Associated Banc-p(US:ASB)2025-07-24 22:00Financial Data and Key Metrics Changes - The company reported earnings of $0.65 per share for Q2 2025, with total loans growing by 1% quarter over quarter and 3% year over year [8][10] - Net interest income reached $300 million, marking a 17% increase compared to the same period last year, and was the highest in the company's history [10][18] - The return on tangible common equity was 12.96%, reflecting a 62 basis point improvement from Q1 [12] Business Line Data and Key Metrics Changes - Commercial and industrial (C&I) loans grew by over $700 million in the first half of 2025, with $356 million added in Q2 alone [6][9] - Total average quarterly loans increased by nearly $400 million compared to Q1, driven primarily by C&I growth [14] - Non-interest income for Q2 was $67 million, a 3% increase year over year, with fee-based revenues and capital markets income contributing to this growth [11][23] Market Data and Key Metrics Changes - Core customer deposits were up 4.3% compared to the same period last year, despite seasonal outflows in Q2 [10][15] - The net interest margin climbed above 3%, with a 29 basis point increase year over year [13][18] - The securities book increased to $9 billion, with an overall yield of 4.24% [22] Company Strategy and Development Direction - The company is focused on executing its strategic plan, which includes enhancing profitability through a mix shift in its asset base and deepening customer relationships [5][12] - The strategy involves replacing lower-yielding residential mortgage loans with higher-yielding C&I loans, aiming for total bank loan growth of 5% to 6% for the year [12][15] - The company remains open to potential acquisitions but emphasizes that any opportunity must align strategically, financially, and culturally with its goals [68][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow core customer deposits in the second half of the year, citing strong household growth trends and a growing commercial pipeline [16][41] - The management team remains vigilant regarding credit quality, with a proactive approach to managing portfolios amid macroeconomic uncertainties [7][30] - The company expects net interest income growth of 14-15% in 2025, assuming three Fed rate cuts [20] Other Important Information - The company added 19 basis points to its CET1 capital so far in 2025, reflecting a strong capital position [7][25] - Non-accrual loans decreased by 16%, indicating improved credit quality [11][31] - The efficiency ratio improved to below 56%, the lowest level since early 2023 [24] Q&A Session Summary Question: Seasonal decline in deposits - Management acknowledged the seasonal decline but noted that it was anticipated and that the commercial pipeline for deposits has increased significantly [38][40] Question: Update on office CRE portfolio - Management indicated that the office CRE portfolio is evolving positively, with proactive clients benefiting from improvements [47][49] Question: Margin outlook and deposit pricing strategy - Management discussed the importance of asset remixing for margin strength and emphasized disciplined pricing strategies for deposits [54][60] Question: Thoughts on acquisitions - Management reiterated that any acquisition would need to be a good strategic, financial, and cultural fit, while focusing on executing the current strategic plan [68][70] Question: ACL increase for C&I portfolio - Management explained that the increase in the allowance for credit losses (ACL) for the C&I portfolio is due to growth in that segment, reflecting a proactive risk management approach [71][72]