Good afternoon, everyone, and welcome to Associated Banc-Corp's Third Quarter 2021 Earnings Conference Call. My name is Shemali, and I will be your operator today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session at the end of this conference. Copies of the slides that will be referenced during today's call are available on the company's website at investor.associatedbank.com. As a reminder, this conference call is being recorded. As outlined on Slide 1, 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 and the Risk Factors section of Associated's most recent Form 10-K and subsequent SEC filings. These factors are incorporated herein by reference. For a reconciliation of the non-GAAP financial measures to the GAAP financial measures mentioned in this conference call, please refer to Pages 20 and 21 of the slide presentation and to Page 10 of the press release financial tables. Following today's presentation, instructions will be given for the question-and-answer session. At this time, I would like to turn the conference over to Andy Harmening, President and CEO, for opening remarks. Please go ahead, sir.

Well, thank you, Shemali. Good afternoon, everyone, and welcome to our third quarter 2021 earnings call. I'm Andy Harmening, and I'm joined today by Chris Niles, our Chief Financial Officer; and Pat Ahern, our Chief Credit Officer. I want to kick things off by covering the macro highlights for the quarter, and give you an update on the strategic initiatives that we presented both internally and externally last month, then Chris will walk you through where we are on margin, fees and expenses. And then finally, Pat will close us out with an update on credit. On a macro level, we continue to see signs of a strengthening economy in our markets. Unemployment rates in Wisconsin and Minnesota have remained at or below 4%. And manufacturing has been consistently expanding, which is reflected in the positive momentum we're seeing in the Midwestern footprint. While the third quarter news cycle is dominated by concerns of surging Delta variant and supply chain challenges, we do remain optimistic about growth in the latter part of this year and into next. Our customers are doing well. Sound credit performance continues to be foundational, and we are well-positioned to participate in the coming expansion. Now, let me touch on third quarter highlights as outlined on Slide 2. On the top-line, we saw revenue expansion across all key areas of our business. Interest income grew, our fee businesses grew, and we realized additional gains during the quarter. We also see signs of increasing customer confidence with spending activity, deposit levels, and capital market transactions all up from the second quarter. On the liability side, rising deposit levels have also allowed us to further moderate our funding costs. Now shifting to credit, we continue to benefit from an improving credit backdrop as we work our way through 2021. Our customers have proven to be resilient, and markets have continued to recover throughout the year. After posting reserve releases in each of the first and second quarters, we posted another negative provision in the third quarter and further net reserve release. Our CECL reserves are now below our CECL day one levels. From an operating expense perspective, we continue to be disciplined, even as we embark on our multiple initiatives. Aside from the $2 million of facility exit costs we incurred in Q3, expenses were fairly flat. Taken together, these factors have helped us drive our year-to-date returns on average tangible common equity to over 13%. Moving to Slide 3, I want to dive a little deeper into loans. We shared back in Q2 that we're starting to see signs of increased lending activity and line utilization in our commercial portfolios. And I'm pleased to announce that this trend has carried over into the third quarter. Average commercial and business lending loans, excluding PPP, grew by over 3% quarter-over-quarter, led by General Commercial. Additionally, we continue to see growth in several specialized lending categories such as CRE Construction. While certain aspects of the economy faced unexpected headwinds during the quarter due to the resurgence of COVID, we continue to be encouraged by the conversations we're having on the front line, and the numbers that are starting to emerge in our pipelines. We're also encouraged by customer activity and consumer activity. We officially launched our auto finance vertical on September 30, and have already funded loans across 13 states. We are excited about the early returns in our auto business. This addition to our product set allows us to further diversify our consumer lending portfolio and earn slightly better spreads in our traditional mortgage origination activities. Consumer card spending activity was also remarkably stronger in the quarter. Outstanding credit card balances increased 6% quarter-over-quarter, a greater than 24% annualized rate, suggesting a significant uptick in the confidence of our retail customers. And finally, our PPP and oil and gas portfolios continue to run off as expected. We expect the majority of our remaining PPP to be paid down in Q4, and we expect the oil and gas portfolio to be largely paid down over the coming year. Additional loan trends for the third quarter are highlighted on Slide 4. On a longer-term trend, we're pleased to see commercial and business lending rebound during the quarter, reflecting our first expansion in more than five quarters. Line utilization was a contributor to the rebound. Commercial line utilization numbers continue to close the gap relative to our historical levels. In April, our commercial customers were funding about 12.5 percentage points below our historic line utilization levels. By September, this gap had narrowed to 8.5 percentage points. And while we still remain well below our pre-COVID monthly averages, our September line utilization was the highest we've seen since July of 2020. Our momentum coming out of the August low experience seems to be establishing a positive trend. Construction lending was also a bright spot for the quarter. Our proactive commercial real estate team continues to grow both outstandings and commitments on a year-over-year basis. Given our substantial back book and construction commitments, we're confident outstandings will continue to grow well into late 2022. As we look to the fourth quarter, we remain optimistic about loan growth but are adjusting our expectations in response to the economic headwinds that played out in the third quarter. Specifically, we now expect full year commercial growth that is CRE and C&I, combined excluding PPP, of approximately 2%. On Slide 5, we've provided a walk forward of our quarterly pre-tax pre-provision income from the second quarter to the third quarter. While our pre-tax income was essentially flat for the quarter, this masked the $9 million improvement in our pre-tax pre-provision results and our positive operating leverage. Looking past the $11 million drop in provisioning, both interest income and fee income items were significant contributors to our quarter-over-quarter improvement. I mentioned last quarter that we expected expansion in pre-tax pre-provision income over the second half of 2021 to more than cover the incremental costs contemplated for our newly announced initiatives. We remain committed to these targets as we head into Q4. Now turning to Slide 6, I'd like to highlight that we announced our strategic vision back in September. We said we'd start executing on our strategies immediately, and we have. Slide 6 shows some of the steps we've taken to make real progress against the four key pillars of our strategic plan. We continue to expand our lending capabilities. Our auto finance business is up and running with book loans nearly 750 dealer partners signed up. We're currently originating loans in a pilot mode across 13 states and 60 dealers. Origination activity to date has been in line with our expectations, and we'll be looking to ramp up our volumes as we move through Q4 and rollout our program to our broader dealer network. In addition, we've rounded out the executive leadership team for both our equipment finance, and our asset-based lending initiatives. We continued to add experienced relationship managers and lending specialists into our core markets to better serve the needs of our commercial and small business customers. We've brought increased focus to our wealth management areas while targeting new opportunities across our footprint. On the digital front, we're on track to transform our consumer digital banking experience in the first quarter with the launch of a new platform, bringing increased customization and architecture that more easily allow us to integrate FinTech partners to improve the customer experience. This is our first big step and a plan that will transition spending towards our digital channels and technology over the next several years. Finally, we're always looking for ways to optimize our capital on the balance sheet. In the third quarter alone, we were doing $100 million of preferred stock, repurchased $60 million of common stock, and increased our common dividend by 11%. Simply put, we are full steam ahead on our efforts, and we look forward to building on this momentum as we head into 2022. So let me pause there and hand it over to Chris Niles, our Chief Financial Officer, to provide further detail on our margin and income statement trends for the quarter.

Thanks, Andy. Turning to Slide 7, our net interest income increased $4 million from the prior quarter or 2%, driven by higher interest income across the board and lower funding and time deposit costs. Our quarterly net interest margin increased slightly, expanding one basis point quarter-over-quarter. We've seen slowing refinance activity which has stabilized our mortgage deals and a steady decline in liability costs. NIM continued to be pressured by high liquidity levels and compressed commercial loan yields. Moving to Slide 8, we continue to see record average deposit levels. Third quarter average deposits were up over $1.2 billion or 5% on a year-over-year basis. This growth continues to be concentrated in our low-cost deposit categories. Low-cost deposits have grown approximately $2 billion from a year ago and at quarter-end accounted for 67% of our total deposits. During the quarter, we continued to work down our high-cost network and time deposits balances. REIT decreased by approximately $1.3 billion from the third quarter of 2020. Meanwhile, our ag and wholesale funding levels have continued to steadily decrease over the past five quarters, and have decreased by nearly $2 billion year-over-year. Looking forward, the deposit pricing and funding actions we have taken are anticipated to help improve our margins in Q4 and into 2022. Turning to Slide 9, given the high levels of liquidity, we began investing in securities late in Q3. We anticipate deploying additional cash balances into investment securities over the next nine months. Reinvestment yields are expected to be approximately 2% or better, and accretive to our current portfolio earnings. We continue to target an investment to total assets ratio of between 17% and 19% for 2021, and expect to rebuild the investment portfolio to somewhere north of 20% of assets by year-end 2022. Looking forward, we expect our full year margin to end this year at approximately 2.40%. Now turning to Slide 10, we will comment on non-interest income. Fee income grew nicely during the quarter. We saw growth across several key categories including our mortgage banking unit, where net income grew $3 million from the prior quarter, assisted by MSR recoveries. We also saw solid growth in our fee-based revenues, where service charges on deposits and account fees were up 9% for the quarter and up 19% year-over-year. Card-based fees were also up 9%. Taken together, we view these trends as encouraging indicators of growth and growing consumer confidence as we emerge from the pandemic. Our non-interest income for the quarter also includes $5 million in asset gains tied to private equity distributions. But even excluding this impact, income grew by nearly 5% from the previous quarter, reflecting the continued strength in our core fee businesses. We now expect to finish 2021 at the upper-end of our most recent new guidance range. On Slide 11, we highlight our expenses. The third quarter came in at $178 million, a $3 million increase from the prior quarter, including $2 million of facilities exit costs. Excluding these exit costs, expenses were up about $1 million. As we continue to rollout our new strategic initiatives, we remain committed to maintaining our expense management discipline. Taking into consideration all the pending initiative actions, we continue to expect our total 2021 non-interest expense to come in consistent with our prior guidance range. Lastly, let me comment on capital. As shown on Slide 12, our tangible book value per share continues to grow quarter-over-quarter and has increased 7% year-over-year to $17.58. Associated's regulatory capital levels all remained strong. Our common equity Tier 1 ratio has grown from the third quarter of 2020, even as we repurchased shares, redeemed preferred, and increased the dividend. We will continue to target TCE levels at or above 7.5%, and CET1 at or above 9.5%. With that, let me turn it over to our Chief Credit Officer, Pat Ahern to give you an update on the credit portfolio.

Thanks Chris. I want to start by providing an update on our allowance, as shown on Slide 13. We utilized the Moody's September 2021 baseline forecast for our CECL forward-looking assumptions. The Moody's baseline forecast assumes additional fiscal support, a continuing low interest rate environment, the recent acceleration in consumer prices to be transitory, and relatively localized COVID cases. Following net reserve releases of $28 million and $40 million in the first and second quarters of 2021, respectively, we posted a further net release of $32 million in the third quarter. This net release was driven by gross reductions in our allowance for all of our core commercial and CRE business units, with a $3 million gross reduction in our allowance related to our general and commercial and business lending portfolio, a $12 million reduction in our CRE allowance, a $14 million reduction in oil and gas, and a $2 million reduction in retail lending. As of September 30, our total ACL was $332 million, down from $364 million in the prior quarter. Furthermore, our ratio of reserves to loans declined to 1.41% from 1.52% during the quarter. We had previously guided that we expected ACLL to loans to drop back down to CECL Day One levels by the end of 2021. In three quarters of the way through the year, we've dropped comfortably below that mark. Turning to our quarterly credit trends presented on Slide 14, most of our key credit metrics continue to improve over the course of the quarter. Our key COVID commercial exposures continue to decline for the quarter, led by declines in our retailer and shopping center exposures. Non-accrual loans also decreased in Q3 and were down 42% year-over-year. Net charge-offs increased slightly from the quarter, and were tied to only one credit. Potential problem loans also increased, with the increases tied to continued pressure in some select COVID-related industries. We expect these trends to normalize as we get into 2022. For the fourth quarter, we expect to adjust provisions to reflect changes to risk ratings, economic conditions, other indications of credit quality, and loan volume. With that, I will now pass it back to Andy to share some closing thoughts as we look to round out the final quarter of 2021.

Thanks, Pat. On Slide 15, we recap our updated guidance for 2021. Amid the economic headwinds we faced in the back-half of the year, we are expecting full-year commercial loan growth excluding PPP to come in at approximately 2%. We expect our full-year net interest margin to land at approximately 2.4% due to elevated liquidity levels and compressed commercial loan yields. We expect to finish 2021 at the upper-end of the $315 million to $325 million range we gave for non-interest income back in September, reflecting continued strength in our core fee businesses over the remainder of the year. Lastly, as I mentioned, we continue to experience positive credit trends due to economic conditions, and as such, we expect the fourth quarter provision to be adjusted to reflect changes to risk grade economic conditions, and other indications of credit quality and loan volume. With that, we'd be happy to take any of your questions.

And our first question is from Scott Siefers with Piper Sandler. Please proceed with your questions.

Definitely, guys. Thanks for taking the questions. Chris, I wanted to maybe start with you just on the plan to deploy the $1 billion plus of excess liquidity over the next nine months or so. Can you talk a little bit about your preference for what you'd like to buy relative to the current composition of the portfolio? And what the interest rate assumptions are, or what kind of rate environment will be necessary to be able to hit those targeted reinvestment rates?

Sure. So I think the mix overall, Scott, will look a lot like what you see in our current portfolio, and won't be a fundamental change from what we've been doing for the last couple of years, just adding a little more volume. From a yield perspective, we've called out that we think that reinvestment portfolio yields will be in the 2% plus range, which is consistent with what we purchased in September.

Okay. Excellent. So that doesn't depend on further increases in the long end of the curve and things like that, that just sort of static environment would be great.

Static environment where you can achieve and deliver on this investment plan, and if rates move higher, that will be even better.

Wonderful. Okay, good. And then, can you let us know what the remaining PPP fees are, that will flow through NII and margin?

Sure. So I think we detailed those on Slide 4 in the materials - sorry at the press release table is what I meant, sorry. The $7 million and again, we think the majority of that will come off. That doesn't mean all of it, but just for clarity, something probably more than half of it.

Okay, perfect. Yeah, sorry, I missed that. I think I missed that last quarter as well. Appreciate you humoring me. So good. All right. Thank you very much.

Sure.

Our next question is from Michael Young with Truist Securities. Please proceed with your questions.

Hey, good afternoon.

Good afternoon, Michael.

I wanted to just touch base on commercial loan growth. I think you've highlighted a lot of positives in terms of utilization rates moving higher, good demand, and construction fundings moving forward, et cetera. But then, on the flip side, maybe moving down to kind of the lower end of the targeted range from a month or two ago. So, could you just talk about what's driving that? Is that payoffs or competition in the market or demand? Any color would be helpful?

Yeah, this is Andy, I'll take that one. As we look at the fourth quarter, we have a few things, we've had a very modest increase in line utilization so far, has not been a major driver. When you look at the fourth quarter, you have to look at mortgage warehouse and what the impact of rates will be to that part of the portfolio. And then we have oil and gas, which we expect to run down and is running down. So, when you look at all those pieces together, and you see that little bit of a lull in the third quarter, we believe that drives us down to the lower end of the range. But at the same time, what I would say is our commercial pipelines remain strong. So we feel good about the fundamental business heading into the fourth quarter. And we feel very good about the state of our initiatives heading into the first quarter, as we get new relationship managers up and running and they're already taking looks at deals, folks we didn't have in the field before. So, that's the primary driver down for the fourth quarter.

Okay, great, that's helpful. And then just as my follow-up, curious as rates have started to move up especially on the long end of the curve. Does that change how you're looking at any loan categories, mainly like longer duration, residential, real estate or anything like that, that you're kind of looking at differently, especially as it pertains to the capital allocation model that you're bringing to bear?

So, what I would say is, I don't think it changes what we're looking at differently. We had already strategically begun to reposition ourselves in expectation of rising rates gently over time, away from mortgage, which we've seen less volume and fewer applications on. And what we've said, we would hold the balances there static going forward, and shift towards more shorter duration, but still fixed-rate assets, such as the auto, such as the equipment finance, which are going to come online and are poised to benefit from the repricing. We continue to expect to participate, as our customers will, in general C&I repricing and CRE repricing over time.

Okay, great.

Shemali, do we have a next question in queue?

Shemali, have we lost you?

I'm not sure if my line is still open, but I can still hear you guys, if that helps.

That is helpful and your line is still open. I have some skills as a moderator as well. And I'd be happy to take the next question. If you've got it on for us, happy to answer.

I'll throw it out there and nothing else to stall. Just on the network deposits as a factor kind of moving forward into a higher rate environment, that's historically been kind of a nice buffer for you guys to pull on when you needed the funding. But can you just talk about that, again, maybe in the context of potentially rising rates going forward? And, I think we're a long way from liquidity scarcity. But, just as you think about that on a go forward basis.

We've been able to nicely maintain our core deposits. As you can see that we've maintained at a pretty low level. Our customer satisfaction coming off of last year, those satisfaction scores remain pretty strong, which is also a key driver of retention. So, we believe that the networks are a big positive for us, whether that's in community markets, they play a very key factor in our major metropolitan markets.

And so just so we're all on the same page, the core funding levels have reflected very positive dynamics and low cost, Andy has articulated. The network deposits that come to us from the large mutual fund complexes and the broker dealers, those deposits, we've been working directly with those providers to manage those balances down and you'll see that on Slide 8, and how we manage those balances down. But we've endeavored to keep relationships open with each of the large dealers, so that should the market come back in a way that would require us to access incremental funding, we would still have good access there. We've tried to manage the largest providers to be the largest remaining components of our current outstanding, so that we're active with them, will remain active in their flow. When the market necessitates that we may need incremental funding, we hope we'll have ready and easy access to those same large providers to support us as we grow in say 2023 or '24, when liquidity perhaps starts to take a turn.

I think I was taking that from a different perspective, which is we have optionality, but we also have the strength of branch network deposits outside of additional network deposits that are still available.

I'd be happy as Andy Harmening to take this next question.

Let me know if you get the operator back, but I guess I'll just continue. Just on share buyback, obviously good to see some strong utilization this quarter. It's not a little bit higher than where it's probably been throughout 3Q. So just there's still pretty strong appetite there or at some point you start to lean more heavily on escalating dividend, or do you look at M&A? How are you walking through the capital allocation bucket?

This is Andy, I'll take the first part of that. What I would say is our focus is on growth. We think that's the best most profitable way to advance the company. And so as we head into 2022, we feel really good about the trajectory that we have of the initiatives and our core businesses where we've been able to add commercial bankers and small business makers. We felt like we had an opportunity in the short-term as we're getting that ramped up towards year-end to maximize our capital position, and we're in a position to buy back stock. If there is a situation where there's some slowdown, we'll remain, and we'll give ourselves that optionality. But our number one priority is growth. Chris?

You said it well. First organic growth, second, maintain competitive dividend. We think with the actions we took in the third quarter, we enhanced our competitive dividend positioning. Third, looking at inorganic opportunities, but the internal organic is the key focus there. Those are downplayed for the moment. We will always look at share purchases as use of incremental capital. Frankly, with the plans we have for organic growth, we have a good use case to deploy all our capital in the near term towards those initiatives.

Thank you. Again, if there's another question out there.

Are other people connected? Are you guys able to open other lines? Are we just…

Yeah, I think that we have our moderator, Shemali, has been disconnected momentarily, so he can't reposition the line. Right now, others can hear us, besides you are already good to be the.

Well, I'll step back so others can ask questions, if they're able.

So for our analysts that are online, feel free to send your email questions directly into Ben McCarville, that's [email protected]. I think most of you have his information handy. We'll be sure to answer them in queue order as we come along.

I hope you hear from this series of events that we're really better at operating a bank than we are serving as moderators, but we're trying like heck to do it.

So I will say, we have a couple questions that came through from Scott Siefers, the additional questions that came through from Scott. And I'll recite the first one here. So, what will be the amount of strategic initiatives charges in 4Q '21? I think you took $2 million in charges in the third quarter, but had been saying $8 million for the full year '21. So $6 million remaining is embedded in the full year '21 guide?

I think that's the right way to think about it, Scott. We're not changing our full guide, so that leads us that amount that you've articulated there as a likely range of outcomes. We're obviously working through those and we'll be diligent and disciplined about managing those properly. But our total expense guide is unchanged.

Next one from Scott, what was the 28% linked quarter increase in potential problem loans this quarter?

Pat?

So those were really like, as I mentioned, tied to what we call COVID-related industries, some movie theater exposure, hospitality, transportation, et cetera. It's really a handful of select deals that we don't see as a systemic increase over the portfolio, which is really very select credits.

Also from Scott, what type of wage inflation are you seeing, and can you absorb it within your existing efficiency initiatives?

Yeah, great question. It's something we're all seeing. As you probably noticed, last week, we announced a wage increase across our entire footprint, effective November 21. That wage increase has already been budgeted for. We believe we have appropriate plans in place for 2022, so we can absorb what we see as increases going forward pretty effectively. The good news is we've had a very nice success on turnover year-over-year relative to what we're hearing in the marketplace.

Last question from Scott, the provision guidance is less specific than usual. Your 1.41% reserve is below the CECL Day One of 1.55%. And now energy was a portion of that. Are we done with the negative provisions? Should we assume that without meaningful economic changes, we'll keep the 1.4% and provisions will keep pace with loan growth?

So, this is Chris Niles, let me give a first response to that. So we've given the more broad guidance because we think going forward our provision will be more economic and portfolio factor-driven. That having been said, we feel very comfortable with where we are at the end of the quarter, if we think the reserve is appropriate. But we also see some good overall dynamics, and we won't be necessarily expecting significant negative pressure over the near-term.

All right. Our next question comes from Chris McGratty with KBW. What is your expense guidance for Q4, trying to get a better idea of the impact of prior one-time items?

So, our expense guidance is for the full year on a total basis, so you can take our total guidance, subtract the first three quarters, and that'll be the fourth quarter guidance.

I think the other thing that to state there is as we've launched multiple initiatives, what we committed to is having positive operating leverage above the second quarter. We clearly did that in Q3 and we expect to do that again in Q4.

Positive pre-tax pre-provision above the $78 million that we outlined.

And then we have a few here from Jon Arfstrom with RBC Capital Markets. So the first question is, when do you think commercial loan yields can bottom out?

Well, Jon, I'd like to think they already have. Now that's a bit over my skis. But the reality is, we're beginning to see market yields generally rise. We take comfort in what we've seen as some of the larger bank syndicated transactions that have come out where they've started to build in SOFR adjustments and other factors. This perhaps the compression and spreads that we've been experiencing has driven absolute yield to the bottoms, we hope for us behind us. While spreads may not expand, absolute yield will continue to rise if market levels rise.

I think the other thing there is a tailwind potentially is as we see this slow, steady increase in utilization that typically comes with an improved margin as well. So it's impossible to say on the forward-looking exactly what bottom looks like, but more to come.

All right, so next up from Jon, are you still planning on $1 billion in auto outstandings by the end of 2022?

We're very much believing we're on track to be able to achieve that. We are three weeks into it. At the writing of this presentation, we were at 60 dealers. Since then I had a call yesterday afternoon, and it looks like we've raised that to 211 dealers in the pilot. So, we are on track for that number. We expect incremental increases in November and December and that will really hit the ground running very well in January.

Also from Jon, if you exclude warehouse and energy, are you more bullish on commercial lending for 2022?

Yes, I mean, the simple answer is yes. We've brought over some talented relationship managers across Wisconsin and Chicago so far in a pretty short period of time. In addition to that, when you think about the markets that we're in, they're tailor-made for asset-based lending and equipment finance. We are looking at deals already in asset-based lending having had the leader in that join us in the third quarter. Equipment finance, we're ramping up quickly. In fact, I met with our Head of Equipment Finance this afternoon on his first day in the office to talk about how we bring a team around ramping that up as quickly as possible. That's a seasoned veteran Scott Denise, who comes to us from Wells Fargo and GE Capital. Those are pieces that we don't have in our numbers today in the third quarter that we expect heading into the first quarter we will have. Despite that, we continue to see a really nice pipeline. We saw commercial increase of 3% in the third quarter and maintained a very nice pipeline in commercial, even with the closings that we had there. Feeling very bullish on our commercial business heading into the first quarter and 2022.

All right. So a couple of things that I might blend together, Jon, so hope that's okay. It seems like the margin should be up nicely in 2022, broader, when are you willing to talk about your outlook for 2022 overall?

Well, Jon, we've historically given our 2022 guidance in our January '22 call, so you can expect to hear from us then. We will be presenting at a conference later this quarter, and will perhaps give you a little more update on our strategic initiatives at that time.

All right, so next up we have a couple of questions from Terry McEvoy with Stephens. So first of all, how will the FTE comp change from the day Andy joined until the day that you're hurting the dumping conditions?

Sure. When you think about the overall FTE counts, we're roughly at 4,000 in the second quarter, 3,990 in the press release tables. We're just over 4010 now, so they really haven't changed much. But the new hires and the additional staff to support all of our initiatives will raise the overall count by a couple hundred, including some backfill open positions that we need to work on as well. You can expect the overall count to go up by several hundred.

Next from Terry, what markets have you hired commercial bankers and what markets are still on the drawing board?

Well, we've hired lenders in Chicago, we've hired lenders in Milwaukee, we've hired a couple in Northeast Wisconsin, which we thought were very strong. So, primarily so far in Chicago, Milwaukee, and then Northeast Wisconsin and Central Wisconsin, we think there is still the opportunity in Minneapolis on the hiring front, and we intend to keep moving forward on that front.

The next question we have is from Daniel Tamayo with Raymond James. With reduction in NIM guidance offset by the balance sheet growth, offset by the balance sheet growth, excuse me, how do you think of our overall net interest income growth now relative to a quarter ago? Can you provide more details from the NIM improvement?

Sure. I think we refer you to the guidance slide where we also highlighted that not only do especially at the upper-end of our fee range, but we expect to be within the total revenue range that we had previously provided at the Barclays presentation conference. The difference, obviously, between total revenue and the fee guidance is the net interest income. It's a fairly robust number, I think you'll find it pretty easy to rise.

Our next question comes from Jonathan Walz with Wells Fargo. What is the duration on the securities you're purchasing as you build investment portfolio? Also, what would the duration go to in a 200 basis points plus raise?

So, Jonathan, as I mentioned, the mix of securities that we're purchasing is very similar to the mix of our current portfolio. It'll be a little bit longer duration on the new mortgages purchase than the existing book, obviously, but similar duration on the new leases. That'll be a little lengthening and a little bit beyond sort of the five-year that you've seen from historically, but not much. With regard to what that would do in an up 200 rate shock, I don't have the immediate number at my hands. Suffice it to say, with a five-year duration at 200 basis point shock is mathematically about 10 points within value. Having said that, I'm not seeing anything in the 10-year yield profile, or the forwards that would indicate us say, consensus view.

All right, I have a few more questions here in my inbox, but if you have any others, feel free to send them along here. Moving on, we have a follow up from Terry McEvoy with Stephens. According to other banks, mortgage yields are less than auto yields. But auto is a non-relationship business, how would you respond to that?

What I would say right now is our mortgage book consists of both originated and third-party originations. The third-party origination expansion is not necessary for us. There's an opportunity on the indirect auto portion of that to get a yield that's better than what we had before. So from an Associated Bank standpoint, it puts us in a really good position in a market that is seeing a downturn, probably in mortgage origination across the industry in 2022 to quickly transpose that. I'd point out that we have pretty significant expectations in very customer-friendly relationship businesses of small business and commercial banking, and that was on purpose. We believe those are massive deposit engines. In addition to that, we have an initiative that we haven't talked as much about and that's a massive fluid initiative, which provides typically 70% to 75% of a retail bank deposit base. We have an upside in gathering deposits from those customers as well. So, in terms of what it means for us, it's a bit of a mix switch out and a trend on mortgage, while simultaneously having a plan around deposits on massive fluids and entering very heavy deposit industries of small business and commercial banking.

All right, and then we have two remaining questions. Next one from Scott Siefers with Piper Sandler. You had suggested a 2.75% steady state NIM over three plus years with your September strategic initiative announcement. Do you still feel comfortable with that expectation in light of how long excess liquidity is sticking around?

Well, I think the question on excess liquidity, look, there's some indications that typically when you see some spend and you see some account fee increases, that's typically a leading indicator that there may be a decrease in deposits over time, we're seeing that. So absent stimulus for those have been sticky for us through three quarters and have been through the whole entire industry, heading into 2022, I think there's some signs of that being a decrease. Overall, right now, I would say that we are still committed to the margin that we laid out in our mid-term plan.

And that actually was the final question that we had in queue. So, if there are no further questions Andy, I think I'll pass it back to you to wrap up.

Well, I'll say two things. Thank you for being with us today. Thank you for your perseverance in getting through three different - four different moderators, including Shemali, and probably one good one. Thank you for the attention you've given Associated Bank. We're excited about what's happening here. Have a great evening.

Thank you. With that you can disconnect your lines.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.