Associated Banc-Corp Reports Second Quarter 2021 Net Income Available to Common Equity of $86 million, or $0.56 Per Common Share

GREEN BAY, Wis., July 22, 2021 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $86 million, or $0.56 per common share, for the quarter ended June 30, 2021. These amounts compare to earnings of $145 million in the quarter ended June 30, 2020, or $0.94 per common share, including the net gain recognized on the sale of Associated Benefits and Risk Consulting ("ABRC"). Excluding the gain on ABRC, second quarter 2020 earnings per share were $0.26 per common share¹. Second quarter 2021 results also compare to earnings of $89 million, or $0.58 per common share for the quarter ended March 31, 2021.

"Our second quarter results were driven by continuing improvement in our loan portfolios," remarked President and CEO Andy Harmening. "Our credit metrics continued to improve, our C&I and CRE customers began to modestly borrow on their lines, and we saw accelerating PPP pay downs - all of which are indicators of an improving economic backdrop. We also saw signs of increased business and consumer confidence; evidenced by rising spending and payments activity. We remain optimistic about the unfolding recovery in our regional footprint and are proactively pursuing various initiatives to lean into the growth we expect to see in our markets. We look forward to updating investors on these initiatives, later this quarter."

Second Quarter 2021 Highlights (all comparisons to the first quarter of 2021)

• Period-end loans (excluding PPP) were up $216 million, to $23.5 billion
• Period-end deposits were down $413 million, to $27.3 billion
• Net interest income was up $4 million, to $180 million
• Fee-based revenue¹ was up $2 million, to $53 million
• Noninterest expense was down $1 million, to $174 million
• Provision for credit losses was negative $35 million, compared to negative $23 million
• Net income available to common equity was down $3 million, to $86 million
• Earnings per common share were down $0.02, to $0.56
• Tangible book value per share was up $0.40, to $17.35

¹This is a non-GAAP financial measure. 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 greater understanding of ongoing operations and enhance comparability of results with prior periods. See page 10 of the attached tables for a reconciliation of GAAP financial measures to non-GAAP financial measures.

Loans

Second quarter 2021 average total loans of $24.1 billion were down 1%, or $365 million from the prior quarter and were down 4%, or $1.1 billion from the same period last year. Excluding PPP, average total loans of $23.4 billion were down 1%, or $259 million from the prior quarter and were down 4%, or $945 million from the same period last year. With respect to second quarter 2021 average balances by loan category:

• Commercial and business lending (excluding PPP) decreased $100 million from the prior quarter and decreased $755 million compared to the same period last year to $8.4 billion.
• Commercial real estate lending decreased $11 million from the prior quarter and increased $439 million from the same period last year to $6.2 billion.
• Consumer lending was $8.8 billion, down $148 million from the prior quarter and down $629 million from the same period last year.
• PPP loans decreased $105 million from the prior quarter and decreased $147 million from the same period last year to $701 million.

Second quarter 2021 period-end total loans of $23.9 billion were down 1%, or $215 million from the prior quarter and were down 4%, or $885 million from the same period last year. Excluding PPP, period-end total loans of $23.5 billion were up 1%, or $216 million from the prior quarter and were down 1%, or $279 million from the same period last year. With respect to second quarter 2021 period-end balances by loan category:

• Commercial and business lending (excluding PPP) increased $242 million from the prior quarter and decreased $93 million from the same period last year to $8.8 billion.
• Commercial real estate lending increased $39 million from the prior quarter and increased $299 million from the same period last year to $6.2 billion.
• Consumer lending was $8.6 billion, down $64 million from the prior quarter and down $485 million from the same period last year.
• PPP loans decreased by $431 million from the prior quarter and decreased $607 million from the same period last year to $405 million.

We continue to expect full-year commercial loan growth, excluding PPP, of 2% to 4% in 2021, driven by an expected 4% to 6% increase in CRE balances and an expected 1% to 2% increase in commercial and business lending outstandings.

Deposits

Second quarter 2021 average deposits of $27.5 billion were up 2%, or $666 million compared to the prior quarter and were up 5%, or $1.3 billion from the same period last year. With respect to second quarter 2021 average balances by deposit category:

• Noninterest-bearing demand deposits increased $403 million from the prior quarter and increased $1.1 billion from the same period last year to $8.1 billion.
• Savings increased $311 million from the prior quarter and increased $862 million from the same period last year to $4.1 billion.
• Interest-bearing demand deposits increased $166 million from the prior quarter and increased $434 million from the same period last year to $5.9 billion.
• Money market deposits increased $106 million from the prior quarter and increased $485 million from the same period last year to $7.0 billion.
• Network transaction deposits decreased $171 million from the prior quarter and decreased $636 million from the same period last year to $909 million.
• Time deposits decreased $149 million from the prior quarter and decreased $960 million from the same period last year to $1.5 billion.

Second quarter 2021 period-end deposits of $27.3 billion were down 1%, or $413 million compared to the prior quarter and were up 3%, or $713 million from the same period last year. Low-cost core deposits (interest-bearing demand, noninterest-bearing demand and savings) made up 66% of deposit balances as of June 30, 2021. With respect to second quarter 2021 period-end balances by deposit category:

• Noninterest-bearing demand deposits decreased $497 million from the prior quarter and increased $425 million from the same period last year to $8.0 billion.
• Savings increased $150 million from the prior quarter and increased $788 million from the same period last year to $4.2 billion.
• Interest-bearing demand deposits increased $221 million from the prior quarter and increased $122 million from the same period last year to $6.0 billion.
• Money market deposits decreased $198 million from the prior quarter and increased $155 million from the same period last year to $7.6 billion.
• Time deposits (excluding brokered CDs) decreased $89 million from the prior quarter and decreased $772 million from the same period last year to $1.5 billion.
• Network transaction deposits (included in money market and interest-bearing deposits) decreased $183 million from the prior quarter and decreased $625 million from the same period last year to $872 million.

Net Interest Income and Net Interest Margin

Second quarter 2021 net interest income of $180 million was up 2%, or $4 million from the prior quarter and the net interest margin decreased 2 basis points from the prior quarter to 2.37%.  Compared to the same period last year, net interest income decreased 5%, or $10 million, and the net interest margin decreased 12 basis points.

• The average yield on total loans for the second quarter of 2021 increased 2 basis points from the prior quarter and decreased 16 basis points from the same period last year to 2.90%.
• The average cost of total interest-bearing liabilities for the second quarter of 2021 decreased 4 basis points from the prior quarter and decreased 24 basis points from the same period last year to 0.36%.
• The net free funds benefit for the second quarter of 2021 decreased one basis point from the prior quarter and compressed 4 basis points compared to the same period last year to 0.11%.

We expect the full year margin for 2021 to be between 2.45% and 2.55%.

Noninterest Income

Second quarter 2021 total noninterest income of $73 million decreased $22 million from the prior quarter and decreased by $181 million from the same period last year, driven by the gain recognized last year on the sale of Associated Benefits and Risk Consulting in the second quarter of 2020 and the decrease in ABRC-related income.

With respect to second quarter 2021 noninterest income line items:

• Service charges and deposit account fees increased $1 million from the prior quarter and increased $4 million from the same period last year.
• Card-based fees increased $1 million from the prior quarter and increased $2 million from the same period last year.
• Mortgage Banking, net was $8 million for the second quarter, down $16 million from the prior quarter, driven by declining gain on sale margins and no additional mortgage servicing rights recoveries. Relative to the prior-year period, Mortgage Banking was down $4 million, principally due to lower gain on sale margins, offset by an $8 million MSR impairment in the prior-year period.

We expect noninterest income of between $315 million and $325 million in 2021.

Noninterest Expense

Second quarter 2021 total noninterest expense of $174 million decreased $1 million from the prior quarter and decreased $9 million compared to the same period last year. 

With respect to second quarter 2021 noninterest expense line items:

• Personnel expense increased $3 million from the prior quarter and decreased $4 million from the same period last year.
• Other expense decreased $2 million from the prior quarter and $4 million from the same period last year.

We are withdrawing our prior 2021 total expense guidance. Total expense for 2021 will reflect incremental growth and efficiency initiatives which are under development and expected to be announced later in the third quarter. Before the impact of such initiatives, we expect total expense for 2021 would be approximately $695 million to $700 million.

Taxes

The second quarter 2021 tax expense was $22 million compared to $25 million of tax expense in the prior quarter and $51 million of tax expense in the same period last year. The effective tax rate for second quarter 2021 was 19.8% compared to an effective tax rate of 20.7% in the prior quarter and an effective tax rate of 25.6% in the same period last year, which was driven by the sale of ABRC.

We expect the annual 2021 tax rate to be between 19% and 21%, assuming no change in the corporate tax rate.

Credit

The second quarter 2021 provision for credit losses was negative $35 million, compared to a negative $23 million in the prior quarter and provision of $61 million in the same period last year.

With respect to second quarter 2021 credit quality:

• Potential problem loans of $196 million were down $68 million, or 26%, from the prior quarter and down $111 million, or 36%, from the same period last year.
• Nonaccrual loans of $147 million were down $16 million, or 10%, from the prior quarter and down $24 million, or 14% from the same period last year. The nonaccrual loans to total loans ratio was 0.61% in the second quarter, down from 0.68% in the prior quarter and down from 0.69% in the same period last year.
• Net charge offs of $5 million were down 3% from the prior quarter and down $22 million, or 83%, from the same period last year.
• The allowance for credit losses on loans (ACLL) of $364 million was down $40 million from the prior quarter and down $64 million compared to the same period last year. The ACLL to total loans ratio was 1.52% in the second quarter, down from 1.67% in the prior quarter and down from 1.73% in the same period last year.

We continue to experience positive credit trends due to economic conditions and expect our provision to adjust with changes to risk grade, other indications of credit quality, and loan volume.

Capital

The Company's capital position remains strong, with a CET1 capital ratio of 10.7% at June 30, 2021. 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 2021 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 22, 2021. 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 2021 earnings call. The second quarter 2021 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 $34 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 220 banking locations serving more than 120 communities throughout Wisconsin, Illinois and Minnesota, and commercial financial services in Indiana, Michigan, Missouri, 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," "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