Associated Banc-Corp (ASB) Beats on Q1 Earnings, Costs Rise

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Associated Banc-Corp 's ASB first-quarter 2018 adjusted earnings of 50 cents per share surpassed the Zacks Consensus Estimate of 41 cents. Also, the figure compares favorably with the prior-year quarter's earnings of 35 cents. The reported quarter's earnings excluded acquisition related costs in connection with the Bank Mutual deal.

Results benefited primarily from an improvement in revenues and absence of provision for credit losses. The company also witnessed growth in loans and deposits. However, rise in expenses was a headwind.

After considering the acquisition related costs, net income available to common shareholders for the quarter was $67.1 million, up from $53.9 million registered in the prior-year quarter.

Revenues Improve, Expenses Increase

Net revenues for the quarter were $300.3 million, up 15% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $292.5 million.

Net interest income was $209.9 million, reflecting an increase of 16% from the year-ago quarter. Net interest margin (NIM) was 2.92%, up 8 basis points (bps) from the prior-year quarter.

Non-interest income totaled $90.4 million, up 13% year over year. The rise was driven by an increase in almost all income components. Notably, the quarter witnessed net asset losses of $107 million.

Non-interest expenses were $213 million, increasing 23% from the year-ago period. The rise was primarily due to an increase in all components of expenses except net foreclosure/OREO expenses.

Efficiency ratio (fully tax equivalent basis) increased to 69.60% from 64.89% in the prior-year quarter. Rise in efficiency ratio indicates deterioration in profitability.

As of Mar 31, 2018, net loans were $22.6 billion, up 10% sequentially. Total deposits increased 5% from the prior-quarter end to $23.8 billion.

Credit Quality: Mixed Bag

Total non-performing assets declined 15% year over year to $232.6 million. As of Mar 31, 2018, total non-accrual loans were $208.6 million, down 20% year over year. Also, provision for credit losses was nil against $9 million in the prior-year quarter.

However, the ratio of net charge-offs to annualized average loans was 0.17% in the reported quarter, up 6 bps from the year-ago quarter.

Capital & Profitability Ratios Improve

As of Mar 31, 2018, Tier 1 risk-based capital ratio was 11.18%, up from 10.62% as of Mar 31, 2017. Further, total risk-based capital ratio was 13.44%, up from 13.05% at the end of the prior-year quarter.

The annualized return on average assets at the quarter end was 0.88%, up from 0.79% in the year-ago quarter. Also, return on average tangible common equity was 11.99% compared with 11.07% in the year-ago quarter.

Our Take

Associated Banc-Corp is well poised to benefit from higher interest rates and rise in loan demand. Also, the acquisition of Diversified Insurance, Bank Mutual and Whitnell are expected to aid its bottom-line growth in the future. However, continuously increasing expenses might hurt profitability. Also, the company'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 carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Among other banks, Huntington Bancshares Incorporated HBAN is scheduled to report results on Apr 24 while BankUnited, Inc. BKU and Prosperity Bancshares Inc. PB are slated to report results on Apr 25.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: BKU , HBAN , ASB , PB

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