Associated Banc-Corp

Good afternoon, everyone, and welcome to Associated Bank Corp's first quarter 2026 earnings conference call. My name is Kevin, and I'll be your operator today. At this time, all participants are in a listen-only mode. We'll be conducting a question-and-answer session at the end of this conference. A copy of the slides that will be referred to during today's call are available on the company's website at investor.associatedbank.com. As a reminder, this conference call 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 could differ materially from the results anticipated or projected in any such forward-looking statements. 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 factor section of Associated's most recent Form 10-K and subsequent SEC filings. These factors are incorporated herein by reference. For reconciliation of the non-GAAP financial measures of the GAAP financial measures mentioned in this conference call, please refer to pages 28 and 29 of the slide presentation and to page 9 of the press release financial tables. Following today's presentation, instructions will be given for the question and answer session. After this time, I'd like to turn the conference over to Andy Harmoning, President and CEO, for opening remarks. Please go ahead, sir.

Well, good afternoon, and thank you for joining our first quarter earnings call. I'm Andy Harmoning, and I am once again joined by our Chief Financial Officer, Derek Meyer, and our Chief Credit Officer, Pat Ahern. I'll start off with some highlights from the quarter, and then from there, Derek will cover the income statement and capital trends, and Pat will provide an update on asset quality. We entered 2026 with strong momentum as a company following a pivotal 2025 that advanced our growth strategy in several important ways with relationship loan and deposit growth, record customer growth, and solid credit performance combining to drive the strongest annual net income in our company's history. In the first quarter of 2026, we remained squarely focused on maintaining momentum with our growth strategy and our first quarter results reflect that trend. We posted annualized first quarter checking household growth of 2.2%, an encouraging result in what is typically a slower season for checking acquisition. We delivered over $500 million of period NC&I loan growth, a 4.6% increase point-to-point versus December 31st. We've also made meaningful progress on our commitment to accelerate our growth momentum in the major metropolitan markets over the remainder of 26 and into 27. Year to date, we've made several key hires across our revenue lines of business, increased marketing acquisition spend, launched our new CNI office in Dallas, and launched a new national franchise banking vertical. To further complement and accelerate our growth momentum, we announced the closing of our acquisition of American National Bank on April 1st. Upon conversion, the combined company will feature a proven relationship-focused strategy, a dynamic product suite, a modern digital experience, an effective marketing acquisition engine, and expanded commercial capabilities, all positioning us to grow and deepen relationships in growth markets such as Omaha and the Twin Cities. Colleagues from both organizations continue to work closely together to facilitate a smooth and successful integration. And we expect to complete the conversion process late in the third quarter of this year. We're excited about our growth prospects that associate over the remainder of the year and beyond. but as always, our intention is to grow in a disciplined way. Recent events have introduced volatility at the macro level, but we feel well positioned to navigate this uncertainty thanks to our disciplined approach to risk management, our enhanced profitability profile, a solid capital position, and the resilience and stability of our Midwestern markets. We look forward to providing additional updates on Associated Bank's growth journey along the way. With that, I'd like to walk through our financial highlights for the quarter on slide four. We reported earnings of 70 cents per share in Q1. Total loans grew by over $600 million or 2% versus the prior quarter. The growth was driven primarily by commercial with C&I balances growing $540 million versus the prior quarter. On the funding side, total deposits grew by $179 million while core customer deposits grew by over $800 million versus Q4. As is typical this time of year, the quarterly increase was impacted by strong seasonal inflows and a handful of accounts in Q1 that flow back out in Q2. With that said, Q1 core customer deposits were up $1.3 billion, or 4.5%, relative to the same period a year ago. Moving to the income statement. Q1 net interest income of $307 million dipped slightly from the record quarterly NII we posted in Q4. but increased 7% relative to Q1 of 2025. Similarly, total non-interest income of $76 million decreased by 4 million from a Q4 that saw strong capital markets activity, but was up meaningfully versus the same period last year. Total non-interest expense of 219 million decreased slightly from the prior quarter. Delivering positive operating leverage remains a primary objective as we continue to execute our plan. Shifting to credit, credit asset quality trends remain strong in Q1. Total criticized loans decreased. We booked $11 million of provision and saw just seven basis points of annualized charge-offs for the quarter after posting 12 basis points of charge-offs in 2025. As I mentioned previously, we've seen strong growth momentum in the early part of 2026, and slide five lays that picture out in greater detail. After several years of investments to modernize our digital experience, enhance our product set, and improve our marketing acquisition capabilities, we now have a proven ability to grow our customer base sustainably over time. In the first quarter, we posted annualized household growth of 2.2%. This number gives us a strong start to the year as we continue to focus on attracting and deepening customer relationships as a means to decrease our reliance on higher-cost wholesale funding sources. We've also made significant investments to grow relationships and take market share on the commercial side, with a steady cadence of leadership hires, RM hires, and expansion capabilities. In Q1, we posted over $500 million in C&I loan growth, nearly a 5% quarterly growth rate. Pipelines have remained strong on both loans and deposits, and we expect our momentum to carry throughout the year. And as mentioned, we closed our acquisition of American National Bank on April 1st. This partnership provides opportunities to deepen relationships with existing American national customers through our expanded product set and capabilities, while also providing growth opportunities in major metro markets like Omaha and Twin Cities, which are both growing faster than the average Midwest. The investments we've made in prior years are driving results in 2026, but we also expect to sustain and accelerate our growth strategy into 2027 and beyond. With that in mind, we executed on several investments here early in 2026 that are intended to drive additional momentum. First, we've leveraged our best-in-class value proposition and a proven marketing acquisition engine to accelerate customer growth. As a reflection of these efforts, our marketing acquisition spend was up 23% in Q1 versus the same period a year ago. As we continue to attract and deepen relationships, we're building a stronger pipeline into our private wealth business. particularly in major metropolitan markets where we're underpenetrated. To capitalize on these opportunities, we hired Lisa Butow earlier this month as Director of Private Banking for Major Metropolitan Markets. Based in the Twin Cities, Lisa brings more than 25 years of expertise, and she most recently served as Managing Director and Private Wealth Banking Manager at Wells Fargo, where she led client-facing banking and lending teams across 11 states. We've also taken several steps to drive incremental growth in commercial, adding another wave of talented bankers and expanding our capabilities. After launching a new C&I office in Kansas City last year and seeing promising results, we expanded the team in Q1 with one additional RM and two additional professionals. Based in part on the successful model we've developed in Kansas City, we also officially launched a new C&I office in Dallas. The commercial market leader has been hired, and we expect RRM hires to begin in May. And earlier this week, we announced a new nationally focused franchise banking vertical led by Shawn Cord. Based in the Twin Cities, Shawn brings more than 30 years of experience with deep expertise in scaling specialty banking platforms and building high-performing teams. Most recently, she led the National Franchise Banking Division for Bremer Bank. We also brought on a new RM and three other professionals to round out Sean's team. As we work to accelerate growth across the company, the successful integration of American National is a key priority to position our combined company for long-term growth and success. On slide six, we provide a reminder of the expected benefits of the partnership and an updated timeline of the integration process. And three weeks post-close, we are on track. In the days immediately following the close on April 1st, we had over 40 legacy associated colleagues on the ground in Omaha. We've completed culture surveys, repositioned their securities portfolio, completed the colleague decisioning process, and achieved several other integration milestones. Along the way, we've been impressed by the passion, enthusiasm, and cultural fit our new colleagues have shown within the combined organization. and the professionalism they've exhibited as they navigate change. Maintaining a strong local leadership presence in our newest market is a top priority. And last week, we announced Jason Hansen as a business segment leader for commercial banking and our new market president for Nebraska and Western Iowa. Jason most recently served as president of American National Bank, and he is uniquely qualified to position our combined company for a long-term growth and success in Omaha and beyond. having joined American National Bank in 2000. Looking ahead, colleagues from both organizations continue to work closely to ensure smooth integration process, and we are on track for conversion of accounts, systems, and branches in late Q3 of this year. We expect to finalize purchase accounting adjustments later this quarter. On slide seven, we recap our plans to drive sustainable growth in 2026 and beyond, and it starts right here in Wisconsin. We have a 165-year foundation of longstanding loyal relationships in the Badger State that provide us with strong funding base for growth. Looking forward, we see plenty of opportunities to grow and deepen relationships across the state. But we also see clear opportunities to accelerate our growth momentum with an expanded presence in major metro markets. We're already seeing the strategy payoff in legacy upper Midwest metros like Milwaukee, Chicago, and the Twin Cities. where we're growing households and driving relationship loan and deposit growth. We're seeing similar success stories emerge in newer markets like Kansas City, where we've already expanded a commercial team that launched just a year ago. And already in 2026, we're further expanding our presence in the strategic growth markets through the American National Deal, which provides entry into Omaha and deepens our presence in the Twin Cities, and through the new CNI office we launched in Dallas. Based on the strong results we've seen through the first quarter and the additional investments we've made in early 2026, we're on track to achieving our targets for household growth and C&I loan growth in 2026. And we expect our ongoing efforts to drive growth momentum sustainably over time. Shifting to our core financial results, we highlight our quarterly loan trends on slide eight. We saw strong loan growth in Q1, particularly in the back half of the quarter. with total period end loans up 2% or $635 million relative to Q4. As has been the case the past several quarters, C&I loans led the way with nearly $540 million of period end loan growth during the quarter. We also saw total CRE balances increase by $143 million as loan production outpaced lower than expected payoffs during the quarter. We continue to expect payoffs to materialize throughout the year. After including the impact of American national acquisition, we now expect 2026 period end loan growth of 17% to 19% as compared to associated standalone results for the year ended December 31st, 2025. Shifting to slide nine, period end deposits grew by 179 million during Q1, while core customer deposits grew by 3% or $820 million. As mentioned, The strength in core customer balance flow was impacted by seasonal inflows we typically see towards the end of the quarter in a handful of accounts. With that said, Q1 core customer deposits were up 4.5% relative to the same period a year ago over the course of the quarter. We also saw balances shift away from brokered CDs and network transaction deposits and into customer deposits and wholesale sources such as FHLB and other wholesales. We also accelerated our funding in Q1 to keep pace with strong loan growth we saw during the quarter. Over the remainder of 2026, we're bullish on our ability to drive incremental core customer deposit growth thanks to a best-in-class consumer value proposition, household growth momentum supported by increased marketing acquisition spend in growth markets, and significant momentum in our commercial deposit gathering capabilities. After including the impact of American national acquisition, We now expect 2026 period end total deposit growth of 17% to 19% and period end customer deposit growth of 19% to 21% as compared to associated standalone results for the year ended December 31st, 2025. With that, I'll pass it over to Derek to discuss our income statement and capital trends.

Thanks, Andy. I'll start with the yield trends on slide 10. In Q1, the yields on our largely floating rate CRE and commercial books both decreased by 29 basis points during the quarter. We also saw an 11 basis point decrease in auto yields, but slight increases in the investment portfolio and ready mortgage. Total interest-bearing deposit costs decreased by 17 basis points in Q1, and we're down 47 basis points since Q1 of last year. In Q1, total earning asset yields decreased 14 basis points to 5.2%. while interest-bearing liabilities decreased 15 basis points to 2.67%. The benefit of net-free funds compressed by five basis points. Moving to slide 11, first quarter net interest income of $307 million decreased $3 million versus the prior quarter and increased $21 million versus Q1 of 2025. As Andy mentioned, the timing of our strong loan growth during the quarter outpaced the natural run rate of our deposit gatherings. As such, we accelerated our funding to match, which put some short-term downward pressure on both NII and margin. With this in mind, our net interest margin decreased three basis points to 3.03 for the quarter. As compared to the same period a year ago, our NIM increased six basis points. Looking ahead, we continue to assess the balance sheet and income statement impacts from the acquisition of American National Bank that closed at the beginning of the month. As it stands today, balances are generally in line with our due diligence assumptions. We expect to share an income growth of 8% to 10% in 2026 as compared to associated standalone results for the year ended December 31, 2025. Moving to slide 15, total non-interest expense came in at $219 million in Q1, slightly lower versus the prior quarter. During the quarter, we saw slight increases in FDIC assessment, technology, legal, and professional fees offset by quarterly decreases in business development, equipment, and other expenses. In Q1, our adjusted efficiency ratio increased slightly from 55.2% to 55.8%. Throughout the year, we continue to invest in the growth of our franchise, but we're anchored on delivering positive operating leverage. We expect to share an updated non-interest expense outlook for the next quarter following the finalization of purchase account adjustments tied to the acquisition of American National. On slide 16, our CET1 ratio finished at 10.47% in Q1. This figure was up 36 basis points from Q1 of 2025, but decreased slightly quarter over quarter due in part to the strong loan growth we saw in the quarter. Our TCE ratio also decreased slightly from the prior quarter to 8.27%, down two basis points versus Q4, but up 31 basis points versus Q1 of 2025. We've continued to see our tangible book value per share expand on a quarterly basis, with Q1 finishing at 22.23, up nearly $2 versus Q1 versus last year. I'll now hand it over to our Chief Credit Officer, Pat Ahern, to provide an update on asset quality.