Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Associated Banc-Corp (ASB, Financial) reported a strong asset quality trend, with non-accruals and net charge-offs decreasing meaningfully during the quarter.
- The company achieved a 2% growth in core customer deposits from the prior quarter, demonstrating the effectiveness of their strategic initiatives.
- ASB's net interest margin increased by 3 basis points, driven by balance sheet growth and an expansion of asset yields.
- The company saw a $6 million increase in net interest income and a $2 million increase in non-interest income, led by growth in wealth management fees.
- ASB's CET1 ratio improved to 9.72%, marking the highest level since Q1 2022, reflecting strong capital accretion.
Negative Points
- The company expects total loan growth to land at the lower end of their original 4% to 6% range for 2024.
- ASB's non-interest expense increased to $201 million for the quarter, driven by legal, professional, and FDIC assessment costs.
- The company anticipates net interest income growth of only 0% to 1% for 2024, indicating limited upside in the current rate environment.
- ASB's criticized and classified loans increased, primarily due to migration within CRE loans, though not seen as a systemic issue.
- The company expects core customer deposit growth to finish 2024 at the lower end of their original 3% to 5% growth range.
Q & A Highlights
Q: Can you discuss the outlook for loan growth in the fourth quarter and what your customers are saying about their borrowing appetite?
A: We expect steady growth due to our seasoned commercial team and steady auto book. Payoffs in commercial real estate may decrease, and we've cleaned up our portfolio, reducing exits. This positions us well for steady growth in the lower end of our original range.
Q: What are your thoughts on the increase in criticized loans? Is this a one-time step up or a trend?
A: The increase is due to a few select credits and not indicative of a systemic issue. We expect some of these credits to see upgrades in the next quarter or two. Our long-term customer relationships in CRE remain strong, and we are confident in addressing these issues.
Q: How has your deposit strategy changed following the Fed's recent rate announcement, and what is your outlook on deposit betas?
A: We've seen the industry drop rates aggressively, allowing us to do the same. We expect deposit betas to be around 51% to 56% for interest-bearing deposits and 45% to 46% for total deposits through next December.
Q: Can you provide more detail on the funding costs at the end of September and the impact on pricing dynamics?
A: Our CD rates were dynamic throughout the quarter, starting at 5% and adjusting to 4.5% and then 4%. Our CD book was flat quarter-over-quarter, with production rates in the brokered market having four handles.
Q: What is your expectation for non-interest income growth, particularly in wealth management fees?
A: We are pleased with our wealth business, driven by market performance and increased referrals. We expect continued growth as we expand our customer base and enhance our mass affluent strategy, which feeds into private wealth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
