Associate Banc-Corp, during its Third Quarter 2023 Earnings Conference Call, reported a steady performance with a focus on customer relationships, balance sheet optimization, and profitability enhancement. CEO Andy Harmening outlined the bank's plans for future growth and discussed its financial performance.
Key takeaways from the call include:
- The bank's core customer deposits grew by $527 million in Q3, a 2% increase, reducing reliance on higher-cost funding sources.
- The bank saw strong employment trends in its Midwestern footprint, contributing to its stable performance.
- Associate Banc-Corp's loan growth is projected to be between 5% and 6% for 2023.
- The bank's net interest margin decreased by 9 basis points to 2.71%.
- The bank expects net interest income growth of between 8% and 10% in 2023.
- The bank's year-to-date pre-tax pre-provision income increased by $68 million compared to the previous year.
During the call, Harmening highlighted the bank's initiatives such as a new mass affluent strategy, product enhancements, and a brand campaign, which contributed to the growth in core customer deposits. He also mentioned the bank's plans to unveil Phase 2 of its strategic plan later in the quarter.
The bank's financial performance in Q3 showed a decrease in reliance on higher-cost funding sources, with core customer deposits growing by 2%. However, the bank expects total core customer deposits to decrease by 3% for 2023 but increase by 2% in the second half of the year. The bank's year-to-date pre-tax pre-provision income increased by $68 million compared to the previous year.
In terms of loan growth, the bank expects growth between 5% and 6% for 2023. This growth is anticipated to be driven by new high-quality consumer and commercial loan balances, as well as upgrades to the bank's online and mobile experiences.
Despite the industry-wide challenge of funding costs and liquidity pressures, the bank has taken steps to manage its asset sensitivity and downside rate risk. As a result, the bank expects net interest income growth of between 8% and 10% in 2023.
The bank's executives also addressed questions from analysts about the increase in non-accruals, the normalization of credit costs, and future loan growth and margin expectations. They discussed factors such as the spike in net charge-offs, the slowdown in pipeline replenishment, and the impact of customer growth on attracting deposits. They also hinted at an upcoming announcement in the fourth quarter regarding Phase 2 of their strategic plan, which would include both strategic and quantitative elements.
In conclusion, Associate Banc-Corp's Q3 performance showed a stable growth trajectory, with a focus on customer relationships, balance sheet optimization, and profitability improvement. The bank's plans for the future include a strategic growth plan and continued focus on managing asset sensitivity and downside rate risk.
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