Earnings call transcript Q4 2022

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Operator

Good afternoon, everyone, and welcome to Associated Banc-Corp's Fourth Quarter 2022 Earnings Conference Call. My name is Dough and I will be your operator today. At this time, all participants are in a listen-only mode.

We will be conducting a question-and-answer session at the end of this conference. Copies of the slides will be referenced during today's call are available on the company's website at investor.associatedbanc.com.

conference being this reminder, a call recorded. is As

during of statements the outlined forward-looking constitute, on today, course X, Slide statements. similar or make As discussion the management expectations, beliefs projections, that may

materially differ such any could results statements. actual from results projected forward-looking anticipated the in or Associated's

most actual discussed website information detailed Associated's today These subsequent section available the SEC Associated's is the and important differ Risk materially of that could risk herein readily Form Additional to factors from in SEC Factors are the factors cause by concerning XX-K results recent the information on reference. filings. incorporated

For to this measures to conference Page press release XX a the XX the in refer non-GAAP please of mentioned Pages of to the measures reconciliation of tables. call, and financial the and GAAP presentation financial XX financial slide

presentation today's Following the for will given instructions question-and-answer session. be

to would remarks. for conference At ahead, like to time, go CEO Please turn this and Harmening, opening Andy the President I over sir.

Andrew Harmening

good Financial everyone then Officer. welcome sharing through by will there, provide highlights the by capital, to Pat reflecting Pat then margins, joined update and whole. and Well, like thank Harmening, update Meyer, from I'm afternoon, things I'm off income our Chief and Ahern, a yearend an and you, start Chief to on credit. on Derek our quarter earnings few as the here and Derek and XXXX today I'd Andy walk call. a Officer; From and will statement on trends Credit Dough our

loan and initial for given balance, and staffed up flexibility We balance their a and since have milestones verticals history. consumer it deposit with relentless met by XXXX. It our to We in the us little drive targets, matter bank. or statement and XXX you focus on year achieved year several executed colleagues. more growth a slice plan no against exceeded commercial bit a driven that was new our strategic how So on customers in ramped XXXX was Associated's

that net top the RMs an from the within our bank giving giving our up competitors to with new customers XX new platform year, most new This commercial several our platform launched ability attract and quality launched experience gives and much then digital ability added to choice. and with digital within we officially digital as a affluent make for and digital these history XX days account us significant attracted We in the a during the more upgrade We enhancements relationships. momentum platform. talent and company's follow new major opening associated future employer And mass sales deepen of our we strategies, improved footprint more leveraging enhancements digital us frequently. us customer

over serve and done our in a of and All to have important leverage, to drive our we've XXXX, enabled of more so it's these efforts improved while positive controlled lot And grown ways in reiterate customers developed management. enhanced firmly been we've our serve remain quality of our continue for to course we around the strengths credit fashion. value to We all stakeholders. discipline a deliver foundational committed to will and our as expense These returns more effectively. efficiently that operating us and look of decade a a lot maintaining foundation in have as

markets below come macro national of Minnesota the January, our strength in midwest continue and in These face continuing we the uncertainty. the Unemployment remain rates and resilience with for of to impressed And results the set average. to be in Wisconsin also XXXX. stable table and by

December Our 'XX. of resilient consumers and of debit December 'XX with in credit remain increased levels spending versus card

opportunities and front sense environment and macro center all growth and is preserve Our where business in makes expansion customers conversations. uncertain it but pursue to continue the

enjoy another year. here to rate rising the given in momentum enabled the and have QX environment trends strong with us new together quarter Taken these us into have

believe But value monitor remain. for to without ourselves macroeconomic stretching marks to our additional we stakeholders question good build drive significant continue take geopolitical that and We the in put risk. our and to a on we momentum position

like to highlight few I'd slide on outlined X. that, With a items

fourth loan deposit as segments. pace and impacts. Our across growth, expansion strong in prior versus once benign further of continued quarter anticipated, margin the quarter credit somewhat all results reflected the slowed major We growth saw growth again But markets, X% our rate and customer quarter-over-quarter most long rising execution key and Based year. interest quarter on strategic the income our XX% versus in a categories. increased prior and our our the same of the activity of the combination in environment, plan net we

With pushed our held operating we for north the equity for and quarter, the flat the once return positive we quarter. leverage, XX% drove expenses common of on again

credit remain our side, the we're to closely trends but On portfolios, quarter continuing monitor benign. fourth

largely of two the charge provision as again points basis During saw quarter, we a again growth. our of did but function net just loan once offs. this quarter, We add

as a double our in XXXX were XXXX. of available X% added quarter rates loan results execution headwind fitting and income the $XXX while whole, Looking million drove history. fiscal provision PTPP of equity growth balances. And from our nearly off versus in net proud we're on strengthen to the in to in able exclamation accomplishments, driven to at focus and our increase year bank's $X.X we turned year, Associated's common a prior quality drive year-over-year. our markets, leverage Despite still momentum we these income, most building high billion our Through is operating help were has a in initiatives what on a this a XX% of profitable a rising increase digit posted point be fourth out combination

to our growth diversified a little loan bit color story. trends. again, X, loan underscores like around I'd Slide once that, impact provide more With Associated's broad of the

For the in vertical. major quarter, consecutive growth reported third every loan nearly we

broad new quarter pay as quality a long activity the Our other businesses. growth led growth the several driven off and bulk in prior But of the commitments pace in opposed of see by expected. way growth slowed slowdown to with construction prior portfolio the did most cases, balanced We of versus high as funding and production.

This Shifting a shows our broad annual of view by base lending provided to X. our growth loan the initiatives. of trend clear various and picture optionality slide

As our but one This strength additional economic area. us we reflects balanced, growth pull markets and and discussed the feeling particular the the environments dynamic gives initiatives. in stretch across in need economic in different also without that of can nature we franchise, durable over our to different the past, like highlights time it to drive this diversified of portfolio levers

strategic on bit Slide X color of more provides a our the status initiatives.

commercial our in markets quarter, last talented effort Chicago, significant RMs sheet. Milwaukee have core and adding bolster a our ranks As in with commercial to our to balance role discussed loans quality like we played

While footprint. This other by achieved from commercial on more also year-over-year, target September, majority drive with holistic us it lines, us coming a names some in services. helped new activity to XX% treasury relationship draws vast increase came balances our up of also a loan that volume the core existing by but relationships four three we of sets of management state our commercial the and year new deposits, growth includes

a additional core commercial XXXX slower see loan to 'XX. at expect pace but in compared to We growth

customer each throughout a also for year balances verticals base. ABL their Our as finance the momentum solid added and fit as established equipment our natural developed and respective team new steadily pipelines

As million continue target we in expect 'XX a growing the businesses their result, growth $XXX these cleared for XXXX. comfortably and team's to

experience environments I've decades impact consumer we continued consumer of And diversify intentionally the stated fit helped knows front, ability to on into loan auto the super one of has strategy our their XXXX. quality the diversifying the scale previously With natural that is our with high team index rates that our conservative team mind, reflect this rate book. also to or slowed us current auto On initiatives as of down conditions in finance auto that slightly any over approach. prime in prime, without head With executing culture. and our approach variety production said, fixed up our produce business, to loans we've market a to for a having credit give that a

also to XXXX. all, of all the its We to to period of X% end residential through expect And end stable expect total year. of in balances X% in continue a to growth relatively remain drive loan we mortgage the

Turning deposits by highlight grew basis, X, our This taken quarter-over-quarter X% cost, growth we and strategic On holistic an slide to fourth cultivate we versus and by despite to relationships. a inflation average quarter the low came base and pressures granular and X%, we've actions deposit in of attract and trends. XXXX. the quarter increasing our of competitive reflection market was deepen deposit fourth the

look cost to our funding As we side. recognized the we've ever than that discussed crucial we past, the and strategies more lending growth particularly is generating as low in fund on

for to CDs by broker add bounces year a of our in balance deposits did QX, we growth deposits. was majority core the customer While driven network and our

comfortable network levels hold year. the this but wholesale term, type we We're expect short and flexing move to in through and as of the check we funding funding

initiatives competitive ability on a we and sight. to bank based in We continue our and at fund the beyond have the monitor in XXXX remain to environment closely the reasonable confident in cost

average increasing the XXth pressures average saw saw annual growth throughout view inflationary deposit year. steadily deposit core competitive customer an highlights deposits X Despite annual to and market categories. deposits our we by the Slide we the behind In interest once driving of XXXX again X%. for consecutive demand able bearing basis, On force we flows. a and still were by were growth year-over-year average our quarterly grow savings, money led year, the

help competitive Shifting for hard the to no growth past lower That's to amplified with cost the cultivate several in deposits core designed that on continues. us deposits. slide work customer be There been as we've why the year for initiatives pressures fund X. will at is denying relationships, XXXX battle

'XX, fact, driving a 'XX. to relationships. In the compared already brought business drove to impact. of RMs holistic initiatives In to customer and in which many a year of in focus non-loan bank, increase turn these XX% to new commercial year-over-year deposits led names, our renewed have we in some This have an in as started increase XX% on

where These a other national management, businesses on efforts by sales us including XX%. director new businesses. treasury complemented a where and HSA that to increased focus allow commercial hired we've sharpened centric those relationships, have activity deposit sales deepen by we've been

and fourth customers launched mass confidence the digital and to providing in storefront. opening the our prospects we sales new This account gave acquisition with affluent side, initiatives consumer the platform us new upgrade simplified On launch digital quarter. modern a digital focused a

CDs. While early, it promising and the in such segments we've savings as seen is still production initial

focus shifted we've With all year full a of impact 'XX sponsorship in marketing a or some a and on in XXXX with results next digital customer from capitalize acquisition launching over to service every product campaign quarter initiatives our to others, of increased And new our set these than XXXX. XXXX, to them in each second more this course quarter further momentum brand launch provide we the to impacted month. expected customer 'XX, deposit have of the spend acquisition. a launch to but a towards of are And eye beginning an with intend new

confident with of we programs pursuing deposit the to continuing the customer In a summary, customer reasonable up, levers to variety of X%. expect directly positive in XXXX, to I'm core funding stops, I've actively deposits for are battle the In Associated similar cost. core X% we results that several times launch heat total regardless achieve of we at drive at drive growth, previous experienced a to can environment.

Finally, slide on X.

helped for leverage management growth. continued our of initiatives with XXXX. expenses, generate deliver diligent revenues PTPP to Coupled our we've operating have in and income significant company Our strong

our remain operating year positive delivering full committed the of XXXX. to For leverage PTPP We income by XX%. XXXX in grew

statement Chief that, further I'll quarter. it provide there the margin, Derek? Derek and our on to trends Meyer, our hand and up revenue income detail Financial pull Officer With for to over

Derek Meyer

Thanks, XX nature yield our trends asset highlights and sheet. sensitive of Andy. the balance our Slide

continue earning On the side quarter. asset average yields meaningfully expand fourth to asset in the

over rate or reflecting earning we've increased points, roughly the of same XXX funds our in asset the yields by of Over the basis the course increase the Fed XX% sensitivity. period, core asset seen target year,

side costs increased roughly liability liability bearing XX% of the interest now XXXX move basis the in points On XXX target. Fed or have funds

costs we to expectations, with liability the in of closely. of half costs year and tracked these While increase this increase largely pace back to the has continue our the monitor started

sensitivity. margin slide reflection costs in sorry, continue to slide loan quarter-over-quarter we liability fourth rising XX. view as in a recent the quarter, growth significant XX. assets net Despite We interest of see expansion with structural on our the coupled this shown our our as I'm

points XXXX. and basis basis $XX the million expanded year versus XX% Here interest equated lift quarter. our QX in in to net grew by compared a income by our expansion versus our then a QX to NII interest margin net XX $XXX full prior This as or million

have continue XX. environment. factors the rate Moving benefiting to slide Several enabled to from us current

we've include to factors sensitivity, manage As betas. versus these on assets cycle reliance prior rate our wholesale the funding our reduced deposit discussed, ability interest natural bearing network and

have we term. the expect increase near continue benefiting the continue dynamics these to do us broader While in betas into to XXXX poised

With that lack the macro for significant into said around the clarity the carries economic of industry forecast uncertainty XXXX.

and we to a reduce to As manage uncertainty result, our actions risk. interest continued meaningful rate to take this

to our intend take interest back manage executed over over our half did rate of rate the Over peak we in rate steps sensitivity But We dampen call X asset we risk. interest downside environment XXXX. swaps. time not to reasonable the XXXX, on and continue billion to will the

our economic we rates meetings and discussed, the rise these income in of in each in for between basis net in XX% and short to dynamics interest February a interest balance the outlook I While expectations just to XXXX. macro with grow by remains points, term Based assumptions on the current XX% rate sheet XX are cut October. March, following uncertain, expect FOMC

customer XXXX. income fee Non-interest implemented than and XX. slide fourth we've service In in based discussed fees and throughout to year, and from were Shifting market the friendly on capital the other wealth reduction mortgage offset the headwinds revenue in stabilization pressure banking the to continues of by markets. the QX we adjustments in income quarter, fee modest management see charges, increases more both driven and

the recognized to contributing million Also a gain quarter-over-quarter decrease $X securities was QX. investment in

and fee deposit quarter mind, our ability our remain beginning the us the deposit As were in moderate low the nature. of XXXX NSF we changes compression changes pressure deposit XXXX. initiatives in costs These OD with profile both a give on X% When in expect in based reminder, account non-interest profitability third year. customer earlier base to our total we see additional pro announced in proactive we the our of expected income focused XXXX. coupled under implementation to they with relationship, and X% enhance year, to competence to income this strengthen throughout broader of With

million, up business development Moving investments as to XX. continue slide to at technology scale Fourth in we in quarter people, came $XXX and our advertising. expenses and

expenses initiatives. improved Despite now year discipline our we've versus last point the XXXX XX.XX% basis, our maintain full our growth, ratio to ability the expense the approximately of by For efficiency revenues. while in to year X% this higher period decreased point efficiency a ratio grew throughout support same expense by steadily FTE our reflecting to driving year. compared On

of which is actually XXXX point shows further expense the This a lower on non-interest by right, our chart decreased underscored the in percent as assets.

we an possible. growth While aspirations to support means we ongoing revenue more our shift On strategies below basis, growth. pursue opportunities invest assets to to continue that expense productive we underperforming growth continue will expense where from keeping committed to in remain to

non-interest X% expect of XXXX. to We total approximately growth in X% expense

Shifting to slide XX.

remain manage growth. while We we to our ranges throughout enhanced levels our drove with levels continue supporting comfortable capital XXXX. given towards target the capital profitability We

Given X.XX the to conditions short the rates XXXX in we X.XX term current to TCE remain range. market for expect elevated maintain and now to into interest expectation

X.X%. and X% between land to one CETX expect We

provide to an I now will Credit Ahern Officer update hand quality. Chief Pat our it over credit to on

Pat Ahern

forecasts at minimal increase recent November Fed forecast two reserves GDP our on X.X was the X.XX modest dollar forward looking growth, trends start points ratio fairly to This as consistent during another driven Moody's alignment I'd assumes ACLL assumptions. portfolios. and build largely at continued XX. to XXXX. On prior in basis, by again settled $XXX XXXX Derek. basis loan utilized our quarter. the growth quarter. a employment significant just Moody's dynamic, our slide CECL to from our million year and deceleration baseline providing this end. shown Thanks, in rate remains In with figure in update an that like increased by represents We've on loan action, for with once But baseline the allowance

Moving to slide XX.

largely credit delinquencies all period fourth same offs increase Non-performing largely The ago. the trains net assets, maturing year quarterly quarter time the during of our and as remained compared decreased and benign book. in normalization the charge quarter. from the Our loans slight a prior to periods recent non-accrual reflects auto

$XX Following QX, fourth a in the million $XX of in quarter. we million provision added another built provision

not provision quality bill the growth our to reiterate that one familiar a the portfolios has in and an portfolio. history, of largely been overextending loan or box one expansion of particular like has years this of our function by investments not credit in area. segments. With a larger core this with come loan expanding driven As from within strongest I'd growth of customer mentioned, XXXX in of reflection ourselves growth concerns growth credit our was relationships, growth recent engagement in loan our representing The our and business, core

credit place Our decade. built of foundation in strong over a Associated the today at course was

We to that controls continues culture, have a risk an work to disciplined underwriting hard this with improved team to experienced management. a bolster portfolio approach proactive and foundation

supply we sensitivity economic said, across a discipline, and chain few portfolio. rate of warning we in in continued labor analysis underwriting our are of disruption as and signs remain stringent well as with fully to credit the reflecting With that economy current concerns, the cost aware elevated the the name inflation, interest

loan to quality. and of adjustments any expect risk conditions, provision changes other we indications credit to reflect forward, Going rates, volumes economic

With it some share will to to that, back thoughts. closing now Andy hand I

Andrew Harmening

Thank you, Pat.

points couple from want Before Q&A afternoon to slide discussion on we our XX. a to this reiterate move I

loan in the we but XXXX. expect period ability of end in mind, X% remain loan to throughout growth we X% not in With drive pace the our and we between saw in year, that quality XXXX. balanced growth confident First, total at

We we from continue expect sensitivity, the current near to balance the deposit benefit continue dampening to to rising growth expect to betas sheet XX% growth, asset we of term. work XX% net our in on environment forecasts and Based action, on in income XXXX. between deliver Fed for but and rate a interest our

in continue to to by and technology invest strategically we to non-interest expect X% grow Lastly, and X% XXXX. in expense people

quarters. expenses in we disciplined as positive operating to continue on remain always, future we As delivering work leverage

let's that, questions. it With for up open

Operator

gentlemen, and Our session. question from Fargo. Instructions] proceed question line Ladies from time, you. [Operator and Wells Thank Jared Please first comes your the at conducting will we be answer question. this with of your Shaw

Jared Shaw

good Everybody evening.

Andrew Harmening

Jared. Hey

Jared Shaw

starting loan on Maybe growth.

You And growth go 'XX? into construction on we this in or you're pipeline the had What forward? like are visibility areas the away great year. does from any there into as heading look focusing shying

Andrew Harmening

growth to new Yes. side of really because a of the little out my construction in see brief loans. real a that And permanent the in saw in the production hesitation We opposed just then question. very equation. on to time some put that of particularly folks funding of some pipelines estate. there. the production, a we point speak up good That's industrial to commercial that's trend market the down refinance are significantly the as CRE the construction new than in I'll in We a rather The mind.

think moderate, category you'll see that as go we throughout the So year. I

purposeful. between and expect and to balanced commercial We that's very consumer have growth

we levers right know, have now. you As several

deemphasize businesses in And maximize performing that are pipelines we through will higher that flowing party start that January. can as go diminishing portfolios we as third origination did holistic to to and December. frankly already have in single into December more opposed that we portfolios, deals, So

be with really to the So throughout and RMs that we've footprint on continue And as solid, seen brought our holistic C&I we evidence relationships. the of we but expect to already within TM. on feel That's year. bringing during it in the on business, RMs full we deposits even a year has and why stronger year ancillary and focus effect those like XXXX including

Jared Shaw

year then could as from to of full levels? that some peaking NII then growth see and 'XX? at year And as with where and income, over full confirm just is I spread we the margins Or 'XX margin is X% you that annualized look are target the X% quarter we Okay, took. changes fourth to guess

Derek Meyer

Jared, are this is Derek. year Those numbers. full

we terms -- And the the yield growth and our loan curve expectation. outlined in it in so based guidance that of on assumptions made on we is

December where we sort We talked of are on in to we're So and in this on rate the moves to the in as calling script. year on even really race. fundamentals all think giving dangerous looked drive I What the try I call we while going When January, about not went at the first of pretty and we're we're are we the it's that about guidance the and peak plans, saw, that. anchored into were planning even durable margin. talked that. weeks

asset We came very into this sensitive.

the but some we're a We in taking are outperformance with stake remain in but which you with saw place. going down a that also on perspective growth. we to that of talked And our bit putting about we asset asset the that sensitive we the into little put put sensitivity hedging, deposit with this year, initiatives you are ground

we start outlined the many other support historically out. to Then committed we We're blanks We expect to a during our our ratio. this deposit So then year loan had to have rising have need which level year-over-year still full on behind new just XX% time. going will to beyond deposit impact And that that the And initiatives you kinds you be that of rates. might below of we've to fill growth. year to of rates. impacts wholesale that what have interest in slide funding ability X, last still loan funding we had growth generate on our

Jared Shaw

rate margin in a through years you're the we of sensitive guide, bit to pretty step be expecting to on. asset still looking is the get that, To still we're go though way right at implies that NII that even guess and significant a up as little down the moves I earlier

Derek Meyer

full it's a what step up. think basis, I it's year year-over-year Yes, a

we're everybody's sequential quarter trying making at your figure that where and to peak is to I quarter, not still and you're out trying when you call. think look

Jared Shaw

Okay.

that expect that shouldn't could on strategies? we end capital return Or natural Okay. to any lower a sheet buyback movement the significant And really is and capital. of management potentially then more the to active expecting in capital of just to the or range? function that be you be a balance we get Should change of

Derek Meyer

change not strategies. looking return organic capital dividend to we're still It's our Yes in growth.

Jared Shaw

I'll thanks. Thank back. Okay, sit you.

Andrew Harmening

Thanks, Jared.

Operator

Our with of next question Scott Please from the Siefers proceed your comes Piper question. Sandler. line with

Scott Siefers

afternoon Good sort taking I wanted the to for there. guys. and ask trajectory Thanks NII about of also question.

So I guess, just will quarter less looking the a at guidance suggests the that what the did quarterly $XX year full quarter. fourth million than average about we of NII 'XX for in be

terms fourth quarter year, is maybe for fourth would Fed quarter we there traject high for rates does it extraordinarily granted, elevated in as dollar that Now, and a say, still the that of then have half the was how the would you long as raising kind the it? the number. an off? Derek, we do the Or dollar maybe stay but words, anything throughout just year? average other year? steadier In have step throughout have we first was NII strong benefit? taper get in down, And sense a And But of would then

Derek Meyer

think Yes, Again, specific. to that going don't. I'm don't I I be

see we don't up, exactly they are catching quarter, I deposit that again, up. called. that they, you I think quarterly and compression I betas don't that think we of catch recognize which have some When

guidance. to can year options number. think full we've the got, with giving the that comfortable get more we're And think we I we So

Scott Siefers

sort the or given some does the to that floor second And took a hedging might of just perfect. any right, by where, have the for half then what, All off like margin, what you've it in of of you Okay. a taper year, do the sense begin actions like, once chance? represent maybe taken,

Derek Meyer

No, we don't.

I evolution swaps on the cowboy you there. into do you XX year that portfolio. of that bit can million impact back you million, as $X.X And can the go using that far point if with we sensitivity that combination and scenarios, been math, I'd down biggest some some think of basis $X you the full the Because asset a shock see, a as to of little basis. [indiscernible]. managing we've our might have

of know shape is sheet and of the is strategy in or interested One faced you and so, [whether] hedging of the isn't your natural do the the book, or we're But we're and we've we'd growth And at each start you in monitoring progress sensitive. with everybody's point asset then about might some we the on we're how the floors. thinking making. want got everybody offering if the quarter auto the not continue I you to balance stay to still And with that things like yield call curve swaps with that protection is yet.

Scott Siefers

Yes.

Perfect. you again. very appreciate guys Okay. much. it Really Thank

Andrew Harmening

Thanks, Scott.

Operator

question. Tamayo comes question next Please from your with James. Daniel Our the line Raymond of with proceed

Daniel Tamayo

afternoon, Good my for Thanks guys. taking questions.

Andrew Harmening

Sure.

Daniel Tamayo

the point where excess the at you say Would at balance growth Maybe another point? with loan stab point balance the different now, that this more to growth liquidity or NII from just at looking you at the you're matched a sheet of expect view. sheet. less But

Derek Meyer

Yes.

that I percent a of going as mean, I'd that's assets. shorthand, way done it, the bottomed a on to, have we view, So characterize we haven't securities are out fixed I

of a growth So is plan our includes deposit that and securities. and there funding component investments supporting

closer gets to what you're about. So you talking it probably

Daniel Tamayo

Yes, that makes sense.

the appreciate comment comfortable restrict Okay would to with rate and ability from expecting leverage then I there or your that that Is in environment achieve of feel pretty operating guidance? that you perspective on that kind any positive a XXXX.

Andrew Harmening

the that the on we've to bit, in in what just are to initiatives is. asked deposit be. obvious 'XX fund a the portfolio, we're the little heading see reasons. there's being bit our understand that side every the might that tailwind on we've have able With that is in and of a been we that the And future what we there Look, to question, that regards call show lot market experienced 'XX, ahead almost we out the marketplace rate what from the question, because little growth already impact a yield into there to have that's the Yes. of able find contradictory information the

a forecast what from low higher things return in return us is. expenses stage, shift to ability all to give at confidence this area those our Our a area

falling could The roll doesn't And down that. towards be mind. to there economy seem be in a our slow quickly

talking and levers levers We a exists. have actions we But what on with. lot and is conversations that a structurally that the demand taking about forward time. automation, make those And how pipelines we I and will change and as also believe company we're our can And point choosing the other our we want we're funding our to over about is there. is match fund really we expectation. go talking see know sheet which deposit what largely loan side. balance that mean about we're 'XX, Those I'll to of That's but have

So you that improvement. opportunity competence we that have and to more for more starts give

drive deposits over those core the time lessen means wholesale we funding. that you that As

spend. in yes, short money digital have have and we we can we strategies as So invest we but side, answer the shifting shifting the because answer, people. on versus our invest spend from the capital side, is in spend, world an confidence have And also physical many deposit where also will digital on invest where to happen, the our we uncertain where and loan we digital the on as what much both tactics

today have So together we and forecasts. those in we're environment confidence level taking XXXX in all the things the a

Daniel Tamayo

all Appreciate that Andy. color

of looking or in year, you're that of And in the curious year. keep to It considering expense for if Just need we lastly, guide. through through pace just where came in the mind expense on growth it. I anything growth Thanks. just if rather steady I'm actually below the there's terms it's was the

Andrew Harmening

not that's higher rhetorical. Daniel? Are you disappointed Sorry,

doing the as have I've start expenses then frankly we And year action it, targeted we branches, it origination, reason that return third has in $XX because very we've do in then place? roughly took physical less, into those which on approach, and space lever and been investing in us expenses we feel going of cannot right we're in simultaneously function less term. that. the a yield in as The Let's here, was And table I also so in an with on that we say, margin it's Sorry, taking our going the have do we expense year approach we is off in the taken year. areas areas confident we areas, We've just to into much think with what first the we staffing new in at taking party the it's that are not cut our this look long strongly out brought million. in we since no. is spending the are of the down, similar which what on that typically a

we to So taking it's X% to proactively because expenses. when say cut we expenses grow are we before actions X%,

will slow expense do long As the we of our proactively where for path. we we that business on to as continue And already doesn't, already team investment. But revenue, exercise down will the team. increase the a ask in leads if is, increase in an also, course that it

very able much grow to answer to your had where revenue. in we've discipline expenses. I we've the that been regards So question, with the to like like an environment I discipline

also incredibly you, bring is tell I not and years expense head experience important in disciplined CFO FP&A. bringing balance talked not when growth you're but that happen as of that about, that's years bring We to will and in discipline often of the execution important, trying an has a towards very management. to accident,

knowing consistently the not everybody your of tell competing will I for that X% quite feel from I immune areas we're to range. and about at And you, X% talent. good looking that has, which issues the different we're business So is

So going with key to we to had retain make talents that to count have or and already we them. regards areas have factored in increases to make

Daniel Tamayo

my Okay, for taking for all That's questions. all great. that. Thanks me. Appreciate

Andrew Harmening

you. Thank

Operator

McEvoy your Please from Stephens. Terry question. of with proceed line Our comes next with question the

Terry McEvoy

Good the thanks. In prior afternoon. provided presentations, loan down finance. auto to those by you categories XXXX Hi, growth outlook commercial three

question ideal grow So the you I of because speak, to you an finance that growth some of hear XXXX would is like the hit so like allow just kind of what would auto is in and bucket how world, lower to and you filler be mix marketplace? to that returns guess target, to in my we that kind the in of to given

Andrew Harmening

only of is the to want great I offering year And that say, returns. that to the of find middle not go Yes, to lot And the opposed the it's class, we going, see out going in going out year what would maybe have and we levers. area is call we're the to this asset hard a a is where in Terry. as best say

so look at closely very And we our mortgage business.

Now prior so is January. versus XX% off the our mortgage business production in far,

historic in seeing we're lows, do pay downs a want that where grow. how seeing that year So I and still at out we're forecast to

through, growth our we trying we levers segments. the is, ability what to what have long people because quality we've in action manage pull we're So is, but with number to these taken quality know

And in at the then going returns those we're are. what areas to look

say I market and period, day while new give to businesses this asset market, us as long. they're lending what lending based [their] So also middle middle finance, is equipment I'll during guidance all that

point, I'm that this risk, to I'd we I side those selling, business, them with division lending. not as high sure our then certain like that the and the we're Prime low environment. up that look it's And risk, like professionals would say to into filler slack I'm would a our for So to we integrated in call we'll auto it label. our our consumer have product. bounce try risk of paper look really part potentially have and a residential pick create not call out it's at feel at that Then the growth it's how between process. higher

the like there. position So we're in I

have where saying So I within we finished we that optionality are. commentary by

be. at, very an can that Our goal over industry. what that we opportunity And closely think at in look we drive We mix time we the we to shift see look margin. have is

is So drive would is do the over what yielding But XXXX, that assets drive can like for to idea time. higher I we balanced growth.

are not We auto company. the lending

areas We commercial between and balance between the and two, that to company while are margin. growth maximizing try on a can those the consumer choose

little have reason I the year. projections. that that the out It's also a our that's of hit haven't going some bit into we So why broken of confidence that can we

Terry McEvoy

loan and say in that a loans they page those look construction significant follow I auto at feel downturn. for commercial that Appreciate what right growth in with a a especially X, and to concerned mean, hand category, as are been When and even cycle how bank finance. do up, CRE then perform growth just may or late investors what who there and I is might finance and What's auto your size has your you response?

Andrew Harmening

started that XX large in what could would real but in say on real call estate, I changing balance derisk is prime, And the Well, probably you if in is in instance, worked estate look to and super over fundamentally that case. prime oversized late. residential for I up have we're at you I market sheet would And out, say that too we've months, and it down. a our residential oversized portfolio doesn't portfolio, we're fluctuations a specifically,

data only ever sheet And brought our has the into that is have data, joined have space. inherently, the us also I oldest how seen mean, we by understand portfolio experience our When the it auto that, in people business is that that, and opinion, the we So they board of risky, Not the I've balance operates. do in of that at decades experience, historical specifically, that going to calling growth. we across experienced. out some decades with less look and new

a other against and portfolio. takes of it's data. know that know because we a into If and scorecard the traditional at prime. way specifically that better think super And standards, to which prime of look investors we I'll super book and And is we it, Then prime. of how we top we is check can take factors, to our XX% of lot that operates. a on So prime went that, approach, XX% we by historical that that say

with the portfolio the would say things be is. what to would that regards those I So

next that credit anywhere. we is The I'd expand thing our box say not did

we've up seen, fact, as we've world the In our credit tightened box, change.

that So approach. commercial commercial estate already up underwriting. underwriting. we've we pretty a on And up We real on tighten had that conservative tighten

looking chief should maybe final added the know balances And risk, we've he I think a in lot table So on well. Officer, that of Chief quite I areas on make at Risk Credit passion a get across this. we I'm comment our this.

Pat Ahern

whether We No, the rate not to you've relative marketplace, adjustments, look to like it's I our on what's did at, to sizing, change in whether we as growth everything would seen. going And whether are that's Andy agree exit. continuing you box it's with said. said, credit underwriting the an interest

client kind to evolves growth you're also marketplace. focusing again, is we've is relative been the in of that what reflects done core stuff on. that of the the kind And it it's all seeing So

to anything in vertical. or some new stretch stretch add like new We didn't didn't geography in we So a that. add to

on we're comfortable feel the we're economy. adjustments core what's we with making had focus we with to So the the coupled going reflect in

Terry McEvoy

taking Thanks for Great. my questions.

Andrew Harmening

question. Good Thank you.

Operator

from the Our next Arfstrom Capital with Markets. RBC Please of question. comes your question line Jon with proceed

Jon Arfstrom

thanks. guys. Hey, Good afternoon,

Andrew Harmening

Hello. Good Jon. afternoon

Jon Arfstrom

what not do couple that by XX Just driving we're numbers, you Pat. delinquencies quarters that? you surprised a are know but follow on of the mentioned you, And a up. like just small normalization, expect On up slide in so to some these for I look quick that

Pat Ahern

now, of by we'd ago, think were long there back kind How not. to thought I it's revert year be we but to that pre-pandemic it's going numbers. takes maybe

we've the the year outperform. as now. again the indirect book, mentioned, book a seeing loan think, auto continues a little is We're I to auto, portfolio over

reaching haven't But of some delinquencies are small kind of rest we're trends. there. normalization really, consumer saw the seen quarter a of we we really that the So and really significant this some

So XXXX when still back get to to be is we numbers say XXXX, to determined.

Jon Arfstrom

that just you terms is message Non-financial refresh ask your brand what and The you, the what do well. delinquencies to That as emphasized for question helps. the about think of messaging? going needs Andy. to talked on campaign you I in was about,

Andrew Harmening

in But to I'll a expertise brought to I what chief we new and commercials sure the part customer those in email is hate to is as to I I'm you going spoil feel marketing research. you, launching. interesting like it officer say and his product for Jon. me we're though,

to about. are when so brand, you're also customers And about about. what what launch then want you the to you first you something want that's know your know But

me. that's execution. and also is, it's [marrying] kind as do, marketing And think we the what are what's messaging going we going we to but in it about true so to to a of what our be message, combine think And we product us about for also

significance with products deal. brand the launch quarter up of should we're big that message. a that going third will, marry it second, to does, the the and we that's fourth And So in

driving you to then, And you when day, be to end of at you think about your triumvirate, you're and about branding, you then think about about new relevant. the and think platform, digital, them think because need product, the the the the you digital

final typically the years relevant, make particularly thing want banks. switching that are XX those to you're and And that I'll say old people you people on to are the sure are is, And that under.

that also sweet the in right the is with be use spot seeing that from message. have the It's in with digital account are are and in ease those we told So right satisfaction, opening. sweet folks our from It of what will spot in we're of of And the it standpoint. important us will consistent a digital. be doing product range

path it's And for even and product board, XX been going into marketing been than months that. lot new our all on of of more but before came it's together we've a coming So on executive nicely. of a work that heck

I'm all myself, So the a making note to email Jon commercials.

Jon Arfstrom

them. I'm sure I'll see

couple saying more Terry's on in of question of the understand on you to expect achieved there, get on wanted a what then from here you I materially Okay X, some you do of kind slide grow what just just auto but diversification? very auto, cleanups, and portfolio and back terms to of you're

Andrew Harmening

up option emphasis. natural at why hedge now mortgage look the say is a that I have And portfolio that's initially we say have to to as a right to important. would decreasing that I mortgage it. grow seeing set we our we're would

is, our the will can other that what mortgage in growth that does, And in position The well. do, number categories it so what we upon exact have find we as specifically will dependent what on overall believe what liquidity, be XXXX.

we little to growth more which is a point and consumer. finer that, it's balanced on between that really a a kind message early why So commercial put of too of bit

Jon Arfstrom

guys. that. at it leave just I'll Thanks, right, I All appreciate it.

Andrew Harmening

All right. Thank you.

Operator

remarks. Thank are further to questions. the call for to you. hand management I'd back like There no closing

Andrew Harmening

bank. interest really in I that the you've had look, appreciate Associated Well,

various will road, me, at your in leadership and speaking our have be with meantime, thank In company to Associated forward bank. if for of team the Ben. you what's this We the with the many locations. you our happening look interest quarter you later questions, contact on story contact or of again, telling And

Operator

Ladies and you gentlemen, this does conclude today's teleconference. Thank participation. your for

this You lines have at a time and wonderful disconnect may your day.

Associated Banc-Corp (ASB) 26 Jan 232022 Q4 Earnings call transcript