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Associated Banc-Corp (ASB) Q3 Earnings Beat, Expenses Down

Zacks Equity Research

Associated Banc-Corp’s ASB third-quarter 2019 adjusted earnings of 50 cents per share outpaced the Zacks Consensus Estimate of 46 cents. The figure compares favorably with 48 cents reported in the prior-year quarter. Earnings (in the reported quarter) excluded certain acquisition-related costs.

Results benefited primarily from lower expenses and rise in non-interest income. However, decline in net interest income, fall in loan and deposit balances, lower rates, and considerable rise in credit costs were the undermining factors.

Net income available to common shareholders (GAAP basis) was $79.5 million, down 5% year over year.

Revenues & Expenses Down

Net revenues were $307.2 million, down marginally year over year. Also, the figure lagged the Zacks Consensus Estimate of $311.1 million.

Net interest income was $206.4 million, a fall of 6% from the year-ago quarter. Net interest margin (NIM) was 2.81%, down 11 basis points (bps).

Non-interest income totaled $100.9 million, up 14% year over year. A significant increase in mortgage banking income primarily drove the rise.

Non-interest expenses were $200.9 million, down 2% from the year-ago quarter. The decline was largely attributable to fall in loan and foreclosure costs, and FDIC assessment charges. Also, acquisition-related costs decreased 28%.

Efficiency ratio (fully tax-equivalent basis) was 64.78% compared with 64.66% in the prior-year quarter. Rise in efficiency ratio indicates deterioration in profitability.

As of Sep 30, 2019, net loans were $22.5 billion, down 2% on a sequential basis. Total deposits decreased 3% from the prior quarter to $24.4 billion.

Credit Quality: Mixed Bag

As of Sep 30, 2019, total non-performing assets were $154.6 million, down 17% year over year. Further, total non-accrual loans were $129 million, down 16%.

However, the company reported provision for credit losses of $2 million compared with provision benefits of $5 million in the prior-year quarter. Also, the ratio of net charge-offs to annualized average loans was 0.24% in the third quarter, up 6 bps.

Capital & Profitability Ratios Deteriorate

As of Sep 30, 2019, Tier 1 risk-based capital ratio was 11.27%, up from 11.45% as of Sep 30, 2018. In addition, common equity Tier 1 capital ratio was 10.21% compared with 10.38% at the end of the prior-year quarter.

Annualized return on average assets was 1.00%, down from 1.02%. Moreover, return on average tangible common equity was 13.27% compared with 14.14% a year ago.

Share Repurchases

During the reported quarter, Associated Banc-Corp repurchased nearly 3 million shares for $60 million.   


Management expects restructuring charges to be $3 million for the fourth quarter.

Also, the company anticipates restructuring charges to result in flat to modestly lower non-interest expenses for 2020, including the pending First Staunton deal costs.

Our Take

Associated Banc-Corp is well positioned to benefit from decent lending scenario and improving economy.  Also, the company’s inorganic growth strategy will support profitability in the quarters ahead. However, elevated expenses are likely to hurt bottom-line growth to some extent.

Associated Banc-Corp Price, Consensus and EPS Surprise


Associated Banc-Corp Price, Consensus and EPS Surprise

Associated Banc-Corp price-consensus-eps-surprise-chart | Associated Banc-Corp Quote

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

Performance of Other Banks

East West Bancorp EWBC third-quarter earnings per share of $1.17 lagged the Zacks Consensus Estimate of $1.20. Nonetheless, the figure was on par with the prior-year quarter level.

Bank OZK’s OZK third-quarter 2019 earnings per share of 81 cents lagged the Zacks Consensus Estimate of 83 cents. The bottom line was higher than the prior-year quarter figure of 58 cents.

Prosperity Bancshares Inc.’s PB third-quarter 2019 earnings of $1.19 per share surpassed the Zacks Consensus Estimate by a penny. The figure inched up nearly 1% on a year-over-year basis.

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