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Business Services Industry

Associated Earns 68 Cents Per Share in 2nd Quarter

Business Wire, July 18, 2002

Business Editors

GREEN BAY, Wis.--(BUSINESS WIRE)--July 18, 2002

Associated Banc-Corp earned $.68 per diluted share in the quarter ended June 30, 2002, a 7.9 percent increase from $.63 per diluted share for the same period in 2001. For the six months ended June 30, 2002, diluted earnings per share were $1.37 compared to $1.20 for the same period in 2001. All per share numbers have been restated to reflect a 10 percent stock dividend, paid on May 15, 2002 to shareholders of record at the close of business on April 29, 2002.

Return on average assets was 1.50 percent in the first six months compared to 1.36 percent for the same period last year. For the quarter, return on average assets was 1.47 percent, compared to 1.42 percent for the same quarter last year.

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Results include the contribution of the former Signal Financial Corporation of Minnesota, since its acquisition on Feb. 28, 2002. Signal, which added $1.1 billion in total assets, $765 million in loans, and $783 million in deposits, was successfully integrated into Associated's operating platform during the second quarter. Signal had a modest impact on the company's overall results for the second quarter.

Loans grew 10 percent compared to one year ago, including the loans acquired with the Signal acquisition. On an annualized basis, total loans grew 5 percent compared to the first quarter this year. Residential real estate loans decreased between the comparable second quarter periods as customers took advantage of lower rates and continued to refinance into fixed rate mortgages. Residential real estate loans declined 9 percent, annualized, from the first quarter. The company sells most of its new fixed rate mortgage production and refinanced mortgages into the secondary market but retains the servicing of these mortgages as well as the customer relationships. Home equity loans have grown as consumers have taken advantage of lower prevailing borrowing rates. Commercial loan growth has been tempered by customers' uncertainty about the prospect for improved business conditions and their willingness to invest in a volatile economic environment. Commercial loans grew 7 percent on an annualized basis compared to the first quarter of this year.

Noninterest-bearing deposits increased 33 percent compared to last year, to $1.6 billion at June 30, 2002, including the impact of Signal. Total deposits for the same period increased 6 percent. Deposits have grown primarily as the result of an improved company focus on gathering new deposit accounts, customer retention and increasing deposit business with existing customers. Total deposits, excluding CDs, grew 6 percent on an annualized basis compared to the first quarter this year.

Net interest income for the quarter and the six-month period ended June 30, 2002 was $126 million and $243 million, respectively. The company's net interest income benefited from loan growth and an improved mix of loans, deposits and other funding sources, as well as lower interest rates. The second quarter 2002 net interest margin was 3.96 percent compared to 3.56 percent in the year earlier quarter and 3.91 percent in the first quarter of 2002. The company issued $175 million in trust preferred securities during the second quarter to strengthen its regulatory capital position and liquidity. The proceeds will be used for general corporate purposes. For the year, the company has spent $29 million to repurchase approximately 850,000 shares of common stock.

Noninterest income grew 2 percent to $97.3 million for the six months ended June 30, 2002 up from $95.3 million for the same period last year; however, it declined 2 percent compared to the second quarter last year. Including the results of Signal, service charges on deposit accounts increased $2.2 million, commissions from retail insurance and investment products were up $1.6 million, and trust fees increased $.4 million in the second quarter of 2002 compared to the second quarter last year. Mortgage banking fee revenue for the second quarter of 2002 decreased $6 million versus the comparable quarter as refinancing activity declined in 2002 compared to 2001. Despite lower mortgage banking revenue, the company's total mortgage production was stronger than expected for the first half of 2002. Additionally, the noninterest income comparison is affected by a $3 million gain on the bulk sale of mortgage servicing in the second quarter of last year.

With the acquisition of Signal, noninterest expenses increased 11 percent for the second quarter of 2002, compared to 2001. The predominant increases in operating expenses were in personnel and occupancy costs which were up 18 percent and 12 percent, respectively, compared to the year earlier quarter, given a larger employee base and broader branch network as the company assimilated Signal's businesses and operations. Late in the second quarter Signal was successfully integrated into Associated's operating platform, and operating efficiency savings are expected to be realized in the coming quarters. Expense comparisons are also affected by the required adoption of Statement of Financial Accounting Standards No. 142, on January 1, 2002. This ended the amortization of goodwill, an expense of approximately $1.4 million or 2 cents per diluted share, per quarter, in 2001. Excluding Signal and the amortization of goodwill for 2001, noninterest expenses were approximately flat compared to the second quarter of 2001.

Business Services Industry

Associated Earns 68 Cents Per Share in 2nd Quarter

Business Wire, July 18, 2002

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