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Associated Banc-Corp (ASB) Down 11.5% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Associated Banc-Corp (ASB). Shares have lost about 11.5% in that time frame, underperforming the S&P 500.

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

Associated Banc-Corp Q2 Earnings Beat Estimates, Revenues Down

Associated Banc-Corp’s second-quarter 2019 adjusted earnings of 51 cents per share outpaced the Zacks Consensus Estimate of 49 cents. The figure compared favorably with 50 cents reported in the prior-year quarter. Earnings (in the reported quarter) excluded acquisition-related costs in connection to the Bank Mutual deal.

Results benefited primarily from lower expenses, rise in non-interest income and growth in loans. However, a decline in net interest income and considerable rise in credit costs were the undermining factors.

Net income available to common shareholders (GAAP basis) was $80.9 million, down 7% year over year.

Revenues & Expenses Down

Net revenues were $309.5 million, down 3% year over year. Also, the figure lagged the Zacks Consensus Estimate of $315.8 million.

Net interest income was $213.6 million, a fall of 6% from the year-ago quarter. NIM was 2.87%, down 15 basis points (bps).

Non-interest income totaled $95.8 million, up 3% year over year. Higher mortgage banking income (up 51%) primarily drove the rise.

Non-interest expenses were $197.8 million, down 6% from the year-ago quarter. The decline was attributable to fall in all cost components except loan costs, technology expenses and other intangible amortization.

Efficiency ratio (fully tax-equivalent basis) decreased to 61.13% from 64.45% in the prior-year quarter. Fall in efficiency ratio indicates higher profitability.

As of Jun 30, 2019, net loans were $23.2 billion, up slightly on a sequential basis. Total deposits decreased 1% from the prior quarter to $25.2 billion.

Credit Quality: A Mixed Bag

As of Jun 30, 2019, total non-performing assets were $185.1 million, down 22% year over year. Further, total non-accrual loans were $166.7 million, down 18%. However, the company reported provision for credit losses of $8 million, up 100% year over year. Moreover, the ratio of net charge-offs to annualized average loans was 0.18% in the second quarter, up 2 bps.

Strong Capital & Profitability Ratios

As of Jun 30, 2019, Tier 1 risk-based capital ratio was 11.18%, up from 11.17% as of Jun 30, 2018. In addition, common equity Tier 1 capital ratio was 10.13% compared with 10.51% at the end of the prior-year quarter.

Annualized return on average assets was 1.01%, down from 1.07%. Moreover, return on average tangible common equity was 13.81% compared with 14.98% a year ago.

Share Repurchases

During the reported quarter, Associated Banc-Corp repurchased nearly 2 million shares for $40 million.

2019 Outlook

Associated Banc-Corp expects 3-6% average loan growth, mainly driven by increase in commercial and business lending portfolios. Notably, the company expects commercial real estate loan growth to continue in the second half of 2019.

The company expects to maintain loan to deposit ratio under 100%, with some seasonality.

Further, the company expects NIM to be nearly 2.90%, based on the assumption of two Fed rate cuts.

Non-interest income is expected to be $360-$375 million, with fee-based revenues expected to improve.

The company projects non-interest expenses to be nearly $790-$795 million, down from prior guidance of approximately $800 million. It anticipates adjusted efficiency ratio to improve 100-200 bps.

Further, the effective tax rate is expected to be 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 a downward trend in estimates review. The consensus estimate has shifted -8.05% due to these changes.

VGM Scores

At this time, Associated Banc-Corp has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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