ASSOCIATED BANC-CORP (ASB)·Q3 2014 Earnings Summary

Executive Summary

• EPS of $0.31 rose 10.7% q/q and 14.8% y/y on stronger net interest income and lower credit provisioning; pretax income increased 9.8% q/q to $75M . Net interest income grew 2.3% q/q to $172.6M while NIM compressed 2 bps to 3.06% .
• Noninterest income increased 3.7% q/q to $74.9M, helped by $4.9M of asset gains, partially offset by a $4M reserve tied to legacy debt protection products that reduced insurance commissions .
• Expenses rose 2.3% q/q to $171.9M, driven by a $2M seasonal marketing campaign and higher FDIC expense; efficiency ratio (FTE) was 69.0% .
• Credit quality continued to improve: potential problem loans fell 24% q/q to $220M; net charge-offs remained low at $2.6M; allowance/loans at 1.55% .
• S&P Global consensus estimates for Q3 2014 were unavailable at request time due to data limits; we cannot assess beats/misses versus Street for EPS/revenue at this time (values from S&P Global were not retrievable).

What Went Well and What Went Wrong

What Went Well

• Loan-driven top-line: Net interest income increased to $172.6M (+$3.9M q/q) on average loan growth of +3% q/q to $17.1B; management highlighted “growth in loan interest income drove top line revenue higher” .
• Credit improvement: Potential problem loans declined 24% q/q to $220M; provision fell to $1M (from $5M in Q2); net charge-offs remained low at $2.6M .
• Capital return: Repurchased ~5M shares at $18.17 average; ROT1CE 10.4%; Tier 1 Common ratio 10.39% at 9/30/14, comfortably above Basel III “well-capitalized” levels .

What Went Wrong

• Margin pressure persisted: NIM slipped 2 bps q/q to 3.06% as asset yields declined 2 bps while liability costs were flat at low levels (deposit costs ~19 bps) .
• Expense uptick: Noninterest expense rose 2% q/q to $172M due to a $2M advertising campaign and higher FDIC expense; efficiency ratio (FTE) ticked to 69.04% .
• Noninterest income mix quality: Insurance commissions fell q/q primarily from a $4M reserve for remediation on legacy debt protection products; noninterest income growth benefited from two real estate asset gains ($3M and $1M) .

Financial Results

Segment/Portfolio Breakdown – Period End Loans ($mm)

KPIs and Credit

Why the changes:

• NIM pressure: Asset yields declined 2 bps q/q while interest-bearing funding costs and deposit costs remained flat at 29 bps and 19 bps, respectively .
• Noninterest income: Up q/q on asset gains ($3M and $1M real estate) and higher mortgage banking, offset by a $4M reserve in insurance commissions .
• Expenses: Advertising +$2M tied to fall campaign; higher FDIC expense from growth in risk‑weighted assets .
• Provision: $1M reflecting improved portfolio metrics and 24% decline in potential problem loans .

Guidance Changes

Note: The Q3 2014 8‑K/press release did not include formal numeric guidance updates; the last disclosed outlook was from the Q2 2014 earnings materials.

Earnings Call Themes & Trends

Management Commentary

• “We are pleased with our strong results this quarter. Growth in loan interest income drove top line revenue higher. We remain focused on investing in technology which is essential to sustain and improve operational efficiency. We will continue our on‑going commitment to build long‑term shareholder value…strengthening our franchise and deploying capital in a disciplined manner.” — Philip B. Flynn, President & CEO .
• Expense context: Advertising expense increased by ~$2M due to the fall marketing campaign; FDIC expense rose with higher risk‑weighted assets .
• Capital and credit stance: Tier 1 Common 10.39% and continued improvement in potential problem loans and low NCOs underpin modest provisioning .

Q&A Highlights

• The Q3 2014 earnings call transcript could not be retrieved from our internal document system due to a database inconsistency. An external copy appears available here: https://de.marketscreener.com/kurs/aktie/ASSOCIATED-BANC-CORP-19343801/news/Transcript-Associated-Banc-Corp-Q3-2014-Earnings-Call-Oct-16-2014-38582110/
• We will update Q&A themes (e.g., margin trajectory, loan pipeline, fee income quality, buybacks cadence) upon successful retrieval of the full transcript.

Estimates Context

• Wall Street consensus (S&P Global) for Q3 2014 EPS and revenue was unavailable at the time of this analysis due to S&P Global daily request limits; therefore, we cannot determine beat/miss vs. consensus for EPS or revenue. Values would be retrieved from S&P Global once access resumes.

Key Takeaways for Investors

• Earnings quality improved: EPS growth driven by stronger loan volumes and lower provisioning, not one‑time items; margin compression persisted but moderated to −2 bps q/q .
• Revenue trajectory constructive: Net interest income grew for the third consecutive quarter; total revenue (non‑GAAP) up to $252M, supported by loan growth and selective asset gains .
• Expense vigilance continues: Short‑term marketing and FDIC costs lifted expenses; management remains focused on technology and efficiency, with FTE efficiency ratio ~69% .
• Credit risk trending favorable: Potential problem loans down sharply and NCOs low, supporting lower provision levels and healthier forward loss outlook .
• Capital deployment as a catalyst: Robust buybacks (~5M shares in Q3) and solid capital ratios support EPS accretion and investor returns; quarterly dividend steady at $0.09 .
• Watch margin path: With deposit costs near floors, asset yield dynamics and mix (e.g., mortgage warehouse, residential) will drive NIM; incremental compression appears modest near‑term .
• Near‑term trading setup: Positive loan/credit trends and buyback pace are supportive; any commentary (from transcript) on Q4 NIM, fee normalization, and expense run‑rate could be stock catalysts when confirmed.