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

Oct 22, 2020 • 05:00 pm ET


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


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Good afternoon, everyone and welcome to Associated Banc-Corp Third Quarter 2020 Earnings Conference Call. My name is Diego and I will be your operator today. [Operator Instructions] We will be conducting a question-and-answer session at the end of this conference. Copies of the slides that will be referenced during today's call are available on the company's website at [Operator Instructions]

As outlined on Slide 1, during the course of the discussions today, management may make statements that constitute, projections, expectations, beliefs, or similar forward-looking statements. Associated actual results could differ materially from the results anticipated or projected in any forward-looking statement. Additional detailed information concerning the important factors that could cause Associated's actual results to differ materially from the information discussed today is readily available on the SEC website in the Risk Factors section of Associated's most recent Form 10-K and subsequent SEC filing. These factors are incorporated herein by reference.

For a reconciliation of the non-GAAP financial measures to the GAAP financial measures mentioned in this conference call, please refer to Pages 21 and 22 of the slide presentation and to Pages 10 and 11 of the press release financial tables. Following today's presentation, instructions will be given for the question-and-answer session.

At this time, I would like to turn the conference over to Philip Flynn, President and CEO for opening remarks. Please go ahead, sir.

Philip B. Flynn

Thank you, and welcome to our third quarter 2020 earnings call. Joining me today are Chris Niles, our Chief Financial Officer; and Patty Ahern, our Chief Credit Officer. Goes without saying that this has been a challenging and unusual year, we pivoted in March in response to pandemic and have been retooling our delivery channel since to best meet our customers' needs. We deployed ourselves to seamlessly interact through virtual channels and have seen an accelerating shift to mobile and online banking. With a likely very low interest rate environment facing us for an extended period, it became critical to respond in areas we can control.

Let's start with the actions we took during the third quarter. On Slide 2, we have detailed our optimization efforts and the restructuring of our securities and real estate lending subsidiaries. During the third quarter, we announced the sale and planned consolidation of 22 of our branches. We also announced the strategic streamlining of several corporate managerial and back-office functions. As a result of these actions, we incurred $16 million of pre-tax charges in Q3, but we expect these changes to drive a $40 million per year reduction and our run rate expenses as we move into this quarter and 2021.

We also deployed about half of our excess liquidity position to repay $950 million of FHLB advances. This prepayment resulted in a $45 million Q3 pre-tax expense; however, we expect this to improve annualized net interest income by $20 million beginning in Q4 2020, continuing through '21, with diminishing but continuing savings through '22 and into '23. Finally, we were able to unlock capital losses through