ASSOCIATED BANC-CORP Q3 FY2024 earnings call

• Macro level: Third quarter showed U.S. economy slowing but Midwestern footprint had resiliency; Wisconsin unemployment at 2.9% and other Midwestern states below national average.
• Consumer: Transformed digital banking platform, deployed product enhancements, launched mass affluent program, saw highest net promoter and mobile banking scores, customer base growth, and higher deposit balances from new customers.
• Commercial: Added commercial and business RMs, progressing on plan to add 26 by early 2025, launched specialty deposit and payment solutions vertical, saw C&I loan growth and core earnings growth.
• Financial highlights: GAAP diluted EPS $0.56, core customer deposits grew, wholesale funding balances worked down, loan portfolio diversified, net interest margin increased by 3 basis points, noninterest income increased by $2 million, efficiency ratio decreased, CET1 ratio at 9.72%, nonaccruals and net charge offs decreased.

On the consumer side, the prime and super prime consumer base remained strong with highest net promoter and mobile banking satisfaction scores on record, customer base growth, and higher per household deposit balances. On the commercial side, they added strong producers, launched a new specialty deposit and payment solutions vertical, saw C&I loan growth and core earnings growth. Core customer deposits grew by over 2% from prior quarter and 2% year-over-year, total loans grew by over 1%, net interest margin increased by 3 basis points, noninterest income increased by $2 million, and noninterest expense was $201 million with efficiency ratio decreasing slightly. Revenue contribution details weren't explicitly broken down by percentage but focus was on growth in these segments.

• Net interest income: Expect growth of between 0 and 1% in 2024.
• Noninterest income: Expect growth of negative 1% to positive 1% in 2024 relative to adjusted 2023 base.
• Noninterest expense: Expect growth of 1% to 2% in 2024 excluding FDIC special assessment impact.
• Loan growth: Expect total loan growth to land at lower end of 4% to 6% range in 2024.
• Core customer deposit growth: Expect to finish 2024 at lower end of 3% to 5% growth range.

• Macroeconomic slowdown could impact business; need to monitor economic conditions.
• Interest rate risk related to balance sheet sensitivity and potential rate cuts.
• Credit risk with migration of some CRE loans into criticized categories, though not seen as systemic.

Q: How is your deposit strategy on non-CD products. How has that changed following last month's Fed announcement and more rates to come? And I asked because I do think of associate as being more of a an offensive bank playing offense. And then how do you see the down rate deposit beta tracking going forward?

A: Derek Meyer said deposit rates adjusted dynamically, with industry moving quickly on rate cuts allowing them to adjust, and deposit beta expected to be 46% by December next year assuming rate cuts.

Q: Follow-up on criticized CRE reserves?

A: Patrick Ahern said increase in CRE reserve was due to migration and monitoring of CRE office book for future cushion.

Q: Wealth management fees run rate?

A: Andrew Harmening said wealth management fees are a good run rate with referrals into the business increasing due to customer base growth and relationship deepening initiatives.

Q: Liability side movement and deposit pricing?

A: Andrew Harmening discussed dynamic CD pricing changes throughout the quarter and CD book details.

Q: Q4 seasonality on deposits and securities book fixed floating?

A: Derek Meyer said deposits have seasonality and tend to be strong, and the securities book is mostly fixed.