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Associated Banc-Corp (ASB) Q4 Earnings Beat, Revenues Decline

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Associated Banc-Corp’s (ASB - Free Report) fourth-quarter 2020 earnings of 40 cents per share surpassed the Zacks Consensus Estimate of 31 cents. However, the bottom line declined 7% year over year.

Results for the reported quarter were aided by a decline in expenses. However, lower revenues and higher provision for credit losses were the headwinds. Nevertheless, the balance sheet position remained strong during the quarter.

Net income available to common shareholders was $61.8 million, down 10% year over year.

For 2020, earnings per share of $1.86 beat the Zacks Consensus Estimate of $1.79. However, the figure was down 3% from that reported in 2019. Net income was $288.4 million, down 7% year over year.

Revenues & Expenses Decline

Net revenues for the reported quarter were $273.7 million, down 7% year over year. However, the top line beat the Zacks Consensus Estimate of $270.8 million.

For the year, net revenues were $1.28 billion, up 5% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $1.18 billion.

Quarterly net interest income was $188 million, down 6% from the year-ago quarter. Net interest margin (NIM) was 2.49%, down 34 basis points (bps) year over year.

Non-interest income declined 8% year over year to $85.7 million. Decrease in insurance commissions and fees, service charges and deposit account fees, card-based fees, net capital markets related income, and net investment securities gains were the primary reasons behind the fall.

Non-interest expenses declined 15% year over year to $172.9 million. The fall was due to a decline in almost all cost components, except for legal and professional costs, loan and foreclosure costs, and FDIC assessment costs.

Efficiency ratio (on a fully tax-equivalent basis) was 58.02%, down from 67.32% in the prior-year quarter. A fall in efficiency ratio indicates an improvement in profitability.

As of Dec 31, 2020, net loans were $24.1 billion, down 2% from the previous quarter end. Total deposits fell marginally on a sequential basis to $26.5 billion.

Credit Quality Deteriorates

In the fourth quarter, the company recorded provision for credit losses of $17 million against no provisions in the year-ago quarter. As of Dec 31, 2020, the ratio of net charge-offs to annual average loans was 0.41%, up 17 bps from the year-ago quarter.

Moreover, as of Dec 31, 2020, total non-performing assets were $225.1 million, up 55% year over year. Further, total non-accrual loans were $210.9 million, jumping 78%.

Capital Ratios Improve & Profitability Ratios Decline

As of Dec 31, 2020, Tier 1 risk-based capital ratio was 11.81%, up from 11.26% recorded in the corresponding period of 2019. In addition, common equity Tier 1 capital ratio was 10.45% compared with 10.21% as of Dec 31, 2019.

At the end of the fourth quarter, annualized return on average assets was 0.78%, down from 0.89% recorded in the prior-year period. Moreover, return on average tangible common equity was 9.75% compared with the year-ago quarter’s 11.33%.


NIM is expected to be 2.55-2.65% for 2021.

Non-interest income is projected to be $280-$300 million for 2021.

Management expects 2021 commercial loan growth of 2-4%, driven by a 4-6% increase in commercial real estate loans, and a 1-2% increase in commercial and industrial loan balances, excluding paycheck protection program (PPP) loans.

Expenses in 2021 are anticipated to be $675 million.

The company expects 2021 provisions to not be more than $70 million.

Effective tax rate is expected to be 18-21% in 2021.

Our Take

Associated Banc-Corp’s branch consolidation and other restructuring efforts are likely to keep supporting financials in the quarters ahead. Also, the company has a solid balance sheet position, which makes it well-poised for growth.

Associated BancCorp Price, Consensus and EPS Surprise


Associated BancCorp Price, Consensus and EPS Surprise

Associated BancCorp price-consensus-eps-surprise-chart | Associated BancCorp Quote

Associated Banc-Corp currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.

Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2020 adjusted earnings per share of 96 cents were 5% lower than the prior-year quarter’s level. The Zacks Consensus Estimate for earnings was 93 cents.

Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.

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