Associated Expands Margin as Acquisition Lifts Loans
Net interest income climbed 20% QoQ to $370 million as margin widened.
Associated Banc-Corp (ASB), the Midwest regional bank, expanded net interest margin by 14 bps QoQ and 13 bps YoY to 3.17%, helping net interest income rise 20% QoQ and 23% YoY to $370 million. Average loan yields increased 14 bps to 5.67%, while the cost of interest-bearing liabilities declined 1 bp to 2.66%.
The margin improvement coincided with a step-up in balance-sheet growth following the April 1 acquisition of American National. Average loans rose 15% QoQ and 18% YoY to $35.9 billion, compared with growth of 1% QoQ and 3% YoY in the fourth quarter of 2024.
Commercial lending accounted for much of the increase. Average commercial-and-business loans grew by $1.8 billion QoQ to $14.8 billion, while average commercial-real-estate loans increased by $1.6 billion to $8.9 billion. Period-end C&I loans rose 11% QoQ and 22% YoY, and auto-finance balances increased 29% QoQ and 36% YoY to $4.0 billion.
Deposits kept pace with the enlarged loan book. Average deposits rose 15% QoQ and 18% YoY to $40.4 billion, including a $4.7 billion sequential increase in average core customer deposits. Noninterest-bearing balances increased by $1.1 billion QoQ to $7.1 billion, while money-market deposits grew by $1.6 billion to $7.6 billion.
Fee revenue provided a smaller lift as noninterest income increased by $5 million QoQ and $13 million YoY to $80 million. Higher card fees and deposit-service charges led the sequential gain, while mortgage-banking revenue declined by $3 million. Expenses rose by $53 million QoQ to $272 million, including $24 million of acquisition costs, alongside higher personnel and professional-services spending.
Credit costs also moved higher. Provision for credit losses increased to $19 million from $11 million in the prior quarter, while net charge-offs rose to $23 million from $5 million and reached an annualized rate of 0.26%. Nonaccrual loans increased by $39 million QoQ to $150 million, lifting the nonaccrual ratio by 6 bps to 0.41%; the allowance ratio rose 2 bps to 1.36%.
Associated ended June with a common-equity Tier 1 ratio of 10.47%. The expanded balance sheet and wider margin strengthened the revenue base, while rising expenses, charge-offs and nonaccrual loans set the measures investors will watch as the acquired portfolio seasons.