Associated Banc-Corp (ASBC) reported its fourth quarter 2012 earnings of 26 cents per share, which came in line with the Zacks Consensus Estimate. The results also compares favorably with the year-ago quarter's earnings of 23 cents.
For the full year 2012, Associated recorded earnings per share of $1.00 compared with 66 cents in 2011. However, the earnings marginally missed the Zacks Consensus Estimate of $1.02.
Quarterly results displayed improvement on a year-over-year basis. Increased top line was partially offset by a rise in operating expenses. Moreover, improved asset quality, and growth in loan and deposit balances were the positives. However, deterioration in capital ratios was the headwind.
Net income available to shareholders for the reported quarter came in at $45.3 million, up 13.8% from $39.8 million in the year-ago quarter. For 2012, net income stood at $173.8 million, up 51.3% from $114.9 million in 2011.
Performance in Detail
Associated's total revenue edged up 2.2% year over year to $258.4 million. Moreover, revenue surpassed the Zacks Consensus Estimate of $243.0 million by 6.3%.
For 2012, total revenue came in at $1.03 billion, rising nearly 1.7% from $1.01 billion in 2011. Moreover, it surpassed the Zacks Consensus Estimate of $946 million by 9.0%.
Net interest income improved 6.3% year over year to $161.5 million. The hike was mainly attributable to lower total interest expenses. Also, net interest margin increased 11 basis points from the prior-year quarter to 3.32%.
Non-interest income stood at $77.9 million, rising 8.9% from $71.5 million in the prior-year quarter. The increase was primarily due to higher core fee revenue, net mortgage banking income, capital market fees and net gains from investment securities. These positives were partially offset by lower bank-owned life insurance income and other income.
Non-interest expense was $176.3 million, up 2.3% from $172.3 million in the year-ago quarter. The rise was mainly a result of higher personnel expense, occupancy costs, equipment costs, data processing expenditure and legal and professional fees.
However, these were offset by lower business development, loan expenses, losses other than loans, foreclosure/ other real estate owned (OREO) costs, Federal Deposit Insurance Corporation (FDIC) expenses as well as other expenses.
The efficiency ratio increased to 72.08% from 74.67% recorded in the prior-year quarter. The decline in efficiency ratio indicates improvement in profitability.
Asset quality displayed mixed bag in the quarter. Non-accrual loans dipped 9.1% sequentially and 29.1% on a year-over-year to $252.9 million. Total nonperforming assets stood at $287.8 million, declining 8.4% from last quarter and 27.8% from the year-ago quarter.
However, ratio of net charge offs to annualized average loans came in at 0.55% in the reported quarter, up from 0.47% in the previous quarter but down from 0.64% in the year-ago quarter. Provision for loan losses increased substantially from the year-ago quarter to 0.3 million.
Loans and Deposits
Associated's total loans in the reported quarter were $15.4 billion, rising nearly 3.0% from previous quarter and 9.8% from the prior-year quarter.
Total deposits for the quarter expanded 3.0% sequentially and 12.2% on a year-over-year to $16.9 billion. The increases were primarily due to the higher levels of noninterest-bearing demand deposits and interest-bearing deposits.
Profitability and Capital Ratios
Though capital ratios remained strong, there was slight deterioration. As of Dec 31, 2012, tier 1 risk-based capital ratio was 11.97%, down from 13.57% as of Sep 30, 2012 and 14.08% as of Dec 31, 2011.
Total risk-based capital ratio came in at 13.39%, dipping from 15.0% at the end of the prior quarter and 15.53% at the end of the prior-year quarter. Tangible common equity ratio stood at 8.54%, down from 8.91% as of Sep 30, 2012 and 8.84% as of Dec 30, 2011.
Profitability metrics displayed mixed movements. The return on average assets was 0.83% in the reported quarter compared with 0.84% as of Sep 30, 2012 and 0.75% as of Dec 31, 2011. Book value per common share was recorded at $16.97, up from $16.82 in the prior quarter and $16.15 in the year-ago period.
During the reported quarter, Associated bought back 2 million shares at an aggregate of $30 million.
Associated's decent top-line growth as well as constantly improving credit quality and strong balance sheet remain quite impressive. However, rising expenses keep us on the sidelines. Moreover, we are concerned about the impacts of the prevailing low interest rate environment, sluggish economic growth and stringent regulatory landscape on the company's financials in the subsequent quarters.
Associated currently retains a Zacks Rank #2 (Buy). Some of the other mid-west banks that are performing well and are worth considering include Enterprise Financial Services Corp. (EFSC), First Interstate Bancsystem Inc. (FIBK) and Heartland Financial USA Inc. (HTLF). All these companies hold Zacks Rank #1 (Strong Buy).