) first-quarter 2013 earnings came in at 27 cents per share,
marginally surpassing the Zacks Consensus Estimate of 25 cents.
This also compares favorably with the year-ago earnings of 24
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On a year-over-year basis, a reduction in top line was more than
offset by a fall in operating expenses. Moreover, improved asset
quality, and growth in loan and deposit balances were the other
positives. However, deterioration in capital ratios was on the
Net income available to shareholders for the reported quarter
came in at $46.2 million, up 11.5% from $41.3 million in the
Performance in Detail
Associated's total revenue declined marginally from the year-ago
quarter to $257.4 million. However, revenues surpassed the Zacks
Consensus Estimate of $243.0 million by 5.9%.
Net interest income improved 1.9% year over year to $157.7
million. The hike was mainly attributable to lower total interest
expense. However, net interest margin decreased 14 basis points
from the prior-year quarter to 3.17%.
Non-interest income stood at $82.0 million, rising 4.5% from
$78.4 million in the prior-year quarter. The increase was
primarily due to higher trust service fees, card-based and other
non-deposit fees and insurance commissions. These positives were
partially offset by lower service charges on deposit accounts and
brokerage and annuity commissions.
Non-interest expense was $166.9 million, down 1.7% from $169.8
million in the year-ago quarter. The fall mainly resulted from
lower business development and advertising costs, other
intangible amortization costs, legal and professional fees,
foreclosure/ other real estate owned (OREO) expenses and other
However, these were partially offset by higher personnel
expenses, occupancy costs, equipment costs, data processing
expenditures, loan expenses, and Federal Deposit Insurance
Corporation (FDIC) expenses.
The efficiency ratio decreased to 68.52% from 70.16% recorded in
the prior-year quarter. The decline in efficiency ratio indicates
Asset quality displayed improvement in the quarter. Non-accrual
loans declined 10.8% sequentially and 31.1% year over year to
$225.4 million. Total nonperforming assets stood at $260.6
million, declining 9.4% from the last quarter and 27.9% from the
Moreover, ratio of net charge offs to annualized average loans
came in at 0.38%, down from 0.55% in the previous quarter and
0.61% in the year-ago quarter.
Loans and Deposits
Associated's total loans in the quarter were $15.6 billion,
rising nearly 0.9% from the previous quarter and 9.1% from the
Total deposits for the quarter expanded 2.8% sequentially and
11.3% year over year to $17.4 billion. The increases were
primarily due to the higher levels of interest-bearing deposits,
savings deposits, money market deposits and brokered certificate
Profitability and Capital Ratios
Though capital ratios remained strong, a slight deterioration was
witnessed. As of Mar 31, 2013, tier 1 risk-based capital ratio
was 12.03%, down from 14.33% as of Mar 31, 2012.
Total risk-based capital ratio came in at 13.45%, declining from
15.78% at the end of the prior-year quarter. Tangible common
equity ratio stood at 8.64%, down from 9.01% as of Mar 31, 2012.
Profitability metrics displayed mixed movements. The return on
average assets was 0.83%, stable compared with the end of prior
quarter and up from 0.79% as of Mar 31, 2012. Book value per
common share was recorded at $17.13, up from $16.97 in the prior
quarter and $16.32 in the year-ago period.
During the reported quarter, Associated bought back 2 million
shares at an aggregate price of $30 million.
Performance of Other Midwest Banks
Commerce Bancshares, Inc
) first-quarter earnings missed Zacks Consensus Estimate by a
penny. The quarterly results were adversely affected by lower
top-line, partially offset by a decline in operating expenses.
First Interstate Bancsystem Inc
) is scheduled to report earnings on Apr 22 and
Heartland Financial USA Inc
) on Apr 29.
Associated's reduced expenses along with constantly improving
credit quality and strong balance sheet are quite impressive.
Significant capital deployment actions will reinforce investors'
confidence in the stock. However, we are concerned about the
impact of the prevailing low interest rate environment,
considerable exposure to commercial loans and concentration risk
emanating from limited geographical diversification.
Associated currently carries a Zacks Rank #3 (Hold).