Associated Banc-Corp Reports First Quarter 2022 Net Income Available to Common Equity of $71 Million, or $0.47 per Common Share

Results driven by positive margin, expense and credit trends.

GREEN BAY, Wis., April 21, 2022 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $71 million, or $0.47 per common share, for the quarter ended March 31, 2022. These amounts compare to earnings of $89 million, or $0.58 per common share for the quarter ended March 31, 2021 and earnings of $74 million, or $0.49 per common share for the quarter ended December 31, 2021.

"Our first quarter results were marked by strong positive momentum in our strategic lending initiatives," said President and CEO Andy Harmening. "Commercial line utilization continues to climb, employment trends in our markets continue to reflect robust productivity and credit remains remarkably benign. Our core customers continue to borrow and grow, and we remain committed to supporting them with their financial needs. In this spirit, we also announced today that we plan to implement several changes to our overdraft program in the third quarter of this year. These changes are expected to reduce the total burden of overdrafts to our customers by approximately 30%."

"As a bank, we're in a far different place than we were a year ago," Harmening continued. "We're well-positioned to deliver expanding margins, positive operating leverage and enhanced value to all of our stakeholders as we move through 2022."

• Average loans were up $302 million to $24.1 billion
• Excluding PPP, average Commercial & Business Lending loans were up $177 million to $9.0 billion
• Average deposits were up $245 million to $28.6 billion
• Quarterly net interest margin was up two basis points to 2.42%
• Net interest income was up $1 million to $188 million
• Noninterest income was down $7 million to $74 million
• Noninterest expense was down $9 million to $173 million
• Provision for credit losses was negative $4 million compared to negative $6 million
• Net income available to common equity was down $3 million to $71 million

First quarter 2022 average total loans of $24.1 billion were up 1%, or $302 million from the prior quarter and were down 1%, or $366 million from the same period last year. Excluding PPP, average total loans of $24.1 billion were up 2%, or $374 million from the prior quarter and were up 2%, or $397 million from the same period last year. With respect to first quarter 2022 average balances by loan category:

• Commercial and business lending (excluding PPP) increased $177 million from the prior quarter and increased $481 million compared to the same period last year to $9.0 billion. 
• Commercial real estate lending increased $43 million from the prior quarter and increased $6 million from the same period last year to $6.2 billion. 
• Consumer lending was $8.9 billion, up $154 million from the prior quarter and down $90 million from the same period last year. 
• PPP loans decreased $71 million from the prior quarter and decreased $763 million from the same period last year to $44 million.

First quarter 2022 period-end total loans of $24.5 billion were up 1%, or $307 million from the prior quarter and were up 2%, or $370 million from the same period last year. Excluding PPP, period-end total loans of $24.5 billion were up 1%, or $355 million from the prior quarter and were up 5%, or $1.2 billion from the same period last year. With respect to first quarter 2022 period-end balances by loan category:

• Commercial and business lending (excluding PPP) decreased $51 million from the prior quarter and increased $759 million from the same period last year to $9.3 billion.
• Commercial real estate lending increased $36 million from the prior quarter and increased $86 million from the same period last year to $6.2 billion.
• Consumer lending was $9.0 billion, up $370 million from the prior quarter and up $343 million from the same period last year.
• PPP loans decreased $48 million from the prior quarter and decreased $819 million from the same period last year to $18 million.

In 2022, we expect full-year auto finance loan growth of over $1.2 billion and total commercial loan growth of $750 million to $1 billion.

First quarter 2022 average deposits of $28.6 billion were up 1%, or $245 million compared to the prior quarter and were up 7%, or $1.8 billion from the same period last year. With respect to first quarter 2022 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $100 million from the prior quarter and increased $650 million from the same period last year to $8.3 billion.
• Savings increased $163 million from the prior quarter and increased $720 million from the same period last year to $4.5 billion.
• Interest-bearing demand deposits increased $216 million from the prior quarter and increased $1.0 billion from the same period last year to $6.7 billion.
• Money market deposits increased $138 million from the prior quarter and increased $155 million from the same period last year to $7.0 billion.
• Time deposits decreased $68 million from the prior quarter and decreased $345 million from the same period last year to $1.3 billion.
• Network transaction deposits decreased $103 million from the prior quarter and decreased $345 million from the same period last year to $735 million.

First quarter 2022 period-end deposits of $28.4 billion were down $61 million compared to the prior quarter and were up 3%, or $728 million from the same period last year. Low-cost core deposits (interest-bearing demand, noninterest-bearing demand and savings) made up 68% of deposit balances as of March 31, 2022. With respect to first quarter 2022 period-end balances by deposit category:

• Noninterest-bearing demand deposits decreased $188 million from the prior quarter and decreased $180 million from the same period last year to $8.3 billion.
• Savings increased $251 million from the prior quarter and increased $628 million from the same period last year to $4.7 billion.
• Interest-bearing demand deposits decreased $403 million from the prior quarter and increased $868 million from the same period last year to $6.6 billion.
• Money market deposits increased $338 million from the prior quarter and decreased $316 million from the same period last year to $7.5 billion.
• Time deposits decreased $58 million from the prior quarter and decreased $272 million from the same period last year to $1.3 billion.
• Network transaction deposits (included in money market and interest-bearing deposits) decreased $4 million from the prior quarter and decreased $292 million from the same period last year to $763 million.

First quarter 2022 net interest income of $188 million was up 1%, or $1 million from the prior quarter and the net interest margin increased 2 basis points from the prior quarter to 2.42%.  Compared to the same period last year, net interest income increased 7%, or $12 million, and the net interest margin increased 3 basis points.

• The average yield on total loans for the first quarter of 2022 decreased 5 basis points from the prior quarter and decreased 7 basis points from the same period last year to 2.81%.
• The average cost of total interest-bearing liabilities for the first quarter of 2022 decreased 1 basis point from the prior quarter and decreased 14 basis points from the same period last year to 0.26%.
• The net free funds benefit for the first quarter of 2022 remained flat to the prior quarter and decreased 4 basis points compared to the same period last year to 0.08%.

We now expect short-term interest rates to rise following each of this year's Federal Open Market Committee meetings. Assuming rate increases of 25 basis points or more following each meeting, we now expect our 2022 net interest income to exceed $840 million.

First quarter 2022 total noninterest income of $74 million decreased $7 million from the prior quarter and decreased $21 million from the same period last year. With respect to first quarter 2022 noninterest income line items:

• Mortgage Banking, net was $8 million for the first quarter, up slightly from the prior quarter. Relative to the prior-year period, Mortgage Banking was down $16 million, driven by slowing refinance activity and higher retention of mortgages on our balance sheet.
• Service charges and deposit account fees decreased slightly from the prior quarter and increased $2 million from the same period last year.
• Card-based fees decreased $1 million from the prior quarter and increased slightly from the same period last year.
• Capital markets fees decreased $1 million from the prior quarter and increased $1 million from the same period last year.

Guided by customer feedback, we announced today that we are making several customer-friendly changes to our overdraft program in the third quarter of 2022. The planned changes are expected to reduce service charges and deposit account fees by approximately $3 million in 2022. Additional details can be found in the press release available at investor.associatedbank.com.

Given our revised outlook for higher rates in 2022, we are also modifying our noninterest income guidance. We are now expecting less mortgage banking income and lower service charge revenues for both commercial and consumer customers over the back half of the year. We now expect total noninterest income for the year of between $290 million and $300 million.

First quarter 2022 total noninterest expense of $173 million decreased $9 million from the prior quarter and decreased $2 million compared to the same period last year. With respect to first quarter 2022 noninterest expense line items:

• Personnel expense decreased $3 million from the prior quarter and increased $1 million from the same period last year.     
• Other expense decreased $7 million from the prior quarter and decreased $2 million from the same period last year, primarily driven by a reduction in pension, donation and other expenses.

We expect total noninterest expense of approximately $725 million to $740 million for 2022.

The first quarter 2022 tax expense was $19 million compared to $15 million of tax expense in the prior quarter and  $25 million of tax expense in the same period last year. The effective tax rate for first quarter of 2022 was 20.1% compared to an effective tax rate of 16.5% in the prior quarter.

We expect the annual 2022 tax rate to be between 19% and 21%, assuming no change in the statutory corporate tax rate.

The first quarter 2022 provision for credit losses was negative $4 million, compared to a negative provision of $6 million in the prior quarter and a negative provision of $23 million in the same period last year. With respect to first quarter 2022 credit quality:

• Total accruing loans 30-89 days past due of $13 million were down $3 million from the prior quarter and down $2 million from the same period last year.
• Nonaccrual loans of $143 million were up $13 million from the prior quarter and down $20 million from the same period last year. The nonaccrual loans to total loans ratio was 0.58% in the first quarter, up from 0.54% in the prior quarter and down from 0.68% in the same period last year. 
• First quarter net recoveries of $2 million compared to net charge offs of $6 million in the prior quarter and net charge offs of $5 million in the same period last year.
• The allowance for credit losses on loans (ACLL) of $318 million was down $2 million from the prior quarter and down $86 million compared to the same period last year. The ACLL to total loans ratio was 1.30% in the first quarter, down from 1.32% in the prior quarter and down from 1.67% in the same period last year.

Throughout the remainder of 2022, we expect to adjust provision to reflect changes to risk grades, economic conditions, other indications of credit quality, and loan volume.

The Company's capital position remains strong, with a CET1 capital ratio of 10.2% at March 31, 2022. The Company's capital ratios continue to be in excess of the Basel III "well-capitalized" regulatory benchmarks on a fully phased in basis.

The Company will host a conference call for investors and analysts at 4:00 p.m. Central Time (CT) today, April 21, 2022. Interested parties can access the live webcast of the call through the Investor Relations section of the Company's website, http://investor.associatedbank.com. Parties may also dial into the call at 877-407-8037 (domestic) or 201-689-8037 (international) and request the Associated Banc-Corp first quarter 2022 earnings call. The first quarter 2022 financial tables with an accompanying slide presentation will be available on the Company's website just prior to the call. An audio archive of the webcast will be available on the Company's website approximately fifteen minutes after the call is over.

Associated Banc-Corp (NYSE: ASB) has total assets of $35 billion and is Wisconsin's largest bank holding company. Headquartered in Green Bay, Wisconsin, Associated is a leading Midwest banking franchise, offering a full range of financial products and services from more than 200 banking locations serving more than 100 communities throughout Wisconsin, Illinois and Minnesota. The company also operates loan production offices in Indiana, Michigan, Missouri, New York, Ohio and Texas. Associated Bank, N.A. is an Equal Housing Lender, Equal Opportunity Lender and Member FDIC. More information about Associated Banc-Corp is available at www.associatedbank.com.

Statements made in this document 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," "target," "outlook," "project," "guidance," 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. 

This press release and related materials may contain references to measures which are not defined in generally accepted accounting principles ("GAAP"). Information concerning these non-GAAP financial measures can be found in the financial tables.  Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate the adequacy of earnings per common share, provide a greater understanding of ongoing operations and enhance comparability of results with prior periods.

Investor Contact:
Ben McCarville, Vice President, Director of Investor Relations
920-491-7059

Media Contact:
Jennifer Kaminski, Vice President, Public Relations Senior Manager
920-491-7576

SOURCE Associated Banc-Corp

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