Associated Banc-p(US:ASB)2023-10-20 00:58Financial Data and Key Metrics Changes - The third quarter results showed a net interest margin (NIM) decrease of 9 basis points to 2.71% [10] - Non-interest income grew by 2% compared to the prior quarter, partially offsetting the pressure on net interest income (NII) [10] - Year-to-date PTPP income increased by $68 million or 20% compared to 2022 [17][26] Business Line Data and Key Metrics Changes - All three major consumer and commercial loan segments reported net balance growth, with the auto finance business leading the growth [10][16] - Core customer deposits grew by $527 million or 2% during the third quarter, allowing a decrease in reliance on higher-cost funding sources [12][15] - The commercial mortgage warehouse business showed growth, but overall lending activity has slowed compared to 2022 [16][17] Market Data and Key Metrics Changes - Employment trends in the Midwest remain strong, with Wisconsin's unemployment rate below 3% [5] - The company expects total loan growth of between 5% and 6% for 2023, reflecting a slowdown in the lending environment [17][33] - The deposit environment has stabilized after a volatile first half of the year, contributing to strong core customer deposit growth [33] Company Strategy and Development Direction - The company is focused on executing initiatives to deepen customer relationships and optimize the balance sheet [6][8] - Phase 2 of the strategic plan is being finalized, with details expected to be shared later in the quarter [8][52] - The strategy emphasizes funding loan growth primarily through core customer deposits, reducing reliance on wholesale funding [12][15] Management's Comments on Operating Environment and Future Outlook - Management noted that while credit metrics have slightly increased, they are consistent with a gradual normalization to pre-COVID levels [11][30] - The company remains confident in its ability to manage growth at a reasonable cost despite ongoing funding pressures [12][28] - The macroeconomic outlook is uncertain, but management expects net interest income growth of between 8% and 10% in 2023 [23][34] Other Important Information - The company added $22 million in provision during the third quarter, maintaining a flat ACLL ratio at 1.26% [10][29] - The consumer household acquisition rate increased by 20% year-over-year, while the attrition rate decreased by 17% [14] - The company is committed to maintaining expense growth below revenue growth over the long term [26] Q&A Session Summary Question: Increase in non-accruals and normalization of credit costs - Management indicated that the increase in non-accruals is part of a normalization process and does not suggest broader issues [36][37] Question: Future loan growth expectations - Management expects balanced growth in the auto finance segment and is cautious about lower-yielding loans [38][39][40] Question: Margin bottoming out - Management expressed confidence that margin pressure is stabilizing and may see an inflection point in 2024 [44][46] Question: Customer CD balances and strategy - The company has successfully attracted customer CD balances and plans to continue this strategy [48][50] Question: Phase 2 of the strategic plan - Management confirmed that the Phase 2 plan will be strategic and quantitative, with details expected later in the fourth quarter [51][52] Question: NII outlook for the fourth quarter - Management discussed various factors that could influence NII, including loan repricing and deposit stabilization [54][55] Question: Credit quality in the real estate book - Management noted stable performance in the real estate book, with non-accruals primarily affecting the C&I side [60][62] Question: Growth in the auto finance book - Management indicated that the auto finance book is maturing, but growth will continue through strategic market expansion [68][70]