Associated Banc-Corp (ASB) reported fourth-quarter 2014 earnings per share of 31 cents, outpacing the Zacks Consensus Estimate by a penny. Moreover, earnings came 10.7% above the year-ago quarter figure.
Better-than-expected results were driven by lower expenses and higher net interest income, partially offset by lower non interest income and higher provision for credit losses. The quarter witnessed strong growth in deposits and loans. While both asset quality and profitability ratios depicted mixed bags, capital ratios deteriorated.
Net income available to common shareholders for the quarter totaled $47.5 million, up 2.2% from the prior-year quarter.
For 2014, Associated Banc-Corp reported earnings per share of $1.16, in line with the Zacks Consensus Estimate. However, earnings were 5.5% above the prior-year figure.
Net income available to common shareholders for the year 2014 totaled $185.5 million, up 1.1% from the prior year.
Performance in Detail
In the quarter, net revenue inched up 0.5% year over year to $244.3 million. However, it missed the Zacks Consensus Estimate of $250 million. For 2014, net revenue grew 1.3% year over year to $971 million, but missed the Zacks Consensus Estimate of $983 million.
Net interest income improved 4.5% year over year to $174.7 million. The increase was attributable to a 5.2% rise in interest income, partially offset by a 13.9% increase in interest expense. Net interest margin (“NIM”) inched down 2 basis points (bps) to 3.04% from the prior-year quarter.
Non-interest income summed $69.6 million, down 8.2% year over year. The fall was mainly due to a decline in total core fee-based revenue and net mortgage banking income, partially offset by a rise in net asset gains.
Non-interest expense decreased 4.1% year over year to $171.8 million. The decline was mainly to the result of a fall in expenses related to personnel, equipment, other intangible amortization, legal and professional fees, foreclosure/OREO expenses and other costs. These were, however, partly offset by a rise in expenses related to technology, business development and advertising, and FDIC expenses.
The efficiency ratio, on a fully taxable equivalent basis, decreased to 69.66% from the prior-year quarter ratio of 72.59%. A decline in efficiency ratio indicates higher profitability.
Total loans as of Dec 31, 2014 amounted to $17.6 billion, up 10.7% year over year. Further, total deposits came in at $18.8 billion, up 8.7% from the prior-year quarter figure.
Asset Quality
Associated Banc-Corp’s asset quality demonstrated mixed figures. Provision for credit losses summed $5.0 million, significantly up from the year-ago quarter. However, non-accrual loans declined 4.3% year over year to $177.4 million. Also, total nonperforming assets fell 4.6% year over year to $194.1 million.
Moreover, ratio of net charge-offs to annualized average loans came in at 0.10%, down 4 bps from the prior-year quarter.
Capital and Profitability Ratios
Capital ratios of Associated Banc-Corp deteriorated. As of Dec 31, 2014, Tier 1 risk-based capital ratio came in at 10.06%, down from 11.83% as of Dec 31, 2013.
Total risk-based capital ratio stood at 12.66% versus 13.09% at the end of the prior-year quarter. Tangible common equity ratio was 6.97%, compared with 8.11% as of Dec 31, 2013.
Further, profitability ratios represented a mixed bag. The return on average assets of 0.75% was down 5 bps year over year. However, book value per common share was recorded at $18.32, up from $17.40 in the prior-year period.
Share Repurchase
During the reported quarter, Associated Banc-Corp bought back $100 million shares in two separate transactions.
Our Viewpoint
Associated Banc-Corp’s efforts to improve its operating efficiency, along with appreciable growth in loans, have started to pay off in the form of an improved top line. Impressive organic growth strategy will further boost the bank’s profitability in the upcoming quarters.
However, considerable exposure to commercial loans and concentration risks arising from limited geographic diversification are likely to be a drag on the financials.
At present, Associated Banc-Corp carries a Zacks Rank #3 (Hold).
Among other Midwest banks, Chemical Financial Corp. (CHFC), First Interstate Bancsystem Inc. (FIBK) and Old National Bancorp. (ONB) are slated to report December-end quarter results on Jan 26, Jan 27 and Feb 2, respectively.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment