Associated Banc-Corp (ASB), the largest bank holding company based in Wisconsin, has demonstrated unwavering resilience and strategic execution amidst a dynamic financial landscape. With a focus on disciplined growth, innovative customer solutions, and prudent risk management, ASB has solidified its position as a leading Midwest banking franchise.
Company Overview
Founded in 1964 and headquartered in Green Bay, Wisconsin, Associated Banc-Corp has evolved from a small community bank serving the Green Bay area into a diversified financial institution serving a wide range of customers, including larger businesses, developers, municipalities, and individual account holders. The company's comprehensive suite of products and services, coupled with a strong presence across 16 states, has positioned it as a trusted partner for its clientele.
Strategic Initiatives
One of the key drivers of ASB's success has been its commitment to strategic initiatives. In 2021, the company launched its multiyear strategic plan, focusing on enhancing the customer experience, deepening relationships, and diversifying its loan portfolio. This disciplined approach has yielded tangible results, as evidenced by the company's strong financial performance and market share gains.
Historical Journey
Associated Bank's journey of expansion began in the 1990s when it started opening branches in Illinois and Minnesota, allowing the bank to diversify its customer base and loan portfolio. However, the early 2000s brought challenges as Associated, like many other banks, struggled during the subprime mortgage crisis. The bank had to work through elevated levels of nonperforming assets and charge-offs. To navigate the crisis, Associated took steps to strengthen its risk management practices and financial position, including raising capital, reducing exposure to risky loan products, and enhancing credit underwriting standards. By the mid-2010s, Associated had returned to profitability and growth.
In recent years, Associated has continued to execute on its strategy of controlled geographic expansion and product diversification. The bank has opened new locations throughout the Midwest while also building out specialty lending verticals like equipment finance and commercial real estate. Additionally, Associated has invested in modernizing its technology and digital capabilities to better serve its customers, demonstrating its ability to adapt and overcome challenges throughout its history.
Financials
As of September 30, 2024, Associated Banc-Corp reported total assets of $42.2 billion, reflecting a 3% increase from the prior year. This growth was primarily driven by a 3% expansion in the loan portfolio, which reached $30.0 billion, and a 15% increase in the bank's available-for-sale (AFS) investment securities, which stood at $4.2 billion.
The company's net interest income for the first nine months of 2024 was $777 million, a slight decrease of 1% compared to the same period in 2023. This decline was largely attributable to the growth in interest-bearing liabilities outpacing the expansion in earning assets, coupled with a narrower rate spread. However, Associated's proactive balance sheet management strategies, including the reduction in wholesale funding and the emphasis on core customer deposits, have mitigated the impact of the changing interest rate environment.
Complementing its strong lending performance, Associated Banc-Corp has also demonstrated resilience in its fee-based businesses. Noninterest income for the first nine months of 2024 increased by 2% year-over-year, reaching $197 million. This growth was primarily driven by a 7% increase in wealth management fees, an 11% rise in bank-owned life insurance income, and a significant surge in investment securities gains, which offset a decline in mortgage banking revenues.
For the most recent quarter, Associated Banc-Corp reported revenue of $326,981,000, net income of $88,018,000, operating cash flow of $105,124,000, and free cash flow of $93,438,000.
Associated Banc-Corp operates through three main reportable business segments: Corporate and Commercial Specialty, Community, Consumer, and Business, and Risk Management and Shared Services.
The Corporate and Commercial Specialty segment, which serves larger businesses, developers, not-for-profits, municipalities, and financial institutions, reported total revenue of $563.76 million for the first nine months of 2024, an 8% increase from the same period in 2023. Net income for this segment grew by 8% to $257.83 million, while average earning assets increased by 2% to $17.74 billion.
The Community, Consumer, and Business segment, which focuses on individuals and small to mid-sized businesses, generated $649.85 million in total revenue for the first nine months of 2024, up 4% year-over-year. Net income for this segment increased by 9% to $235.84 million, while average deposits grew by 1% to $18.34 billion.
The Risk Management and Shared Services segment reported total revenue of $239.28 million for the first nine months of 2024, a 46% increase from the prior year period. However, this segment also saw an increased net loss of $208.90 million, up 15% compared to the same period in 2023.
Risk Management
Prudent risk management has been a hallmark of Associated Banc-Corp's operations. The company's nonperforming assets ratio stood at 0.35% as of September 30, 2024, reflecting a decrease from the prior year's level of 0.43%. This strong asset quality is underpinned by the bank's disciplined underwriting practices, proactive portfolio monitoring, and targeted risk mitigation strategies.
Liquidity and Capital Position
To support its growth initiatives and maintain a robust capital position, Associated Banc-Corp has been actively managing its capital structure. As of September 30, 2024, the company's common equity tier 1 (CET1) ratio stood at 9.72%, well above the regulatory minimum requirements. This solid capital base provides the flexibility to pursue strategic opportunities while ensuring the bank's long-term stability and resilience.
Future Outlook
Looking ahead, Associated Banc-Corp remains optimistic about its future prospects. The company has provided guidance for 2024, expecting net interest income growth of 0% to 1% and noninterest income growth of -1% to 1% compared to the adjusted 2023 base. Furthermore, the bank has reiterated its commitment to maintaining disciplined expense management, with a forecast of 1% to 2% growth in noninterest expense (excluding the impact of FDIC special assessments) in 2024.
In the third quarter of 2024, Associated Banc-Corp saw encouraging signs of progress, with over $600 million in core customer deposit growth and nearly $300 million in C&I loan growth. The company continues to expect total loan growth to land at the lower end of their original range of 4-6% in 2024, and core customer deposit growth to finish 2024 at the lower end of their original 3-5% growth range.
Associated Banc-Corp expects their TCE ratio to remain in the range of 6.75-7.75% in 2024, and their CET1 ratio to remain in the range of 9-10% over the same timeframe.
Conclusion
In conclusion, Associated Banc-Corp's strategic execution, resilient performance, and prudent risk management have positioned the company as a formidable player in the Midwest banking landscape. With a diversified business model, a strong capital position, and a steadfast focus on customer-centric solutions, ASB is poised to continue its trajectory of sustainable growth and value creation for its shareholders.