Associated Banc-Corp (NYSE:ASB) Q3 2020 Earnings Conference Call - Final Transcript

Oct 22, 2020 • 05:00 pm ET

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Associated Banc-Corp (NYSE:ASB) Q3 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Philip B. Flynn

the restructuring of our securities and real estate lending subsidiaries and this resulted in a $49 million after-tax benefit during the quarter.

Turning to Slide 3, we've highlighted the impact of our Q3 initiatives on our pre-tax pre-provision income, adjusting for the $60 million of restructuring and prepayment costs, third quarter PTPP would have been $90 million.

On Slide 4, we've provided a walk forward of EPS, which breaks down the various initiatives executed during the quarter. You'll notice when tax effected, the one-time costs of our efficiency initiatives were more than covered by the tax benefits we realized from the reorganization of our subsidiaries. If you were to exclude both the restructuring charges and the tax benefits from our EPS for the third quarter, the adjusted $0.24 result is within $0.02 of our reported GAAP EPS of $0.26. So in effect, the items largely offset each other. The actions this quarter were net additive to our tangible book value.

Turning to Slide 5, average loan balance trends are shown. Total average loans came in at $25 billion, down slightly from the prior quarter's average. Commercial real estate grew $312 million driven by the continuing funding of construction loans and at September 30, we still had $1.9 billion of unfunded commercial real estate commitments. Commercial and business lending on the other hand, declined by $271 million on average, as our general commercial customers, largely use their increased excess liquidity balances to pay down open lines of credit.

Turning to Slide 6, we highlight changes in the end of period loan balances. Period end loans were up $171 million or 1% for the quarter, driven again by strong growth in commercial real estate lending, which was up $298 million. Mortgage activity remains strong, which was reflected in our elevated mortgage warehouse lending balances at quarter end.

Power and utilities lending along with commercial real estate construction and investor loans have continued to grow throughout 2020. I'll also call out, oil and gas which declined nearly $100 million during Q3 and now represents only 1.3% of our total loan portfolio. Consumer lending balances came down during the quarter, driven by refinancing activity and our decision to sell $70 million of pre-payments susceptible mortgages.

Now let me provide an update on our deferral programs. On Slide 7, you can see our commercial deferrals have continued to steadily decline. As of October 19, we have approximately $227 million of active commercial loan deferrals, down 73% from June. Our commercial deferrals have largely rolled off their additional 90-day terms and the remaining deferrals are primarily related to COVID impacted portfolios.

Commercial real estate loan deferrals were $182 million of that $227 million and are primarily related to hotel and retail borrowers. Commercial and business lending deferrals have declined to just $45 million at October 19 and they now comprised less than 1% of the commercial and business loan book. Taken together the $227 million of active commercial and commercial real estate deferrals on October 19