Associated Banc-Corp ASB announced fourth-quarter and 2017 results last week. Adjusted earnings per share of 41 cents in the quarter outpaced the Zacks Consensus Estimate of 38 cents. Also, the figure represents an increase of 21% from the prior-year quarter.
Results benefited primarily from an improvement in net interest income and absence of provision for loan losses. The company also witnessed growth in deposits. However, lower non-interest income, a rise in expenses and a slight decline in loans were the headwinds.
After considering charges related to the tax act, net income available to common shareholders was $47.6 million or 31 cents per share.
For 2017, adjusted earnings improved 21% year over year to $1.52 per share. After considering tax related charges, net income available to common shareholders was $219.9 million or 1.42 per share.
Net Interest Income & Expenses Increase
Net revenues declined marginally year over year to $271.5 million. Also, revenues lagged the Zacks Consensus Estimate of $280 million.
Net interest income was $187 million, reflecting an increase of 4% from the year-ago quarter. Net interest margin (NIM) came in at 2.79%, down 1 basis point (bp) from the prior-year quarter.
Non-interest income for the quarter totaled $84.5 million, down 8% year over year. Lower net mortgage banking fees and investment securities gains as well as net asset loss were the primary reasons for the decrease.
Non-interest expenses were $181.7 million, increasing 2% from the year-ago period. The rise was primarily due to higher business development and advertising expenses, net foreclosure/OREO expenses, and legal and professional fees expenses.
Efficiency ratio (fully tax equivalent basis) increased to 65.45% from 63.90% in the prior-year quarter. Note that a rise in efficiency ratio indicates deterioration in profitability.
As of Dec 31, 2017, net loans were $20.5 billion, down nearly 1% sequentially. Total deposits increased 2% from the prior-quarter end to $22.8 billion.
Credit Quality Improves
Total non-performing assets declined 22% year over year to $228.6 million. Further, ratio of net charge-offs to annualized average loans came in at 0.19% in the reported quarter, down 14 bps from the year-ago quarter.
As of Dec 31, 2017, total non-accrual loans were $208.5 million, down 24% year over year. Also, provision for credit losses was nil against $15 million in the prior-year quarter.
Capital Ratios Improve, Profitability Ratios Deteriorate
As of Dec 31, 2017, Tier 1 risk-based capital ratio was 10.82%, up from 10.27% as of Dec 31, 2016. Further, total risk-based capital ratio was 13.22%, up from 12.68% at the end of the prior-year quarter.
The annualized return on average assets at the quarter end was 0.66%, down from 0.75% in the year-ago quarter. Also, return on average tangible common equity came in at 9.16% compared with 10.78% in the year-ago quarter.
Our Take
Associated Banc-Corp is well poised to benefit from higher interest rates and rise in loan demand. Further, the acquisition of Whitnell & Co. is expected to be accretive to 2018 earnings. Also, the company expects the Bank Mutual deal to be accretive to its earnings in 2019. However, mounting expenses remain a key near-term concern for the company.
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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Huntington Bancshares Incorporated HBAN reported fourth-quarter 2017 adjusted earnings per share of 26 cents, in line with the Zacks Consensus Estimate. However, the figure came in higher than the prior-year quarter adjusted earnings of 24 cents. The reported figure excludes Federal tax reform-related estimated tax benefit of 11 cents per share.
BankUnited, Inc.’s BKU fourth-quarter 2017 adjusted earnings per share of 86 cents for the quarter surpassed the Zacks Consensus Estimate of 62 cents. Moreover, the bottom line compared favorably with the prior-year quarter’s earnings of 59 cents per share.
Prosperity Bancshares Inc.’s PB fourth-quarter 2017 adjusted earnings of 99 cents per share for the quarter lagged the Zacks Consensus Estimate by a penny. The figure was in line with the prior-year quarter’s earnings.
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