Associated Banc-Corp ASB has announced balance sheet repositioning transactions to support its organic growth strategy. While the transactions will result in a net loss in fourth-quarter 2024 for the company, the strategy is focused on long-term growth and profitability. 

President and CEO Andy Harmening said, “This balance sheet repositioning supports and accelerates our organic strategy by enhancing our earnings profile, boosting capital, and providing additional capacity for loan growth.”

Details & Impact of ASB’s Balance Sheet Repositioning

As part of the balance sheet repositioning strategy, Associated Banc-Corp sold approximately $1.3 billion of investment securities (yielded 1.87% on average) and intends to sell $0.7 billion of low-yielding mortgage loans, primarily from single-product relationships. The sale of mortgage loans is expected to close in the first quarter of 2025.

The balance sheet repositioning transactions are expected to result in a post-tax loss of $253 million. 

ASB reinvested the proceeds from the sale of investment securities in almost $1.5 billion of higher-yielding securities. These securities will yield 5.08% on average.

Further, the repositioning will likely increase Associated Banc-Corp’s wholesale funding capacity by paying down FHLB advances and removing low-yielding assets from the books.

On a proforma basis, the repositioning is expected to add roughly $15.8 million to the third quarter 2024 net interest income and 19 basis points to the net interest margin. Further, it will enhance ASB’s earnings, boost capital and provide capacity for growth. Apart from these, the sale of mortgage loans will lower residential mortgage loans as a percentage of total loans.
 

Image Source: Associated Banc-Corp

Our Take on ASB’s Balance Sheet Repositioning Strategy

The balance sheet repositioning underscores Associated Banc-Corp’s commitment to long-term growth and profitability. While the immediate financial impact is a cause of concern, the company’s strategic vision – optimizing its asset mix, boosting capital and seizing growth opportunities – positions it well for success.

Shares of ASB have gained 22.8% in the past three months, outperforming the industry’s rally of 20.8%.
 

Image Source: Zacks Investment Research

At present, Associated Banc-Corp carries a Zacks Rank of 3 (Hold).

ASB’s Peers Worth a Look

Some better-ranked peers of ASB are Civista Bancshares CIVB and MidWestOne Financial Group MOFG, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Estimates for CIVB’s current-year earnings have been revised 9.1% upward in the past 60 days. The company’s shares have gained 38.1% in the past three months.

Estimates for MOFG’s current-year earnings have been revised 4.1% north in the past two months. The company’s shares have jumped 19.6% in the past three months.

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