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Associated Banc-Corp (ASB) Q4 Earnings Beat, Revenues Down Y/Y

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Associated Banc-Corp’s (ASB - Free Report) fourth-quarter 2021 earnings of 49 cents per share surpassed the Zacks Consensus Estimate of 42 cents. The bottom line improved from 40 cents in the prior-year quarter.

Results gained from growth in loan balance and provision benefits. However, lower rates and a decline in both net interest income and non-interest income were the major headwinds.

Net income available to common shareholders was $74 million, up 20% from the year-ago quarter.

In 2021, earnings of $2.18 per share beat the consensus estimate of $2.11 and were up 17% year over year. Net income available to common shareholders was $333.9 million, up 16%.

Revenues Fall, Expenses Rise

Net revenues came in at $268.3 million, down 2% year over year. The top line beat the Zacks Consensus Estimate of $266.1 million.

In 2021, net revenues decreased 17% to $1.06 billion. The top line matched the consensus estimate.

Net interest income (NII) was $186.8 million, inching down 1%. Net interest margin was 2.40%, down 9 basis points (bps).

Non-interest income fell 5% to $82.1 million. The decline was mainly due to lower net mortgage banking income and the absence of gains on the sale of branches in the reported quarter.

Non-interest expenses rose 5% to $182.2 million. The increase was mainly due to higher personnel costs and other expenses.

Efficiency ratio (on a fully tax-equivalent basis) was 65.46%, up from 58.02% in the prior-year quarter. A rise in efficiency ratio indicates deterioration in profitability.

As of Dec 31, 2021, total loans were $24.2 billion, up 3% sequentially. Total deposits rose 2% to $28.5 billion.

Credit Quality Improves

Provisions for credit losses were a benefit of $6 million against the provision of $17 million in the prior-year quarter. As of Dec 31, 2021, the ratio of net charge-offs to annual average loans was 0.10%, down 31 bps.

As of Dec 31, 2021, total non-performing assets were $160.1 million, down 29% year over year. Further, total non-accrual loans came in at $130.4 million, plunging 38%.

Capital Ratios Deteriorate, Profitability Ratios Improve

As of Dec 31, 2021, Tier 1 risk-based capital ratio was 11.02%, down from the 11.81% recorded in the corresponding period of 2020. Common equity Tier 1 capital ratio was 10.31%, down from 10.45%.

At the end of the fourth quarter, annualized return on average assets was 0.87%, up from 0.78% recorded in the prior-year period. Return on average tangible common equity was 11.09%, up from the year-ago quarter’s 9.75%.

Share Repurchase Update

During the quarter, Associated Banc-Corp repurchased 1.1 million shares worth $25 million.

2022 Outlook

Management anticipates NII to be more than $800 million. Non-interest income is expected to exceed $300 million.

Management projects auto finance loan growth of more than $1.2 billion and total commercial loan growth in the range of $750 million to $1 billion.

Non-interest expenses are expected to be in the range of $725-$740 million.

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 expects to adjust provisions to indicate changes to risk grades, economic conditions, loan volumes and other indications of credit quality.

Our Take

Associated Banc-Corp’s business restructuring efforts are likely to keep supporting financials. The company has a solid balance-sheet position, making 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

Commerce Bancshares Inc.’s (CBSH - Free Report) fourth-quarter 2021 earnings per share of 94 cents matched the Zacks Consensus Estimate. The bottom line, however, declined 10.5% from the prior-year quarter.

CBSH’s results primarily benefited from an improvement in non-interest income, a slight rise in loan balance and provision benefit. However, an increase in non-interest expenses and a fall in net interest income were the major headwinds.

Hancock Whitney Corporation’s (HWC - Free Report) fourth-quarter 2021 adjusted earnings of $1.51 per share outpaced the Zacks Consensus Estimate of $1.35. The bottom line improved 29% from the prior-year quarter.

HWC’s results benefited from higher non-interest income, fall in non-interest expenses and provision benefit. However, a decline in net interest income, which reflected lower interest rates, was the undermining factor.

Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2022 (ended Dec 31) earnings of 71 cents per share surpassed the Zacks Consensus Estimate of 69 cents. The figure reflects a year-over-year jump of 39%.

WAFD’s results primarily benefited from increased revenues, decreased provision for credit losses and a robust loan balance. The company’s balance-sheet position remained strong during the quarter. However, an increase in expenses was the undermining factor.