Associated Banc Q2 2026 Earnings Report

Associated Banc EPS Results

• Actual EPS: $0.73
• Consensus EPS: $0.72
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.65

Associated Banc Revenue Results

• Actual Revenue: $454.54 million
• Expected Revenue: $438.01 million
• Beat/Miss: Beat by +$16.53 million
• YoY Revenue Growth: N/A

Associated Banc Announcement Details

• Quarter: Q2 2026
• Date: 7/23/2026
• Time: After Market Closes
• Conference Call Date: Thursday, July 23, 2026
• Conference Call Time: 5:00PM ET

Associated Banc (NYSE:ASB), through its primary subsidiary Associated Bank, N.A., is a regional financial services company headquartered in Green Bay, Wisconsin. The bank operates more than 200 branches across the Midwest, offering community-focused banking solutions for individuals, small businesses and commercial clients. Its emphasis on personalized service and regional decision-making supports long-standing customer relationships.

On the consumer side, Associated Bank provides checking and savings accounts, residential mortgages, home equity lines of credit, auto financing and credit card products. For business clients, the company offers commercial lending, treasury and cash management, equipment financing, foreign exchange and capital markets services. Wealth management, trust administration and insurance products are delivered through dedicated private banking and investment advisory teams.

Established in 1861 as Third National Bank of Green Bay, the institution has grown organically and through select acquisitions to serve Wisconsin, Illinois and Minnesota, with specialized commercial banking operations extending into Arizona and Florida. Over its history, Associated Banc has maintained a focus on supporting local economies, partnering with civic organizations and investing in community development initiatives across its footprint.

The bank’s leadership is headed by President and Chief Executive Officer Loren M. Hansen, who oversees strategic planning, digital innovation and risk management. Hansen is supported by an executive team responsible for finance, operations, technology and client experience. Under their guidance, Associated Banc continues to prioritize regional expertise, customer-driven solutions and sustainable growth.

Associated Banc Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Associated said it already hit its full-year target of 9%-10% organic C&I loan growth by June 30, driven by $644 million of organic C&I growth in Q2 and nearly $1.2 billion in first-half growth.
• Positive Sentiment: Management highlighted strong organic deposit momentum, with 6% year-over-year organic core customer deposit growth and primary checking households up on an annualized basis, which they said reflects improving customer acquisition and retention.
• Positive Sentiment: The American National acquisition is tracking largely to plan, with expected cost saves now rising to about 30% of the acquired expense base and the earn-back still holding at 2.25 years.
• Neutral Sentiment: Q2 results included a higher net interest margin of 3.17% and management expects further margin expansion in the second half of 2026 as purchase accounting benefits burn off and the balance sheet remix continues.
• Neutral Sentiment: Credit metrics remained solid overall, though non-accruals and criticized loans increased modestly; management said the American National portfolio is performing in line with due diligence and that they are not seeing unexpected issues.

Presentation

[Operator]

Good afternoon, everyone, and welcome to Associated Banc-Corp's second quarter 2026 earnings conference call. My name is Alicia, and I will be your operator today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session at the end of the conference. Copies of the slides that will be referenced during today's call are available on the company's website at investor.associatedbank.com. As a reminder, this conference is being recorded. As outlined on slide two, during the course of the discussion today, management may make statements that constitute projections, expectations, beliefs, or similar forward-looking statements. Associated's actual results may differ materially from the results anticipated or projected in such forward-looking statements.

[Operator]

Additional detailed information concerning the important factors that could cause Associated's actual results to differ materially from the information discussed today is readily available on the SEC website in the Risk Factors section of Associated's most recent Form 10-K and subsequent SEC filings. These factors are incorporated herein by reference. For a reconciliation of the non-GAAP financial measures to the GAAP financial measures mentioned in this conference call, please refer to pages 28 through 31 of the slide presentation and to pages 10 and 11 of the press release financial tables. Following today's presentation, instructions will be given for the question-and-answer session. At this time, I would like to turn the conference over to Andy Harmening, President and CEO, for opening remarks. Please go ahead, sir.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Thank you, and good afternoon. Welcome to our second quarter earnings call. I am Andy Harmening, and as usual, I am joined by Derek Meyer, our CFO, and Pat Ahern, our Chief Credit Officer. I will start with some highlights from the quarter, and from there, Derek will cover income statement and capital trends, and Pat will provide a credit update.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Midway through 2026, delivering sustainable, profitable organic growth continues to be the primary focus for our company, and we have maintained momentum in several important ways. We are driving relationship growth, and particularly in commercial. Back in January, we set a target of 9%-10% organic C&I loan growth for the year, and we have already hit that target as of June 30th, thanks to the addition of over $600 million in balances during the second quarter. We are also driving relationship deposit growth.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Through the first half of 2026, our organic customer household growth has held above 2% on an annualized basis, trending ahead of the 2% target we set for ourselves at the beginning of the year. From June 30th of 2025 to June 30th of 2026, organic core customer deposits were up 6%, which is the strongest June to June growth we have seen in the last five years. As we look to the back half of 2026 and into 2027, we are well positioned to maintain our growth trajectory thanks to steady execution against our organic initiatives and the ongoing integration of American National Corporation.

[Andy Harmening, President and CEO at Associated Banc-Corp]

With respect to initiatives, our hiring has progressed as planned. We've been pleased with the initial results we've seen from several recent investments, including our expanded Kansas City C&I team, our new Dallas C&I office, our new Franchise Banking vertical, and key leadership hires in our private wealth business. We expect the impact from these investments to ramp up later this year and into 2027. With respect to American National, we've incorporated their balance sheet, assessed the purchase accounting impacts, and identified cost saves. As we work through the integration process, the team and the businesses have been as advertised. It's becoming clear that we are positioned to drive organic growth momentum over time. Our next major milestone is systems and branch conversion, which we expect to take place in October of this year.

[Andy Harmening, President and CEO at Associated Banc-Corp]

As always, our intention is to grow in a disciplined way. Maintaining our conservative approach on expenses, risk management, and credit will remain as the foundation of our strategy. We look forward to providing additional updates as Associated's growth journey along the way. With that, I'd like to walk through our Q2 financial highlights beginning on slide four. We reported GAAP EPS of $0.63 in Q2 or $0.73 after adjusting for $24 million of non-recurring costs recognized during the quarter through our acquisition of American National. With the addition of nearly $4 billion in American National loan balances during the quarter, total loans grew by 15% versus the prior quarter. Excluding the impact of American National, we saw organic loan growth of 3% or $940 million in Q2.

[Andy Harmening, President and CEO at Associated Banc-Corp]

The vast majority of this growth was driven by our commercial business, led by $644 million in organic C&I growth during the quarter. Total deposits and core customer deposits both grew by 12% in Q2 after adding over $4 billion in American National balances to our balance sheet.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Excluding the impact of American National, total deposits decreased by 1% due to the normal seasonality we typically see in our portfolios in Q2. With that said, we saw organic core customer deposit growth of 6% or $1.7 billion from June 30th of last year through June 30th of this year. This was the strongest June to June growth we've seen since I arrived at the bank over five years ago. Moving to the income statement. Q2 net interest income of $370 million increased by 20% or $63 million versus the prior quarter following the addition of American National.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Total non-interest income of $80 million increased by $5 million versus the prior quarter, led by growth in wealth, service charges, and card-based fees. Total non-interest expense of $272 million increased by $53 million versus the prior quarter, following the incorporation of American National. Our Q2 expenses also included $24 million in one-time expenses tied to the deal. Shifting to credit. Asset quality trends remained solid in Q2 as we absorbed American National's balance sheet. During the quarter, we booked $19 million in provision. Our ACL ratio increased by 2 basis points. We saw $23 million in charge-offs for the quarter. After excluding approximately $7 million in net charge-offs for a handful of credits inherited from American National, our charge-offs were largely in line with historical trends.

[Andy Harmening, President and CEO at Associated Banc-Corp]

On slide five, we provided an update to key transaction estimates we shared when we announced the American National deal in December of last year. By and large, the transaction has come in as expected. While non-recurring merger expenses have come in slightly above expectations and fair value marks were impacted by the shift in rates, the credit mark was in line, and our expected cost saves have increased from 25% of American National's expense base to approximately 30%. Taken together, our expected earn back has held firm at 2.25 years. We remain on track for the systems and branch conversion expected to take place in October. Shifting to slide six, we highlight our quarterly loan trends through Q2.

[Andy Harmening, President and CEO at Associated Banc-Corp]

As mentioned previously, our second quarter flows were impacted by the addition of nearly $4 billion of American National balances that were added to our balance sheet as of April 1st. With the addition of American National, total loans grew by 15%, or $4.7 billion on a spot basis relative to Q1. Excluding the impact of American National, total period end loans grew by 3%, or $940 million organically. Organic growth was led by C&I, which grew $640 million or 5% during the quarter. We also saw organic CRE balances increase by $251 million as production outpaced payoffs again in Q2. We continue to expect elevated payoffs in the back half of the year. As outlined on slide seven, our results over the first half of the year reflect continued growth momentum.

[Andy Harmening, President and CEO at Associated Banc-Corp]

This is particularly true with respect to the growth we've seen in our commercial business, which is a reflection of both the investments we've made in the business over the past five years and incremental tailwinds expected from our latest wave of investments in 2026.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Throughout the past five years, we've bolstered our leadership team with top talent, increased our RMs by nearly 50%, and expanded our capabilities to grow commercial relationships. After posting over $500 million growth in C&I in Q1, we delivered another $644 million of organic growth in Q2. Taken together, we've grown organic C&I loans by nearly $1.2 billion or 10% through June 30th. Effectively hitting our original full-year growth target within the first six months of the year. We expect these prior investments to sustain our growth momentum in the coming quarters, but we also intend to sustain our growth in 2027 and beyond.

[Andy Harmening, President and CEO at Associated Banc-Corp]

With that in mind, we remain focused on expanding our capabilities and hiring talented bankers to deepen relationships and take share in major metro markets. After launching a new C&I office in Kansas City last year and seeing promising initial results, we doubled the size of the team earlier this year. Based on the successful model we deployed in Kansas City, we also officially launched a new C&I office in Dallas by hiring a respected market leader, Brandon White, in May. We're rounding out our team as we speak, and we're bullish about the commercial opportunity in the state of Texas. Finally, our new franchise banking team, led by industry veteran Shaun Coard, has already started to book deals after just launching the business in April.

[Andy Harmening, President and CEO at Associated Banc-Corp]

For the combined company, we now expect period end total loan growth of 18%-20% in 2026 and continue to expect C&I loan growth of 20%-22%, as compared to Associated standalone results for the year ended December 31st, 2025. Moving to slide eight. Our Q2 deposit balances grew by 12%, due in large part by the addition of over $4 billion in deposits from American National. Excluding these balances, period end deposits decreased by 1% versus the prior quarter, largely driven by the seasonality we typically see in our deposit base during the second quarter each year. With that being said, slide nine shows a clearer view of the organic growth story within our deposit base, excluding the impacts of American National or short-term seasonality.

[Andy Harmening, President and CEO at Associated Banc-Corp]

As we've discussed previously, we have spent five years building out our capabilities to fund our loan growth sustainably over time, primarily with relationship-focused customer deposits, and those efforts are paying off. On the consumer side, we've made significant investments to modernize our digital banking experience, enhance our product set, improve our marketing acquisition capabilities, and develop a successful mass affluent program. We've enhanced our ability to attract, deepen, and retain customer relationships to grow our customer base organically in a way this company hasn't seen before. Year-to-date, through June 30th, we've grown primary checking households by 2.4% on an annualized basis. The strongest growth rate we've seen since we began tracking over a decade ago. In commercial, we've not only grown our RM base by nearly 50%, but we've also sharpened our focus on deepening relationships across the team.

[Andy Harmening, President and CEO at Associated Banc-Corp]

In addition to loans, we're driving other business including deposit growth, TM, capital markets, and HSA. As an example, our treasury management and HSA businesses are both growing double digits year-over-year. We've also officially completed the tech upgrades necessary for our deposit-focused HOA and title company vertical, which we expect to be a meaningful driver of commercial deposit growth going forward. As we continue to attract and deepen relationships across the bank, that presents a natural opportunity to develop a stronger pipeline into private wealth business, particularly in major metro markets where we're under-penetrated. To better facilitate the connectivity of our teams across the footprint and at the local level, we've added several talented executives to our private wealth leadership team, including our new director of private banking for major metro markets, Lisa Buetow in the Twin Cities, and another executive in the Twin Cities, Ken LaChance.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Finally, the integration of American National is proceeding as expected. We're confident that this partnership will provide opportunities to deepen relationships with existing customers, while also providing growth opportunities in attractive markets like Omaha and the Twin Cities. Taken together, these efforts have helped us build a sustainable deposit-gathering engine that is having a real impact on our financial results. From June 30th of last year to June 30th of this year, we posted organic core customer deposit growth of 6%, compared to 4% the previous year and 2% the year before that. Going forward, we're confident in our ability to drive sustainable core customer deposit growth thanks to best-in-class consumer value proposition, household growth momentum supported by increased marketing acquisition, spend in growth markets, and significant enhancements to our commercial deposit gathering capabilities.

[Andy Harmening, President and CEO at Associated Banc-Corp]

We continue to expect 2026 period-end total deposit growth of 17%-19%, and period-end core customer deposit growth of 19%-21%, as compared to Associated standalone results for the year ended December 31st, 2025. With that, I'll pass it to Derek to discuss our income statement and capital needs.

[Derek Meyer, CFO at Associated Banc-Corp]

Thanks, Andy. I'll start with yield trends on slide 10. In Q2, we saw the yields on most earning asset categories increase following the addition of American National to our balance sheet. Of note, the yield on our auto portfolio increased by 38 basis points, reflecting the impact from deferred loan costs and fee adjustments tied to the acquisition of American National. We also saw quarterly investment yields increase by 5 basis points following our repositioning of American National's securities portfolio earlier in the quarter. Within that transaction, we sold their securities portfolio with a book value of approximately $1 billion and reinvested the same amount at a yield of approximately 4.6%. Overall, the yield on total earning assets increased by 12 basis points during the quarter, while the rate on total interest-bearing liabilities decreased by 1 basis point.

[Derek Meyer, CFO at Associated Banc-Corp]

Net free funds expanded by 2 basis points versus the prior quarter. Moving to slide 11, second quarter net interest income of $370 million increased $63 million versus the prior quarter and increased $70 million versus Q2 of 2025 after adding American National to our balance sheet. Our net interest margin increased 14 basis points to 3.17% for the quarter. On the right-hand side of the slide, we've included a table disaggregating several key impacts to our NII and margin following the addition of American National. The net accretion impacts from purchase accounting and adjustments for deferred loan costs and fees combined to drive a 6-basis point improvement in our Q2 margin.

[Derek Meyer, CFO at Associated Banc-Corp]

After assessing the balance sheet and income statement impacts from the acquisition of American National, we now expect a total 2026 net interest income to grow by 19%-21% as compared to Associated standalone results for the year ended December 31st, 2025. Slide 12 provides a reminder of the steps we've taken to put ourselves in a more neutral interest rate position. We're maintaining repricing flexibility by keeping our funding obligations short. We're protecting our variable rate loan portfolio by maintaining received fixed swap balances of approximately $2.45 billion. We built a $4 billion fixed rate auto book with low prepayment risk. An up 100 ramp scenario now represents a 1.9% impact to our NII as of Q2, while a down 100 scenario now represents a 1.2% impact. We expect to maintain this relatively neutral position going forward.

[Derek Meyer, CFO at Associated Banc-Corp]

Moving to slide 13, total investment security balances grew to $10.2 billion in Q2 following the acquisition of American National and repositioning of their securities book early in the quarter. Our securities plus cash to total assets ratio finished at 23.3% as of Q2. We continue to target a range of between 22% and 24% for the year. Slide 14 shows a detailed view of quarterly non-interest income trends. Total non-interest income of $80 million in Q2 was up $5 million from the prior quarter and $13 million versus Q2 of 2025. This increase was driven in part by our acquisition of American National. We also saw a healthy growth in our legacy wealth management and capital markets businesses. American National has not historically focused on these areas, and we view them as opportunities for our combined company as we get through conversion and into 2027.

[Derek Meyer, CFO at Associated Banc-Corp]

In 2026, we continue to expect total non-interest income growth of 8%-10% as compared to Associated's standalone results for the year ended December 31st, 2025. Moving to slide 15, total non-interest expenses of $272 million increased by $53 million versus the prior quarter following the acquisition of American National, along with the addition of $24 million in non-recurring costs recognized in connection with the acquisition. Most of the non-recurring costs year-to-date have landed in the personnel and legal and professional categories. After adjusting for these non-recurring expenses during the quarter, our efficiency ratio decreased to 52.9%. As we move forward, we will continue to growth of our franchise, but we're anchored on delivering positive operating leverage.

[Derek Meyer, CFO at Associated Banc-Corp]

After incorporating the impact of American National acquisition, including the non-recurring costs incurred as part of the acquisition, we now expect non-interest expense to grow by 20%-21% in 2026 as compared to Associated's standalone results for the year ended December 31st, 2025. On slide 16, our CET1 ratio finished at 10.47% in Q2. This figure was flat from the prior quarter, up 27 basis points relative to Q2 in 2025. Our TCE ratio remained flat from the prior quarter and up 21 basis points from Q2 of 2025 at 8.27%. Our tangible book value per share finished at $22.15, down slightly from the prior quarter, up $1.31 relative to Q2 of 2025. I'll now hand it over to Chief Credit Officer Pat Ahern to provide an update on asset quality.

[Pat Ahern, Chief Credit Officer at Associated Banc-Corp]

Thanks, Derek. I'll start with an allowance update on slide 17. Our CECL forward-looking assumptions utilized the Moody's May 2026 baseline forecast. Forecast remains consistent with a resilient economy containing a more optimistic GDP outlook despite the higher interest rate environment, higher levels of inflation and tariff negotiations. Moody's forecast continues to contain less total rate cuts in the latter half of 2026 compared to prior forecasts. In Q2, our ACL increased by $69 million-$494 million, with the increase driven by an equal mix of loan growth and normal credit movements. Our ACL ratio as a percentage of total loans increased to 1.36%, up 2 basis points from the prior quarter and up 1 basis point from the same period a year ago. On slide 18, we continue to see solid performance across our key credit quality metrics in Q2.

[Pat Ahern, Chief Credit Officer at Associated Banc-Corp]

Total delinquencies of $60 million decreased by $28 million versus the prior quarter, and were generally in line with the levels we've seen previously. Total criticized loans increased by $290 million versus the prior quarter, with much of the dollar increase driven by the addition of American National. However, as a percentage of total loans, criticized loans were largely in line with prior quarters. Non-accrual balances increased to $150 million in Q2, up $39 million versus Q1. Approximately one half of the increase in non-accrual loans came from the American National portfolio as we aligned several credits to Associated's credit strategy and philosophies. Q2 net charge-offs of $23 million included $7 million of charge-offs from American National. The net charge-offs from Associated equate to approximately 18 basis points for the quarter and 13 basis points year-to-date, which aligns with our historical trends.

[Pat Ahern, Chief Credit Officer at Associated Banc-Corp]

Keep in mind, this is after two quarters of 7 basis points or less of net charge-offs. Finally, we booked $19 million of provision in Q2, up $8 million from the prior quarter and up $1 million from Q2 of 2025. With the merger of American National, we have taken a thoughtful, vigilant approach toward both risk rating and charge-off decisions to best align with the Associated process and philosophy. To confirm, we are not finding any surprises in the American National portfolio relative to due diligence, and we are tracking to our day one credit mark. At this time, we have completed portfolio reviews of the vast majority of American National Credit and remain confident in our integration, finding the portfolio modestly exceeding our expectations. We also continue to feel comfortable with the credit performance of our core portfolio.

[Pat Ahern, Chief Credit Officer at Associated Banc-Corp]

With that said, our teams remain vigilant in reviewing our portfolios and staying in regular contact with both Associated and American National customers to stay ahead of any emerging risk. We also remain diligent in monitoring credit stressors in the macroeconomy to ensure current underwriting reflects the impact of ongoing inflation pressures, shifting labor markets, tariffs, and other economic concerns. In addition, we continue to maintain specific attention to the effects of elevated interest rates on the portfolio, including ongoing interest rate sensitivity analysis bank wide. We expect any future provision adjustments will reflect changes to risk grades, economic conditions, loan volumes, and other indications of credit quality. With that, I will now pass it back to Andy for closing remarks.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Thank you, Pat. On slide 19, we provide an update to our outlook following a Q2 that included continued organic momentum, the close of the American National acquisition, the incorporation of their balance sheet, and the finalization of all purchase accounting marks. As we sit here today, our current expectations for the American National Partnership are largely in line with the assumptions we provided when we announced the deal. As a reminder, this outlook does not assume any material incremental growth expectations for the American National businesses in 2026. With that, let's open it up for questions.

[Operator]

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Thank you. Our first question comes from the line of Brandon Rudd from Stephens. Please proceed.

[Brandon Rudd, Analyst at Stephens]

Hi. Thanks for taking my questions. My first one, if I could unpack the expense guide of up 20%-21%. I understand, I think that's a GAAP number. If we wanted to back into a core kind of at the midpoint for 2026, is it fair to say you just grow 2025 by 20.5% and then strip out the $52.5 million? That kind of gets you somewhere to a number around $980 million for 2026 on a core basis.

[Derek Meyer, CFO at Associated Banc-Corp]

Yeah, I would take the guide and just take out the numbers on slide five. It sounds like that's what you did. We're pretty much on track with our original 3% guidance for core ASB. A little bit higher as a result of deferred comp expense, which is net neutral because it's offset with fees in terms of EPS. Other than that, it's, I think, pretty straightforward, Andy. I think you've got it.

[Brandon Rudd, Analyst at Stephens]

Okay, perfect. Thank you. One on the balance sheet. The outlook for the total loan growth is a bit higher, but the C&I loan growth is unchanged. Is that related to the franchise business that you mentioned earlier, Andy, or is that coming from the commercial real estate business? I'm just curious what's driving the increments of 100 basis points.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Yeah, it's largely coming from CRE and the C&I balances for us. We've had a very strong first half of the year, but we pulled forward a little bit of production, and we would expect some pay downs in the second half of the year as we did at the beginning of the year. It's kind of the carryover for the industry from 2021 production. Overall, couldn't be much more pleased with the first half productivity. The reason that that shows a little bit of a slow in the second half is the timing of some production that hit in Q2, and then taking that off the board and probably having the payouts we expected in the CRE in the second half of the year.

[Brandon Rudd, Analyst at Stephens]

Okay. Thank you very much. If I could just squeeze one more in. With the October conversion, is it safe to say that the first quarter with the full run rate of cost savings is the first quarter of 2027?

[Andy Harmening, President and CEO at Associated Banc-Corp]

That is fair to say. Yes, I think it'll be pretty darn clear as you exit 2026 what we have. We'll see a lot of the one-timers. Clearly, a lot came through in the second quarter. Preponderance of the rest comes through in the third quarter. Then you obviously, after conversion, then you have a few of the cost saves that come through in the fourth. That means that we should be heading for a very understandable year-end and a clean first quarter.

[Brandon Rudd, Analyst at Stephens]

Okay, perfect. Thank you very much.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Thank you, Brandon.

[Operator]

Our next question comes from the line of Daniel Tamayo with Raymond James. Please proceed.

[Daniel Tamayo, Director at Raymond James]

Thanks, guys. Excuse me. Good afternoon.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Hi, Dan.

[Daniel Tamayo, Director at Raymond James]

Sorry. I just want to go back to the expense guide, just to make sure we're all on the same page here. As we think about the year-end number, that fourth quarter number to build on in 2027, then we get a little bit more maybe savings in the first quarter. Are you thinking the number goes down in the fourth quarter from the third quarter? Or if you're comfortable giving us something a little bit cleaner in terms of where we should target for the fourth quarter number. I'm getting a number just over $260. I don't know if that's in the ballpark of where we should be looking, but my number overall was a little bit higher than $980 based on the math I ran for the year.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Yeah, I think we're not ready to parse the quarters yet. It's not clear exactly based on the conversion dates and the contract terminations where the one-time costs will go. I think the full year midpoint guidance that's implied, minus the $52.5, gets you to our full year number this year. If you back that out, it's going to be hard to pin me down to a quarterly run rate yet.

[Daniel Tamayo, Director at Raymond James]

Okay. We can get close enough, I think.

[Andy Harmening, President and CEO at Associated Banc-Corp]

I think so too.

[Daniel Tamayo, Director at Raymond James]

You thought. The big increase in the guide basically on a core basis was the deferred comp, I think is what you were saying before. Like that's how we should think about the difference?

[Andy Harmening, President and CEO at Associated Banc-Corp]

Yeah. If you go through and you're trying to reverse engineer if we've been naughty or nice, I think the only thing to take away from this is we're on track organically except the deferred comp. We would have been at the 3% original expense guide. We're on track with hitting our merger expenses, actually a little bit better in the long run, except for the one-time costs are a little higher. We're pretty transparent about that on slide five.

[Daniel Tamayo, Director at Raymond James]

With the increase in the cost saves from 25%-30% Is it fair to say that from where you guys were thinking about things last quarter to where you're thinking about things now, the 27 number would be lower? Because of the deferred comp, it kind of evens out or it's higher?

[Derek Meyer, CFO at Associated Banc-Corp]

No, I would say for next year, compared to our original business case, we had more tangible book value dilution. I'm going to work off of page five if you're following along at home here. There's a couple elements to it. Part of it is the expenses, right? We had higher one-time costs. What we're finding after three months of working through this, is it looks like we're going to land at a run rate going into next year that is a better run rate than what we originally anticipated. That help gets us our tangible book value earn back to where we expect it to be. The rest of that, I'm going to go beyond what you asked for. This is offsetting the marks since interest rates were higher.

[Derek Meyer, CFO at Associated Banc-Corp]

We had bigger marks across a couple areas. We expect our revenue to be higher also. That showed up this quarter. We expect it to show up the next eight quarters to get us probably a 60% better revenue over that time period. That also helps us recapture some of that dilution. There's a little bit better credit quality as Pat's gotten satisfied with what he's seen in the last three months of actual. Hopefully that's helpful.

[Daniel Tamayo, Director at Raymond James]

It is, Derek. Thank you. If I could just change gears here quickly. Also a follow-up, ironically, from the first question. The increase in pay-downs that you were talking about, maybe Andy, you could give us a sense of back-half breakdown by pay-downs versus runoff expectations versus originations. Just trying to get at core origination pace, if that's similar or picking up or going down the back?

[Andy Harmening, President and CEO at Associated Banc-Corp]

Yeah. To predict every payoff that we might have in the second half of the year would be a mistake. What I would tell you very simply is we had a rise in mortgage warehouse of about $150 million exiting the quarter unexpectedly. That went back out. To me, we have outstanding organic growth even under any measurement. That is something that changes going into the third quarter. We have higher than expected productivity in CRE. We have pipelines that are significantly up. We have C&I pipelines that are up 20% versus the same period coming off an annualized 20% growth in the first half. When all that hits and how that hits and what pays down when, it's uncertain. When we look at the natural course of CRE in particular, we would expect that we would have increased payoffs in the second half.

[Andy Harmening, President and CEO at Associated Banc-Corp]

That's how we gauged our guidance for the rest of the year. However, I would say that for us, one of the things I'm really pleased with is our NIM. We look at the NIM going to 3.17%. We roughly believe that about 2 basis points of that comes organically. We're going into the second half of the year with momentum on, we believe, relative to prior periods and prior years on deposits and loans. We have momentum in our customer growth. That means that you're starting to get granular checking account growth. We haven't seen that in a long time. June to June, we saw a 3.6% increase in that category. We see a mix shift as a result of increase in our commercial loans and decrease in our resi.

[Andy Harmening, President and CEO at Associated Banc-Corp]

What that means for us in a world that's always competitive is we believe that we'll have NIM expansion in the third quarter, and we believe we'll have NIM expansion in the fourth quarter. To me, that's a really exciting story for us as we start to hit 3.17%, and we believe we can go beyond that. With regards to specific dollars in payoffs by category beyond that, I wouldn't hasten to guess on that.

[Daniel Tamayo, Director at Raymond James]

No, that's helpful. I know it's a tough question, but I appreciate all the color, Derek and Andy. I'll step back. Thanks.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Thanks, Daniel.

[Operator]

Our next question comes to the line of Casey Haire with Autonomous Research. Please proceed.

[Casey Haire, Analyst at Autonomous Research]

Great. Thanks. Good afternoon, guys. Maybe a follow-up on the NIM, which sounds pretty positive. Maybe can you help us out with how deposit cost trends and where new money loan yields are on a core basis versus that 560 level in the second quarter? Thank you.

[Derek Meyer, CFO at Associated Banc-Corp]

One, deposit trends have been. We're very pleased with it. In fact, our conclusion after we went through all these materials because we had a really strong loan growth and we liked the way that the first quarter turned out with ANC was that our deposit pricing was sort of the unsung hero of the quarter. We had strong point-to-point growth. Deposit costs actually improved modestly second quarter at Legacy ASB in terms of funding costs. This is usually a quarter where we're most exposed to wholesale funding because we have seasonal declines in our core customer deposits, even though we're up 6% year-over-year. I would say in an environment where everyone's trying to understand where the strong loan demand is going to drive funding costs, we were very satisfied with the performance from that standpoint.

[Derek Meyer, CFO at Associated Banc-Corp]

Loan yields are still going to continue to be grinding up over time. We think once we get through

[Derek Meyer, CFO at Associated Banc-Corp]

A few quarters where we have a lot of this accretion burn through because it comes in quickly. We've got the schedule in there that shows it. We're going to start to continue to grind up on our margin as a result of the remix of the portfolio. You'll see that in spades when you look at the yields on the CRE and C&I relative to what's happening with resi. We also got the benefit of reposition the securities book.

[Casey Haire, Analyst at Autonomous Research]

Okay, very good. Switching to capital management. Just wondering, you've got ANB now closed here. You've got the conversion upcoming. Where are you guys in terms of M&A appetite? It sounds like things are going organically. Got very nice pipelines and NIM on the way up. Just wondering what the appetite is on the M&A front.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Casey, I almost went for a head fake thinking you were going to ask about buybacks. I'm happy to talk about M&A. I bet you I get somebody to ask about buybacks next. The M&A side for me, I'll answer it in this way. The primary growth strategy for our company was organic growth. The question when we did this deal back in December was, would we take our eye off the ball and lose momentum in organic growth? I don't recall having 20% annualized C&I growth as a company ever. To see the deposit growth on top of that has been our goal, and we're achieving that halfway through the year. The second goal is to have continued organic growth while completing the American National integration.

[Andy Harmening, President and CEO at Associated Banc-Corp]

That is really on track, frankly, getting through all the detailed marks and understanding where we stood on credit in particular, and seeing that we're in a good spot there and still being at the due diligence two and a quarter, that was good news. Really good news for us. The third piece of it is, hey, with ANB, can we leverage ANB with the current Associated Bank capabilities? We do that largely after systems conversion, a little bit right now. We're going to be adding wealth capabilities, capital markets capabilities, consumer products, health savings accounts, and an upgraded consumer digital platform. When you look at that in a growth market like Omaha, I can't be much more excited. I'm trying to calm down. This is an earnings call.

[Andy Harmening, President and CEO at Associated Banc-Corp]

When I look at this and we say we are well on our way to showing that ANB enhances our organic growth strategy, and I've said this a few times. The number one thing I don't want to do is throw away five years of hard work to become an organic machine on a bad deal. That's how I'm thinking about life right now. As we get through this conversion and we execute on the way we are so far, we can have more thoughts on the M&A front.

[Casey Haire, Analyst at Autonomous Research]

Got you. Thank you.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Thank you.

[Operator]

Our next question comes from the line of Jared Shaw with Barclays. Please proceed.

[John Rao, Analyst at Barclays]

Hi, this is John Rao in for Jared. Really good trends it looks like on, I guess, the balance sheet as a whole. Digging into the deposit side and funding remix over the next few years. I guess what does that look like in terms of brokered balances as a percentage of deposits and FHLB? Like, what are the priorities of reducing those more non-core funding sources?

[Derek Meyer, CFO at Associated Banc-Corp]

Yeah, if you treat those as fungible, add the FHLB and brokered and network deposits, we expect even by the end of this year for that as a mix, as a percent, to be down one or 2% versus what we previously forecasted. We think we take another step in that direction. This structurally helps us, and it adds a market like Omaha, where we can put in place the wealth strategies, the mass affluent strategies, the product segmentation in a market that's growing faster and give us some tailwinds behind some of those. We're eager to take that metro market and help it thrive and drive down that wholesale borrowing. I think because of our overall pace of growth, to target materially faster wholesale repositioning would be a challenge. We do not want to hold back the rest of the bank waiting for that to happen.

[John Rao, Analyst at Barclays]

Okay, great. That's helpful. Then maybe if you could spend just a couple minutes on the HOA title business, how big that can be, and is there anything kind of holding that back from starting to generate deposits today?

[Andy Harmening, President and CEO at Associated Banc-Corp]

I can thankfully say no. I can't think of anything holding that back, and I say that a little tongue in cheek. We had to build out some technology digital capabilities for that business, and we had brought in a very seasoned team that knows this business, that had started that business at another major institution. What can that be for this? For us, we think over time it should be hundreds of millions of dollars. The technology on that literally launched in June-ish timeframe, and we've already seen dollars coming into that at the end of June, beginning of July. We think we'll see some growth in the second half.

[Andy Harmening, President and CEO at Associated Banc-Corp]

If I had to handicap that, and leaving 2027, you're probably talking about a business that would have $200 million-$300 million in deposits because there's just no lack of understanding of who the player is in that market. If you're starting this business and you haven't been in it, you probably have a challenge. The technology is important. Relationships and knowledge of people is as well. We think that that could have a steady, significant impact to our growth over time. That's one piece. Secondly, that I haven't gotten into this as much, but our treasury management sales are up over 20% year-to-date, well over 20%. The reason I care about that is not from the fees from treasury management. Those are nice, but the correlation as a leading indicator to deposit growth has always been significant.

[Andy Harmening, President and CEO at Associated Banc-Corp]

That is pretty exciting to see for us on the go forward, and that's something we have not had at that level in the last several years. You combine that with the HOA and title, and then you start to see the remix of where we're getting growth in our consumer checking accounts. We've not seen 3.6% growth in several years in that category, and that comes from a customer growth that goes from negative three to minus one to zero to one to one and a half to two. We are starting to just now see the tailwinds on repeatable fundable deposit growth as a company. Those several things together. Thank you for asking about the HOA title business. It's very timely for us.

[John Rao, Analyst at Barclays]

Great. Thanks for all the color.

[Operator]

Thank you. Our next question comes from the line of Jon Arfstrom from RBC Capital Markets. Please proceed.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Hey, good afternoon, guys.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Hey, Jon.

[Derek Meyer, CFO at Associated Banc-Corp]

Jon.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Hey, Andy, how do you feel about buying back stock?

[Andy Harmening, President and CEO at Associated Banc-Corp]

Oh, my gosh. Yeah. Oh, my gosh. Okay, you got me a little. Yeah, no, we've talked about this. The things that I needed to see, I need to see that we're pulling through the increased profitability profile. We clearly are. You can see that in the margin. Now when I look at the rest of the year, what I see is forecasted growth and the rate curve. Feel pretty good about where that is going to be. We've also gotten through the ANB balance sheet, and we understand what it is. We understand what the marks are. We're in a pretty good position to deploy the already approved share repurchases in the third quarter and the fourth quarter.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Okay, good.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Thanks for the question, Jon.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Yeah, you got it. That was easy. Derek, to the extent you can you just remind us of the typical deposit seasonality you see in the second half of the year, just so we can understand the mix a little better?

[Derek Meyer, CFO at Associated Banc-Corp]

Yeah. The second half of the year is when we see most of the growth which is why we keep looking year-over-year to make sure we're tracking that way. It really starts mid-quarter. It stabilizes at the first half of the quarter. It's mid-quarter then grows really strongly, both really across all our lines of business the rest of the year. It's in our wealth, it's in our commercial business through government deposits and consumer. Everybody knows this who does a lot of consumer work, even outside of banking. When summer is over and the action starts really from there to the end of the year, the economic activity also drives more account acquisition. We start acquiring households and expanding the ones we already picked up. It's really across the board.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Just to reiterate this, Jon, we have a tracker that basically shows when the dip starts almost to the day and week each year. The only thing different about this year is we're growing more year-to-year than we had in the past. The dip is all similar. Probably the other thing that is different is the launch of the new vertical, the HOA title vertical that we just launched more or less in June with the technology introduction.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Yep. Okay. Just one more I want to squeeze in here. I don't know if it's for you, Pat or Andy. There've been questions on other calls about the competitive environment and lending. Based on what I'm seeing in your growth and your yields, it doesn't feel like you feel like it's overly competitive. Any thoughts or comments on the environment?

[Andy Harmening, President and CEO at Associated Banc-Corp]

Yeah, I'll take that one. Certainly, Pat, you can since you're looking at every deal coming across. The thing that's interesting for us right now that's exciting for me and gives me confidence is there's always competition and there's competition now. However, we are seeing growth in commercial through small business, which is our smaller revenue businesses, business banking, which is the next segment up, commercial banking, and community banking. If you think about that, four different lines of business are all seeing double digit growth because we've invested in every single one of those businesses. Those businesses span significant geographies, primarily Chicago, Milwaukee, Twin Cities, Northern Wisconsin, Kansas City, St. Louis, and Omaha. Between geographic distribution, business line distribution, we have a pretty good advantage.

[Andy Harmening, President and CEO at Associated Banc-Corp]

When you put on top of that that we've expanded in geographies and we've added new verticals, it puts us in a position where we don't have to press down to take deals that we either don't like from a credit standpoint or we don't like from a return profile standpoint. It's also why I see this as a sustainable model for us. Pat, add to that?

[Pat Ahern, Chief Credit Officer at Associated Banc-Corp]

Yeah. I would just echo the comment that there's always competition. It's always depending on the lines of business. I think to Andy's point, we're evaluating each credit as they come in to how it fits into the bank's overall strategy. There's the credit aspect, the return aspect. That's kind of our discipline, is we want to make sure it fits the ongoing long-term plan.

[Andy Harmening, President and CEO at Associated Banc-Corp]

I'd say the other thing to remember is we're remixing the balance sheet, I know you know that, Jon. When the return profile on a commercial relationship that brings in deposits versus a non-customer resi deal that we have running off right now, that's why we feel comfortable that we've been kind of dripping up on our margin each quarter. With increased productivity, you continue to see that. Those are a couple different things in play that might be unique to us.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Yep. Okay. Thanks a lot. I appreciate it.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Thank you.

[Operator]

Our next question comes from the line of Christopher McGratty with KBW. Please proceed.

[Chris O'Connell, Analyst at KBW]

Hey, good afternoon. This is Chris O'Connell filling in for Chris.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Chris for Chris.

[Chris O'Connell, Analyst at KBW]

Yeah. Just wanted to see if you guys could provide some color on the NPL increase for the quarter. I know credit overall has been very solid. I think half of it was driven by the ANB acquisition. Just a little bit of color on each part?

[Pat Ahern, Chief Credit Officer at Associated Banc-Corp]

Yeah, sure. In terms of the non-accruals, like you said, about half that came from the American National portfolio. There were several credits there, relatively small. It was really trying to align risk rating into our process and philosophy. Nothing, no concentrations, no overarching concerns, whether it be industry, geography, et cetera. We're comfortable with that. I think overall, the stuff that we saw in the ASB side was just kind of normal evolution of business cycles. We're not seeing anything emerging as an area that we're concerned about, again, relative to industries, geography, lines of business, et cetera. From a criticized standpoint, again, the dollar amounts went up via the acquisition, but from a basis standpoint, we're consistent, 1 basis point or 2 basis point shift there. We're very comfortable with that. We've been, as we mentioned earlier, very pleased with the overall profile of the portfolio.

[Pat Ahern, Chief Credit Officer at Associated Banc-Corp]

It's lived up to expectations. We're happy with that, and we'll continue our deep dives, but we've been through the majority of it, and we like what we've seen.

[Chris O'Connell, Analyst at KBW]

Great. Thanks, Pat. In terms of the net charge-offs coming from American National, is the $7 million a typical kind of run rate for them in that loan portfolio that you would think going forward? On the overall reserve ratio as well, given the puts and takes of the deal, bringing on the marked portfolio, and the overall loan mix shift leaning more towards higher reserve C&I. Maybe expectations as to if that overall reserve ratio will be more steady or kind of trend up over time.

[Pat Ahern, Chief Credit Officer at Associated Banc-Corp]

I think from a reserve ratio, I think we're going to be pretty steady. We're not seeing anything on the horizon that's going to shift how we look at our ACL ratio right now. In terms of charge-off rate, we accelerated a couple credits. Again, some pretty small bite-sized things that we wanted to more align with our process and philosophies and how we manage some stress credits. We don't expect that to replicate itself going forward.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Yeah, just for clarity, that came after a full portfolio review using the ASB approach to underwriting on a granular level. That is not a repetitive situation. I'll just reiterate, the approach to credit from American National Bank is very good. We feel comfortable that we basically identified this, but it also fit within the expected marks that we had because we know as you go as deep as you can possibly go, you're going to find something within there that may not fit exactly, but we found it. That's through extensive deep dive. I feel pretty good about the fact that we, frankly, I would say, found really nothing outside of what we expected from due diligence.

[Andy Harmening, President and CEO at Associated Banc-Corp]

In fact, I think we're within a few $100,000 on a multi-billion-dollar portfolio on the mark, and we feel extremely well reserved overall in the portfolio for both companies.

[Chris O'Connell, Analyst at KBW]

Perfect. Thanks for taking my questions.

[Operator]

Thank you. There are no further questions. I'd like to pass the call back over to management for any closing remarks.

[Andy Harmening, President and CEO at Associated Banc-Corp]

Well, I would just say thank you for the great questions today and for the interest in Associated Bank. We look forward to speaking with you in the near future and continuing to tell our story. Thank you very much.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Andy Harmening, President and CEO
• Derek Meyer, CFO
• Pat Ahern, Chief Credit Officer

Analysts

• Brandon Rudd, Analyst at Stephens
• Daniel Tamayo, Director at Raymond James
• Casey Haire, Analyst at Autonomous Research
• John Rao, Analyst at Barclays
• Jon Arfstrom, Analyst at RBC Capital Markets
• Chris O'Connell, Analyst at KBW