Associated Banc-corp · NYSE:ASB
Associated Banc-corp — Q2 2020 Earnings Presentation
24 slides from Associated Banc-corp's earnings presentation, Jul 23, 2020
Slide 1: Second Quarter 2020 Earnings Presentation
SECOND QUARTER 2020 EARNINGS PRESENTATION July 23, 2020
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Important note regarding forward-looking statements: Statements made in this presentation 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 management’s
Slide 3: Second Quarter 2020 Update
SECOND QUARTER 2020 UPDATE Associated remains well prepared to face the challenges ahead Associated Banc-Corp Reports Second Quarter 2020 Earnings of $0.94 Per Common Share Including the Gain on Sale of Associated Benefits and Risk Consulting ▪ We continue to support our ▪ 2Q20 net charge offs of $2
Slide 4: Loan Trends
LOAN TRENDS PPP loans, funding of CRE commitments and unusually high line draws on commercial lines drove increases Average Quarterly Loans Average Loan Growth (1Q20 to 2Q20) ($ in billions) ($ in millions) $25.2 $23.4 $23.3 $23.3 PPP $849 $22.8 Mortgage warehouse $364 $10.0 $8.6 $8.5 $8.2 $8.4 Gene
Slide 5: End of Period Loan Trends
END OF PERIOD LOAN TRENDS $1 billion of PPP loans offset by repayment of commercial lines EOP Loan Change1 1Q20 to 2Q20 ($ in millions) Total loans +$467 million (+2%) Commercial and Business Lending +$436 million (+5%) PPP $1,012 – PPP loans were the main driver for growth $163 CRE construction –
Slide 6: Loan Portfolio Overview
LOAN PORTFOLIO OVERVIEW We continue to monitor our COVID affected loan portfolios ($ in millions as of 6/30/2020) Key COVID June 30, Coml. Loan % of Total Deferred % of Total Nonaccrual % of Total 2020 Exposures Loans Loans Loans Loans Loans PPP Loans $ 1,012 $ - - $ - - $ - - Commercial and industr
Slide 7: Key COVID Commercial Loan Exposures
KEY COVID COMMERCIAL LOAN EXPOSURES1 Key COVID commercial loan exposures are spread across multiple industries without large concentrations ($ in millions) % of total C&BL Utilization CRE Utilization Total loans 2 Retailers/Shopping Centers Retailers $ 97.9 45% $ 664.1 89% $ 762.0 3.07% Retail REITs
Slide 8: Commercial COVID-19 Relief
COMMERCIAL COVID-19 RELIEF Commercial deferral requests have slowed during the quarter Loan Deferrals & Modifications1 Deferred and Modified Loans Trend ($ in billions) Loan Deferrals Commercial Real Estate $0.8 – $561 million (66 loans) Corporate CRE – $78 million (140 loans) Regional/Business $0
Slide 9: Consumer COVID-19 Relief
CONSUMER COVID-19 RELIEF Consumer deferral requests have dropped off during the quarter Loan Deferrals & Modifications1 Deferred and Modified Loans Trend Loan Deferrals ($ in billions) ▪ $725 million (2,840 loans) of residential mortgage and consumer loans2 Fee Waivers $0.7 $0.7 ▪ Our COVID-19 Relie
Slide 10: Deferral Trends
DEFERRAL TRENDS We continue to monitor and work with customers on their deferred loans Many customers that participated in payment relief are moving back toward normally scheduled payment structures Consumer – 27% of Customers have made at least one payment post modification Small Business had 1
Slide 11: Allowance Update
ALLOWANCE UPDATE Second quarter ACLL2 covered 1.73% of total loans, an increase of 11 bps from the first quarter Second Quarter ACLL Loan Allowance Walkforward ($ in millions) ▪ Allowance for credit losses on loans (ACLL) increased $35 million, or 9%, at the end of 2Q 2020 from 1Q 2020 ▪ Assumptions
Slide 12: Credit Quality – Quarterly Trends
CREDIT QUALITY – QUARTERLY TRENDS Reserve builds on key commercial exposures and oil and gas while credit metrics remain fairly stable Potential Problem Loans1 Nonaccrual Loans1 ($ in millions) ($ in millions) $307 $167 $172 $234 $63 $137 $129 $118 $50 $166 $161 $67 $63 $29 $4 $133 $36 $23 $32 $43 $
Slide 13: Deposit Portfolio Trends
DEPOSIT PORTFOLIO TRENDS Low-cost deposits continue to grow while reducing high-cost non-core funding Average Quarterly Deposits EOP Funding Change 1Q20 to 2Q20 ($ in billions) ($ in millions) Noninterest-bearing demand $1,467 $26.1 $25.1 $25.2 $24.1 $24.3 Savings $362 $5.1 $5.3 $6.9 Money Market $1
Slide 14: Net Interest Income and Yield Trends
NET INTEREST INCOME AND YIELD TRENDS Fed Funds rate cuts and increased liquidity have pressured year to date NIM down to 2.66% Net Interest Income and Net Interest Margin Average Yields ($ in millions) 4.41% 4.42% 2.88% 4.20% 2.81% 2.83% 2.84% 3.65% 4.05% 3.87% 3.65% 3.14% 3.07% 2.49% 2.99% 3.38% 3.
Slide 15: Noninterest Income Trends
NONINTEREST INCOME TRENDS Mortgage banking grew during the second quarter despite partially offsetting MSR impairment Noninterest Income Trend Gross Mortgage Banking Income ($ in millions) ($ in millions) $20 $15 $(8) $254 $11 $9 $101 $7 $(9) $96 $98 $93 $9 $11 $12 $7 $6 2Q 2019 3Q 2019 4Q 2019 1Q 2
Slide 16: Asset Gains and Losses
ASSET GAINS AND LOSSES Asset Gains of $157 million including the sale of ABRC Asset Gains (Losses) Walkforward ABRC Transaction Terms ($ in millions) Buyer $266 million¹ Purchase — 3x multiple of LTM revenue² Price — 18x multiple of LTM net income² Consideration 100% cash $163 million (net of
Slide 17: Customer Activity Update
CUSTOMER ACTIVITY UPDATE Customer activity is showing positive trends Debit and Credit Card Monthly Branch Activity1 Active Mobile Users3 Purchases2 Branch activity has ticked Customers are beginning to Active mobile users have back up but shifted to drive- use their cards again resulting increased
Slide 18: Expense Trends
EXPENSE TRENDS Expense discipline remains a focus as the second quarter continues downward trend Noninterest Expense Business Development and Advertising ($ in millions) ($ in millions) $201 $204 $198 $8 $2 $192 $8 $4 $1 $183 $7 $6 $2 $1 $4 $71 $76 $82 $76 $72 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020
Slide 19: Strong Capital Position
STRONG CAPITAL POSITION Capital ratios improved during the second quarter bolstered by the sale of ABRC Highlights Capital Ratio Walkdowns ▪ Expect CET1 ratio to grow over balance of 2020 ▪ Regulatory capital ratios not expected to be impacted by PPP ▪ ABRC sale improved the TCE ratio2 by 27 bps Com
Slide 20: 2020 Updated Outlook
2020 UPDATED OUTLOOK We are refining our guidance for the remainder of 2020 ▪ Expect loan to deposit ratio to be ▪ We expect a quarterly expense approximately 90%, excluding run rate of approximately $175M PPP for the rest of the year due to the $15M quarterly reduction of ▪ Target investments / tot
Slide 21: Appendix
APPENDIX
Slide 22: Total Loans Outstanding Balances as of June 30, 2020
TOTAL LOANS OUTSTANDING BALANCES AS OF JUNE 30, 2020 Well diversified $24.8 billion loan portfolio ($ in millions) % of Total % of Total 1 1 06/30/2020 Loans 06/30/2020 Loans 2 C&BL (by NAICS ) CRE (by property type code) Wholesale/Manufacturing $ 1,907 7.7% Multi-Family $ 1,841 7.4% Utilities 1,603
Slide 23: Loan Stratification Outstandings as of June 30, 2020
LOAN STRATIFICATION OUTSTANDINGS AS OF JUNE 30, 2020 C&BL by Geography CRE by Geography Total Loans1 $9.9 billion $5.9 billion Minnesota 8% Illinois Minnesota Illinois Illinois 17% 10% 16% 25% Wisconsin 3 Minnesota Other Texas 25% 10% Midwest2 8% Wisconsin Wisconsin 23% Other 2 29% Other 25% Midwest
Slide 24: Reconciliation and Definitions of Non-GAAP Items
RECONCILIATION AND DEFINITIONS OF NON-GAAP ITEMS ($ IN MILLIONS) Adjusted Noninterest Expense Reconcilation1 2Q19 3Q19 4Q19 1Q20 2Q20 Noninterest expense $198 $201 $204 $192 $183 Acquisition related costs 4 2 1 2 1 Severance / Frontline pay 1 0 4 0 2 Adjusted noninterest expense $193 $199 $199 $190