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Associated Banc-Corp (ASB) Up 11% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Associated Banc-Corp (ASB - Free Report) . Shares have added about 11% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Associated Banc-Corp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Associated Banc-Corp's Q4 Earnings Beat, Revenues Rise

Associated Banc-Corp’s fourth-quarter 2018 adjusted earnings of 50 cents per share surpassed the Zacks Consensus Estimate by a penny. The figure compares favorably with the prior-year quarter’s earnings of 31 cents. Earnings excluded acquisition-related costs in connection with the Bank Mutual deal.

Results benefited primarily from an improvement in NII. The company also witnessed growth in loans and deposits during the quarter. However, rise in expenses and slight fall in non-interest income hurt results to some extent.

Net income available to common shareholders (GAAP basis) was $85.3 million, up from $47.7 million registered in the prior-year quarter.

Adjusted earnings per share for 2018 came in at $2.03 per share which surpassed the Zacks Consensus Estimate of $2.01. Also, the figure compares favorably with earnings of $1.45 per share reported in 2017. The company’s net income for 2018 amounted to $322.8 million compared with $219.9 million recorded in the prior year.

Revenues Improve, Expenses Rise

Net revenues for the quarter were $308 million, up 13.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $311.13 million.

Net revenues for 2018 were $1.24 million, up 15% year over year. The figure came in line with the Zacks Consensus Estimate.

Net interest income for the quarter was $223.9 million, reflecting an increase of 19.8% from the year-ago quarter. Net interest margin (NIM) was 3.02%, up 23 basis points (bps) from the prior-year quarter.

Non-interest income totaled $84 million, down marginally year over year. Lower net income from capital markets and net losses in assets led to the decline.

Non-interest expenses were $193.2 million, up 6.3% from the year-ago period. The upswing stemmed from an increase in all components of expenses except for legal and professional costs, FDIC assessment expenses and net foreclosure /OREO expense.

Efficiency ratio (fully tax-equivalent basis) decreased to 60.93% from 65.45% in the prior-year quarter. Fall in efficiency ratio indicates higher profitability.

As of Dec 31, 2018, net loans were $22.7 billion, up marginally on a sequential basis. Total deposits increased slightly from the end of the third quarter to $24.9 billion.

Credit Quality: A Mixed Bag

As of Dec 31, 2018, total non-performing assets were $139.9 million, down 38.8% year over year. Further, total non-accrual loans were $127.9 million, down 38.7% year over year. Moreover, the ratio of net charge-offs to annualized average loans was nil in the reported quarter compared to 0.20% in the year-ago quarter.

However, during the fourth quarter, the company reported provision for credit losses of $1 million against no provision in the prior-year quarter.

Capital & Profitability Ratios Improve

As of Dec 31, 2018, Tier 1 risk-based capital ratio was 11.33%, up from 10.82% as of Dec 31, 2017. In addition, total risk-based capital ratio was 13.47%, up from 13.22% at the end of the prior-year quarter.

The annualized return on average assets at the end of the reported quarter was 1.07%, up from 0.66% at the end of the year-ago quarter. Moreover, return on average tangible common equity was 15.08% compared with 9.16% in the year-ago quarter.

2019 Outlook

Associated Banc-Corp expects 3-6% average loan growth. Also, it expects to maintain its loan to deposit ratio between 90% and 100%, with some seasonality.

Further, the company expects a stable to improving NIM based on Fed rate hikes. It anticipates non-interest income to be in the range of $360-$375 million, with fee based revenues expected to improve.

The company projects non-interest expense to be approximately $800 million, which is down from $822 million recorded in 2018. The company anticipates adjusted efficiency ratio to improve by 100 bps.

Further, the effective tax rate is expected to be in the range of 21.

Provisions are expected to adjust with changes to risk grade, other indications of credit quality and loan volume.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Associated Banc-Corp has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Associated Banc-Corp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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