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Business Services Industry

Associated 2nd Quarter Earnings Per Diluted Share up 12 Percent

Business Wire, July 17, 2003

Business Editors

GREEN BAY, Wis.--(BUSINESS WIRE)--July 17, 2003

Associated Banc-Corp (NASDAQ:ASBC) earned $.76 per diluted share in the quarter that ended June 30, 2003, a 12 percent increase from $.68 per diluted share for the same period in 2002. Net income was $56.7 million, compared to $52.3 million for the comparable quarter of 2002.

Return on average assets was 1.51 percent in the second quarter 2003 compared to 1.47 percent in the second quarter of 2002. Return on average equity was 17.37 percent compared to 16.79 percent in the year-earlier quarter.

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For the six months ended June 30, 2003, diluted earnings per share were $1.53, up 12 percent from $1.37 per diluted share in the same period in 2002. Return on average assets was 1.55 percent and return on average equity was 17.86 percent, compared to 1.51 percent and 17.58 percent, respectively, for the six months ended June 30, 2002.

"Associated is pleased to have delivered such positive results in the second quarter," Associated President and CEO Paul Beideman said. "While lower interest rates have put pressure on our net interest margin, they have also contributed to high levels of mortgage production and sales activity, which contributed significantly to our financial results," he said.

Net interest income was $127 million for the second quarter, compared to $126 million in the year-earlier period, and $127 million for the previous quarter. The net interest margin for second quarter 2003 was 3.79 percent, down from 3.96 percent a year ago and 3.87 percent for first quarter 2003. For the first six months of 2003, net interest income was $255 million, up 5 percent compared to $243 million for the same period of 2002. Net interest margin was 3.83 percent for the first six months of 2003, compared to 3.94 percent for the same period in 2002.

Total loans at the end of the second quarter 2003 were $10.4 billion, an increase of $505 million or 5 percent compared to a year earlier. The growth occurred in commercial loans, up $557 million, or 9 percent, while consumer and residential real estate loans were relatively unchanged compared to a year ago. Total loans, again led by commercial loan growth, were up 4 percent on an annualized basis since March 31, 2003.

Total deposits were $9.5 billion at June 30, 2003, up 5 percent, or $427 million, compared to a year ago. Transaction deposit accounts (demand, savings, interest-bearing demand and money market accounts) were $6.2 billion, up 13 percent over June 30, 2002. Time deposits were $3.3 billion at June 30, 2003, compared to $3.5 billion last year, tempered by the prolonged lower interest rate environment and customer preference to keep funds liquid. Since March 31, 2003, total deposits were up 17 percent on an annualized basis.

The provision for loan losses was $12.1 million for the second quarter of 2003, compared to $12.0 million for the same quarter last year, and $13.0 million for the first quarter in 2003. For the first six months of 2003, the provision for loan losses was $25.1 million, compared to $23.3 million for the same period last year. The ratio of the allowance for loan losses was 1.66 percent of total loans at June 30, 2003, and at March 31, 2003, but up from 1.50 percent at June 30, 2002.

Net chargeoffs for the second quarter of 2003 were $10.1 million, compared to net chargeoffs of $7.6 million for second quarter 2002 and $5.1 million for the first quarter 2003. For the six months that ended June 30, 2003, annualized net chargeoffs were 0.29 percent of average loans, compared to 0.31 percent for the same period last year. Nonperforming loans were $117 million as of June 30, 2003, up from $94.7 million as of March 31, 2003, and $87.3 million a year ago. The increase in nonperforming loans from the first quarter of 2003 is principally related to two customers, one in the construction industry and one in the hospitality industry.

"Most of our commercial customers are managing effectively in the current enviroment and we are working with them as they plan for the future. We believe any significant improvement in asset quality depends on sustained economic improvement," Beideman said.

Noninterest income grew to $70.2 million for the second quarter, compared to $49.9 million in the same period of 2002. The continued strong activity in the mortgage and mortgage refinancing market generated $1.2 billion of mortgages for sale into the secondary market for the second quarter of 2003, similar to the $1.1 billion in first quarter 2003, and up significantly from $0.4 billion in the second quarter of 2002. Mortgage banking revenue of $28.8 million in the second quarter of 2003 was nearly three times that of the year-earlier period. In comparison to the first quarter of 2003, noninterest income was up $5.0 million, with $2.7 million of the increase in mortgage banking income, as well as increased insurance revenue attributable primarily to our previously announced acquisition of CFG Insurance Services, Inc. as of April 1, 2003.

Business Services Industry

Associated 2nd Quarter Earnings Per Diluted Share up 12 Percent

Business Wire, July 17, 2003

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