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Associated Banc-Corp (ASB) Q4 Earnings Beat on Higher NII
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Associated Banc-Corp’s (ASB - Free Report) fourth-quarter 2022 earnings of 70 cents per share handily surpassed the Zacks Consensus Estimate of 65 cents. The bottom line was 43% higher than the prior-year quarter. Our estimate for earnings was 61 cents.
Results were primarily aided by a rise in net interest income (NII) on higher rates. The quarter witnessed an increase in loans and deposit balances. However, a rise in expenses, higher provisions and lower non-interest income hurt the results to some extent.
Net income available to common shareholders was $105.9 million, up 43% from the year-ago quarter.
In 2022, earnings per share of $2.34 grew 7% year over year and beat the consensus estimate of $2.29. Our estimate for earnings was $2.26. Net income available to common shareholders increased 6% to $354.6 million.
Revenues Improve on Higher Loans, Expenses Rise
Net revenues (FTE basis) were $355.6 million, up 30% year over year. The top line beat the Zacks Consensus Estimate of $347.9 million. Our estimate for FTE revenues was $346.8 million.
In 2022, net revenues (FTE basis) rose 17% to $1.26 billion. The top line beat the consensus estimate of $1.25 billion. Our estimate for FTE revenues was the same as the consensus estimate.
NII was $289 million, surging 55% year over year. Our estimate for NII was $271.3 million. The net interest margin was 3.31%, up 91 basis points (bps) year over year.
Non-interest income declined 24% to $61.7 million. The fall was due to a decline in almost all fee income components except for card-based fees, other fee-based revenues and other income. In the reported quarter, the company recorded a net investment securities gain of $1.9 million. Our estimate for non-interest income was $70.8 million.
Non-interest expenses increased 8% to $196.8 million. The rise was due to increased personnel costs, technology costs, business development and advertising expenses, and FDIC assessment costs. Our estimate for non-interest expenses was $200.7 million.
The adjusted efficiency ratio was 54.28%, down from 64.82% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2022, total loans were $28.8 billion, up 4% from Sep 30, 2022. Total deposits increased 1% to $29.6 billion.
Credit Quality: Mixed Bag
In the reported quarter, the company recorded a provision for credit losses of $20 million against a provision benefit of $6 million in the prior-year quarter. Our estimate for the metric was $21.7 million.
As of Dec 31, 2022, total non-performing assets were $128.5 million, down 21% year over year. Total non-accrual loans were $111.5 million, declining 15%.
Capital Ratios Deteriorate, Profitability Ratios Improve
As of Dec 31, 2022, Tier 1 risk-based capital ratio was 9.95%, down from 11.02% recorded in the corresponding period of 2021. Common equity Tier 1 capital ratio was 9.35%, down from 10.31%.
At the end of the fourth quarter, annualized return on average assets was 1.12%, up from 0.87% recorded in the prior-year period. Return on average tangible common equity was 16.15%, up from 11.34%.
2023 Outlook
Management expects loan growth to be in the range of 7-9%.
NII is projected to increase in the 15-17% range. On the other hand, non-interest income is expected to decline 6-8%.
Non-interest expenses are anticipated to rise 4-6%.
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. However, elevated expenses and provisions are likely to hurt profits in the near term.
Associated BancCorp Price, Consensus and EPS Surprise
Commerce Bancshares Inc.’s (CBSH - Free Report) fourth-quarter 2022 earnings per share of $1.04 surpassed the Zacks Consensus Estimate of $1.02. The bottom line increased 15.6% from the prior-year quarter.
Results primarily benefited from an improvement in NII, a slight rise in loan balance and higher rates. However, an increase in non-interest expenses and provisions and a fall in non-interest income were the major headwinds for CBSH.
BankUnited, Inc.’s (BKU - Free Report) fourth-quarter 2022 earnings per share of 82 cents missed the Zacks Consensus Estimate of $1.11 by a considerable margin. The bottom line also declined 41.8% from the prior-year quarter. We had projected earnings per share of 96 cents.
BKU’s results were adversely impacted by subdued fee income performance and an increase in credit costs. However, higher NII, a decent rise in loan balance, increasing rates and a fall in expenses acted as tailwinds.
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Associated Banc-Corp (ASB) Q4 Earnings Beat on Higher NII
Associated Banc-Corp’s (ASB - Free Report) fourth-quarter 2022 earnings of 70 cents per share handily surpassed the Zacks Consensus Estimate of 65 cents. The bottom line was 43% higher than the prior-year quarter. Our estimate for earnings was 61 cents.
Results were primarily aided by a rise in net interest income (NII) on higher rates. The quarter witnessed an increase in loans and deposit balances. However, a rise in expenses, higher provisions and lower non-interest income hurt the results to some extent.
Net income available to common shareholders was $105.9 million, up 43% from the year-ago quarter.
In 2022, earnings per share of $2.34 grew 7% year over year and beat the consensus estimate of $2.29. Our estimate for earnings was $2.26. Net income available to common shareholders increased 6% to $354.6 million.
Revenues Improve on Higher Loans, Expenses Rise
Net revenues (FTE basis) were $355.6 million, up 30% year over year. The top line beat the Zacks Consensus Estimate of $347.9 million. Our estimate for FTE revenues was $346.8 million.
In 2022, net revenues (FTE basis) rose 17% to $1.26 billion. The top line beat the consensus estimate of $1.25 billion. Our estimate for FTE revenues was the same as the consensus estimate.
NII was $289 million, surging 55% year over year. Our estimate for NII was $271.3 million. The net interest margin was 3.31%, up 91 basis points (bps) year over year.
Non-interest income declined 24% to $61.7 million. The fall was due to a decline in almost all fee income components except for card-based fees, other fee-based revenues and other income. In the reported quarter, the company recorded a net investment securities gain of $1.9 million. Our estimate for non-interest income was $70.8 million.
Non-interest expenses increased 8% to $196.8 million. The rise was due to increased personnel costs, technology costs, business development and advertising expenses, and FDIC assessment costs. Our estimate for non-interest expenses was $200.7 million.
The adjusted efficiency ratio was 54.28%, down from 64.82% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2022, total loans were $28.8 billion, up 4% from Sep 30, 2022. Total deposits increased 1% to $29.6 billion.
Credit Quality: Mixed Bag
In the reported quarter, the company recorded a provision for credit losses of $20 million against a provision benefit of $6 million in the prior-year quarter. Our estimate for the metric was $21.7 million.
As of Dec 31, 2022, total non-performing assets were $128.5 million, down 21% year over year. Total non-accrual loans were $111.5 million, declining 15%.
Capital Ratios Deteriorate, Profitability Ratios Improve
As of Dec 31, 2022, Tier 1 risk-based capital ratio was 9.95%, down from 11.02% recorded in the corresponding period of 2021. Common equity Tier 1 capital ratio was 9.35%, down from 10.31%.
At the end of the fourth quarter, annualized return on average assets was 1.12%, up from 0.87% recorded in the prior-year period. Return on average tangible common equity was 16.15%, up from 11.34%.
2023 Outlook
Management expects loan growth to be in the range of 7-9%.
NII is projected to increase in the 15-17% range. On the other hand, non-interest income is expected to decline 6-8%.
Non-interest expenses are anticipated to rise 4-6%.
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. However, elevated expenses and provisions are likely to hurt profits in the near term.
Associated BancCorp Price, Consensus and EPS Surprise
Associated BancCorp price-consensus-eps-surprise-chart | Associated BancCorp Quote
ASB 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 2022 earnings per share of $1.04 surpassed the Zacks Consensus Estimate of $1.02. The bottom line increased 15.6% from the prior-year quarter.
Results primarily benefited from an improvement in NII, a slight rise in loan balance and higher rates. However, an increase in non-interest expenses and provisions and a fall in non-interest income were the major headwinds for CBSH.
BankUnited, Inc.’s (BKU - Free Report) fourth-quarter 2022 earnings per share of 82 cents missed the Zacks Consensus Estimate of $1.11 by a considerable margin. The bottom line also declined 41.8% from the prior-year quarter. We had projected earnings per share of 96 cents.
BKU’s results were adversely impacted by subdued fee income performance and an increase in credit costs. However, higher NII, a decent rise in loan balance, increasing rates and a fall in expenses acted as tailwinds.