Associated Banc-Corp Reports First Quarter 2023 Net Income Available to Common Equity of $100 Million, or $0.66 per Common Share

Results driven by continued execution against the Company's people-led, digitally enabled plan

GREEN BAY, Wis., April 20, 2023 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $100 million, or $0.66 per common share, for the quarter ended March 31, 2023. These amounts compare to earnings of $106 million, or $0.70 per common share, for the quarter ended December 31, 2022 and earnings of $71 million, or $0.47 per common share, for the quarter ended March 31, 2022.

"Our first quarter results were fueled by the strength and stability of our core markets and our ongoing efforts to deepen relationships and deliver solutions for our customers," said President and CEO Andy Harmening. "Here in the Midwest, unemployment remains low and economic activity remains healthy. These factors have enabled us to maintain momentum with the execution of our strategic plan. During the quarter, we once again grew both loans and deposits and drove positive operating leverage while maintaining our conservative approach to risk management. Taken together, these factors helped us deliver a return on average tangible common equity¹ above 15%."

"While several banks in other parts of the country have experienced volatility in recent weeks, our customer deposit flows were stable during the quarter," Harmening continued. "We attribute this stability to the quality of our franchise and the resilience of the Upper Midwest markets we serve. Over our Company's 162-year history, we've established deep roots in over 100 communities, and we've grown a granular deposit base that includes consumers, high net worth individuals, small businesses and large businesses. Our strategic plan is designed to build upon this granularity over time, and we feel well-positioned to help our customers and communities become financially stronger in 2023 and beyond."

First Quarter 2023 Highlights (all comparisons to the fourth quarter of 2022)

• Total period end commercial loans increased $175 million to $18.2 billion
• Total period end consumer loans increased $233 million to $11.0 billion
• Total period end deposits increased $696 million to $30.3 billion
• Quarterly net interest margin decreased 24 basis points to 3.07%
• Noninterest income increased slightly to $62 million
• Noninterest expense decreased $9 million to $187 million
• Provision for credit losses on loans was $18 million, compared to a provision of $20 million in the prior quarter
• Net income available to common equity decreased $5 million to $100 million

Loans

First quarter 2023 average total loans of $28.8 billion were up 2%, or $650 million, from the prior quarter and were up 20%, or $4.7 billion, from the same period last year. With respect to first quarter 2023 average balances by loan category:

• Commercial and business lending increased $86 million from the prior quarter and increased $1.6 billion compared to the same period last year to $10.6 billion.
• Commercial real estate lending increased $189 million from the prior quarter and increased $1.1 billion from the same period last year to $7.3 billion.
• Consumer lending increased $376 million from the prior quarter and increased $2.1 billion from the same period last year to $11.0 billion.

First quarter 2023 period-end total loans of $29.2 billion were up 1%, or $408 million, from the prior quarter and were up 19%, or $4.7 billion, from the same period last year. With respect to first quarter 2023 period-end balances by loan category:

• Commercial and business lending increased $169 million from the prior quarter and increased $1.6 billion from the same period last year to $10.9 billion.
• Commercial real estate lending increased $6 million from the prior quarter and increased $1.0 billion from the same period last year to $7.2 billion.
• Consumer lending increased $233 million from the prior quarter and increased $2.1 billion from the same period last year to $11.0 billion.

In 2023, we now expect to drive full-year total loan growth of 6% to 8%.

Deposits

First quarter 2023 average deposits of $29.9 billion were up 2%, or $538 million, from the prior quarter and were up 4%, or $1.2 billion, from the same period last year. With respect to first quarter 2023 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $748 million from the prior quarter and decreased $976 million from the same period last year to $7.3 billion.
• Savings increased $4 million from the prior quarter and increased $135 million from the same period last year to $4.7 billion.
• Interest-bearing demand deposits decreased $17 million from the prior quarter and increased $92 million from the same period last year to $6.8 billion.
• Money market deposits increased $154 million from the prior quarter and increased $505 million from the same period last year to $7.5 billion.
• Total time deposits increased $899 million from the prior quarter and increased $1.0 billion from the same period last year to $2.4 billion.
• Network transaction deposits increased $246 million from the prior quarter and increased $412 million from the same period last year to $1.1 billion.

First quarter 2023 period-end deposits of $30.3 billion were up 2%, or  $696 million, from the prior quarter and were up 7%, or $1.9 billion, from the same period last year. With respect to first quarter 2023 period-end balances by deposit category:

• Noninterest-bearing demand deposits decreased $432 million from the prior quarter and decreased $987 million from the same period last year to $7.3 billion.
• Savings increased $126 million from the prior quarter and increased $69 million from the same period last year to $4.7 billion.
• Interest-bearing demand deposits decreased $124 million from the prior quarter and increased $360 million from the same period last year to $7.0 billion.
• Money market deposits increased $118 million from the prior quarter and increased $835 million from the same period last year to $8.4 billion.
• Total time deposits increased $1.0 billion from the prior quarter and increased $1.6 billion from the same period last year to $2.9 billion.
• Network transaction deposits (included in money market and interest-bearing deposits) increased $294 million from the prior quarter and increased $511 million from the same period last year to $1.3 billion.

We now expect to drive total average core customer deposit growth of 1% to 3% in 2023.

Net Interest Income and Net Interest Margin

First quarter 2023 net interest income of $274 million decreased $15 million, or 5%, from the prior quarter and increased $86 million, or 46%, from the same period last year. The net interest margin decreased to 3.07%, reflecting a 24 basis point decrease from the prior quarter and a 65 basis point increase from the same period last year.

• The average yield on total loans for the first quarter of 2023 increased 56 basis points from the prior quarter and increased 268 basis points from the same period last year to 5.49%.
• The average cost of total interest-bearing liabilities for the first quarter of 2023 increased 90 basis points from the prior quarter and increased 222 basis points from the same period last year to 2.48%.
• The net free funds benefit for the first quarter of 2023 increased 18 basis points from the prior quarter and increased 53 basis points compared to the same period last year to 0.61%.
• We now expect total net interest income growth of 13% to 15% in 2023.

Noninterest Income

First quarter 2023 total noninterest income of $62 million increased 1% from the prior quarter and decreased $12 million, or 17%, from the same period last year. With respect to first quarter 2023 noninterest income line items:

• Mortgage banking, net was $4 million for the first quarter, up $1 million from the prior quarter and down $5 million from the same period last year.
• Service charges and deposit account fees decreased $1 million from the prior quarter and decreased $4 million from the same period last year.
• Other fee-based revenue increased $1 million from the prior quarter and increased $1 million from the same period last year.
• Capital markets, net decreased $1 million from the prior quarter and decreased $4 million from the same period last year.

We now expect total noninterest income to compress by 8% to 10% in 2023.

Noninterest Expense

First quarter 2023 total noninterest expense of $187 million decreased $9 million, or 5%, from the prior quarter and increased $14 million, or 8%, from the same period last year as we continued to invest in people and technology. With respect to first quarter 2023 noninterest expense line items:

• Personnel expense decreased $2 million from the prior quarter and increased $12 million from the same period last year.
• Technology expense decreased $2 million from the prior quarter and increased $2 million from the same period last year.
• Business development and advertising expense decreased $2 million from the prior quarter and increased $1 million from the same period last year.

We now expect total noninterest expense to grow by approximately 4% in 2023.

Taxes

The first quarter 2023 tax expense was $27 million compared to $25 million of tax expense in the prior quarter and $19 million of tax expense in the same period last year. The effective tax rate for first quarter 2023 was 20.9% compared to an effective tax rate of 18.9% in the prior quarter and an effective tax rate of 20.1% in the same period last year.

We continue to expect the 2023 effective tax rate to be between 20% and 21%, assuming no change in the statutory corporate tax rate.

Credit

The first quarter 2023 provision for credit losses on loans was $18 million, compared to a provision of $20 million in the prior quarter and a negative provision of $4 million in the same period last year. Provision build in the first quarter was primarily driven by loan growth related to our strategic initiatives. With respect to first quarter 2023 credit quality:

• Nonaccrual loans of $118 million were up $6 million from the prior quarter and down $26 million from the same period last year. The nonaccrual loans to total loans ratio was 0.40% in the first quarter, up from 0.39% in the prior quarter and down from 0.58% in the same period last year.
• First quarter 2023 net charge offs of $3 million were up compared to net charge offs of $1 million in the prior quarter and were up compared to a net recovery of $2 million in the same period last year.
• The allowance for credit losses on loans (ACLL) of $366 million was up $15 million compared to the prior quarter and up $48 million compared to the same period last year. The ACLL to total loans ratio was 1.25% in the first quarter, up from 1.22% in the prior quarter and down from 1.30% in the same period last year.

In 2023, we expect to adjust provision to reflect changes to risk grades, economic conditions, loan volumes, and other indications of credit quality.

Capital

The Company's capital position remains strong, with a CET1 capital ratio of 9.45% at March 31, 2023. The Company's capital ratios continue to be in excess of the Basel III "well-capitalized" regulatory benchmarks on a fully phased in basis.

FIRST QUARTER 2023 EARNINGS RELEASE CONFERENCE CALL

The Company will host a conference call for investors and analysts at 4:00 p.m. Central Time (CT) today, April 20, 2023. 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 2023 earnings call. The first quarter 2023 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.

ABOUT ASSOCIATED BANC-CORP

Associated Banc-Corp (NYSE: ASB) has total assets of $41 billion and is the largest bank holding company based in Wisconsin. 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.

FORWARD-LOOKING STATEMENTS

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. 

NON-GAAP FINANCIAL MEASURES

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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