Associated Banc-Corp (ASB) 2013 Q2 法說會逐字稿

Good afternoon everyone, and welcome to Associated Banc-Corp's second quarter 2013 earnings conference call. My name is Mike, and I will be your operator today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session at the end of this conference.

(Operator Instructions)

Copies of the slides that will be referenced during today's call are available on the Company's website at investor.associatedbanc.com. As a reminder, this conference call is been recorded. During the course of the discussion today, Associated management may make statements that constitute projections, expectations, beliefs, or similar forward-looking statements. Associated's actual results could differ materially from the results anticipated or projected in any such forward-looking statements.

Additional detailed information concerning the important factors that could cause Associated's actual results to differ materially from the information discussed today is readily available on the SEC website in the risk factors section of Associated's most recent form 10-K and any subsequent SEC filings. These factors are incorporated herein by reference. Following today's presentation, instructions will be given for the question and answer session.

At this time, I would like to turn the conference over to Mr. Philip Flynn, President and CEO, for opening remarks. Mr. Flynn, the floor is your's, sir.

Thank you, Mike. Welcome to our second quarter earnings conference call.

Joining me today are Chris Niles, our Chief Financial Officer, and the Scott Hickey, our Chief Credit Officer.

Highlights for the second quarter outlined on Slide Number 2. These solid results were highlighted by another record quarter for mortgage banking and improving net interest income. For the quarter, we reported net income to common shareholders of $47 million, or $0.28 per share. This compares to net income of $42 million, or $0.24 a share a year ago. Return on Tier 1 common equity was 9.9%. Average loan balances increased by 2% from the previous quarter, with the majority of growth coming from the commercial portfolios.

Average deposits of $17.1 billion were essentially flat the first quarter. Gross fee income was $84 million, was up 3% from the first quarter, and was driven by mortgage banking. Net interest income was up $2 million from the first quarter, reflecting one additional day, and further liability cost management actions. We maintained the quarterly dividend at $0.08 per share, and repurchased another $30 million of common stock, or approximate 2 million shares at an average price of $15.09. Our Tier 1 common equity ratio remains very strong at 11.48%.

Let me share some detail of the main performance drivers during the second quarter. Loan growth is highlighted on Slide 3. Average loans continued to grow from the first quarter, with net growth of $280 million. This represents a 2% quarter-over-quarter growth rate, and an 8% increase year over year. Growth during the second quarter was driven by continued strong results in our commercials and commercial real estates businesses, which were both up 4%, offset by continued runoff of home equity and installment loans, and our planned reduction in the retention of 15-year mortgages. Commercial and business lending average balances increased by $245 million during the quarter, with general commercial loans growing an average of $90 million.

Within our specialized lending areas we saw our powers and utilities business grow an average of $108 million, driven by portfolio acquisitions from European banks, and our oil and gas book was up $60 million, while mortgage warehouse shrank, reflecting refi activity at quarter end. Average commercial real estate loans grew by $130 million during the quarter, with multifamily and retail projects construction loans accounted for $78 million of that growth. We continue to see good opportunities to grow our commercial real estate portfolio. Average residential mortgage loans grew by $39 million, or 1% during the quarter. We continue to hold approximately $1.3 billion of 15-year fixed-rate mortgages on our balance sheet, and intend to maintain that level going forward, reflecting our strategy to sell substantially all of our 15- and 30-year production.

During the second quarter, we sold $782 million of loans, compared to $680 million in the prior quarter. Gain on these sales total over $10 million for the second quarter, or about 218 basis points on the loans delivered. With continued relatively low mortgage rates, we expect our home equity portfolios to experience more runoff, as consumers deleverage and refinance into lower priced first lien mortgages, and almost 0.5 of our home equity portfolio is in a first lien position.

Average deposits of $17.1 billion were basically flat compared to the first quarter. Increases in checking and savings average balances were offset by money market and time deposit declines. We also paid off $300 million of higher rate federal home loan bank advances maturing during the second quarter.

Turning to Slide 4, net interest income of $160 million increased by $2 million, or 2% quarter-over-quarter. Loan interest income was up over $1 million from the first quarter, while our liability funding cost decreased by $1 million. Net interest margin for the second quarter was 316 basis points, down 1 basis point from the prior quarter. Year-over-year net interest margin is down a total of 14 basis points. The five basis point decline in total asset yields was primarily driven by it a seven basis point decline in commercial loan yields. The renewal and refinancing trends in our commercial books are grinding away at embedded floors, and we expect to see continuing pressure on the asset side of our balance sheet. Our strategy is to remain asset sensitive in this low rate environment, and we recognize that this is weighing on our margin.

Loan pricing continues to be competitive in our footprint, as banks seek to gain market share. In commercial real estate, for example, we've recently seen lenders aggressively come back to this business who retreated during the crisis. With this competition, we've seen yields on new commercial, commercial real estate, and specialized loans decline by about 10 to 15 basis points on recent transactions. We continue to manage down interest varying liability costs, which now stand at 41 basis points, down from 65 basis points a year ago. Our expectation for the rest of 2013 is that earning asset yields will continue to compress, while our ability to manage deposits and funding costs lower will become more challenging. There will be some continuing benefit from repricing of the CD book through the rest of the year, and additionally we have about $26 million of 9.25% subordinated debt outstanding that's redeemable in October.

On Slide 5, total noninterest income for the quarter was $84 million, up $2 million from the first quarter and up $8 million, or 11%, from the second quarter of 2012. Mortgage banking had another record quarter, and was up over $1 million from the first quarter. Mortgage banking income was aided by a $3 million pick-up in MSR valuation compared to the first quarter, which was partially offset by a $2 million decline in gain-on-sale. After this quarter's MSR gain, there will be $2 million left in the valuation allowance. This will be reflected in our second quarter 10-Q filing.

In our core fee categories, service charges on deposits, card-based income, trust service fees all improved by 4% to 5% from the first quarter. Gains in core fee revenues were offset by a $2 million second quarter decrease in insurance revenue from the previous quarter. Recently, there's been an industry-wide focus on third-party vendor relationships in the products that are sold to our customers. Related to this, we proactively recognize a $3 million reserves related to third-party products sold in prior years.

Capital market fees increase by about $2 million from a weaker than usual first quarter. We also revalued some of our real estate that we intend to sell down to market value, as part of our continuing process to evaluate consolidation opportunities and rationalize our footprint. Total noninterest expense for the quarter increased by $3 million, or 2%, from the first quarter. Personnel expenses increased by $2 million, including $1 million charge for severance related to our ongoing consolidation efforts. FTE levels continued to decline, and are at their lowest levels since mid-2010.

Losses other than loans were also up $2 million from the first quarter, due to higher unfunded commitment reserves. Occupancy expense declined by more than $1 million. This is a seasonal variance related to a reduction in contracted services, mainly snow removal. Our efficiency ratio is showing improvement in recent quarters, and we've remain committed to work diligently toward a number that is more in line with our peers.

Turning to credit quality on Slide 6, we've now improved credit quality to a point where improvements in future will likely be more modest. Net charge-offs were $14 million for the second quarter, and the majority of those charge-offs were in our home equity portfolios. Potential problem loans declined to $310 million, and are down 24% from $410 million a year ago.

The level of nonaccrual loans, total loans continued to improve to 138 basis points, down from 145 basis points at the end of the first quarter. That ratio has improved for the 13th consecutive quarter. Total nonaccrual loans at $217 million were down from $225 million at the end of the first quarter and $318 million a year ago. The allowance for loan losses now equals 1.76% of loans, and covers 127% of period end nonaccruals. The provision for loan losses for the quarter was $4 million, which was the same amount we provided for in the first quarter. We expect provision expense to increase as loans grow.

Turning to Slide 7, our capital ratios continue to remain very strong, with a Tier 1 common equity ratio of 11.48%. We are well-capitalized, and well in excess of the Basel III expectations on a fully phased-in basis. We reiterate that our priority for capital deployment continues to focus on organic growth. We plan to maintain our dividend in line with earnings growth, and will be disciplined in evaluating other opportunities to optimize our capital structure over the coming year.

On Slide 8, we've replaced our 2013 full-year guidance with our second half outlook. Average loan growth for the first half of the year was about 4%. We expect quarterly loan growth for the remainder of the year to be in the 1% to 2% range for quarter. We've not made any changes to our deposit growth guidance. We will remain focused on disciplined deposit pricing, and we will look to continue to grow core retail deposits and commercial deposits through our enhanced Treasury management offerings. We expect continued modest net interest margin compression over the course of the year, driven by continued pressure on earning asset yields.

We expect to defend margin compression through some liability repricing and refinancing actions. We are focused on expense management, and are committed to keep total noninterest expense for 2013 flat on a year-over-year basis compared to 2012. Credit trends are expected to continue to improve, but more modestly. Provision expense is expected to increase generally in line with new loan growth. Capital deployment will continue to be a priority in order to drive long-term shareholder value.

With that, we will open it up to your questions.

Thank you, sir. We will now begin the question-and-answer session.

(Operator Instructions)

The first question we have comes from Dave Rochester of Deutsche Bank. Please go ahead sir.

Good afternoon guys.

Hi, Dave.

On the margin, I know you mentioned there's stronger competition, but are you seeing any relief at all from higher longer term rates on real estate loan pricing?

Short rates are what really makes the difference for us in our Commercial businesses. So the fact that the long end has moved impacts our Mortgage Lending business by slowing, or been slow really this quarter, but certainly will slow we think for the remainder of the year. So for us to really see help on the margin, we need movement on the short end.

What are you guys seeing in terms of reinvestment rates today? Because I know those were up for you guys.

On the security slope?

Yes.

We have been closer to sort of the 1.5, and the market's backed up, arguably, 60, 70 basis points for the sort of three-year duration stuff that's typical of our portfolio. So, we would see rates in the 2s, low 2s, opposed to the 1.5s,

So a little less pressure.

That helps a little.

Yes, and then in terms of the securities premium, amortization expense going forward with the backup in the curve, can you talk about how much of a benefit you saw this quarter, and if the curve stays where it is, how much more you might expect through the end of this year?

We saw around $1 million of net pick-up relative to the first quarter in terms of change period-over-period. Obviously there's slightly different principal balances, et cetera, but order of magnitude, that was the shift. And we would expect, given the continued back-up, a little -- we've seen a little rally here to see that get better. So it reduced amortization expense in future periods.

Great. And just based on what you guys are seeing in the competitive landscape on the repricing the portfolio that's coming off the floors, if we assume that the current curve persist, are you thinking we hit a bottom on the NIN, sometime maybe in the first half of next year?

We've been reluctant to call the bottom, but if you and Mr. Bernanke give us some guidance would be happy to.

(Laughter) all right. Just one last one. On your new loan growth guidance. Is that primarily in your bringing that in related to the competitive landscape? Are you seeing any drop-off in activity in any of your businesses, just maybe some color there?

Well, it has been competitive. I think in some of our business lines, it appears of late to have gotten more competitive. For example, particularly in commercial real estate. Generally speaking, I think for our bank, and I think for most banks, we are not getting a lot of growth out of general economic activity, and certainly in our part of the world, most of our loan growth has been taking share from somebody else. As it gets more competitive and as we are not getting a lot of action out of the economy, I think it is just prudent to assume that we are not going to be generating 2%-plus quarterly loan growth for the rest of the year.

Now, we'd be delighted if that happens. Originally we thought we would get to high single digit loan growth over the course of this year, and basically what we are saying is we think it will probably be 6% to 8% for the year, say. So it's still probably at the upper end of what other banks are doing, but maybe a point or so less than what we were thinking when we started the year.

All right, great. Thanks, guys.

Next we have Chris McGratty of KBW.

Good afternoon, guys. On M&A, I think in the past you've talked about completing the deal or announcing the deal this year. Obviously there's a big one in Chicago this week. Can you maybe talk about appetite for markets, whether you still think you can announce a deal this year, and kind of size? Thanks.

Just to be clear we never -- I certainly don't recall saying we were going to announce a deal this year. (Laughter). But our view on M&A has been very consistent, and we've been quite transparent about it. We believe that the most effective M&A transaction for us will be the one where we can either buy someone's branch network, or perhaps a whole bank in a part of our footprint where we have significant overlap so that we can be assured of significant cost takeouts. Our view of that hasn't changed, even given the transaction that was announced in Chicago a couple days ago.

Okay. And then one for you, Chris. On the DDA decline in the quarter. I think the first quarter was seasonal, but anything to read into the $200 million drop in DDA?

I think we have an end of period loss that you could particularly see in the second quarter and in the fourth quarter, but the average balances for DDA were up both on the checking overall and savings overall from the second quarter to the first. Focusing on the average, I think, tells the appropriate story.

Okay. And one last one on the commercial loan yields, the C&I yields. They're actually up a basis point. Maybe I missed it, but can you offer a little bit of color on what drove the increase?

I think we had reasonable renewals, and so on the renewals we tend to have a slightly higher effective yield. We also had a small amount of interest recovery relative to the prior period, and the combination of those two has led to a modest improvement.

Okay, thanks.

The next question we have comes from Scott Siefers of Sandler O'Neill.

Good afternoon, guys. I guess either Phil or Chris. I was just hoping you could expand a little on your thoughts on capital management. Phil, you gave a summary toward the end of your prepped remarks, but it sounds like the balance sheet growth dynamic, maybe a little slower, not materially slower, but a little slower than maybe we would have thought 90 days or so ago. And then I think you guys are getting toward the upper end of the range you've kind of called out, sort of the between book and tangible book as the appropriate place to repurchase a lot of shares. So, just am curious how you're thinking about that dynamic here, given the run in the stock price?

Sure. So our priorities for using capital has been consistent since Chris and I walked through the door here, which are, number one to support the organic growth, and we continue to grow at a pretty decent clip, I think. We will continue to support the organic growth. We're paying out an $0.08 per quarter dividend, and as our earnings continue to grow, we will revisit that at an appropriate place in the future. Our third priority is to deploy capital toward an accretive acquisition, but those haven't come about. So our fourth priority has been, therefore, to repurchase shares, which we've been doing now for the last four quarters, three or four quarters.

As we said today, we still have $35 million of available Board-approved allocation to buy back shares. It is likely we will exercise that. And we will be in discussions with our Board in the future about our plans for buybacks going forward. We have said that at less than book value, buying back shares is a pretty easy choice to make. That said, we have a lot of optimism about the course of our Company. We will not have a hard stop, if you will, at book value, but we will spend time talking to our Board about what direction we will take going forward.

Okay. That's perfect. I appreciate that color. And then maybe just a separate question on mortgage. Your numbers have obviously held up pretty well, and then as we look into the second half of the year, obviously expect some sort of slowing. But I wonder if you could just maybe frame order of magnitude of how you guys are thinking about the second half of the year, and just maybe what the major kind of pros and cons are as you look at sort of where your pipeline applications are, characteristics of the portfolio, et cetera, and how you're thinking about that?

Sure. First of all, we've been quite delighted with the results through the first half. When we were planning for this year, our expectation is that we would have a drop-off in our mortgage banking activity through the course of the year, and of course we've had basically two record quarters in a row. So that's been great. Interestingly, as we got into the first quarter, toward the end of the first quarter, we had a shifting of our backlog of Mortgage business where we started to pick up quite a bit of purchase money applications rather than simply refis. Last year we averaged about 80% of the book was refi, 20% new stuff. So we moved to a 50/50 mix on the same volume, give or take $1 billion, say, at any point in time.

Then as rates started to move, we seem to have a land rush of applications for refis, and the backlog went up to about $1.5 billion. So as we sit here today, as of mid-July, the backlog is now down to about $1 billion again, and it's moved back to about 50/50 mix. We are actually pretty encouraged by that, particularly the mix aspects, because the purchase applications will likely continue forward, while we certainly expect refi activity to dwindle as time goes on. We certainly continue to expect to see a fall-off in our mortgage banking income as the year goes on, but with purchase activity picking up here and all across the country, results may be a little better than what we would have -- certainly what we thought they were going to be a couple quarters ago.

Okay. That's great. I appreciate it.

Next we have Matthew Clark of Credit Suisse. Please go ahead.

Hey, guys. On expenses, I think your run rate is basically -- it gets you to flat for the year relative to last, and can you just discuss maybe initiatives that you have as we look beyond this year? Obviously you're reinvesting in the business, but you also want to right-size that efficiency ratio. Can you give us a sense for what opportunities might exist as you look at the franchise today?

Sure. You've seen our efficiency ratio come in at about three points since the end of the year, which is good. That's a combination of discipline on the expense side and a little bit of help on the revenue side. We continue to look for opportunities for consolidation, both on the front office and the back office. As you know, we've consolidated more than 30 branches over the past, call it 1.5 years, about 10% of our network. We continue to look for opportunities to do that, and there'll probably be some that will present themselves to us.

A big focus right now is on efficiency in the back shop, and we've talked quite a bit about the fact that the Company was an under-investor in technology solutions for processing in its past, and that's led us to an awful lot of manual types of processes. So we are working diligently in a number of areas of the Company to improve the efficiency of the back shop. In order to do that often requires investment upfront in order to get efficiency in the back end.

So for example, we are in the process of modernizing our commercial loan operations system, which is a technology project upfront, efficiency out the back, and we are a third of the way through that project. We have others like that that we are doing. We are also working hard on consolidating physical facilities to get efficiency and to save money. So we've, actually this is this the first conference call we've had in the building that we bought in downtown Green Bay, and we are two-thirds of the way of consolidating more than 500 of our colleagues into this building and getting out of five different leased spaces. Likewise, we've moved into a consolidated space in Chicago, and will be taking people out of, I think, four different facilities there. We are looking for other opportunities and are working on other opportunities for consolidation around the Company. So there's a lot of different things we are doing which will lead to more efficiency in the future.

Okay, that's helpful. And then on the incremental growth in the power utilities book, I think you had mentioned that there's some opportunities to acquire some portfolios. I guess how much more of that do you think there is out there, and do you feel like you might be reaching a, tapping out, or reaching a point where you don't want to grow that portfolio too large relative to the overall?

Our specialty businesses are still relatively small compared to the overall book. So we are not in any particular danger of stopping. These portfolio purchases that we've been able to do are quite happenstance, obviously. We cannot plan for those, but we are getting good organic growth in both our Oil and Gas business and the Power and Utility business anyway, and when the opportunity presents itself, particularly as of late with European banks trying to pull back capital to Europe, we will take advantage of that, if the opportunity presents itself. But we don't plan for those things, those are little bluebirds that come by that we are happy to take advantage of.

Just remind us how -- size of the overall specialty book, and what you like -- your comfort level with the relative size?

Yes, so when we talk about specialty book, we talk about not just power and oil and gas, but we've also got our mortgage warehouse, healthcare, financial services, and a few others. Most of the growth has been in power and utilities and oil and gas. We expect the mortgage warehouse business to actually be much more modest than it has been, and we saw that at the end of the second quarter.

What we've said publicly is the sum total of those, when we've got to $1 billion in outstandings, we would take a look and decide how much more we want to do in proportion to the rest of our balance sheet. But as the mortgage warehouse probably comes down a bit, we have plenty of room. These are also, generally speaking, portfolios and credit types that have lower embedded loss content than basic commercial lending or commercial real estate lending. So we are quite comfortable in growing these businesses, both to generate income, as well as the diversification play for the portfolio. At this point, we're not feeling tapped out, is the short answer to your question.

Got it. Thanks.

The next question we have comes from Emlen Harmon of Jefferies.

Hey, good evening guys.

Hi.

Going back to the loan growth, you guys are kind of, as you laid out, you're hoping to get 1% to 2% loan growth on a quarterly basis through the rest of the year. The production the last couple of quarters has been closer to 1%. Is there anything in particular in terms of either pent-up demand or anything else you are expecting kind of coming down the pipeline here that you think would push you closer to the 2% end if things? I know you just mentioned one particular with some portfolio purchases, but just anything else out there that would push you to the higher end?

Our average loan growth actually has been about 2% for the last quarters. So we are anticipating, give or take, 2% maybe a little bit lighter than that. So actually think it will slow slightly from where we've been.

Okay. Got you. I was looking more at the end of period balances.

Yes, we've moved -- we talked about this a quarter or two ago, that because of the way the mortgage warehouse outstandings tend to work, whether we have a lot of pocket outstandings at the end of the quarter. Looking at the point to point is not really the best way to do this. And the fact is, we make net interest income on average loans, not on loans on one day. So, we've moved to talking about our loan growth on averages, and that's why the average has been give or take 2% the last couple of quarters. We expect the average growth to be 1% to 2% for the next two quarters.

Got you. Okay, thank you, that's helpful. Then just a couple of questions on the expense fronts. I'll fire both at you at the same time. Just are the facility consolidations in the expense run rate at this point in time, or can we expect a little bit of help there as we go through the rest of the year? And then also would be just curious on your progress on branch upgrades? I think last debate you were roughly two-thirds of the way through there.

Sure. So on the consolidations that we've done here in Green Bay and Chicago in particular, you really haven't seen the lift. All the lift that you seeing in this quarter's occupancy is really predominately related to snow removal seasons quarter-to-quarter. The lift you will see will be as the leases that we had here in Green Bay and Chicago are terminated and expired. You'll start to see the benefit of that really roll to us fourth quarter this year, but really throughout next year and beyond. The lift will come next year. We've incurred the expenses already today. We will have two quarters here of a little bit of overlapping expenses. But that expense is already partially reflected in the second quarter.

With regard to the second part of your question on where we are in the footprint. We, as I said, we're about two-thirds of the way through. We continue to do what we thought we would get done. It is just that some of the order of the branches, but we will get about 40 or more branches done this year, and those are in progress.

And we probably have, what, another 50 to do after that?

80 in total that haven't yet been touched.

80 out of?

200.

Right. We are, yes, give or take two-thirds, be done by the end of next year.

Again, some of the 40 that we're doing this year are already in progress.

Got it. Okay, thanks for taking the questions.

The next question we have comes from Terry McEvoy of Oppenheimer.

Hi, good afternoon. What was the size of the mortgage warehouse at the end of the quarter? And how much of the potential run-off of that portfolio was taken into consideration when it came to your updated loan growth guidance?

I don't have the -- Terry, I don't have the mortgage warehouse outstandings at the end of the quarter, but the thing to remember about the mortgage warehouse is the outstandings tend to be on our books for a very brief period of time at the end of each quarter. So its impact on our average loan outstandings isn't all that great. So it is not a big contributor to our view, frankly, of where the loan growth is going to be going forward. I mean, it impacts it a little bit, but it is not material.

Then just a small question. How do you hedge the MSR? You've had a nice gain in Q2. I'm guessing there's some sort of hedging strategy, and how does that come into play in either recent quarters and going forward?

Actually, Terry, the reason there was a gain in the last two quarters is explicitly because we do not hedge the MSR. So what you had seen for several quarters, probably more than a year, was fairly consistent write-downs to the MSR, which is why we are carrying our MSRs down at 60 basis points of value. And what you have seen in the last two quarters is those rates been generally moved back up, and then more strongly moved back up here, our recovery in the MSR value to something closer to original cost. We would suggest to you that our current capitalized fair value at around 79 basis points is a very conservative level relative to peers, and we feel very good about that value. But the reason you saw the write-downs in prior quarters and the write-ups in the last two quarters is it's because we do not hedge.

That's what I thought. Thanks, Chris.

Sure.

(Operator Instructions)

As a follow-up to Terry's comment, I would just say that keep in mind we only have $60 million of MSR on the books. It is not a particularly large number for us, which is another reason we don't really hedge it.

The next question we have comes from Jon Arfstrom of RBC Capital Markets.

Thanks. Good afternoon, guys.

Good afternoon.

Just a couple more loan growth questions, and then one other. But in terms of the growth outlook, how much of it do you expect to be driven by the, call it the footprint versus the Specialty businesses?

We've had -- we expected good balanced growth across the whole book, and we've had really pretty solid consistent growth in Commercial, Commercial Real Estate, as well as the Specialties, as well as residential. Now one of the places where we are seeing a slowdown is, we are very disciplined about fixed rate loans that we hold on the balance sheet. So we build our bucket, or our appetite, for 15-year mortgages, and are only topping that up now. So we are not getting a lot of growth out of holding 15-year mortgages. But generally speaking, we've had really nice balance here for at least a couple years across the major loan categories. And we expect that going forward.

Okay. And then just maybe a little more granularity on CRE, the growth, kind of maybe geography, type, size, a little more detail?

Sure. We operate, I think it is nine commercial role state offices in Minnesota, Wisconsin, Illinois, and then we have LPOs in Indianapolis, Cincinnati, and outside of Detroit, as well as St. Louis. We've had really nice growth out of the new LPOs. We've had good growth in actually all of the legacy markets, as well. So, it is not in one particular geography that's been driving our CRE growth. We got back into the CRE business probably more quickly than a lot of our competitors in the upper Midwest, because we, as you will recall back in 2010, cleaned up that loan book very quickly coming out of the crisis. I would say we've had nice growth across the geographies.

We've had a disproportionate amount of multi-family construction growth as you would expect, as everybody has, because that's been really the real estate asset class that you've seen, new asset class that you've seen new activity in. But we've also seen activity in retail, a little bit in office, a little bit in industrial, not as much. And we maintained a, quite a granular real estate portfolio as far as individual credits compared to many of our competitors. Frankly, I think we are running a much more disciplined business than some of the people we compete with.

Okay. And then just a question on capital markets. I may have just missed it, but anything that drove that number higher, and is that a repeatable number, or more of a one-time item in there?

This quarter was more of a normal number coming off of a relatively low first quarter.

Okay. All right, thanks.

It appears we have no further questions at this time. We will go ahead and conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Mr. Philip Flynn. Mr. Flynn?

Thanks, appreciate that. Really appreciate all the good questions today. I'd like to point out a recent accomplishment related to how our colleagues feel about the work that they do. For the second year in a row, we've been named a top place to work in the Milwaukee Journal Sentinel's annual top workplaces survey. This survey, which is given to our colleagues, measured several workplace factors, such as strategic direction, work conditions, pay, and career opportunities. So having colleagues that feel good about their workplace has a positive effect on how they interact with our customers, which helps drive value for our shareholders.

To conclude, we are committed to our long-term strategies, which are based on building deeper relationships with our consumer and business customers through sound value-added solutions to their financial needs. We look forward to talking with you again next quarter, and if you have any questions in the meantime, please give us a call.

Thanks again for your interest in Associated.

We thank you, sir, and the rest of your management team for your time. The conference call is now concluded. At this time, you may disconnect your lines. Thank you, and take care everyone.