Results driven by strong loan and deposit growth, expanding margins and stable credit

GREEN BAY, Wis., Oct. 20, 2022 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $93 million, or $0.62 per common share, for the quarter ended September 30, 2022. These amounts compare to earnings of $84 million, or $0.56 per common share, for the quarter ended June 30, 2022 and earnings of $85 million, or $0.56 per common share, for the quarter ended September 30, 2021.

"Our third quarter results were a reflection of both the strength and resilience we continue to see in our markets and our ongoing efforts to deepen relationships and deliver capabilities through our strategic initiatives," said President and CEO Andy Harmening. "Within our footprint, unemployment remains low, the consumer remains healthy, and our commercial customers continue to seek opportunities amid an uncertain macro environment. With these trends as a backdrop, our initiatives helped bring in more than $1 billion in high-quality loans and $600 million in deposits during the quarter. This growth was supported by substantial margin expansion and stable credit trends. All of which combined to drive enhanced profitability and a return on average tangible common equity¹ north of 14%."

"While we continue to keep a close eye on the current economic environment, we've been working to de-risk our balance sheet for over a decade," Harmening continued. "Our relentless focus on credit quality and the diversifying benefits of our strategic plan put us in a position to deliver enhanced value to our stakeholders over the remainder of 2022 and beyond."

• End of period total commercial loans were up $720 million to $17.5 billion
• End of period total consumer loans were up $602 million to $10.3 billion
• End of period total deposits were up $622 million to $29.2 billion
• Quarterly net interest margin was up 42 basis points to 3.13%
• Noninterest income was down $5 million to $71 million
• Noninterest expense was up $14 million to $196 million, including an incremental $6 million contribution to our charitable foundation vs. the prior quarter
• Provision for credit losses on loans was $17 million, compared to a provision of zero in the prior quarter
• Net income available to common equity was up $9 million to $93 million

Third quarter 2022 average total loans of $27.1 billion were up 7%, or $1.7 billion, from the prior quarter and were up 13%, or $3.2 billion, from the same period last year. With respect to third quarter 2022 average balances by loan category:

• Commercial and business lending (excluding PPP) increased $597 million from the prior quarter and increased $1.5 billion compared to the same period last year to $10.2 billion.
• Commercial real estate lending increased $405 million from the prior quarter and increased $608 million from the same period last year to $6.8 billion.
• Consumer lending was $10.1 billion, up $665 million from the prior quarter and up $1.4 billion from the same period last year.
• PPP loans decreased $9 million from the prior quarter and decreased $271 million from the same period last year to $5 million.

Third quarter 2022 period-end total loans of $27.8 billion were up 5%, or $1.3 billion, from the prior quarter and were up 18%, or $4.2 billion, from the same period last year. With respect to third quarter 2022 period-end balances by loan category:

• Commercial and business lending (excluding PPP) increased $395 million from the prior quarter and increased $1.8 billion from the same period last year to $10.6 billion.
• Commercial real estate lending increased $334 million from the prior quarter and increased $768 million from the same period last year to $6.9 billion.
• Consumer lending was $10.3 billion, up $602 million from the prior quarter and up $1.8 billion from the same period last year.
• PPP loans decreased $8 million from the prior quarter and decreased $181 million from the same period last year to $1 million.

Third quarter 2022 average deposits of $28.9 billion were up 2%, or $704 million, compared to the prior quarter and were up 3%, or $800 million, from the same period last year. With respect to third quarter 2022 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $14 million from the prior quarter and decreased $22 million from the same period last year to $8.1 billion.
• Savings increased $53 million from the prior quarter and increased $487 million from the same period last year to $4.7 billion.
• Interest-bearing demand deposits increased $174 million from the prior quarter and increased $243 million from the same period last year to $6.6 billion.
• Money market deposits increased $418 million from the prior quarter and increased $317 million from the same period last year to $7.3 billion.
• Time deposits decreased $24 million from the prior quarter and decreased $204 million from the same period last year to $1.2 billion.
• Network transaction deposits increased $98 million from the prior quarter and decreased $21 million from the same period last year to $873 million.

Third quarter 2022 period-end deposits of $29.2 billion were up 2%, or $622 million, compared to the prior quarter and were up 5%, or $1.3 billion, from the same period last year. With respect to third quarter 2022 period-end balances by deposit category:

• Noninterest-bearing demand deposits increased $139 million from the prior quarter and increased $54 million from the same period last year to $8.2 billion.
• Savings increased $1 million from the prior quarter and increased $430 million from the same period last year to $4.7 billion.
• Interest-bearing demand deposits increased $332 million from the prior quarter and increased $714 million from the same period last year to $7.1 billion.
• Money market deposits increased $140 million from the prior quarter and increased $325 million from the same period last year to $7.9 billion.
• Time deposits increased $10 million from the prior quarter and decreased $177 million from the same period last year to $1.2 billion.
• Network transaction deposits (included in money market and interest-bearing deposits) decreased $28 million from the prior quarter and decreased $65 million from the same period last year to $864 million.

Third quarter 2022 net interest income of $264 million increased $48 million, or 22%, from the prior quarter and increased $81 million, or 44%, from the same period last year. The net interest margin increased to 3.13%, reflecting a 42 basis point improvement from the prior quarter and a 75 basis point increase from the same period last year.

• The average yield on total loans for the third quarter of 2022 increased 90 basis points from the prior quarter and increased 114 basis points from the same period last year to 4.06%.
• The average cost of total interest-bearing liabilities for the third quarter of 2022 increased 45 basis points from the prior quarter and increased 51 basis points from the same period last year to 0.81%.
• The net free funds benefit for the third quarter of 2022 increased 12 basis points from the prior quarter and increased 13 basis points compared to the same period last year to 0.22%.

We now expect short-term interest rates to rise by 75 basis points following the Federal Open Market Committee (FOMC) meeting in November and expect a 50 basis point increase following the FOMC's December meeting. Based on these assumptions, we now expect our 2022 net interest income to exceed $935 million.

Third quarter 2022 total noninterest income of $71 million decreased $5 million, or 6%, from the prior quarter and decreased $11 million, or 14%, from the same period last year. With respect to third quarter 2022 noninterest income line items:

• Mortgage Banking, net was $2 million for the third quarter, down $4 million from the prior quarter and down $9 million from the same period last year, driven by slowing refinance activity and higher retention of mortgages on our balance sheet.
• Service charges and deposit account fees decreased $1 million from the prior quarter and decreased $2 million from the same period last year.
• Wealth management fees decreased $1 million from the prior quarter and decreased $2 million from the same period last year.
• Investment securities gains (losses) increased $6 million from the prior quarter and increased $6 million from the same period last year.

Third quarter 2022 total noninterest expense of $196 million increased $14 million, or 8%, from the prior quarter and increased $18 million, or 10%, from the same period last year as we continued to invest in people and technology. Our third quarter noninterest expense also included an incremental $6 million expense for a contribution to our charitable foundation. With respect to other third quarter 2022 noninterest expense line items:

• Personnel expense increased $6 million from the prior quarter and increased $10 million from the same period last year.
• Technology expense increased $1 million from the prior quarter and increased $3 million from the same period last year.
• Occupancy expense decreased slightly from the prior quarter and decreased $2 million from the same period last year.

We now expect total noninterest expense of approximately $740 million to $750 million for 2022.

Taxes

The third quarter 2022 tax expense was $26 million compared to $23 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 third quarter 2022 was 21.4% compared to an effective tax rate of 21.2% in the prior quarter and an effective tax rate of 20.6% in the same period last year.

We continue to expect the 2022 effective tax rate to be approximately 21%, assuming no change in the statutory corporate tax rate.

Credit

The third quarter 2022 provision for credit losses on loans was $17 million, compared to a provision of zero in the prior quarter and a negative provision of $24 million in the same period last year. Provision build in the third quarter was largely a function of increased loan volume. With respect to third quarter 2022 credit quality:

• Nonaccrual loans of $116 million were up $8 million from the prior quarter and down $19 million from the same period last year. The nonaccrual loans to total loans ratio was 0.42% in the third quarter, up from 0.41% in the prior quarter and down from 0.57% in the same period last year.
• Third quarter net charge offs of $2 million were up compared to negligible net charge offs in the prior quarter and were down compared to net charge offs of $8 million in the same period last year.
• The allowance for credit losses on loans (ACLL) of $333 million was up $15 million compared to the prior quarter and flat compared to the same period last year. The ACLL to total loans ratio was 1.20% in the third quarter, flat compared to the prior quarter and down from 1.41% in the same period last year.

Going forward, we expect any provision adjustments to reflect changes to risk grades, economic conditions, loan volumes, and other indications of credit quality.

The Company's capital position remains strong, with a CET1 capital ratio of 9.4% at September 30, 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.

Based on current market dynamics, we now expect our TCE ratio to land within a range of 7.00% to 7.25% at year-end.

The Company will host a conference call for investors and analysts at 4:00 p.m. Central Time (CT) today, October 20, 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 third quarter 2022 earnings call. The third 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 $38 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.

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

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SOURCE Associated Banc-Corp