Associated Banc-Corp says it has laid off about 3% of its more than 4,000 employees, will close 14 branches and will cut discretionary spending to reduce expenses.
The Green Bay, Wisconsin, bank will also sell close to $2 billion of mortgages and investment securities as well as hire 20 new relationship managers to boost its lending and deposit-gathering efforts, the bank said in a press release.
The workforce reductions are part of the latest phase of a
"So, as we were continuing on with those lines of business, we basically said 'Look, let's take that and let's do a strategic plan 2.0,'" Associated Chief Executive Officer Andy Harmening said in an interview Friday.
The changes announced Thursday will keep noninterest expense growth between 3% and 4% in both 2023 and 2024, executives said. Associated said it has identified between $25 million and $30 million of noninterest expense savings that it can execute in 2024. The bank will pay a one-time charge of $5 million related, in part, to severance for laid-off employees. The workforce reductions were completed on Nov. 8, according to a slide presentation released by Associated this week.
About a third of the workforce reductions are in the bank's mortgage division, Harmening said.
"We're good at doing mortgages, and we'll continue to do mortgages for our customers," Harmening said. "But when mortgage customers don't bank with us, and mortgages are one of the lowest-yielding products and oftentimes locked in for an extended period of time, it's just not the best use of the balance sheet."
Associated said it has reached an agreement to sell about $1 billion of mortgage loans by the end of the year. The bank also said it had sold about $800 million of investment securities. Associated will record an after-tax loss of $157 million in the fourth quarter related to the asset sales, the bank said in a statement.
Executives said the securities sales would notably increase the bank's wholesale funding capacity by allowing it to reduce high-cost funding from the Federal Home Loan Bank System and get rid of low-yielding assets. As interest rates continue to increase this year, banks across the industry have been forced to decide whether to keep assets that deliver only meager returns in the short term.
"This has historically been a pretty sleepy bank, and the new management team has come in and done a good job putting growth back into focus," said Timur Braziler, a vice president at Wells Fargo Securities who covers the bank. "It started with just growth, and the next phase here is about moving into more profitable growth."
The changes give Associated Bank a clearer path to improved net interest margin and earnings, said Daniel Tamayo, an analyst at Raymond James & Associates.
"The bank's exit of certain higher-risk asset classes and exit of lower-yielding mortgage loans, restructuring of its securities portfolio, and focus on higher-yielding commercial relationships has helped its credit risk profile and net interest margin," Tamayo wrote in a research note Friday.
