Associated Banc-Corp posts higher Q4 profit as margins expand, credit costs ease

Associated Banc-Corp (NYSE: ASB) reported higher fourth-quarter profit on Thursday, supported by stronger net interest income, expanding margins and stable credit quality, as the regional lender benefited from higher interest rates and steady loan growth.

The Wisconsin-based bank said net income available to common shareholders rose to $137.1 million, or 80 cents per diluted share, in the three months ended Dec. 31, compared with a loss in the year-earlier period.

Total revenue for the quarter was $623.7 million, up from a year earlier, driven primarily by higher net interest income. Net interest income increased to $318.5 million, reflecting improved asset yields and disciplined funding costs. The bank’s net interest margin expanded to 3.03%, compared with 2.86% a year earlier.

For full-year 2025, Associated reported net income of $463 million, or $2.77 per share, up sharply from $112 million, or 72 cents per share, in 2024. The bank said annual net interest income reached a record level as loan growth and balance sheet repricing offset higher deposit costs.

Loan and deposit growth

Average loans rose about 5% year over year in the fourth quarter, led by growth in commercial and industrial lending, while total deposits increased roughly 3%, the bank said. Management cited continued customer activity across its Midwest footprint, including Wisconsin, Illinois, Minnesota and Missouri.

Non-interest income totaled $75.1 million in the quarter, down from the prior year, reflecting lower gains from balance-sheet repositioning and reduced mortgage banking revenue. Fee income from wealth management and service charges was largely stable, the bank said. Non-interest expense increased modestly to $188.3 million, reflecting higher compensation and technology-related costs. The efficiency ratio for the quarter was 47.9%, compared with 52.6% a year earlier, indicating improved operating leverage.

Credit quality remains stable

Credit performance remained stable during the quarter. The bank recorded a provision for credit losses of $14.8 million, down from the prior year. Net charge-offs were 0.23% of average loans, while non-performing assets declined slightly on a sequential basis.

The allowance for credit losses stood at 1.35% of total loans at quarter-end, consistent with recent quarters. Management said portfolio performance remained resilient despite economic uncertainty.

Associated ended the quarter with a common equity Tier-1 capital ratio of 10.49%, well above regulatory minimums, providing flexibility to support growth and shareholder returns.

Strategic developments

In December, Associated agreed to acquire American National Corporation, the parent of American National Bank, in an all-stock transaction valued at about $604 million. The acquisition is expected to close in the second quarter of 2026, subject to regulatory approval.

The bank said the deal would expand its presence in Nebraska and strengthen its commercial banking franchise in the Midwest. The transaction is expected to be modestly accretive to earnings after integration costs. Associated returned capital to shareholders during the quarter through dividends, paying 23 cents per share, unchanged from the prior quarter.

Outlook

For 2026, excluding the impact of the pending acquisition, the bank expects mid-single-digit loan and deposit growth, modest expansion in net interest income, and largely stable credit costs. Management said it will continue to focus on expense discipline while investing in technology and client relationships.

Reasons to Pass on ASB

• Acquisition Risks: $604M American National deal faces regulatory delays, integration costs, and dilution risks beyond Q2 2026 close.
• Non-Interest Income Drop: Fell to $75.1M from lower repositioning gains and mortgage revenue.
• Expense Growth: Non-interest expenses up to $188.3M on compensation and tech spending.
• Modest 2026 Outlook: Mid-single-digit loan/deposit growth; modest NII gains, excluding acquisition.
• Commercial Loan Exposure: Growth reliant on C&I lending amid sector vulnerabilities.
• Rate Sensitivity: NIM at 3.03% vulnerable to Fed cuts and sticky deposit costs.
• Regional Concentration: Limited to Midwest footprint, sensitive to local cycles.
• Static Dividend: Unchanged at 23 cents per share, conservative amid capital needs.