Associated Banc-Corp Reports Fourth Quarter 2022 Earnings of $0.70 Per Common Share and $2.34 Per Common Share for the Full Year 2022

GREEN BAY, Wis., Jan. 26, 2023 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $106 million, or $0.70 per common share, for the quarter ended December 31, 2022. These amounts compare to earnings of $74 million, or $0.49 per common share for the quarter ended December 31, 2021 and earnings of $93 million, or $0.62 per common share for the quarter ended September 30, 2022. For the year ended December 31, 2022, the Company reported earnings of $355 million, or $2.34 per common share. These amounts compare to earnings of $334 million, or $2.18 per common share, for the year ended December 31, 2021.

"This quarter served as a fitting exclamation point for the most profitable year in our company's 162-year history," said President and CEO Andy Harmening. "By listening to our customers and empowering our colleagues, we've enhanced engagement, deepened relationships, and delivered more meaningful solutions to the communities we serve. This momentum has enabled us to add nearly $4.6 billion in high-quality loan balances over the course of the year, expand margins, drive operating leverage into the double-digits, and enhance our profitability profile. Importantly, we've achieved all of this without abandoning our foundational discipline on expenses and credit quality."

"While we're proud of what we've accomplished so far, we feel like we're just getting started," Harmening continued. "As we shift to 2023, we're closely monitoring the economic environment, but continue to feel well-positioned thanks to the diversifying benefits of our strategic plan and our decade-long effort to de-risk our balance sheet. We've laid the groundwork to create a stronger Associated Bank for years to come."

2022 SUMMARY (all comparisons to 2021)

• End of period total commercial loans were up $2.4 billion to $18.0 billion
• End of period total consumer loans were up $2.2 billion to $10.8 billion
• End of period total deposits were up $1.2 billion to $29.6 billion
• Net interest income was up $231 million to $957 million
• Noninterest income was down $50 million to $282 million
• Noninterest expense was up $37 million to $747 million
• Provision for credit losses was $33 million, compared to a negative provision of $88 million in 2021
• Net income available to common equity was up $21 million to $355 million
• Earnings per common share increased $0.16 to $2.34

Loans

Fourth quarter 2022 period-end total loans of $28.8 billion were up 4%, or $982 million, from the prior quarter and were up 19%, or $4.6 billion from the same period last year. With respect to fourth quarter 2022 period-end balances by loan category:

• Commercial and business lending increased $179 million from the prior quarter and increased $1.3 billion from the same period last year to $10.8 billion.
• Commercial real estate lending increased $336 million from the prior quarter and increased $1.0 billion from the same period last year to $7.2 billion.
• Consumer lending increased $467 million from the prior quarter and increased $2.2 billion from the same period last year to $10.8 billion.

Fourth quarter 2022 average total loans of $28.2 billion were up 4%, or $1.1 billion, from the prior quarter and were up 18%, or $4.4 billion, from the same period last year. With respect to fourth quarter 2022 average balances by loan category:

• Commercial and business lending increased $338 million from the prior quarter and increased $1.6 billion compared to the same period last year to $10.5 billion.
• Commercial real estate lending increased $294 million from the prior quarter and increased $928 million from the same period last year to $7.1 billion.
• Consumer lending increased $508 million from the prior quarter and increased $1.9 billion from the same period last year to $10.6 billion.

Full year 2022 average loans of $26.2 billion were up 9%, or $2.1 billion, from 2021. With respect to full year 2022 average balances by loan category:

• Commercial and business lending increased $748 million to $9.9 billion.
• Commercial real estate lending increased $439 million to $6.6 billion.
• Consumer lending increased $955 million to $9.8 billion.

In 2023, we expect total loan growth of 7% to 9% on an end of period basis as compared to the year ended December 31, 2022.

Deposits

Fourth quarter 2022 period-end deposits of $29.6 billion were up 1%, or $438 million, from the prior quarter and were up 4%, or $1.2 billion from the same period last year. With respect to fourth quarter 2022 period-end balances by deposit category:

• Noninterest-bearing demand deposits decreased $464 million from the prior quarter and decreased $743 million from the same period last year to $7.8 billion.
• Savings decreased $104 million from the prior quarter and increased $195 million from the same period last year to $4.6 billion.
• Interest-bearing demand deposits decreased $21 million from the prior quarter and increased $81 million from the same period last year to $7.1 billion.
• Money market deposits increased $330 million from the prior quarter and increased $1.1 billion from the same period last year to $8.2 billion.
• Total time deposits increased $696 million from the prior quarter and increased $583 million from the same period last year to $1.9 billion.
• Network transaction deposits (included in money market and interest-bearing deposits) increased $115 million from the prior quarter and increased $212 million from the same period last year to $979 million.

Fourth quarter 2022 average deposits of $29.3 billion were up 2%, or $453 million, from the prior quarter and were up 3%, or $925 million from the same period last year. With respect to fourth quarter 2022 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $31 million from the prior quarter and decreased $328 million from the same period last year to $8.1 billion.
• Savings decreased $75 million from the prior quarter and increased $293 million from the same period last year to $4.7 billion.
• Interest-bearing demand deposits increased $244 million from the prior quarter and increased $325 million from the same period last year to $6.8 billion.
• Money market deposits increased $55 million from the prior quarter and increased $490 million from the same period last year to $7.4 billion.
• Total time deposits increased $232 million from the prior quarter and increased $82 million from the same period last year to $1.5 billion.
• Network transaction deposits increased $28 million from the prior quarter and increased $63 million from the same period last year to $901 million.

Full year 2022 average deposits of $28.8 billion were up 4%, or $1.1 billion from 2021. With respect to full year 2022 average balances by deposit category:

• Noninterest-bearing demand deposits increased $88 million to $8.2 billion.
• Savings increased $514 million to $4.7 billion.
• Interest-bearing demand deposits increased $525 million to $6.6 billion.
• Money market deposits increased $224 million to $7.2 billion.
• Network transaction deposits decreased $108 million to $822 million.
• Time deposits decreased $179 million to $1.3 billion.

Net Interest Income and Net Interest Margin

Full year 2022 net interest income of $957 million was up 32%, or $231 million, from 2021. Net interest margin of 2.91% was up 52 basis points from the prior year. The increases in net interest income and margin were driven by the execution of our strategic initiatives and rising interest rates during 2022.

• The average yield on total earning assets increased 85 basis points from the prior year to 3.47%.
• The average cost of interest-bearing liabilities increased 45 basis points from the prior year to 0.78%.
• The net free funds benefit increased 12 basis points from the prior year to 0.22%.

Fourth quarter 2022 net interest income of $289 million was up 9%, or $25 million, from the prior quarter. Net interest margin of 3.31% was up 18 basis points from the prior quarter. Compared to the same period last year, net interest income increased 55%, or $102 million, and the net interest margin increased 91 basis points.

• The average yield on total earning assets for the fourth quarter of 2022 increased 74 basis points from the prior quarter and increased 187 basis points from the same period last year to 4.46%.
• The average cost of total interest-bearing liabilities for the fourth quarter of 2022 increased 77 basis points from the prior quarter and increased 131 basis points from the same period last year to 1.58%.
• The net free funds benefit for the fourth quarter of 2022 increased 21 basis points from the prior quarter and increased 35 basis points from the same period last year to 0.43%.

We expect total net interest income growth of 15% to 17% in 2023.

Noninterest Income

Full year 2022 noninterest income of $282 million decreased $50 million from the prior year. The decrease was largely influenced by market-driven decreases in mortgage banking income and wealth management fees, customer-friendly changes to our overdraft program, and asset gains recognized during 2021. With respect to 2022 noninterest income line items:

• Mortgage Banking, net decreased $32 million from the prior year, driven by slowing refinance activity and higher retention of mortgages on our balance sheet.
• Asset gains (losses), net decreased $10 million from the prior year, driven primarily by gains on private equity investments in 2021.
• Wealth management fees decreased $6 million from the prior year, driven by lower market valuations.
• Service charges and deposit account fees decreased $2 million from the prior year. Guided by customer feedback, we announced several customer-friendly changes to our overdraft program in the third quarter of 2022.

Fourth quarter 2022 total noninterest income of $62 million decreased $9 million from the prior quarter and decreased $20 million from the same period last year. With respect to fourth quarter 2022 noninterest income line items:

• Investment securities gains (losses) decreased $8 million from the prior quarter and decreased $2 million from the same period last year.
• Capital markets fees decreased $2 million from the prior quarter and decreased $4 million from the same period last year.
• Mortgage Banking, net was $2 million for the fourth quarter, flat to the prior quarter and down $6 million from the same period last year, driven by slowing refinance activity and higher retention of mortgages on our balance sheet.

We expect total noninterest income to compress by 6% to 8% in 2023.

Noninterest Expense

Full year 2022 noninterest expense of $747 million increased 5%, or $37 million, from the prior year as we continued to invest in people and technology. With respect to full year 2022 noninterest expense line items:

• Personnel expense increased $27 million from the prior year, largely driven by higher incentive compensation and additional hiring tied to our strategic initiatives.
• Technology expense increased $9 million from the prior year, driven by digital investments tied to our strategic initiatives.
• Business development and advertising increased $4 million from the prior year as business activity picked up throughout the year.

Fourth quarter 2022 total noninterest expense of $197 million increased $1 million from the prior quarter and increased $14 million from the same period last year. With respect to fourth quarter 2022 noninterest expense line items:

• Personnel expense was flat to the prior quarter and increased $11 million from the same period last year.
• Technology expense increased $3 million from the prior quarter and increased $5 million from the same period last year.
• Occupancy expense increased $2 million from the prior quarter and decreased $1 million from the same period last year.

We expect noninterest expense to grow by 4% to 6% in 2023.

Taxes

The fourth quarter 2022 tax expense was $25 million compared to $26 million of tax expense in the prior quarter and $15 million of tax expense in the same period last year. The effective tax rate for fourth quarter 2022 was 18.9% compared to an effective tax rate of 21.4% in the prior quarter and an effective tax rate of 16.5% in the same period last year. The lower effective tax rate in fourth quarter 2021 was due in part to an increase in tax-exempt interest and benefits from bank and corporate owned life insurance.

In 2023, we expect the annual effective tax rate to be between 20% and 21%, assuming no change in the corporate tax rate.

Credit

Full year 2022 provision for credit losses was $33 million, compared to a negative provision of $88 million in the prior year. The increase in provision in 2022 was primarily driven by loan growth related to our strategic initiatives.

The fourth quarter 2022 provision for credit losses was $20 million, compared to a provision of $17 million in the prior quarter and a negative provision of $6 million in the same period last year. With respect to fourth quarter 2022 credit quality:

• Nonaccrual loans of $111 million were down $5 million, or 4%, from the prior quarter and down $19 million, or 15%, from the same period last year. The nonaccrual loans to total loans ratio was 0.39% in the fourth quarter, down from 0.42% in the prior quarter and down from 0.54% in the same period last year.
• Net charge offs of $1 million were down $1 million, or 37%, from the prior quarter and down $5 million, or 82%, from the same period last year.
• The allowance for credit losses on loans (ACLL) of $351 million was up $19 million from the prior quarter and up $32 million from the same period last year. The ACLL to total loans ratio was 1.22% in the fourth quarter, up from 1.20% in the prior quarter and down from 1.32% 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 9.35% at December 31, 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.

FOURTH QUARTER 2022 EARNINGS RELEASE CONFERENCE CALL

The Company will host a conference call for investors and analysts at 4:00 p.m. Central Time (CT) today, January 26, 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 fourth quarter 2022 earnings call. The fourth 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.

ABOUT ASSOCIATED BANC-CORP

Associated Banc-Corp (NYSE: ASB) has total assets of $39 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