Associated’s spending priorities: Commercial expansion, digital upgrade

Associated Banc-Corp is expected to announce a new growth plan by mid-September that includes an investment in improving its digital banking offers.

Executives at the Green Bay, Wisconsin, company did not disclose Thursday how much they will spend on the initiative, or many other details about the plan. But by eliminating Associated’s previous expense guidance of $625 million for 2021, they signaled that the effort will cost a significant sum of money.

“We have a serviceable digital strategy today, but we’ll be looking for a lot more,” CEO Andy Harmening said Thursday during a call with investors. “We will have to spend money in digital. The exact amount of that is what we’re finalizing right now.”

“As we get into our growth initiatives and execute on those, I believe that will open up optionality for us,” Associated CEO Andy Harmening said Thursday.

Before joining Associated in April, Harmening led a technology overhaul at the $175 billion-asset Huntington Bancshares in Columbus, Ohio, which included new features to give customers more control over their spending.

Since his arrival at Associated, the $34 billion-asset company has promoted Doug Peacock from director of strategic channels to head of digital strategy.

On Thursday, Harmening said that Associated’s growth plan will also include an effort to expand small business and commercial lending into key markets like Chicago and Minneapolis. And he signaled interest in newer markets like St. Louis.

While the bank’s expenses are expected to increase from about $174 million per quarter over the back half of the year, its income before taxes and loan-loss provisions are forecast to exceed the extra spending, Harmening said.

He even hinted at interest in a future acquisition — once the upcoming growth plan is put in place, and the company has ramped up in new markets.

“As we get into our growth initiatives and execute on those, I believe that will open up optionality for us both from a market standpoint and then ultimately from a scale standpoint and potentially a second step in the merger and acquisition market,” Harmening said.

Associated reported net income available to common equity of $86.1 million in the second quarter, down 40% year-over-year.

As at many other banks, net interest income fell due to low borrowing rates, dipping 5% from last year. Noninterest income was 71% lower as the company lost the revenue from its former insurance and consulting business, which it sold in June 2020, and because mortgage fees declined as refinancing slowed.

The company expects noninterest income to be between $315 million and $325 million for the year, which would be down from $514 million in 2020.

Excluding the revenues from the unit Associated sold, noninterest income was up by $68 million. Bank executives pointed to wealth management and deposit fees as the main drivers of noninterest income growth in the second half of the year.

Associated forecasts loan growth from commercial real estate and commercial and industrial lending to be between 2% and 4% in 2021, excluding Paycheck Protection Program activity.

To support their optimism, executives pointed to a 2.8% increase in commercial lending between the first three months of this year and the most recent quarter.

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