<DOCUMENT>
<TYPE>13F-HR
<SEQUENCE>1
<FILENAME>r10q601.txt
<DESCRIPTION>FORM 13F
<TEXT>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
------------------------------------------
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
-------------------- -------------------
Commission file number 0-5519
--------------------------------------------------------
Associated Banc-Corp
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1098068
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(State or other jurisdiction of incorporation or organization) (IRS employer
identification no.)
1200 Hansen Road, Green Bay, Wisconsin 54304
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(Address of principal executive offices) (Zip code)
(920) 491-7000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ --------
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of registrant's common stock, par value $0.01
per share, at July 31, 2001, was 66,113,177 shares.
<PAGE>
ASSOCIATED BANC-CORP
TABLE OF CONTENTS
Page No.
PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets -
June 30, 2001, June 30, 2000 and December 31, 2000 3
Consolidated Statements of Income -
Three and Six Months Ended June 30, 2001 and 2000 4
Consolidated Statement of Changes in Stockholders' Equity -
Six Months Ended June 30, 2001 5
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 26
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 6. Exhibits and Reports on Form 8-K 28
Signatures 29
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements:
ASSOCIATED BANC-CORP
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<S> <C> <C> <C>
June 30, June 30, December 31,
2001 2000 2000
-------------- -------------- ----------------
($ in Thousands, except share data)
ASSETS
Cash and due from banks $ 309,521 $ 338,727 $ 368,186
Interest-bearing deposits in other financial institutions 4,692 4,721 5,024
Federal funds sold and securities purchased under agreements to
resell 42,350 116,320 23,310
Investment securities:
Held to maturity-at amortized cost (fair value of $385,283 and
$372,873, in 2000, respectively) --- 391,414 368,558
Available for sale-at fair value (amortized cost of $3,166,009,
$2,915,152, and $2,867,109, respectively) 3,249,373 2,848,595 2,891,647
Loans held for sale 128,192 11,773 24,593
Loans 8,983,678 8,696,417 8,913,379
Allowance for loan losses (126,390) (115,395) (120,232)
-------------- -------------- ----------------
Loans, net 8,857,288 8,581,022 8,793,147
Premises and equipment 122,592 134,924 127,600
Other assets 498,281 570,763
526,329
-------------- -------------- ----------------
Total assets $13,212,289 $12,998,259 $13,128,394
============== ============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $ 1,175,615 $ 1,131,871 $1,243,949
Interest-bearing deposits 7,324,611 8,113,520 8,047,697
-------------- -------------- ----------------
Total deposits 8,500,226 9,245,391 9,291,646
Short-term borrowings 2,958,835 2,555,837 2,598,203
Long-term debt 522,234 122,792 122,420
Accrued expenses and other liabilities 180,316 144,016 147,429
-------------- -------------- ----------------
Total liabilities 12,161,611 12,068,036 12,159,698
Stockholders' equity
Preferred stock --- --- ---
Common stock (par value $0.01 per share,
authorized 100,000,000 shares, issued 66,402,157,
68,798,457 and 66,402,157 shares, respectively) 664 688 664
Surplus 297,289 355,279 296,479
Retained earnings 710,052 624,661 663,566
Accumulated other comprehensive income (loss) 51,857 (42,861) 15,581
Treasury stock at cost (297,054, 262,718 and 285,948 shares,
respectively) (9,184) (7,544) (7,594)
-------------- -------------- ----------------
Total stockholders' equity 1,050,678 930,223 968,696
-------------- -------------- ----------------
Total liabilities and stockholders' equity $ 13,212,289 $ 12,998,259 $ 13,128,394
============== ============== ================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
ITEM 1. Financial Statements Continued:
<TABLE>
<CAPTION>
ASSOCIATED BANC-CORP
Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
2001 2000 2001 2000
----------- ------------- ------------ ------------
(In Thousands, except per share data)
INTEREST INCOME
Interest and fees on loans $178,236 $177,650 $362,611 $349,889
Interest and dividends on investment securities:
Taxable 37,082 40,782 75,654 82,504
Tax exempt 10,042 9,171 20,206 17,367
Interest on deposits in other financial institutions 94 106 215 170
Interest on federal funds sold and securities
purchased under agreements to resell 194 589 641 1,141
----------- ------------- ------------ ------------
Total interest income 225,648 228,298 459,327 451,071
INTEREST EXPENSE
Interest on deposits 78,965 92,137 170,392 173,695
Interest on short-term borrowings 38,140 38,074 81,444 79,495
Interest on long-term debt 4,591 1,725 6,536 3,170
----------- ------------- ------------ ------------
Total interest expense 121,696 131,936 258,372 256,360
----------- ------------- ------------ ------------
NET INTEREST INCOME 103,952 96,362 200,955 194,711
Provision for loan losses 6,365 5,166 11,947 10,881
----------- ------------- ------------ ------------
Net interest income after provision for loan losses 97,587 91,196 189,008 183,830
NONINTEREST INCOME
Trust service fees 7,339 9,526 15,411 19,649
Service charges on deposit accounts 9,550 8,207 18,295 15,681
Mortgage banking 15,391 4,902 24,565 9,492
Credit card and other nondeposit fees 7,234 7,260 14,020 12,536
Retail commissions 4,265 5,337 8,749 10,945
Asset sale gains, net 383 13,043 915 21,307
Investment securities gains (losses), net (4) (5,490) 242 (7,192)
Other 6,871 7,703 13,151 14,014
----------- ------------- ------------ ------------
Total noninterest income 51,029 50,488 95,348 96,432
NONINTEREST EXPENSE
Personnel expense 41,233 38,916 81,538 77,554
Occupancy 5,927 5,672 12,281 11,816
Equipment 3,650 3,755 7,330 7,852
Data processing 4,822 6,708 9,665 12,387
Business development and advertising 3,191 3,269 6,192 6,499
Stationery and supplies 2,330 1,999 4,062 3,823
FDIC expense 446 421 880 898
Other 20,679 20,291 38,780 38,813
----------- ------------- ------------ ------------
Total noninterest expense 82,278 81,031 160,728 159,642
----------- ------------- ------------ ------------
Income before income taxes 66,338 60,653 123,628 120,620
Income tax expense 20,319 16,956 35,523 33,842
----------- ------------- ------------ ------------
NET INCOME $46,019 $43,697 $88,105 $86,778
=========== ============= ============ ============
Earnings per share:
Basic $0.70 $0.63 $1.33 $1.25
Diluted $0.69 $0.63 $1.32 $1.25
Average shares outstanding:
Basic 66,146 68,918 66,148 69,211
Diluted 66,691 69,206 66,676 69,508
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
ITEM 1. Financial Statements Continued:
<TABLE>
<CAPTION>
ASSOCIATED BANC-CORP
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other
Common Retained Comprehensive Treasury
Stock Surplus Earnings Income (Loss) Stock Total
---------- --------- ---------- --------------- ---------- ------------
($ in Thousands, except per share data)
Balance, December 31, 2000 $664 $296,479 $663,566 $15,581 $(7,594) $968,696
Comprehensive income:
Net income --- --- 88,105 --- --- 88,105
Cumulative effect of accounting change, net
of tax --- --- --- (1,265) --- (1,265)
Net loss on derivative instruments, net of
tax --- --- --- (235) --- (235)
Net unrealized holding gains, net of tax --- --- --- 37,776 --- 37,776
------------
Comprehensive income 124,381
------------
Cash dividends, $0.60 per share --- --- (39,695) --- --- (39,695)
Common stock issued:
Stock options exercised --- --- (1,924) --- 5,392 3,468
Tax benefit of stock options --- 810 --- --- --- 810
Purchase of treasury stock --- --- --- --- (6,982) (6,982)
--------- ---------- ---------- --------------- ---------- ------------
Balance, June 30, 2001 $664 $297,289 $710,052 $51,857 $(9,184) $1,050,678
========= ========== ========== =============== ========== ============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
ITEM 1. Financial Statements Continued:
<TABLE>
<CAPTION>
ASSOCIATED BANC-CORP
Consolidated Statements Of Cash Flows
(Unaudited)
For the Six Months Ended June 30,
<S> <C> <C>
2001 2000
--------------- ------------
($ in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $88,105 $86,778
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 11,947 10,881
Depreciation and amortization 9,526 9,957
Amortization (accretion) of:
Mortgage servicing rights 6,609 4,779
Intangibles 4,203 4,491
Investment premiums and discounts (368) 235
Deferred loan fees and costs (1,190) (1,369)
(Gain) loss on sales of securities, net (242) 7,192
Gain on sales of assets, net (4,918) (21,307)
Gain on sales of loans held for sale, net (9,545) (1,135)
Mortgage loans originated and acquired for sale (1,008,849) (156,736)
Proceeds from sales of mortgage loans held for sale 914,795 158,053
Increase in interest receivable and other assets (2,960) (23,466)
Increase (decrease) in interest payable and other liabilities 33,697 5,105
----------------- ---------------
Net cash provided by operating activities 40,810 83,458
----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (76,638) (486,370)
Capitalization of mortgage servicing rights (9,735) (1,779)
Purchases of:
Securities available for sale (292,255) (632,145)
Premises and equipment, net of disposals (3,945) (6,413)
Proceeds from:
Sales of securities available for sale 57,384 458,464
Maturities of securities available for sale 305,138 167,697
Maturities of securities held to maturity --- 22,483
Sale of credit card receivables --- 156,376
Sales of other real estate owned and other assets 13,467 5,591
----------------- ---------------
Net cash used by investing activities (6,584) (316,096)
----------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (791,420) 635,932
Net increase (decrease) in short-term borrowings 360,632 (219,254)
Repayment of long-term debt (186) (1,491)
Proceeds from issuance of long-term debt 400,000 100,000
Cash dividends (39,695) (36,566)
Proceeds from exercise of stock options 3,468 1,992
Sales of branch deposits --- (74,183)
Purchase of treasury stock (6,982) (28,190)
----------------- ---------------
Net cash provided (used) by financing activities (74,183) 378,240
----------------- ---------------
Net increase (decrease) in cash and cash equivalents (39,957) 145,602
Cash and cash equivalents at beginning of period 396,520 314,166
----------------- ---------------
Cash and cash equivalents at end of period $356,563 $459,768
================= ===============
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $270,221 $248,434
Income taxes 32,856 42,995
Supplemental schedule of noncash investing activities:
Securities held to maturity transferred to securities available for sale 372,873 ---
Loans transferred to other real estate 1,740 3,506
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
ITEM 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Notes to Consolidated Financial Statements
NOTE 1: Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly Associated
Banc-Corp's ("Corporation") financial position, results of its operations and
cash flows for the periods presented, and all such adjustments are of a normal
recurring nature. The consolidated financial statements include the accounts of
all subsidiaries. All material intercompany transactions and balances are
eliminated. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.
These interim consolidated financial statements have been prepared according to
the rules and regulations of the Securities and Exchange Commission and,
therefore, certain information and footnote disclosures normally presented in
accordance with accounting principles generally accepted in the United States of
America have been omitted or abbreviated. The information contained in the
consolidated financial statements and footnotes in the Corporation's 2000 annual
report on Form 10-K, should be referred to in connection with the reading of
these unaudited interim financial statements.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ significantly from those estimates.
Estimates that are particularly susceptible to significant change include the
determination of the allowance for loan losses and the valuation of investment
securities and mortgage servicing rights.
NOTE 2: Reclassifications
Certain items in the prior period consolidated financial statements have been
reclassified to conform with the June 30, 2001 presentation.
NOTE 3: Adoption of Statements of Financial Accounting Standards ("SFAS")
As required, on January 1, 2001, the Corporation adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,"
(collectively referred to as "SFAS 133" or as the "statement"). The adoption of
SFAS 133 had an immaterial impact on the consolidated financial statements. See
Note 5 of the notes to consolidated financial statements for a more detailed
discussion.
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," replaces SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
and rescinds SFAS No. 127, "Deferral of the Effective Date of Certain Provisions
of SFAS No. 125." The statement revises the standards for accounting for
securitizations and other transfers of financial assets and requires certain
disclosures, but it also carries over most of the provisions of SFAS No. 125
without modification. The statement provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments of
liabilities based on the application of a financial components approach that
focuses on control. It was effective for transactions occurring after March 31,
2001, and was to be applied prospectively with certain exceptions. The adoption
was not material to the Corporation's financial position or results of
operations.
NOTE 4: Earnings Per Share
Basic earnings per share is calculated by dividing net income available to
common stockholders by the weighted average number of common shares outstanding.
Diluted earnings per share is calculated by dividing net income by the weighted
average number of shares adjusted for the dilutive effect of outstanding stock
options.
Presented below are the calculations for basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
2001 2000 2001 2000
------------- ------------- -------------- --------------
(In Thousands, except per share data)
Net income $46,019 $43,697 $88,105 $86,778
============= ============= ============== ==============
Weighted average shares outstanding 66,146 68,918 66,148 69,211
Effect of dilutive stock options outstanding 545 288 528 297
------------- ------------- -------------- --------------
Diluted weighted average shares outstanding 66,691 69,206 66,676 69,508
============= ============= ============== ==============
Basic earnings per share $0.70 $0.63 $1.33 $1.25
============= ============= ============== ==============
Diluted earnings per share $0.69 $0.63 $1.32 $1.25
============= ============= ============== ==============
</TABLE>
NOTE 5: Derivatives and Hedging Activities
Effective January 1, 2001, the Corporation adopted SFAS 133, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
All derivatives, whether designated in hedging relationships or not, are
required to be recorded on the balance sheet at fair value. If the derivative is
designated as a fair value hedge, the changes in the fair value of the
derivative and of the hedged item attributable to the hedged risk are recognized
in earnings. If the derivative is designated as a cash flow hedge, the effective
portions of changes in the fair value of the derivative are recorded in other
comprehensive income and are recognized in the income statement when the hedged
item affects earnings. Ineffective portions of changes in the fair value of cash
flow hedges are recognized in earnings.
The Corporation uses derivative instruments primarily to hedge the variability
in interest payments or protect the value of certain assets and liabilities
recorded on its balance sheet from changes in interest rates. The predominant
activities affected by the statement include the Corporation's use of interest
rate swaps and certain mortgage banking activities. The adoption of the
statement included the following:
o Under SFAS No. 133, the Corporation was allowed a one-time opportunity to
reclassify investment assets from held-to-maturity ("HTM") to
available-for-sale ("AFS"). Thus upon adoption, the Corporation
reclassified all its HTM securities to AFS. The amortized cost and fair
value of the securities transferred were $369 million and $373 million,
respectively.
o The Corporation designated its interest rate swaps existing at December 31,
2000, to qualify for hedge accounting. The swaps hedge the exposure to
variability in interest payments of variable rate liabilities. These hedges
represent cash flow hedges and were highly effective at adoption. On
adoption, the cumulative effect, net of taxes of $843,000, was recorded as
a decrease to other comprehensive income of $1.3 million.
o The Corporation's commitments to sell groups of residential mortgage loans
that it originates or purchases as part of its mortgage banking business,
as well as its commitments to originate residential mortgage loans are
considered derivatives under SFAS No. 133. The fair value of these
derivatives at adoption, an $11,000 net gain, was recorded directly to the
consolidated statements of income in mortgage banking income.
In accordance with the statement, the Corporation measures the effectiveness of
its hedges on a periodic basis. Any difference between the fair value change of
the hedge versus the fair value change of the hedged item is considered to be
the "ineffective" portion of the hedge. The ineffective portion of the hedge is
recorded as an increase or decrease in the related income statement
classification of the item being hedged. For the mortgage derivatives which are
not accounted for as hedges, changes in the fair value are recorded as an
adjustment to mortgage banking income.
At June 30, 2001, the swaps designated as cash flow hedges have a notional
amount of $500 million, have a weighted average pay/receive rate of 5.61% and
4.73%, respectively, and a weighted average maturity of 54 months. At June 30,
2001, the estimated fair value of the swaps was a $2.5 million loss, or $1.5
million, net of taxes of $1.0 million, carried as a component of other
comprehensive income. There was no ineffective portion to be recorded.
Currently, none of the existing amounts within other comprehensive income are
expected to be reclassified into earnings within the next 12 months.
At June 30, 2001, the swaps designated as fair value hedges have a notional
amount of $29 million, a weighted average pay/receive rate of 7.48% and 6.19%,
respectively, and a weighted average maturity of 62 months. At June 30, 2001,
the estimated fair value of these swaps was a $128,000 gain.
The change in fair value of the mortgage derivatives since adoption of SFAS 133
was a net gain of $924,000 and is recorded in mortgage banking income for the
six months ended June 30, 2001.
NOTE 6: Segment Reporting
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," requires selected financial and descriptive information about
reportable operating segments. The statement uses a "management approach"
concept as the basis for identifying reportable segments. The management
approach is based on the way that management organizes the segments within the
enterprise for making operating decisions, allocating resources, and assessing
performance. The segments reflect the structure of the internal organization,
focusing on financial information that the enterprise uses to make decisions
about the operating matters.
The Corporation's reportable segment is banking, conducted through its bank,
mortgage, insurance, and brokerage subsidiaries. For purposes of segment
disclosure under this statement, these entities have similar economic
characteristics and the nature of their products, services, processes,
customers, delivery channels and regulatory environment are similar.
The "other" segment is comprised of smaller nonreportable segments, including
asset management, consumer finance, treasury, holding company investments, as
well as inter-segment eliminations and residual revenues and expenses,
representing the difference between actual amounts incurred and the amounts
allocated to operating segments. The net loss for the "other" segment in 2001
versus 2000 was predominantly driven by the lower trust revenue.
Selected segment information is presented below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
---------------------------------------------------------- -------------- ------------- --------------- --------------
Banking Other Eliminations Consolidated
Total
---------------------------------------------------------- -------------- ------------- --------------- --------------
As of and for the three months ended June 30, 2001 ($ in Thousands)
Total assets $13,881,860 $1,208,585 $(1,878,156) $13,212,289
============== ============= =============== ==============
Interest income $235,721 $4,144 $(14,217) $225,648
Interest expense 133,884 2,029 (14,217) 121,696
-------------- ------------- --------------- --------------
Net interest income 101,837 2,115 --- 103,952
Provision for loan losses 6,913 (548) --- 6,365
Noninterest income 70,567 14,854 (34,392) 51,029
Depreciation and amortization 9,260 281 --- 9,541
Other noninterest expense 87,519 19,610 (34,392) 72,737
Income taxes 19,819 500 --- 20,319
-------------- ------------- --------------- --------------
Net income (loss) $48,893 $(2,874) $--- $46,019
============== ============= =============== ==============
As of and for the three months ended June 30, 2000
Total assets $13,793,634 $1,154,441 $(1,949,816) $12,998,259
============== ============= =============== ==============
Interest income $241,107 $5,418 $(18,227) $228,298
Interest expense 147,007 3,156 (18,227) 131,936
-------------- ------------- --------------- --------------
Net interest income 94,100 2,262 --- 96,362
Provision for loan losses 3,911 1,255 --- 5,166
Noninterest income 64,234 18,089 (31,835) 50,488
Depreciation and amortization 9,187 280 --- 9,467
Other noninterest expense 85,031 18,368 (31,835) 71,564
Income taxes 17,550 (594) --- 16,956
-------------- ------------- --------------- --------------
Net income $42,655 $1,042 $--- $43,697
============== ============= =============== ==============
---------------------------------------------------------- -------------- ------------- --------------- --------------
<PAGE>
---------------------------------------------------------- -------------- ------------- --------------- --------------
Banking Other Eliminations Consolidated
Total
---------------------------------------------------------- -------------- ------------- --------------- --------------
As of and for the six months ended June 30, 2001 ($ in Thousands)
Total assets $13,881,860 $1,208,585 $(1,878,156) $13,212,289
============== ============= =============== ==============
Interest income $482,552 $8,665 $(31,890) $459,327
Interest expense 285,309 4,953 (31,890) 258,372
-------------- ------------- --------------- --------------
Net interest income 197,243 3,712 --- 200,955
Provision for loan losses 12,200 (253) --- 11,947
Noninterest income 130,329 32,755 (67,736) 95,348
Depreciation and amortization 19,776 562 --- 20,338
Other noninterest expense 170,821 37,305 (67,736) 140,390
Income taxes 34,169 1,354 --- 35,523
-------------- ------------- --------------- --------------
Net income (loss) $90,606 $(2,501) $--- $88,105
============== ============= =============== ==============
As of and for the six months ended June 30, 2000
Total assets $13,793,634 $1,154,441 $(1,949,816) $12,998,259
============== ============= =============== ==============
Interest income $475,910 $10,445 $(35,284) $451,071
Interest expense 285,317 6,327 (35,284) 256,360
-------------- ------------- --------------- --------------
Net interest income 190,593 4,118 --- 194,711
Provision for loan losses 9,408 1,473 --- 10,881
Noninterest income 125,137 36,876 (65,581) 96,432
Depreciation and amortization 18,652 575 --- 19,227
Other noninterest expense 171,506 34,490 (65,581) 140,415
Income taxes 33,175 667 --- 33,842
-------------- ------------- --------------- --------------
Net income $82,989 $3,789 $--- $86,778
============== ============= =============== ==============
---------------------------------------------------------- -------------- ------------- --------------- --------------
</TABLE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and the
Results of Operations
Forward-Looking Statements
Forward-looking statements have been made in this document that are subject to
risks and uncertainties. These forward-looking statements describe future plans
or strategies and include Associated Banc-Corp's expectations of future results
of operations. The words "believes," "expects," "anticipates," or other similar
expressions identify forward-looking statements.
Shareholders should note that many factors, some of which may be discussed
elsewhere in this document could affect the future financial results of
Associated Banc-Corp (the "Corporation") and could cause those results to differ
materially from those expressed in forward-looking statements contained in this
document. These factors include the following:
- operating, legal, and regulatory risks;
- economic, political, and competitive forces affecting the Corporation's
banking, securities, asset management, and credit services businesses; and
- the risk that the Corporation's analyses of these risks and forces could be
incorrect and/or that the strategies developed to address them could be
unsuccessful.
These factors should be considered in evaluating the forward-looking statements,
and undue reliance should not be placed on such statements.
Overview
The following discussion and analysis is presented to assist in the
understanding and evaluation of the Corporation's financial condition and
results of operations. It is intended to complement the unaudited consolidated
financial statements, footnotes, and supplemental financial data appearing
elsewhere in this Form 10-Q and should be read in conjunction therewith.
Management continually evaluates strategic acquisition opportunities and other
various strategic alternatives that could involve the sale or acquisition of
branches or other assets, or the consolidation or creation of subsidiaries.
In the second quarter of 2001, the Corporation merged all of the Wisconsin bank
affiliates (Associated Bank South Central, Associated Bank North, Associated
Bank Milwaukee, Associated Bank, National Association, Associated Bank
Lakeshore, National Association, and Associated Bank Green Bay, National
Association) into a single national banking charter, headquartered in Green Bay,
Wisconsin, under the name Associated Bank, National Association. Certain nonbank
subsidiaries (Associated Leasing, Inc. and Associated Banc-Corp Services, Inc.)
also merged with and into the resultant bank, becoming operating divisions of
Associated Bank, National Association.
Results of Operations - Summary
Net income for the first six months of 2001 ("YTD01") totaled $88.1 million, or
$1.33 and $1.32 for basic and diluted earnings per share ("EPS"). Comparatively,
net income for the first six months of 2000 ("YTD00") was $86.8 million, or
$1.25 for basic and diluted EPS, respectively. YTD01 results generated an
annualized return on average assets ("ROA") of 1.36% and an annualized return on
average equity ("ROE") of 17.61%, compared to 1.38% and 19.19%, respectively,
for the same period in 2000. YTD01 net interest margin was 3.45% compared to
3.41% for the comparable period in 2000.
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
TABLE 1
Summary Results of Operations: Trends
($ in Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
2001 2001 2000 2000 2000
---------------------------------------------- -------------- ------------- ------------- -------------- ------------
Net income (Qtr) $46,019 $42,086 $39,701 $41,504 $43,697
Net income (YTD) $88,105 $42,086 $167,983 $128,282 $86,778
Earnings per share - basic (Qtr) $0.70 $0.64 $0.60 $0.61 $0.63
Earnings per share - basic (YTD) $1.33 $0.64 $2.46 $1.86 $1.25
Earnings per share - diluted (Qtr) $0.69 $0.63 $0.60 $0.61 $0.63
Earnings per share - diluted (YTD) $1.32 $0.63 $2.46 $1.86 $1.25
Return on average assets (Qtr) 1.42% 1.31% 1.21% 1.28% 1.39%
Return on average assets (YTD) 1.36% 1.31% 1.31% 1.35% 1.38%
Return on average equity (Qtr) 18.02% 17.18% 16.95% 17.75% 19.06%
Return on average equity (YTD) 17.61% 17.18% 18.26% 18.70% 19.19%
Efficiency ratio (Qtr) * 51.38% 53.68% 54.08% 56.63% 56.03%
Efficiency ratio (YTD) * 52.48% 53.68% 55.48% 55.95% 55.61%
Net interest margin (Qtr) 3.56% 3.34% 3.20% 3.25% 3.37%
Net interest margin (YTD) 3.45% 3.34% 3.36% 3.35% 3.41%
* Noninterest expense divided by sum of taxable equivalent net interest income
plus noninterest income, excluding investment securities gains (losses), net,
and asset sales gains, net.
</TABLE>
Net Interest Income and Net Interest Margin
Net interest income on a fully taxable equivalent basis for the six months ended
June 30, 2001, was $212.1 million, up $7.3 million or 3.6% from the comparable
period last year. This increase was primarily attributable to the benefit of
lower interest rates and a higher level of earning assets.
Interest rates fell during the first six months of 2001, but rose during the
same period in 2000. Comparatively, while the average Federal funds rate for
YTD01 was 101 basis points ("bp") lower than for YTD00, the rate at June 30,
2001 was 275 bp lower than that at June 30, 2000.
The net interest margin for YTD01 was 3.45%, up 4 bp from 3.41% for YTD00. This
comparable period increase is attributable to a 3 bp increase in interest rate
spread and a 1 bp higher contribution from net free funds. The yield on earning
assets was 7.70% for YTD01, down 2 bp from the comparable period last year.
The cost of interest-bearing liabilities was 4.81% for YTD01, down 5 bp compared
to YTD00. The average cost of interest-bearing deposits excluding brokered CDs
increased 12 bp and was offset by a reduction of 57 bp in the cost of wholesale
funds (comprised of short-term borrowings and long-term debt). The increased
cost of interest-bearing deposits was primarily due to longer-term CDs
originated in the second half of 2000.
Earning assets increased by $326 million (2.7%) over the comparable period last
year, while interest-bearing liabilities grew $231 million (2.2%). Loans growth,
particularly in commercial loans, was the primary contributor to the growth in
earning assets, up an average of $497 million (5.8%). The ratio of average loans
to earning assets increased, with loans making up 73.9% of earning assets for
YTD01 compared to 71.8% for YTD00.
Average investments decreased $171 million (5.1%), primarily in average U.S.
government agencies and mortgage related securities. The 2.2% growth in
interest-bearing liabilities was primarily attributable to increases in
wholesale funding, which was up $501 million, offset by a $146 million reduction
in interest-bearing deposits excluding brokered CDs and a $124 million decrease
in brokered CDs.
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE 2
Net Interest Income Analysis-Taxable Equivalent Basis
($ in Thousands)
----------------------------------------------------------------------------------------------------------------------
Six Months ended June 30, 2001 Six Months ended June 30, 2000
------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------------------------------------- ------------- ------------ ---------- ------------- ----------- ----------
Loans $9,024,936 $363,185 8.04% $8,527,965 $350,515 8.17%
Investments and other 3,187,837 107,284 6.73 3,358,462 110,594 6.59
------------- ------------ ------------- -----------
Total earning assets 12,212,773 470,469 7.70 11,886,427 461,109 7.72
Other assets, net 811,744 736,885
------------- -------------
Total assets $13,024,517 $12,623,312
============= =============
Interest-bearing deposits, excluding
brokered CDs $7,040,467 154,527 4.43% $7,186,576 154,201 4.31%
Brokered CDs 505,257 15,866 6.33 629,965 19,494 6.22
Wholesale funding 3,237,342 87,979 5.41 2,735,864 82,665 5.98
------------- -------------
------------ -----------
Total interest-bearing liabilities 10,783,066 258,372 4.81 10,552,405 256,360 4.86
------------ -----------
Demand, non-interest bearing 1,100,142 1,042,500
Other liabilities 132,438 119,145
Stockholders' equity 1,008,871 909,262
------------- -------------
Total liabilities and equity $13,024,517 $12,623,312
============= =============
Interest rate spread 2.89% 2.86%
Net free funds 0.56 0.55
---------- ----------
Net interest income, taxable equivalent,
and net interest margin $212,097 3.45% $204,749 3.41%
============ ========== =========== ==========
Tax equivalent adjustment $11,142 $10,038
------------ -----------
Net interest income, as reported $200,955 $194,711
============ ===========
------------------------------------------- ------------- ------------ ---------- ------------- ----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE 2 (continued)
Net Interest Income Analysis-Taxable Equivalent Basis
($ in Thousands)
----------------------------------------------------------------------------------------------------------------------
Three Months ended June 30, 2001 Three Months ended June 30, 2000
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------------------------------------- ------------- ------------ ---------- ------------- ----------- ----------
Loans $9,063,780 $178,525 7.84% $8,596,648 $178,001 8.23%
Investments and other 3,164,578 52,664 6.66% 3,334,295 55,618 6.67
------------- ------------ ------------- -----------
Total earning assets 12,228,358 231,189 7.53% 11,930,943 233,619 7.79
Other assets, net 808,237 743,230
------------- -------------
Total assets $13,036,595 $12,674,173
============= =============
Interest-bearing deposits,
excluding brokered CDs $7,040,448 73,778 4.20% $7,155,538 78,326 4.62%
Brokered CDs 348,965 5,187 5.96 873,112 13,811 6.36
Wholesale funding 3,371,135 42,731 5.01 2,535,132 39,799 6.21
------------- ------------ ------------- -----------
Total interest-bearing liabilities 10,760,548 121,696 4.51 10,563,782 131,936 5.00
------------ -----------
Demand, non-interest bearing 1,115,347 1,058,252
Other liabilities 136,413 130,154
Stockholders' equity 1,024,287 921,985
------------- -------------
Total liabilities and equity $13,036,595 $12,674,173
============= =============
Interest rate spread 3.02% 2.79%
Net free funds 0.54 0.58
---------- ----------
Net interest income, taxable equivalent,
and net interest margin $109,493 3.56% $101,683 3.37%
============ ========== =========== ==========
Tax equivalent adjustment $5,541 $5,321
------------ -----------
Net interest income, as reported $103,952 $96,362
------------------------------------------- ------------- ------------ ---------- ------------- ----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
TABLE 3
Volume / Rate Variance - Taxable Equivalent Basis
($ in Thousands)
-----------------------------------------------------------------------------------------------------------------------
Comparison of
Six months ended June 30, 2001 versus 2000
Variance Attributable to
<S> <C> <C> <C>
Income/
Expense
Variance * Volume Rate
-------------------------------------------------------- --------------------- --------------------- --------------
INTEREST INCOME
Loans $ 12,670 $ 23,154 $ (10,484)
Investments and other (3,310) (5,394) 2,084
--------------------- --------------------- --------------
Total interest income 9,360 17,760 (8,400)
INTEREST EXPENSE
Interest-bearing deposits excluding brokered CDs $ 326 $ (3,645) $ 3,971
Brokered CDs (3,628) (2,960) (668)
Wholesale funding 5,314 13,218 (7,904)
--------------------- --------------------- --------------
Total interest expense 2,012 6,613 (4,601)
--------------------- --------------------- --------------
Net interest income $ 7,348 $ 11,147 $ (3,799)
===================== ===================== ==============
* The change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the relationship
of the absolute dollar change in each.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
TABLE 3 (continued)
Volume / Rate Variance - Taxable Equivalent Basis
($ in Thousands)
--------------------------------------------------------------------------------------------
Comparison of
Three months ended June 30, 2001 versus 2000
Income/ Variance Attributable to
Expense
Variance * Volume Rate
------------------------------------------------- ------------- ------------- ------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $ 524 $11,076 $(10,552)
Investments and other (2,954) (2,609) (345)
------------- ------------- ------------
Total interest income (2,430) 8,467 (10,897)
INTEREST EXPENSE
Interest-bearing deposits excluding brokered CDs $ (4,548) $(1,001) $ (3,547)
Brokered CDs (8,624) (5,596) (3,028)
Wholesale funding 2,932 10,597 (7,665)
------------- ------------- ------------
Total interest expense (10,240) 4,000 (14,240)
------------- ------------- ------------
Net interest income $ 7,810 $ 4,467 $ 3,343
================================================= ============= ============= ============
</TABLE>
Provision for Loan Losses
YTD01 provision for loan losses was $11.9 million, up $1.0 million from YTD00.
YTD01 net charge-offs as a percent of average loans (on an annualized basis)
were 0.13% compared to YTD00 of 0.11%. The ratio of the allowance for loan
losses to total loans was 1.41%, up from the 1.33% for YTD00. See Table 8.
The provision for loan losses results from the methodology used to determine the
adequacy of the allowance for loan losses which focuses on changes in the size
and character of the loan portfolio, changes in levels of impaired and other
nonperforming loans, historical losses on each portfolio category, the risk
inherent in specific loans, concentrations of loans to specific borrowers or
industries, existing economic conditions, the fair value of underlying
collateral, and other factors which could affect potential credit losses. See
additional discussion under the "Allowance for Loan Losses" section.
Noninterest Income
YTD01 noninterest income was $95.3 million, down $1.1 million (1.1%) compared to
YTD00. Primary categories that have impacted the change between comparable
periods were mortgage banking, net gains (losses) on both investment securities
and asset sales, and trust service fees.
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
TABLE 4
Noninterest Income
($ in Thousands)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2nd Qtr. 2nd Qtr. Dollar Percent YTD YTD Dollar Percent
2001 2000 Change Change 2001 2000 Change Change
------------------------------------ -------- --------- --------- --------- --------- --------- --------- -----------
Trust service fees $7,339 $9,526 $(2,187) (23.0)% $15,411 $19,649 $(4,238) (21.6)%
Service charges on deposit accounts 9,550 8,207 1,343 16.4 18,295 15,681 2,614 16.7
Mortgage banking 15,391 4,902 10,489 214.0 24,565 9,492 15,073 158.8
Credit card & other nondeposit fees 7,234 7,260 (26) (0.4) 14,020 12,536 1,484 11.8
Retail commissions 4,265 5,337 (1,072) (20.1) 8,749 10,945 (2,196) (20.1)
Bank owned life insurance income 3,184 3,131 53 1.7 6,318 6,030 288 4.8
Asset sale gains, net 383 13,043 (12,660) (97.1) 915 21,307 (20,392) (95.7)
Other 3,687 4,572 (885) (19.4) 6,833 7,984 (1,151) (14.4)
-------- --------- --------- --------- --------- --------- --------- -----------
Subtotal $51,033 $55,978 $(4,945) (8.8)% $95,106 $103,624 $(8,518) (8.2)%
Investment securities gains
(losses), net (4) (5,490) 5,486 (99.9) 242 (7,192) 7,434 (103.4)
-------- --------- --------- --------- --------- --------- --------- -----------
Total noninterest income $51,029 $50,488 $541 1.1% $95,348 $96,432 $(1,084) (1.1)%
======== ========= ========= ========= ========= ========= ========= ===========
Subtotal, net of asset sale gains $50,650 $42,935 $7,715 18.0% $94,191 $82,317 $11,874 14.4%
==================================== ======== ========= ========= ========= ========= ========= ========= ===========
</TABLE>
Trust service fees decreased $4.2 million, or 21.6%, between the comparable
six-month periods. The change was predominantly due to a decrease in the market
value of assets under management, primarily from the declines in the stock and
bond markets between the comparable periods, and competitive market conditions.
Service charges on deposit accounts were up $2.6 million, or 16.7%, primarily
due to YTD01 benefiting from the 2000 mid-year rate increases in non-sufficient
fund/overdraft charges and other service charges.
Mortgage banking income consists of servicing fees, the gain or loss on sales of
mortgage loans to the secondary market, gains on sales of servicing, and
production-related revenue (origination, underwriting and escrow waiver fees).
Mortgage banking income increased $15.1 million, more than double the YTD00
level. The increase was primarily a result of a significant increase in
secondary mortgage loan production and related sales between comparable periods
($1 billion of production in YTD01 versus $157 million in YTD00). The higher
production levels positively impacted gains on sales (up $13.3 million, of
which, $935,000 was related to gains in the fair value of mortgage derivatives
and $4.0 million was due to the sale of mortgage servicing) and volume related
fees (up $1.8 million). The portfolio of loans serviced for others was down
($5.0 billion at YTD01, down 9% from $5.5 billion at YTD00) due to the sales of
mortgage servicing rights of a portion of the portfolio.
Credit card and other nondeposit fees were $14.0 million for YTD01, an increase
of $1.5 million or 11.8% over YTD00. Credit card revenue was enhanced by the
April 2000 acquisition agreement and five-year agency agreement with Citibank
USA which provide for agent fees and other income on new and existing card
business.
Retail commission income (which includes commissions from insurance and
brokerage product sales) was down $2.2 million compared to YTD00, primarily due
to a weaker stock market and lower interest rate environment between comparable
periods. Insurance commissions declined $993,000, while brokerage commissions
declined $1.2 million.
Net asset sale gains decreased $20.4 million versus YTD00, due to the gain on
sale of $128 million credit card receivables ($12.9 million) and the net premium
on the sales of deposits of five branches ($8.2 million) during YTD00.
Other noninterest income decreased $1.2 million, or 14.4% from YTD00, of which
$1.5 million was recognized during the second quarter of 2000 in connection with
an interim servicing agreement with Citibank USA related to the credit card
receivable sale.
Net investment securities gains (losses) increased $7.4 million versus YTD00.
The YTD00 net losses of $7.2 million were from securities sold to mitigate
interest rate risk and enhance future yields.
Noninterest Expense
Noninterest expense remained relatively unchanged between comparable periods, at
$160.7 million for YTD01 versus $159.6 million for YTD00. Additionally,
excluding a $2.2 million valuation adjustment on mortgage servicing rights in
YTD01, noninterest expense was slightly lower (down $1.1 million, or 0.7%) than
the same period last year.
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
TABLE 5
Noninterest Expense
($ in Thousands)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2nd Qtr. 2nd Qtr. Dollar Percent YTD YTD Dollar Percent
2001 2000 Change Change 2001 2000 Change Change
-------------------------------------- --------- -------- -------- -------- --------- ---------- --------- ---------
Personnel expense $41,233 $38,916 $2,317 6.0% $81,538 $77,554 $3,984 5.1%
Occupancy 5,927 5,672 255 4.5 12,281 11,816 465 3.9
Equipment 3,650 3,755 (105) (2.8) 7,330 7,852 (522) (6.6)
Data processing 4,822 6,708 (1,886) (28.1) 9,665 12,387 (2,722) (22.0)
Business development & advertising 3,191 3,269 (78) (2.4) 6,192 6,499 (307) (4.7)
Stationery and supplies 2,330 1,999 331 16.6 4,062 3,823 239 6.3
FDIC expense 446 421 25 5.9 880 898 (18) (2.0)
Mortgage servicing rights
amortization 2,710 2,350 360 15.3 6,609 4,779 1,830 38.3
Intangible amortization expense 2,102 2,238 (136) (6.1) 4,203 4,491 (288) (6.4)
Legal and professional fees 777 2,201 (1,424) (64.7) 1,669 3,796 (2,127) (56.0)
Other 15,090 13,502 1,588 11.8 26,299 25,747 552 2.1
-------------------------------------- --------- -------- -------- -------- --------- ---------- --------- ---------
Total noninterest expense $82,278 $81,031 $1,247 1.5% $160,728 $159,642 $1,086 0.7%
====================================== ========= ======== ======== ======== ========= ========== ========= =========
</TABLE>
Personnel expense increased $4.0 million or 5.1% over YTD00, and represented
50.7% of total noninterest expense in YTD01 compared to 48.6% in YTD00. Salary
expense increased $1.7 million or 2.7% between comparable periods, due primarily
to merit increases, partially offset by the decline in full-time equivalent
employees. Average full-time equivalent employees were down 1.9% to 3,850 for
YTD01. Fringe benefits increased $2.3 million (14.8%) over YTD00, primarily the
result of higher premium-based benefits.
Occupancy expense increased primarily due to rate increases in utilities, while
equipment expense declined predominantly in computer depreciation expense. Data
processing costs decreased due to lower overall vendor costs and lower credit
card processing costs given the sale of the credit card receivables in April
2000. Business development and advertising declined, primarily in television
advertising.
Mortgage servicing rights amortization expense includes the amortization of the
mortgage servicing rights asset and increases or decreases to the valuation
allowance associated with the mortgage servicing rights asset. Amortization of
mortgage servicing rights increased by $1.8 million between comparable periods,
predominantly driven by the addition of a $2.2 million valuation adjustment
during YTD01, reflecting the decline in interest rates in 2001.
Legal and professional fees were down $2.1 million between comparable periods,
principally in consultant fees. Other expense was $26.3 million, up $552,000
from YTD00, due primarily to increased mortgage loan expenses related to the
higher secondary mortgage loan production during 2001 versus 2000.
Income Taxes
Income tax expense for YTD01 was $35.5 million, up $1.7 million or 5.0% from
YTD00. The effective tax rate (income tax expense divided by income before
taxes) was 28.7% and 28.1% for YTD01 and YTD00, respectively.
Balance Sheet
At June 30, 2001, total assets were $13.2 billion, an increase of $214 million,
or 1.6%, over June 30, 2000. Loans grew $287 million, or 3.3%, since June 30,
2000. Commercial loans (up $536 million or 12%), now comprise 55% of total
loans, consistent with Corporate strategic objectives, while residential real
estate loans tempered overall loan growth (down $378 million or 12%) given the
high refinance activity that occurred in 2001. Loans held for sale grew $116
million as a result of the increased residential mortgage loan activity between
periods. Total deposits were down $745 million or 8.1%, primarily in brokered
CDs which were down $644 million since June 30, 2000. Total deposits excluding
brokered CDs ("retail deposits") were down $101 million or 1.2%. Demand deposits
grew $44 million (3.9%), representing 14% to total deposits and to retail
deposits at June 30, 2001, compared to 12% and 14%, respectively, a year
earlier.
Since year-end 2000, total assets grew $84 million, primarily in loans. Loans
increased $70 million (1.6% annualized), to $9.0 billion at June 30, 2001, with
continued mix changes as noted in Table 6. Deposits decreased $791 million
(17.2% annualized), to $8.5 billion at June 30, 2001, led by brokered CDs which
decreased $593 million since year-end 2000 (see Table 7).
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
TABLE 6
Period End Loan Composition
($ in Thousands)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
June 30, % of June 30, % of Dec. 31, % of
2001 Total 2000 Total 2000 Total
--------------------------------------------- -------------- ------- -------------- --------- ------------- --------
Commercial, financial & agricultural ("CF&A
loans") $1,774,451 20% $1,552,203 18% $1,657,322 19%
Real estate-construction 749,185 8 564,084 6 660,732 7
Commercial real estate 2,401,869 27 2,265,142 26 2,287,946 26
Lease financing 14,026 -- 22,483 -- 14,854 --
-------------- ------- -------------- --------- ------------- --------
Commercial 4,939,531 55 4,403,912 50 4,620,854 52
Residential real estate 2,863,382 32 3,241,495 38 3,158,721 35
Home Equity 535,525 6 453,961 5 508,979 6
-------------- ------- -------------- --------- ------------- --------
Residential mortgage 3,398,907 38 3,695,456 43 3,667,700 41
Consumer 645,240 7 597,049 7 624,825 7
-------------- ------- -------------- --------- ------------- --------
Total loans $8,983,678 100% $8,696,417 100% $8,913,379 100%
============== ======= ============== ========= ============= ========
--------------------------------------------- -------------- ------- -------------- --------- ------------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
TABLE 7
Period End Deposit Composition
($ in Thousands)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
June 30, % of June 30, % of Dec. 31, % of
2001 Total 2000 Total 2000 Total
--------------------------------------------- -------------- ------- -------------- --------- ------------- --------
Demand $1,175,615 14% $1,131,871 12% $1,243,949 14%
Savings 839,538 10 968,610 11 857,247 9
NOW 762,910 9 784,077 8 850,280 9
Money Market 1,759,104 21 1,366,995 15 1,492,628 16
Brokered CDs 322,857 4 966,755 10 916,060 10
Other time 3,640,202 42 4,027,083 44 3,931,482 42
-------------- ------- -------------- --------- ------------- --------
Total deposits $8,500,226 100% $9,245,391 100% $9,291,646 100%
============== ======= ============== ========= ============= ========
Retail deposits $8,177,369 96% $8,278,636 90% $8,375,586 90%
============== ======= ============== ========= ============= ========
--------------------------------------------- -------------- ------- -------------- --------- ------------- --------
</TABLE>
On average, total assets for YTD01 increased to $13.0 billion, or $401 million
(3.2%) over YTD00. Average earning assets for YTD01 were $12.2 million, an
increase of $326 million over YTD00. Loan growth accounted for essentially all
the earning asset growth.
Allowance For Loan Losses
The loan portfolio is the Corporation's primary asset subject to credit risk.
Credit risk is controlled and monitored through the use of lending standards, a
thorough review of potential borrowers, and on-going review of loan payment
performance. Active asset quality administration, including early problem loan
identification and timely resolution of problems, further ensures appropriate
management of credit risk and minimization of loan losses.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
TABLE 8
Allowance for Loan Losses and Nonperforming Assets
($ in Thousands)
--------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------- --------------------------- ----------------
At and for the At and for the
Six months ended year ended
June 30, December 31,
----------------------------------------------------------------------- --------------------------- ----------------
<S> <C> <C> <C>
2001 2000 2000
------------- ------------- ----------------
Allowance for Loan Losses (AFLL):
Balance at beginning of period $120,232 $113,196 $113,196
Decrease from sale of credit card receivables --- (4,216) (4,216)
Provision for loan losses 11,947 10,881 20,206
Charge-offs (7,216) (5,758) (11,155)
Recoveries 1,427 1,292 2,201
------------- ------------- ----------------
Net charge-offs (5,789) (4,466) (8,954)
------------- ------------- ----------------
Balance at end of period 126,390 $115,395 $120,232
============= ============= ================
Nonperforming Assets:
Nonaccrual loans $49,147 $35,155 $41,045
Accruing loans past due 90 days or more 3,779 4,886 6,492
Restructured loans 143 --- 159
------------- ------------- ----------------
Total nonperforming loans 53,069 40,041 47,696
Other real estate owned 2,603 3,954 4,032
------------- ------------- ----------------
Total nonperforming assets $55,672 $43,995 $51,728
============= ============= ================
Ratios:
AFLL to net charge-offs (annualized) 10.83x 12.85x 13.43x
Net charge-offs to average loans (annualized) 0.13% 0.11% 0.10%
AFLL to total loans 1.41% 1.33% 1.35%
Nonperforming loans to total loans 0.59% 0.46% 0.54%
Nonperforming assets to total assets 0.42% 0.34% 0.39%
AFLL to nonperforming loans 238% 288% 252%
----------------------------------------------------------------------- ------------- ------------- ----------------
</TABLE>
As of June 30, 2001, the allowance for loan losses ("AFLL") was $126.4 million,
representing 1.41% of loans outstanding, compared to $115.4 million, or 1.33% of
loans, at June 30, 2000, and $120.2 million, or 1.35% at year-end 2000. At June
30, 2001, the AFLL was 238% of nonperforming loans compared to 288% and 252% at
June 30 and December 31, 2000, respectively. Table 8 provides additional
information regarding activity in the AFLL.
The AFLL at June 30, 2001 increased $11.0 million (9.5%) since June 30, 2000 and
$6.2 million (5.1%) since December 31, 2000. The increase is, in part, in
response to continued growth in total loans and the increase in nonperforming
loans between comparable periods. Loans at June 30, 2001, grew $287 million
(3.3%) since June 30, 2000. Commercial loans (see CF&A loans, commercial real
estate and real estate construction loans included in Table 6) were up $536
million, while residential real estate loans were down $378 million, tempering
overall loan growth. Period end loans grew $70 million (1.6% annualized) since
year-end. The mix of commercial loans increased as a percent of total loans to
55% at June 30, 2001 compared to 50% at June 30, 2000 and 52% at December 31,
2000.
Charge-offs were $7.2 million for the six months ended June 30, 2001, $5.8
million for the comparable period ended June 30, 2000, and $11.2 million for the
year 2000, while recoveries for the corresponding periods were $1.4 million,
$1.3 million, and $2.2 million, respectively. As a result, the ratio of net
charge-offs to average loans on an annualized basis was 0.13%, 0.11%, and 0.10%
for YTD01, YTD00, and for the year 2000, respectively. The softening economy has
affected the Corporation's customers and will likely continue for the remainder
of the year.
The AFLL represents management's estimate of an amount adequate to provide for
probable credit losses in the loan portfolio at the balance sheet date.
Management's evaluation of the adequacy of the AFLL is based on management's
ongoing review and grading of the loan portfolio, consideration of past loan
loss experience, trends in past due and nonperforming loans, risk
characteristics of the various classifications of loans, existing economic
conditions, the fair value of underlying collateral, and other factors which
could affect probable credit losses. Thus, in general, the change in the AFLL is
a function of a number of factors, including but not limited to changes in the
loan portfolio (see Table 6), net charge-offs and nonperforming loans (see Table
8).
Management believes the AFLL to be adequate at June 30, 2001. While management
uses available information to recognize losses on loans, future adjustments to
the AFLL may be necessary based on changes in economic conditions and the impact
of such change on the Corporation's borrowers. As an integral part of their
examination process, various regulatory agencies also review the AFLL. Such
agencies may require that changes in the AFLL be recognized when their credit
evaluations differ from those of management, based on their judgments about
information available to them at the time of their examination.
Nonperforming Loans And Other Real Estate Owned
Management is committed to an aggressive nonaccrual and problem loan
identification philosophy. This philosophy is embodied through the ongoing
monitoring and reviewing of all pools of risk in the loan portfolio to ensure
that problem loans are identified quickly and the risk of loss is minimized.
Nonperforming loans are considered an indicator of potential future loan losses.
Nonperforming loans are defined as nonaccrual loans, loans 90 days or more past
due but still accruing and restructured loans. The Corporation specifically
excludes student loan balances that are 90 days or more past due and still
accruing and that have contractual government guarantees as to collection of
principal and interest, from its definition of nonperforming loans. The
Corporation had $18 million, $17 million and $20 million of student loans at
June 30, 2001, June 30, 2000, and December 31, 2000, respectively.
Table 8 provides detailed information regarding nonperforming assets. Total
nonperforming loans at June 30, 2001 were up $5.4 million and $13.0 million from
year-end 2000 and YTD00, respectively. The ratio of nonperforming loans to total
loans was .59% at YTD01, as compared to .54% and .46% at year-end 2000, and
YTD00, respectively. Nonaccrual loans account for the majority of the $13.0
million increase in nonperforming loans between comparable June 30 periods, with
nonaccrual loans increasing $14.0 million (of which, $10.0 million was
attributable to the addition of several large commercial relationships),
partially offset by a $1.1 million decrease in accruing loans past due 90 or
more days. Nonaccrual loans also account for the majority of the $5.4 million
increase in nonperforming loans since year-end 2000. Nonaccrual loans increased
$8.1 million (of which, $7.0 million was attributable to the addition of a few
large commercial credits), while accruing loans past due 90 or more days
decreased $2.7 million (due to the transfer of one large commercial credit from
this category to the nonaccrual category).
Other real estate owned was $2.6 million at YTD01, down $1.4 million from both
December 31 and June 30, 2000.
Potential problem loans are loans where there are doubts as to the ability of
the borrower to comply with present repayment terms. The decision of management
to place loans in this category does not necessarily mean that the Corporation
expects losses to occur but that management recognizes that a higher degree of
risk is associated with these performing loans. At June 30, 2001, potential
problem loans totaled $156 million. The loans that have been reported as
potential problem loans are not concentrated in a particular industry.
Management does not presently expect significant losses from credits in this
category.
Liquidity
Effective liquidity management ensures the cash flow requirements of depositors
and borrowers, as well as the operating cash needs of the Corporation, are met.
Funds are available from a number of sources, including the securities
portfolio, the core deposit base, lines of credit with major banks, the ability
to acquire large and brokered deposits, and the ability to securitize or package
loans for sale. Additionally, liquidity is provided from loans and securities
repayments and maturities.
The subsidiary banks are subject to regulation and, among other things, may be
limited in their ability to pay dividends or transfer funds to the parent
company. Accordingly, consolidated cash flows as presented in the consolidated
statements of cash flows may not represent cash immediately available for the
payment of cash dividends to the Corporation's stockholders or for other cash
needs.
For the six months ended June 30, 2001, net cash provided from operating
activities was $40.8 million, while investing and financing activities used net
cash of $6.6 million and $74.2 million, respectively, for a net decrease in cash
and cash equivalents of $40.0 million since year-end 2000. Generally, during
YTD01, anticipated maturities of time deposits (predominantly in brokered CDs)
occurred, while total asset growth since year-end 2000 was minimal (less than
1%). Thus, other financing sources increased, particularly long-term debt and
other short-term borrowings, to replace the net decrease in deposits and to
provide for common stock repurchases and payment of cash dividends to the
Corporation's stockholders.
For the six months ended June 30, 2000, net cash was provided from both
operating and financing activities ($83.5 million and $378.2 million,
respectively), while investing activities used net cash of $316.1 million for a
net increase in cash and cash equivalents of $145.6 million since year-end 1999.
Generally, total assets grew during the first half of 2000, primarily in loans,
and cash was also needed for payment of cash dividends and for common stock
repurchases. These needs were funded by increased deposits (primarily brokered
CDs) net of deposits sold, and by proceeds from the sale of credit card
receivables. During YTD00 proceeds from sales and maturities of investment
securities were predominantly reinvested by the Corporation to mitigate interest
rate risk and enhance future investment yields.
The parent company manages its liquidity position to provide the funds necessary
to pay dividends to stockholders, service debt, invest in subsidiaries,
repurchase common stock, and satisfy other operating requirements. The parent
company's funding sources are varied, including dividends and service fees from
subsidiaries, borrowings with major banks, commercial paper issuance, and
proceeds from the issuance of equity. The parent company had $200 million of
established lines of credit with nonaffiliated banks, of which $200 million was
available at June 30, 2001. During 2000, a $200 million commercial paper program
was initiated, of which $29.7 million was outstanding at June 30, 2001.
Additionally, effective in May 2001, the parent filed a registration statement
utilizing a "shelf" registration process. Under this shelf process, the parent
company may offer up to $500 million of any combination of the following
securities, either separately or in units: debt securities, preferred stock,
depositary shares, common stock, and warrants. While there was nothing
outstanding at June 30, 2001 under the shelf offerings, effective in August
2001, the parent company obtained $200 million in a subordinated notes offering,
bearing a 6.75% coupon rate and 10-year maturity.
During 2000, the four largest subsidiary banks (Associated Bank Illinois,
National Association, Associated Bank Milwaukee, Associated Bank Green Bay,
National Association, and Associated Bank North) established a $2.0 billion bank
note program. As noted in the section titled "Overview," during the second
quarter of 2001 the Corporation merged its Wisconsin banks into a single
national charter named Associated Bank, National Association; thus, subsequently
the program is associated with Associated Bank Illinois, National Association
and Associated Bank, National Association. Under this program, short-term and
long-term debt may be issued. As of June 30, 2001, $200 million was outstanding
under this program.
The parent company and certain banks were rated by Moody's, Standard and Poor's
(S&P), and Fitch. These ratings, along with the Corporation's other ratings,
provide opportunity for greater funding capacity and funding alternatives.
Capital
Stockholders' equity at June 30, 2001 increased to $1.1 billion, compared to
$930.2 million at June 30, 2000. The increase in equity between the two periods
was primarily composed of the retention of earnings and the exercise of stock
options, with offsetting decreases to equity from the payment of dividends and
the repurchase of common stock. Additionally, stockholders' equity at June 30,
2001, included $51.9 million of accumulated other comprehensive income,
predominantly related to unrealized gains on securities available-for-sale, net
of the tax effect. At June 30, 2000, stockholders' equity included $42.9 million
of accumulated other comprehensive loss, related to unrealized losses on
securities available-for-sale, net of the tax effect. Excluding the accumulated
other comprehensive income (loss), stockholders' equity to assets would be 7.59%
and 7.46% at June 30, 2001 and 2000, respectively.
Stockholders' equity grew $82.0 million since year-end 2000. The increase in
equity between the two periods was primarily composed of the retention of
earnings and the exercise of stock options, with offsetting decreases to equity
from the payment of dividends and the repurchase of common stock. Additionally,
stockholders' equity at year-end, included $15.6 million of accumulated other
comprehensive income, related to unrealized gains on securities
available-for-sale, net of the tax effect. Excluding the accumulated other
comprehensive income, stockholders' equity to assets would be 7.59% and 7.27% at
June 30, 2001 and December 31, 2000, respectively.
Cash dividends of $0.60 per share were paid in YTD01, compared to $0.5272 per
share in YTD00, representing an increase of 13.8%.
The Board of Directors ("BOD") has authorized management to repurchase shares of
the Corporation's common stock each quarter in the market, to be made available
for issuance in connection with the Corporation's employee incentive plans and
for other corporate purposes. During YTD01, 200,000 shares were repurchased
under this authorization, at an average cost of $34.45 per share. Additionally,
under two separate actions in 2000, the BOD authorized the repurchase and
cancellation of the Corporation's outstanding shares, not to exceed 6.7 million
shares on a combined basis. Under these authorizations no shares were
repurchased during YTD01, and approximately 3.4 million shares remain authorized
to repurchase at June 30, 2001. The repurchase of shares will be based on market
opportunities, capital levels, growth prospects, and other investment
opportunities.
The adequacy of the Corporation's capital is regularly reviewed to ensure that
sufficient capital is available for current and future needs and is in
compliance with regulatory guidelines. The assessment of overall capital
adequacy depends on a variety of factors, including asset quality, liquidity,
stability of earnings, changing competitive forces, economic conditions in
markets served and strength of management. The capital ratios of the Corporation
and its banking affiliates are greater than minimums required by regulatory
guidelines. The Corporation's capital ratios are summarized in Table 9.
<PAGE>
<TABLE>
<CAPTION>
TABLE 9
Capital Ratios
(In Thousands, except per share data)
------------------------------------------- ------------ -------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
June 30, March 31, Dec. 31, Sept. 30, June 30,
2001 2001 2000 2000 2000
------------------------------------------- ------------ -------------- ------------- -------------- ---------------
Total stockholders' equity $1,050,678 $1,023,978 $968,696 $931,183 $930,223
Tier 1 capital 896,276 870,096 846,371 840,180 961,874
Total capital 1,020,620 989,683 966,994 957,530 971,089
Market capitalization 2,379,119 2,198,989 2,008,274 1,751,531 1,494,770
------------ -------------- ------------- -------------- ---------------
Book value per common share $15.89 $15.48 $14.65 $13.94 $13.57
Cash dividend per common share 0.31 0.29 0.29 0.29 0.26
Stock price at end of period 35.99 33.25 30.38 26.25 21.81
Low closing stock price for the period 31.63 29.75 21.84 22.13 21.81
High closing stock price for the period 35.99 36.19 30.63 26.63 27.27
------------ -------------- ------------- -------------- ---------------
Total equity / assets 7.95% 7.80% 7.38% 7.09% 7.16%
Total equity / assets, adjusted (1) 7.59 7.46 7.27 7.22 7.46
Tangible common equity / assets 7.23 7.06 6.62 6.31 6.36
Tier 1 leverage ratio 6.93 6.74 6.52 6.57 6.86
Tier 1 risk-based capital ratio 9.64 9.69 9.37 9.41 10.03
Total risk-based capital ratio 10.98 11.02 10.70 10.72 11.30
------------ -------------- ------------- -------------- ---------------
Shares outstanding (period end) 66,105 66,135 66,116 66,725 68,536
Basic shares outstanding (average) 66,146 66,150 66,314 68,031 68,918
Diluted shares outstanding (average) 66,691 66,688 66,542 68,293 69,206
============ ============== ============= ============== ===============
(1) - Ratio is based upon total equity and assets excluding the unrealized gains
(losses) arising during the year, net of income tax.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Second Quarter Results
Net income for second quarter 2001 ("2Q01") was $46.0 million, up $2.3 million
from the $43.7 million net income earned in the second quarter of 2000 ("2Q00").
ROE was 18.02%, down 104 bp from 2Q00, while ROA remained virtually unchanged
with an increase of 3 bp to 1.42%.
Fully taxable equivalent net interest income for 2Q01 was $109.5 million, $7.8
million higher than 2Q00. The net interest margin of 3.56% in 2Q01 was 19 bp
higher than the net interest margin of 3.37% in 2Q00 (see Tables 2 and 3).
Changes in the volume and mix of average earning assets contributed $4.5 million
to taxable equivalent net interest income, and changes in the rate environment
also impacted taxable equivalent net interest income favorably by $3.3 million
(see Table 3). Average earning assets growth (up $297 million to $12.2 billion),
a decrease in interest-bearing deposits excluding brokered CDs (down $115
million), and a decrease in brokered CDs (down $524 million), was funded
primarily by wholesale funds (up $836 million).
The net interest margin rose 19 bp to 3.56% for 2Q01, attributed primarily to
falling interest rates (the average Fed funds rate for 2Q01 was 194 bp lower
than 2Q00), and greater reliance on wholesale funds (which represented 31.3% of
interest-bearing liabilities for 2Q01 compared to 24.0% for 2Q00). The 19 bp
increase in net interest margin was the result of a 49 bp decrease in rate on
interest-bearing liabilities, offset partly by a 26 bp drop in earning asset
yield and 4 bp lower contribution from net free funds.
The provision for loan losses was up $1.2 million over the provision for 2Q00,
in part due to loan growth particularly in commercial loans (CF&A loans,
commercial real estate and real estate construction loans) and the increase in
nonperforming loans between comparable periods. The AFLL to loans at June 30,
2001 was 1.41% compared to 1.33% at June 30, 2000. See Tables 6 and 8.
Noninterest income was $51.0 million for 2Q01, up $541,000 over 2Q00 (see Table
4). The change between comparable quarters was impacted by three primary
components: a) net asset sale gains (down $12.7 million, as a result of the
$12.9 million gain recorded on the sale of the credit card receivables in 2Q00),
b) net investment gains (losses) (up $5.5 million, principally due to losses
incurred on mortgage-related securities sales in 2Q00), and c) mortgage banking
income (up $10.5 million, primarily due to a dramatic increase in secondary
mortgage loan production, positively impacting gains on the sale of mortgages
and volume related fees, and $2.9 million gain from sale of mortgage servicing).
Excluding these three components, noninterest income was down $2.8 million, or
7.3%. Trust service fees were down $2.2 million due to declines in the market
value of assets under management. Service charges on deposit accounts in 2Q01
were up $1.3 million (16.4%) and include fee increases and changes in NSF and
other service charges. Other income decreased $885,000, primarily due to $1.5
million recognized in connection with an interim servicing agreement with
Citibank USA related to the credit card receivable sale.
Noninterest expense for 2Q01 was up $1.2 million over 2Q00 (see Table 5), in
part due to a $2.3 million increase in personnel expense (of which, $1.2 million
was due to higher fringe benefits and $1.1 million was attributable to higher
salary expense from 2001 merit increases) and a $1.6 million increase in other
expense (primarily in loan expense related to the higher secondary mortgage loan
production during 2Q01 versus 2Q00). Partially offsetting these expense
increases were lower data processing (due to software and system enhancement
costs incurred in 2Q00) and legal and professional fees (attributable to higher
consultant fees during 2Q00). Income taxes were up $3.4 million between
comparable quarters, due to the increase in income before taxes and the increase
in the effective tax rate, at 30.6% for 2Q01 compared to 28.0% for 2Q00.
Current Accounting Pronouncements
In July 2001, the FASB issued Statement of Financial Accounting Standard
("SFAS") No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001 as well as
all purchase method business combinations completed after June 30, 2001. SFAS
No. 141 also specifies criteria which intangible assets acquired in a purchase
method business combination must meet to be recognized and reported apart from
goodwill. SFAS No. 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually. SFAS No. 142 will also require that intangible
assets with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
assets to Be Disposed Of".
The Corporation is required to adopt the provisions of SFAS No. 141 immediately
and SFAS No. 142 effective January 1, 2002. Furthermore, any goodwill and any
intangible asset determined to have an indefinite useful life that are acquired
in a purchase business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in accordance with
the appropriate pre-SFAS No. 142 accounting literature. Goodwill and intangible
assets acquired in business combinations completed before July 1, 2001 will
continue to be amortized prior to the adoption of SFAS No. 142.
SFAS No. 141 will require upon adoption of SFAS No. 142, that the Corporation
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in SFAS 141 for recognition apart from
goodwill. Upon adoption of SFAS 142, the Corporation will be required to assess
the useful lives and residual values of all intangible assets acquired in
purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Corporation will be required to test the intangible asset for
impairment in accordance with the provisions of SFAS No. 142 within the first
interim period. Any impairment loss will be measured as of the date of adoption
and recognized as the cumulative effect of a change in accounting principle in
the first interim period.
As of the date of adoption, the Corporation expects to have unamortized goodwill
in the amount of $92 million which will be subject to the transition provisions
of SFAS No. 141 and SFAS No. 142. Amortization expense related to this goodwill
was $6.6 million ($6.3 million after tax) and $3.3 million ($3.1 million after
tax) for the year ended December 31, 2000 and the six months ended June 30,
2001. Due to the extensive nature and effort in adopting SFAS No. 141 and SFAS
No. 142, it is not practicable to reasonably estimate the impact of adopting
these Statements on the Corporation's financial statements at the date of this
report, including whether any transitional impairment losses will be required to
be recognized as the cumulative effect of a change in accounting principle.
Subsequent Event
On July 25, 2001, the Board of Directors declared a $0.31 per share dividend
payable August 15, 2001, to shareholders of record as of August 1, 2001.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Corporation has not experienced any material changes to its market risk
position since December 31, 2000, from that disclosed in the Corporation's 2000
Form 10-K Annual Report.
<PAGE>
ASSOCIATED BANC-CORP
PART II - OTHER INFORMATION
ITEM 4: Submission of matters to a vote of security holders
(a) The corporation held its Annual Meeting of Shareholders on
April 25, 2001. Proxies were solicited by corporation
management pursuant to Regulation 14A under the Securities
Exchange Act of 1934.
(b) Directors elected at the Annual Meeting were Robert S.
Gaiswinkler, Robert C. Gallagher, Robert P. Konopacky, and
John C. Meng.
(c) The matters voted upon and the results of the voting were as
follows:
(i) Election of the below-named nominees to the Board of Directors
of the Corporation:
FOR WITHHELD
All Nominees: 54,708,819 971,700
By Nominee:
Robert S. Gaiswinkler 54,635,604 1,044,915
Robert C. Gallagher 54,597,272 1,083,247
Robert P. Konopacky 54,404,712 1,275,807
John C. Meng 54,506,974 1,173,545
(ii) Ratification of the selection of KPMG LLP as independent
auditors of Associated for the year ending December 31, 2001.
FOR AGAINST ABSTAIN
--- ------- -------
55,248,884 194,134 237,501
(d) Not applicable
<PAGE>
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11, Statement regarding computation of
per-share earnings. See Note 4 of the notes to
consolidated financial statements in Part I Item I.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the six months ended
June 30, 2001.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ASSOCIATED BANC-CORP
----------------------------------------
(Registrant)
Date: August 13, 2001 /s/ Robert C. Gallagher
----------------------------------------
Robert C. Gallagher
President and Chief Executive Officer
Date: August 13, 2001 /s/ Joseph B. Selner
---------------------------------------
Joseph B. Selner
Principal Financial Officer
</TEXT>
</DOCUMENT>