On Thursday, Associated Banc (NYSE:ASB) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=Kbrc7qOD
Summary
Associated Banc reported a strong start to 2026 with earnings of $0.70 per share, driven by a 2% increase in total loans and significant growth in core customer deposits.
The company completed the acquisition of American National Bank, boosting its presence in key markets like Omaha and the Twin Cities, and expects to complete integration by late Q3 2026.
Management highlighted strategic investments in expanding commercial operations, including a new CNI office in Dallas and the launch of a national franchise banking vertical, aiming to sustain growth momentum into 2027.
Net interest income slightly decreased from the prior quarter but increased 7% compared to Q1 2025, with expectations of 8% to 10% income growth in 2026.
Asset quality remained strong with total criticized loans decreasing and a low level of net charge-offs; a disciplined approach to risk management is emphasized amid macroeconomic volatility.
Full Transcript
OPERATOR
Good afternoon everyone and welcome to Associated Bancorp’s first quarter 2026 earnings conference call. My name is Kevin and I’ll be your operator today at this time all participants are in a listen only mode. We’ll be conducting a question and answer session at the end of this conference. A copy of the slides that will be referred to during today’s call are available on the company’s website at investor.associatedbank.com As a reminder, this conference call is being recorded as outlined on slide 2. During the course of the discussion today, management may make statements that constitute projections, expectations, beliefs or similar forward looking statements. Associated’s actual results could differ materially from the results anticipated or projected in any such forward looking statements. Additional detailed information concerning the important factors that could cause Associated’s actual results to differ materially from the information discussed today is readily available on the SEC website in the Risk Factors section of Associated’s most recent Form 10K and subsequent SEC filings. These factors are incorporated herein by reference. For a reconciliation of the non GAAP financial measures of the GAAP financial measures mentioned in this conference call, please Refer to pages 28 and 29 of the slide presentation and to page 9 of the press release. Financial Tables following today’s presentation, instructions will be given for the question and answer session. At this time, I’d like to turn the conference over to Andy Harmoning, President and CEO, for opening remarks. Please go ahead, sir.
Andy Harmoning (President and CEO)
Well, good afternoon and thank you for joining our first quarter earnings call. I’m Andy Harmoning and I am once again joined by our Chief Financial Officer Derek Meyer and our Chief Credit Officer Pat Ahern. I’ll start off with some highlights from the quarter and then from there. Derek will cover the income statement and capital trends and Pat will provide an update on asset quality. We entered 2026 with strong momentum as a company following a pivotal 2025 that advanced our growth strategy in several important ways. With relationship loan and deposit growth, record customer growth and solid credit performance combining to drive the strongest annual net income in our company’s history in the first quarter of 2026. We remain squarely focused on maintaining momentum with our growth Strategy and our first quarter results reflect that trend. We posted annualized first quarter checking household growth of 2.2%, an encouraging result in what is typically a slower season for checking acquisition. We delivered over $500 million of period C&I loan growth, a 4.6% increase point to point versus December 31st. We’ve also made meaningful progress on our commitment to accelerate our growth momentum in the major metropolitan markets over the remainder of 2026 and into 2027 year to date, we’ve made several key hires across our revenue lines of business and increased marketing acquisition spend, launched our new CNI office in Dallas and launched a new national franchise banking vertical to further complement and accelerate our growth momentum. We announced the closing of our acquisition of American National bank on April 1. Upon conversion, the combined company will feature a proven relationship focused strategy, a dynamic product suite, a modern digital experience, an effective marketing acquisition engine and expanded commercial capabilities, all positioning us to grow and deepen relationships in growth markets such as Omaha and the Twin Cities. Colleagues from both organizations continue to work closely together to facilitate a smooth and successful integration and we expect to complete the conversion process late in the third quarter of this year. We’re excited about our growth prospects at Associate over the remainder of the year and beyond, but as always, our intention is to grow in a disciplined way. Recent events have introduced volatility at the macro level, but we feel well positioned to navigate this uncertainty thanks to our disciplined approach to risk management, our enhanced profitability profile, a solid capital position, and the resilience and stability of our Midwestern markets. We look forward to providing additional updates on Associated Banks growth journey along the way. With that, I’d like to walk through our financial highlights for the quarter. On Slide 4, we reported earnings of $0.70 per share in Q1 total loans grew by over $600 million or 2% versus the prior quarter. The gross was driven primarily by commercial with CNI balances growing $540 million versus the prior quarter. On the funding side, total deposits grew by $179 million while core customer deposits grew by over $800 million versus Q4. As is typical this time of year, the quarterly increase was impacted by strong seasonal inflows in a handful of accounts in Q1 that flow back out in Q2. With that said, Q1 core customer deposits were up $1.3 billion or 4.5% relative to the same period a year ago. Moving to the income statement Q1, net interest income of 307 million dipped slightly from the record quarterly NII we posted in Q4 but increased 7% relative to Q1 of 2025. Similarly, total non interest income of $76 million decreased by $4 million from a Q4 that saw strong capital markets activity but was up meaningfully versus the same period last year. Total non interest expense of $219 million decreased slightly from the prior quarter. Delivering positive operating leverage remains a primary objective as we continue to execute our plan Shifting to credit Credit Asset quality trends remained strong in Q1 total criticized loans decreased. We booked $11 million of provision and saw just 7 basis points of annualized charge offs for the quarter after posting 12 basis points of charge offs in 2025. As I mentioned previously, we’ve seen strong growth momentum in the early part of 2026 and slide five lays that picture out in greater detail. After several years of investments to modernize our digital experience, enhance our product set and improve our marketing acquisition capabilities, we now have a proven ability to grow our customer base sustainably over time. In the first quarter we posted annualized household growth of 2.2%. This number gives us a strong start to the year as we continue to focus on attracting and deepening customer relationships as a means to decrease our reliance on higher cost wholesale funding sources. We’ve also made significant investments to grow relationships and take market share on the commercial side with a steady cadence of leadership hires, RM hires and expansion capabilities. In Q1, we posted over $500 million in CNI loan growth, nearly a 5% quarterly growth rate. Pipelines have remained strong on both loans and deposits and we expect our momentum to carry throughout the year. And as mentioned, we closed our acquisition of American National bank on April 1. This partnership provides opportunities to deepen relationships with existing American national customers through our expanded product set and capabilities while also providing growth opportunities in major metro markets like Omaha and Twin Cities, which are both growing faster than the average Midwest. The investments we’ve made in prior years are driving results in 2026, but we also expect to sustain and accelerate our growth strategy into 27 and beyond. With that in mind, we executed on several investments here early in 2026 that are intended to drive additional momentum. First, we’ve leveraged our best in class value proposition and a proven marketing acquisition engine to accelerate customer growth. As a reflection of these efforts, our marketing acquisition spend was up 23% in Q1 versus the same period a year ago. As we continue to attract and deepen relationships, we’re building a stronger pipeline into our private wealth business, particularly in major metropolitan markets where we’re under penetrated. To capitalize on these opportunities, we hired Lisa Buteau earlier this month as Director of Private Banking for major metropolitan markets. Based in the Twin Cities, Lisa brings more than 25 years of expertise and she most recently served as Managing Director and private wealth Banking Manager at Wells Fargo where she led client facing banking and lending teams across 11 states. We’ve also taken several steps to drive incremental growth in commercial adding another wave of talented bankers and expanding our capabilities. After launching a new CNI office in Kansas City last year and seeing promising results, we expanded the team in Q1 with one additional RM and two additional professionals. Based in part on the successful model we’ve developed in Kansas City, we also officially launched a new CNI office in Dallas. The commercial market leader has been hired and we expect RMM hires to begin in May and earlier this week we announced a new nationally focused franchise banking vertical led by Shawn Cord, based in the Twin Cities. Shawn brings more than 30 years of experience with deep expertise in scaling specialty banking platforms and building high performing teams. Most recently, she led the National Franchise Banking Division for Bremer Bank. We also brought on a new RM and three other professionals to round out Shawn’s team as we work to accelerate growth across the company. The successful integration of American national is a key priority to position our combined company for long term growth and Success. On slide 6, we provide a reminder of the expected benefits of the partnership and an updated timeline of the integration process and three weeks post close we are on track. In the days immediately following the close on April 1, we had over 40 legacy associated colleagues on the ground in Omaha. We’ve completed culture surveys, repositioned their securities portfolio, completed the colleague decisioning process and achieved several other integration milestones along the way. We’ve been impressed by the passion, enthusiasm and cultural fit our new colleagues have shown within the combined organization and the professionalism they’ve exhibited as they navigate change. Maintaining a strong local leadership presence in our newest market is a top priority and last week we announced Jason Hanson as a Business Segment Leader for Commercial Banking and our new Market President for Nebraska and Western Iowa. Jason most recently served as President of American national bank and he is uniquely qualified to position our combined company for a long term growth and success in Omaha and beyond, having joined American National bank in 2000. Looking ahead, colleagues from both organizations continue to work closely to ensure smooth integration process and we are on track for conversion of accounts, systems and branches in late Q3 of this year. We expect to finalize purchase accounting adjustments later this quarter. On slide 7, we recap our plans to drive sustainable growth in 2026 and beyond and it starts right here in Wisconsin. We have a 165 year foundation of longstanding loyal relationships in the Badger State that provide us with strong funding base for growth. Looking forward, we see plenty of opportunities to grow and deepen relationships across the state, but we also see clear opportunities to accelerate our growth momentum with an expanded presence in major metro markets we’re already seeing the strategy pay off in legacy upper Midwest metros like Milwaukee, Chicago and the Twin Cities, where we’re growing households and driving relationship loan and deposit growth. We’re seeing similar success stories emerge in newer markets like Kansas City, where we’ve already expanded a commercial team that launched just a year ago. And already in 2026, we’re further expanding our presence in the strategic growth markets through the American National Deal, which provides entry into Omaha and deepens our presence in the Twin Cities and through the new CNI office we launched in Dallas. Based on the strong results we’ve seen through the first quarter and the additional investments we’ve made in early 2026, we’re on track to achieving our targets for household growth and CNI loan growth in 2026, and we expect our ongoing efforts to drive growth momentum sustainably over time. Shifting to our core financial results, we highlight our quarterly loan Trends on Slide 8. We saw strong loan growth in Q1, particularly in the back half of the quarter, with total period end loans up 2% or $635 million relative to Q4. As has been the case the past several quarters, CNI loans led the way with nearly 540 million of period end loan growth during the quarter. We also saw total CRE balances increase by $143 million as loan production outpaced lower than expected payoffs during the quarter. We continue to expect payoffs to materialize throughout the year after including the impact of American National Acquisition. We now expect 2026 period end loan growth of 17% to 19% as compared to associated standalone results for the year ended December 31, 2025. Shifting to slide 9 period end deposits grew by 179 million during Q1, while core customer deposits grew by 3% or $820 million. As mentioned, the strength in core customer deposit core customer balance flow was impacted by seasonal inflows we typically see towards the end of the quarter in a handful of accounts. With that said, Q1 core customer deposits were up 4.5% relative to the same period a year ago. Over the course of the quarter, we also saw balances shift away from brokered CDs and network transaction deposits and into customer deposits and wholesale sources such as FHLB and other wholesale. We also accelerated our funding in Q1 to keep pace with strong loan growth we saw during the quarter over the remainder of 2026. We’re bullish on our ability to drive incremental core customer deposit growth thanks to a best in class consumer value proposition household growth momentum supported by increased marketing acquisition spend in growth markets and and significant momentum in our commercial deposit gathering capabilities. After including the impact of American National Acquisition, we now expect 2026 period end total deposit growth of 17% to 19% and period end customer deposit growth of 19% to 21% as compared to associated standalone results for the year ended December 31, 2025. With that, I’ll pass it over to Derek to discuss our income statement and capital trends.
Derek Meyer (Chief Financial Officer)
Thanks Andy. I’ll start with the Yield trends on slide 10 in Q1. The yields on our largely floating rate CRE and commercial books both decreased by 29 basis points during the quarter. We also saw an 11 basis point decrease in auto yields, a slight increases in the investment portfolio. On RESI Mortgage, total interest bearing Deposit costs decreased by 17 basis points in Q1 and we’re down 47 basis points since Q1 of last year. In Q1, total earning asset yields decreased 14 basis points to 5.2% while …
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