%
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Retail commissions 12,727 8,031 58.5% 47,171 25,571 84.5%
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Bank owned life insurance income 2,525 3,417 (26.1%) 13,101 13,790 (5.0%)
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Asset sale gains, net 432 1,366 (68.4%) 1,181 1,569 (24.7%)
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Investment securities gains (losses), net (719) - N/M 637 702 (9.3%)
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Other 4,793 3,379 41.8% 13,701 18,174 (24.6%)
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Total noninterest income 59,036 51,742 14.1% 210,247 216,882 (3.1%)
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Noninterest Expense
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Personnel expense 65,193 54,391 19.9% 224,548 208,040 7.9%
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Occupancy 8,297 6,710 23.7% 29,572 28,077 5.3%
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Equipment 3,855 3,206 20.2% 12,754 12,818 (0.5%)
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Data processing 5,966 5,731 4.1% 23,632 23,273 1.5%
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Business development and advertising 4,271 4,165 2.5% 14,975 15,194 (1.4%)
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Stationery and supplies 1,567 1,741 (10.0%) 5,436 6,705 (18.9%)
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Other intangible amortization 1,699 870 95.3% 4,350 2,961 46.9%
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Loan expense 2,328 1,446 61.0% 6,536 7,550 (13.4%)
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- --------------------------------------------------------------------------------------------------------
Other 16,791 15,125 11.0% 56,066 54,497 2.9%
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Total noninterest expense 109,967 93,385 17.8% 377,869 359,115 5.2%
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Income before income taxes 103,923 75,891 36.9% 370,337 321,716 15.1%
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Income tax expense 33,069 20,282 63.0% 112,051 93,059 20.4%
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Net Income $ 70,854 $ 55,609 27.4% $ 258,286 $ 228,657 13.0%
- ------------------------------------------=====================----------=====================----------
- ------------------------------------------=====================----------=====================----------
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Earnings Per Share:
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Basic $ 0.57 $ 0.51 11.8% $ 2.28 $ 2.07 10.1%
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Diluted $ 0.57 $ 0.50 14.0% $ 2.25 $ 2.05 9.8%
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Average Shares Outstanding:
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Basic 123,509 109,965 12.3% 113,532 110,617 2.6%
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Diluted 125,296 111,499 12.4% 115,025 111,761 2.9%
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N/M - Not meaningful.
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Consolidated Statements of Income (Unaudited) - Quarterly Trend
Associated Banc-Corp
(in thousands, except per share amounts) 4Q04 3Q04 2Q04 1Q04 4Q03
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Interest Income
Interest and fees on loans $ 179,612 $ 142,389 $ 137,449 $ 135,252 $ 137,289
Interest and dividends on investment securities
and deposits in other financial institutions:
Taxable 37,631 31,590 30,767 31,032 29,194
Tax-exempt 10,047 10,255 10,267 10,235 9,939
Interest on federal funds sold and securities
purchased under agreements to resell 260 241 68 27 36
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Total interest income 227,550 184,475 178,551 176,546 176,458
Interest Expense
Interest on deposits 36,835 27,191 26,656 27,554 29,247
Interest on short-term borrowings 14,898 10,262 7,241 6,539 5,390
Interest on long-term funding 17,360 13,806 12,775 13,378 14,684
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Total interest expense 69,093 51,259 46,672 47,471 49,321
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Net Interest Income 158,457 133,216 131,879 129,075 127,137
Provision for loan losses 3,603 - 5,889 5,176 9,603
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Net interest income after provision for
loan losses 154,854 133,216 125,990 123,899 117,534
Noninterest Income
Trust service fees 8,107 7,773 8,043 7,868 8,150
Service charges on deposit accounts 16,943 13,672 13,141 12,397 12,735
Mortgage banking, net 6,045 619 11,414 2,253 9,018
Credit card and other nondeposit fees 8,183 6,253 6,074 5,671 5,646
Retail commissions 12,727 11,925 13,162 9,357 8,031
Bank owned life insurance income 2,525 3,580 3,641 3,355 3,417
Asset sale gains, net 432 309 218 222 1,366
Investment securities gains (losses), net (719) (6) (569) 1,931 -
Other 4,793 3,034 2,742 3,132 3,379
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Total noninterest income 59,036 47,159 57,866 46,186 51,742
Noninterest Expense
Personnel expense 65,193 53,467 53,612 52,276 54,391
Occupancy 8,297 6,939 6,864 7,472 6,710
Equipment 3,855 3,022 2,878 2,999 3,206
Data processing 5,966 5,865 6,128 5,673 5,731
Business development and advertising 4,271 3,990 4,057 2,657 4,165
Stationery and supplies 1,567 1,214 1,429 1,226 1,741
Other intangible amortization 1,699 935 934 782 870
Loan expense 2,328 1,152 1,670 1,386 1,446
Other 16,791 12,447 14,415 12,413 15,125
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Total noninterest expense 109,967 89,031 91,987 86,884 93,385
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Income before income taxes 103,923 91,344 91,869 83,201 75,891
Income tax expense 33,069 27,977 27,363 23,642 20,282
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Net Income $ 70,854 $ 63,367 $ 64,506 $ 59,559 $ 55,609
===============================================================
Earnings Per Share:
Basic $ 0.57 $ 0.58 $ 0.59 $ 0.54 $ 0.51
Diluted $ 0.57 $ 0.57 $ 0.58 $ 0.53 $ 0.50
Average Shares Outstanding:
Basic 123,509 110,137 110,116 110,294 109,965
Diluted 125,296 111,699 111,520 111,830 111,499
Selected Quarterly Information
Associated Banc-Corp
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(in thousands, except per share &
full time equivalent employee data) YTD2004 YTD 2003 4th Qtr 2004 3rd Qtr 2004 2nd Qtr 2004 1st Qtr 2004 4th Qtr 2003
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Summary of Operations
Net interest income 552,627 510,762 158,457 133,216 131,879 129,075 127,137
Provision for loan losses 14,668 46,813 3,603 - 5,889 5,176 9,603
Asset sale gains, net 1,181 1,569 432 309 218 222 1,366
Investment securities gains (losses), net 637 702 (719) (6) (569) 1,931 -
Noninterest income (excluding securities & asset gains) 208,429 214,611 59,323 46,856 58,217 44,033 50,376
Noninterest expense 377,869 359,115 109,967 89,031 91,987 86,884 93,385
Income before income taxes 370,337 321,716 103,923 91,344 91,869 83,201 75,891
Income taxes 112,051 93,059 33,069 27,977 27,363 23,642 20,282
Net income 258,286 228,657 70,854 63,367 64,506 59,559 55,609
Taxable equivalent adjustment 25,528 24,903 6,342 6,395 6,387 6,404 6,230
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Per Common Share Data (1)
Net income:
Basic $ 2.28 $ 2.07 $ 0.57 $ 0.58 $ 0.59 $ 0.54 $ 0.51
Diluted 2.25 2.05 0.57 0.57 0.58 0.53 0.50
Dividends 0.9767 0.8867 0.2500 0.2500 0.2500 0.2267 0.2267
Market Value:
High $ 34.85 $ 28.75 $ 34.85 $ 32.19 $ 30.13 $ 30.37 $ 28.75
Low 27.09 21.43 32.08 28.81 27.09 28.08 25.87
Close 33.23 28.53 33.23 32.07 29.63 29.86 28.53
Book value 15.55 12.26 15.55 13.18 12.53 12.67 12.26
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Performance Ratios (annualized)
Net interest margin 3.80% 3.84% 3.74% 3.76% 3.80% 3.80% 3.81%
Return on average assets 1.58 1.53 1.49 1.60 1.67 1.57 1.49
Return on average equity 17.22 17.58 15.46 17.76 18.87 17.37 16.85
Return on tangible average equity (2) 22.11 21.56
Efficiency ratio (3) 48.04 47.86 49.07 47.75 46.82 48.40 50.82
Effective tax rate 30.26 28.93 31.82 30.63 29.78 28.42 26.73
Dividend payout ratio (4) 42.84 42.83 43.86 43.10 42.37 41.98 44.44
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Average Balances
Assets $ 16,365,762$ 14,969,860 $ 18,956,445 $ 15,730,451 $ 15,498,005 $ 15,261,277 $ 14,852,390
Earning assets 15,202,892 13,946,832 17,437,476 14,688,914 14,480,701 14,185,569 13,828,992
Interest-bearing liabilities 12,868,370 11,855,236 14,761,878 12,381,407 12,231,733 12,083,003 11,637,646
Loans 11,174,856 10,622,499 12,858,394 10,708,701 10,685,542 10,433,411 10,354,726
Deposits 10,144,528 9,299,506 11,658,646 9,621,557 9,701,945 9,585,074 9,679,789
Stockholders' equity 1,499,606 1,300,990 1,822,715 1,419,600 1,374,632 1,378,804 1,309,167
Stockholders' equity / assets 9.16% 8.69% 9.62% 9.02% 8.87% 9.03% 8.81%
Goodwill and other intangible assets $ 331,638 $ 240,445
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At Period End
Assets $ 20,520,136 $ 16,135,761 $ 15,502,556 $ 15,510,868 $ 15,247,894
Loans 13,881,887 10,830,627 10,556,603 10,486,610 10,291,810
Allowance for loan losses 189,762 175,007 177,980 177,717 177,622
Goodwill 685,378 232,564 232,528 224,388 224,388
Mortgage servicing rights, net 76,247 45,555 48,735 39,649 42,477
Other intangible assets 43,193 24,308 25,242 20,250 21,032
Deposits 12,786,239 9,677,273 9,583,592 9,702,758 9,792,843
Stockholders' equity 2,017,419 1,453,465 1,378,894 1,395,293 1,348,427
Stockholders' equity / assets 9.83% 9.01% 8.89% 9.00% 8.84%
Shares outstanding, end of period 129,770 110,281 110,048 110,168 109,966
Shares repurchased during period 376 - 205 492 212
Average per share cost of shares repurchased during period $ 33.25 $ - $ 27.93 $ 29.32 $ 28.18
Year-to-date shares repurchased during period 1,073 697 697 492 3,091
YTD average per share cost of shares repurchased during period $ 30.43 $ 28.91 $ 28.91 $ 29.32 $ 24.11
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Selected trend information
Average full time equivalent employees 4,746 3,979 4,010 4,024 4,098
Trust assets under management, at market value $ 4,600,000 $ 4,400,000 $ 4,300,000 $ 4,300,000 $ 4,100,000
Mortgage loans originated for sale 427,951 253,917 579,020 359,791 524,118
Portfolio serviced for others 9,543,000 6,011,000 6,010,000 5,904,000 5,928,000
Mortgage servicing rights, net / Portfolio serviced for others 0.80% 0.76% 0.81% 0.67% 0.72%
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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 equity excluding average goodwill and other intangible assets. This is a non-GAAP financial measure.
(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) Ratio is based upon basic earnings per share.
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Financial Summary and Comparison
Associated Banc-Corp Three months ended Year ended
December 31, December 31,
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(in thousands) 2004 2003 % Change 2004 2003 % Change
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Allowance for Loan Losses
Beginning balance $ 175,007 $ 176,223 (0.7%) $ 177,622 $ 162,541 9.3%
Balance related to acquisition 14,750 - N/M 14,750 - N/M
Provision for loan losses 3,603 9,603 (62.5%) 14,668 46,813 (68.7%)
Charge offs (5,710) (10,476) (45.5%) (22,202) (37,107) (40.2%)
Recoveries 2,112 2,272 (7.0%) 4,924 5,375 (8.4%)
-------------------------- ---------------------------
Net charge offs (3,598) (8,204) (56.1%) (17,278) (31,732) (45.6%)
-------------------------- ---------------------------
Ending Balance $ 189,762 $ 177,622 6.8% $ 189,762 $ 177,622 6.8%
========================== ===========================
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Credit Quality 4Q04 vs 3Q04 4Q04 vs 4Q03
Dec 31, 2004 Sept 30, 2004 % Change June 30, 2004 Mar 31, 2004 Dec 31, 2003 % Change
-------------------------------------------------------------------------------------------
Nonaccrual loans $ 112,761 $ 81,124 39.0% $ 80,622 $ 88,313 $ 113,944 (1.0%)
Loans 90 or more days past due and
still accruing 2,153 10,309 (79.1%) 5,207 5,258 7,495 (71.3%)
Restructured loans 37 39 (5.1%) 40 42 43 (14.0%)
-------------------------- ----------------------------------------
Total nonperforming loans 114,951 91,472 25.7% 85,869 93,613 121,482 (5.4%)
Other real estate owned 3,915 4,526 (13.5%) 6,613 7,199 5,457 (28.3%)
-------------------------- ----------------------------------------
-------------------------- ----------------------------------------
Total nonperforming assets 118,866 95,998 23.8% 92,482 100,812 126,939 (6.4%)
========================== ========================================
Provision for loan losses 3,603 - N/M 5,889 5,176 9,603 (62.5%)
Net charge offs 3,598 2,973 21.0% 5,626 5,081 8,204 (56.1%)
Allowance for loan losses / loans 1.37% 1.62% 1.69% 1.69% 1.73%
Allowance for loan losses / nonperforming
loans 165.08 191.32 207.27 189.84 146.21
Nonperforming loans / total loans 0.83 0.84 0.81 0.89 1.18
Nonperforming assets / total assets 0.58 0.59 0.60 0.65 0.83
Net charge offs / average loans (annualized) 0.11 0.11 0.21 0.20 0.31
Year-to-date net charge offs / average loans 0.15 0.17 0.20 0.20 0.30
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Period End Loan Composition 4Q04 vs 3Q04 4Q04 vs 4Q03
Dec 31, 2004 Sept 30, 2004 % Change June 30, 2004 Mar 31, 2004 Dec 31, 2003 % Change
-------------------------------------------------------------------------------------------
Commercial, financial & agricultural $ 2,803,333 $ 2,479,764 13.0% $ 2,247,779 $ 2,123,846 $ 2,116,463 32.5%
Real estate - construction 1,459,629 1,152,990 26.6% 1,118,284 1,094,597 1,077,731 35.4%
Commercial real estate 3,933,131 3,242,009 21.3% 3,292,783 3,368,660 3,246,954 21.1%
Lease financing 50,718 49,423 2.6% 48,979 45,998 38,968 30.2%
-------------------------- ----------------------------------------
Commercial 8,246,811 6,924,186 19.1% 6,707,825 6,633,101 6,480,116 27.3%
Residential mortgage 2,714,580 1,943,199 39.7% 1,951,396 1,969,065 1,975,661 37.4%
Home equity (1) 1,866,485 1,290,436 44.6% 1,231,077 1,204,541 1,138,311 64.0%
Installment 1,054,011 672,806 56.7% 666,305 679,903 697,722 51.1%
-------------------------- ----------------------------------------
Retail 2,920,496 1,963,242 48.8% 1,897,382 1,884,444 1,836,033 59.1%
-------------------------- ----------------------------------------
Total loans $ 13,881,887 $ 10,830,627 28.2% $ 10,556,603 $ 10,486,610 $ 10,291,810 34.9%
========================== ========================================
(1) Home equity includes home equity lines and residential mortgage junior liens.
- ------------------------------------------------------------------------------------------------------------------------
-------------------------- -------------
Period End Deposit Composition 4Q04 vs 3Q04 4Q04 vs 4Q03
Dec 31, 2004 Sept 30, 2004 % Change June 30, 2004 Mar 31, 2004 Dec 31, 2003 % Change
-------------------------------------------------------------------------------------------
Demand $ 2,347,611 $ 1,867,905 25.7% $ 1,822,716 $ 1,755,485 $ 1,814,446 29.4%
Savings 1,116,158 936,975 19.1% 948,755 918,608 890,092 25.4%
Interest-bearing demand 2,854,880 2,334,072 22.3% 2,355,287 2,375,492 2,330,478 22.5%
Money market 2,083,717 1,516,423 37.4% 1,477,513 1,542,875 1,573,678 32.4%
Brokered CDs 361,559 186,326 94.0% 263,435 230,983 165,130 119.0%
Other time deposits 4,022,314 2,835,572 41.9% 2,715,886 2,879,315 3,019,019 33.2%
-------------------------- ----------------------------------------
Total deposits $ 12,786,239 $ 9,677,273 32.1% $ 9,583,592 $ 9,702,758 $ 9,792,843 30.6%
========================== ========================================
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N/M - Not meaningful.
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Net Interest Income Analysis - Taxable Equivalent Basis
Associated Banc-Corp Year ended December 31, 2004 Year ended December 31, 2003
---------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
(in thousands) Balance Income/Expense Yield/Rate Balance Income/Expense Yield/Rate
---------------------------------------------------------------------------------------
Earning assets:
Loans: (1) (2) (3)
Commercial $ 6,928,494 $ 350,889 5.06% $ 6,450,523 $ 329,695 5.11%
Residential mortgage 2,170,600 122,453 5.64 2,377,438 142,359 5.99
Retail 2,075,762 122,406 5.90 1,794,538 107,808 6.01
------------------------------ -------------------------------
Total loans 11,174,856 595,748 5.33 10,622,499 579,862 5.46
Investments and other 4,028,036 196,902 4.89 3,324,333 172,405 5.19
------------------------------ -------------------------------
Total earning assets 15,202,892 792,650 5.21 13,946,832 752,267 5.39
Other assets, net 1,162,870 1,023,028
-------------- --------------
Total assets $ 16,365,762 $ 14,969,860
============== ==============
Interest-bearing liabilities:
Savings deposits $ 967,930 $ 3,487 0.36% $ 928,147 $ 4,875 0.53%
Interest-bearing demand deposits 2,406,280 19,874 0.83 1,827,304 15,348 0.84
Money market deposits 1,628,208 14,259 0.88 1,623,438 15,085 0.93
Time deposits, excluding Brokered CDs 3,042,933 76,930 2.53 3,063,873 84,957 2.77
------------------------------ -------------------------------
Total interest-bearing deposits,
excluding Brokered CDs 8,045,351 114,550 1.42 7,442,762 120,265 1.62
Brokered CDs 232,066 3,686 1.59 178,853 2,857 1.60
------------------------------ -------------------------------
Total interest-bearing deposits 8,277,417 118,236 1.43 7,621,615 123,122 1.62
Wholesale funding 4,590,953 96,259 2.10 4,233,621 93,480 2.21
------------------------------ -------------------------------
Total interest-bearing liabilities 12,868,370 214,495 1.67 11,855,236 216,602 1.83
Noninterest-bearing demand 1,867,111 1,677,891
Other liabilities 130,675 135,743
Stockholders' equity 1,499,606 1,300,990
-------------- --------------
Total liabilities and stockholders' equity $ 16,365,762 $ 14,969,860
============== ==============
---------------- -----------------
Net interest income and rate spread (1) $ 578,155 3.54% $ 535,665 3.56%
================ =================
Net interest margin (1) 3.80% 3.84%
Taxable equivalent adjustment $ 25,528 $ 24,903
================ =================
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Three months ended December 31, 2004 Three months ended December 31, 2003
---------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Income / ExpenseYield / Rate Balance Income / Expense Yield / Rate
---------------------------------------------------------------------------------------
Earning assets:
Loans: (1) (2) (3)
Commercial $ 7,702,801 $ 104,124 5.29% $ 6,436,734 $ 80,185 4.88%
Residential mortgage 2,552,396 36,050 5.63 2,105,442 31,045 5.86
Retail 2,603,197 39,751 6.07 1,812,550 26,325 5.75
------------------------------ -------------------------------
Total loans 12,858,394 179,925 5.52 10,354,726 137,555 5.23
Investments and other 4,579,082 53,967 4.71 3,474,266 45,133 5.19
------------------------------ -------------------------------
Total earning assets 17,437,476 233,892 5.31 13,828,992 182,688 5.22
Other assets, net 1,518,969 1,023,398
-------------- --------------
Total assets $ 18,956,445 $ 14,852,390
============== ==============
Interest-bearing liabilities:
Savings deposits $ 1,087,220 $ 959 0.35% $ 922,336 $ 878 0.38%
Interest-bearing demand deposits 2,525,312 5,688 0.90 2,179,546 4,353 0.79
Money market deposits 1,918,149 5,012 1.04 1,572,197 3,391 0.86
Time deposits, excluding Brokered CDs 3,634,972 23,703 2.59 3,067,720 20,132 2.60
------------------------------ -------------------------------
Total interest-bearing deposits,
excluding Brokered CDs 9,165,653 35,362 1.53 7,741,799 28,754 1.47
Brokered CDs 278,812 1,473 2.10 162,116 493 1.21
------------------------------ -------------------------------
Total interest-bearing deposits 9,444,465 36,835 1.55 7,903,915 29,247 1.47
Wholesale funding 5,317,413 32,258 2.38 3,733,731 20,074 2.12
------------------------------ -------------------------------
Total interest-bearing liabilities 14,761,878 69,093 1.85 11,637,646 49,321 1.68
Noninterest-bearing demand 2,214,181 1,775,874
Other liabilities 157,671 129,703
Stockholders' equity 1,822,715 1,309,167
-------------- --------------
Total liabilities and stockholders' equity $ 18,956,445 $ 14,852,390
============== ==============
---------------- -----------------
Net interest income and rate spread (1) $ 164,799 3.46% $ 133,367 3.54%
================ =================
Net interest margin (1) 3.74% 3.81%
Taxable equivalent adjustment $ 6,342 $ 6,230
================ =================
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(1) The yield on tax exempt loans and securities is computed on a taxable equivalent basis using a tax rate of 35% for all periods presented and is net of the effects of certain disallowed interest deductions.
(2) Nonaccrual loans and loans held for sale have been included in the average balances.
(3) Interest income includes net loan fees.
Selected Data on First Federal Acquisition
Associated Banc-Corp
On October 29, 2004, the Corporation consummated its acquisition of First Federal Capital Corp, based in La Crosse, Wisconsin. The acquisition was accounted for under the purchase method; thus, the results of operations of First Federal prior to the consummation date were not included in the accompanying consolidated financial statements. As of acquisition, First Federal operated a $4 billion savings bank with over 90 banking locations serving more than 40 communities in Wisconsin, northern Illinois, and southern Minnesota, building upon and complimenting the Corporation’s footprint.
Per the definitive agreement First Federal shareholders received 0.9525 shares (restated for the Corporation’s 3-for-2 stock split in May 2004) of the Corporation’s common stock for each share of First Federal common stock held, an equivalent amount of cash, or a combination thereof. The Merger Agreement provided that the aggregate consideration paid by the Corporation for the First Federal outstanding common stock must be equal to 90% stock and 10% cash, with the cash consideration based upon the Corporation’s closing stock price on the effective date of the merger. The Corporation’s closing stock price on October 29, 2004 was $34.69 per share. The value of the common stock consideration was based upon the Corporation’s average market price surrounding the date of signing and announcing the definitive agreement. Based upon the aforementioned values for the 90% stock/10% cash, the Corporation issued approximately 19.4 million shares of common stock (valued at approximately $535 million) and $75 million in cash.
To record the transaction, the Corporation assigned estimated fair values to the assets acquired and liabilities assumed. The excess cost of the acquisition over the estimated fair value of the net assets acquired was allocated to identifiable intangible assets with the remainder then allocated to goodwill. The following table summarizes the estimated fair value of the assets acquired a nd liabilities assumed of First Federal at the date of the acquisition.
(In millions, except shares issued)
Investment securities available for sale $ 665
Loans 2,742
Allowance for loan losses (15)
Other assets 256
Mortgage servicing rights 32
Intangible assets 21
Goodwill 452
----------
----------
Total assets acquired 4,153
----------
Deposits 2,701
Borrowings 768
Other liabilities 56
Total liabilities acquired 3,525
----------
Net assets acquired $ 628
==========
Cash consideration $ 90
Stockholders' equity addition 538
----------
$ 628
==========
==========
Shares issued (actual) 19,446,813
==========
Loans:
Commercial $ 1,075
Residential mortgage 786
Home equity 475
Installment 406
----------
Total loans $ 2,742
==========
Deposits:
Noninterest-bearing demand deposits $ 475
Interest-bearing demand deposits 239
Savings deposits 187
Money market deposits 573
Time deposits 1,227
----------
Total deposits $ 2,701
==========
