Credit issues continue to weigh heavily on Associated Banc-Corp.
The Green Bay, Wis., company reported net income of $47 million in the second quarter, down about 1.5% from the same period last year. Associated's profitability was constrained by a $14 million provision for loan losses.
By comparison, its provision was $6 million lower than in the first quarter and $9 million higher than a year earlier.
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Associated Banc-Corp in Green Bay, Wis., reported first-quarter net income of $40 million Thursday, an 11% drop from the same period in 2015. In doing so the $28 billion-asset company joined the lengthening list of banks whose bottom lines fell victim to ongoing tumult in the energy market.
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Associated Banc-Corp in Green Bay, Wis., reported fourth-quarter earnings of $42.8 million, a 12.2% drop from a year earlier as the company set aside a significantly higher amount of money to address potential problems in its energy portfolio.
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Several banks have recently purchased highly visible properties in strategically important markets, investing in real estate at a time when the industry is closing branches at a record pace. Low rates may be a factor, but many bankers are also trying to send a message to clients and prospects.
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Energy loans have been Associated's most sensitive credit-quality issue for a number of months. The $29 billion-asset company charged off $19 million of energy loans in the second quarter, up from $13 million in the first quarter. There were no energy-related chargeoffs in the second quarter of 2015. Nonaccrual loans jumped 65% year over year to $283 million, but much of the increase — $118 million — occurred in the energy portfolio.
"Absent energy, we really are at cyclical lows" in problem credits, Chief Executive Philip B. Flynn said Thursday in a conference call with analysts. If not for energy issues, the loan-loss provision "would be very low, no doubt," Flynn added.
On a more positive note, Associated has originated more than $1 billion of loans since the start of 2016. "That's the strongest level of organic growth in Associated's history," Flynn said.
The new loans were well-distributed among the company's different business lines, including energy lending. Associated originated $86 million of energy loans in the second quarter. "We remain active in the energy business," Flynn said.
Deposits have also grown in 2016, but at a less robust pace than loans. As a result, the loan-to-deposit ratio climbed to 98%. By contrast, the average loan-to-deposit ratio for banks with more than $10 billion of assets is 68.4%, according to the Federal Deposit Insurance Corp. Typically Associated's deposit-gathering picks up steam in the second half of the year, Flynn said.
