On Friday, Associated Banc-Corp ASB came up with the announcement of increasing allowance for loan losses in the energy portfolio by $13 million for the quarter ended Dec 31, 2015. This will ultimately decrease the company’s fourth-quarter 2015 net earnings by about 3 cents per share.
Allowance associated with the energy portfolio will stand at 5.6% at the end of 2015 as compared with 3.8% at the end of the third quarter. Notably, Associated Banc-Corp expects total provision for loan losses in the fourth quarter to be $20 million as compared with $8 million in the third quarter.
"We began to proactively risk grade and reserve against our energy portfolio as oil and gas prices became volatile towards the end of 2014. The continuing decline in the market price for oil and the negative outlook for a near term price recovery has caused us to update our views. With these additional reserves, we will have $42 million in energy related reserves at year end 2015, up from $17 million a year ago," said President and CEO Philip B. Flynn.
Therefore, Associated Banc-Corp will continue to focus on the energy business with proactive efforts amid the current market volatility.
As of Dec 31, 2015, 1 billion of commitments with $752 million of outstandings comprised the company's energy portfolio. This represented about 4% of the total loan portfolio with 100% secured by reserves. Notably, the energy portfolio included about 50% credits to small and mid-sized companies.
Associated Banc-Corp currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance industry include Enterprise Financial Services Corp. EFSC, First Busey Corporation BUSE and Old National Bancorp. ONB. All three carry a Zacks Rank #2 (Buy).
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