Associated Banc-Corp (NYSE:ASB) Q3 2023 Earnings Call Transcript

Andy Harmening: Well, I mean, Daniel, you know it’s been a pretty interesting market the last six months. And so over that period of time, we’ve looked at every loan category. We’ve looked at every security. We’ve looked at tranches of tranches. And what I would say is we know our portfolio as well as we could know it right now. If there comes a time when there’s an opportunity in one of those tranches, we’ll be prepared for that. Right now, we’re not prepared to speak to that.

Daniel Tamayo: Okay. Thank you for all the color.

Andy Harmening: Thank you.

Operator: Thank you. Our next question comes from Jon Arfstrom with RBC Capital Markets. Please proceed with your question.

Jon Arfstrom: Hey. Thanks. Good afternoon.

Andy Harmening: Hey, Jon.

Jon Arfstrom: Hey. Looking at Slide 8, and I don’t know if this is Derek or Andy but can you talk about just the cadence of when you think your margin might bottom out? I mean when I look at slides 8 and slide 7, it sure seems like some of the pressure on interest bearing liabilities is starting to fade a little bit and you’re getting the asset repricing. But would you guys say we’re at or near a bottom on your margin?

Andy Harmening: Well, John, it’s a good question. I can tell you I feel a lot more certainty than I did on March 10th. When we look at the last few months, it’s been pretty interesting. The one encouraging sign, several encouraging signs I would say is we’ve seen a decrease, I talked about the decrease in attrition that we’ve experienced, that helps us understand what the volatility is going to be. We’ve seen a, I think we’re pretty near the bottom on our non-interest-bearing deposit percentage. We don’t see it going down significantly from where it is. And that slowdown that we saw this quarter, we actually expected to slow down again in the fourth quarter. And that’s why we have confidence that we’re getting near the bottom.

We think knowing that that non-interest bearing is where it is, then the question becomes, what is your asset growth? What can you put on at higher yields? And that’s what is to be determined what the market will allow. We won’t force it. We’re not going to force growth for growth’s sake as we go into the end of this year and the beginning of next year, but we think there will be some modest growth out there for us. When you put that in at higher yields, that of course takes the place of — creates less pressure on that margin. So we expect the margin pressure to continue to decrease in the fourth quarter. We do believe that in 2024 we will see an inflection point in there. Of course, it’s based on multiple variables, but the number one positive that I see right now is hitting a terminal number, getting close to the terminal number on non-interest-bearing deposits.

Jon Arfstrom: Yeah, okay.

Derek Meyer: Yeah, I don’t think I have a lot to add from my standpoint.

Jon Arfstrom: Okay, that’s helpful though. Slide 3 on the customer CDs versus brokered CDs. You need to talk a little bit about what you did there and how you attracted the customer CD balances and should we expect more of that in the next couple of quarters?

Derek Meyer: Yeah, our customer CD balances have been largely the same rates for quite some time, I think, even towards the end of the last quarter. And In fact, now we’re toying with the idea of dropping the promo rates a little bit this quarter to see if we continue to hold, sounds like we’re getting some interference, but to see if we can continue to hold the production. So that strategy has worked well and we’ve stayed fairly short. Most of our production all along this year has been in the seven-month CD. Really that’s about the only story there. The brokered CDs we’ve stayed short all along, when we first went into them after Silicon Valley, we mostly went into three months with almost everything. And then as things progressed and we wanted to make sure we had secured funding coverage, that grew a little bit more.