Associated Banc-Corp Reports Third Quarter 2023 Net Income Available to Common Equity of $80 Million, or $0.53 per Common Share

Results driven by balance sheet growth and continued progress against the Company's strategic initiatives

GREEN BAY, Wis., Oct. 19, 2023 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $80 million, or $0.53 per common share, for the quarter ended September 30, 2023. These amounts compare to earnings of $84 million, or $0.56 per common share, for the quarter ended June 30, 2023 and earnings of $93 million, or $0.62 per common share, for the quarter ended September 30, 2022.

"We continued to see steady improvements in customer acquisition, retention and satisfaction scores during the quarter, enabling us to grow core customer deposits by over $500 million and decrease our reliance on non-customer funding sources," said President and CEO Andy Harmening. "Our strategic initiatives have also enabled us to deliver another quarter of balanced, high-quality loan growth. While we feel well positioned today, we recognize that the banking environment continues to evolve, and we look forward to sharing more details about the second phase of our strategic plan later this quarter."

Third Quarter 2023 Highlights (all comparisons to the second quarter of 2023)

• Total period end commercial loans increased $68 million to $18.5 billion
• Total period end consumer loans increased $276 million to $11.7 billion
• Total period end deposits increased $109 million to $32.1 billion
• Quarterly net interest margin decreased 9 basis points to 2.71%
• Noninterest income increased $1 million to $67 million
• Noninterest expense increased $6 million to $196 million
• Provision for credit losses on loans remained flat at $22 million
• Net income available to common equity decreased $4 million to $80 million

Loans

Third quarter 2023 average total loans of $29.9 billion were up 2%, or $446 million, from the prior quarter and were up 10%, or $2.8 billion, from the same period last year. With respect to third quarter 2023 average balances by loan category:

• Commercial and business lending increased $86 million from the prior quarter and increased $793 million from the same period last year to $11.0 billion.
• Commercial real estate lending increased $17 million from the prior quarter and increased $545 million from the same period last year to $7.3 billion.
• Consumer lending increased $343 million from the prior quarter and increased $1.5 billion from the same period last year to $11.6 billion.

Third quarter 2023 period end total loans of $30.2 billion were up 1%, or $344 million, from the prior quarter and were up 9%, or $2.4 billion, from the same period last year. With respect to third quarter 2023 period end balances by loan category:

• Commercial and business lending increased $40 million from the prior quarter and increased $582 million from the same period last year to $11.2 billion.
• Commercial real estate lending increased $28 million from the prior quarter and increased $450 million from the same period last year to $7.3 billion.
• Consumer lending increased $276 million from the prior quarter and increased $1.3 billion from the same period last year to $11.7 billion.

In 2023, we now expect full-year total loan growth of 5% to 6%.

Deposits

Third quarter 2023 average deposits of $32.0 billion were up 2%, or $721 million, from the prior quarter and were up 11%, or $3.1 billion, from the same period last year. With respect to third quarter 2023 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $351 million from the prior quarter and decreased $1.8 billion from the same period last year to $6.3 billion.
• Savings increased $65 million from the prior quarter and increased $79 million from the same period last year to $4.8 billion.
• Interest-bearing demand deposits increased $315 million from the prior quarter and increased $392 million from the same period last year to $7.0 billion.
• Money market deposits decreased $450 million from the prior quarter and decreased $1.0 billion from the same period last year to $6.3 billion.
• Total time deposits increased $970 million from the prior quarter and increased $4.7 billion from the same period last year to $6.0 billion.
• Network transaction deposits increased $172 million from the prior quarter and increased $766 million from the same period last year to $1.6 billion.

Third quarter 2023 period end deposits of $32.1 billion were up $109 million from the prior quarter and were up 10%, or $2.9 billion, from the same period last year. With respect to third quarter 2023 period end balances by deposit category:

• Noninterest-bearing demand deposits decreased $143 million from the prior quarter and decreased $1.8 billion from the same period last year to $6.4 billion.
• Savings increased $59 million from the prior quarter and increased $128 million from the same period last year to $4.8 billion.
• Interest-bearing demand deposits increased $490 million from the prior quarter and increased $406 million from the same period last year to $7.5 billion.
• Money market deposits decreased $253 million from the prior quarter and decreased $641 million from the same period last year to $7.3 billion.
• Total time deposits decreased $45 million from the prior quarter and increased $4.8 billion from the same period last year to $6.1 billion.
• Network transaction deposits (included in money market and interest-bearing deposits) increased $49 million from the prior quarter and increased $785 million from the same period last year to $1.6 billion.

We continue to 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

Third quarter 2023 net interest income of $254 million decreased $4 million, or 1%, from the prior quarter and decreased $10 million, or 4%, from the same period last year. The net interest margin decreased to 2.71%, reflecting a 9 basis point decrease from the prior quarter and a 42 basis point decrease from the same period last year.

• The average yield on total loans for the third quarter of 2023 increased 19 basis points from the prior quarter and increased 190 basis points from the same period last year to 5.96%.
• The average cost of total interest-bearing liabilities for the third quarter of 2023 increased 30 basis points from the prior quarter and increased 255 basis points from the same period last year to 3.36%.
• The net free funds benefit for the third quarter of 2023 increased three basis points from the prior quarter and increased 49 basis points compared to the same period last year to 0.71%.

We now expect total net interest income growth of 8% to 10% in 2023.

Noninterest Income

Third quarter 2023 total noninterest income of $67 million increased $1 million, or 2%, from the prior quarter and decreased $4 million, or 6%, from the same period last year. With respect to third quarter 2023 noninterest income line items:

• Mortgage banking, net was $7 million for the third quarter, down $1 million from the prior quarter and up $4 million from the same period last year.
• Service charges and deposit account fees increased slightly from the prior quarter and decreased $2 million from the same period last year.
• Capital markets, net increased slightly from the prior quarter and decreased $2 million from the same period last year.
• Asset gains (losses) increased $1 million from the prior quarter and increased $1 million from the same period last year.

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

Noninterest Expense

Third quarter 2023 total noninterest expense of $196 million increased $6 million, or 3%, from the prior quarter and increased slightly from the same period last year as we continued to invest in our strategic initiatives. With respect to third quarter 2023 noninterest expense line items:

• Personnel expense increased $3 million from the prior quarter and decreased $1 million from the same period last year.
• Technology expense increased $2 million from the prior quarter and increased $3 million from the same period last year.
• Occupancy expense increased $1 million from the prior quarter and increased slightly from the same period last year.

We continue to expect total noninterest expense growth of 3% to 4% in 2023, excluding any nonrecurring items incurred in the fourth quarter.

Taxes

The third quarter 2023 tax expense was $19 million compared to $24 million of tax expense in the prior quarter and $26 million of tax expense in the same period last year. The effective tax rate for the third quarter of 2023 was 18.9% compared to an effective tax rate of 21.3% in the prior quarter and an effective tax rate of 21.4% 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 third quarter 2023 provision for credit losses on loans was $22 million, compared to a provision of $22 million in the prior quarter and a provision of $17 million in the same period last year. With respect to third quarter 2023 credit quality:

• Nonaccrual loans of $169 million were up $37 million from the prior quarter and up $52 million from the same period last year. The nonaccrual loans to total loans ratio was 0.56% in the third quarter, up from 0.44% in the prior quarter and up from 0.42% in the same period last year.
• Third quarter 2023 net charge offs of $18 million were up compared to net charge offs of $11 million in the prior quarter and were up compared to net charge offs of $2 million in the same period last year.
• The allowance for credit losses on loans (ACLL) of $381 million was up $4 million compared to the prior quarter and up $48 million compared to the same period last year. The ACLL to total loans ratio was 1.26% in the third quarter, flat with 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 9.55% at September 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.

THIRD 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, October 19, 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 third quarter 2023 earnings call. The third 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 $42 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

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SOURCE Associated Banc-Corp