8-K: Associated Banc-Corp Reports Solid Third Quarter Earnings, Driven by Loan and Deposit Growth

Associated Banc-Corp announced third quarter 2024 net income available to common equity of $85 million, or $0.56 per common share, demonstrating growth in loans and deposits.

Summary

• Associated Banc-Corp reported a net income available to common equity of $85 million, or $0.56 per common share, for the third quarter of 2024.
• This compares to $113 million, or $0.74 per share, in the previous quarter and $80 million, or $0.53 per share, in the same quarter of the previous year.
• The company experienced a $373 million increase in total loans and a $863 million increase in total deposits during the quarter.
• Core customer deposits grew by $618 million, which helped reduce reliance on wholesale funding.
• Net interest income was $263 million, with a net interest margin of 2.78%.
• The company expects 2024 period end loan and core customer deposit growth to finish at the lower end of their previous ranges of 4% to 6% and 3% to 5% respectively.
• They now expect total net interest income growth of 0% to 1% in 2024.
• Noninterest income is expected to finish within a range of negative 1% to 1% growth in 2024, excluding the impact of mortgage and investment securities sales from the fourth quarter of 2023.
• Total noninterest expense is now expected to grow by 1% to 2% in 2024, after adjusting for FDIC special assessments.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. While the company shows growth in key areas like loans and deposits, there are some concerns about reduced net income compared to the previous quarter and lowered guidance for net interest income growth. The company's strong capital position and focus on customer satisfaction are positive, but the overall outlook is mixed.

Positives

• The company achieved solid bottom line results for shareholders.
• There was nearly $400 million in balanced loan growth.
• Core customer deposits grew by over $600 million.
• The company decreased its reliance on wholesale funding.
• The net interest margin expanded.
• The company saw strong credit performance.
• The company is growing its customer base and delivering industry-leading customer satisfaction.
• The company is adding top talent to its commercial banking team.
• The company's capital position remains strong, with a CET1 capital ratio of 9.72%.

Negatives

• Net income available to common equity decreased compared to the previous quarter.
• The company expects 2024 period end loan and core customer deposit growth to finish at the lower end of their previous ranges.
• The company now expects total net interest income growth of 0% to 1% in 2024.
• Mortgage banking income decreased compared to the same period last year.
• Noninterest expense increased compared to the prior quarter and the same period last year.

Risks

• The company's forward-looking statements are subject to risks and uncertainties, and actual results may differ materially.
• Changes in economic conditions, risk grades, and loan volumes could impact the provision for credit losses.
• The company's performance is subject to market conditions and interest rate fluctuations.
• The company's growth plans are dependent on the successful execution of its strategic initiatives.

Future Outlook

The company expects 2024 period end loan and core customer deposit growth to finish at the lower end of their previous ranges. They now expect total net interest income growth of 0% to 1% in 2024. Noninterest income is expected to finish within a range of negative 1% to 1% growth in 2024, excluding the impact of mortgage and investment securities sales from the fourth quarter of 2023. Total noninterest expense is now expected to grow by 1% to 2% in 2024, after adjusting for FDIC special assessments.

Management Comments

• In the first nine months of 2024, we've remained squarely focused on executing Phase 2 of our strategic growth plan, and the financial tailwinds have started to emerge here in the third quarter, said President and CEO Andy Harmening.
• During the quarter, we drove nearly $400 million in balanced loan growth and over $600 million in core customer deposit growth, which enabled us to decrease our reliance on wholesale funding and expand our margin.
• We also saw strong credit performance again during the quarter, helping us to deliver solid bottom line results for our shareholders.
• We're growing our customer base, delivering industry-leading customer satisfaction, and adding top talent to our commercial banking team.
• We look forward to building on this momentum and providing additional updates along the way.

Industry Context

This announcement reflects a trend in the banking industry where institutions are focusing on growing core deposits and managing loan portfolios to improve profitability and reduce reliance on wholesale funding. The emphasis on customer satisfaction and talent acquisition also aligns with industry best practices for sustainable growth.

Comparison to Industry Standards

• The reported net interest margin of 2.78% is within the range of regional banks, but specific comparisons would require a peer analysis.
• The CET1 ratio of 9.72% is above the regulatory minimums, indicating a strong capital position, which is a positive sign compared to other banks.
• The loan growth of $373 million and deposit growth of $863 million are positive indicators, but the growth rate should be compared to peers to assess relative performance.
• The company's focus on growing core customer deposits and reducing reliance on wholesale funding is a common strategy among banks seeking to improve stability and profitability, similar to strategies employed by companies like KeyCorp and Fifth Third Bancorp.
• The company's emphasis on customer satisfaction and talent acquisition is also a common theme in the industry, with companies like JPMorgan Chase and Bank of America investing heavily in these areas.

Stakeholder Impact

• Shareholders will be impacted by the reported earnings and future outlook.
• Employees may be affected by the company's strategic initiatives and talent acquisition efforts.
• Customers will benefit from the company's focus on customer satisfaction and improved services.
• Creditors will be interested in the company's capital position and credit quality.

Next Steps

• The company will continue to execute Phase 2 of its strategic growth plan.
• The company will focus on building on its momentum and providing additional updates.
• The company will host a conference call for investors and analysts to discuss the results.

Key Dates

Keywords

earnings, net income, loan growth, deposit growth, net interest margin, credit quality, capital ratios, financial results, banking, financial services