GREEN BAY, Wis. -- January 25, 2024 -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $171 million, or $1.13 per common share. These amounts compare to earnings of $355 million, or $2.34 per common share, for the year ended December 31, 2022. For the quarter ended December 31, 2023, the Company reported a loss of $94 million, or $(0.62) per common share. These amounts compare to earnings of $106 million, or $0.70 per common share for the quarter ended December 31, 2022 and earnings of $80 million, or $0.53 per common share for the quarter ended September 30, 2023.

"2023 was an extraordinary year for regional banking," said President and CEO Andy Harmening. "Over the course of the year, the industry was tested in several new ways amid an uncertain macro environment. We addressed the immediate risks, while our colleagues remained forward looking, taking great care of our customers while continuing to execute our people-led, digitally enabled strategy. The results of these efforts were clearly visible in the back half of the year, with diversified loan growth, improving household growth metrics, and 3% core customer deposit¹ growth."

"To capitalize on this momentum, we announced the next phase of our strategic plan during the fourth quarter," Harmening continued. "This plan advances our strategy by accelerating the impacts of our initiatives, and importantly, we've already made significant progress as we enter 2024. We look forward to sharing additional updates on our progress throughout the year."

2023 SUMMARY (all comparisons to 2022)

• End of period total commercial loans increased $202 million to $18.2 billion

• End of period total consumer loans increased $214 million to $11.0 billion

• End of period total deposits increased $3.8 billion to $33.4 billion

• Net interest income increased $82 million to $1.0 billion

• Noninterest income decreased $219 million to $63 million, including one time items recognized in 4Q 2023²

• Noninterest expense increased $67 million to $814 million, including one time items recognized in 4Q 2023³

• Provision for credit losses was $83 million, compared to a provision of $33 million in 2022

• Net income available to common equity decreased $183 million to $171 million, including one time items recognized in 4Q 2023^2,3

• Earnings per common share decreased $1.21 to $1.13, including one time items recognized in 4Q 2023^2,3

Loans

Fourth quarter 2023 period end total loans of $29.2 billion decreased 3%, or $977 million, from the prior quarter, driven primarily by a sale of $969 million in residential mortgages associated with the balance sheet repositioning announced during the fourth quarter of 2023. Compared to the same period last year, period end total loans were up 1%, or $417 million. With respect to fourth quarter 2023 period end balances by loan category:

• Commercial and business lending decreased $361 million from the prior quarter and increased $42 million from the same period last year to $10.8 billion.

• Commercial real estate lending increased $46 million from the prior quarter and increased $160 million from the same period last year to $7.4 billion.

• Total consumer lending decreased $662 million from the prior quarter and increased $214 million from the same period last year to $11.0 billion.

Fourth quarter 2023 average total loans of $30.0 billion were up $68 million from the prior quarter and were up 6%, or $1.8 billion, from the same period last year. With respect to fourth quarter 2023 average balances by loan category:

• Commercial and business lending decreased $165 million from the prior quarter and increased $290 million from the same period last year to $10.8 billion. 

• Commercial real estate lending increased $85 million from the prior quarter and increased $335 million from the same period last year to $7.4 billion. 

• Total consumer lending increased $148 million from the prior quarter and increased $1.1 billion from the same period last year to $11.7 billion. 

Full year 2023 average loans of $29.5 billion were up 13%, or $3.3 billion, from 2022. With respect to full year 2023 average balances by loan category:

• Commercial and business lending increased $979 million to $10.8 billion.

• Commercial real estate lending increased $719 million to $7.3 billion.

• Total consumer lending increased $1.6 billion to $11.4 billion.

In 2024, we expect total loan growth of 4% to 6% on an end of period basis as compared to the year ended December 31, 2023.

Deposits

Fourth quarter 2023 period end deposits of $33.4 billion were up 4%, or $1.3 billion, from the prior quarter and were up 13%, or $3.8 billion from the same period last year. With respect to fourth quarter 2023 period end balances by deposit category:

• Noninterest-bearing demand deposits decreased $303 million from the prior quarter and decreased $1.6 billion from the same period last year to $6.1 billion.

• Savings decreased $1 million from the prior quarter and increased $231 million from the same period last year to $4.8 billion.

• Interest-bearing demand deposits increased $1.3 billion from the prior quarter and increased $1.7 billion from the same period last year to $8.8 billion.

• Money market deposits decreased $938 million from the prior quarter and decreased $1.9 billion from the same period last year to $6.3 billion.

• Total time deposits increased $1.2 billion from the prior quarter and increased $5.4 billion from the same period last year to $7.3 billion.

• Network transaction deposits (included in money market and interest-bearing deposits) decreased $83 million from the prior quarter and increased $587 million from the same period last year to $1.6 billion.

Fourth quarter 2023 average deposits of $32.2 billion were up 1%, or $190 million, from the prior quarter and were up 10%, or $2.9 billion from the same period last year. With respect to fourth quarter 2023 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $148 million from the prior quarter and decreased $1.9 billion from the same period last year to $6.2 billion.

• Savings increased $47 million from the prior quarter and increased $201 million from the same period last year to $4.9 billion.

• Interest-bearing demand deposits increased $177 million from the prior quarter and increased $325 million from the same period last year to $7.2 billion.

• Money market deposits decreased $173 million from the prior quarter and decreased $1.3 billion from the same period last year to $6.1 billion.

• Total time deposits increased $309 million from the prior quarter and increased $4.8 billion from the same period last year to $6.3 billion.

• Network transaction deposits decreased $23 million from the prior quarter and increased $716 million from the same period last year to $1.6 billion.

Full year 2023 average deposits of $31.3 billion were up 9%, or $2.6 billion from 2022. With respect to full year 2023 average balances by deposit category:

• Noninterest-bearing demand deposits decreased $1.5 billion to $6.6 billion.

• Savings increased $121 million to $4.8 billion.

• Interest-bearing demand deposits increased $266 million to $6.9 billion.

• Money market deposits decreased $496 million to $6.7 billion.

• Network transaction deposits increased $648 million to $1.5 billion.

• Total time deposits increased $3.6 billion to $4.9 billion.

In 2024, we expect core customer deposit growth of 3% to 5% on an end of period basis as compared to the year ended December 31, 2023.

Net Interest Income and Net Interest Margin

Full year 2023 net interest income of $1.0 billion was up 9%, or $82 million, from 2022. Net interest margin of

2.81% decreased 10 basis points from the prior year.

• The average yield on total earning assets increased 178 basis points from the prior year to 5.25%.

• The average cost of interest-bearing liabilities increased 235 basis points from the prior year to 3.13%.

• The net free funds benefit increased 47 basis points from the prior year to 0.69%.

Fourth quarter 2023 net interest income of $253 million decreased $1 million from the prior quarter. Net interest margin of 2.69% decreased 2 basis points from the prior quarter. Compared to the same period last year, net interest income decreased 12%, or $36 million, and the net interest margin decreased 62 basis points.

• The average yield on total earning assets for the fourth quarter of 2023 increased 15 basis points from the prior quarter and increased 105 basis points from the same period last year to 5.51%.

• The average cost of total interest-bearing liabilities for the fourth quarter of 2023 increased 19 basis points from the prior quarter and increased 197 basis points from the same period last year to 3.55%.

• The net free funds benefit for the fourth quarter of 2023 increased 2 basis points from the prior quarter and increased 30 basis points from the same period last year to 0.73%.

We expect total net interest income growth of 2% to 4% in 2024.

Noninterest Income

Full year 2023 noninterest income of $63 million decreased $219 million from the prior year. The decrease was primarily driven by one time items associated with the balance sheet repositioning announced during the fourth quarter of 2023, including a $136 million loss on a mortgage portfolio sale and a $65 million net loss on a sale of investments. With respect to 2023 noninterest income line items:

• Investment securities gains (losses), net decreased $63 million from the prior year, driven primarily by a $65 million net loss on a sale of investments associated with the balance sheet repositioning announced during the fourth quarter of 2023.

• Service charges and deposit account fees decreased $13 million from the prior year.

• Capital markets, net decreased $5 million from the prior year, driven primarily by lower market activity levels.

• Mortgage banking, net increased $1 million from the prior year.

Fourth quarter 2023 total noninterest income of negative $131 million decreased $198 million from the prior quarter and decreased $193 million from the same period last year. The decrease was primarily driven by one time items associated with the balance sheet repositioning announced during the fourth quarter of 2023, including a $136 million loss on a mortgage portfolio sale and a $65 million net loss on a sale of investments. With respect to fourth quarter 2023 noninterest income line items:

• Investment securities gains (losses) decreased $59 million from the prior quarter and decreased $57 million from the same period last year, driven primarily by a $65 million net loss on a sale of investments associated with the balance sheet repositioning announced during the fourth quarter of 2023.

• Mortgage banking, net was $2 million for the fourth quarter, down $5 million from the prior quarter and down $1 million from the same period last year.

• Service charges and deposit account fees decreased $2 million from the prior quarter and decreased $3 million from the same period last year.

• Capital markets, net increased $4 million from the prior quarter and increased $4 million from the same period last year.

After adjusting to exclude the impact of one time items associated with the balance sheet repositioning announced during the fourth quarter of 2023, we expect total noninterest income to decrease by 0% to 2% in 2024.

Noninterest Expense

Full year 2023 noninterest expense of $814 million increased 9%, or $67 million, from the prior year, including a $31 million expense for the FDIC special assessment that was finalized during the fourth quarter of 2023. With respect to full year 2023 noninterest expense line items:

• FDIC assessment expense increased $44 million from the prior year, driven primarily by a $31 million expense for the special assessment finalized during the fourth quarter of 2023.

• Personnel expense increased $14 million from the prior year, largely driven by increased merit and benefits expense.

• Technology expense increased $11 million from the prior year, driven by digital investments tied to our strategic initiatives.

• Business development and advertising increased $3 million from the prior year as business activity picked up throughout the year.

Fourth quarter 2023 noninterest expense of $239 million increased $43 million from the prior quarter and increased $43 million from the same period last year, driven primarily by a $31 million expense for the FDIC special assessment finalized during the fourth quarter of 2023. With respect to fourth quarter 2023 noninterest expense line items:

• FDIC assessment expense increased $32 million from the prior quarter and $35 million from the same period last year, primarily driven by the $31 million special assessment finalized during the fourth quarter of 2023.

• Personnel expense increased $4 million from the prior quarter and increased $2 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.

After adjusting to exclude the impact of the FDIC special assessment, we expect total noninterest expense to grow by 2% to 3% in 2024.

Taxes

The fourth quarter 2023 had tax benefit of $47 million compared to $19 million of tax expense in the prior quarter and $25 million of tax expense in the same period last year, driven primarily by the previously announced one-time items impacting financial results during the fourth quarter of 2023.

In 2024, we expect the annual effective tax rate to be between 19% and 21%, assuming no change in the corporate tax rate.

Credit

Full year 2023 provision for credit losses was $83 million, compared to a provision of $33 million in the prior year. The increase in provision in 2023 was primarily driven by loan growth related to our strategic initiatives.

The fourth quarter 2023 provision for credit losses was $21 million, compared to a provision of $22 million in the prior quarter and a provision of $20 million in the same period last year. With respect to fourth quarter 2023 credit quality:

• Nonaccrual loans of $149 million decreased $20 million, or 12%, from the prior quarter and increased $38 million, or 34%, from the same period last year. The nonaccrual loans to total loans ratio was 0.51% in the fourth quarter, down from 0.56% in the prior quarter and up from 0.39% in the same period last year. 

• Net charge offs of $16 million decreased $3 million, or 15%, from the prior quarter and increased $15 million from the same period last year as we began to see limited credit migration during 2023.

• The allowance for credit losses on loans (ACLL) of $386 million increased $5 million from the prior quarter and increased $34 million from the same period last year. The ACLL to total loans ratio was 1.32% in the fourth quarter, up from 1.26% in the prior quarter and up from 1.22% in the same period last year.

In 2024, 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 9.39% at December 31, 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.

FOURTH 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, January 25, 2024. 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 2023 earnings call. The fourth 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 $41 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 nearly 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.

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