Associated Banc-p(ASB) - 2025 Q2 - Quarterly Report

PART I. Financial Information This section provides the unaudited financial statements and management's analysis of the company's financial condition and operational results Item 1. Financial Statements (Unaudited) The unaudited financial statements for June 30, 2025, show total assets of $44.0 billion and net income of $212.9 million, driven by increased net interest income Consolidated Balance Sheets Total assets increased to $44.0 billion by June 30, 2025, driven by loan growth and FHLB advances, while deposits slightly decreased Consolidated Balance Sheet Highlights (in thousands, as of June 30, 2025 vs. Dec 31, 2024) | Metric | Jun 30, 2025 (Unaudited) | Dec 31, 2024 (Audited) | Change | | :--- | :--- | :--- | :--- | | Total Assets | $43,993,729 | $43,023,068 | +2.25% | | Loans, net | $30,231,091 | $29,405,041 | +2.81% | | Total Deposits | $34,147,565 | $34,648,434 | -1.45% | | FHLB advances | $3,879,489 | $1,853,807 | +109.27% | | Total Liabilities | $39,212,948 | $38,417,506 | +2.07% | | Total Stockholders' Equity | $4,780,781 | $4,605,562 | +3.80% | Consolidated Statements of Income Net interest income rose 13.9% to $585.9 million for the six months ended June 30, 2025, contributing to an 8.2% increase in net income Consolidated Income Statement Summary (in thousands, Six Months Ended June 30) | Metric (except EPS) | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $585,940 | $514,451 | +13.9% | | Provision for credit losses | $30,999 | $47,009 | -34.1% | | Total Noninterest Income | $125,754 | $130,144 | -3.4% | | Total Noninterest Expense | $419,971 | $393,518 | +6.7% | | Net Income | $212,916 | $196,742 | +8.2% | | Net Income Available to Common Equity | $207,166 | $190,992 | +8.5% | | Diluted Earnings Per Common Share | $1.24 | $1.26 | -1.6% | Consolidated Statements of Comprehensive Income Comprehensive income significantly increased to $273.0 million for the six months ended June 30, 2025, driven by net income and positive other comprehensive income Comprehensive Income Summary (in thousands, Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Income | $212,916 | $196,742 | | Total Other Comprehensive Income (Loss) | $60,119 | $(48,117) | | Comprehensive Income | $273,035 | $148,625 | Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity grew to $4.78 billion by June 30, 2025, primarily due to comprehensive income, partially offset by dividends - Total stockholders' equity grew to $4.78 billion by June 30, 2025, up from $4.61 billion at the end of 2024[25] - Common stock dividends of $0.23 per share were paid in the second quarter of 2025[26] Consolidated Statements of Cash Flows Net cash provided by operating activities was $239.6 million, while financing activities provided $765.5 million, leading to a $240.5 million net increase in cash Cash Flow Summary (in thousands, Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $239,637 | $267,996 | | Net cash used in investing activities | $(764,621) | $(655,093) | | Net cash provided by financing activities | $765,485 | $422,369 | | Net increase in cash and cash equivalents | $240,501 | $35,272 | Notes to Consolidated Financial Statements Detailed notes explain accounting policies and financial data, covering investment securities, loans, funding, and segment reporting Note 5: Investment Securities The investment portfolio includes $5.04 billion in AFS and $3.67 billion in HTM securities, with unrealized losses attributed to interest rate changes Investment Securities Portfolio (in thousands, June 30, 2025) | Category | Amortized Cost | Fair Value | | :--- | :--- | :--- | | Total AFS investment securities | $5,007,880 | $5,036,508 | | Total HTM investment securities | $3,672,161 | $3,140,331 | - Management does not believe any unrealized losses at June 30, 2025 represent credit deterioration, attributing them primarily to changes in interest rates and market conditions[60] Note 6: Loans Total loans increased to $30.6 billion by June 30, 2025, with commercial loans forming the largest segment, and credit quality details provided Loan Composition (in thousands) | Loan Category | Jun 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total commercial | $19,704,154 | $18,928,090 | | Total consumer | $10,903,451 | $10,840,496 | | Total loans | $30,607,605 | $29,768,586 | - Total nonaccrual loans stood at $113.0 million as of June 30, 2025, down from $123.3 million at December 31, 2024[76][78] Note 8: Short and Long-Term Funding Funding structure shifted with FHLB advances more than doubling to $3.88 billion, while short-term and other long-term funding decreased Funding Composition (in thousands) | Funding Source | Jun 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Short-term funding | $75,585 | $470,369 | | FHLB advances | $3,879,489 | $1,853,807 | | Other long-term funding | $593,530 | $837,635 | - In January 2025, $250.0 million of 10-year subordinated notes matured and were repaid, contributing to the decrease in long-term funding[102] Note 14: Segment Reporting The Corporation operates three segments, with Community, Consumer, and Business generating the highest net income at $171.8 million Net Income by Segment (in thousands, Six Months Ended June 30, 2025) | Segment | Net Income (Loss) | | :--- | :--- | | Corporate and Commercial Specialty | $135,377 | | Community, Consumer, and Business | $171,782 | | Risk Management and Shared Services | $(94,241) | | Consolidated Net Income | $212,916 | - Effective in Q4 2024, the private wealth operating segment was moved from the Corporate and Commercial Specialty segment to the Community, Consumer and Business segment, with prior periods recast to reflect this change[159] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights strong first-half 2025 performance with 14% net interest income growth and expanded net interest margin, maintaining robust capital and liquidity Performance Summary First-half 2025 saw average loans increase 3% and net interest income grow 14% to $585.9 million, with net interest margin expanding to 3.01% - Average loans increased by $828.3 million (3%) from the first six months of 2024, driven by commercial and auto finance lending[191] - Net interest income rose by $71.5 million (14%) year-over-year, with net interest margin increasing to 3.01% from 2.77% due to balance sheet repositioning[191] - Noninterest expense increased by $26.5 million (7%) from the first six months of 2024, primarily due to annual merit increases, higher consultant fees, and OREO write-downs[191] Balance Sheet Analysis Total assets grew 2% to $44.0 billion by June 30, 2025, driven by loan growth and a 109% increase in FHLB advances, despite a 1% deposit decrease - Total assets reached $44.0 billion, up 2% from December 31, 2024, with loans increasing by $839.0 million[209] - FHLB advances increased by $2.0 billion (109%) to fund loan growth and manage seasonal deposit outflows[209] - Residential loans held for sale decreased by $549.9 million (85%) following the closing of a mortgage portfolio sale in January 2025[209] Credit Risk and Nonperforming Assets Credit risk is managed through diversification, with nonperforming assets at $148.2 million (0.48% of total loans plus OREO) and nonaccrual loans decreasing Nonperforming Assets (in thousands) | Metric | Jun 30, 2025 | Dec 31, 2024 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Total nonaccrual loans | $112,999 | $123,260 | $154,423 | | OREO | $34,287 | $20,217 | $8,325 | | Total nonperforming assets | $148,169 | $144,164 | $163,418 | | NPAs to total loans plus OREO | 0.48% | 0.48% | 0.55% | - The largest commercial and industrial industry exposures are in Real Estate (9% of total loan exposure) and Utilities (8% of total loan exposure)[216] Liquidity and Capital The Corporation maintains strong liquidity of $14.7 billion, covering uninsured deposits by 173%, and robust capital ratios exceeding regulatory minimums Key Capital Ratios (as of June 30, 2025) | Ratio | Value | Regulatory Minimum (Well-Capitalized) | | :--- | :--- | :--- | | CET1 capital ratio | 10.20% | 6.5% | | Tier 1 capital ratio | 10.77% | 8.0% | | Total capital ratio | 12.83% | 10.0% | | Tier 1 leverage ratio | 8.72% | 5.0% | - Total available liquidity was $14.7 billion at June 30, 2025, including $5.0 billion in FHLB capacity and $5.4 billion in Federal Reserve discount window capacity[252][254] - Estimated uninsured and uncollateralized deposits were 24.8% of total deposits at June 30, 2025, with available liquidity covering these deposits by 173%[253][254] Item 3. Quantitative and Qualitative Disclosures About Market Risk Market and interest rate risk are centrally managed, with the Corporation's asset-sensitive profile indicating a 1.6% earnings improvement from a 100 bp rate increase Estimated % Change in Rate Sensitive Earnings at Risk (EAR) Over 12 Months | Gradual Rate Change | Dynamic Forecast (Jun 30, 2025) | Static Forecast (Jun 30, 2025) | | :--- | :--- | :--- | | 100 bp increase | 1.6% | 1.4% | | 100 bp decrease | (1.0)% | (0.9)% | - The Corporation's interest rate risk profile is asset sensitive as of June 30, 2025, indicating that a higher yield curve generally adds to income[264] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, 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 June 30, 2025[308] - There were no material changes to the Corporation's internal control over financial reporting during the second quarter of 2025[309] PART II. Other Information This section provides other required information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The Corporation is involved in various legal proceedings, with management believing outcomes will not materially adversely affect its overall financial condition - The Corporation is party to various legal proceedings in the normal course of business and believes the outcomes will not have a material adverse effect on its overall financial condition[131][134] Item 1A. Risk Factors No material changes to risk factors were reported since the 2024 Annual Report on Form 10-K - No material changes in Risk Factors were reported since the 2024 Annual Report on Form 10-K[312] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Corporation repurchased 4,134 common shares for tax withholding in Q2 2025, with $39.1 million remaining authorized for repurchase Common Stock Purchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 1,045 | $21.41 | | May 2025 | 2,088 | $22.95 | | June 2025 | 1,001 | $22.88 | | Total | 4,134 | $22.54 | - As of June 30, 2025, $39.1 million remained available for repurchase under the 2021 Board authorization[314] Item 5. Other Information No director or officer adopted or terminated Rule 10b5-1 trading arrangements during the second quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in the second quarter of 2025[316] Item 6. Exhibits Exhibits filed with Form 10-Q include employment agreements, equity plans, and CEO/CFO certifications under Sarbanes-Oxley - Exhibits filed include certifications under Section 302 and 906 of Sarbanes-Oxley by the CEO and CFO[321][322]