ASSOCIATED BANC-CORP INVESTOR PRESENTATION THIRD QUARTER 2015

Transcription

1 ASSOCIATED BANC-CORP INVESTOR PRESENTATION THIRD QUARTER 205

2 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 995. 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. Forwardlooking 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 0-K and subsequent SEC filings. Such factors are incorporated herein by reference.

3 OUR FOOTPRINT AND FRANCHISE 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 00 communities Offering a full range of banking services and other financial products and services Loans Second Quarter 205 Deposits 202 In Footprint 0% MN 2% Other 7% 2 WI 37% IL 25% MN 8% WI 67% IL 24% > $ billion deposits > $300 million deposits Period end as of June 30, 205; Loans excludes $0.4 billion installment and credit card portfolio 2 Includes Missouri, Indiana, Ohio, Michigan and Iowa 2

4 ATTRACTIVE MIDWEST MARKETS We Serve a Large and Growing Market Place Our footprint covers ~ 20% of the U.S. population (Est. pop ~ 6 million ) Our footprint is estimated to have contributed ~ 30% of the country s recent population growth Favorable Employment Dynamics LARGE DEMOGRAPHIC BASE SOLID JOB GROWTH Our footprint s employment has grown over the past three years 3 Wisconsin, Minnesota, Indiana, Iowa, and Ohio have unemployment rates below the national unemployment rate 3 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 years 2 MANUFACTURING CENTRIC CREDIT WORTHY CUSTOMERS Our Markets have Demonstrated Consumer Credit Strength Eight of the Top 0 American cities with the highest credit scores are located within our footprint 4 Seven of the top 0 are located in our three state branch footprint US Census Bureau Annual Estimates of the Resident Population, US Bureau of Labor Statistics, Manufacturing Industry Employees, US Bureau of Labor Statistics, Total Nonfarm Employees, June Experian.com, 204 Annual Credit Study, VantageScore registered trademark 3

5 205 SECOND QUARTER HIGHLIGHTS Solid Loan and Fee-Revenue Growth Offset Continued Margin Compression Balance Sheet Average loans of $8.2 billion were up $373 million, or 2% QoQ Average deposits of $9.6 billion were up $57 million, or 3% QoQ Net Interest Income & Net Interest Margin Net interest income of $66 million was down $ million QoQ Net interest margin of 2.83% compared to 2.89% in the first quarter Noninterest Income 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 Avail. to Common & ROTCE Capital Net income (NIAC) of $48 million, or $0.3 per share Return on average common equity Tier of 0.55% Repurchased 3.2 million shares of common stock during 2Q Issued $65 million in preferred stock with a dividend rate of 6.25% Capital ratios remain strong with a common equity Tier ratio of 9.3% 4

6 GROWING THE LOAN PORTFOLIO ($ IN BILLIONS) $3.0 $3.2 $2.7 $2.9 $4.6 $3.0 $3.3 $3.3 $5.7 $2.5 $3.7 $3.7 $6.6 $2. $4. $4.0 $8.2 $2.0 $4.9 $4. Cumulative Change 2Q 20 2Q 205 -$.2 billion +$2.2 billion +$.2 billion $4.2 $5.0 $5.9 $6.5 $7.2 +$3.0 billion 2Q 20 2Q 202 2Q 203 2Q 204 2Q 205 Commercial & Business Residential Mortgage Commercial Real Estate Home Equity & Installment Based on average balances 5

7 LOAN PORTFOLIO GROWTH YTD 205 AVERAGE LOAN GROWTH OF $80 MILLION, OR 5% FROM 4Q 204 ($ IN MILLIONS) Residential Mortgage $393 YTD Change General Commercial Loans $203 +9% Mortgage Warehouse $48 Commercial Real Estate $83 +7% Oil & Gas $76 +2% Power & Utilities ($2) $9 Home Equity & Installment (6%) Commercial & Business Residential Mortgage Commercial Real Estate Home Equity & Installment 6

8 DIVERSE PORTFOLIO OF VALUE-ADDED BUSINESSES Community, Consumer, and Business Corporate and Commercial Specialty Community Markets Private Client and Institutional Services Consumer and Business Banking Corporate and Specialized Lending Commercial Real Estate Lending Rochester, MN Eau Claire, WI La Crosse, WI Central Wisconsin Rockford, IL Peoria, IL Southern Illinois Private Banking Personal Trust Asset Management Retirement Plan Services Associated Financial Group Associated Investment Services Branch Banking Commercial Banking Residential Lending Payments and Direct Channels Corporate Commercial and Specialized Lending Commercial Deposits and Treasury Management Capital Markets CRE Lending Real Estate Investment Trusts CRE Syndications CRE Tax Credits 7

9 NET INTEREST INCOME AND MARGIN 7.00% 6.00% 5.00% 4.00% 3.00% 2.00%.00% 0.00%.00% 0.80% 0.60% 0.40% 0.20% 0.00% Yield on Interest-earning Assets 4.47% 4.07% 3.77% 3.55% 3.38% 4.00% 3.80% 3.47% 3.3% 3.5% 2Q 20 2Q 202 2Q 203 2Q 204 2Q 205 Total Interest-earning Yield Total Loan Yield Cost of Interest-bearing Liabilities 0.9% 0.65% 0.63% 0.37% 0.4% 0.29% 0.40% 0.24% 0.9% 0.2% 2Q 20 2Q 202 2Q 203 2Q 204 2Q 205 $80 $70 $60 $50 $40 $30 $20 $0 $ % 4.00% 3.00% 2.00%.00% 0.00% Net Interest Income & Net Interest Margin ($ in millions) $69 $66 $60 $54 $ % 3.30% 3.6% 3.08% 2.83% 2Q 20 2Q 202 2Q 203 2Q 204 2Q Interest Bearing Deposit Costs Other Funding Costs Net Interest Income Net Interest Margin Includes the effect of pre-refunding $430 million of senior notes due Q 206 8

10 INTEREST RATE SENSITIVITY 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 $0 billion (88%) of the commercial loan portfolio will re-price or mature within one year o 60% of the commercial loan portfolio is floating or adjustable rate and less than 3% is fixed long term Overall, we have a stable and low cost deposit funding base o Historically, our deposit pricing has lagged Federal Reserve interest rate increases o We have estimated our low cost core deposits have an effective beta of approximately 0.5 (i.e., deposit rates modeled to increase ~50bps per 00bps increase in Fed funds rates) Commercial Loan Maturity Distribution and Interest Rate Sensitivity ($ in billions).5% Within Yr -5 Yrs 2.0% 00bps increase Dynamic Forecast After 5 Yrs Sensitivity Analysis Estimated % Change in Earnings Over 2 Months 2.9% Total 4.% 200bps increase Static Forecast % of Total Fixed $3.2 $. $0.3 $4.6 40% Floating $3.9 $2.6 $0.3 $6.8 60% Total $7. $3.7 $0.6 $.4 00% % by Maturity 63% 32% 5% Change in net interest income and earnings at risk due to instantaneous moves in benchmark interest rates. We evaluate the sensitivity using: ) a dynamic forecast incorporating balance sheet growth, and 2) a static forecast where the current balance sheet is held constant. 9

11 BRANCH OPTIMIZATION Changing customer behavior has driven our focus on branch channel optimization By year end 205, we expect to consolidate thirteen additional branches for a total of 00 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 20, we have significantly modernized our branch footprint to create an improved client experience, which has led to high deposit retention and organic deposit growth BRANCHES ~25 DEPOSITS ($ in billions) $4 $4 $8 $9 $2 2Q Q 20 YE 205 Forecast 2Q Q 20 Recent Quarter Total Deposits Insured Deposits 2 Total Deposits as of June 30, 205; Insured Deposits (less than $250,000) as of March 3, Insured Deposits covered by the FDIC, per Call Report 0

12 EVOLVING DELIVERY MODEL Enhanced multi-channel connections drive customer adoption and efficiency 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 Branch Transactions Teller ~2/3 ATM ~/3 Redesigned website to enhance ecommerce Driving to a consistent digital channel experience Implemented online lending and deposit sales solutions Deposit Customer Usage > 50% > 20% Leveraging customer analytics and a virtual sales team to drive cross-sell Nearly 0% of all new loan applications now come through online channels Online Deposit Account openings have doubled Online Banking Mobile Banking Dec 204 Jun 205

13 PURSUING EFFICIENCY GAINS ($ IN MILLIONS) Efficiency Ratio at YTD 205 = 69% 70.4% Goal = Peer Average or Better 69.3% 69.6% 69.0% 69.0% Areas of Focus Back Office Initiatives: Implementing technology solutions in labor intensive processes $80 $60 $40 $20 $00 $80 $60 $40 $20 $- 4,985 4,968 $52 $67 4,728 $75 $80 4,406 4,443 $ YTD 205 Efficiency Ratio 2 3 Technology Spend FTE 5,000 4,800 4,600 4,400 4,200 4,000 3,800 3,600 3,400 Real Estate Initiatives: Actions to optimize our real estate holdings and capacity Distribution Initiatives: Optimize the way we interact with our customers 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 2

14 STRONG CAPITAL POSITION MANAGED OUR CURRENT CAPITAL INTO OUR TARGET RANGE OF 8-9.5% 7.9% 7.9% 7.9% Common Equity Tier Ratio Basel I 2.3% 2.2%.6%.5% Basel III 9.7% 9.3% YTD 205 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 Capital Management Priorities Funding Paying a Non-organic Organic 2 Competitive 3 Growth 4 Growth Dividend Opportunities Share Buybacks and Redemptions 3

15 WHY ASSOCIATED Management Team Focused on Creating Long-Term Value Attractive Midwest Markets $0.28 $0.28 $ % Diverse Portfolio of Value-Added Businesses Modern and Rapidly Evolving Delivery Model $ % 9.9% 9.6% 0.6%.0% 0.0% 9.0% Asset Sensitive Rate Profile 8.0% 7.0% Disciplined Capital Philosophy $0.05 $0.08 $0.09 $ % 5.0% 2Q 202 2Q 203 2Q 204 2Q 205 Dividends per Common Share Diluted EPS ROTCE Return on Average Common Equity Tier (ROTCE). Management uses Common Equity Tier, 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 to stockholders equity. 4

16 SECOND HALF 205 OUTLOOK Balance Sheet Margin High single digit annual average loan growth Maintain loan / deposit ratio under 00% Modest continuing compression throughout the second half of the year Noninterest Income Seasonally lower insurance commissions Noninterest Expense Full year not to exceed $700 million Capital Provision Now in our target range Continue to follow stated corporate priorities for capital deployment Pausing on additional stock repurchases Based on loan growth and changes in risk grade or other indicators of credit quality Outlook incorporates effects of Ahmann & Martin Co. acquisition. 5

17 APPENDIX

18 LOANS BY INDUSTRY AND STATE JUNE 205 PERIOD END BALANCES Profsnl, Scientific, and Tech Svs 3% Health Care and Soc. Assist. 5% C&BL by Industry ($7.2 billion) Rental and Leasing Svs 3% Real Estate 8% Retail Trade 4% Finance & Insurance 2% Oil & Gas % Power & Utilities 9% Manufacturing 2% Wholesale Trade 0% C&BL by State ($7.2 billion) Transport. and Whsing % Other 3% Other 3% Industrial 6% CRE by Industry ($4.2 billion) Retail 9% Construction 26% Hotel / Motel 4% Multi-Family 2% CRE by State ($4.2 billion) Office / Mixed Use 2% Residential Mortgage by State ($4.9 billion) Minnesota 4% In- Footprint 8% Illinois 38% Other % Wisconsin 39% Home Equity by State ($.6 billion) Other 2% Minnesota % Other 2% Other 33% Wisconsin 32% In Footprint 2% Wisconsin 33% Illinois 6% In-Footprint 8% Minnesota % Illinois 6% Minnesota 0% Illinois 23% Wisconsin 72% Includes Missouri, Indiana, Ohio, Michigan and Iowa 7

19 NONINTEREST INCOME TRENDS ($ IN MILLIONS) Total Noninterest Income $87 Mortgage Banking (net) Income $72 $75 $70 $80 $6 $2 $5 $7 $3 $7 $0 $2 $2 $4 2Q 204 3Q 204 4Q 204 Q 205 2Q 205 Other Noninterest Income 2 $60 $54 $56 $64 $66 $7 $4 $ $9 $ 2Q 204 3Q 204 4Q 204 Q 205 2Q 205 2Q 204 3Q 204 4Q 204 Q 205 2Q 205 Mortgage Banking (net) and Other Noninterest Income Core Fee-based Revenue 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. 8

20 INSURANCE BUSINESS EXPANSION KEY DRIVER OF NONINTEREST REVENUE GROWTH In February 205, 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 4,000 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 Insurance Commissions Trend ($ in millions) $20 $20 Insurance Commissions YTD 205 Property & Casualty 25% $ $2 $4 $2 $ 4Q 203 Q 204 2Q 204 3Q 204 4Q 204 Q 205 2Q 205 Excludes a $4 million reserve related to the remediation of debt protection products Employee Benefits & Other 75% 9

21 NONINTEREST EXPENSE TRENDS ($ IN MILLIONS) Technology 2 Spend Total Noninterest Expense $2 $20 $2 $2 $22 $68 $72 $72 $74 $77 $70 $74 $75 $74 $74 2Q 204 3Q 204 4Q 204 Q 205 2Q 205 Other Non-Personnel Spend 3 $49 $54 $54 $53 $52 $98 $98 $97 $00 $03 2Q 204 3Q 204 4Q 204 Q 205 2Q 205 Personnel 68% 69% 70% 69% 69% Efficiency Ratio 5,000 4,800 4,600 4,400 4,200 4,000 3,800 2Q 204 3Q 204 4Q 204 4,43 4,359 4,320 2Q 204 3Q 204 4Q 204 Q 205 2Q 205 4,422 4,465 Q 205 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 Other Noninterest Expense FTE 4 Trend 2Q

22 CREDIT QUALITY INDICATORS ($ IN MILLIONS) Potential Problem Loans to Total Loans Nonaccruals to Total Loans $00 $04 $08 $2 $6 $20 $24 $28 $32 $36 $40 $48 $52 $56 $60 $68 $72 $76 $80 $84 $88 $92 $96 $200 $204 $208 $22 $26 $220 $224 $228 $236 $240 $244 $248 $256 $260 $264 $268 $272 $276 $280 $284 $288 $292 $296 $300 $304 $308 $32 $36 $320 $324 $328 $332 $336 $340 $252 $232 $64 $44 $2 $6 $20 $24 $28 $32 $36 $40 $44 $48 $52 $60 $64 $68 $72 $76 $80 $84 $88 $92 $96 $56 $-$4 $8 $288 $220 $29 $90.69% $200.28%.08%.22%.09% 2Q 204 3Q 204 4Q 204 Q 205 2Q % $00 $04 $08 $2 $6 $20 $24 $28 $32 $36 $40 $44 $48 $52 $56 $60 $64 $68 $72 $76 $84 $88 $92 $96 $200 $204 $208 $22 $26 $220 $224 $228 $232 $236 $240 $244 $248 $252 $256 $260 $264 $272 $276 $280 $284 $292 $296 $300 $304 $308 $32 $36 $320 $324 $328 $332 $336 $ % $288 $ % $80.50% $2 $6 $20 $24 $28 $32 $36 $40 $44 $48 $52 $56 $60 $64 $68 $76 $80 $84 $88 $96 $92.00% $ % $-$4 $8 $79 $84 $77 $74 $60.05%.07%.0% 0.97% 0.88% 2Q 204 3Q 204 4Q 204 Q 205 2Q % 2.50% 2.00%.50%.00% 0.50% Potential Problem Loans PPLs / Total Loans Nonaccruals Nonaccruals / Total Loans $20 Net Charge Offs to Average Loans.40% Allowance to Total Loans $6 $2 $8 $4 $- $9 $4 $6 $3 $3 0.9% 0.0% 0.3% 0.06% 0.06% 2Q 204 3Q 204 4Q 204 Q 205 2Q %.00% 60% 0.80% 0.60% 80% 0.40% 0.20% 0.00% 0% 52% 45% 50% 52% 63%.59%.55%.5%.48%.43% 2Q 204 3Q 204 4Q 204 Q 205 2Q % 2.50% 2.00%.50%.00% Net Charge Offs NCOs / Avg Loans (annualized) ALLL / Nonaccruals ALLL / Total Loans 2

23 OIL AND GAS LENDING UPDATE 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 Portfolio Overview Asset-based loans collateralized by a lien on oil & gas reserves Generally, we are participants in syndicated loans in this sector Oil & Gas Period End Loan Balances ($ in millions) $659 $ Second Quarter Loan Composition 49 clients All Other Loans 96% Portfolio Performance Oil & Gas 4% 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 Over $ billion in aggregate commitments Average commitment of $2 million $25 $354 Released $ million in reserves in the second quarter ($ in Millions) 4Q 204 Q 205 2Q 205 EOP Loan Balance $754 $780 $757 Oil & Gas Related Reserves $7 $27 $26 2Q 202 2Q 203 2Q 204 2Q 205 Reserve/EOP Loans 2.26% 3.46% 3.43% 22

24 Millions HIGH QUALITY SECURITIES ($ IN MILLIONS) Investment Type Amortized Cost Fair Value Duration (Yrs) Agency MBS $2,357. $2, $0.03 $0.026 $0.039 $0.052 $0.065 $0.078 $0.09 $0.04 $0.7 $0.30 $0.43 $0.56 $0.69 $0.82 $0.95 $0.22 $0.234 $0.247 $0.260 $0.273 $0.286 $0.299 $0.32 $0.338 $0.35 $0.364 $0.377 $0.390 $0.403 $0.46 $0.429 $0.442 $0.455 $0.468 $0.48 $0.494 $0.507 $0.520 $0.533 $0.546 $0.559 $0.572 $0.598 $0.6 $0.624 $0.637 $0.650 $0.663 $0.676 $0.689 $0.75 $0.728 $0.74 $0.754 $0.767 $0.780 $0.793 $0.806 $0.89 $0.832 $0.845 $0.858 $0.87 $0.884 $0.897 $0.90 $0.923 $0.936 $0.949 $0.975 $0.988 $.00 $.04 $.027 $.040 $.053 $.066 $.092 $.05 $.8 $.3 $.44 $.57 $.70 $.83 $.96 $.209 $.222 $.235 $.248 $.26 $.274 $.287 $.300 $.33 $.326 $.352 $.365 $.378 $.39 $.404 $.47 $.430 $.443 $.469 $.482 $.495 $.508 $.52 $.534 $.547 $.560 $.573 $.586 $.599 $.62 $.625 $.638 $.65 $.664 $.677 $.690 $.703 $.729 $.742 $.755 $.768 $.78 $.794 $.807 $.820 $.846 $.859 $.872 $.885 $.898 $.9 $.924 $.937 $.950 $.963 $.976 $.989 $2.002 $2.05 $2.028 $2.04 $2.054 $2.067 $2.080 $2.06 $2.9 $2.32 $2.45 $2.58 $2.7 $2.84 $2.97 $2.223 $2.236 $2.249 $2.262 $2.275 $2.288 $2.30 $2.34 $2.327 $2.340 $2.353 $2.366 $2.379 $2.392 $2.405 $2.48 $2.43 $2.444 $2.457 $2.483 $2.496 $2.509 $2.522 $2.535 $2.548 $2.56 $2.574 $2.600 $2.63 $2.626 $2.639 $2.652 $2.665 $2.678 $2.69 $2.704 $2.77 $2.730 $2.743 $2.756 $2.769 $2.782 $2.795 $2.808 $2.82 $2.834 $2.860 $2.873 $2.886 $2.899 $2.92 $2.925 $2.938 $2.95 $2.964 $2.977 $2.990 $3.003 $3.06 $3.029 $3.042 $3.055 $3.068 $3.08 $3.094 $3.07 $3.20 $3.33 $3.46 $3.59 $3.72 $3.85 $3.98 $3.2 $3.237 $3.250 $3.263 $3.276 $3.289 $3.302 $3.35 $3.328 $3.34 $3.354 $3.367 $3.380 $3.393 $3.406 $3.49 $3.432 $3.445 $3.458 $3.47 $3.484 $3.497 $3.50 $3.523 $3.536 $3.549 $3.562 $3.575 $3.588 $3.64 $3.627 $3.640 $3.653 $3.666 $3.679 $3.692 $3.705 $3.78 $3.73 $3.744 $3.757 $3.770 $3.783 $3.796 $3.809 $3.822 $3.835 $3.848 $3.874 $3.887 $3.900 $3.93 $3.926 $3.939 $3.952 $3.965 $3.99 $4.004 $4.07 $4.030 $4.043 $4.056 $4.069 $4.082 $4.095 $4.08 $4.2 $4.34 $4.47 $4.60 $4.73 $4.86 $4.99 $4.22 $4.225 $4.25 $4.264 $4.277 $4.290 $4.303 $4.36 $4.329 $4.342 $4.368 $4.38 $4.394 $4.407 $4.420 $4.433 $4.446 $4.459 $4.472 $4.485 $4.498 $4.5 $4.524 $4.537 $4.550 $4.563 $4.576 $4.589 $4.602 $4.628 $4.64 $4.654 $4.667 $4.680 $4.693 $4.706 $4.79 $4.745 $4.758 $4.77 $4.784 $4.797 $4.80 $4.823 $4.836 $4.849 $4.862 $4.875 $4.888 $4.90 $4.94 $4.927 $4.940 $4.953 $4.966 $4.979 $5.005 $5.08 $5.03 $5.044 $5.057 $5.070 $5.083 $5.096 $5.22 $5.35 $5.48 $5.6 $5.74 $5.87 $5.200 $5.23 $5.226 $5.239 $5.252 $5.265 $5.278 $5.29 $5.304 $5.37 $5.330 $5.343 $5.356 $5.382 $5.395 $5.408 $5.42 $5.434 $5.447 $5.460 $5.473 $5.499 $5.52 $5.525 $5.538 $5.55 $5.564 $5.577 $5.590 $5.603 $5.66 $5.629 $5.642 $5.655 $5.668 $5.68 $5.694 $5.707 $5.720 $5.733 $5.759 $5.772 $5.785 $5.798 $5.8 $5.824 $5.837 $5.850 $5.876 $5.889 $5.902 $5.95 $5.928 $5.94 $5.954 $5.967 $5.980 $5.993 $6.006 $6.09 $6.032 $6.045 $6.058 $6.07 $6.084 $6.097 $6.0 $6.36 $6.49 $6.62 $6.75 $6.88 $6.20 $6.24 $6.227 $6.253 $6.266 $6.279 $6.292 $6.305 $6.38 $6.33 $6.344 $6.357 $6.370 $6.383 $6.396 $6.409 $6.422 $6.435 $6.448 $6.46 $6.474 $6.487 $3.60 $3.86 $3.978 $4.238 $4.355 $4.65 $4.732 $4.992 $5.09 $5.369 $5.486 $5.746 $5.863 $6.23 $6.240 $6.500 GNMA CMBS,794.3, Municipals 984.0, Agency & Other CMOs Corporates & Other $3.224 $0.208 $0.325 $0.585 $0.702 $0.962 $.079 $.339 $.456 $.76 $.833 $2.093 $2.20 $2.470 $2.587 $2.847 Govt & Agencies Strategic Portfolio $5,900.9 $5, Membership Stock $- Total Portfolio $6,06.6 $6,099.2 Net Unamortized Premium.0 Investment Securities & Yield $5,756 $5,938 $4,926 $4, % 2.57% 2.63% 2.45% 2Q 202 2Q 203 2Q 204 2Q 205 Fair Value Average Yield 6.00% 5.00% 4.00% 3.00% 2.00%.00% Fair Value Composition June 30, 205 GNMA MBS 8% GNMA CMOs 7% Municipals 7% Other CMOs 6% Other 0% GNMA CMBS 30% Other MBS 32% Risk Weighting Profile June 30, 205.7% 0.9% 75.6% 22.7% 53.% 46.0% Q 205 2Q 205 0% RWA 20% RWA All Other 99% government backed Agency and other government paper Treasuries and GNMA 23

25 RECONCILIATION AND DEFINITIONS OF NON-GAAP ITEMS ( OF 2) 2Q 204 3Q 204 4Q 204 Q 205 2Q 205 Efficiency Ratio Reconciliation: Efficiency ratio, as defined by the Federal Reserve 69.70% 69.44% 70.33% 70.30% 70.23% Taxable equivalent adjustment (.32) (.36) (.40) (.42) (.34) Asset gains, net Other intangible amortization (0.4) (0.40) (0.32) (0.32) (0.35) Efficiency ratio, fully taxable equivalent 68.23% 69.04% 69.66% 68.86% 69.05% Efficiency Ratio Reconciliation: YTD 205 Efficiency ratio, as defined by the Federal Reserve 73.64% 72.6% 7.04% 69.97% 70.26% Taxable equivalent adjustment (.74) (.59) (.45) (.36) (.38) Asset gains (losses), net (0.92) (0.86) 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% 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). 24

26 RECONCILIATION AND DEFINITIONS OF NON-GAAP ITEMS (2 OF 2) ($ in thousands) 2Q 202 2Q 203 2Q 204 2Q 205 Common Equity Tier Reconciliation: Stockholders Equity $2,909,62 $2,876,976 $2,929,946 $2,904,39 Accumulated other comprehensive income (loss) (66,579) 25,05 (0,494) (2,594) Preferred equity (63,272) (63,272) (6,024) (22,05) Intangible assets (946,492) (942,374) (938,370) (950,438) Deferred tax assets (DTAs) / Disallowed servicing assets (4,749) (2,470) (407) (3,866) Common Equity Tier $,828,529 $,893,875 $,99,65 $,825,478 Common Equity Tier, 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, along with other capital measures, to assess and monitor our capital position. Common Equity Tier for 205 follows Basel III and is defined as common stock and related surplus, net of treasury stock, plus retained earnings. Common Equity Tier for 204 follows Basel I and is defined as Tier capital excluding qualifying perpetual preferred stock and qualifying trust preferred securities. 25