• Adjusted Earnings Per Share (EPS): $0.57 for Q4 2024.
• Core Customer Deposit Growth: Nearly $900 million in Q4 2024.
• Adjusted Loan Growth: Over $500 million in Q4 2024.
• Net Interest Income: $270 million in Q4 2024, an increase of $8 million from Q3.
• Net Interest Margin: Increased by 3 basis points to 2.81% in Q4 2024.
• Adjusted Noninterest Income: $72 million in Q4 2024, a $5 million increase from the prior quarter.
• Adjusted Noninterest Expense: $210 million in Q4 2024.
• Provision for Credit Losses: $17 million in Q4 2024.
• Net Charge-Off Ratio: Decreased by 2 basis points to 0.16% in Q4 2024.
• Common Equity Tier 1 (CET1) Ratio: 10% at year-end 2024.

• Warning! GuruFocus has detected 9 Warning Sign with ASB.

Release Date: January 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Associated Banc-Corp (NYSE:ASB) reported strong financial results with adjusted earnings per share of $0.57, reflecting the strength of its core businesses.
• The company achieved significant growth in core customer deposits, increasing by nearly $900 million in the fourth quarter.
• ASB successfully raised over $300 million in new capital through a common stock issuance, which was used for balance sheet repositioning.
• The company added two respected business leaders to its Board of Directors and elevated three senior business line leaders to its executive leadership team.
• ASB's commercial and business lending segments showed robust growth, contributing over $300 million to total loan growth in the fourth quarter.

Negative Points

• The fourth quarter results were impacted by nonrecurring items tied to balance sheet repositioning, resulting in a $130 million loss from the sale of mortgages and a $148 million net loss on security sales.
• Total noninterest expense increased by $9 million from the third quarter, driven by strategic investments and hiring, which could pressure future profitability.
• The company's allowance for credit losses increased by $5 million in the fourth quarter, reflecting some migration into criticized loans.
• Total bank-wide delinquencies increased to $80 million for the quarter, indicating potential credit quality concerns.
• ASB's net interest margin only expanded by 3 basis points to 2.81%, with expectations of further pressure due to asset sensitivity and potential rate cuts.

Q & A Highlights

Q: Derek, could you discuss the trajectory of the margin from the fourth quarter's 2.81% and the impact of the restructuring? Also, could you elaborate on funding dynamics given the expected growth in deposits and loans? A: Derek Meyer, CFO: We expect a stable margin outlook once we benefit from the restructuring, potentially reaching closer to 3%. The market bias suggests fewer rate cuts, which could provide upside. Our hedging strategies and securities repositioning should help stabilize and potentially increase margins. Regarding funding, we aim to close the gap between loan and deposit growth, primarily through core deposits, and expect to reduce reliance on wholesale funding.

Q: Andy, could you explain the expected $1.2 billion C&I growth for this year compared to the previous $750 million forecast? A: Andrew Harmening, CEO: The increase is due to our completed hiring of high-quality relationship managers (RMs) and their ramped-up production. We have clearer visibility into 2025's potential, with growth largely driven by commercial activities. Additionally, our asset-based lending and leasing business, which has grown significantly, continues to offer opportunities.

Q: Pat, regarding the credit side, how far along are you in the deep dive on the loan portfolio, and should we expect continued migration in loan ratings? A: Patrick Ahern, Chief Credit Officer: The deep dives are ongoing, aimed at early recognition of credit changes. This proactive approach helps us stay ahead of potential stress, and we haven't seen a buildup in nonaccruals, indicating we're managing risks effectively.

Q: Andy, with the significant changes made, do you think major changes are over, particularly regarding the balance sheet structure? A: Andrew Harmening, CEO: We've largely completed the necessary changes, especially in reducing residential real estate concentration. While we have no major changes planned for 2024, we remain open to opportunities that align with our growth strategy. Our focus is on executing organic growth.

Q: Andy, how do record-high customer satisfaction scores translate into growth, and does this support the 6% core consumer deposit growth target? A: Andrew Harmening, CEO: Improved customer satisfaction and household growth directly impact deposit growth. We've seen a 23% increase in account quality, and each 1% growth in households equates to $150 million in additional balances. Our strategies, including a new deposit vertical and enhanced RM capabilities, support our confidence in achieving the deposit growth target.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.