Associated Banc-Corp (ASB) September 2026 Conference Transcript

Okay, good morning. Thanks for showing up early this morning, and we're excited to start off our second day of the conference. This morning we're starting with Associated Bank Corp and Andy Harmoning, President and CEO, coming in from Wisconsin to join us. So thanks.

Yeah, thank you, Jared. So this was the first conference we ever did five years ago when I started, and it was during COVID, and it was remote, and we launched our first strap plan. And the world's changed since then. Our bank has changed since then. And so we're wrapping up 2026. And from a consumer standpoint, what's happened for us as a different bank is, you know, we've gone from shrinking customer base to growing kind of minus 2% to plus 2%, expanded product set, spent a lot of time and energy on digital segmentation, some specialty businesses on the consumer side. And then the commercial side, we've grown roughly $6 billion on a $7-plus billion portfolio in those five years, including $1.2 billion in CNI growth in the first half of this year and $1.2 billion last year. So we've made a lot of progress, but right now how I'm thinking about the company is really three ways. one we have to continue with organic growth and we did in the first half of the year whether that be customer growth deposit growth B&I growth so we're in a pretty good position there we have the American National Bank integration that's right in front of us pleased with where we are today finding finding the marks are coming right in where we expected the cost saves are a little bit ahead of schedule, and we've gone through Mach 2 conversion, so the final conversion should occur here in the next three weeks. So excited about getting that, and then we'll roll out a new strat plan at the beginning of the year, which we're a couple passes into, and we think that we'll be able to continue to expand margin, expand ROTC, and we think we'll be able to grow additionally on the household growth that we've had so far. So that's our story. work.

Well, thanks for that overview. You know, as you mentioned, it's now been several months since the American National Acquisition closed. As you've moved from diligence into actual operating the business, what's gone better than expected, and what's been more challenging, and I guess, what would you have learned about the organization that you really didn't know before?

Well, you think you know what it is, and, you know, every time there's a deal, people say the culture's the line, and what's really nice is when they do. And so, what we've found is you know we've done surveys of our colleagues and their colleagues side by side and you know using the three words to describe the companies both sides use the same three words in the survey and then you get in and you meet with folks and the attention to detail with customer satisfaction the attention to detail on credit they're what we had hoped for when we're looking at it but then you know we had held open some positions in some key areas and and kind of done hey the best best athlete wins and we have been able to put fill a lot of positions with American national colleagues particularly in the risk group of course we have people in the field finance and so we've actually gotten better from a colleague standpoint so that's been really encouraging to me and I think what you learn going through integration is, it's a lot of work. And so I'm really pleased with the associated colleagues on our side being able to continue to grow the bank, grow our funding base, grow the loan side of it while we get through the integration. So that's what we've seen so far. And frankly, we're chomping at the bit to get this integrated.

And along those lines, when you announced the transaction, the goal wasn't just to get larger. It was really to create a stronger platform for growth. As you sit here today, what areas of the business excite you the most now that you've had time to operate as a combined company?

Yeah, if you think about the fact that we've gone from negative 2% household growth to positive 2%, that is starting to create a tailwind really for the first time for our company. And then we think about Omaha where they have 20 branches, our marketing acquisition tools, our consumer product set, which is quite strong on the deposit side, and now we're talking about, as a company, how we go from 2% growth to 3% growth. Well, that's a hard jump, but we think Omaha is the fastest-growing major metropolitan market in our footprint, and then you pair on top of that the Twin Cities. That's the second fastest-growing, and we're getting branch networks in both of those. In Omaha, on the commercial side, the commercial team is strong. With American National, the leadership is very good. But we have capital markets, syndications, capabilities that they just didn't have. And we have a little bit bigger balance sheet. And so when we look at consumer and commercial, there's opportunity on both sides. And then we run a pretty decent-sized private wealth business. They don't have that offering today. So we'll launch a private wealth offering in Omaha right after systems conversion.

On the commercial side, at the beginning of the year, you targeted 9% to 10% organic CNI growth and really effectively reached that goal by mid-year. What's driving the momentum you're seeing today, and why do you think it can continue?

Yeah, the simple answer to that is we've had a lot of hires on the commercial side. We've had a lot of hires on the relationship manager side. But we've also moved into some major metropolitan markets. And the question for us is, you know, we're headquartered in Green Bay, we're growing nicely in Milwaukee, can we grow in Chicago, Twin Cities, Kansas City, now Dallas? And the answer is yes. If you get the right people, you get experienced bankers that have been in the market for a long time, you have a process that makes sense, you can grow. And then we've launched a franchise vertical, we've expanded into Dallas and already are booking business. You know, we continue to benefit from, excuse me, asset-based lending, equipment finance. So we've launched multiple verticals at the same time. And we've gotten the right people in the right chairs. And so we think it's a formula that works. And what's kind of interesting, if you think about the go forward, is Kansas City, for example, when we rolled out the new team there, you know, the question mark, can you hire a team of experienced bankers and grow in a responsible way? When we did that, another team immediately came available, and we doubled the size of that team and kept going. So that model worked. We've carried that model to Dallas and hired our first relationship managers and leader there. and they're already putting deals on the books.

Geographic expansion, you talked about treasury management as another. Where do you think you've seen the strongest returns, and where would you be willing to invest more capital at this point?

Yeah, you know, a little bit of a rinse and repeat. So we'll be able to continue to add on the relationship manager front. That has worked for us. But when I look at treasury management, that's a really exciting one because we're up significant double digits in treasury management sales and what goes with treasury management sales. And when you get primacy, you get deposits. And when you get deposits and you get treasury management, you typically get the low-cost deposits. And that's happening for us at a pretty good rate right now. But if I look out over the next three years at our opportunity to layer on top of the 50 RMs that we've added, treasury management capabilities that can compete with any regional bank or even super regional, if you layer on those capabilities, you see a runway on the funding side. I see a runway on the funding side be significant over 12, 24, 36 months.

Competition side, competition remains intense across both loans and deposits. How do you characterize the current competitive environment, and where Or do you think associated has become more differentiated than it was a few years ago?

Well, you know, when you're shrinking your customer base for an extended period of time, not good. And so when you want to grow it, you go out and you build products by listening to the customer. And you basically create attributes that they care about. So, you know, whether they're getting a paycheck early or they're able to see the credit monitoring easily in the customer experience, I would say for banks our size, we're pretty developed on the product capability. We're developed on the digital capability, but we just hired a new head of digital that, you know, a very short period in. I was with her last week, and her ideas on what we can do to improve the digital ecosystem married with the product is really impressive. So when you look at competition, the question is, what are you offering? How are you offering? What's the ease of use? What are the characteristics of the product set that makes somebody buy? And then do you have new ideas? And so our point in our team is always to be challenging kind of what your status quo is and making sure you have new attributes. Because what worked last year will work a little bit less the next year and the next year. And so literally just reviewed seven new capabilities that we think will launch over the course of 2027 that will continue to keep us ahead of the game. And when we get done with that, we'll come up with seven more. And so when you're thinking about the household game and the industry is at a net zero and you start to get to two and you want to get to three, that is the door to your funding capabilities. And then when you create segment management, you're able to deepen. And so for us, yes, the competition is real. you have to it's not a set it and forget it it's constant but that's on the consumer side the commercial side we're opening our HOA title business we didn't put a deal on the books in the first year because we had to build out our digital capabilities well now we have and lo and behold right when we launched the digital capabilities we got our first large couple of customers the upside there is significant for us because they know the industry. And so we look at treasury management capabilities spread across. So all of these pieces for us on the competition side, a lot on the funding, has been built over an extended period of time. And then the commercial side of it is really making sure that you have a good process and making sure that you have folks that are local that know the markets.

Along those lines, as you speak with commercial customers today, what are you hearing regarding business confidence, investment plans, and hiring intentions? Is the uncertainty around rates, tariffs, and policy causing businesses to become more cautious, or are they looking to invest?

Both. It's interesting. I do a CEO roundtable probably every single month in a different city. I was in Chicago roughly three weeks ago, And it's incredible what you learn from the CEOs about what's happening with trade, what the impact on cost is. And for all of the reasons you listed, there is a feeling of caution in the marketplace. And there's a feeling of confidence within their own business. So it's a bit of a bifurcated situation. You know, we've seen that over the last couple of years. As people hear about global tensions, they see what's happening in the economy, they'll pause for a moment, and they'll look around and say, wait a second, everything seems okay. You know, I think the economy, generally speaking, is pretty solid. And then they get back in the game, and so you'll see a lull in growth and an increase. And what's interesting that I see right now is the confidence in their own company and our commercial pipelines are up from August to August over 30%. However, the period of time, while people are looking at what's happening kind of in the greater world and the country.

To the deposit side, you know, a few years ago, investors primarily viewed associated through the lens of funding constraints. Today, the conversation seems much different. How would you describe the evolution of the deposit franchise and why you believe the growth you're seeing now is sustainable?

Yeah, several reasons that I'd mentioned. So on the core customer funding, we kind of did an end of June to end of June comparison for the last three years, 2% growth and 4% growth and 6% growth. And it's not because the markets got easier and got hotter. It's because we got better. And that is both on the consumer side and that is on the commercial side. And so if you start to grow your customer base, the next logical question is, are they bringing deposits to you? And so are you growing low-balance accounts, or are you deepening those? And if you can do both those things, you can end up in a pretty good place. And so that is segment management. So you bring them in through acquisition, marketing, product set, and then you deepen them through what your capabilities are. And kind of the more you have, the more we get. So the quality of our account has gone up at the same time we've grown the customer base faster. So that makes it pretty durable. And that's kind of going from mass market to mass affluent, and the next step in that evolution will be private wealth for us. And so that's why I like the trend we're on, but there is still opportunity. And you'll hear about that more from us in 2027 and 2028 as we build our plan. It's just a funnel that goes up on that side. and the commercial side, that, again, we have the HOA title vertical, which will be helpful to us. But the productivity from the relationship managers and our level of penetration is going up. Our level of being the prime bank on deals has gone up. TM sales has gone up, and our product is going to get better. And so when you see that trend, that gives you – that's pretty encouraging. So it ends up being three things. You get the consumer going, bringing customers deep in. You get the commercial going with treasury management and primacy. And then they meet a private wealth. And so we wanted to get one and two right. And now we'll start investing in the experience more heavily on the private wealth side.

As the bank grows, how would you like investors to think about the future deposit mix? is the larger opportunity, just gathering more deposits overall, improving the mix, increasing the operating accounts like you talked about, or all of the above?

That's an all of the above. When I first got to the bank, they said, well, what do you want? Do you want to grow accounts or do you want to grow deposits? And the answer is yes. And that's how I would feel about all those things. You cannot, if you want to be a survivor bank, you cannot be a one-trick pony. And the secret is there are a lot of pieces that go into success right now, and you have to have it across all of your lines of business. There has to be participation on the product, the digital, the customer experience, the workflow, the outbound marketing, the communication, and the coordination and collaboration between the teams. When I think about all of those pieces, the question that I've had coming into this role is, can you be great individually within these groups and then actually have a team that cares about working with each other? And as you get some wins, people seem to be more willing to collaborate. So, yes, I would say all of the above.

I guess one of the biggest surprises in second quarter was the strength of the margin outlook. Despite the runoff of some purchase accounting benefits, you still expect margin expansion in both the third and fourth quarters. What gives you confidence in that trajectory?

Yeah, I think back to kind of the low point as I was coming in when we had like a 239 margin and now we're heading towards the 320s. And the first answer is yes, I do expect margin expansion, even in the face of, you know, the accretion impact that we will see. And, again, it is a number of fronts, but on a very basic level, we continue to run off low-yielding resi, and that has been a strategy. Our correspondent banking, we eliminated that, but it had a little tail on it. We've gone from 30, at our peak, 36% of our balance sheet was residential real estate. Today it's 18%. So the balance sheet mix is real. We'll continue to have the, we'll do residential loans, but the portfolio will be a runoff portfolio for a period of time, and we'll put on higher margin commercial business that's supported by deposits. And so, really, you're talking about remixing the loan side of the balance sheet, but now when I look at June to June, you can see our non-interest-bearing deposits rising. That has not been the case for quite some time, and it's in line with your household growth. And so, you know, that creates a funding opportunity for you, and deposits can get more competitive, but if you're also getting the non-interest and nominally interest-bearing deposits, which we are, it can offset that from a competitive standpoint. And that's why, relatively speaking, we're in a pretty good position, and it's why we think we'll be able to continue to slowly, each quarter, you know, move the margin up a little bit.

But on the deposit pricing, how are you thinking about that and the mix in this rate environment? This time last year we were talking about the potential for rate cuts. Now we're talking about the potential for rate hikes. How is that changing your thinking around deposit structure and pricing?

Yeah, I know the interesting thing about our situation right now is if loans slow a little bit, because we build a machine on the deposit acquisition and growth side, But that helps. We still are in a pretty good position overall. And so with the potential rate increase, likely rate increase, we're slightly asset sensitive. So on a very basic level, we make more money. So I think that will help our margin a little bit. I don't think it will change a forecast that we have. We felt pretty comfortable before that rate increase. I don't think it does anything to dampen growth. by going up a quarter percent. And I think overall, I really think it just probably slightly expands our profitability, but it doesn't damage the outlook in any way based on kind of both sides of the balance sheet strategies that we have today.

You may be shifting over to the fee income side. You've talked about wealth, treasury management, capital markets, and deeper commercial relationships as important pieces of the long-term growth story, which fee businesses have the greatest potential to become larger contributors over the next few years?

Well, if I look at the immediacy, we're seeing fee income growth just because we're growing our customer base. And whether that be service charge income, credit card, debit card income, that's in the immediate. In the three-year period of time, Treasury management will play a significant role for us. I love that we're seeing the sales, and as we add tools to that with a larger workforce across our entire network, to me that's probably the low-hanging fruit for our company. And I expect we hired a new head of treasury management that we brought in from a major bank. They're very strong, and they've put together a roadmap that we're in the middle of strategic planning, but we're likely to fund most of that.

You mentioned earlier, you know, brought up the systems conversion next month. That really is the next major milestone. As you approach that conversion, what are the biggest opportunities you see once the two banks are fully operating on the same platform, two legacy banks on the same platform?

Yeah, no, I feel like we're waiting for Omaha, you know, a really good growth market that we already have the digital platform. We already have the marketing capabilities on the consumer side. We already have the product set. We're ready to get get on with it. And so to me, that's an immediate, you know, once you get through the conversion, you make sure everyone's set and you head and we head into the end of the year with just another market that's opened up for us. And then in the Twin Cities, you deepen your penetration. And so there's there's there's something to doing the the density of the marketing and the density of your footprint. and we increased just enough to make us more significant in that market. We're now number 10 in the Twin Cities and deposit market share. We're number two in Omaha, and so a well-known name in Omaha, but opportunity on the consumer side immediately. And in the Twin Cities, moving in the top 10, we think the opportunity there between consumer and commercial, and then we've had significant hires in private wealth, All of those pieces, post-conversion, will allow us to start to run.

A significant amount of technology work has gone into the deposit gathering capabilities you've talked about, the treasury management, specialty businesses, beyond the merger, integration. Where are technology and AI creating the most tangible opportunities for growth or efficiency in process with AI already?

We're seeing it on the development side pretty significantly. We had an option to renew and buy something for $800,000 90 days ago. And we thought, well, gosh, let's see if we can build it. And we built it in a very short period of time for $45,000. It cost us $65,000 just because I was so excited. We gave a bonus to the two people that did it, the two people that did it. So we took the time to create a structure on that. In our risk and fraud framework, we have the same situation going on. So we think that on the expense side, just the development cost is starting to already go down. We're able to build a little bit of the – we'll lean into it with some of the simpler applications that we have. The buy versus build is more real, and we'll assess that. We brought in a new head of procurement so that we basically can marry, you know, what is our vendor strategy to what our development is. But on the sales side, I think it's going to be significant, too. And that's whether we build it ourselves or we employ somebody to help us on that side. And so we just brought in a new head of AI for the commercial bank, and he's fantastic. He's working on what is the idea of research and delivery and how do we go more quickly, everything from researching a customer, presenting to a customer, to the back end of a customer. And so I wouldn't put a number to it today, but we'll drive efficiency in 2027 and we'll drive more efficiency in 2028. And I think when you look at some of the private wealth capabilities and the ability to do planning and marry that up with your core platform, and by the way, have we not invested in our core digital platform, which we can plug private wealth into, which we can plug the planning into, with a human at the middle of it, all of those things will help on the delivery to the customer side and not that long a term.

On credit, credit quality has remained resilient despite elevated rates, and you've indicated the ANC portfolios come in largely as expected. What trends are you monitoring most closely today, and where are you potentially becoming more comfortable?

The comfortable part. Did you throw that one in at the end? There is some comfort in managing a consumer portfolio that's super prime. I mean, you know, when you start looking at the FICO's of the REZE, you know, the REZE has a low yield, but the good news is it has FICO scores right around 800, just below. The auto book is the same thing. You're in the, you know, 790 range there. So, you know, you look at delinquencies as a precursor to issues that we're going to have, and delinquencies are flat as a pancake. I think probably for most banks right now, and certainly the ones that deal with prime, super prime customers, you cannot get lazy with portfolio review. And so on the CNI side, on the CRE side, we just don't see the emerging issues happening. And the message from our credit team to our field team is we're coming. We're coming this week. We're coming next week. Next week, we're going to come the following month, and we're going to continually pour through these portfolios until we see a trend. And if we see a trend, then we're going to dig into whatever that looks like. Thus far, as you know, it's been a pretty benign credit market for a long time. And I just don't want to get a false sense of security based on that. But the credit side is very clean today.

As you said, you've taken a disciplined approach to reviewing the ANC portfolio and aligning credits with associated credit philosophy. Were there any lessons from that process that reinforced or changed how you think about risk going forward?

No. There are a couple portfolios that didn't fit with us, which were smaller portfolios. But the overall commercial, we were able to get through a vast majority of everything that they have already. And we made appropriate adjustments to fit our model, and we did it and still are seeing the right return metric. So I don't feel like there's somebody waiting around a corner for us. And as you know, the two things that can get you are credit and systems. And the credit is, it looks very much like what we've had on our books.

Mission progresses and profitability improves. How are you thinking about capital priorities over the medium term? And I guess at what point does capital return become a more meaningful part of the story again? Yeah.

Buybacks? However you want to describe it. Yeah, no, we got authorized just over $200 million for buybacks. And, you know, the good news for us is that we have a good enough margin and a good enough ROTC, a good enough return today that we can both fund our growth and consider deploying capital in additional ways. And so we fully expect in the third quarter and the fourth quarter to exercise all those approved dollars, and we expect to be able to fund growth that we have. We're in the best position we've been in in quite some time with the ability to accrete capital, and then we'll work through the conversion, and the one-time expenses will be largely completed, a lot of it this quarter and almost entirely in the fourth quarter, and that puts us in a really good position heading into 27.

Great. We have a few minutes. Are there any questions from the audience before we wrap up? And I guess, Andy, while you're not, I guess, ready to probably share specific guidance for 2027 today, how should we think about what's next for Associated once you get through the conversion?

Yeah, so when we look at 2027, you know, this will be the third time that we put a strategic plan out there, and the first question that usually comes up is how are you going to control expenses? And the answer usually is the same way we did the first two times. We will cut to spend. And so we'll find cost-save opportunities in places that we feel probably don't have as good a return. And then we'll invest in areas that we think have a better return. And so it's worked the last two times where we've been able to expand our margin, expanded our return. And what's particularly interesting now for us is we've expanded margin and return, but we've also shown that we can compete in Milwaukee and Chicago and the twin cities will move into Omaha Kansas City so now we've shown some clarity that we can compete in major metropolitan markets well that that opens the door for a lot more business so I'm pretty optimistic heading into the the strap planning session from we were to two rounds into that session already and you You know, there are specific actions that we think will lead to more household growth and expanded margin and return. Well, thanks very much.

Thanks for joining us, and I hope you have a great rest of the day. Thank you. Thanks, Jared.