ASB-PE — Associated Banc-Corp

Summary of Associated Banc-Corp Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Earnings: Q4 earnings per share (EPS) were $0.80, while full-year EPS reached $2.77.
• Net Interest Income (NII): Set a record at $310 million for Q4, up 15% year-over-year.
• Total Loans: Grew 1% quarter-over-quarter and 5% year-over-year, primarily driven by a 2% increase in Commercial & Industrial (C&I) loans.
• Core Deposits: Increased by nearly $700 million in Q4, totaling a 3.5% growth rate year-over-year.
• Return on Average Tangible Common Equity (ROTCE): Increased to over 15% in Q4, with an annual ROTCE of 13.6%.
• Credit Quality: Non-accrual loans decreased to 32 basis points of total loans, with net charge-offs at just 3 basis points for the quarter.

2. Strategic Updates and Business Highlights

• Strategic Investments: Completed Phase two of the strategic plan, focusing on organic growth and market share expansion in major metropolitan areas.
• Acquisition Announcement: Agreement to acquire American National Corporation, enhancing presence in Omaha and strengthening position in the Twin Cities.
• Customer Growth: Achieved the strongest year for organic household growth in a decade, with significant C&I loan growth and a shift from low-yielding residential mortgages to higher-value commercial loans.
• Market Focus: Plans to invest in growth markets including the Twin Cities, Omaha, Kansas City, and Dallas, with a focus on hiring additional relationship managers (RMs).

3. Forward Guidance and Outlook

• 2026 Expectations:
  • Total loan growth projected at 5% to 6%, with C&I loan growth expected between 9% to 10%.
  • Core customer deposits anticipated to grow by 5% to 6%.
  • NII growth forecasted between 5.5% and 6.5%, assuming two Federal Reserve rate cuts.
  • Non-interest income expected to increase by 4% to 5%.
• Expense Management: Anticipated non-interest expense growth of 3% in 2026, excluding the impact of the American National acquisition.

4. Bad News, Challenges, or Points of Concern

• Residential Mortgage Portfolio: Continued decline in low-yielding residential mortgage loans, which may impact overall loan growth.
• Market Conditions: Ongoing macroeconomic uncertainties, including inflation and interest rate pressures, which could affect credit quality and loan performance.
• Competitive Pressures: Concerns regarding deposit betas and competition for deposits, which could impact net interest margin (NIM) stability.

5. Notable Q&A Insights

• Integration of American National: Management expressed confidence in the strategic fit and potential growth opportunities post-acquisition, though specific financial impacts remain to be clarified.
• Loan and Deposit Growth: Management indicated that new hires in key markets are expected to contribute to loan and deposit growth, with a strong pipeline suggesting continued momentum.
• Credit Quality Monitoring: While current credit metrics are strong, management remains vigilant about potential risks stemming from economic conditions, particularly in real estate.
• Capital Management: The focus remains on organic growth, with capital generation expected to provide options for future investments or potential buybacks.

Overall, Associated Banc-Corp reported strong financial performance in 2025, driven by strategic investments and organic growth initiatives. The outlook for 2026 remains positive, although the company acknowledges potential challenges in the macroeconomic environment and competitive landscape.