Release Date: July 25, 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 GAAP earnings per share (EPS) of $0.74 for the quarter, including a one-time $33 million tax benefit.
- The company saw a significant improvement in customer satisfaction scores, achieving the highest net promoter scores since 2017.
- ASB experienced a net positive growth in consumer checking households in both Q1 and Q2, with the fastest rate of growth in over a decade.
- The company has added several new loan verticals and expanded its commercial team, contributing to a diversified asset base.
- ASB's credit performance remains solid, with decreases in delinquencies, criticized loans, and net charge-offs compared to the prior quarter.
Negative Points
- Average core customer deposits decreased by less than 1%, reflecting a slower deposit growth quarter.
- The pace of loan growth slowed in several categories due to payoffs and slightly lower loan demand in an elevated rate environment.
- Total interest expense for the quarter was $196 million, indicating ongoing funding cost pressures.
- ASB's net interest margin (NIM) decreased by 4 basis points due to higher funding costs and asset yield impacts.
- The company now expects total loan growth to land at the lower end of its original range of 4% to 6% due to market conditions and increased CRE payoffs.
Q & A Highlights
Q: Can you provide more details on the net interest income guidance and expected margin expansion for the rest of the year?
A: Andrew Harmening (President, CEO): We expect deposit and loan growth in both the third and fourth quarters, leading to steady NIM expansion throughout the second half of the year. Derek Meyer (CFO): Yes, we expect sequential increases in net interest income and margin expansion in both quarters, with a handful of basis points each.
Q: Was the FDIC assessment adjustment in the second quarter a negative adjustment?
A: Derek Meyer (CFO): Yes, it was a $2 million unwind of an accrual based on receiving the actual bill from the FDIC.
Q: What is driving the expected expense increase in the back half of the year?
A: Derek Meyer (CFO): The increase is personnel-driven due to new hires and investments in account acquisition, marketing, and segmentation to support growth.
Q: Can you provide more color on the expected margin expansion in the back half of the year?
A: Derek Meyer (CFO): The expansion is more mix-driven, with continued benefits from the investment portfolio and auto book, as well as expected C&I growth from new RMs. We also anticipate a more efficient deposit cost structure with potential Fed rate cuts.
Q: What factors are contributing to the lower loan growth expectation?
A: Andrew Harmening (President, CEO): We are still within our forecast range, but at the lower end due to proactive management of our CRE book and slower auto demand. However, our pipelines are up, and we expect new RM hires to contribute to growth in the second half.
Q: How many of the planned 26 RM hires have been completed?
A: Andrew Harmening (President, CEO): We have completed 10 net hires and expect to reach 100% by the end of the first quarter of 2025.
Q: What gives you confidence in the expected loan and deposit growth in the back half of the year?
A: Andrew Harmening (President, CEO): Our pipelines are up, and we expect less negative impact from CRE paydowns. On the deposit side, we have improved consumer capabilities and added RMs, with positive trends in household growth and customer satisfaction.
Q: What is the outlook for non-interest-bearing demand deposits?
A: Derek Meyer (CFO): We expect non-interest-bearing deposits to grow a few hundred million between now and the end of the year, with a focus on consumer growth and improved customer retention.
Q: How do you plan to manage expenses with the expected new hires?
A: Andrew Harmening (President, CEO): We continuously look for areas to cut expenses to invest in growth. This approach has been effective, and we expect to manage expenses similarly in 2025.
Q: Can you provide details on the $81 million of office CRE loans that matured in the first half of the year?
A: Derek Meyer (CFO): It was a mix of loans that we kept, paid off via sale, or refinanced. We expect a similar approach for the remaining maturities in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
