ASSOCIATED BANC-CORP (ASBA) Q3 2024 Earnings Call Transcript

Good afternoon everyone, and welcome to Associated Banc-Corp's Third Quarter 2024 Earnings Conference Call. My name is Paul, and I will be your operator today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session at the end of this conference. Copies of the slides that will be referenced during today's call are available on the Company's website at investor.associatedbank.com. As a reminder, this conference call is being recorded. As outlined on Slide 1, during the course of the discussion today, management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements. Associated's actual results could differ materially from the results anticipated or projected in any such forward-looking statements. Additional detailed information concerning the important factors that could cause Associated's actual results to differ materially from the information discussed today is readily available on the SEC website in the Risk Factors section of Associated's most recent Form 10-K and subsequent SEC filings.

These factors are incorporated herein by reference. For a reconciliation of the non-GAAP financial measures to the GAAP financial measures mentioned in this conference call, please refer to Pages 28 through 30 of the slide presentation and to Pages 10 and 11 of the press release financial tables. Following today's presentation, instructions will be given for the Q&A session. At this time, I would like to turn the conference over to Andy Harmening, President and CEO, for opening remarks. Please go ahead, sir.

Well, good afternoon everyone and welcome to our third quarter earnings call. I'm Andy Harmening and I'm joined once again by our CFO, Derek Meyer; and our Chief Credit Officer, Pat Ahern. I'll start off by sharing some highlights from the quarter and then from there, Derek will provide a few updates on our margin, income statement and capital trends, and Pat will provide an update on credit. At a macro level, the third quarter did bring a variety of data points indicating a slowing of the U.S. economy, but closer to home we continue to see signs of resiliency and stability in our Midwestern footprint. Unemployment in Wisconsin is at 2.9% and many other Midwestern states are also below the national average. Our prime and super prime consumer base has remained strong and our commercial clients have largely been able to manage their way through elevated rates, supply chain issues and inflation.

We serve stable markets and in tandem with our conservative approach to credit, that stability has translated to strong asset quality trends again this quarter. Importantly, it has also enabled us to stay squarely focused on the execution of our strategic plan and now we're seeing several tailwinds start to emerge across our company. On the consumer side, we now have a value proposition that stacks up well against just about anyone in the industry, whether that's a commercial bank or a fintech. Over the past few years, we've completely transformed the customer experience by building out a modernized digital banking platform to make it easier for our customers to manage their money when and where they want. We've deployed customer-favorite product enhancements like Grace Zone, early pay, credit monitoring, and we've launched a new mass affluent program to deepen relationships with the strategically important customer segment.

We're going to continue to make enhancements, but we already have what we need to grow in our markets on the consumer side of the business and we are growing. We believe we're right on track and importantly, so do our customers. In 2024, we've seen the highest net promoter and mobile banking satisfaction scores on record. We're also growing our customer base for the first time in years and attracting higher per household deposit balances with these new customers. On the commercial side, we continue to build momentum by adding strong producers in key growth markets. Following the addition of several experienced leaders such as Phil Trier, Neil Riegelman and Michael Levins over the past year, we're progressing on our overall plan to add 26 commercial and business relationship managers by early 2025. Earlier this week we announced the launch of a new specialty deposit and payment solutions vertical focused on deposit-centric industries such as title and escrow, HOA, property management and fintechs.

This vertical will be led by Rick Bruhn, an industry expert who joins us from U.S. Bank where he spent the past 18 years of his career. Our organic Phase 2 initiatives are already impacting our financial results. Here in the third quarter we saw encouraging signs of progress. With over $600 million in core customer growth, core customer deposit growth and nearly $300 million in C&I loan growth and solid core earnings growth, we have positioned ourselves to outperform in both an improving macroeconomic scenario or in a low growth market condition. With that said, I'd like to walk through some of the additional financial highlights from the third quarter beginning on Slide 2.

Thanks Andy. I'll start by discussing our asset and liability yield trends on Slide 7. Despite the 50 basis point rate cut at the tail end of the quarter, we saw asset yields inch higher in all major loan categories, including CRE, C&I, Auto, and Resi here in Q3. Largely driven by these trends, our overall earning asset yield increased by 3 basis points during the quarter to 5.68%. On the liability side, interest-bearing deposit costs ticked up by 3 basis points, but growth in deposits enabled us to decrease the reliance on higher-cost wholesale funding during the quarter. As such, our total cost of interest-bearing liabilities decreased to 3.59%. Moving to Slide 8, the trends I just described netted out to a 3 basis point expansion in our quarterly net interest margin, landing us at 2.78% for the quarter. Our net interest income came in at $253 million for the quarter, representing a $6 million increase from prior quarter and an $8 million increase from the same period a year ago. Based on our latest expectations for balance sheet growth, deposit betas and Fed actions, we now expect to drive net interest income growth of between zero and 1% in 2024.

Thanks Derek. I'd like to start our credit portion with an allowance update on Slide 14. We utilized the Moody's August 2024 baseline forecast for our CECL forward-looking assumptions. The Moody's baseline forecast remains consistent with a resilient economy despite the high interest rate environment. The baseline forecast contains no additional rate hikes, slower but positive GDP growth rates, a cooling labor market, and continued deceleration of inflation. Our Allowance for Credit Losses increased by another $8 million in Q3 to finish the quarter at $398 million, with an increase in CRE partially offset by a decrease in commercial and business lending. The uptick in CRE largely stemmed from some migration into criticized loans during Q3. We do not feel that this increase is an indication of a significant shift in credit stress, but rather it is a reflection of our adherence to risk rating definition guidance, acknowledging shifts in credit profiles. We do not view these credits as representing risk of loss at this time as reflected in our stable allowance. Altogether, our reserves to loan ratio increased by 1 basis point from the prior quarter and 7 basis points from the same period a year ago to 1.33%.

Thanks Pat. I'll wrap up by reiterating a couple of key points from our presentation on Slide 17. Starting with the balance sheet, we've continued to seek selective loan growth that emphasizes full banking relationships, quality credit profiles, and diversification to deliver improved returns. With this in mind, we continue to expect total loan growth to land at the lower end of our original range of 4% to 6% in 2024. We're pleased with the work that's been done across the bank to attract, deepen and retain customer relationships and with the resulting momentum we've seen in foundational areas such as customer satisfaction and household growth. We remain confident in our ability to deliver core customer deposit growth and we continue to expect our core customer deposit growth to finish 2024 at the lower end of our original 3% to 5% growth range. On the income statement, we've adjusted our most recent forecast for balance sheet growth, deposit betas, and rate environment.

Taking these factors into account, we now expect net interest income growth of between 0 and 1% for 2024. We continue to feel encouraged by the durability of our noninterest income in a challenged environment, and we continue to expect noninterest income growth of negative 1% to positive 1% in 2024 relative to our adjusted 2023 base. And finally, our disciplined approach to expenses remains a foundational focus for our company. With this in mind, we've lowered our noninterest expense outlook to growth of 1% to 2% in 2024 after excluding the impact of the FDIC special assessment. With that, let's open it up for questions.

Thank you for your patience. Our first question comes from Daniel Tamayo with Raymond James. Please go ahead with your question.

Hi, thank you. Good afternoon everybody. Maybe first just, you know, on the margin, as we think about how we might go forward, just you have a table on Slide 9 that shows the funding maturities. Just curious, kind of some of the rate pickup opportunities you think on that, especially on the one year funding opportunities that you show there, what that might look like?

Yes. So I'll say a couple of things. I'm getting a little feedback. Page 9, we put out there on purpose. I mean, we wanted to show our contractual funding obligations really have been contained to one year or less and I think that jumps out pretty clearly. When you think about the one year out, we feel like we have a lot of ability to work with a rate increase that is slow and steady. I would say where anybody would get in trouble is or be pressured more on margin would be if you see a big jump quickly and then you see an inverted rate curve, we're not believing that those two things will happen and so with the fact we've been able to remain short. And then on the CD side, it doesn't even pull up the fact that we have $3.6 billion in customer CDs that are essentially seven months in duration. When those are renewing, we're getting over 90% retention on those and we're picking up 100 basis points plus so far.

So we feel like we can manage the downward interest rate risk. There are a lot of factors that come into that during the year. We haven't given guidance for next year, but we've set ourselves up in a way to be ready for that. And I would say the other thing that Derek's done a very nice job of for us is making us less asset sensitive, which is also on Page 9. You can see back when I had gotten here, we were very asset sensitive and we kind of rode that up and then steadily over a couple of years, Derek and his team managed that down purposefully, where now we think we're very much in line with the industry and with an even playing field, it comes down to execution of strategies.

And then maybe one on the lender hirings where you provided an update as to where you stand now. It looks like it will be a pretty good jump here in the next quarter or two with the kind of final leg of those hirings. But curious where you stand in terms of where you think you stand in terms of kind of fully baked in opportunities from those lenders from a lending perspective and where that might end up.

Yes. So we put at the beginning what our forecast for increased performance would be. Maybe I could share some stats that we haven't explicitly called out, but when we look up, we're about 17% up in RMs over the past year. What's interesting is we track pipelines greater than 50% probability to close and pipelines above 50%. Now above 50% some people might say that's wishful thinking, below that. If you have above 50% certainty, you're pretty likely going to close those deals. That pipeline from a year ago is up 18%. So we already see the early - It's great to hire people. We don't make money by hiring people. We make money by having them get out there, get a full relationship and book it. So right now, the category that is the probability of closing above 50% is growing at a rate very similar to what we're seeing in the hiring front. So that's pretty impactful to us. We also have hired people that have not solicitations those expire.

We had one expire in October. We have one expire in November. Our ability to attract top talent, I'm as confident right now as I have been since I joined this company three and a half years ago. So I feel quite confident we're going to be able to bring in talent over the next three to four months and get the entire team net, the net team at a position where we are up 26 RMs. It takes about six months for somebody typically to really hit their stride. So we expect the impact from the folks we've already hired throughout the year. We're sticking with what we believe we can get an upside because these folks are talented, and they're bringing their pipelines up at a rate that is quite good. So it's a long answer to a short question, but now we've gone to the second phase which is we've gone from hiring people to seeing a pipeline that has certainty. In this past quarter, we saw a little bit of growth. We expect that, that will continue on even a modest growth marketplace through 2025.

Perfect. I appreciate all that color. I’ll step back. Thanks Andy.

Thank you. Our next question is from Scott Siefers with Piper Sandler. Please proceed with your question.

Good afternoon everybody. Thanks for taking the questions. Andy, I was hoping you might be able to kind of discuss the outlook for the complexion of loan growth in the fourth quarter. I think at least touched on it or a portion of it with the comments about onboarding personnel from earlier this year, but it looks like we need to be just a touch stronger than you generated in the third quarter. So just curious where that will come from? And maybe more broadly, if you can spend a moment on sort of what your customers are saying about appetite to borrow will make get them off the sidelines, et cetera.

Yes. Well, you asked a lot in that one question. I'm ready and so what I would say is every quarter that goes by, if you think about a ramp-up of six months, got another quarter for the folks that are here in the commercial team. So that piece of it gives me quite a bit of confidence. We've been able to bring auto loans in at a really nice yield and when we're bringing people in last month, I believe, Derek, the FICO was 796, I mean, Derek and I are concerned that we won't be able to get financed. So we're really pleased with the quality of that customer, but we're also steadily growing that portfolio going into the rest of the year. We won't accelerate that. But those have been the key drivers. For us, on the commercial real estate side, it's healthy to get payoffs when people have completed some of their construction projects. So we're down in that category. I actually see that as a good thing for the bank and for the borrower.

However, that longer-term rates stayed a little bit high. So we may not see the payoffs in the fourth quarter that we did in the third quarter. That's uncertain. But it looks like if those stay a little high, and we get the yield curve we are seeing now that, that could also lead to fewer payoffs. And then finally, when you have a situation where you bring in a lot of new people, you do have some people exit. And so we look closely at the portfolio and say, with exits, what credits are we willing to exit? So we had a few credits that we thought were okay if they exited in the second and third quarter. We feel pretty clean right now. And so we don't think that we would have the payoff volume that we had in the prior two quarters either. So you marry a seasoned commercial group with a steady order book and a decrease in payoffs. And that's where we think we instead – we've stayed pretty steady in the range that we have. But now we've gone to the lower end of the loans.

Got it. Okay. Perfect. Thank you. And then maybe, Pat, can you – would you spend your second kind of expanding on your comments regarding the increase in criticized loans? It feels kind of like because there was just a risk rating shift in there. Would that be sort of a onetime step up? Or does that take a couple of quarters to work its way through? How do the sort of pushes and pulls in there work?

Well, as I noted, I think we've circled a handful of those credits that we think are kind of short term, they could see upgrades in the next quarter or two – so we're not overly concerned that there's going to be some continued migration there. These are kind of – a lot of the things, these are not portfolio-wide. These are more select credits, and it's kind of normal course of business stuff that we're seeing. And I'll point out that in the CRE book, we continue to focus on long-term customer relationships. And these are sponsors we've worked with for many years we remain very confident on how those relationships are stepping up and working with us to address some of these issues. And like I said, there are more kind of normal course of business stuff, and nothing systematic or a big shift within the portfolio.

Got it. All right, sounds good. Thank you very much.

Thank you, Scott.

Thank you. Our next question is from Jared Shaw with Barclays. Please proceed with your question.

Hey, good evening. Thanks. Maybe just going back to the auto side, the auto growth has been a little lower than I think what you had indicated earlier in the year, but you called out sort of good yields and great credit metrics there. What's causing you to keep that growth rate a little lower than maybe you would that $200 million to $250 million range earlier? Is it just trying to build that capital ratio or what's sort of the dynamic from keeping you from seeing better growth there?

Yes. It's not – thanks for your question, Jared. It's not the capital ratio. This is a category where we said we want to be prime and super prime, and we want it to fit into the rest of our book, and we don't want to be aggressive – we've said we don't want to be the auto bank per se. And we want to make sure that we're keeping our outstandings in a range. For us, as we've seen a little bit slower growth, we don't want it to outpace the rest of the portfolio. However, the deals that we're putting on with the 796 FICO and a very nice yield is a very good business. We don't want to dip down in FICO. We don't want to dip down in credit risk on a balanced scorecard, we won't. And so when demand has gone down a little bit, we could expand our network dealers we haven't aggressively done that to make up for it. We like the pace that we're running at. We like the dealers that we're dealing with. We like this steady growth in the business. And frankly, we want our commercial business to ramp up. And that is – that's the area of focus for us right now where we were trying to get a pivot in the overall portfolio. So as we've seen some softening in the auto sales overall, we haven't felt that we need to press on that to put something, put additional volume on the books.

Okay. All right. Thanks for the color. And then on the securities portfolio, I mean, Derek, what's the expectation on cash flow over the next year coming from securities? And can you just sort of remind us of what the roll-off yield and roll-on yield is looking like?

Yes. So we have about $400 million a quarter that rolls off. We're probably putting on $500 million. The differential in what's rolling off and what's going back on is not as large as it was, but it's still probably 25 to 50 basis points. We have a good portion of that still in our held to maturity that's more muni and those aren't rolling off. They're more long-term investment. So we – but we still think for the next five or six quarters, you're going to get three or four basis points a quarter pickup in the total book.

Okay. All right. Thanks. And then just finally for me, I guess, looking at expenses and maybe looking out into 2025, not guidance for 2025, but just sort of the outlook with you pulling back the expense growth going into the end of the year, but still bringing on these new hires? How should we think about the trajectory maybe of longer-term investment in the business and is positive operating leverage, something we should be thinking is attainable as we go out over the next year or so?

Let me take that one. So you said a few things in there. And I will say we don't share guidance for 2025 until January, but a few things with regards to positive operating leverage because you started with expenses, but of course, it's expense and revenue. And the revenue part of it is really impacted by rate. And so when we think about the first piece of that, we think we've set ourselves up by staying short on deposits. What we do know going into next year, and I'm particularly happy with is that we have momentum in categories that we need momentum in, in order to drive revenue, and that is customer growth. That is deposit growth that's sustainable and when you have customer growth with really high satisfaction that leads to sustainable deposit growth. So I feel really good about that heading into next year. We have a commercial book on the deposit side that we right-sized a couple of businesses; we're done right-sizing that.

So as we head into 2025, my expectation is to market outperform versus our peers going into that. And then, look, we have spent a lot of energy getting really good leaders on the commercial side and good people attract good people. And we mix that with a team that was really pretty solid that we already had at the bank with the new folks we're adding that are quality. I don't see anyone that has that combination of customer satisfaction, customer growth leading to deposit growth on consumer and then investment in additional 26 RMs on a base of 90. And so I find those to be good lead indicators that we're set up to outperform. Now to get to positive operating leverage, we have to understand what happens in the rate cut scenario. And there's no one on this call that knows that. We know that the rates are likely to be cut. We don't know at what pace, at what time. And we don't know what the yield curve will do on that.

And I say that those – the impact of those, they're not just generic loan and deposit impacts, they could impact stuff like the amortization of resi loans that are at a lower rate, which we would love to see. So we're going to get a feel for that, we think, as we go through this final quarter and we'll be set up in a better position to answer that positive operating leverage question. But Jared, you know that's on my mind. Obviously, I could rattle off a lot of things that go into that. That's what our team is discussing what we think the impact of rate. That's probably the biggest unknown because we're tracking every other key indicator going into it. So we think we're relatively well set up from a revenue expense standpoint. And I will tell you, we've already, as we have in every single year, we've actually just wrapped up our expense management tactics going into 2025. So we're ready on that piece down to the line of business at this point.

Great. Thanks for the color.

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

Hey, thanks. Good afternoon.

Jon?

Hey, one follow-up on Jared's question, on Derek on the securities portfolio size, should we expect modest growth like we've seen in the last few quarters? Is that the right way to think about it?

That's right. Yes.

Noninterest-bearing deposits, we talked about that a little bit last quarter. I expect them to be a little bit higher, but maybe just help us understand what's going on there and what kind of an outlook you have? Is that maybe troughed?

Yes, we experienced some growth this quarter, though we are approaching the level we initially anticipated for the year. It's likely about $100 million to $200 million below what we expected a year ago. However, we did see growth this quarter, and we believe the amount has stabilized in nominal terms. We expect the remainder of the portfolio to grow at a faster pace as we move into next year. Additionally, while I’ve mentioned before that the industry may see a lower percentage of noninterest-bearing deposits, I don't view it as a significant risk to our earnings, unlike the concerns we faced at the end of last year.

And I would say, comparatively, if you think about a bank that's growing at 0% on their customer base, checking household customer base for one that's growing at 2% to 3%, which is what we expect. And by the way, we haven't been able to enjoy that kind of growth in the past. We went from minus 1.5% to zero to what we expect 1.5 this year we're forecasting through next year. So – that plays a positive role when you think about noninterest-bearing accounts and balances.

Okay. And then just on the net interest income guide. The 0% to 1% when you kind of play around with the numbers, it feels like net interest income is troughing. I know the margin is a little bit tougher. But is it safe to say that net interest income is likely at a bottom at this point based on what you're seeing?

Yes, as we evaluate this year and begin to consider scenarios for next year, we believe the second quarter marked our lowest point.

Okay, one more question if I can. Pat, I know you addressed the question about criticized earlier. Do you have any thoughts on the provision moving forward? Will it simply align with loan growth and charge-offs, or do you believe there is a need to gradually continue building reserves?

I think we're pretty solid with where our reserves are right now. And I think we'll continue to watch any movements. But I think loan growth is obviously a factor. So we'll look at that, but we feel pretty good about the reserves right now.

Okay. All right, thanks guys. Appreciate it.

Thank you, Jon.

Thank you. Our next question is from Terry McEvoy with Stephens Inc. Please proceed with your question.

Hi, good afternoon. Thanks for taking my questions. Maybe if we could start, how is your deposit strategy on non-CD products. How has that changed following last month's Fed announcement and more rates to come? And I asked because I do think of associate as being more of an offensive bank playing offense. And then how do you see the down rate deposit beta tracking going forward?

Do you want to touch on that, Derek?

Yes. So I think what's been pleasing, it might be because of softer loan growth during the quarter. We as an industry, we've seen, at least initially, everybody dropped rates pretty aggressively. So that allowed us to do that. We took our rate specials down from 4.5% to 4%, I think we're already moving those down in the next week again. And that seems to be similar to what I see other banks doing. So that's been very positive. Normally, you see deposits lag quite a bit the first quarter after rates start dropping. Again, I see the industry moving pretty quickly, which gives us room from that standpoint. If we think about going into next year, we think that the down beta are the same that we've shared before, which would be 51% to 56% on interest-bearing, probably 45%, 46% on total deposits. I mean that's looking at this before this first rate cut all the way through next December.

Perfect. And then a follow-up for Pat. How much should we read into the increase in the construction CRE reserve is up to 3.74%. And was that connected at all to the migration into substandard loans that we've talked about a couple of times?

Yes. In part, it was due to that migration. And then as always, we're always looking at the CRE office book to make sure we're – that's still playing out in many markets. So we want to make sure we've got enough cushion there just for the future, but it's a combination of both.

Great. Then maybe one quick on that. The $24 million of wealth management fees, is that a good run rate? The market's been strong. Are there any onetime estate fees or something like that can show up in any given quarter?

Yes. No. Look, I'm really pleased with our wealth business. We're just starting to hit the tip of the iceberg with that. The market has been good. That's been a driver of it. However, we're seeing referrals into that at a rate that we've not seen before. And so when you start to grow your customer base, when you create a mass affluent strategy that logically upstreams into private wealth, that's starting to happen. In addition to that, when you add 16 commercial RMs net and then you get to 26. Those all have business owners and the partnership there has been spectacular. And so they're starting to refer into there. We've had good financial performance there frankly, in the future. We've had investments in our consumer bank with step one. We've had investments in our commercial bank. That was step two. We're going to meet at wealth here at some point in the future. And – but in the meantime, we're seeing a really nice trend going into that business.

Thanks for taking my questions.

Thank you, Terry.

Thank you. Our next question is from Timur Braziler with Wells Fargo. Please proceed with your question.

Hi, good afternoon. Starting with some of the changes on the fund that you saw with the incremental time deposits coming on, the mix shift within the wholesale base, can you give us some sort of proxy as to where funding costs were at September 30 to help us kind of formulate the starting point for 4Q?

I'm not sure what you mean by a spot funding cost estimate. I don't have that calculated.

There has been significant movement on the liability side. I would appreciate more detail on how that impacted the pricing dynamic, particularly regarding the deposit base. Specifically, I would like to know what rates the CDs were brought on at and whether they were below the 3Q rate, as well as how the CDs performed in the third quarter compared to the previous quarter.

Yes, we adjusted our pricing throughout the quarter. Initially, most of our CD special rates were at 5%, which we raised for a few weeks at the end of the quarter before lowering them to 4.50%, and we plan to bring them down to 4% on November 1. This has been quite dynamic. About half of our CD portfolio is in the brokered market, where we also had strong production. Our quarter-over-quarter CD book remained flat, but we did grow it, with the rate consistent across both quarters. You can see that on Page 7 of the tables we provided, where the average daily percentage for both quarters was 4.83.

Okay. Thanks for that. And then I guess just looking at the NII guide, that implies a step up in the fourth quarter. And I get that asset sensitivity has been reduced kind of when you extend it out over the next 12 months. But I'm just wondering where the confidence is in NII being able to grow in 4Q given maybe some of the near-term asset sensitivity pressures and the lag that might come on the liability side?

Yes. I think our biggest confidence in NII growth and the fact that we think this second quarter this year was the trough is driven by our strategies. And that – what I mean by that is the loan growth and the deposit growth, both in improved profitability products, C&I loans versus the resi runoff, core customer deposits versus the wholesale funding. And then the overall growth of the balance sheet is what gives us that confidence. I think if we weren't taking market share and didn't have a plan to take market share vis-à-vis our C&I strategy, it would be harder for us to say that because you just wouldn't have enough balance sheet growth to support the NII outlook we're talking about.

Got it. And then may be another way of asking my first question. Just any thoughts around interest-bearing beta as it sits in 4Q? And then what the expectation is for data on the way down kind of magnitude and timeline?

I don't have a specific quarterly date for you. The best guidance I can provide is what I mentioned earlier about the period leading up to the first rate cut, which would have been in August, and our expectations for our beta to finish by December of next year. This assumes 75 basis points of cuts this year and 100 basis points next year, leading to a full deposit beta of 46%.

Great. Thanks for the question. Derek the, loan betas, I guess, can you just help us on loan betas, your assumptions on the down data for the asset side?

Yes. The easiest thing to consider, as we disclose in the quarterly report, is that our loan book has 66% of its loans either repricing or maturing within a year. We have $2.85 billion in swaps, with about $1.7 billion of that against the loans, which brings the percentage of loans repricing this year down to about 60%. This presents some opportunity. Additionally, when considering our securities book as part of our earning assets, we expect yields to gradually increase throughout the year. This could result in our overall asset beta being lower than the deposit or total liability beta mentioned earlier. The challenge will be how things conclude next year. We believe this positions us to expand our margin at the end of next year compared to this year, but the extent of that will be largely influenced by the competitiveness in deposit pricing across the industry. Therefore, a slightly slower growth could be advantageous for us from a deposit perspective, as we anticipate less competition in this area. We still have the capability to generate loan growth due to our market share strategy, which involves hiring more commercial and industrial relationship managers.

Okay. That's really helpful. Thank you. I guess maybe a housekeeping, Q4 seasonality on deposits, anything to be aware of? And then also on the securities book, can you just remind us what's fixed floating in that portfolio? Thank you.

Almost all of it is fixed. There's a small portion related to the securities, and sometimes there's a bit of FHLBs involved, but I consider it mostly fixed. Our seasonality for deposits tends to be strong, as we saw in the latter half of last year. I expect this trend to continue, especially with the additional initiatives we have in place.

Thank you, Chris.

Thank you. There are no further questions at this time.

Well, we really appreciate everyone's interest in the questions. We look forward to talking to you soon. If you have a question between now and next quarter, feel free to reach out, and we appreciate your following Associated Banc.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.