Associated Banc-Corp — 2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022; the supplied filing text does not provide a clear standalone fourth-quarter income statement. Associated Banc-Corp is a Wisconsin-based bank holding company operating primarily in Wisconsin, Illinois, and Minnesota. Its banking and related services are organized into Corporate and Commercial Specialty; Community, Consumer, and Business; and Risk Management and Shared Services.
Key financial metrics
| Metric | 2022 | Comparison |
|---|---|---|
| Total revenue | $1.240 billion | Up 17% from 2021 |
| Net interest income | $957 million | Up 32%; net interest margin was 2.91%, up 52 basis points |
| Net income | $366 million | Up 4% from $351 million |
| Diluted earnings per common share | $2.34 | Up from $2.18 |
| Provision for credit losses | $33 million expense | Versus an $88 million release in 2021 |
| Noninterest income | $282 million | Down 15% |
| Noninterest expense | $747 million | Up 5% |
| Total assets | $39.4 billion | Up 12% year over year |
| Total loans | $28.8 billion | Up 19%; commercial loans were 62% of the portfolio |
| Total deposits | $29.6 billion | Up 4%; uninsured deposits were $15.7 billion |
| Cash flow | $847 million operating cash provided; $5.3 billion investing cash used; $4.0 billion financing cash provided | Cash and cash equivalents decreased $404 million to $621 million |
| Capital | Parent CET1 ratio 9.35%; Bank CET1 ratio 10.00% | Both entities were reported as well capitalized |
Margins, liquidity, and debt. Rising rates and loan growth lifted net interest income, while funding costs increased. Average interest-bearing liability cost rose 45 basis points. Year-end FHLB advances were $4.32 billion, up $2.70 billion; total short- and long-term funding, including FHLB advances, was $5.17 billion. Management reported compliance with internal liquidity objectives and sufficient liquidity under stressed scenarios. Available future funding included $958 million from FHLB collateral and $607 million through Federal Reserve discount-window borrowing capacity.
Material changes versus 2021
- Net interest income increased $231 million, reflecting higher rates, loan growth, and strategic initiatives. Average loans rose 9% to $26.2 billion.
- Noninterest income fell $50 million, primarily from lower mortgage banking income and wealth management fees, customer-friendly overdraft changes, and lower asset gains than in 2021.
- Credit-loss provision moved from a $88 million release to a $33 million expense. Net charge-offs fell to $1.3 million from $23.7 million; nonaccrual loans declined to $111 million from $130 million.
- Net interest margin improved to 2.91% from 2.39%, while the parent CET1 ratio decreased to 9.35% from 10.31% and the Bank’s to 10.00% from 10.75%.
- Unrealized losses on AFS securities widened: fair value was $2.74 billion against $3.00 billion amortized cost. HTM securities had a $559 million fair-value shortfall versus amortized cost. During 2022, approximately $1.62 billion of mortgage-related securities was reclassified from AFS to HTM.
Outlook, risks, contingencies, and unusual items
- 2023 outlook: Management expected period-end loan growth of 7%–9%, net interest income growth of 15%–17%, noninterest income compression of 6%–8%, and noninterest expense growth of 4%–6%. Provision expense was expected to respond to credit grades, economic conditions, loan volumes, and other credit indicators.
- Interest-rate exposure: Management described the balance sheet as asset sensitive for near-term earnings, but higher rates reduce modeled market value of equity: a 100-basis-point instantaneous increase implied a 4.2% decline at year-end 2022. A one-percentage-point rise was estimated to reduce securities portfolio market value by approximately $364 million.
- Credit and concentration risks: CRE was $8.2 billion, or 29% of loans; commercial lending overall was 62%. Management cited uncertainty around economic conditions, real estate values, inflation, and borrower repayment capacity. The allowance for credit losses on loans was $351 million, including unfunded commitments.
- Deposit and funding risks: Uninsured deposits totaled $15.7 billion. Loan growth was supported partly by increased FHLB borrowing; deposit outflows or more costly funding could pressure liquidity and earnings.
- Fee and regulatory exposure: Overdraft transaction fees were approximately $23 million in 2022. In July 2022 the company eliminated NSF, overdraft transfer, and continuous overdraft fees and reduced the daily overdraft-fee limit, with potential effects on future fee income. Consumer-product scrutiny and litigation or remediation remain possible.
- Unusual accounting and market items: The company elected fair-value accounting for mortgage servicing rights beginning January 1, 2022, recognizing subsequent valuation changes in earnings. It reported no material cybersecurity incidents discovered in 2022. A previously identified inadvertent purge of certain older active-account documents had no material impact to date, but potential loss was not estimable.
- Legal matters: The company reported pending and threatened claims arising in the ordinary course and said current proceedings were not expected to materially affect consolidated financial condition; outcomes remain uncertain and could affect a particular period. The filing also states management cannot assess the probability or estimate potential losses from certain consumer-product regulatory matters.
- Subsequent events: In February 2023, the Board declared a $0.21 quarterly common dividend. The company also issued $300 million of 6.625% subordinated notes due 2033.
Important facts for investors to verify
- Whether the 2023 net interest income and loan-growth forecasts were achieved, and how deposit pricing and funding costs affected margin.
- Trends in uninsured deposits, deposit mix, FHLB advances, and other liquidity sources as loan growth continues.
- Credit performance in CRE—particularly office, investor, and construction exposures—and whether criticized, nonaccrual, or potential problem loans rise.
- The effect of securities unrealized losses, the AFS-to-HTM reclassification, and accumulated other comprehensive loss on tangible equity and regulatory capital.
- Whether reduced overdraft fees, mortgage-market weakness, and lower wealth-management fees continued to weigh on noninterest income.
- Developments in litigation, consumer-product examinations, and the account-document incident, including any financial or reputational consequences.