Executive Summary

Q2 2017 delivered net income available to common equity of $56 million and diluted EPS of $0.36, up 16% year over year; net interest income rose to $184 million and net interest margin held at 2.83% .
Balance sheet growth was driven by residential mortgage retention and solid commercial lending; average loans rose $449 million sequentially and $880 million year over year to $20.5B, while average deposits increased $1.2B YoY to $21.5B .
Credit quality improved: nonaccrual loans fell to $232 million (1.12% of total loans) and potential problem loans declined to $263 million, both down materially vs prior year; effective tax rate decreased to 26% due to a reserve release from a favorable state tax court ruling .
Strategic catalyst: ASB announced the all-stock acquisition of Bank Mutual (~$482M value), expected to be EPS accretive in 2019 with <1% tangible book value dilution at closing—supporting scale, branch density and efficiency improvements .
EPS was in line with consensus per Zacks/Nasdaq reporting; S&P Global consensus data was unavailable for this request .

What Went Well and What Went Wrong

What Went Well
- “Robust loan growth and improving fee-based income trends” with residential mortgage retention strategy driving most loan growth; card-based, trust, brokerage and annuity fees supported bottom-line expansion .
- Net interest income increased 4% YoY (to $184M) with loan yields up 27 bps YoY; CET1 ratio of 9.9% and return on average CET1 improved to 10.6% .
- Credit metrics improved: nonaccrual loans down 18% YoY to $232M; potential problem loans down 43% YoY to $263M; oil & gas allowance at $33M (5.4% of O&G loans) indicating disciplined risk management .
What Went Wrong
- Elevated interest expense: cost of interest-bearing deposits rose 20 bps YoY to 0.51%, and total interest expense jumped 70% YoY, compressing NII growth sequentially .
- Noninterest expense increased 1% YoY to $176M, with personnel (+$3M) and technology (+$1M) costs higher; efficiency ratio (FTE) rose vs Q1 to 65.21% .
- Net charge-offs increased sequentially to $12.6M (25 bps of average loans), driven by commercial and industrial, though still below year-ago levels .

Financial Results

Metric	Q2 2016	Q4 2016	Q1 2017	Q2 2017
Total Revenue ($USD Millions)	$258.9	$272.3	$260.1	$266.2
Net Interest Income ($USD Millions)	$176.7	$180.0	$180.3	$183.8
Noninterest Income ($USD Millions)	$82.2	$92.3	$79.8	$82.4
Diluted EPS ($USD)	$0.31	$0.34	$0.35	$0.36
Net Interest Margin (%)	2.81%	2.80%	2.84%	2.83%
Efficiency Ratio (Fully tax-equivalent) (%)	67.77%	63.90%	64.89%	65.21%
RO Avg CET1 (%)	9.86%	10.52%	10.61%	10.63%
Net Income to Common ($USD Millions)	$46.9	$52.5	$53.9	$55.6

Noninterest Income Breakdown ($USD Millions)

Component	Q2 2016	Q1 2017	Q2 2017
Trust service fees	$11.5	$11.9	$12.3
Service charges on deposit accounts	$16.4	$16.4	$16.0
Card-based & other nondeposit fees	$12.7	$12.5	$13.8
Insurance commissions	$22.0	$21.6	$20.9
Brokerage & annuity commissions	$4.1	$4.3	$4.3
Mortgage banking, net	$4.1	$4.6	$5.0
Capital markets fees, net	$3.8	$3.9	$4.0
Bank-owned life insurance	$3.0	$2.6	$3.9
Investment securities gains (losses), net	$3.1	$0.0	$0.4
Other	$1.8	$2.3	$2.2

Key KPIs

KPI	Q2 2016	Q1 2017	Q2 2017
Loan-to-Deposit Ratio (%)	97.65%	92.30%	96.14%
CET1 Ratio (%)	9.17%	9.87%	9.87%
Nonaccrual Loans ($USD Millions)	$282.6	$260.0	$231.9
Nonaccrual Loans / Total Loans (%)	1.43%	1.29%	1.12%
Potential Problem Loans ($USD Millions)	$456.7	$339.7	$262.6
Allowance for Loan Losses / Loans (%)	1.35%	1.40%	1.35%
Net Charge-offs ($USD Millions)	$20.6	$5.7	$12.6
Effective Tax Rate (%)	30.39%	27.31%	25.58%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Annual average loan growth	FY 2017	Not explicitly quantified prior	Mid-to-high single digit	Reiterated/clarified
Loan-to-deposit ratio	FY 2017	Not explicitly quantified prior	Maintain under 100%	Reiterated/clarified
Net interest margin trend	FY 2017	Not explicitly detailed prior	Improving trend	Reiterated
Fee-based revenues	FY 2017	Not explicitly detailed prior	Improving YoY	Reiterated
Mortgage banking revenue	FY 2017	Not explicitly detailed prior	Declining YoY	Reiterated
Noninterest expense	FY 2017	Not explicitly detailed prior	~1% higher than prior year	Reiterated
Efficiency ratio	FY 2017	Not explicitly detailed prior	Continued improvement	Reiterated
Capital deployment priorities	FY 2017	Continue stated priorities	Maintain priorities	Reiterated
Provision outlook	FY 2017	Not explicitly detailed prior	Adjust with risk grades, credit quality, loan volume	Reiterated

Earnings Call Themes & Trends

Note: The Q2 2017 earnings call transcript could not be retrieved due to a document database inconsistency; thematic tracking uses press release and investor presentation disclosures.

Topic	Previous Mentions (Q4 2016, Q1 2017)	Current Period (Q2 2017)	Trend
Mortgage retention strategy	Residential mortgage average loans $6.32B (Q4) and $6.56B (Q1), momentum building	Strategy drove most loan growth; average residential mortgage $6.96B	Improving
Fee-based revenue	Total noninterest income $92.3M (Q4), $79.8M (Q1)	$82.4M with gains in card-based fees, trust, brokerage	Stabilizing
Oil & Gas exposure	Potential problem loans $351.1M (Q4), $339.7M (Q1); O&G allowance 5.5–5.7%	Potential problem loans down to $262.6M; O&G allowance $33M (5.4%)	Improving
Credit quality	Nonaccrual loans $275.3M (Q4), $260.0M (Q1)	Nonaccrual loans $231.9M (1.12% of loans)	Improving
Technology investment	Tech expense $14.4M (Q4), $14.4M (Q1)	Tech expense $15.5M to drive efficiency	Increasing investment
Capital & M&A	No Q4/Q1 M&A announcements	Announced Bank Mutual acquisition; EPS accretive in 2019; <1% TBV dilution	Expansionary

Management Commentary

“Robust loan growth and improving fee-based income trends drove this quarter’s results… Disciplined expense controls combined with improving credit trends rounded out the quarter. We remain on track to deliver on our full year guidance.” — Philip B. Flynn, President & CEO .
Outlook emphasized “mid-to-high single digit annual average loan growth,” maintaining loan-to-deposit ratio under 100%, improving NIM trend, and continued efficiency ratio improvement .

Q&A Highlights

The Q2 2017 earnings call transcript was unavailable due to a retrieval error in the document database. No Q&A excerpts or clarifications can be cited from the call at this time.

Estimates Context

EPS vs consensus: ASB reported $0.36 diluted EPS; public sources indicate EPS was in line with Zacks consensus for Q2 2017 .
S&P Global (Capital IQ) consensus estimates were unavailable for this request due to a provider limit error; therefore, estimate comparisons rely on publicly reported consensus from Zacks/Nasdaq for EPS, and revenue consensus was not available.

Key Takeaways for Investors

Residential mortgage retention strategy is a core growth engine; average loans and yields are rising, supporting net interest income resilience even as deposit costs climb .
Fee income mix is strengthening (card-based, trust, brokerage), helping offset expected declines in mortgage banking revenue through the year .
Credit normalization is favorable: nonaccruals, potential problem loans, and O&G risk are all lower YoY; allowance coverage remains solid at 1.35% of loans .
The Bank Mutual acquisition is a notable strategic catalyst, enhancing Wisconsin density, core deposits, and efficiency; management targets EPS accretion in 2019 and minimal TBV dilution at close—supportive for medium-term multiple expansion if integration executes as planned .
Near term, rising funding costs pressure NII growth vs asset yield gains; watch deposit mix and pricing discipline as rates move to preserve NIM trajectory .
Expense control remains key: personnel and technology investments are elevating run-rate costs; execution against the efficiency ratio improvement plan is a critical KPI to monitor .
With EPS in line and improving credit, stock performance likely hinges on integration updates and evidence of NIM improvement and fee momentum; the narrative is constructive but requires delivery against 2017 outlook .

Additional Data and Trend Tables

Loans and Deposits (Period End, $USD Millions)

Metric	Q2 2016	Q1 2017	Q2 2017
Total Loans	$19,815.3	$20,147.7	$20,783.1
Total Deposits	$20,292.9	$21,828.0	$21,618.2
Money Market Deposits	$8,448.5	$8,608.5	$9,228.1
Noninterest-bearing Demand	$5,039.3	$5,338.2	$5,038.2

Asset Quality Highlights

Metric	Q2 2016	Q1 2017	Q2 2017
Nonperforming Assets ($USD Millions)	$296.3	$274.9	$247.1
NPAs / Total Assets (%)	1.02%	0.94%	0.83%
Net Charge-offs to Avg Loans (bps)	42 bps	11 bps	25 bps

Non-GAAP Measures (FTE Efficiency Ratio, Fee-Based Revenue)

Metric	Q2 2016	Q1 2017	Q2 2017
FTE Efficiency Ratio (%)	67.77%	64.89%	65.21%
Fee-Based Revenue ($USD Millions)	$67	$67	$67

Notes: Efficiency ratio definitions and reconciliations are provided by management; FTE adjusts NII for tax-equivalent basis; “fee-based revenue” is non-GAAP (sum of trust service fees, service charges, card-based fees, insurance commissions, and brokerage & annuity commissions) .

Prior Quarters’ Earnings Materials

Q1 2017 results (EPS $0.35 diluted; NII $180.3M; noninterest income $79.8M; NIM 2.84%) are shown in the quarterly trend tables above .
Q4 2016 results (EPS $0.34 diluted; NII $180.0M; noninterest income $92.3M; NIM 2.80%) are shown in the quarterly trend tables above .

Other Relevant Q2 2017 Press Releases

“Associated Banc-Corp to acquire Bank Mutual Corporation” joint press release (transaction terms, strategic/financial rationale, EPS accretion expectation, TBV dilution <1% at closing) .
ASB’s Q2 2017 press release hosted on investor site confirms the headline results and summary trends .

S&P Global consensus data was unavailable for this request; EPS consensus references rely on publicly reported Zacks/Nasdaq sources.

ASSOCIATED BANC-CORP (ASB)·Q2 2017 Earnings Summary