Associated Banc-Corp Reports Second Quarter 2023 Net Income Available to Common Equity of $84 Million, or $0.56 per Common Share

Results driven by balance sheet expansion, stable credit trends, and progress against the Company's strategic initiatives

GREEN BAY, Wis., July 20, 2023 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $84 million, or $0.56 per common share, for the quarter ended June 30, 2023. These amounts compare to earnings of $100 million, or $0.66 per common share, for the quarter ended March 31, 2023 and earnings of $84 million, or $0.56 per common share, for the quarter ended June 30, 2022.

"Our second quarter results were marked by the resilience and stability of our Midwestern markets and continued execution against our strategic plan," said President and CEO Andy Harmening. "Unemployment remains well below the national average in most of our footprint and economic activity has continued at a healthy pace. With these trends as a backdrop, our diversified company loan portfolio, with a prime/super prime concentration of consumer loans, has delivered strong credit performance again this quarter. This stability enabled us to add another $642 million in high-quality loans and build momentum with our customer acquisition strategies during the quarter. As a result of these efforts, we're already seeing customer checking acquisition rates 11% higher than a year ago, our attrition is down, and our digital customer satisfaction scores are at a multi-year high."

"While we're pleased with the initial results of these efforts, we've yet to realize the full impact of our customer acquisition strategies," Harmening continued. "We look forward to building on this momentum and delivering enhanced capabilities for our customers in the coming quarters. Along the way, our disciplined approach to credit, expenses and risk management will be our foundation."

Second Quarter 2023 Highlights (all comparisons to the first quarter of 2023)

• Total period end commercial loans increased $274 million to $18.4 billion
• Total period end consumer loans increased $367 million to $11.4 billion
• Total period end deposits increased $1.7 billion to $32.0 billion
• Quarterly net interest margin decreased 27 basis points to 2.80%
• Noninterest income increased $3 million to $66 million
• Noninterest expense increased $3 million to $191 million
• Provision for credit losses on loans increased $4 million to $22 million
• Net income available to common equity decreased $16 million to $84 million

Loans

Second quarter 2023 average total loans of $29.4 billion were up 2%, or $592 million, from the prior quarter and were up 16%, or $4.0 billion, from the same period last year. With respect to second quarter 2023 average balances by loan category:

• Commercial and business lending increased $283 million from the prior quarter and increased $1.3 billion from the same period last year to $10.9 billion.
• Commercial real estate lending increased $44 million from the prior quarter and increased $932 million from the same period last year to $7.3 billion.
• Consumer lending increased $265 million from the prior quarter and increased $1.8 billion from the same period last year to $11.2 billion.

Second quarter 2023 period end total loans of $29.8 billion were up 2%, or $642 million, from the prior quarter and were up 13%, or $3.4 billion, from the same period last year. With respect to second quarter 2023 period end balances by loan category:

• Commercial and business lending increased $194 million from the prior quarter and increased $929 million from the same period last year to $11.1 billion.
• Commercial real estate lending increased $81 million from the prior quarter and increased $756 million from the same period last year to $7.3 billion.
• Consumer lending increased $367 million from the prior quarter and increased $1.7 billion from the same period last year to $11.4 billion.

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

Deposits

Second quarter 2023 average deposits of $31.3 billion were up 5%, or $1.4 billion, from the prior quarter and were up 11%, or $3.1 billion, from the same period last year. With respect to second quarter 2023 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $670 million from the prior quarter and decreased $1.5 billion from the same period last year to $6.7 billion.
• Savings increased $85 million from the prior quarter and increased $67 million from the same period last year to $4.7 billion.
• Interest-bearing demand deposits decreased $151 million from the prior quarter and increased $251 million from the same period last year to $6.7 billion.
• Money market deposits decreased $793 million from the prior quarter and decreased $167 million from the same period last year to $6.7 billion.
• Total time deposits increased $2.6 billion from the prior quarter and increased $3.7 billion from the same period last year to $5.0 billion.
• Network transaction deposits increased $321 million from the prior quarter and increased $692 million from the same period last year to $1.5 billion.

Second quarter 2023 period end deposits of $32.0 billion were up 6%, or  $1.7 billion, from the prior quarter and were up 12%, or $3.4 billion, from the same period last year. With respect to second quarter 2023 period end balances by deposit category:

• Noninterest-bearing demand deposits decreased $763 million from the prior quarter and decreased $1.5 billion from the same period last year to $6.6 billion.
• Savings increased $47 million from the prior quarter and increased $69 million from the same period last year to $4.8 billion.
• Interest-bearing demand deposits increased $61 million from the prior quarter and increased $248 million from the same period last year to $7.0 billion.
• Money market deposits decreased $836 million from the prior quarter and decreased $247 million from the same period last year to $7.5 billion.
• Total time deposits increased $3.2 billion from the prior quarter and increased $4.9 billion from the same period last year to $6.1 billion.
• Network transaction deposits (included in money market and interest-bearing deposits) increased $327 million from the prior quarter and increased $709 million from the same period last year to $1.6 billion.

We now expect total core customer deposits (which excludes network transaction deposits and brokered CDs) to decrease by 3% in 2023 on a period end basis, with 2% growth in the second half of the year.

Net Interest Income and Net Interest Margin

Second quarter 2023 net interest income of $258 million decreased $16 million, or 6%, from the prior quarter and increased $42 million, or 19%, from the same period last year. The net interest margin decreased to 2.80%, reflecting a 27 basis point decrease from the prior quarter and a nine basis point increase from the same period last year.

• The average yield on total loans for the second quarter of 2023 increased 28 basis points from the prior quarter and increased 261 basis points from the same period last year to 5.77%.
• The average cost of total interest-bearing liabilities for the second quarter of 2023 increased 58 basis points from the prior quarter and increased 270 basis points from the same period last year to 3.06%.
• The net free funds benefit for the second quarter of 2023 increased seven basis points from the prior quarter and increased 58 basis points compared to the same period last year to 0.68%.

We now expect total net interest income growth of 10% to 12% in 2023.

Noninterest Income

Second quarter 2023 total noninterest income of $66 million increased $3 million, or 6% from the prior quarter and decreased $10 million, or 13%, from the same period last year. With respect to second quarter 2023 noninterest income line items:

• Mortgage banking, net was $8 million for the second quarter, up $4 million from the prior quarter and up $2 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.
• Card-based fees increased $1 million from the prior quarter and were flat from the same period last year.

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

Noninterest Expense

Second quarter 2023 total noninterest expense of $191 million increased $3 million, or 2%, from the prior quarter and increased $9 million, or 5%, from the same period last year as we continued to invest in our strategic initiatives. With respect to second quarter 2023 noninterest expense line items:

• Personnel expense decreased $2 million from the prior quarter and increased $1 million from the same period last year.
• FDIC assessment expense increased $3 million from the prior quarter and increased $4 million from the same period last year.
• Occupancy expense decreased $1 million from the prior quarter and decreased $1 million from the same period last year.
• Business development and advertising expense increased $1 million from the prior quarter and increased $1 million from the same period last year.

We now expect total noninterest expense growth of 3% to 4% in 2023.

Taxes

The second quarter 2023 tax expense was $24 million compared to $27 million of tax expense in the prior quarter and $23 million of tax expense in the same period last year. The effective tax rate for the second quarter of 2023 was 21.3% compared to an effective tax rate of 20.9% in the prior quarter and an effective tax rate of 21.2% 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 second quarter 2023 provision for credit losses on loans was $22 million, compared to a provision of $18 million in the prior quarter and a provision of zero in the same period last year. Provision build in the second quarter was largely a function of loan growth, limited credit movement and macro trends. With respect to second quarter 2023 credit quality:

• Nonaccrual loans of $131 million were up $14 million from the prior quarter and up $23 million from the same period last year. The nonaccrual loans to total loans ratio was 0.44% in the second quarter, up from 0.40% in the prior quarter and up from 0.41% in the same period last year.
• Second quarter 2023 net charge offs of $11 million were up compared to net charge offs of $3 million in the prior quarter and were up compared to net charge offs of less than $1 million in the same period last year.
• The allowance for credit losses on loans (ACLL) of $377 million was up $11 million compared to the prior quarter and up $59 million compared to the same period last year. The ACLL to total loans ratio was 1.26% in the second quarter, up from 1.25% in the prior quarter and up from 1.20% 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 9.48% at June 30, 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.

SECOND 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, July 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 second quarter 2023 earnings call. The second 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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