ASSOCIATED BANC-CORP
INVESTOR PRESENTATION
FORWARD-LOOKING STATEMENTS
Important note regarding forward-looking statements:
Statements made in this presentation which are not purely historical are forward-looking
statements, as defined in the Private Securities Litigation Reform Act of 1995. This includes any statements regarding management’s plans, objectives, or goals for future operations, products or services, and forecasts of its revenues, earnings, or other measures of performance. Such
forward-looking statements may be identified by the use of words such as “believe”, “expect”, “anticipate”, “plan”, “estimate”, “should”, “will”, “intend”, “outlook”, or similar expressions. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements. Factors which may cause actual results to differ materially from those contained in such forward-looking statements include those identified in the Company’s most
recent Form 10-K and subsequent SEC filings. Such factors are incorporated herein by reference.
OUR FOOTPRINT AND FRANCHISE
1 – Period end as of June 30, 2015; Loans excludes $0.4 billion installment and credit card portfolio 2 – Includes Missouri, Indiana, Ohio, Michigan and Iowa
1861 1999 2006 1987 2011 2011 2012 > $1 billion deposits > $300 million deposits 2
•
Largest bank headquartered in Wisconsin•
$27 billion in assets: Top 50 publicly traded bank holding company in the U.S.•
Over 200 banking locations serving over one million customers in over 100communities
•
Offering a full range of banking services and other financial products and servicesWI 37% IL 24% MN 12% In Footprint 10% Other 17% Second Quarter 20151 WI 67% IL 25% MN 8% Deposits Loans 2
ATTRACTIVE MIDWEST MARKETS
3 LARGE DEMOGRAPHIC BASE SOLID JOB GROWTH CREDIT WORTHY CUSTOMERS MANUFACTURING CENTRICFavorable
Employment
Dynamics
We Serve a Large and Growing
Market Place
• Our footprint covers ~ 20% of the U.S. population (Est. pop ~ 61 million1)
• Our footprint is estimated to have
contributed ~ 30% of the country’s recent population growth1
Top Concentration of
Manufacturing Jobs
• Our footprint is home to ~ 30% of all manufacturing jobs in the U.S.2
• Our footprint’s manufacturing labor force has grown over the past three years2
Our Markets have
Demonstrated
Consumer Credit
Strength
• Our footprint’s employment has grown over the past three years3
• Wisconsin, Minnesota, Indiana, Iowa, and Ohio have unemployment rates below the national unemployment rate3
• Eight of the Top 10 American cities with the highest credit scores are located within our footprint4
• Seven of the top 10 are located in our three state branch footprint
1 –US Census Bureau Annual Estimates of the Resident Population, 2011-2014 2 – US Bureau of Labor Statistics, Manufacturing Industry Employees, 2011-2014 3 – US Bureau of Labor Statistics, Total Nonfarm Employees, June 2015
2015 SECOND QUARTER HIGHLIGHTS
4
Solid Loan and Fee-Revenue Growth Offset Continued Margin Compression
•
Average loans of $18.2 billion were up $373 million, or 2% QoQ•
Average deposits of $19.6 billion were up $571 million, or 3% QoQ•
Net interest income of $166 million was down $1 million QoQ•
Net interest margin of 2.83% compared to 2.89% in the first quarter•
Repurchased 3.2 million shares of common stock during 2Q•
Issued $65 million in preferred stock with a dividend rate of 6.125%•
Capital ratios remain strong with a common equity Tier 1 ratio of 9.31%•
Noninterest income of $87 million was up $6 million QoQ•
Core fee-based revenue increased $2 million from the first quarter•
Mortgage banking revenue was up $3 million from the first quarter•
Net income (NIAC) of $48 million, or $0.31 per share•
Return on average common equity Tier 1 of 10.55% Net Interest Income&
Net Interest Margin
Noninterest Income Capital Balance Sheet Net Income Avail. to Common & ROT1CE
$4.2 $5.0 $5.9 $6.5 $7.2 $2.9 $3.3 $3.7 $4.0 $4.1 $2.7 $3.3 $3.7 $4.1 $4.9 $3.2 $3.0 $2.5 $2.1 $2.0 2Q 2011 2Q 2012 2Q 2013 2Q 2014 2Q 2015
Commercial & Business Commercial Real Estate Residential Mortgage Home Equity & Installment
GROWING THE LOAN PORTFOLIO
1
($ IN BILLIONS)
1 – Based on average balances 5
Cumulative Change 2Q 2011 – 2Q 2015 +$1.2 billion +$2.2 billion +$3.0 billion $18.2 $15.7 $16.6 $14.6 $13.0 -$1.2 billion
LOAN PORTFOLIO GROWTH
YTD 2015 AVERAGE LOAN GROWTH OF $801 MILLION, OR 5% FROM 4Q 2014
($ IN MILLIONS) 6 ($121) $19 $76 $83 $148 $203 $393
Home Equity & Installment Commercial Real Estate
Residential Mortgage
Power & Utilities Oil & Gas Mortgage Warehouse General Commercial Loans
YTD Change +2% +9% +7% (6%)
Commercial & Business Residential Mortgage
Commercial Real Estate Home Equity & Installment
DIVERSE PORTFOLIO OF VALUE-ADDED
BUSINESSES
7 Corporate and Specialized Lending Consumer and Business Banking Private Client andInstitutional Services Commercial Real Estate Lending Private Banking Personal Trust Asset Management Retirement Plan Services Associated Financial Group Associated Investment Services Community Markets Branch Banking Commercial Banking Residential Lending Payments and Direct Channels Corporate Commercial and Specialized Lending Commercial Deposits and Treasury Management Capital Markets
Community, Consumer, and Business Corporate and Commercial Specialty Rochester, MN Eau Claire, WI La Crosse, WI Central Wisconsin Rockford, IL Peoria, IL Southern Illinois CRE Lending Real Estate Investment Trusts CRE Syndications
$154 $154 $160 $169 $166 3.29% 3.30% 3.16% 3.08% 2.83% 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 $100 $110 $120 $130 $140 $150 $160 $170 $180 2Q 2011 2Q 2012 2Q 2013 2Q 2014 2Q 2015 Net Interest Income Net Interest Margin 4.00% 3.80% 3.47% 3.31% 3.15% 4.47% 4.07% 3.77% 3.55% 3.38% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 2Q 2011 2Q 2012 2Q 2013 2Q 2014 2Q 2015 Total Interest-earning Yield Total Loan Yield
NET INTEREST INCOME AND MARGIN
8
Net Interest Income & Net Interest Margin Yield on Interest-earning Assets
Cost of Interest-bearing Liabilities
0.63% 0.37% 0.24% 0.19% 0.21% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 2Q 2011 2Q 2012 2Q 2013 2Q 2014 2Q 2015 Interest Bearing Deposit Costs Other Funding Costs 0.91% 0.65% 0.41% 0.29% 0.40%1 ($ in millions)
INTEREST RATE SENSITIVITY
9
• Net interest income will benefit from asset re-pricing in a rising rate environment
• Continued growth in floating rate loans has positioned us to benefit from rising rates
o $10 billion (88%) of the commercial loan portfolio will re-price or mature within one year
o 60% of the commercial loan portfolio is floating or adjustable rate and less than 3% is fixed long term
• Overall, we have a stable and low cost deposit funding base
o Historically, our deposit pricing has lagged Federal Reserve interest rate increases
o We have estimated our low cost core deposits have an effective beta of approximately 0.5 (i.e., deposit rates modeled to increase ~50bps per 100bps increase in Fed funds rates)
1.5%
2.9% 2.0%
4.1%
100bps increase 200bps increase
Dynamic Forecast Static Forecast
Sensitivity Analysis
Estimated % Change in Earnings1 Over 12 Months
Commercial Loan Maturity Distribution and Interest Rate Sensitivity
($ in billions) Within 1 Yr 1-5 Yrs After 5 Yrs Total % of Total Fixed $3.2 $1.1 $0.3 $4.6 40% Floating $3.9 $2.6 $0.3 $6.8 60% Total $7.1 $3.7 $0.6 $11.4 100% % by Maturity 63% 32% 5%
1 – Change in net interest income and earnings at risk due to instantaneous moves in benchmark interest rates. We evaluate the
sensitivity using: 1) a dynamic forecast incorporating balance sheet growth, and 2) a static forecast where the current balance sheet is held constant.
BRANCH OPTIMIZATION
10 315 270 ~215 2Q 2007 2Q 2011 YE 2015 Forecast $14 $14 $19 $8 $12 2Q 2007 2Q 2011 Recent QuarterTotal Deposits Insured Deposits
($ in billions)
• By year end 2015, we expect to consolidate thirteen additional branches for a total of 100 branch consolidations since mid 2007 • During the same period, we reinvigorated the overall delivery model
to meet the changing preferences of our customers:
o Continued investments in mobile and online technology
o Significant deployment of ATM and other self service solutions • Since 2011, we have significantly modernized our branch footprint to create an improved client experience, which has led to high deposit retention and organic deposit growth
Changing customer behaviorhas driven our focus on branch channel optimization
BRANCHES DEPOSITS
1 2
1 –Total Deposits as of June 30, 2015; Insured Deposits (less than $250,000) as of March 31, 2015 2 – Insured Deposits covered by the FDIC, per Call Report
EVOLVING DELIVERY MODEL
11
Physical Channels Self Service Channels Direct Channel Targeting
• We have integrated digital solutions into branches • We have developed lower
cost branch concepts • We fully deployed ATM and
deposit automation
• Redesigned website to enhance eCommerce • Driving to a consistent
digital channel experience • Implemented online lending
and deposit sales solutions
• Leveraging customer
analytics and a virtual sales team to drive cross-sell • Nearly 10% of all new loan
applications now come through online channels Enhanced multi-channel connections drive customer adoption and efficiency
ATM ~1/3 Teller ~2/3 > 50% > 20%
Online Banking Mobile Banking
Branch Transactions Deposit Customer Usage
Dec 2014 Jun 2015
Online Deposit Account openings have doubled
PURSUING EFFICIENCY GAINS
($ IN MILLIONS) Efficiency Ratio1 at YTD 2015 = 69% Goal = Peer Average or Better
1 – Efficiency ratio = Noninterest expense, excluding other intangible amortization, divided by sum of taxable equivalent net interest income plus
noninterest income, excluding investment securities gains/losses, net, and asset gains/losses, net. This is a non-GAAP financial measure. Please refer to the appendix for a reconciliation of this measure to the efficiency ratio as defined by the Federal Reserve.
2 – Technology Spend = Technology and Equipment expenses 3 – FTE = Average Full Time Equivalent Employees
12 70.4% 69.3% 69.6% 69.0% 69.0% $52 $67 $75 $80 $43 4,985 4,968 4,728 4,406 4,443 2011 2012 2013 2014 YTD 2015 3,400 3,600 3,800 4,000 4,200 4,400 4,600 4,800 5,000 $20 $40 $60 $80 $100 $120 $140 $160 $180
Technology Spend FTE
Efficiency Ratio1 2 3
Areas of Focus
Back Office Initiatives:
Implementing technology solutions in labor intensive
processes
Real Estate Initiatives:
Actions to optimize our real estate holdings and
capacity
Distribution Initiatives:
Optimize the way we interact with our
STRONG CAPITAL POSITION
MANAGED OUR CURRENT CAPITAL INTO OUR TARGET RANGE OF 8 - 9.5%
13 7.9% 7.9% 7.9% 12.3% 12.2% 11.6% 11.5% 9.7% 9.3% 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015
•
Proactive capital management has restored capital to normalized levels; Capital is modestly above pre-crisis levels•
Well positioned for changing economic cycles and future challenges•
DFAST: We modeled sufficient capital to remain “well capitalized” throughout the forecasting horizon•
Share repurchase program is on “pause”Common Equity Tier 1 Ratio
Basel III Basel I
Funding
Organic
Growth
Paying a
Competitive
Dividend
Non-organic
Growth
Opportunities
Share
Buybacks and
Redemptions
Capital Management Priorities
$0.05 $0.08 $0.09 $0.10 $0.24 $0.28 $0.28 $0.31 2Q 2012 2Q 2013 2Q 2014 2Q 2015 Dividends per Common Share Diluted EPS
WHY ASSOCIATED
14
1 – Return on Average Common Equity Tier 1 (ROT1CE). Management uses Common Equity Tier 1, along with other capital
measures to assess and monitor our capital position. This is a non-GAAP financial measure. Please refer to the appendix for a reconciliation of Common Equity Tier 1 to stockholders’ equity.
ROT1CE
Attractive Midwest Markets
Diverse Portfolio of Value-Added Businesses
Modern and Rapidly Evolving Delivery Model
Asset Sensitive Rate Profile
Disciplined Capital Philosophy
Management Team Focused on Creating Long-Term Value
1 9.3% 9.9% 9.6% 10.6% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0%
SECOND HALF 2015 OUTLOOK
15
Balance Sheet
• High single digit annual average loan growth
• Maintain loan / deposit ratio under 100%
Margin
• Modest continuing compression throughout the second half of
the year
Noninterest
Income
1• Seasonally lower insurance commissions
Noninterest
Expense
1• Full year not to exceed $700 million
Capital
• Now in our target range
• Continue to follow stated corporate priorities for capital
deployment
• Pausing on additional stock repurchases
Provision
• Based on loan growth and changes in risk grade or other
indicators of credit quality
LOANS BY INDUSTRY AND STATE
JUNE 2015 PERIOD END BALANCES
17 Manufacturing 21% Other 13% Wholesale Trade 10% Power & Utilities 9% Oil & Gas
11% Finance & Insurance 12% Retail Trade 4% Real Estate 8% Health Care and Soc. Assist. 5% Profsnl, Scientific, and Tech Svs 3% Rental and Leasing Svs 3% Transport. and Whsing 1% C&BL by Industry ($7.2 billion) Wisconsin 32% Illinois 16% Minnesota 11% In-Footprint1 8% Other 33% C&BL by State ($7.2 billion) Multi-Family 21% Office / Mixed Use 21% Construction 26% Retail 19% Industrial 6% Other 3% Hotel / Motel 4% CRE by Industry ($4.2 billion) CRE by State ($4.2 billion) Wisconsin 33% Illinois 23% Minnesota 10% In Footprint1 21% Other 12%
Residential Mortgage by State ($4.9 billion) Wisconsin 39% Illinois 38% Minnesota 14% In-Footprint1 8% Other 1%
Home Equity by State ($1.6 billion) Wisconsin 72% Illinois 16% Minnesota 11% Other 2%
NONINTEREST INCOME TRENDS
($ IN MILLIONS) $7 $14 $11 $9 $11 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015Mortgage Banking (net) Income
$60 $54 $56 $64 $66 $12 $21 $14 $16 $21 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015
Mortgage Banking (net) and Other Noninterest Income Core Fee-based Revenue
Total Noninterest Income
$5 $7 $3 $7 $10 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015
Other Noninterest Income2
18 1 – Core Fee-based Revenue = Trust service fees plus service charges on deposit accounts plus card-based and other nondeposit fees plus insurance commissions
plus brokerage and annuity commissions. This is a non-GAAP measure. Please refer to the press release tables for a reconciliation to noninterest income.
2 – Other Noninterest Income = Total noninterest income minus net mortgage banking income minus core fee-based revenue. This is a non-GAAP measure. Please
refer to the press release tables for a reconciliation to noninterest income.
$72 $75 $70
$80
$87
INSURANCE BUSINESS EXPANSION
KEY DRIVER OF NONINTEREST REVENUE GROWTH
19
Insurance Commissions Trend
• In February 2015, Associated Financial Group (AFG), a leading risk and benefit consulting
practice based in WI, acquired Ahmann & Martin Co., a leading property and casualty brokerage based in the Twin Cities
• The acquisition created one of the largest risk and benefit consulting firms in the country
o AFG is now positioned as a Top 50 U.S. insurance brokerage firm serving approximately 14,000 customers
• The acquisition significantly expanded Associated’s property and casualty insurance capabilities and related insurance commission revenue potential
o Expected to generate additional seasonal insurance revenues in the first half of each year going forward Property & Casualty 25% Employee Benefits & Other 75%
1 –Excludes a $4 million reserve related to the remediation of debt protection products
$11 $12 $14 $12 $11
$20 $20
4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015
($ in millions)
1
NONINTEREST EXPENSE TRENDS
($ IN MILLIONS) $49 $54 $54 $53 $52 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 Technology2 SpendTotal Noninterest Expense $21
$20 $21 $21 $22 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015
Other Non-Personnel Spend3
4,431 4,359 4,320 4,422 4,465 3,800 4,000 4,200 4,400 4,600 4,800 5,000 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015
1 – Efficiency ratio = Noninterest expense, excluding other intangible amortization, divided by sum of taxable equivalent net interest income plus noninterest income, excluding investment
securities gains/losses, net, and asset gains / losses, net. This is a non-GAAP financial measure. Please refer to the appendix for a reconciliation of this measure.
2 – Technology Spend = Technology and Equipment expenses
3 – Other Non-Personnel Spend = Total Noninterest Expense less Personnel and Technology spend 4 – FTE = Average Full Time Equivalent Employees
Efficiency Ratio1 68% 69% 70% 69% 20 $98 $98 $97 $100 $103 $70 $74 $75 $74 $74 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015
Personnel Other Noninterest Expense
FTE4 Trend
$168 $172 $172 $174 $177
CREDIT QUALITY INDICATORS
($ IN MILLIONS) 21 $179 $184 $177 $174 $160 1.05% 1.07% 1.01% 0.97% 0.88% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% $- $4 $8 $12 $16 $20 $24 $28 $32 $36 $40 $44 $48 $52 $56 $60 $64 $68 $72 $76 $80 $84 $88 $92 $96 $100 $104 $108 $112 $116 $120 $124 $128 $132 $136 $140 $144 $148 $152 $156 $160 $164 $168 $172 $176 $180 $184 $188 $192 $196 $200 $204 $208 $212 $216 $220 $224 $228 $232 $236 $240 $244 $248 $252 $256 $260 $264 $268 $272 $276 $280 $284 $288 $292 $296 $300 $304 $308 $312 $316 $320 $324 $328 $332 $336 $340 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 Nonaccruals Nonaccruals / Total Loans$3 $3 $4 $6 $9 0.06% 0.06% 0.10% 0.13% 0.19% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% $4 $8 $12 $16 $20 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 Net Charge Offs NCOs / Avg Loans (annualized)
152% 145% 150% 152% 163% 1.59% 1.55% 1.51% 1.48% 1.43% 1.00% 1.50% 2.00% 2.50% 3.00% 0% 80% 160% 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 ALLL / Nonaccruals ALLL / Total Loans $288 $220 $190 $219 $200 1.69% 1.28% 1.08% 1.22% 1.09% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% $- $4 $8 $12 $16 $20 $24 $28 $32 $36 $40 $44 $48 $52 $56 $60 $64 $68 $72 $76 $80 $84 $88 $92 $96 $100 $104 $108 $112 $116 $120 $124 $128 $132 $136 $140 $144 $148 $152 $156 $160 $164 $168 $172 $176 $180 $184 $188 $192 $196 $200 $204 $208 $212 $216 $220 $224 $228 $232 $236 $240 $244 $248 $252 $256 $260 $264 $268 $272 $276 $280 $284 $288 $292 $296 $300 $304 $308 $312 $316 $320 $324 $328 $332 $336 $340 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 Potential Problem Loans PPLs / Total Loans
Potential Problem Loans to Total Loans Nonaccruals to Total Loans
Allowance to Total Loans Net Charge Offs to Average Loans
OIL AND GAS LENDING UPDATE
22
• Portfolio is performing as expected
• Oil & Gas period end loans decreased 3% in the second quarter
• Spring borrowing base re-determinations and the SNC exam are complete
• Released $1 million in reserves in the second quarter
($ in Millions) 4Q 2014 1Q 2015 2Q 2015
EOP Loan Balance $754 $780 $757
Oil & Gas Related Reserves $17 $27 $26
Reserve/EOP Loans 2.26% 3.46% 3.43%
Portfolio Overview
Oil & Gas 4%
All Other Loans
96%
2015 Second Quarter
Loan Composition 49 clients
Over $1 billion in aggregate commitments Average commitment of $21 million • Exclusively focused on the upstream sector
(‘Exploration and Production’ or ‘E&P’ sector) • Focused on the small to mid-size independent
segment, both public and private companies • Asset-based loans collateralized by a lien on oil
& gas reserves
• Generally, we are participants in syndicated loans in this sector
Portfolio Performance $251 $354 $659 $757 2Q 2012 2Q 2013 2Q 2014 2Q 2015
Oil & Gas Period End Loan Balances
HIGH QUALITY SECURITIES
($ IN MILLIONS) 23 $4,521 $4,926 $5,756 $5,938 2.98% 2.57% 2.63% 2.45% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% $0.013 $0.026 $0.039 $0.052 $0.065 $0.078 $0.091 $0.104 $0.117 $0.130 $0.143 $0.156 $0.169 $0.182 $0.195 $0.208 $0.221 $0.234 $0.247 $0.260 $0.273 $0.286 $0.299 $0.312 $0.325 $0.338 $0.351 $0.364 $0.377 $0.390 $0.403 $0.416 $0.429 $0.442 $0.455 $0.468 $0.481 $0.494 $0.507 $0.520 $0.533 $0.546 $0.559 $0.572 $0.585 $0.598 $0.611 $0.624 $0.637 $0.650 $0.663 $0.676 $0.689 $0.702 $0.715 $0.728 $0.741 $0.754 $0.767 $0.780 $0.793 $0.806 $0.819 $0.832 $0.845 $0.858 $0.871 $0.884 $0.897 $0.910 $0.923 $0.936 $0.949 $0.962 $0.975 $0.988 $1.001 $1.014 $1.027 $1.040 $1.053 $1.066 $1.079 $1.092 $1.105 $1.118 $1.131 $1.144 $1.157 $1.170 $1.183 $1.196 $1.209 $1.222 $1.235 $1.248 $1.261 $1.274 $1.287 $1.300 $1.313 $1.326 $1.339 $1.352 $1.365 $1.378 $1.391 $1.404 $1.417 $1.430 $1.443 $1.456 $1.469 $1.482 $1.495 $1.508 $1.521 $1.534 $1.547 $1.560 $1.573 $1.586 $1.599 $1.612 $1.625 $1.638 $1.651 $1.664 $1.677 $1.690 $1.703 $1.716 $1.729 $1.742 $1.755 $1.768 $1.781 $1.794 $1.807 $1.820 $1.833 $1.846 $1.859 $1.872 $1.885 $1.898 $1.911 $1.924 $1.937 $1.950 $1.963 $1.976 $1.989 $2.002 $2.015 $2.028 $2.041 $2.054 $2.067 $2.080 $2.093 $2.106 $2.119 $2.132 $2.145 $2.158 $2.171 $2.184 $2.197 $2.210 $2.223 $2.236 $2.249 $2.262 $2.275 $2.288 $2.301 $2.314 $2.327 $2.340 $2.353 $2.366 $2.379 $2.392 $2.405 $2.418 $2.431 $2.444 $2.457 $2.470 $2.483 $2.496 $2.509 $2.522 $2.535 $2.548 $2.561 $2.574 $2.587 $2.600 $2.613 $2.626 $2.639 $2.652 $2.665 $2.678 $2.691 $2.704 $2.717 $2.730 $2.743 $2.756 $2.769 $2.782 $2.795 $2.808 $2.821 $2.834 $2.847 $2.860 $2.873 $2.886 $2.899 $2.912 $2.925 $2.938 $2.951 $2.964 $2.977 $2.990 $3.003 $3.016 $3.029 $3.042 $3.055 $3.068 $3.081 $3.094 $3.107 $3.120 $3.133 $3.146 $3.159 $3.172 $3.185 $3.198 $3.211 $3.224 $3.237 $3.250 $3.263 $3.276 $3.289 $3.302 $3.315 $3.328 $3.341 $3.354 $3.367 $3.380 $3.393 $3.406 $3.419 $3.432 $3.445 $3.458 $3.471 $3.484 $3.497 $3.510 $3.523 $3.536 $3.549 $3.562 $3.575 $3.588 $3.601 $3.614 $3.627 $3.640 $3.653 $3.666 $3.679 $3.692 $3.705 $3.718 $3.731 $3.744 $3.757 $3.770 $3.783 $3.796 $3.809 $3.822 $3.835 $3.848 $3.861 $3.874 $3.887 $3.900 $3.913 $3.926 $3.939 $3.952 $3.965 $3.978 $3.991 $4.004 $4.017 $4.030 $4.043 $4.056 $4.069 $4.082 $4.095 $4.108 $4.121 $4.134 $4.147 $4.160 $4.173 $4.186 $4.199 $4.212 $4.225 $4.238 $4.251 $4.264 $4.277 $4.290 $4.303 $4.316 $4.329 $4.342 $4.355 $4.368 $4.381 $4.394 $4.407 $4.420 $4.433 $4.446 $4.459 $4.472 $4.485 $4.498 $4.511 $4.524 $4.537 $4.550 $4.563 $4.576 $4.589 $4.602 $4.615 $4.628 $4.641 $4.654 $4.667 $4.680 $4.693 $4.706 $4.719 $4.732 $4.745 $4.758 $4.771 $4.784 $4.797 $4.810 $4.823 $4.836 $4.849 $4.862 $4.875 $4.888 $4.901 $4.914 $4.927 $4.940 $4.953 $4.966 $4.979 $4.992 $5.005 $5.018 $5.031 $5.044 $5.057 $5.070 $5.083 $5.096 $5.109 $5.122 $5.135 $5.148 $5.161 $5.174 $5.187 $5.200 $5.213 $5.226 $5.239 $5.252 $5.265 $5.278 $5.291 $5.304 $5.317 $5.330 $5.343 $5.356 $5.369 $5.382 $5.395 $5.408 $5.421 $5.434 $5.447 $5.460 $5.473 $5.486 $5.499 $5.512 $5.525 $5.538 $5.551 $5.564 $5.577 $5.590 $5.603 $5.616 $5.629 $5.642 $5.655 $5.668 $5.681 $5.694 $5.707 $5.720 $5.733 $5.746 $5.759 $5.772 $5.785 $5.798 $5.811 $5.824 $5.837 $5.850 $5.863 $5.876 $5.889 $5.902 $5.915 $5.928 $5.941 $5.954 $5.967 $5.980 $5.993 $6.006 $6.019 $6.032 $6.045 $6.058 $6.071 $6.084 $6.097 $6.110 $6.123 $6.136 $6.149 $6.162 $6.175 $6.188 $6.201 $6.214 $6.227 $6.240 $6.253 $6.266 $6.279 $6.292 $6.305 $6.318 $6.331 $6.344 $6.357 $6.370 $6.383 $6.396 $6.409 $6.422 $6.435 $6.448 $6.461 $6.474 $6.487 $6.500 2Q 2012 2Q 2013 2Q 2014 2Q 2015 M illi o n sFair Value Average Yield
Investment Securities & Yield
Risk Weighting Profile – June 30, 2015 Fair Value Composition – June 30, 2015
22.7% 46.0% 75.6% 53.1% 1.7% 0.9% 1Q 2015 2Q 2015 0% RWA 20% RWA All Other
Investment Type Amortized Cost Fair Value Duration (Yrs) Agency MBS $2,357.1 $2,393.0 3.11 GNMA CMBS 1,794.3 1,774.6 3.88 Municipals 984.0 1,000.6 5.90
Agency & Other CMOs 757.9 762.6 3.27 Corporates & Other 6.6 6.7 1.39 Govt & Agencies 1.0 1.0 1.63
Strategic Portfolio $5,900.9 $5,938.5 3.83
Membership Stock 160.8 160.8
Total Portfolio $6,061.6 $6,099.2 Net Unamortized Premium 111.0
99% government backed Agency and other
government paper
Treasuries and GNMA
Other MBS 32% GNMA CMBS 30% Municipals 17% GNMA MBS 8% GNMA CMOs 7% Other CMOs 6% Other 0%
RECONCILIATION AND DEFINITIONS OF
NON-GAAP ITEMS (1 OF 2)
Efficiency ratio is defined by the Federal Reserve guidance as noninterest expense divided by the sum of net interest income plus noninterest income, excluding investment securities gains / losses, net. Efficiency ratio, fully taxable equivalent, is noninterest expense, excluding other intangible amortization, divided by the sum of taxable equivalent net interest income plus noninterest income, excluding investment securities gains / losses, net and asset gains / losses, net. This efficiency ratio is presented on a taxable equivalent basis, which adjusts net interest income for the tax-favored status of certain loans and investment securities. Management believes this measure to be the preferred industry measurement of net interest income as it enhances the comparability of net interest income arising from taxable and tax-exempt sources and it excludes certain specific revenue items (such as investment securities gains / losses, net and asset gains / losses, net).
2011 2012 2013 2014 YTD 2015
Efficiency Ratio Reconciliation:
Efficiency ratio, as defined by the Federal Reserve 73.64% 72.16% 71.04% 69.97% 70.26%
Taxable equivalent adjustment (1.74) (1.59) (1.45) (1.36) (1.38)
Asset gains (losses), net (0.92) (0.86) 0.39 0.73 0.41
Other intangible amortization (0.54) (0.45) (0.42) (0.39) (0.34)
Efficiency ratio, fully taxable equivalent 70.44% 69.26% 69.56% 68.95% 68.95%
24
2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015
Efficiency Ratio Reconciliation:
Efficiency ratio, as defined by the Federal Reserve 69.70% 69.44% 70.33% 70.30% 70.23%
Taxable equivalent adjustment (1.32) (1.36) (1.40) (1.42) (1.34)
Asset gains, net 0.26 1.36 1.05 0.30 0.51
Other intangible amortization (0.41) (0.40) (0.32) (0.32) (0.35)
RECONCILIATION AND DEFINITIONS OF
NON-GAAP ITEMS (2 OF 2)
25 Common Equity Tier 1, a non-GAAP financial measure, is used by banking regulators, investors and analysts to assess and compare the quality and composition of our capital with the capital of other financial services companies. Management uses Common Equity Tier 1, along with other capital measures, to assess and monitor our capital position. Common Equity Tier 1 for 2015 follows Basel III and is defined as common stock and related surplus, net of treasury stock, plus retained earnings. Common Equity Tier 1 for 2014 follows Basel I and is defined as Tier 1 capital excluding qualifying perpetual preferred stock and qualifying trust preferred securities.
($ in thousands) 2Q 2012 2Q 2013 2Q 2014 2Q 2015
Common Equity Tier 1 Reconciliation:
Stockholders’ Equity $2,909,621 $2,876,976 $2,929,946 $2,904,391 Accumulated other comprehensive income (loss) (66,579) 25,015 (10,494) (2,594)
Preferred equity (63,272) (63,272) (61,024) (122,015)
Intangible assets (946,492) (942,374) (938,370) (950,438) Deferred tax assets (DTAs) / Disallowed servicing assets (4,749) (2,470) (407) (3,866)
