Associated Banc Q3 Earnings Call Highlights

Key Points

• Stronger quarterly performance: Associated Banc reported Q3 adjusted EPS of $0.81, with net interest income up $7 million sequentially to $377 million and net interest margin expanding to 3.20%. Core customer deposits grew by nearly $700 million, helping reduce wholesale funding.
• Growth outlook remains robust: Management maintained its 2026 loan and deposit growth targets, supported by commercial loan pipelines that were up approximately 36% to 40% year over year. The company also raised its 2026 outlook for non-interest income growth to 12% to 14%.
• Costs and credit remain controlled: Non-interest expense fell $12 million sequentially, while net charge-offs declined and criticized loans dropped 7%. The bank repurchased $100 million of shares and expects to complete the remaining authorization in Q4, with its CET1 ratio at 10.38%.

Associated Banc NYSE: ASB reported third-quarter results marked by higher net interest income, expanding margin, deposit growth and lower expenses, while management said commercial loan pipelines support its outlook for continued growth.

President and Chief Executive Officer Andy Harmening said the bank remains focused on attracting and deepening customer relationships to support organic growth, improve its balance-sheet mix and increase profitability. The company reported GAAP earnings per share of $0.76 for the third quarter, or $0.81 after adjusting for nonrecurring acquisition costs.

Total loans ended the quarter at $36.5 billion, up $53 million from the prior quarter. Harmening said elevated commercial loan payoffs and paydowns affected balance growth, though relationship commercial lending production remained solid. The company continued to reduce lower-yielding, non-relationship residential mortgage balances while pursuing growth in commercial categories.

Deposits, Margin and Revenue

Core customer deposits increased nearly $700 million, or 2% from the second quarter, supported by organic growth initiatives and seasonal inflows. Interest-bearing demand deposits accounted for nearly $400 million of the growth. The increase in customer deposits enabled Associated Banc to reduce wholesale funding during the quarter.

Third-quarter net interest income rose $7 million from the preceding quarter to $377 million. Net interest margin expanded 3 basis points to 3.20%, which Harmening described as the company’s second-best quarter in more than a decade. Chief Financial Officer Derek Meyer said the expansion occurred despite a lower contribution from purchase-accounting accretion related to the American National acquisition.

Associated Banc said it expects full-year 2026 net interest income to increase 19% to 21% compared with Associated’s standalone results for the year ended Dec. 31, 2025. Meyer said management expects to produce roughly 1 to 2 basis points of organic net interest margin expansion per quarter, even as acquisition-related accretion declines.

Non-interest income totaled $87 million, up 8% from the prior quarter and 7% from a year earlier. Growth was broad-based and led by capital markets and asset gains, while service charges, deposit account fees and card-based fees also increased. Wealth management fees were stable sequentially.

The company raised its expectation for 2026 non-interest income growth to 12% to 14% compared with its 2025 standalone results. Management said it sees longer-term opportunities in wealth management and capital markets, particularly in the American National customer base, which historically had less emphasis in those areas.

Loan Pipeline and Growth Outlook

Management reiterated its outlook for 2026 period-end total loan growth of 18% to 20% and C&I loan growth of 20% to 22%, each compared with Associated Banc’s standalone balances at the end of 2025. It also maintained expectations for period-end total deposit growth of 17% to 19% and core customer deposit growth of 19% to 21% on the same basis.

Harmening said commercial loan pipelines were up approximately 36% to 40% year over year based on commitments, with a larger increase when measured by funded opportunities. He said the company expects solid commercial production and C&I growth in the fourth quarter.

Commercial real estate lending production increased about 50% year to date, Harmening said, although CRE payoffs rose at a similar rate. About half of CRE production has been construction lending, and unfunded construction commitments have also increased. Management said it expects low- to mid-single-digit CRE growth over the next 12 months.

The company also cited early progress in newer markets. Harmening said the Kansas City team has exceeded the company’s projections, while Associated Banc has begun booking loans in Dallas. Following the completed conversion of American National systems and branches, the company said checking-account openings in the first seven days after conversion were 121% higher than a June-to-August comparison period, though Harmening cautioned against using that early measure to forecast 2027 results.

Expenses, Capital and Credit

Non-interest expense declined $12 million sequentially to $260 million. Expenses included $13 million of nonrecurring costs associated with the American National acquisition, down from $24 million in the second quarter. Associated Banc has recorded $39 million of acquisition-related expenses year to date and now expects total acquisition costs of about $48.5 million, below the $52.5 million forecast provided in July. The company expects the remaining costs to be recognized by the end of 2026.

Meyer said the company remains focused on positive operating leverage and will seek to identify expense reductions to fund investments under its next strategic plan. Management expects 2026 non-interest expense to grow 19% to 20% versus the company’s 2025 standalone results, including acquisition-related costs.

Associated Banc repurchased $100 million of shares during the quarter at a weighted average price of $30.88. Its common equity Tier 1 ratio ended the period at 10.38%, within its 10% to 10.75% target range. The company said it expects to complete the remainder of its existing repurchase authorization during the fourth quarter.

Credit metrics remained largely stable, according to Chief Credit Officer Pat Ahern. The allowance for credit losses declined $4 million to $491 million, while the allowance ratio fell 2 basis points to 1.34% of total loans. Net charge-offs were $18 million, or 19 basis points on an annualized basis, down $6 million from the second quarter.

Non-accrual balances increased by $33 million sequentially, primarily because of the reclassification of a $30 million C&I credit following a shared national credit exam. Ahern said the company remains comfortable with the underlying asset quality and expects full resolution of that credit. Criticized loans declined 7%, or $121 million, from the prior quarter.

Management said it plans to provide more detail on its next multiyear strategic plan and its expectations for 2027 during its fourth-quarter earnings call in January.

About Associated Banc (NYSE:ASB)

Associated Banc-Corp is a regional bank holding company headquartered in Green Bay, Wisconsin. Through its principal subsidiary, Associated Bank, it provides banking and financial services to individuals, families, businesses and institutions.

Associated Bank offers commercial and corporate banking, retail banking, mortgage lending, consumer lending, treasury management, investment and wealth management, and institutional services. Its business banking activities include lending, deposit accounts, cash-management solutions and other services designed for small and middle-market companies.

The company primarily serves customers across Wisconsin, Illinois and Minnesota through its branch network and digital banking channels.

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