Associated Banc-Corp: Strong Deposit and Loan Growth Drives Q4 2024 Results

Associated Banc-Corp (ASB) reported robust financial performance in the fourth quarter of 2024, driven by significant core deposit and loan growth. Despite challenges from nonrecurring items, the company's adjusted earnings per share (EPS) of $0.57 reflected the strength of its core businesses. ASB's strategic focus on core deposit and loan growth aligns with its long-term growth strategy, offering potential rewards and risks that investors should consider.



Core Deposit and Loan Growth

ASB achieved nearly $900 million in core deposit growth in the fourth quarter, reducing its reliance on wholesale funding and improving funding dynamics. The company's commercial and business lending segments contributed over $300 million to total loan growth, demonstrating the bank's ability to originate new loans and attract customers.



Nonrecurring Items and Balance Sheet Repositioning

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. However, ASB successfully raised over $300 million in new capital through a common stock issuance, which was used for balance sheet repositioning and reducing residential real estate concentration.

Credit Quality and Margin Pressure

ASB's total bank-wide delinquencies increased to $80 million for the quarter, indicating potential credit quality concerns. The company's allowance for credit losses increased by $5 million in the fourth quarter, reflecting some migration into criticized loans. Additionally, ASB's net interest margin expanded by only 3 basis points to 2.81%, with expectations of further pressure due to asset sensitivity and potential rate cuts.

Management's Outlook and Strategies

ASB's management expects a stable margin outlook once it benefits from the restructuring, potentially reaching closer to 3%. The company aims to close the gap between loan and deposit growth, primarily through core deposits, and reduce reliance on wholesale funding. ASB plans to maintain and build upon its strong customer satisfaction scores by improving customer satisfaction and household growth, launching a new deposit vertical, and enhancing relationship manager (RM) capabilities.



Investor Takeaways

Investors should monitor ASB's core deposit and loan growth, customer satisfaction scores, deposit-to-loan ratio, and credit quality metrics to evaluate the company's underlying financial performance and future prospects. By focusing on these key drivers, investors can better understand ASB's plans to maintain and build upon its strong customer satisfaction scores and drive deposit growth in the coming quarters.

In conclusion, ASB's strong deposit and loan growth in the fourth quarter of 2024 demonstrates the company's commitment to its long-term growth strategy. While nonrecurring items impacted quarterly earnings, investors should focus on the company's core earnings, loan and deposit growth, net interest margin, balance sheet repositioning, and credit quality metrics to assess its financial health and growth potential.