Associated Banc-Corp Reports First Quarter 2021 Net Income Available to Common Equity of $89 million, or $0.58 Per Common Share

GREEN BAY, Wis., April 22, 2021 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ('Associated' or 'Company') today reported net income available to common equity ('earnings') of $89 million, or $0.58 per common share, for the quarter ended March 31, 2021. These amounts compare to earnings of $62 million, or $0.40 per common share for the quarter ended December 31, 2020 and earnings of $42 million, or $0.27 per common share for the quarter ended March 31, 2020.

'Driven by strong credit dynamics and the benefit of the ongoing mortgage refinance wave, we've delivered one of our strongest quarters ever,' said President and CEO Philip B. Flynn. 'The improving credit outlook, complemented by strong fee income trends and record deposit activity drove this quarter's earnings. The recovery has proven much stronger than we anticipated and we are optimistic about the growth we expect to come later this year. With customer activity at record levels, we are leveraging our digital capabilities and investing in our teams to meet the expanding needs of our customers across our footprint.'

First Quarter 2021 Highlights (all comparisons to the first quarter of 2020)

• Average loans of $24.5 billion were up 5%, or $1.2 billion
• Average deposits of $26.8 billion were up 10%, or $2.5 billion
• Noninterest expense of $175 million decreased 9%, or $17 million
• Noninterest income of $95 million decreased 3%, or $3 million
• Net interest income of $176 million decreased 13%, or $27 million
• Net negative provision for credit losses of $23 million, down $76 million
• Net income available to common equity of $89 million increased 112%, or $47 million
• Earnings per common share of $0.58 increased 115%, or $0.31 per common share
• Tangible book value per share was $16.95, up 16% from $14.64
• Facilitated $293 million of new PPP loans for over 4,100 customers

Loans

First quarter 2021 average loans of $24.5 billion were up 5%, or $1.2 billion from the same period last year and were down 1%, or $218 million from the fourth quarter 2020. With respect to first quarter 2021 average balances by loan category:

• Commercial and business lending decreased $100 million from the prior quarter, driven by PPP forgiveness, and increased $964 million compared to the same period last year to $9.3 billion.
• Commercial real estate lending increased $14 million from the prior quarter and $842 million from the same period last year to $6.2 billion.
• Consumer lending was $8.9 billion, down $132 million from the prior quarter and down $651 million from the same period last year.

First quarter 2021 period-end loans of $24.2 billion were down 1%, or $203 million from the same period last year and 1%, or $289 million from the fourth quarter 2020. With respect to first quarter 2021 period-end balances by loan category:

• Commercial and business lending increased $14 million from the prior quarter and decreased $74 million from the same period last year to $9.4 billion.
• Commercial real estate lending decreased $40 million from the prior quarter and increased $560 million from the same period last year to $6.1 billion.
• Consumer lending was $8.6 billion, down $264 million from the prior quarter and $689 million from the same period last year.

We continue to expect full-year commercial loan growth 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 C&BL outstandings, excluding PPP.

Deposits

First quarter 2021 average deposits of $26.8 billion were up 10%, or $2.5 billion from the same period last year and $66 million compared to the fourth quarter 2020. With respect to first quarter 2021 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $10 million from the prior quarter and increased $2.2 billion from the same period last year to $7.7 billion.
• Savings increased $182 million from the prior quarter and $941 million from the same period last year to $3.8 billion.
• Interest-bearing demand deposits decreased $27 million from the prior quarter and increased $406 million from the same period last year to $5.7 billion.
• Money market deposits increased $336 million from the prior quarter and $337 million from the same period last year to $6.9 billion.
• Network transaction deposits decreased $186 million from the prior quarter and $354 million from the same period last year to $1.1 billion.
• Time deposits decreased $230 million from the prior quarter and $978 million from the same period last year to $1.7 billion.

First quarter 2021 period-end deposits of $27.7 billion were up 8%, or $2 billion from the same period last year and 5%, or $1.2 billion compared to the fourth quarter 2020. Low-cost core deposits (interest-bearing demand, noninterest-bearing demand and savings) made up 65% of deposit balances as of March 31, 2021. With respect to first quarter 2021 period-end balances by deposit category:

• Noninterest-bearing demand deposits increased $834 million from the prior quarter and $2.4 billion from the same period last year to $8.5 billion.
• Savings increased $383 million from the prior quarter and $1 billion from the same period last year to $4.0 billion.
• Interest-bearing demand deposits decreased $343 million from the prior quarter and $422 million from the same period last year to $5.7 billion.
• Money market deposits increased $516 million from the prior quarter and increased $121 million from the same period last year to $7.8 billion.
• Time deposits decreased $196 million from the prior quarter and $1 billion from the same period last year to $1.6 billion.
• Network transaction deposits (included in money market and interest-bearing deposits) decreased $142 million from the prior quarter and $677 million from the same period last year to $1.1 billion.

Net Interest Income and Net Interest Margin

First quarter 2021 net interest income of $176 million was down 6%, or $12 million from the prior quarter and the net interest margin decreased 10 basis points from the prior quarter to 2.39%. Compared to the same period last year, net interest income decreased 13%, or $27 million, and the net interest margin decreased 45 basis points.

• The average yield on total earning assets for the first quarter of 2021 decreased 13 basis points from the prior quarter and decreased 100 basis points from the same period last year to 2.67%.
• The average cost of total interest-bearing liabilities for the first quarter of 2021 decreased 3 basis points from the prior quarter and decreased 66 basis points from the same period last year to 0.40%.
• The net free funds benefit for the first quarter of 2021 was flat to the prior quarter and compressed 11 basis points compared to the same period last year.

We expect the full year's margin to be approximately 2.45% to 2.55% in 2021.

Noninterest Income

First quarter 2021 total noninterest income of $95 million increased $10 million from the prior quarter and decreased by only $3 million from the same period last year, despite the loss of $23 million of Associated Benefits & Risk Consulting-related income.

With respect to first quarter 2021 noninterest income line items:

• Gain on previously disclosed sale of Whitnell & Co. was $2 million.
• Gains on previously disclosed sale of branches were $1 million.
• Mortgage Banking, net was $24 million for the first quarter, up $9 million from the previous quarter and up $18 million from the same period last year, driven by continued refinancing volumes and mortgage servicing rights recoveries.

We expect noninterest income of $310 million to $330 million in 2021.

Noninterest Expense

First quarter 2021 total noninterest expense of $175 million increased $2 million from the prior quarter and decreased $17 million compared to the same period last year.

With respect to first quarter 2021 noninterest expense line items:

• Personnel expense increased $6 million from the prior quarter, primarily driven by increased compensation, incentives and mortgage commissions, and decreased $10 million from the same period last year, primarily driven by reduced staffing as a result of corporate restructurings in third quarter 2020 and the sale of ABRC.
• Other expense decreased $2 million from the prior quarter and $4 million from the same period last year.

We expect 2021 noninterest expense to be approximately $690 million to $695 million.

Taxes

The first quarter 2021 tax expense was $25 million compared to $17 million of tax expense in the prior quarter and $10 million of tax expense in the same period last year. The effective tax rate for first quarter 2021 was 20.7% compared to an effective tax rate of 20.1% in the prior quarter and an effective tax rate of 18.2% in the same period last year.

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

Credit

The first quarter 2021 provision for credit losses was negative $23 million, down from provision of $17 million in the prior quarter and provision of $53 million in the same period last year.

With respect to first quarter 2021 credit quality:

• Potential problem loans of $264 million were down $17 million, or 6%, from the prior quarter and up $31 million, or 13%, from the same period last year.
• Nonaccrual loans of $163 million were down $48 million, or 23%, from the prior quarter and up $27 million, or 19% from the same period last year. The nonaccrual loans to total loans ratio was 0.68% in the first quarter, down from 0.86% in the prior quarter and up from 0.56% in the same period last year.
• Net charge offs of $5 million were down $23 million, or 83%, from the prior quarter and down $12 million, or 72%, from the same period last year.
• The allowance for credit losses on loans (ACLL) of $404 million was down $28 million from the prior quarter and up $10 million compared to the same period last year. The ACLL to total loans ratio was 1.67% in the first quarter, down from 1.76% in the prior quarter and up from 1.62% in the same period last year.

We expect our full year 2021 provision to be nominal.

Capital

The Company's capital position remains strong, with a CET1 capital ratio of 10.8% at March 31, 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.

FIRST 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, April 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 first quarter 2021 earnings call. The first 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 $35 billion and is one of the top 50 publicly traded U.S. bank holding companies. 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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