Back to top

Associated Banc-Corp (ASB) Q3 Earnings Beat, Revenues Rise (revised)

Read MoreHide Full Article

Associated Banc-Corp (ASB - Free Report) reported third-quarter 2017 earnings per share of 41 cents, outpacing the Zacks Consensus Estimate of 36 cents. The figure represents an increase of 21% from the prior-year quarter.

Results benefited primarily from an improvement in net interest income and lower credit costs. The company also witnessed growth in loans and deposits. However, lower non-interest income and a slight rise in expenses were the headwinds.

Net income available to common shareholders for the quarter increased 21% year over year to $62.7 million.

Net Interest Income & Expenses Increase

Net revenues rose nearly 2.7% year over year to $281 million. Revenues came in ahead of the Zacks consensus estimate of $277 million. 

Net interest income was $190.1 million, reflecting an increase of 6% from the year-ago quarter. Net interest margin (NIM) came in at 2.84%, reflecting an increase of 7 basis points (bps) from the prior-year quarter.

Non-interest income for the quarter totaled $85.9 million, down 10% year over year. Lower net mortgage banking fees, net capital market income and investment securities gains as well as net asset loss were the primary reasons for the decrease.

Non-interest expenses were $177.4 million, increasing nearly 1% from the year-ago period. The rise was primarily due to higher business development and advertising expenses, and legal and professional fees expenses.

Efficiency ratio (fully tax equivalent basis) declined to 62.55% from 63% in the prior-year quarter. Note that a decline in efficiency ratio indicates improvement in profitability.

Credit Quality Improves

Total non-performing assets declined approximately 26% year over year to $226.4 million. Further, ratio of net charge-offs to annualized average loans came in at 0.19% in the reported quarter, down from 0.39% in the year-ago quarter.

As of Sep 30, 2017, total non-accrual loans were $210.5 million, down 27% year over year. Also, provision for credit losses decreased 76% from the prior-year quarter to $5 million.

Strong Balance Sheet, Capital & Profitability Ratios Improve

As of Sep 30, 2017, net loans were $20.7 billion, up nearly 1% sequentially. Also, total deposits increased 3.3% from the prior-quarter end to $22.3 billion.

As of Sep 30, 2017, Tier 1 risk-based capital ratio was 10.64%, up from 10.08% as of Sep 30, 2016. Further, total risk-based capital ratio was 13.03%, up from 12.49% at the end of the prior-year quarter.

The annualized return on average assets at the quarter end was 0.86%, up from 0.74% in the year-ago quarter. Also, return on average tangible common equity came in at 12.20% compared with 10.68% in the year-ago quarter.

Share Repurchases

During the reported quarter, Associated Banc-Corp repurchased nearly 1.6 million shares for $37 million.

Our Viewpoint

Associated Banc-Corp is well poised to benefit from higher interest rates and rise in loan demand. Further, the acquisition of Whitnell & Co. is expected to be accretive to 2018 earnings.  Also, the company expects the Bank Mutual deal to be accretive to its earnings by 2% in 2019.

However, mounting expenses remain a key near-term concern for the company. Also, its increased dependence on commercial loans and lack of geographic exposure make us apprehensive.

Associated Banc-Corp Price, Consensus and EPS Surprise

 

Associated Banc-Corp Price, Consensus and EPS Surprise | Associated Banc-Corp Quote

At present, Associated Banc-Corp carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other Midwest banks, Old National Bancorp (ONB - Free Report) and UMB Financial Corporation (UMBF - Free Report) are slated to announce results on Oct 24, while Huntington Bancshares Incorporated (HBAN - Free Report) is scheduled to report on Oct 25.

(We are reissuing this article to correct a mistake. The original article, issued Friday, October 20, 2017, should no longer be relied upon.)

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>



More from Zacks Analyst Blog

You May Like