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Associated Banc-Corp (ASB) Q4 Earnings Beat, Revenues Down Y/Y

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Associated Banc-Corp’s ASB fourth-quarter 2021 earnings of 49 cents per share surpassed the Zacks Consensus Estimate of 42 cents. The bottom line improved from 40 cents in the prior-year quarter.

Results gained from growth in loan balance and provision benefits. However, lower rates and a decline in both net interest income and non-interest income were the major headwinds.

Net income available to common shareholders was $74 million, up 20% from the year-ago quarter.

In 2021, earnings of $2.18 per share beat the consensus estimate of $2.11 and were up 17% year over year. Net income available to common shareholders was $333.9 million, up 16%.

Revenues Fall, Expenses Rise

Net revenues came in at $268.3 million, down 2% year over year. The top line beat the Zacks Consensus Estimate of $266.1 million.

In 2021, net revenues decreased 17% to $1.06 billion. The top line matched the consensus estimate.

Net interest income (NII) was $186.8 million, inching down 1%. Net interest margin was 2.40%, down 9 basis points (bps).

Non-interest income fell 5% to $82.1 million. The decline was mainly due to lower net mortgage banking income and the absence of gains on the sale of branches in the reported quarter.

Non-interest expenses rose 5% to $182.2 million. The increase was mainly due to higher personnel costs and other expenses.

Efficiency ratio (on a fully tax-equivalent basis) was 65.46%, up from 58.02% in the prior-year quarter. A rise in efficiency ratio indicates deterioration in profitability.

As of Dec 31, 2021, total loans were $24.2 billion, up 3% sequentially. Total deposits rose 2% to $28.5 billion.

Credit Quality Improves

Provisions for credit losses were a benefit of $6 million against the provision of $17 million in the prior-year quarter. As of Dec 31, 2021, the ratio of net charge-offs to annual average loans was 0.10%, down 31 bps.

As of Dec 31, 2021, total non-performing assets were $160.1 million, down 29% year over year. Further, total non-accrual loans came in at $130.4 million, plunging 38%.

Capital Ratios Deteriorate, Profitability Ratios Improve

As of Dec 31, 2021, Tier 1 risk-based capital ratio was 11.02%, down from the 11.81% recorded in the corresponding period of 2020. Common equity Tier 1 capital ratio was 10.31%, down from 10.45%.

At the end of the fourth quarter, annualized return on average assets was 0.87%, up from 0.78% recorded in the prior-year period. Return on average tangible common equity was 11.09%, up from the year-ago quarter’s 9.75%.

Share Repurchase Update

During the quarter, Associated Banc-Corp repurchased 1.1 million shares worth $25 million.

2022 Outlook

Management anticipates NII to be more than $800 million. Non-interest income is expected to exceed $300 million.

Management projects auto finance loan growth of more than $1.2 billion and total commercial loan growth in the range of $750 million to $1 billion.

Non-interest expenses are expected to be in the range of $725-$740 million.

Effective tax rate is expected to be 19-21%, assuming no change in the corporate tax rate.

Common equity tier 1 ratio is expected to be 9.5% or higher, and tangible common equity ratio is estimated at or above 7.5%.

The company expects to adjust provisions to indicate changes to risk grades, economic conditions, loan volumes and other indications of credit quality.

Our Take

Associated Banc-Corp’s business restructuring efforts are likely to keep supporting financials. The company has a solid balance-sheet position, making it well poised for growth.

Associated BancCorp Price, Consensus and EPS Surprise

Associated BancCorp Price, Consensus and EPS Surprise
Associated BancCorp Price, Consensus and EPS Surprise

Associated BancCorp price-consensus-eps-surprise-chart | Associated BancCorp Quote

Associated Banc-Corp currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Commerce Bancshares Inc.’s CBSH fourth-quarter 2021 earnings per share of 94 cents matched the Zacks Consensus Estimate. The bottom line, however, declined 10.5% from the prior-year quarter.

CBSH’s results primarily benefited from an improvement in non-interest income, a slight rise in loan balance and provision benefit. However, an increase in non-interest expenses and a fall in net interest income were the major headwinds.

Hancock Whitney Corporation’s HWC fourth-quarter 2021 adjusted earnings of $1.51 per share outpaced the Zacks Consensus Estimate of $1.35. The bottom line improved 29% from the prior-year quarter.

HWC’s results benefited from higher non-interest income, fall in non-interest expenses and provision benefit. However, a decline in net interest income, which reflected lower interest rates, was the undermining factor.

Washington Federal’s WAFD first-quarter fiscal 2022 (ended Dec 31) earnings of 71 cents per share surpassed the Zacks Consensus Estimate of 69 cents. The figure reflects a year-over-year jump of 39%.

WAFD’s results primarily benefited from increased revenues, decreased provision for credit losses and a robust loan balance. The company’s balance-sheet position remained strong during the quarter. However, an increase in expenses was the undermining factor.


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