Associated Banc-p(US:ASB)2024-10-29 20:17PART I. Financial Information Financial Statements The unaudited consolidated financial statements detail the financial position, operations, and cash flows, showing asset growth to $42.2 billion and a net income increase to $284.8 million for the nine months ended September 30, 2024 Consolidated Balance Sheets Total assets increased to $42.2 billion by September 30, 2024, driven by growth in net loans and available-for-sale investment securities, with corresponding increases in liabilities and stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 (Unaudited) | Dec 31, 2023 (Audited) | | :--- | :--- | :--- | | Total Assets | $42,210,815 | $41,015,855 | | Loans, net | $29,629,131 | $28,865,124 | | AFS investment securities, at fair value | $4,152,527 | $3,600,892 | | HTM investment securities, net | $3,769,150 | $3,860,160 | | Goodwill | $1,104,992 | $1,104,992 | | Total Liabilities | $37,797,579 | $36,841,882 | | Total deposits | $33,554,298 | $33,446,049 | | Short-term funding | $917,028 | $326,780 | | FHLB advances | $1,913,294 | $1,940,194 | | Total Stockholders' Equity | $4,413,236 | $4,173,973 | Consolidated Statements of Income Net income for the nine months ended September 30, 2024, increased to $284.8 million, despite a slight decrease in net interest income and higher provision for credit losses Income Statement Summary (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $776,960 | $786,171 | $262,509 | $254,244 | | Provision for credit losses | $68,000 | $62,014 | $20,991 | $21,943 | | Noninterest Income | $197,365 | $194,195 | $67,221 | $66,579 | | Noninterest Expense | $594,115 | $574,291 | $200,597 | $196,205 | | Net Income | $284,760 | $273,762 | $88,018 | $83,248 | | Net Income Available to Common Equity | $276,135 | $265,137 | $85,143 | $80,373 | | Diluted EPS | $1.82 | $1.75 | $0.56 | $0.53 | Consolidated Statements of Comprehensive Income Total comprehensive income significantly increased to $344.1 million for the nine months ended September 30, 2024, primarily due to net income and a positive shift in other comprehensive income Comprehensive Income Summary (in thousands) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net Income | $284,760 | $273,762 | | Total Other Comprehensive Income (Loss) | $59,348 | $(66,340) | | Comprehensive Income | $344,108 | $207,422 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $4.41 billion by September 30, 2024, driven by net income and positive other comprehensive income, partially offset by dividends - Stockholders' equity grew to $4.41 billion by the end of Q3 2024, up from $4.17 billion at the start of the year1517 - Key drivers for the equity change in the first nine months of 2024 include net income of $284.8 million, offset by common stock dividends of $100.6 million and preferred stock dividends of $8.6 million151617 Consolidated Statements of Cash Flows Net cash provided by operating activities was $373.1 million for the nine months ended September 30, 2024, with investing activities using $1.17 billion and financing activities providing $843.1 million Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $373,120 | $378,110 | | Net cash (used in) investing activities | $(1,173,035) | $(2,224,411) | | Net cash provided by financing activities | $843,134 | $1,937,635 | | Net increase in cash and cash equivalents | $43,219 | $91,334 | Notes to Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, investment and loan portfolios, credit quality, goodwill, funding, derivatives, and segment reporting Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial condition and results of operations, highlighting a slight decrease in net interest income to $777 million and growth in average loans and deposits for the nine months ended September 30, 2024 Performance Summary The performance summary for the first nine months of 2024 shows growth in average loans and deposits, a decrease in net interest income, and an increase in the provision for credit losses - Average loans increased by $135 million year-over-year, driven by auto finance and commercial lending197 - Average deposits grew by $2.0 billion (6%) year-over-year, led by increases in time and interest-bearing demand deposits198 - Net interest income decreased by 1% to $777 million, and the net interest margin fell to 2.77% from 2.86% in the prior year period, attributed to interest-bearing liability growth outpacing earning asset growth199 - The provision for credit losses was $68 million, up from $62 million in the first nine months of 2023, reflecting macroeconomic trends200 Income Statement Analysis Income statement analysis reveals a 1% decrease in net interest income due to rising liability costs, a 2% increase in noninterest income, and a 3% rise in noninterest expense Net Interest Income Analysis (Nine Months Ended Sep 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Average Earning Assets ($ thousands) | $37,929,019 | $37,413,946 | | Average Interest-Bearing Liabilities ($ thousands) | $30,573,791 | $28,970,746 | | Net Interest Income ($ thousands) | $776,960 | $786,171 | | Net Interest Margin (FTE) | 2.77% | 2.86% | - Noninterest income increased by $3 million (2%) YoY, driven by a $7 million increase in wealth management fees and a $4 million increase in investment securities gains201218219 - Noninterest expense increased by $20 million (3%) YoY, primarily due to a $14 million rise in personnel expense and a $4 million increase in FDIC expense202220221 - The effective tax rate for the first nine months of 2024 was 8.79%, down significantly from 20.43% in the prior-year period, due to deferred tax benefits from a strategic reallocation of the investment portfolio and a legal entity rationalization plan222 Balance Sheet Analysis Total assets grew to $42.2 billion by September 30, 2024, driven by loan and AFS securities growth, while credit quality remained stable with nonaccrual loans decreasing - Total assets grew by $1.2 billion (3%) from Dec 31, 2023, reaching $42.2 billion224 Loan Composition as of Sep 30, 2024 (in thousands) | Loan Category | Amount | % of Total | | :--- | :--- | :--- | | Total Commercial | $18,564,683 | 62% | | Total Consumer | $11,426,214 | 38% | | Total Loans | $29,990,897 | 100% | Nonperforming Assets (in thousands) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total nonaccrual loans | $128,476 | $148,997 | | Total nonperforming assets | $148,098 | $160,421 | | NPAs to total assets | 0.35% | 0.39% | - The Allowance for Credit Losses on Loans (ACLL) was $397.5 million, or 1.33% of total loans, at September 30, 2024260261 Liquidity and Capital Resources The Corporation maintains strong liquidity with $12.5 billion available and capital ratios well above regulatory minimums, while also increasing its common stock dividend - Total available liquidity stood at $12.5 billion as of September 30, 2024277 - Estimated uninsured and uncollateralized deposits were 22.3% of total deposits at September 30, 2024. Secured funding available within one business day covered these deposits by 127%269277 Capital Ratios as of Sep 30, 2024 | Ratio | Value | | :--- | :--- | | CET1 capital ratio | 9.72% | | Tier 1 capital ratio | 10.30% | | Total capital ratio | 12.36% | | Tier 1 leverage ratio | 8.49% | - On October 29, 2024, the Board of Directors declared a quarterly cash dividend of $0.23 per common share, an increase of $0.01 from the previous quarter323 Quantitative and Qualitative Disclosures About Market Risk The Corporation manages market and interest rate risk through ALCO, using simulation models to assess Earnings at Risk and Market Value of Equity, with an asset-sensitive profile as of September 30, 2024 Estimated % Change in Earnings at Risk (EAR) Over 12 Months | Gradual Rate Change | Dynamic Forecast (Sep 30, 2024) | Static Forecast (Sep 30, 2024) | | :--- | :--- | :--- | | 100 bp increase | 1.6% | 1.5% | | 100 bp decrease | (1.0)% | (0.7)% | Estimated % Change in Market Value of Equity (MVE) | Instantaneous Rate Change | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | 100 bp increase | (9.8)% | (10.1)% | | 100 bp decrease | 8.7% | 9.7% | - The Corporation's interest rate risk profile is asset sensitive as of September 30, 2024, indicating that a higher yield curve generally adds to income284 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of September 30, 2024329 - No material changes were made to the internal control over financial reporting during the third quarter of 2024330 PART II. Other Information Legal Proceedings The Corporation is involved in various legal proceedings arising from normal business, which management believes will not have a material adverse financial effect - The company is involved in various legal proceedings from normal business operations but does not expect them to have a material adverse financial impact141145 Risk Factors No material changes to the risk factors previously disclosed in the Corporation's 2023 Annual Report on Form 10-K have been reported - No material changes in risk factors were reported since the 2023 Form 10-K334 Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2024, the Corporation repurchased 15,537 common shares for $347,000 solely for tax withholding on equity compensation, with $61 million remaining authorized for repurchase Common Stock Purchases (Q3 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1 - July 31, 2024 | 6,764 | $22.91 | | Aug 1 - Aug 31, 2024 | 8,396 | $21.94 | | Sep 1 - Sep 30, 2024 | 377 | $21.27 | | Total | 15,537 | $22.35 | - All share repurchases in Q3 2024 were for minimum tax withholding settlements on equity compensation335 Other Information No director or officer of the Corporation adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the third quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading plan in Q3 2024337 Exhibits This section lists exhibits filed with the Form 10-Q, including the Global Note, a retirement agreement, Sarbanes-Oxley certifications, and interactive data files - Exhibits filed include certifications by the CEO and CFO, a retirement agreement, and interactive data files339340341