GREEN BAY, Wis., Oct. 21, 2021 /PRNewswire/ -- Associated Banc-Corp (NYSE: ASB) ("Associated" or "Company") today reported net income available to common equity ("earnings") of $85 million, or $0.56 per common share, for the quarter ended September 30, 2021. These amounts compare to earnings of $40 million, or $0.26 per common share for the quarter ended September 30, 2020 and earnings of $86 million, or $0.56 per common share for the quarter ended June 30, 2021.
"Our third quarter results were driven by expanding revenue trends," remarked President and CEO Andy Harmening. "We saw increasing signs of business confidence during the quarter. Average commercial and business lending (excluding PPP) loans grew by over 3% from the second quarter. Net interest income and noninterest income also increased, and coupled with disciplined expense and capital management, we delivered a return on average tangible common equity of over 12.7%. At the end of the quarter, we successfully launched our new Auto Finance vertical and are encouraged by the early activity we are seeing. We've also rounded out the leadership team with the hiring of a new President of Equipment Finance and Leasing and are now proceeding with leaders in place for all of our strategic expansions. We look forward to updating investors about our initiatives later this quarter."
Third Quarter 2021 Highlights (all comparisons to the second quarter of 2021)
- Average loans were down $215 million, to $23.9 billion
- Excluding PPP, average loans were up $211 million, to $23.6 billion
- Average deposits were up $604 million, to $28.1 billion
- Net interest income was up $4 million, to $184 million
- Noninterest income was up $9 million, to $82 million
- Noninterest expense was up $3 million, to $178 million
- Provision for credit losses was negative $24 million, compared to negative $35 million
- Net income available to common equity was down $1 million, to $85 million
- Earnings per common share remained unchanged at $0.56
- Tangible book value per share was up $0.23, to $17.58
Loans
Third quarter 2021 average total loans of $23.9 billion were down 1%, or $215 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 $23.6 billion were up 1%, or $211 million from the prior quarter and were down 1%, or $335 million from the same period last year. With respect to third quarter 2021 average balances by loan category:
- Commercial and business lending (excluding PPP) increased $271 million from the prior quarter and decreased $42 million compared to the same period last year to $8.7 billion.
- Commercial real estate lending increased approximately $1 million from the prior quarter and increased $128 million from the same period last year to $6.2 billion.
- Consumer lending was $8.7 billion, down $60 million from the prior quarter and down $420 million from the same period last year.
- PPP loans decreased $426 million from the prior quarter and decreased $744 million from the same period last year to $275 million.
Third quarter 2021 period-end total loans of $23.6 billion were down 1%, or $326 million from the prior quarter and were down 6%, or $1.4 billion from the same period last year. Excluding PPP, period-end total loans of $23.4 billion were down less than 1%, or $103 million from the prior quarter and were down 2%, or $542 million from the same period last year. With respect to third quarter 2021 period-end balances by loan category:
- Commercial and business lending (excluding PPP) increased $17 million from the prior quarter and decreased $31 million from the same period last year to $8.8 billion.
- Commercial real estate lending decreased $50 million from the prior quarter and decreased $49 million from the same period last year to $6.1 billion.
- Consumer lending was $8.5 billion, down $69 million from the prior quarter and down $461 million from the same period last year.
- PPP loans decreased $223 million from the prior quarter and decreased $840 million from the same period last year to $182 million.
We expect full-year commercial loan growth, excluding PPP, of approximately 2% in 2021.
Deposits
Third quarter 2021 average deposits of $28.1 billion were up 2%, or $604 million compared to the prior quarter and were up 5%, or $1.2 billion from the same period last year. With respect to third quarter 2021 average balances by deposit category:
- Noninterest-bearing demand deposits increased $72 million from the prior quarter and increased $730 million from the same period last year to $8.1 billion.
- Savings increased $127 million from the prior quarter and increased $786 million from the same period last year to $4.2 billion.
- Interest-bearing demand deposits increased $465 million from the prior quarter and increased $509 million from the same period last year to $6.3 billion.
- Money market deposits increased $30 million from the prior quarter and increased $546 million from the same period last year to $7.0 billion.
- Time deposits decreased $75 million from the prior quarter and decreased $701 million from the same period last year to $1.4 billion.
- Network transaction deposits decreased $15 million from the prior quarter and decreased $634 million from the same period last year to $894 million.
Third quarter 2021 period-end deposits of $27.9 billion were up 2%, or $587 million compared to the prior quarter and were up 4%, or $1.1 billion from the same period last year. Low-cost core deposits (interest-bearing demand, noninterest-bearing demand and savings) made up 67% of deposit balances as of September 30, 2021. With respect to third quarter 2021 period-end balances by deposit category:
- Noninterest-bearing demand deposits increased $171 million from the prior quarter and increased $681 million from the same period last year to $8.2 billion.
- Savings increased $96 million from the prior quarter and increased $749 million from the same period last year to $4.3 billion.
- Interest-bearing demand deposits increased $439 million from the prior quarter and increased $428 million from the same period last year to $6.4 billion.
- Money market deposits decreased $57 million from the prior quarter and decreased $104 million from the same period last year to $7.6 billion.
- Time deposits decreased $62 million from the prior quarter and decreased $616 million from the same period last year to $1.4 billion.
- Network transaction deposits (included in money market and interest-bearing deposits) increased $58 million from the prior quarter and decreased $462 million from the same period last year to $929 million.
Net Interest Income and Net Interest Margin
Third quarter 2021 net interest income of $184 million was up 2%, or $4 million from the prior quarter and the net interest margin increased 1 basis point from the prior quarter to 2.38%. Compared to the same period last year, net interest income increased 1%, or $2 million, and the net interest margin increased 7 basis points.
- The average yield on total loans for the third quarter of 2021 increased 2 basis points from the prior quarter and was flat compared to the same period last year at 2.92%.
- The average cost of total interest-bearing liabilities for the third quarter of 2021 decreased 6 basis points from the prior quarter and decreased 22 basis points from the same period last year to 0.30%.
- The net free funds benefit for the third quarter of 2021 decreased 2 basis points from the prior quarter and decreased 4 basis points compared to the same period last year to 0.09%.
We expect our full-year net interest margin to finish 2021 at approximately 2.40%.
Noninterest Income
Third quarter 2021 total noninterest income of $82 million increased $9 million from the prior quarter and increased $7 million from the same period last year. With respect to third quarter 2021 noninterest income line items:
- Mortgage Banking, net was $11 million for the third quarter, up $3 million from the prior quarter. Relative to the prior-year period, Mortgage Banking was down $2 million, principally due to lower gain on sale margins.
- Service charges and deposit account fees increased $1 million from the prior quarter and increased $3 million from the same period last year.
- Capital markets fees increased $1 million from the prior quarter and were flat from the same period last year.
- Asset gains, net increased $5 million from the prior quarter and increased $6 million from the same period last year, largely driven by private equity distributions.
We expect noninterest income to finish at the upper end of a range between $315 million and $325 million in 2021.
Noninterest Expense
Third quarter 2021 total noninterest expense of $178 million increased $3 million from the prior quarter and decreased $50 million compared to the same period last year due to the loss on prepayment of FHLB advances in third quarter 2020. With respect to third quarter 2021 noninterest expense line items:
- Personnel expense increased $1 million from the prior quarter and decreased $1 million from the same period last year.
- Other expense increased $3 million from the prior quarter and decreased $4 million from the same period last year.
- Legal and professional expense decreased $2 million from the prior quarter and $1 million from the same period last year.
We continue to expect approximately $705 million to $711 million of noninterest expense for 2021, which includes expenses from our previously announced growth and efficiency initiatives and proposed facilities exit costs.
Taxes
The third quarter 2021 tax expense was $23 million compared to $22 million of tax expense in the prior quarter and $58 million of tax benefit in the same period last year. The effective tax rate for third quarter 2021 was 20.6% compared to an effective tax rate of 19.8% in the prior quarter.
We expect the annual 2021 tax rate to be between 19% and 21%, assuming no change in the statutory corporate tax rate.
Credit
The third quarter 2021 provision for credit losses was negative $24 million, compared to a negative $35 million in the prior quarter and provision of $43 million in the same period last year. With respect to third quarter 2021 credit quality:
- Potential problem loans of $251 million were up $55 million, or 28%, from the prior quarter and down $42 million, or 14%, from the same period last year.
- Nonaccrual loans of $135 million were down $12 million, or 8%, from the prior quarter and down $97 million, or 42% from the same period last year. The nonaccrual loans to total loans ratio was 0.57% in the third quarter, down from 0.61% in the prior quarter and down from 0.93% in the same period last year.
- Net charge offs of $8 million were up $3 million from the prior quarter and down $22 million from the same period last year.
- The allowance for credit losses on loans (ACLL) of $332 million was down $32 million from the prior quarter and down $110 million compared to the same period last year. The ACLL to total loans ratio was 1.41% in the third quarter, down from 1.52% in the prior quarter and down from 1.77% in the same period last year.
For the fourth quarter, we expect to adjust provision to reflect changes to risk grade, economic conditions, other indications of credit quality, and loan volume.
Capital
In the third quarter, we redeemed all outstanding Depositary Shares representing interest in our 5.375% Perpetual Preferred Stock, Series D at a redemption price of $25 per Depositary Share. We also repurchased $60 million of common stock during the quarter.
The Company's capital position remains strong, with a CET1 capital ratio of 10.6% at September 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.
THIRD 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, October 21, 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 third quarter 2021 earnings call. The third 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 200 banking locations serving more than 100 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," "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
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SOURCE Associated Banc-Corp
