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

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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.)

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