Associated Banc-Corp (ASB) Down 5.2% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Associated Banc-Corp (ASB). Shares have lost about 5.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Associated Banc-Corp due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Associated Banc-Corp's Q3 Earnings In Line, Costs Rise

Associated Banc-Corp's third-quarter 2018 adjusted earnings of 49 cents per share were in line with the Zacks Consensus Estimate. The figure compares favorably with the prior-year quarter's earnings of 41 cents.

The reported quarter's earnings excluded acquisition-related costs in connection with the Bank Mutual deal. After including these charges, earnings were 48 cents per share.

Results benefited primarily from an improvement in revenues and provision benefits. The company also witnessed growth in deposits. However, rise in expenses hurt results to some extent.

Net income available to common shareholders (GAAP basis) was $83.5 million, up from $62.7 million in the prior-year quarter.

Revenues Improve, Expenses Rise

Net revenues were $307.7 million, up 11% year over year. However, the figure lagged the Zacks Consensus Estimate of $321.0 million.

Net interest income was $219.4 million, reflecting an increase of 15% from the year-ago quarter. NIM was 2.92%, up 8 basis points (bps) from the prior-year quarter.

Non-interest income totaled $88.3 million, up 3% year over year. The rise was driven by an increase in almost all income components except for bank and corporate owned life insurance, and net mortgage banking income.

Non-interest expenses were $204.4 million, increasing 15% from the year-ago period. The rise was primarily due to an increase in all components of expenses except for legal and professional costs, and FDIC assessment expenses.

Efficiency ratio (fully tax-equivalent basis) increased to 64.66% from 62.55% in the prior-year quarter. Rise in efficiency ratio indicates lower profitability.

As of Sep 30, 2018, net loans were $22.6 billion, down marginally on a sequential basis. Total deposits increased nearly 4% from the end of the prior quarter to $24.8 billion.

Credit Quality Improves

As of Sep 30, 2018, total non-performing assets were $186.1 million, down 18% year over year. Further, total non-accrual loans were $154.1 million, down 27% year over year. Moreover, during the quarter, the company reported provision benefits of $5 million against provision for credit losses of $5 million in the prior-year quarter.

However, the ratio of net charge-offs to annualized average loans was 0.21% in the reported quarter, up 1 bp from the year-ago quarter.

Capital & Profitability Ratios Improve

As of Sep 30, 2018, Tier 1 risk-based capital ratio was 11.42%, up from 10.64% as of Sep 30, 2017. Further, total risk-based capital ratio was 13.56%, up from 13.04% at the end of the prior-year quarter.

The annualized return on average assets at the end of the reported quarter was 1.02%, up from 0.86% in the year-ago quarter. Moreover, return on average tangible common equity was 14.14% compared with 12.20% in the year-ago quarter.


The company expects to maintain a loan to deposit ratio of under 100%. Moreover, it remains committed to fund majority of its loan growth with core deposits.

Moreover, the increase in deposit costs is expected to be somewhat lesser in the fourth quarter than what was experienced in the third quarter.

Based on the assumption of more rate hikes and benefit from Bank Mutual's higher loan yields, the company expects NIM to be nearly 2.95% in 2018.

In fourth-quarter 2018, the company expects run-rate expense savings of $3-$5 million.

The company projects non-interest expenses to be nearly $196-$198 million in the fourth quarter of 2018 (taking into consideration Bank Mutual and Diversified Insurance Solutions deals).

Management anticipates effective tax rate to be 22% in the fourth quarter of 2018. For 2018, effective tax rate is expected to be 20%.

Management expects fourth-quarter efficiency ratio to improve by 200 bps year over year.

The company continues to expect common equity Tier 1 ratio within a range of 8.0% to 9.5% over the medium term.

Provisions in 2018 are expected to adjust with changes to risk grade, other indications of credit quality and loan volume.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Associated Banc-Corp has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Associated Banc-Corp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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.

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

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