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Associated Banc-Corp (ASB) Q3 Earnings Beat, Costs Down, Stock Up
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Shares of Associated Banc-Corp (ASB - Free Report) gained almost 1% in aftermarket trading in response to better-than-expected third-quarter 2021 results. Earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 42 cents. The bottom line improved significantly from 26 cents in the prior-year quarter.
Results gained from growth in both net interest income and non-interest income. Also, lower expenses and provision benefits offered support. However, a fall in loan balance and lower rates were the major headwinds.
Net income available to common shareholders was $84.7 million, substantially up from $40 million in the year-ago quarter.
Revenues Rise, Expenses Fall
Net revenues came in at $265.8 million, up 3.1% year over year. The top line also beat the Zacks Consensus Estimate of $264.2 million.
Net interest income was $183.7 million, inching up 1%. Net interest margin (NIM) was 2.38%, up 7 basis points (bps).
Non-interest income grew 9% to $82.1 million. The rise was mainly due to higher net gain on the sale of assets, as well as an increase in wealth management fees, service charges and deposit account fees, and card-based fees.
Non-interest expenses declined 22% to $177.9 million. The fall was mainly due to a decrease in all cost components, except for technology, business development and advertising charges, and FDIC assessment costs.
Efficiency ratio (on a fully tax-equivalent basis) was 63.61%, down from 83.25% in the prior-year quarter. A fall in efficiency ratio indicates an improvement in profitability.
As of Sep 30, 2021, net loans were $23.3 billion, down 1% sequentially. Total deposits rose 2.2% to $27.9 billion.
Credit Quality Improves
Provisions for credit losses were a benefit of $24 million against the provision of $43 million in the prior-year quarter. As of Sep 30, 2021, the ratio of net charge-offs to annual average loans was 0.10%, down 30 bps.
As of Sep 30, 2021, total non-performing assets were $168.9 million, down 33% year over year. Further, total non-accrual loans came in at $135.1 million, plunging 42%.
Capital Ratios Mixed, Profitability Ratios Improve
As of Sep 30, 2021, Tier 1 risk-based capital ratio was 11.30%, down from the 11.57% recorded in the corresponding period of 2020. Common equity Tier 1 capital ratio was 10.57%, up from 10.22%.
At the end of the September quarter, annualized return on average assets was 1.01%, up from 0.51% recorded in the prior-year period. Return on average tangible common equity was 12.72%, up from the year-ago quarter’s 6.36%.
Share Repurchase Update
During the quarter, Associated Banc-Corp repurchased shares worth $60 million.
2021 Outlook
Management anticipates net total revenues to be $1.045-$1.060 billion. Net interest margin now is projected to be 2.40%, down from the prior guidance of the lower end of the 2.45-2.55% range.
Non-interest income is expected in the upper end of $315-$325 million range.
Commercial loan growth (excluding paycheck protection program) is now expected to be roughly 2%, down from the earlier guidance of in the lower end of the 2-4% range.
Non-interest expenses are expected to be in the range of $705-$711 million and include the new initiative-related charges.
Effective tax rate is expected to be 19-21%, assuming no change in the corporate tax rate.
Common equity tier 1 ratio is expected to be 9.5% or higher, and tangible common equity ratio is estimated at or above 7.5%.
The company continues to experience positive credit trends due to economic conditions and expects provision in the fourth quarter of 2021 to adjust with changes to risk grade, other indications of credit quality, and loan volume.
Our Take
Associated Banc-Corp’s business restructuring efforts are likely to keep supporting financials. The company has a solid balance-sheet position, which makes it well poised for growth.
Associated BancCorp Price, Consensus and EPS Surprise
Hancock Whitney Corporation’s (HWC - Free Report) third-quarter 2021 adjusted earnings of $1.45 per share outpaced the Zacks Consensus Estimate of $1.29. The bottom line improved 61.1% from the prior-year quarter.
Commerce Bancshares Inc.’s (CBSH - Free Report) third-quarter 2021 earnings per share of $1.05 surpassed the Zacks Consensus Estimate of $1.00. The bottom line, however, declined almost 1% from the prior-year quarter.
Zions Bancorporation’s (ZION - Free Report) third-quarter 2021 net earnings per share of $1.45 surpassed the Zacks Consensus Estimate of $1.38. The bottom line represents an increase of 43.6% from the year-ago quarter’s number.
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Associated Banc-Corp (ASB) Q3 Earnings Beat, Costs Down, Stock Up
Shares of Associated Banc-Corp (ASB - Free Report) gained almost 1% in aftermarket trading in response to better-than-expected third-quarter 2021 results. Earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 42 cents. The bottom line improved significantly from 26 cents in the prior-year quarter.
Results gained from growth in both net interest income and non-interest income. Also, lower expenses and provision benefits offered support. However, a fall in loan balance and lower rates were the major headwinds.
Net income available to common shareholders was $84.7 million, substantially up from $40 million in the year-ago quarter.
Revenues Rise, Expenses Fall
Net revenues came in at $265.8 million, up 3.1% year over year. The top line also beat the Zacks Consensus Estimate of $264.2 million.
Net interest income was $183.7 million, inching up 1%. Net interest margin (NIM) was 2.38%, up 7 basis points (bps).
Non-interest income grew 9% to $82.1 million. The rise was mainly due to higher net gain on the sale of assets, as well as an increase in wealth management fees, service charges and deposit account fees, and card-based fees.
Non-interest expenses declined 22% to $177.9 million. The fall was mainly due to a decrease in all cost components, except for technology, business development and advertising charges, and FDIC assessment costs.
Efficiency ratio (on a fully tax-equivalent basis) was 63.61%, down from 83.25% in the prior-year quarter. A fall in efficiency ratio indicates an improvement in profitability.
As of Sep 30, 2021, net loans were $23.3 billion, down 1% sequentially. Total deposits rose 2.2% to $27.9 billion.
Credit Quality Improves
Provisions for credit losses were a benefit of $24 million against the provision of $43 million in the prior-year quarter. As of Sep 30, 2021, the ratio of net charge-offs to annual average loans was 0.10%, down 30 bps.
As of Sep 30, 2021, total non-performing assets were $168.9 million, down 33% year over year. Further, total non-accrual loans came in at $135.1 million, plunging 42%.
Capital Ratios Mixed, Profitability Ratios Improve
As of Sep 30, 2021, Tier 1 risk-based capital ratio was 11.30%, down from the 11.57% recorded in the corresponding period of 2020. Common equity Tier 1 capital ratio was 10.57%, up from 10.22%.
At the end of the September quarter, annualized return on average assets was 1.01%, up from 0.51% recorded in the prior-year period. Return on average tangible common equity was 12.72%, up from the year-ago quarter’s 6.36%.
Share Repurchase Update
During the quarter, Associated Banc-Corp repurchased shares worth $60 million.
2021 Outlook
Management anticipates net total revenues to be $1.045-$1.060 billion. Net interest margin now is projected to be 2.40%, down from the prior guidance of the lower end of the 2.45-2.55% range.
Non-interest income is expected in the upper end of $315-$325 million range.
Commercial loan growth (excluding paycheck protection program) is now expected to be roughly 2%, down from the earlier guidance of in the lower end of the 2-4% range.
Non-interest expenses are expected to be in the range of $705-$711 million and include the new initiative-related charges.
Effective tax rate is expected to be 19-21%, assuming no change in the corporate tax rate.
Common equity tier 1 ratio is expected to be 9.5% or higher, and tangible common equity ratio is estimated at or above 7.5%.
The company continues to experience positive credit trends due to economic conditions and expects provision in the fourth quarter of 2021 to adjust with changes to risk grade, other indications of credit quality, and loan volume.
Our Take
Associated Banc-Corp’s business restructuring efforts are likely to keep supporting financials. 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-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
Hancock Whitney Corporation’s (HWC - Free Report) third-quarter 2021 adjusted earnings of $1.45 per share outpaced the Zacks Consensus Estimate of $1.29. The bottom line improved 61.1% from the prior-year quarter.
Commerce Bancshares Inc.’s (CBSH - Free Report) third-quarter 2021 earnings per share of $1.05 surpassed the Zacks Consensus Estimate of $1.00. The bottom line, however, declined almost 1% from the prior-year quarter.
Zions Bancorporation’s (ZION - Free Report) third-quarter 2021 net earnings per share of $1.45 surpassed the Zacks Consensus Estimate of $1.38. The bottom line represents an increase of 43.6% from the year-ago quarter’s number.