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ASSOCIATED BANC-CORP - Quarter Report: 2021 June (Form 10-Q)

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to 
Commission file number: 001-31343

Associated Banc-Corp
(Exact name of registrant as specified in its charter)
Wisconsin39-1098068
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
433 Main Street
Green Bay,Wisconsin54301
(Address of principal executive offices)(Zip Code)
(920) 491-7500
(Registrant’s telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, par value $0.01 per shareASBNew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.375% Non-Cum. Perp Pref Stock, Srs DASB PrDNew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.875% Non-Cum. Perp Pref Stock, Srs EASB PrENew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.625% Non-Cum. Perp Pref Stock, Srs FASB PrFNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes          No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes          No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filer  Smaller reporting company  
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes          No  
APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of registrant’s common stock, par value $0.01 per share, at July 26, 2021 was 152,967,324.
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ASSOCIATED BANC-CORP
Table of Contents
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ASSOCIATED BANC-CORP
Commonly Used Acronyms and Abbreviations
The following listing provides a reference of common acronyms and abbreviations used throughout the document:
ABRCAssociated Benefits & Risk Consulting, the Corporation's insurance division which was sold on June 30, 2020
ACLLAllowance for Credit Losses on Loans
AFSAvailable for Sale
ALCO Asset / Liability Committee
ARRCAlternative Reference Rate Committee
ASCAccounting Standards Codification
Associated / Corporation / our / weAssociated Banc-Corp collectively with all of its subsidiaries and affiliates
Associated Bank / the BankAssociated Bank, National Association
ASUAccounting Standards Update
Basel IIIInternational framework established by the Basel Committee on Banking Supervision for the regulation of capital and liquidity
bpbasis point(s)
CARES ActCoronavirus Aid, Relief, and Economic Security Act
CDsCertificates of Deposit
CDIsCore Deposit Intangibles
CECLCurrent Expected Credit Losses
CET1Common Equity Tier 1
CRACommunity Reinvestment Act
CRECommercial Real Estate
EAREarnings at Risk
Economic Aid ActEconomic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
Federal ReserveBoard of Governors of the Federal Reserve System
FFELPFederal Family Education Loan Program
FHLBFederal Home Loan Bank
FHLMCFederal Home Loan Mortgage Corporation
FICOFair Isaac Corporation, provider of a broad-based risk score to aid in credit decisions
First StauntonFirst Staunton Bancshares, Incorporated
FNMAFederal National Mortgage Association
FTEsFull-time equivalent employees
FTPFunds Transfer Pricing
GAAPGenerally Accepted Accounting Principles
GNMAGovernment National Mortgage Association
GSEsGovernment-Sponsored Enterprises
HTMHeld to Maturity
LIBORLondon Interbank Offered Rate
LTVLoan-to-Value
MSRsMortgage Servicing Rights
MVEMarket Value of Equity
Net Free FundsNoninterest-bearing sources of funds
NIINet Interest Income
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NPAsNonperforming Assets
OREOOther Real Estate Owned
Parent CompanyAssociated Banc-Corp individually
PCDPurchased Credit Deteriorated
PPPPaycheck Protection Program
PPPLFPaycheck Protection Program Liquidity Facility
RAPRetirement Account Plan - the Corporation's noncontributory defined benefit retirement plan
Repurchase AgreementsSecurities sold under agreements to repurchase
Restricted Stock AwardsRestricted common stock and restricted common stock units to certain key employees
Retirement Eligible ColleaguesColleagues whose retirement meets the early retirement or normal retirement definitions under the applicable equity compensation plan
RockefellerRockefeller Capital Management
S&PStandard & Poor's
SBASmall Business Administration
SECU.S. Securities and Exchange Commission
Series C Preferred StockThe Corporation's 6.125% Non-Cumulative Perpetual Preferred Stock, Series C, liquidation preference $1,000 per share
Series D Preferred StockThe Corporation's 5.375% Non-Cumulative Perpetual Preferred Stock, Series D, liquidation preference $1,000 per share
Series E Preferred StockThe Corporation's 5.875% Non-Cumulative Perpetual Preferred Stock, Series E, liquidation preference $1,000 per share
Series F Preferred StockThe Corporation's 5.625% Non-Cumulative Perpetual Preferred Stock, Series F, liquidation preference $1,000 per share
SOFRSecured Overnight Finance Rate
TDRTroubled Debt Restructuring
USI USI Insurance Services LLC
WhitnellWhitnell & Co.
YTDYear-to-Date

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Table of Contents

PART I - FINANCIAL INFORMATION
ITEM 1.Financial Statements:

ASSOCIATED BANC-CORP
Consolidated Balance Sheets
 June 30, 2021December 31, 2020
 (In Thousands, except share and per share data)
(Unaudited)(Audited)
Assets
Cash and due from banks$406,994 $416,154 
Interest-bearing deposits in other financial institutions1,340,385 298,759 
Federal funds sold and securities purchased under agreements to resell25,000 1,135 
Investment securities AFS, at fair value3,323,346 3,085,441 
Investment securities HTM, net, at amortized cost1,799,834 1,878,938 
Equity securities17,144 15,106 
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost168,281 168,280 
Residential loans held for sale160,547 129,158 
Loans23,947,536 24,451,724 
Allowance for loan losses(318,811)(383,702)
Loans, net23,628,725 24,068,022 
Tax credit and other investments294,220 297,232 
Premises and equipment, net398,050 418,914 
Bank and corporate owned life insurance682,709 679,647 
Goodwill1,104,992 1,109,300 
Other intangible assets, net62,498 68,254 
Mortgage servicing rights, net48,335 41,961 
Interest receivable81,797 90,263 
Other assets609,766 653,219 
Total assets$34,152,625 $33,419,783 
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits$7,999,143 $7,661,728 
Interest-bearing deposits19,265,157 18,820,753 
Total deposits27,264,299 26,482,481 
Federal funds purchased and securities sold under agreements to repurchase170,419 192,971 
Commercial paper55,785 59,346 
FHLB advances1,619,826 1,632,723 
Other long-term funding549,024 549,465 
Allowance for unfunded commitments45,276 47,776 
Accrued expenses and other liabilities337,942 364,088 
Total liabilities30,042,573 29,328,850 
Stockholders’ Equity
Preferred equity290,200 353,512 
Common equity
Common stock1,752 1,752 
Surplus1,708,246 1,720,329 
Retained earnings2,576,766 2,458,920 
Accumulated other comprehensive income (loss)2,889 12,618 
Treasury stock, at cost(469,801)(456,198)
Total common equity3,819,852 3,737,421 
Total stockholders’ equity4,110,052 4,090,933 
Total liabilities and stockholders’ equity$34,152,625 $33,419,783 
Preferred shares authorized (par value $1.00 per share)
750,000 750,000 
Preferred shares issued and outstanding299,458 364,458 
Common shares authorized (par value $0.01 per share)
250,000,000 250,000,000 
Common shares issued175,216,409 175,216,409 
Common shares outstanding152,864,579 153,540,224 
Numbers may not sum due to rounding.
See accompanying notes to consolidated financial statements.
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Table of Contents

Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Income (Unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 (In Thousands, except per share data)
2021202020212020
Interest income
Interest and fees on loans$174,228 $191,895 $348,277 $416,681 
Interest and dividends on investment securities
Taxable8,840 16,103 15,855 36,375 
Tax-exempt14,366 14,616 28,528 29,498 
Other interest1,826 2,231 3,521 5,535 
Total interest income199,260 224,845 396,180 488,090 
Interest expense
Interest on deposits4,609 13,178 10,519 49,844 
Interest on federal funds purchased and securities sold under agreements to repurchase30 51 55 420 
Interest on other short-term funding13 40 
Interest on PPPLF— 676 — 676 
Interest on FHLB advances9,524 15,470 19,017 33,096 
Interest on long-term funding5,575 5,593 11,160 11,200 
Total interest expense19,745 34,973 40,764 95,276 
Net interest income179,515 189,872 355,416 392,814 
Provision for credit losses(35,004)61,000 (58,009)114,001 
Net interest income after provision for credit losses214,519 128,872 413,425 278,813 
Noninterest income
Wealth management fees22,706 20,916 45,120 41,732 
Service charges and deposit account fees15,549 11,484 30,404 26,706 
Card-based fees10,982 8,893 20,725 18,490 
Other fee-based revenue4,244 4,774 8,840 9,272 
Capital markets, net5,696 6,910 13,814 14,845 
Mortgage banking, net8,128 12,263 32,054 18,407 
Bank and corporate owned life insurance 3,088 3,625 5,791 6,719 
Insurance commissions and fees86 22,430 161 45,038 
Asset gains (losses), net(a)
(14)157,361 4,796 157,284 
Investment securities gains (losses), net24 3,096 (16)9,214 
Gains on sale of branches, net(b)
36 — 1,038 — 
Other2,918 2,737 6,059 5,090 
Total noninterest income73,443 254,490 168,786 352,796 
Noninterest expense
Personnel106,994 111,350 211,020 225,551 
Technology20,236 21,174 40,975 41,973 
Occupancy14,679 14,464 30,835 30,532 
Business development and advertising4,970 3,556 9,366 9,382 
Equipment5,481 5,312 10,999 10,751 
Legal and professional6,661 5,058 13,191 10,217 
Loan and foreclosure costs2,671 3,605 4,891 6,725 
FDIC assessment3,600 5,250 8,350 10,750 
Other intangible amortization2,203 2,872 4,439 5,686 
Other6,979 10,766 15,755 24,030 
Total noninterest expense174,475 183,407 349,821 375,598 
Income (loss) before income taxes113,487 199,955 232,389 256,012 
Income tax expense (benefit)22,480 51,238 47,082 61,457 
Net income91,007 148,718 185,307 194,555 
Preferred stock dividends4,875 4,144 10,082 7,945 
Net income available to common equity$86,131 $144,573 $175,226 $186,611 
Earnings per common share
Basic$0.56 $0.94 $1.14 $1.21 
Diluted$0.56 $0.94 $1.13 $1.20 
Average common shares outstanding
Basic152,042 152,393 152,198 153,547 
Diluted153,381 153,150 153,473 154,360 
Numbers may not sum due to rounding.
(a) Both the three and six months ended June 30, 2020 include a gain of $163 million from the sale of ABRC.
(b) Includes the deposit premium on the sale of branches net of miscellaneous costs to sell. See Note 2 Acquisitions and Dispositions for additional details on the branch sales.
See accompanying notes to consolidated financial statements.
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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
 ($ in Thousands)
2021202020212020
Net income$91,007 $148,718 $185,307 $194,555 
Other comprehensive income (loss), net of tax
Investment securities AFS
Net unrealized gains (losses)7,978 21,641 (16,002)48,060 
Amortization of net unrealized (gains) losses on AFS securities transferred to HTM securities645 776 1,163 1,332 
Reclassification adjustment for net losses (gains) realized in net income(24)(3,096)16 (9,214)
Income tax (expense) benefit(2,277)(4,841)3,574 (10,066)
Other comprehensive income (loss) on investment securities AFS6,322 14,481 (11,249)30,112 
Defined benefit pension and postretirement obligations
Amortization of prior service cost(37)(38)(74)(75)
Amortization of actuarial loss (gain)1,050 803 2,100 1,610 
Income tax (expense) benefit(253)(192)(506)(385)
Other comprehensive income (loss) on pension and postretirement obligations760 573 1,519 1,150 
Total other comprehensive income (loss)7,082 15,054 (9,729)31,263 
Comprehensive income$98,088 $163,772 $175,578 $225,818 
Numbers may not sum due to rounding.
See accompanying notes to consolidated financial statements.

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Item 1. Financial Statements Continued:    
ASSOCIATED BANC-CORP
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(In Thousands, except per share data)Preferred EquityCommon StockSurplusRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury StockTotal
Balance, December 31, 2020$353,512 $1,752 $1,720,329 $2,458,920 $12,618 $(456,198)$4,090,933 
Comprehensive income
Net income— — — 94,301 — — 94,301 
Other comprehensive income (loss)— — — — (16,811)— (16,811)
Comprehensive income77,490 
Common stock issued
Stock-based compensation plans, net— — (16,986)— — 27,542 10,556 
Purchase of treasury stock, open market purchases— — — — — (17,973)(17,973)
Purchase of treasury stock, stock-based compensation plans— — — — — (3,593)(3,593)
Cash dividends
Common stock, $0.18 per share— — — (27,870)— — (27,870)
Preferred stock(a)
— — — (5,207)— — (5,207)
Stock-based compensation expense, net— — 3,444 — — — 3,444 
Balance, March 31, 2021$353,512 $1,752 $1,706,786 $2,520,144 $(4,193)$(450,222)$4,127,780 
Comprehensive income:
Net income— — — 91,007 — — 91,007 
Other comprehensive income (loss)— — — — 7,082 — 7,082 
Comprehensive income98,088 
Common stock issued:
Stock-based compensation plans, net— — (3,632)— — 11,250 7,618 
Purchase of treasury stock, open market purchases— — — — — (29,972)(29,972)
Purchase of treasury stock, stock-based compensation plans— — — — — (856)(856)
Cash dividends:
Common stock, $0.18 per share— — — (27,822)— — (27,822)
Preferred stock(b)
— — — (4,875)— — (4,875)
Redemption of preferred stock(63,313)— — (1,687)— — (65,000)
Stock-based compensation expense, net— — 5,092 — — — 5,092 
Balance, June 30, 2021$290,200 $1,752 $1,708,246 $2,576,766 $2,889 $(469,801)$4,110,052 
Numbers may not sum due to rounding.
(a) Series C, $0.3828125 per share; Series D, $0.3359375 per share; Series E, $0.3671875 per share; and Series F, $0.3515625 per share.
(b) Series C, $0.3197115 per share; Series D, $0.3359375 per share; Series E, $0.3671875 per share; and Series F, $0.3515625 per share.
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(In Thousands, except per share data)Preferred EquityCommon StockSurplusRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury StockTotal
Balance, December 31, 2019$256,716 $1,752 $1,716,431 $2,380,867 $(33,183)$(400,460)$3,922,124 
Cumulative effect of ASU 2016-13 adoption (CECL)— — — (98,337)— — (98,337)
Total shareholder's equity at beginning of period, as adjusted256,716 1,752 1,716,431 2,282,530 (33,183)(400,460)3,823,787 
Comprehensive income
Net income— — — 45,838 — — 45,838 
Other comprehensive income (loss)— — — — 16,209 — 16,209 
Comprehensive income62,046 
Common stock issued
Stock-based compensation plans, net— — (20,659)— — 23,555 2,896 
Purchase of treasury stock, open market purchases— — — — — (71,255)(71,255)
Purchase of treasury stock, stock-based compensation plans— — — — — (5,555)(5,555)
Cash dividends
Common stock, $0.18 per share— — — (28,392)— — (28,392)
Preferred stock(a)
— — — (3,801)— — (3,801)
Stock-based compensation expense, net— — 10,744 — — — 10,744 
Balance, March 31, 2020$256,716 $1,752 $1,706,516 $2,296,176 $(16,974)$(453,714)$3,790,471 
Comprehensive income:
Net income— — — 148,718 — — 148,718 
Other comprehensive income (loss)— — — — 15,054 — 15,054 
Comprehensive income163,772 
Common stock issued:
Stock-based compensation plans, net— — 1,523 — — (1,350)173 
Purchase of treasury stock, stock-based compensation plans— — — — — 
Cash dividends:
Common stock, $0.18 per share— — — (27,889)— — (27,889)
Preferred stock(b)
— — — (4,144)— — (4,144)
Issuance of preferred stock97,129 — — — — — 97,129 
Stock-based compensation expense, net— — 4,939 — — — 4,939 
Balance, June 30, 2020$353,846 $1,752 $1,712,978 $2,412,859 $(1,920)$(455,057)$4,024,457 
Numbers may not sum due to rounding.
(a) Series C, $0.3828125 per share; Series D, $0.3359375 per share; and Series E, $0.3671875 per share.
(b) Series C, $0.3828125 per share; Series D, $0.3359375 per share; Series E, $0.3671875 per share; and Series F, $0.0849931 per share.

See accompanying notes to consolidated financial statements.




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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
 ($ in Thousands)
20212020
Cash Flow From Operating Activities
Net income$185,307 $194,555 
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Provision for credit losses(58,009)114,001 
Depreciation and amortization24,200 29,119 
Addition to (recovery of) valuation allowance on mortgage servicing rights, net(10,239)17,029 
Amortization of mortgage servicing rights11,352 10,043 
Amortization of other intangible assets4,439 5,686 
Amortization and accretion on earning assets, funding, and other, net10,796 14,060 
Net amortization of tax credit investments16,552 13,661 
Losses (gains) on sales of investment securities, net16 (9,214)
Asset (gains) losses, net(4,796)(157,284)
(Gains) losses on sale of branch, net(1,038)— 
(Gain) loss on mortgage banking activities, net(24,008)(26,545)
Mortgage loans originated and acquired for sale(889,315)(860,674)
Proceeds from sales of mortgage loans held for sale884,581 1,022,268 
Changes in certain assets and liabilities
(Increase) decrease in interest receivable8,466 4,099 
Increase (decrease) in interest payable(4,907)(3,682)
Increase (decrease) in expense payable11,274 (49,911)
(Increase) decrease in net derivative position56,833 (138,961)
Increase (decrease) in unsettled trades— 20,515 
(Increase) decrease in net income tax position(27,779)18,606 
Net change in other assets and other liabilities36,476 68,750 
Net cash provided by (used in) operating activities230,202 286,120 
Cash Flow From Investing Activities
Net decrease (increase) in loans478,170 (1,912,941)
Purchases of
AFS securities(1,162,109)(867,693)
HTM securities(81,368)(65,563)
Federal Home Loan Bank and Federal Reserve Bank stocks(1)(78,153)
Premises, equipment, and software, net of disposals(19,706)(22,577)
Other intangibles— (200)
Proceeds from
Sales of securities 158,743 626,276 
Sale of Federal Home Loan Bank and Federal Reserve Bank stocks— 100,000 
Prepayments, calls, and maturities of AFS investment securities 699,584 499,025 
Prepayments, calls, and maturities of HTM investment securities 195,107 191,953 
Sales, prepayments, calls, and maturities of other assets12,421 12,728 
Net cash received in business segment sale2,415 256,571 
Net change in tax credit and alternative investments(34,200)(30,276)
Net cash (paid) received in acquisition — (31,518)
Net cash provided by (used in) investing activities249,056 (1,322,370)
Cash Flow From Financing Activities
Net increase (decrease) in deposits813,098 2,334,002 
Net decrease in deposits due to branch sales(31,083)— 
Net increase (decrease) in short-term funding(26,112)(309,144)
Net increase (decrease) in short-term FHLB advances— (520,000)
Repayment of long-term FHLB advances(18,049)(16,583)
Proceeds from long-term FHLB advances5,251 4,000 
Proceeds from PPPLF— 1,009,760 
(Repayment) proceeds of finance lease principal(1,035)(1,007)
Proceeds from issuance of preferred shares— 97,129 
Proceeds from issuance of common stock for stock-based compensation plans18,174 3,069 
Redemption of preferred shares(65,000)— 
Purchase of treasury stock, open market purchases(47,945)(71,255)
Purchase of treasury stock, stock-based compensation plans(4,450)(5,548)
Cash dividends on common stock(55,693)(56,281)
Cash dividends on preferred stock(10,082)(7,945)
Net cash provided by (used in) financing activities577,074 2,460,197 
Net increase (decrease) in cash and cash equivalents1,056,332 1,423,947 
Cash and cash equivalents at beginning of period716,048 588,744 
Cash and cash equivalents at end of period(a)
$1,772,379 $2,012,691 
Numbers may not sum due to rounding.
(a) No restricted cash due to the Federal Reserve reducing the required reserve ratio to zero
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ASSOCIATED BANC-CORP
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
 ($ in Thousands)
20212020
Supplemental disclosures of cash flow information
Cash paid for interest$44,782 $97,929 
Cash paid for (received from) income and franchise taxes54,179 3,318 
Loans and bank premises transferred to OREO18,535 5,212 
Capitalized mortgage servicing rights7,488 9,169 
Loans transferred into held for sale from portfolio, net9,970 201,827 
Unsettled trades to purchase securities— 20,515 
Acquisition
Fair value of assets acquired, including cash and cash equivalents— 459,235 
Fair value ascribed to goodwill and intangible assets— 20,793 
Fair value of liabilities assumed— 480,028 

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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Notes to Consolidated Financial Statements
These interim consolidated financial statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally presented in accordance with GAAP have been omitted or abbreviated. The information contained on the consolidated financial statements and footnotes in Associated Banc-Corp's 2020 Annual Report on Form 10-K should be referred to in connection with the reading of these unaudited interim financial statements.
Note 1 Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and comprehensive income, changes in stockholders’ equity, and cash flows of the Corporation and Parent Company for the periods presented, and all such adjustments are of a normal recurring nature. The consolidated financial statements include the accounts of all subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Estimates that are particularly susceptible to significant change include the determination of the ACLL, goodwill impairment assessment, MSRs valuation, and income taxes. Management has evaluated subsequent events for potential recognition or disclosure.
Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes.
Note 2 Acquisitions and Dispositions
Acquisitions:
The Corporation has not had any acquisitions during the first six months of 2021.
2020
First Staunton Acquisition
On February 14, 2020, the Corporation completed its acquisition of First Staunton. The purchase price was based on an assumed 4% deposit premium at announcement. The conversion of the branches was completed simultaneously with the close of the transaction, expanding the Bank's presence into nine new Metro-East St. Louis communities. As a result of the acquisition and other consolidations, a net of seven branch locations were added.
The Corporation recorded approximately $15 million in goodwill related to the First Staunton acquisition. Goodwill created by the acquisition is not tax deductible. See Note 8 for additional information on goodwill, as well as the carrying amount and amortization of CDI assets related to the First Staunton acquisition.
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The following table presents the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date related to the First Staunton acquisition:
 ($ in Thousands)Purchase Accounting AdjustmentsFebruary 14, 2020
Assets
Cash and cash equivalents$— $44,782 
Investment securities AFS(24)98,743 
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost— 781 
Loans(4,808)369,741 
Premises and equipment, net(3,005)4,865 
Bank owned life insurance6,770 
Goodwill14,812 
Core deposit intangibles (included in other intangible assets, net on the face of the consolidated balance sheets)7,379 7,379 
OREO (included in other assets on the face of the consolidated balance sheets)670 762 
Other assets2,795 7,692 
Total assets$556,328 
Liabilities
Deposits$1,285 $438,684 
Other borrowings61 34,613 
Accrued expenses and other liabilities179 6,730 
Total liabilities$480,028 
Total consideration paid$76,300 
For a description of methods used to determine the fair value of significant assets and liabilities presented on the balance sheet above, see Assumptions section of this Note.
The Corporation has purchased loans with the First Staunton acquisition, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination (PCD). The carrying amount of those loans is as follows:
($ in Thousands)February 14, 2020
Purchase price of loans at acquisition$77,221 
Allowance for credit losses at acquisition3,504 
Non-credit discount/(premium) at acquisition(951)
Par value of acquired loans at acquisition$79,774 
The Corporation acquired no PCD securities in connection with the acquisition.
Assumptions
Investment Securities: The fair value of investments on the date of acquisition was determined utilizing an external third party broker opinion of the market value.
Loans: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. For the non-credit (interest and liquidity) premium, loans were grouped together according to similar characteristics when applying various valuation techniques. For the credit discount, loans were also grouped based on whether they had more than insignificant deterioration in credit since origination.
CDIs: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits. The CDIs are being amortized on a straight-line basis over 10 years.
Time Deposits: The fair value for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.
FHLB Borrowings: The fair value of FHLB advances is estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.
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Dispositions:
2021
On March 1, 2021, the Corporation closed on the sale of its wealth management subsidiary, Whitnell, to Rockefeller for a purchase price of $8 million. Associated reported a first quarter 2021 pre-tax gain of approximately $2 million, included in asset gains (losses), net on the consolidated statements of income, in conjunction with the sale.
On February 26, 2021, the Bank completed the sale of one branch located in Monroe, Wisconsin to Summit Credit Union. Under the terms of the transaction, Associated Bank sold $31 million in total deposits and no loans. Associated Bank received an approximately 4% purchase premium on deposits transferred.
2020
On June 30, 2020, the Corporation completed the sale of ABRC to USI for $266 million in cash. Associated recorded a second quarter 2020 pre-tax book gain of approximately $163 million in conjunction with the sale.
On December 11, 2020, the Bank completed the sale of five branches in Peoria, Illinois to Morton Community Bank. Under the terms of the transaction, the Bank sold $180 million in total deposits and no loans. Associated Bank received a 4% purchase premium on deposits transferred. With the sale of these branches, the Bank exited the Peoria market.
On December 11, 2020, the Bank completed the sale of two branches in southwest Wisconsin to Royal Bank. Under the terms of the transaction, Associated Bank sold $53 million in total deposits and no loans. Associated Bank received a 4% purchase premium on deposits transferred in the Prairie du Chien and Richland Center branches.
Note 3 Summary of Significant Accounting Policies
The accounting and reporting policies of the Corporation conform to U.S. GAAP and to general practice within the financial services industry. A discussion of these policies can be found in Note 1 Summary of Significant Accounting Policies included in the Corporation’s 2020 Annual Report on Form 10-K. There have been no changes to the Corporation's significant accounting policies since December 31, 2020.
New Accounting Pronouncements Adopted
StandardDescriptionDate of adoptionEffect on financial statements
ASU 2019-12
Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes
The FASB issued this amendment to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendment also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this Update were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendment was permitted.1st Quarter 2021Adoption of this amendment did not have a material impact on the Corporation's results of operation, financial position or liquidity.
ASU 2020-08 Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other CostsThe FASB issued this amendment to clarify that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The amendments in this Update were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments was not permitted.1st Quarter 2021Adoption of this amendment did not have a material impact on the Corporation's results of operation, financial position or liquidity.
Future Accounting Pronouncements
There are no applicable accounting pronouncements recently issued that have not yet been adopted by the Corporation.
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Note 4 Earnings Per Common Share
Earnings per common share are calculated utilizing the two-class method. Basic earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding adjusted for the dilutive effect of common stock awards (outstanding stock options and unvested restricted stock awards). Presented below are the calculations for basic and diluted earnings per common share:
 Three Months Ended June 30,Six Months Ended June 30,
 (In Thousands, except per share data)2021202020212020
Net income$91,007 $148,718 $185,307 $194,555 
Preferred stock dividends(4,875)(4,144)(10,082)(7,945)
Net income available to common equity$86,131 $144,573 $175,226 $186,611 
Common shareholder dividends(27,620)(27,667)(55,280)(55,931)
Unvested share-based payment awards(203)(222)(412)(351)
Undistributed earnings$58,309 $116,684 $119,533 $130,329 
Undistributed earnings allocated to common shareholders$57,887 $115,750 $118,722 $129,377 
Undistributed earnings allocated to unvested share-based payment awards422 934 810 953 
Undistributed earnings$58,309 $116,684 $119,533 $130,329 
Basic
Distributed earnings to common shareholders$27,620 $27,667 $55,280 $55,931 
Undistributed earnings allocated to common shareholders57,887 115,750 118,722 129,377 
Total common shareholders earnings, basic$85,506 $143,417 $174,002 $185,307 
Diluted
Distributed earnings to common shareholders$27,620 $27,667 $55,280 $55,931 
Undistributed earnings allocated to common shareholders57,887 115,750 118,722 129,377 
Total common shareholders earnings, diluted$85,506 $143,417 $174,002 $185,307 
Weighted average common shares outstanding152,042 152,393 152,198 153,547 
Effect of dilutive common stock awards1,339 757 1,275 813 
Diluted weighted average common shares outstanding153,381 153,150 153,473 154,360 
Basic earnings per common share$0.56 $0.94 $1.14 $1.21 
Diluted earnings per common share$0.56 $0.94 $1.13 $1.20 
Non-dilutive common stock options of approximately 3 million and 8 million for the three months ended June 30, 2021 and 2020, respectively, and 3 million and 7 million for the six months ended June 30, 2021 and 2020, respectively, were excluded from the earnings per common share calculation.
Note 5 Stock-Based Compensation
The fair values of stock options and restricted stock awards (including restricted stock units) are amortized as compensation expense on a straight-line basis over the vesting period of the grants. For colleagues who meet the definition of retirement eligible under the 2017 Incentive Compensation Plan and the 2020 Incentive Compensation Plan, expenses related to stock options and restricted stock awards are fully recognized on the date the colleague meets the definition of normal or early retirement. Compensation expense recognized is included in personnel expense on the consolidated statements of income.
Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock option represents the period of time stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the implied volatility of the Corporation’s stock.
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The Corporation did not grant stock options in the first six months of 2021. The following assumptions were used in estimating the fair value for options granted for the full year 2020:
2020
Dividend yield3.50 %
Risk-free interest rate1.60 %
Weighted average expected volatility21.00 %
Weighted average expected life5.75 years
Weighted average per share fair value of options$2.39
A summary of the Corporation’s stock option activity for the six months ended June 30, 2021 is presented below:
Stock Options
Shares(a)
Weighted Average
Exercise Price
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value(a)
Outstanding at December 31, 20206,473 $19.77 6.23 years$2,005 
Exercised1,085 16.44 
Forfeited or expired80 23.24 
Outstanding at June 30, 20215,308 $20.40 6.25 years$8,456 
Options Exercisable at June 30, 20213,725 $20.52 5.43 years$6,407 
(a) In thousands
Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. For the six months ended June 30, 2021, the intrinsic value of stock options exercised was $6 million compared to less than $1 million for the six months ended June 30, 2020. The total fair value of stock options vested was $3 million for both the six months ended June 30, 2021 and 2020.
The Corporation recognized compensation expense for the vesting of stock options of approximately $755,000 for the six months ended June 30, 2021, compared to $3 million for the six months ended June 30, 2020. Included in compensation expense for 2021 was approximately $65,000 for the accelerated vesting of stock options granted to retirement eligible colleagues. At June 30, 2021, the Corporation had approximately $2 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend predominately through the first quarter of 2024.
The Corporation also has issued time-based and performance-based restricted stock awards under the 2017 Incentive Compensation Plan and subsequent 2020 Incentive Compensation Plan. Performance awards are based on performance goals of earnings per share and total shareholder return with vesting ranging from a minimum of 0% to a maximum of 150% of the target award. Performance awards are valued utilizing a Monte Carlo simulation model to estimate fair value of the awards at the grant date.

The following table summarizes information about the Corporation’s restricted stock awards activity for the six months ended June 30, 2021:
Restricted Stock Awards
Shares(a)
Weighted Average
Grant Date Fair Value
Outstanding at December 31, 20202,293 $20.70 
Granted1,200 20.17 
Vested789 21.23 
Forfeited34 23.32 
Outstanding at June 30, 20212,670 $19.96 
(a) In thousands
The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant's award agreement. Performance-based restricted stock awards granted during 2020 and 2021 will cliff-vest after the three year performance period has ended. Service-based restricted stock awards granted during 2020 and 2021 will vest ratably over a period of four years. Expense for restricted stock awards issued of approximately $8 million was recorded for the six months ended June 30, 2021 and $12 million was recorded for the six months ended June 30, 2020. Included in compensation expense for the first six months of 2021 was approximately $2 million of expense for the accelerated vesting of restricted stock awards granted to retirement eligible colleagues. The Corporation had $28 million of unrecognized compensation costs related to restricted stock awards at June 30, 2021 that are expected to be recognized over the remaining requisite service periods that extend predominately through the first quarter of 2025.
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The Corporation has the ability to issue shares from treasury or new shares upon the exercise of stock options or the granting of restricted stock awards. The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. The repurchase of shares, if any, will be based on market and investment opportunities, capital levels, growth prospects, and regulatory constraints. Such repurchases may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchase programs, or similar facilities.

Note 6 Investment Securities
Investment securities are classified as AFS, HTM, or equity on the consolidated balance sheets at the time of purchase. The amortized cost and fair values of securities AFS and HTM at June 30, 2021 were as follows:
($ in Thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair Value
Investment securities AFS
U. S. Treasury securities$124,216 $498 $(181)$124,533 
Agency securities15,000 — (9)14,991 
Obligations of state and political subdivisions (municipal securities)398,617 21,992 — 420,609 
Residential mortgage-related securities
FNMA / FHLMC2,049,513 11,681 (3,285)2,057,909 
GNMA90,956 3,011 — 93,967 
Commercial mortgage-related securities
FNMA / FHLMC93,693 2,647 (632)95,708 
GNMA284,815 4,777 — 289,593 
Asset backed securities
FFELP214,904 914 (354)215,464 
SBA7,575 46 (48)7,573 
Other debt securities3,000 — — 3,000 
Total investment securities AFS$3,282,290 $45,566 $(4,509)$3,323,346 
Investment securities HTM
U. S. Treasury securities$1,000 $13 $— $1,013 
Obligations of state and political subdivisions (municipal securities)1,479,375 121,908 (190)1,601,093 
Residential mortgage-related securities
FNMA / FHLMC41,505 2,151 — 43,656 
GNMA66,979 2,618 — 69,597 
Commercial mortgage-related securities
FNMA/FHLMC63,668 515 (591)63,591 
GNMA147,366 4,225 — 151,591 
Total investment securities HTM$1,799,893 $131,430 $(781)$1,930,541 

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The amortized cost and fair values of securities AFS and HTM at December 31, 2020 were as follows:
($ in Thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair Value
Investment securities AFS
U. S. Treasury securities$26,436 $95 $— $26,531 
Agency securities24,985 53 — 25,038 
Obligations of state and political subdivisions (municipal securities)425,057 25,605 — 450,662 
Residential mortgage-related securities
FNMA / FHLMC1,448,806 12,935 (500)1,461,241 
GNMA231,364 4,176 (3)235,537 
Commercial mortgage-related securities
FNMA / FHLMC19,654 3,250 — 22,904 
GNMA511,429 13,327 — 524,756 
Asset backed securities
FFELP329,030 1,172 (3,013)327,189 
SBA8,637 — (53)8,584 
Other debt securities3,000 — — 3,000 
Total investment securities AFS$3,028,399 $60,612 $(3,570)$3,085,441 
Investment securities HTM
U. S. Treasury securities$999 $25 $— $1,024 
Obligations of state and political subdivisions (municipal securities)1,441,900 133,544 — 1,575,445 
Residential mortgage-related securities
FNMA / FHLMC54,599 2,891 — 57,490 
GNMA114,553 4,260 — 118,813 
Commercial mortgage-related securities
FNMA / FHLMC11,211 — — 11,211 
GNMA255,742 9,218 — 264,960 
 Total investment securities HTM$1,879,005 $149,938 $— $2,028,943 
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The expected maturities of investment securities AFS and HTM at June 30, 2021, are shown below:
 AFSHTM
($ in Thousands)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Due in one year or less$6,278 $6,285 $29,227 $29,460 
Due after one year through five years77,593 78,211 42,396 43,855 
Due after five years through ten years419,367 436,807 175,687 184,271 
Due after ten years37,595 41,829 1,233,065 1,344,520 
Total debt securities540,833 563,132 1,480,375 1,602,106 
Residential mortgage-related securities
FNMA / FHLMC2,049,513 2,057,909 41,505 43,656 
GNMA90,956 93,967 66,979 69,597 
Commercial mortgage-related securities
FNMA / FHLMC93,693 95,708 63,668 63,591 
GNMA284,815 289,593 147,366 151,591 
Asset backed securities
FFELP 214,904 215,464 — — 
SBA7,575 7,573 — — 
Total investment securities$3,282,290 $3,323,346 $1,799,893 $1,930,541 
Ratio of fair value to amortized cost101.3 %107.3 %
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On a quarterly basis, the Corporation refreshes the credit quality of each HTM security. The following table summarizes the credit quality indicators of HTM securities at amortized cost at June 30, 2021:
($ in Thousands)AAAAAANot RatedTotal
U. S. Treasury securities$1,000 $— $— $— $1,000 
Obligations of state and political subdivisions (municipal securities)600,671 867,638 10,872 194 1,479,375 
Residential mortgage-related securities
FNMA / FHLMC41,505 — — — 41,505 
GNMA66,979 — — — 66,979 
Commercial mortgage-related securities
FNMA / FHLMC63,668 — — — 63,668 
GNMA 147,366 — — — 147,366 
Total HTM securities$921,188 $867,638 $10,872 $194 $1,799,893 
The following table summarizes the credit quality indicators of HTM securities at amortized cost at December 31, 2020:
($ in Thousands)AAAAAATotal
U. S. Treasury securities$999 $— $— $999 
Obligations of state and political subdivisions (municipal securities)567,252 860,607 14,041 1,441,900 
Residential mortgage-related securities
FNMA / FHLMC54,599 — — 54,599 
GNMA114,553 — — 114,553 
Commercial mortgage-related securities
FNMA / FHLMC11,211 — — 11,211 
GNMA 255,742 — — 255,742 
Total HTM securities$1,004,357 $860,607 $14,041 $1,879,005 
Investment securities gains (losses), net includes proceeds from the sale of investment securities as well as any applicable write-ups or write-downs of investment securities. The proceeds from the sale of investment securities for the three and six months ended June 30, 2021 and 2020, are shown below:
Three Months Ended June 30,Six Months Ended June 30,
($ in Thousands)2021202020212020
Gross gains on AFS securities$386 $3,106 $421 $9,304 
Gross (losses) on AFS securities(362)(11)(437)(90)
Investment securities gains (losses), net$24 $3,096 $(16)$9,214 
Proceeds from sales of investment securities$107,412 $261,037 $158,708 $626,276 
During the second quarter of 2021, the Corporation sold $107 million of lower yielding FFELP student loan asset backed securities at a slight gain and reinvested the proceeds into higher yielding mortgage backed securities. During the first quarter of 2021, the Corporation sold $51 million of lower yielding U.S. Treasury and Agency securities at a slight loss to take advantage of the steeper yield curve by reinvesting the proceeds into similar but higher yielding, longer duration securities.
During the second quarter of 2020, the Corporation sold $261 million of less liquid securities at a gain of $3 million, reinvesting the proceeds into more liquid securities in order to further improve portfolio liquidity. During the first quarter of 2020, the Corporation sold $281 million of primarily prepayment sensitive mortgage-related securities at a gain of $6 million. Additionally, in February 2020, the Corporation sold $84 million of certain securities acquired in the First Staunton acquisition that did not fit the parameters of the Corporation's current investment strategy.
Investment securities with a carrying value of approximately $1.8 billion and $1.6 billion at June 30, 2021 and December 31, 2020, respectively, were pledged to secure certain deposits or for other purposes as required or permitted by law.
Accrued interest receivable on HTM securities totaled $14 million at both June 30, 2021 and December 31, 2020. Accrued interest receivable on AFS securities totaled $7 million and $8 million at June 30, 2021 and December 31, 2020, respectively. Accrued interest receivable on both HTM and AFS securities is included in interest receivable on the consolidated balance sheets. There was no interest income reversed for investments going into nonaccrual at both June 30, 2021 and 2020.
A security is considered past due once it is 30 days past due under the terms of the agreement. At both June 30, 2021 and December 31, 2020, the Corporation had no past due HTM securities.

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The allowance for credit losses on HTM securities was approximately $58,000 at June 30, 2021 and approximately $67,000 at December 31, 2020, attributable entirely to the Corporation's municipal securities, included in investment securities HTM, net, at amortized cost on the consolidated balance sheets. The Corporation also holds U.S. Treasury, municipal and mortgage-related securities issued by the U.S. government or a GSE which are backed by the full faith and credit of the U.S. government and, as a result, no allowance for credit losses has been recorded related to these securities.

The following represents gross unrealized losses and the related fair value of investment securities AFS and HTM, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at June 30, 2021:
 Less than 12 months12 months or moreTotal
($ in Thousands)Number
of
Securities
Unrealized
(Losses)
Fair
Value
Number
of
Securities
Unrealized
(Losses)
Fair
Value
Unrealized
(Losses)
Fair
Value
Investment securities AFS
U.S. Treasury securities$(181)$9,743 — — $— $(181)$9,743 
Agency securities(9)14,991 — — — (9)14,991 
FNMA / FHLMC residential mortgage-related securities17 (3,285)604,030 — — — (3,285)604,030 
Commercial mortgage-related securities
FNMA / FHLMC(632)39,472 — — — (632)39,472 
GNMA— 34 — — — — 34 
Asset backed securities
FFELP(36)23,835 (318)72,947 (354)96,782 
SBA— — — (48)4,642 (48)4,642 
Total25 $(4,143)$692,103 18 $(366)$77,589 $(4,509)$769,692 
Investment securities HTM
Obligations of state and political subdivisions (municipal securities)11 $(190)$18,891 — $— $— $(190)$18,891 
FNMA / FHLMC commercial mortgage-related securities(591)42,530 — — — (591)42,530 
Total17 $(781)$61,422 — $— $— $(781)$61,422 
For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities AFS and HTM, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2020:
 Less than 12 months12 months or moreTotal
($ in Thousands)Number
of
Securities
Unrealized
(Losses)
Fair
Value
Number
of
Securities
Unrealized
(Losses)
Fair
Value
Unrealized
(Losses)
Fair
Value
Investment securities AFS
Residential mortgage-related securities
FNMA / FHLMC$(500)$163,002 — $— $— $(500)$163,002 
GNMA(3)9,784 — — — (3)9,784 
GNMA commercial mortgage-related securities— 287 — — — — 287 
Asset backed securities
FFELP(129)9,267 16 (2,885)178,681 (3,013)187,948 
SBA14 (53)8,379 — — — (53)8,379 
Other debt securities— 2,000 — — — — 2,000 
Total27 $(685)$192,720 16 $(2,885)$178,681 $(3,570)$371,400 
Investment securities HTM
GNMA residential mortgage-related securities$— $325 — $— $— $— $325 
Total$— $325 — $— $— $— $325 
The Corporation reviews the AFS investment securities portfolio on a quarterly basis to monitor its credit exposure. A determination as to whether a security’s decline in fair value is the result of credit risk takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in this impairment analysis include the extent to which the security has been in an unrealized loss position, the change in security rating, financial condition and near-term prospects of the issuer, as well as the security and industry specific economic conditions.
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Based on the Corporation’s evaluation, management does not believe any unrealized losses at June 30, 2021 represent credit deterioration as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions. The U.S. Treasury 3 year and 5 year rates increased by 29 bp and 51 bp, respectively, from December 31, 2020. The Corporation does not intend to sell nor does it believe that it will be required to sell the securities in an unrealized loss position before recovery of their amortized cost basis.
FHLB and Federal Reserve Bank stocks: The Corporation is required to maintain Federal Reserve Bank stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. The Corporation had FHLB stock of $82 million at both June 30, 2021 and December 31, 2020. The Corporation had Federal Reserve Bank stock of $87 million at both June 30, 2021 and December 31, 2020. Accrued interest receivable on FHLB stock totaled approximately $952,000 and $972,000 at June 30, 2021 and December 31, 2020, respectively. There was no accrued interest receivable on Federal Reserve Bank stock at both June 30, 2021 and December 31, 2020. Accrued interest receivable on both FHLB stock and Federal Reserve Bank stock is included in interest receivable on the consolidated balance sheets.
Equity Securities
Equity securities with readily determinable fair values: The Corporation's portfolio of equity securities with readily determinable fair values is primarily comprised of CRA Qualified Investment mutual funds and a money market mutual fund. At June 30, 2021 and December 31, 2020, the Corporation had equity securities with readily determinable fair values of $3 million and $2 million, respectively.
Equity securities without readily determinable fair values: The Corporation's portfolio of equity securities without readily determinable fair values primarily consists of 77,996 Visa Class B restricted shares, 77,000 of which the Corporation received in 2008 as part of Visa's initial public offering and carried at fair value after the Corporation donated 42,039 Visa Class B restricted shares to the Corporation's Charitable Remainder Trust during the second quarter of 2019, with the subsequent sale of those shares resulting in an observable market price after the shares were previously carried at a zero cost basis. During the first quarter of 2020, the Corporation acquired 996 Visa Class B restricted shares from the acquisition of First Staunton, and those shares are carried at a zero cost basis due to the lack of an observable market price since the time of acquisition. The Corporation had equity securities without readily determinable fair values of $14 million at June 30, 2021 and $13 million at December 31, 2020.
Note 7 Loans
The period end loan composition was as follows:
($ in Thousands)June 30, 2021December 31, 2020
PPP$405,482 $767,757 
Commercial and industrial7,909,119 7,701,422 
Commercial real estate — owner occupied880,755 900,912 
Commercial and business lending9,195,355 9,370,091 
Commercial real estate — investor4,300,651 4,342,584 
Real estate construction1,880,897 1,840,417 
Commercial real estate lending6,181,549 6,183,001 
Total commercial15,376,904 15,553,091 
Residential mortgage7,638,372 7,878,324 
Home equity631,783 707,255 
Other consumer300,477 313,054 
Total consumer8,570,632 8,898,632 
Total loans$23,947,536 $24,451,724 

Accrued interest receivable on loans totaled $59 million at June 30, 2021, and $66 million at December 31, 2020, and is included in interest receivable on the consolidated balance sheets. Interest accrued but not received for loans placed on nonaccrual is reversed against interest income. The amount of accrued interest reversed totaled approximately $140,000 and $238,000 for the three and six months ended June 30, 2021, respectively, and approximately $1 million for both the three and six months ended June 30, 2020.

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The following table presents commercial and consumer loans by credit quality indicator by vintage year at June 30, 2021:
Term Loans Amortized Cost Basis by Origination Year(a)
($ in Thousands)
Rev Loans Converted to Term(a)
Rev Loans Amortized Cost BasisYTD 20212020201920182017PriorTotal
PPP:(b)
Risk rating:
Pass$— $— $282,722 $113,640 $— $— $— $— $396,362 
Special Mention— — 212 212 — — — — 424 
Potential Problem— — 7,958 737 — — — — 8,695 
PPP$— $— $290,892 $114,589 $— $— $— $— $405,482 
Commercial and industrial:
Risk rating:
Pass$2,084 $2,381,324 $1,116,185 $1,135,991 $1,179,056 $946,719 $290,980 $651,006 $7,701,262 
Special Mention— 445 13,162 13,582 56,423 28,681 109 10 112,412 
Potential Problem3,011 28,181 4,007 7,754 19,395 14,985 1,075 1,668 77,064 
Nonaccrual32 — — 231 725 16,205 138 1,081 18,380 
Commercial and industrial$5,126 $2,409,950 $1,133,354 $1,157,558 $1,255,599 $1,006,590 $292,303 $653,765 $7,909,119 
Commercial real estate - owner occupied:
Risk rating:
Pass$11,768 $25,900 $106,833 $179,316 $201,438 $124,160 $67,086 $154,611 $859,345 
Special Mention— — — 3,223 — — 97 255 3,575 
Potential Problem— 580 366 6,274 797 769 2,999 6,044 17,828 
Nonaccrual— — — — — — — 
Commercial real estate - owner occupied$11,768 $26,480 $107,198 $188,813 $202,235 $124,929 $70,182 $160,918 $880,755 
Commercial and business lending:
Risk rating:
Pass$13,852 $2,407,225 $1,505,741 $1,428,948 $1,380,495 $1,070,879 $358,066 $805,617 $8,956,970 
Special Mention— 445 13,374 17,017 56,423 28,681 206 265 116,411 
Potential Problem3,011 28,761 12,330 14,765 20,191 15,754 4,074 7,712 103,587 
Nonaccrual32 — — 231 725 16,205 138 1,089 18,387 
Commercial and business lending$16,894 $2,436,431 $1,531,444 $1,460,960 $1,457,834 $1,131,519 $362,484 $814,683 $9,195,355 
Commercial real estate - investor:
Risk rating:
Pass$32,109 $108,396 $659,581 $1,001,096 $1,027,913 $581,600 $193,334 $362,007 $3,933,926 
Special Mention— — 30,901 65,075 84,483 29,100 10,418 12,132 232,109 
Potential Problem799 — 6,738 25,879 4,917 15,417 4,519 14,144 71,613 
Nonaccrual— — 12,504 21,138 9,763 19,372 — 227 63,003 
Commercial real estate - investor$32,908 $108,396 $709,724 $1,113,188 $1,127,075 $645,489 $208,270 $388,511 $4,300,651 
Real estate construction:
Risk rating:
Pass$5,734 $31,184 $338,231 $771,306 $512,719 $151,219 $21,386 $14,671 $1,840,716 
Special Mention— — — — 7,542 15,885 42 23,470 
Potential Problem— — 11 128 16,237 — — 89 16,465 
Nonaccrual— — — — — — — 247 247 
Real estate construction$5,734 $31,184 $338,242 $771,433 $536,497 $167,104 $21,427 $15,009 $1,880,897 
Commercial real estate lending:
Risk rating:
Pass$37,843 $139,580 $997,812 $1,772,402 $1,540,632 $732,819 $214,719 $376,679 $5,774,642 
Special Mention— — 30,901 65,075 92,025 44,985 10,459 12,134 255,579 
Potential Problem799 — 6,749 26,007 21,153 15,417 4,519 14,233 88,078 
Nonaccrual— — 12,504 21,138 9,763 19,372 — 474 63,250 
Commercial real estate lending$38,642 $139,580 $1,047,966 $1,884,621 $1,663,572 $812,593 $229,697 $403,520 $6,181,549 
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Term Loans Amortized Cost Basis by Origination Year(a)
($ in Thousands)
Rev Loans Converted to Term(a)
Rev Loans Amortized Cost BasisYTD 20212020201920182017PriorTotal
Total commercial:
Risk rating:
Pass$51,695 $2,546,805 $2,503,553 $3,201,349 $2,921,126 $1,803,698 $572,785 $1,182,296 $14,731,612 
Special Mention— 445 44,274 82,092 148,447 73,666 10,666 12,399 371,990 
Potential Problem3,810 28,761 19,079 40,772 41,345 31,171 8,593 21,945 191,665 
Nonaccrual32 — 12,504 21,368 10,488 35,577 138 1,563 81,637 
Total commercial$55,536 $2,576,011 $2,579,410 $3,345,581 $3,121,406 $1,944,111 $592,182 $1,218,202 $15,376,904 
Residential mortgage:
Risk rating:
Pass$— $— $958,932 $2,127,161 $1,164,371 $498,556 $791,985 $2,036,364 $7,577,370 
Special Mention— — 299 — — 420 — 464 1,183 
Potential Problem— — 319 378 561 731 124 911 3,024 
Nonaccrual— — 245 1,907 3,328 5,582 6,715 39,018 56,795 
Residential mortgage$— $— $959,795 $2,129,446 $1,168,260 $505,289 $798,824 $2,076,757 $7,638,372 
Home equity:
Risk rating:
Pass$3,403 $517,872 $191 $1,852 $9,887 $11,545 $9,371 $70,719 $621,438 
Special Mention12 25 — — 31 14 — 200 270 
Potential Problem1,162 233 10 — 1,152 18 — 146 1,558 
Nonaccrual320 59 10 377 163 350 349 7,209 8,517 
Home equity$4,896 $518,189 $211 $2,229 $11,233 $11,927 $9,720 $78,275 $631,783 
Other consumer:
Risk rating:
Pass$487 $159,450 $5,542 $8,478 $8,354 $2,777 $1,182 $114,125 $299,908 
Special Mention369 — — 13 — — 383 
Nonaccrual62 — 15 49 16 19 25 186 
Other consumer$491 $159,881 $5,542 $8,493 $8,416 $2,793 $1,201 $114,151 $300,477 
Total consumer:
Risk rating:
Pass$3,890 $677,322 $964,665 $2,137,491 $1,182,613 $512,878 $802,538 $2,221,208 $8,498,715 
Special Mention12 394 299 — 44 434 — 666 1,836 
Potential Problem1,162 233 329 378 1,712 749 124 1,057 4,583 
Nonaccrual324 121 254 2,299 3,540 5,949 7,083 46,252 65,498 
Total consumer$5,388 $678,070 $965,547 $2,140,168 $1,187,909 $520,010 $809,745 $2,269,183 $8,570,632 
Total loans:
Risk rating:
Pass(c)
$55,585 $3,224,127 $3,468,217 $5,338,840 $4,103,739 $2,316,576 $1,375,323 $3,403,504 $23,230,327 
Special Mention12 839 44,573 82,092 148,491 74,100 10,666 13,064 373,826 
Potential Problem4,972 28,994 19,409 41,150 43,057 31,920 8,717 23,002 196,248 
Nonaccrual355 121 12,758 23,667 14,028 41,526 7,221 47,814 147,135 
Total loans$60,924 $3,254,081 $3,544,958 $5,485,750 $4,309,315 $2,464,122 $1,401,926 $3,487,385 $23,947,536 
(a) Revolving loans converted to term loans are also reported in their year of origination.
(b) The Corporation’s policy is to assign risk ratings at the borrower level. PPP loans are 100% guaranteed by the SBA and therefore the Corporation considers these loans to have a risk profile similar to pass rated loans.
(c) Accruing TDRs are included in pass unless otherwise rated as special mention.

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The following table presents commercial and consumer loans by credit quality indicator by vintage year at December 31, 2020:
Term Loans Amortized Cost Basis by Origination Year(a)
($ in Thousands)
Rev Loans Converted to Term(a)
Rev Loans Amortized Cost Basis20202019201820172016PriorTotal
PPP:(b)
Risk rating:
Pass$— $— $745,767 $— $— $— $— $— $745,767 
Special Mention— — 3,988 — — — — — 3,988 
Potential Problem— — 18,002 — — — — — 18,002 
PPP$— $— $767,757 $— $— $— $— $— $767,757 
Commercial and industrial:
Risk rating:
Pass$4,628 $2,177,138 $1,389,260 $1,435,519 $1,182,302 $483,957 $305,998 $453,734 $7,427,908 
Special Mention— 10,159 2,719 39,854 37,042 113 215 67 90,169 
Potential Problem2,565 7,237 19,331 28,413 56,580 2,269 6,477 1,179 121,487 
Nonaccrual16,852 — 6,238 5,789 17,014 16,623 8,781 7,414 61,859 
Commercial and industrial$24,045 $2,194,534 $1,417,548 $1,509,575 $1,292,938 $502,962 $321,471 $462,394 $7,701,422 
Commercial real estate - owner occupied:
Risk rating:
Pass$1,150 $18,022 $185,861 $209,069 $128,360 $99,546 $147,366 $79,111 $867,335 
Special Mention— 113 1,882 3,122 300 658 264 — 6,339 
Potential Problem— 3,486 4,104 8,916 — 1,490 4,437 3,747 26,179 
Nonaccrual— — — — — 318 — 740 1,058 
Commercial real estate - owner occupied$1,150 $21,621 $191,847 $221,107 $128,660 $102,012 $152,067 $83,598 $900,912 
Commercial and business lending:
Risk rating:
Pass$5,778 $2,195,160 $2,320,888 $1,644,588 $1,310,662 $583,503 $453,364 $532,845 $9,041,009 
Special Mention— 10,272 8,589 42,976 37,342 771 479 67 100,496 
Potential Problem2,565 10,723 41,437 37,329 56,580 3,759 10,915 4,926 165,668 
Nonaccrual16,852 — 6,238 5,789 17,014 16,941 8,781 8,154 62,917 
Commercial and business lending$25,195 $2,216,154 $2,377,152 $1,730,682 $1,421,598 $604,974 $473,539 $545,992 $9,370,091 
Commercial real estate - investor:
Risk rating:
Pass$10,971 $171,497 $1,249,644 $976,332 $720,237 $271,987 $341,658 $211,360 $3,942,714 
Special Mention— — 90,235 97,333 12,339 — 21,882 8,465 230,254 
Potential Problem— 838 16,343 13,575 30,911 2,279 239 27,209 91,396 
Nonaccrual19,803 — 10,141 53,056 446 14,267 — 309 78,220 
Commercial real estate - investor$30,774 $172,335 $1,366,364 $1,140,297 $763,933 $288,533 $363,779 $247,343 $4,342,584 
Real estate construction:
Risk rating:
Pass$776 $47,880 $645,925 $738,561 $294,910 $25,219 $