8-K: Associated Banc-Corp Reports Full Year 2024 Earnings, Impacted by Repositioning

Associated Banc-Corp's full year 2024 earnings were $0.72 per common share, or $2.38 excluding nonrecurring items related to balance sheet repositioning.

Summary

• Associated Banc-Corp reported net income available to common equity of $112 million, or $0.72 per common share, for the year ended December 31, 2024, compared to $171 million, or $1.13 per common share, for the year ended December 31, 2023.
• For the quarter ended December 31, 2024, the company reported a loss of $164 million, or $1.03 per common share, compared to a loss of $94 million, or $0.62 per common share for the quarter ended December 31, 2023.
• Excluding nonrecurring items, the company reported adjusted earnings of $367 million, or $2.38 per common share for the year, and $91 million, or $0.57 per common share for the fourth quarter.
• Nonrecurring items in the fourth quarter included a $130 million loss on a mortgage portfolio sale and a $148 million net loss on a sale of investments.
• Total deposit growth for the year was $1.2 billion, with total core customer deposit growth also at $1.2 billion.
• Total loan growth was $552 million, with adjusted total loan growth of $1.3 billion.
• Net interest income for the year was $1.0 billion.
• Total noninterest loss was $(9) million, with adjusted noninterest income of $269 million.
• Total noninterest expense was $818 million, with adjusted noninterest expense of $804 million.
• The provision for credit losses was $85 million, and the net charge offs to average loans ratio was 0.23%.
• The company expects total period end loan growth of 5% to 6% in 2025.
• The company expects total period end deposit growth of 1% to 2% and core customer deposit growth of 4% to 5% in 2025.
• The company expects total net interest income growth of 12% to 13% in 2025.
• After adjusting to exclude the impact of the mortgage and investment securities sales announced during the fourth quarter of 2024, the company expects total noninterest income growth of between 0% and 1% in 2025.
• After adjusting to exclude the $14 million impact of the loss on prepayments of FHLB advances recognized in the fourth quarter of 2024, the company expects total noninterest expense to grow by 3% to 4% in 2025.
• In 2025, the company expects the annual effective tax rate to be between 19% and 21%, assuming no change in the corporate tax rate.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the company reported a loss for the quarter, it also highlighted positive trends in deposit and loan growth, and provided optimistic guidance for 2025. The balance sheet repositioning is expected to improve profitability in the future.

Positives

• Total deposit growth of $1.2 billion and total core customer deposit growth of $1.2 billion were achieved.
• Total loan growth was $552 million, with adjusted total loan growth of $1.3 billion.
• The company expects total net interest income growth of 12% to 13% in 2025.
• The CET1 capital ratio remains strong at 10.00% at December 31, 2024.
• The company expects total period end loan growth of 5% to 6% in 2025.
• The company expects total period end deposit growth of 1% to 2% and core customer deposit growth of 4% to 5% in 2025.
• Commercial and business lending increased $338 million from the prior quarter and increased $924 million from the same period last year to $11.7 billion.

Negatives

• The company reported a loss of $164 million, or $1.03 per common share, for the quarter ended December 31, 2024.
• Full year 2024 noninterest income of negative $9 million decreased $73 million from the prior year.
• The decrease was primarily driven by nonrecurring items associated with the balance sheet repositioning announced during the fourth quarter of 2024, including a $130 million loss on a mortgage portfolio sale and a $148 million net loss on a sale of investments.

Risks

• The company's forward-looking statements are subject to risks and uncertainties, and actual results may differ materially.
• Factors which may cause actual results to differ materially from those contained in such forward-looking statements include those identified in the company's most recent Form 10-K and subsequent SEC filings.

Future Outlook

The company expects total period end loan growth of 5% to 6%, total period end deposit growth of 1% to 2%, core customer deposit growth of 4% to 5%, and total net interest income growth of 12% to 13% in 2025. The company expects the annual effective tax rate to be between 19% and 21% in 2025.

Management Comments

• '2024 was a year of significant progress for Associated,' said President and CEO Andy Harmening.
• 'We're entering 2025 with several tailwinds including record-high customer satisfaction scores, net customer household growth, balance sheet growth, and a strengthened profitability profile.'

Industry Context

This announcement reflects the ongoing trends in the banking industry, including balance sheet repositioning in response to changing interest rates and economic conditions. Banks are focused on improving efficiency, growing core customer deposits, and managing credit risk.

Comparison to Industry Standards

• Comparing Associated Banc-Corp's CET1 ratio of 10.00% to peers like Huntington Bancshares (10.1%) and Fifth Third Bancorp (10.4%) suggests a similar capital adequacy position.
• The net interest margin of 2.78% is within the range of regional banks, but lower than some high-performing institutions like Western Alliance Bancorporation (3.6%).
• Loan growth of 2% is moderate compared to some fast-growing banks like Axos Financial (20%), but reflects a more conservative approach.
• The efficiency ratio of 69.58% is higher than some of the most efficient banks like U.S. Bancorp (54%), indicating room for improvement in operational efficiency.

Stakeholder Impact

• Shareholders will be impacted by the lower earnings in 2024, but may benefit from the expected improvements in 2025.
• Employees may be affected by the company's strategic initiatives and cost management efforts.
• Customers may benefit from the enhanced consumer value proposition and digital upgrades.
• Creditors will be interested in the company's capital ratios and asset quality.

Next Steps

• The company expects the loan sale to close in 1Q 2025.
• The company expects the repositioning to be completed in 1Q 2025 with the full financial impact realized beginning in 2Q 2025.

Key Dates