ASB - Earnings call transcript Q3 2017

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Operator

Good afternoon, everyone and welcome to Associated Banc-Corp’s Third Quarter 2017 Earnings Conference Call. My name is Darren and I will be your operator today. At this time, all participants are in a 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.associatedbank.com.

conference recorded. this reminder, a is being As

As the statements discussion Slide X, statements. that course of during the forward-looking today, similar projections, beliefs outlined expectations, on constitute or management may make

differ actual such any materially Associated’s statements. could from results projected forward-looking anticipated the in or results

recent results today in information detailed most is These subsequent of on SEC website actual readily risk any important materially factors from Associated’s could cause factors herein available XX-K Additional differ that the the SEC section are the factors Associated’s by concerning and to Form information discussed the reference. filings. incorporated

For press this measures to conference release financial a Page slide the in refer non-GAAP please to mentioned the tables. to measures reconciliation of call, presentation the the GAAP of financial and financial XX

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

Philip Flynn

welcome quarter and our you third earnings to Thank call.

today Joining John Officer. are Officer; Chief and Chief Hankerd, our Financial Credit me Niles, our Chris

the by to driven quarter’s the details X. and quarter recorded quarter highlighted on highest earnings year. from second X, interest income, and in this prior gain. from Highlighted results average and on our quarterly were credit for We loans XXXX. green, X% since increased the Slide Loan capital return efficiency X.X mortgage improving third Turning Slide dynamics are growing billion residential

June. contribution adjustable retention on mortgage quarter's mortgages Third balance driven primarily lesser in growth that and growth was from concluded strategy rate X/X by with a in X/X sheet,

our now loan XX% fourth verticals. at in C&I a we outstanding. quarter. saw from most of to our residential expect Residential pace reasonable grow of total within We during QX to Highlighted growth incremental specialized blue, average continue the represent mortgages mortgages

from in lower was commitments utilization utilization rises prior from Notably mortgage utilization to total XX% XX% we warehouse and have the the C&I with increased the which falling reduced much year, summer from than C&I generally last X% QX year. quarter expected. X% prior saw typically line While during

result, our seemingly flat but line reported a As was with C&I C&I industry portfolio trends. in

with seen the REIT's our growth pleased we're However, in outstanding. we've

Our CRE approximately our assuming and acquisition mindful growth exposure real billion be trends closes. in our real Mutual been within was we’re concentrated commercial We've upper as estate in of Midwest exposure moderating mutual estate portfolio Bank presented the in constant. X when are Orange. the Bank is highly commercial the specifically will

the assuming. many Mutual's customers, We about of CRE exposure have deliberate relationships Bank we're existing with incremental we're being so

QX or expect annual or the integration we Slide deposits. share its XXXX. Average our is On pleased of grow Mutual estate be second X to million gather, bank year. Nonetheless, X% released report grown trends. ability to highlight in measure least across the average line at deposit X% successful important real deposit guidance. Bank we're data, our We from deposits increased in believe remain growth Per and and recently to prior we've mid-single XXXX as digit outstanding deliver loan with We track we commercial our muted position of on the quarterly we to X, portfolio for the the from quarter market footprint. FDIC our XXX billion that retain core an

rate while activity X.X translates and annual we've by growth funding in the deposits deposit customer reducing to Over our rate more network transaction our customer X% the X.X billion. course year, an of net deposits which a sensitive increased by billion

QX. received back their sector while during year. deposit to see year in have pronounced we funding significant tend QX, Many half the flows new a first private for in outflows during with seasonal reminder, municipalities As see pattern. of each a the we half the We year balances during of increase fiscal

our dynamics shifted mix from mind borrowings public of strategically these network transaction our funding growth. our and effective fund seasonal manage We we and funding the with and in QX, most deposits time mix fund to away continuously deposits. into During the way cost see

Turning and the XX X, up interest the ago. year. from from XXX to the was X X the second basis of quarter, X.XX% interest a million X points was from second quarter million prior income million margin Net net Slide point up year from and third in basis quarter up

demand bearing year, last the of assets our with funded we nearly earnings Over deposit. XX% non-interest

points benefit the expansion. expanded funds As X asset bearing were benefit ago the the sensitive non-interest the loan deposits demand a margin our net points known rates, basis as profile portfolio. basis by of XX these This to commercial key which is Fed has Total is was quarter-over-quarter points. free increased yields from commercial LIBOR-based our quarter, of reflecting basis contributor and year up XX the benefit

re-pricing from interest-bearing and driven of approximately dynamics deposits. network cost our increased deposit Our reflects of year prior the deposits the X.X, primarily basis XX of points data transaction by the

see our pressure to deposit pricing markets. modest continue competitive within We in

We deposit to have see higher shift balances begun rates. time locking in to customers for

of a pricing market our accounts. also money pressure modest amount in have We seen

we We appropriately to deposits to believe customer markets. continue our in monitor to continue grow the were priced core competitive situation

to continue in year-over-year margin trend. net improving We interest expect

of quarter, income Turning from the second third Slide from down to million X, million million but quarter was XX the X X year. prior non-interest up

loan from million our loans resumed decreased originating year, last in the practice historic Mortgage sales. second banking the as increased the reflecting income from portfolio we for sale year's mortgage of income market. expected, banking secondary quarter As X prior

XX year other insurance ago quarters life by on a basis, of offset items. down prior from some prior income year increased and full shortfall payouts. by non-interest that X line Bank million As policy was up that owned revenue a reminder we income year driven with about guided be will million

the years, XX XX At Over BOLI period in in totaled during a same statement. of to income the million. million end, range XX nearly quarter taxable after COLI last reflected annual BOLI as tax XX income. income tax our investment which is our is exempt, XXX and five effective income million BOLI income BOLI between equivalent was our and Since our million

expect so see overtime. payouts edge BOLI we We on since bought insurance policy policies increasing to haven’t our the of any XXXX, increasing new based

a as to of stream expect be we income result but of volatility revenue years, a course continue a with recurring some the over As of result, will BOLI payouts. coming the policy timing

Slide ago of a $XXX million year from Turning non-interest the to million from X, million expense was prior and the $X $X quarter quarter. up

operations, on continue to advertising the ratio. the from and increased partnership related in with prior by our latest campaigns the streamline as improvement X year-over-year and million development fall X million advertising Bay efficiency Power in Packers solutions quarter and to Business from Green We evidenced our invest that expanded J.D. prior our year, to recognition.

year ongoing prior by Power contact operations channel recognized outstanding from quarter for customer year-over-year recent the the second for Associated's million by driven live consolidation including remain our an of track prior were experience. Occupancy the service and from impact We million year on Whitnell less X J.D. acquisition. X the expense phone the deliver consecutive providing internal to expense efforts. center X% decreased growth than

recent year-to-date a last related the compared stock XX% and standards favorable in a court in tax tax reflecting change to Our rate to ruling. XX% accounting year comparable compensation period effective was

we losses quarter X.XX% quick million XXs high which on to be Slide the the quarter portfolio, the and continue were in of Provision to acquisition prior remain results detailed from driven provide with X the loan a otherwise acquisition XX We of metrics Bank SNC the XX net rates oil total QX loans, The trends charge-offs the of year. in low the the like the problem charge-offs, rate Net effective to credit the loans On fourth in million tax our include Mutual X, from in prior remarkably XXs. you quality to for decreased a by million benign. XX in from year. effective loans, gas quarter. largely improved examination. with prior the full in of decreased QX completed contributing expect million total status charge-offs non-accrual for charge-offs prior quarterly and the from Whitnell. allowance improving the and tax Credit expense update second and to of QX the year potential net all quality quarter to I'd

agreement into you acquire As we entered in Bank to Mutual. an know July,

We first the quarter the our regulatory regulators receive with to meeting we'll we transaction be applications Mutual vote XXXX. the week on merger approvals filed anticipate Bank in and close of will next our allow acquisition. special have to us shareholder its to holding

with we We transaction look our the timeline the planning call. integration Bank also during closing Associated track early the outlined we next last We to Mutual's customers year. to and on forward remain welcoming earnings continue and

around price XXXX The acquisition material existing of centered affluent charitable Whitnell to and The accretive an assets provide the private solutions talented Whitnell Illinois Bank services month, on our that common AUM financial both to have we tax, The repurchased earnings, we and I'd the of ability comprehensive management Turning estate wealth mention by based Brook, announcement to family services and also enhances earnings. Mutual run acquisition, XX, expected $XX.XX. an approximately Oak revenue presence Mid-Western XXXX rate XX a of completed increases of at not base. office firm to our modestly shares more to it banking X XX%. Slide this acquisition adds billion under existing management. professionals impact will planning planning Chicago-land adds transaction clients. be acquisition to earlier million related client public Associated's our and for average but of and the like is following to related financial X.X stock than

those for with comments, So questions. the up open let me call

Operator

question question. be time, Instructions] this Bank. [Operator from proceed first session. question-and-answer Dave Please a with Deutsche will Rochester comes your At of conducting we Our

Dave Rochester

I just on real want expenses start quick. to

horizon an think I prevent level You job constrained wondering, anything see of next control on achieving from a you expense similar obviously expense fairly you year. organic this growth guys if basis? on just was that keeping the year great done you a will

Philip Flynn

On an organic basis, to expect we expenses manage tightly. very would

top consolidating of Bank that. We on will be Mutual

will get when you give January, to an estimate. So we we

Dave Rochester

Great. Okay.

we're good. sounds looks pipeline trend C&I, How are loan XQ. in you the color pipeline there? On in side, into It rates resi how just to looks like expecting C&I the wondering utilization heading any

Philip Flynn

at bit, Really around so hard loan to our build how we outstandings. commercial looking is I all we the industry-wide, well. been goes. somewhat are there starting year, the hear pay estate, real will in see is a to downs pipeline hear as to I really significant scheduled starting folks commercial grow pipeline our that but that that really it’s forecast surprising some from utilization, Likewise,

helped us a decent with very not pipeline. would I but yet the or be seen, that quarter guess new much in would whether year be we So is to the that fourth starting

Dave Rochester

switching Okay, to And quick. great. just deposits real

seasonal inflows and the on network guys next have overtime? that talked those the Has have ultimately again quarter. Or deposits are that’s have will know guys had largely you you it funding by about I You balances? planning of declining. driven reduced maintaining source probably

Chris Niles

that that volatility we source would been and deposits We stable of to rolling coming we much had core particularly having and overtime. down up core with and those we've core said, volatility our those ongoing many be flow for a faster very see we customer view nice some a a clip. those been sticky have at steady in ebb of longstanding our given providers as markets, occurs. That funding. the of relationships as find and think us And I of source funding We’ve

that And source growing won’t of pie, of retail rather and steady our But possible, price are deposits. don’t a it choices, whole always choice, the given funding piece network probably, we for have place that the since into the be us. mosaic. at we deposits with So we sticky the a funds would stable for overall fund but small fit best very looking

Dave Rochester

on that. neutral have at -- Are the competitive. guess upside side, you mentioned pricing thinking margin it. somewhat commercial you’re bit market retail hike next deposit a I or are the that about of thinking you given rate Got this just will we’re more point? talking side, guess appreciate has And means you the now? potential the you've Understood. little what the for been as how dynamics are I asset about you I

Chris Niles

So, modestly be we asset been. have continue as sensitive, we to

There is lag So, about we would period hike. the benefit that we’ve next from rate before. always talked the

all to money As the by the But bit have are this its to continue into a as we a in for a bit competition rates continue turning they move edges, up, will for to little in see. seeing it’s far deposits, just that up, move little whether space. assuming not means we around changes market market the any free

Operator

Please SunTrust. with question Young Michael your proceed next comes question. from of Our

Michael Young

magnitude Hey, and this and timing to nice Does repurchase quarter. good pull But share with your on of time? from just maybe going afternoon. Wanted to around the just past capital of see the kind start especially some get a thoughts was wanted return, that Bank closing with that? to market forward, obviously tackling Mutual you blocking for and

Philip Flynn

about talked fourth priorities that buying share our often for usage We've capital out of in is and mind four. always

remaining if that sense we us shares We something for would made and have authorization board capital buy was that overall managing back to do that. the position, we determine

Michael Young

Okay so specific plans no opportunity? it's that to just continue

Philip Flynn

a transaction wouldn’t Yes. your and plans priority But, phone you had now. lot a close the question. I right be big right on yes, Mike, now we do, even the obviously have to I as perfectly we mean Bank us that's going tell Mutual referencing you if have I to probably for to honest. on

Michael Young

And occupancy expense Is of a obviously run there we to another down a and reaching that that maybe to million that can then sustainable you kind of back trend? just expense the leg opportunities? continue $X great. on move Okay, Do bottom think or rate going lower are take here side the on basis. other

Philip Flynn

a branch that I incremental some combination there closures, the merger Obviously, already expect Well, immediate Bank be we be with we will application. our absorb there which Mutual, in to important trend it's publically recognize branches. in we disclosed will think different

So a rate probably digest. and post different let will that then there will run be merger we

then the we the of right look the into probably that the opportunities. run 'XX. end sort that Let of to toward got sort will and make our new sure the adjust And locations incremental customers we rate of 'XX

Operator

your Next Scott question. with question with Siefers comes O’Neill. from proceed Sandler Please

Scott Siefers

reserve What started kind could on think you a oil and through as just of needs as should last and how clearly still in in credit maybe rest puts then the down credit reserve will the you quarters, and to guys couple on room how about of that see think takes which little about have you portfolio, needs it the bring cost. something, which breathing over about very, we overall And gas First the cost? large? reserving ultimately is And for very you overall the you strong, be providing you overall of dynamic go think gives portfolio? portfolio reserving the of the appropriate and

Philip Flynn

Phil. is this Scott, Sure,

I we're the little So a if out more you that whole look reserves oil on on, bit still the there is at a Slide of XX, would we of tell you than work few update at have gas. and relatively high and a book holding level still credits to X%. complete against process

take this credits we'll point. are believe old of we remaining reserve at that the So to quickly resolving care

gas, oil the yes, really no next we credit come for other don’t quarters. least. So, if oil right stress stress and it's will We -- you're gas the at years we essentially any and in that likely credit allowance than And just over couple the down several rest book. the of of see had

out billion we which and quite charge-offs extraordinary, have If been charge-offs have loan oil book. you on no the plus a almost gas will have we $XX wiped

So isn’t immediately it's quite horizon. sometime all And this posture, that that been credit point, a see normal. will don’t We normal to start on but know to amazing. we revert we the back at

future mediate a it's at guidance not when better the fairly going unlikely provisioning low, give least it's that in we that we will but January. have stay for of So, to sense

Scott Siefers

say. on with expected here expect the we year where kind to a XQ? were maybe from margin lag the But it been we dunk have up your be get to then, or re-pricing year-over-year said near-term in ago you looks about down you the where or in in maybe asset you And given given which I expectations, where say higher, additional or I now move Fed you either a would what actually stable would are be can should or much talk a any Or just pretty should perhaps in little could if of slam year the Phil, like Chris, catch being margin? absent base, you speak

Philip Flynn

take easy let I'll answers, so that Chris answer the I'll one.

we any modest Fed absent expect action, would a uptick. So

think and and the way Fed action for December that that a flatten [fours] period in Fed us action a I assuming However, the confidently through difference there which would very for would are against out. is projecting -- December that

Chris Niles

That third year for What the would Xnd December… second? was a be that the in row within December.

Philip Flynn

The Xnd December.

Chris Niles

of end last the at lag this the had couple for year we've Yes, each years. of

that We right. anticipated haven't yet,

Scott Siefers

Okay.

Chris Niles

the prior the It the months to happens out in up. the period. tends last rate of It of benefit flatten

Scott Siefers

are piggyback And noticed part X one level. had makes That help level higher? be the the perhaps just a just you but will down Phil, is you. a going suggesting little phase to final of Or a just an Thank more but that’s Maybe up bounce then X now? hey, actual Or okay. on, million going ongoing X more Yes, stream right might more you is lot be steady could be BOLI question, this that volatile? to elevated to be sense. or

Philip Flynn

is have from the any a since base of comes and Yes, but is I predict, BOLI about we why XXXX, level starting stream. we older. is, a history, which reason a BOLI pool course happen payouts of I of insured get And There is And to talked if which lot BOLI of the do debts insured, are the they bought haven’t have lot a we insurance. to the of since hard and the that along look revenue investment at sort we think just talk earnings. you BOLI from never is recurring there the then, about there

there who trying such to was going that’s model statements to and volatile So to to to the a but revenue for thinking it's flowing volatile this, up. a difficult stream our income be the model about just spikes revenue come of of line, point with years years is for analysts are all

Scott Siefers

Maybe -- or a volatile periodically? to I of above. don’t want quarterly but What your expect was we are rate mouth, of run slightly above going in X pops words basis, at on to million-ish that still some at these or kind put slightly but

Philip Flynn

is five We upwards. volatility some and even the clearly with a last trend at there a look took years

Operator

Merrill Our comes your of of Ebrahim Please next Poonawala with question. question America proceed Bank from Lynch.

Ebrahim Poonawala

that book. get XX% a had how just Phil, mortgage you bigger is which up book? ALCO terms We've strategy of to terms be? And in you or I NBA what's but portfolio chosen on to to mortgage target should the it's big around that buying that? of loan of these want of question growth. a the that in sort to growth loan total strategy driving securities, a of add sort mentioned Is

Philip Flynn

the largest and in a many have footprint. in are Midwest years we and in Wisconsin the have significant our so, Yes, presence states for mortgage been in other we lender

asset of C&I, sheet the between for balance the and to stated commercial real Our be goal disposition in thirds estate rough mortgage. is residential

a we're mortgage. right in sitting that little under estate, real residential bit that bit So about commercial in little over commercial, there

we'll down hope would We most step that residential would and step classes our grow. percentage integrated, estate Bank will a commercial book. overall little up asset other bit will So Mutual likely. that real to mortgage the continue grow of is once, Certainly,

but all of reminder, you know doing we look them. continue any out don't did on mortgage June. stopped these keep books, we and proportion we feel like in And at a that to some of production this grow XX-year as point we So, we're to

are loans so, balance private sheet putting other on rate the And mortgages forward. banking are CRE loans and largely than going some adjustable what

Ebrahim Poonawala

a other coming who there strategy these it is clients one product cross-sell relationship? of And in deposits a to Or actively to Understood. is products? just in, are terms

Philip Flynn

mortgages, you just often reality doing cross bank the reality. necessarily into cross that's that People customers, is to to tells try don't a any selling sell turns provider. actually sell, with it a but one but of lot they to mortgage their their necessarily don't mortgage trying they're We they're shop bank but for product the

Ebrahim Poonawala

where to quarter. quarter? else moving you warehouse to balances after a grow And not Or understood. in decided of not something due in this this didn't Was compete mortgage you just enough, that point? to pickup in to said given the lead seeing was Fair sensitivity price something there terms that

Philip Flynn

previously is having so the numbers our our of so pricing cheap… industry we seen But perhaps got said, been yet. been, pricing. it's same big a in No, lot they some change other data That report other didn't haven't mortgage competitors I way warehouse.

Ebrahim Poonawala

pricing. Award

Philip Flynn

Perhaps that would explain some but… spreads,

Ebrahim Poonawala

that sense, No, my for taking understood. makes Thanks questions.

Operator

Stephens. of Our next your with question comes question. from Please Terry McEvoy proceed

Terry McEvoy

Thanks that seasonality I'm if was good, you the quarter wondering year-over-year, us a bit down afternoon. in remind looking you insurance at could And was little you the comment then of see could correctly. on business, numbers typically if I third the also just business.

Philip Flynn

that just was But down bit, small Sure, were year-over-year X% third quarter-over-quarter less commissions the to a were lift it we hopefully clarity, first right, quarter-over-quarter. amount of we page at expect a so over the little looking But slightly year-over-year up so certainly table. for fourth third half, was be and it’s the more three back second. insurance quarters see in you're than seasonality the and quarter muted. actually it very little been and is and a do There we the

us hoped the looking make that so it within with in would I pricing to in have. soft business to is the and benefited of clients it sort we hasn't continue market, more we commercial cross-sell necessarily place good of think and book. way headway a market more and But our

Chris Niles

to business. grow the continue we acquisitions for through opportunities look to And

Terry McEvoy

a would the as question Bank my saves from view I conversion about then really you on Do systems have then thinking an fall the the conversion? when updated Mutual bottom-line? And to follow-up. the asked cost

Philip Flynn

earnings was the line are last we The the on that time time call looking at. still we line we when that transaction announced the out laid

Terry McEvoy

lastly. putting X/X market some growth? enough in out you Or out building and to the support X/X the of then there on market just you that mortgages? with Mortgages And are was of ARMs are portfolio portfolio,

Philip Flynn

market we have cetera. in almost it’s Minneapolis, our market. No, -- is cities Chicago, the some big in et There all

is of room. there plenty So,

Operator

of comes Please from proceed with Piper Jaffray. Race next question. Our your Nathan question

Nathan Race

terms brokered in network quarter around the the in I was curious funding thinking and just Guys, of in timing of costs? the outflows context of CDs deposits the of of XQ obviously was

Philip Flynn

Yes, on don’t see between manage look the customer obviously to comes we a to advances, to bank But other and loan the a per core our that network borrowings deposit know would our optimize total providers see of I significant for we deposit our federal what and deposits, home cost quarter. outflow. think push so “any plan I necessary We’ll have network don’t in side se”.

Operator

If there are time, would Philip no to Mr. back to for this comments. further questions like over Flynn at closing call I the turn

Philip Flynn

level Well, joining with to closing, forward results really In our and guidance thanks. earnings with for returns you January, on Thanks XXXX. dynamics and time. announced the look providing increased we’ll year efficiency roll of and since out ahead We our improving bottom-line, at the full we in highest that quarter’s year everybody today. for we return capital, pleased us and were our pleased credit, that expanding

in thanks any as for So, the interest if a in always And meantime your us questions again call. you’ve give Associated.

Operator

does today’s This teleconference. conclude

have disconnect wonderful may this and lines You a time. participation day. at you your for Thank your

Associated Banc-Corp (ASB) 19 Oct 172017 Q3 Earnings call transcript