8-K: Associated Banc-Corp Achieves Record Net Interest Income and Strong Loan Growth in Q2 2025

Associated Banc-Corp reported second quarter 2025 earnings of $0.65 per common share, driven by record net interest income and robust commercial and industrial loan growth, while maintaining a strong capital position.

Summary

• Net income available to common equity was $108 million, or $0.65 per common share, for the quarter ended June 30, 2025.
• This compares to earnings of $99 million, or $0.59 per common share, for the prior quarter (March 31, 2025), and $113 million, or $0.74 per common share, for the same period last year (June 30, 2024).
• Net interest income reached a record $300 million, increasing 5% from the prior quarter and 17% from the same period last year.
• Net interest margin expanded to 3.04%, a 7 basis point increase from the prior quarter and a 29 basis point increase from the same period last year.
• Total period-end loans were $30.6 billion, up 1% from the prior quarter and 3% from the same period last year.
• Commercial and industrial (C&I) loans grew by $339 million from the prior quarter and $1.3 billion from the same period last year, reaching $12.4 billion.
• Total period-end deposits were $34.1 billion, decreasing 3% from the prior quarter but increasing 4% from the same period last year.
• Core customer deposits were $28.3 billion, down 3% from the prior quarter but up 4% from the same period last year.
• Noninterest income was $67 million, increasing $8 million from the prior quarter, primarily due to a $7 million loss recognized in the first quarter related to a mortgage sale settlement.
• Noninterest expense was $209 million, a $1 million decrease from the prior quarter.
• Provision for credit losses was $18 million, compared to $13 million in the prior quarter and $23 million in the same period last year.
• Nonaccrual loans decreased by $22 million from the prior quarter to $113 million, with the nonaccrual loans to total loans ratio improving to 0.37% from 0.44%.
• Net charge-offs were $13 million, increasing from $9 million in the prior quarter but decreasing from $21 million in the same period last year.
• The Allowance for Credit Losses on Loans (ACLL) increased by $5 million to $412 million, representing 1.35% of total loans.
• The Common Equity Tier 1 (CET1) capital ratio was 10.20% at June 30, 2025, exceeding Basel III well-capitalized benchmarks.
• Book value per share was $27.67 and tangible book value per share was $20.84.

Sentiment

Score: 8

Explanation: The company delivered strong financial results with record net interest income, significant margin expansion, and robust commercial loan growth. Credit quality metrics improved, and capital ratios remain strong. Raised full-year guidance for key profitability metrics indicates positive momentum, despite a slight quarter-over-quarter decline in total deposits and a year-over-year dip in EPS.

Positives

• Record net interest income of $300 million, a 17% increase year-over-year.
• Net interest margin expanded to 3.04%, up 29 basis points year-over-year.
• Strong commercial and industrial (C&I) loan growth, increasing $339 million quarter-over-quarter and $1.3 billion year-over-year.
• Diluted earnings per common share increased to $0.65 from $0.59 in the prior quarter.
• Nonaccrual loans decreased by $22 million quarter-over-quarter and $41 million year-over-year, indicating improved credit quality.
• CET1 capital ratio of 10.20% remains strong and above regulatory benchmarks.
• Total liquidity sources covered 173% of uninsured, uncollateralized deposits as of June 30, 2025.
• Raised full-year 2025 guidance for total net interest income growth to 14% to 15% (from 12% to 13%).
• Raised full-year 2025 guidance for total noninterest income growth to 1% to 2% (from 0% to 1%).
• Noninterest expense decreased by $1 million quarter-over-quarter, contributing to an improved efficiency ratio of 55.81%.

Negatives

• Diluted earnings per common share of $0.65 decreased from $0.74 in the same period last year.
• Total period-end deposits decreased 3% ($1.0 billion) from the prior quarter.
• Core customer deposits decreased $833 million from the prior quarter.
• Consumer lending decreased $128 million from the prior quarter and $374 million from the same period last year.
• Net charge-offs increased to $13 million from $9 million in the prior quarter.
• Raised full-year 2025 guidance for total noninterest expense growth to 4% to 5% (from 3% to 4%).

Risks

• Factors which may cause actual results to differ materially from forward-looking statements include those identified in the Company’s most recent Form 10-K and subsequent Form 10-Qs and other SEC filings, which are incorporated by reference.

Future Outlook

Management now expects total net interest income growth of 14% to 15% in 2025, an increase from the previous guidance of 12% to 13%. Total noninterest income growth is now expected to be between 1% and 2% in 2025, up from 0% to 1%, after adjusting for prior mortgage and investment securities sales impacts. Total noninterest expense is now expected to grow by 4% to 5% in 2025, up from 3% to 4%, after adjusting for the loss on FHLB advances prepayments. The company continues to expect 2025 period-end loan growth of 5% to 6% and period-end core customer deposit growth of 4% to 5%. Total deposit growth guidance for 2025 has been updated to 1% to 3% (from 1% to 2%). The annual effective tax rate is still expected to be between 19% and 21%, and the CET1 capital ratio target remains 10% to 10.5% in 2025.

Management Comments

• President & CEO Andy Harmening stated, "Midway through 2025, Associated Bank is seeing strong momentum from the strategic actions we’ve taken over the past several quarters."
• Harmening highlighted, "In the second quarter, we delivered over $350 million in additional C&I loan growth, another 7 basis points of margin expansion, and the best checking household growth we’ve seen since we began tracking a decade ago—all of which contributed to the strongest quarterly net interest income we've seen in company history."
• Harmening also noted, "Importantly, we also delivered another 9 basis points of CET1 capital accretion and solid credit performance."
• Harmening concluded, "While uncertainty has been an ongoing theme at the macro level, we feel well-positioned to build on our momentum over the back half of the year thanks to our strengthened profitability profile, solid capital position, and disciplined approach to growth. We look forward to providing additional updates on our progress along the way."

Industry Context

The company's strong performance, particularly in net interest income and margin expansion, indicates effective balance sheet management and loan growth strategies amidst a macro environment characterized by ongoing uncertainty. The focus on commercial and industrial lending aligns with a strategy to capture business growth opportunities, while the slight decline in total deposits quarter-over-quarter could reflect broader industry trends of deposit migration or competition for funding, though core customer deposits show resilience year-over-year.

Comparison to Industry Standards

• Not explicitly detailed in the filing.

Stakeholder Impact

• Shareholders: Positive impact due to increased earnings per share quarter-over-quarter, record net interest income, and strong capital position, potentially supporting future dividends and share value.
• Customers: Continued focus on commercial and industrial lending suggests strong support for business clients, while efforts to deepen customer relationships aim to benefit deposit holders.
• Employees: Stable financial performance and strategic growth initiatives imply job security and potential for growth within the company.

Next Steps

• Continue to build on momentum over the back half of 2025 through strengthened profitability profile, solid capital position, and disciplined growth approach.
• Provide additional updates on progress along the way.

Key Dates

Recommendation

The company's second-quarter results demonstrate strong operational execution, highlighted by record net interest income and significant net interest margin expansion. Robust commercial and industrial loan growth, coupled with improving credit quality metrics (e.g., declining nonaccrual loans), indicates a healthy underlying business. The upward revision of full-year guidance for net interest income and noninterest income signals management's confidence in continued positive momentum. While total deposits saw a slight quarter-over-quarter decline, the year-over-year growth and maintained core customer deposit guidance are reassuring. The strong capital position provides a solid foundation for future growth and resilience. These factors collectively suggest a positive outlook for the stock.

Keywords

Banking, Financial Services, Regional Bank, Commercial Lending, Deposits, Net Interest Income, Earnings, ASB, Credit Quality, Capital Ratios