Associated forecasts 2025 upswing after fourth-quarter loss

Associated Banc-Corp in Green Bay, Wisconsin, reported a $164 million fourth-quarter loss Thursday. The $43 billion-asset Associated telegraphed the likelihood of year-end red ink in December, when it announced a major balance-sheet restructuring plan involving the sale of $2 billion in mortgages and securities at a loss. 

In a press release Thursday, Associated said it sold $1.3 million of securities at a loss of $148 million. The related sale of a $700 million portfolio of mortgages, on track to close this month, will result in losses totaling $130 million. Associated used some of the sale proceeds to prepay Federal Home Loan Bank advances, generating an additional $14 million of losses.

For all of 2024, Associated reported net income totaling $112 million, compared to a $171 million full-year profit in 2023. 

Still, the asset sales, combined with a $331 equity raise completed in November, strengthened Associated’s profitability profile entering 2025, according to CEO Andy Harmening. For 2025, Associated is projecting total loan growth of 5% to 6%, and core customer deposit growth — excluding network transaction deposits and brokered CDs — in the 4% to 5% range. 

“I’m more confident than ever that we’re on the right track,” Harmening said Thursday on a conference call with analysts. 

Associated launched an initiative to add 26 commercial and business relationship managers in November 2023. Twenty-one of the 26 are onboard and Harmening expects to complete the project by the end of the first quarter. Meanwhile, the new hires have steadily increased their production as they’ve settled in, Harmening said. Commercial loan growth is expected to reach $1.2 billion in 2025, up about 45% over 2024.

“We have clear momentum in the commercial space,” Harmening said during the conference call. “We have the leaders in place.” 

Asset quality proved to be a strength throughout 2024 for Associated. Fourth-quarter net chargeoffs and a provision for credit losses of $12 million and $17 million, respectively,  “represented the lowest numbers we’ve seen in the past several quarters,” Chief Credit Officer Patrick Ahern said on the conference call. 

While Associated has seen an uptick in total criticized loans, which rose 55% from the fourth quarter of 2023 to $1.27 billion, Ahern attributed the trend to the company’s disciplined adherence to risk-rating standards rather deteriorating credit quality. 

“Our credit metrics continue to give us confidence that what we’ve seen to date is a handful of credits migrating within our rating system and not necessarily a sign of broader issues coming down the road in future quarters,” Ahern said. 

As with other banks, Associated’s commercial real estate portfolio, especially office loans, is being closely watched by investors and analysts. Office loans totaled $917 million on Dec. 31, down 12% from a year ago and equal to 13% of Associated’s $7.2 billion CRE portfolio. Nonaccrual CRE loans totaled $86 million on Dec. 31, level with year-end 2023.

Continued strength in the U.S. economy, especially within Associated’s Midwest footprint, have Harmening feeling bullish on the company’s prospects for growth in 2025.  He pointed to the region’s low unemployment rates and what he termed a sense of cautious optimism among commercial clients. “This continued stability has enabled us to remain front-footed with the execution of our growth strategy,” Harmening said.