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

Zacks Equity Research

Associated Banc-Corp’s ASB 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 revenues. The company witnessed growth in deposits during the quarter. However, rise in expenses 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.


Associated Banc-Corp expects to achieve 3-6% average loan growth in 2019. Also, it expects to maintain its loan to deposit ratio between 90% and 100% in 2019, with some seasonality.

Further, the company expects a stable to improving net interest margin. It anticipates non-interest income between $360 million and $375 million in 2019.

The company projects non-interest expense to be approximately $800 million in 2019. Further, it forecasts the effective tax rate to be in the range of 21%-23%.  

Our Take

Associated Banc-Corp is well positioned to benefit from higher interest rates and rise in loan demand. Nevertheless, given the company’s inorganic growth efforts and continued investment in franchise, expenses are likely to remain elevated in the quarters ahead. Moreover, the bank’s increased dependence on commercial loans remains a key near-term concern.

Associated Banc-Corp Price, Consensus and EPS Surprise


Associated Banc-Corp Price, Consensus and EPS Surprise | 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

Washington Federal’s WAFD first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.2%.

Synovus Financial’s SNV fourth-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure came in 27.8% higher than the prior-year tally.

Hancock Whitney Corporation’s HWC fourth-quarter 2018 operating earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.13. The reported figure, however, came in 30.2% higher than the year-ago tally.

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