Associated Banc-Corp (ASB) Bundle
Understanding Associated Banc-Corp (ASB) Revenue Streams
Understanding Associated Banc-Corp’s Revenue Streams
Associated Banc-Corp has a diversified revenue structure primarily composed of net interest income and noninterest income. Here’s a detailed breakdown of its revenue sources for 2024.
Revenue Breakdown by Source
- Net Interest Income: For the third quarter of 2024, net interest income was $262.5 million, up from $254.2 million in the same quarter of 2023, representing a year-over-year increase of 3%.
- Noninterest Income: Noninterest income was $67.2 million for the third quarter of 2024, compared to $66.6 million in the third quarter of 2023, which is an increase of 1%.
Year-over-Year Revenue Growth Rate
The overall revenue for the third quarter of 2024 was $329.7 million, a 3% increase from $320.8 million in the third quarter of 2023. The revenue growth rate for the nine months ending September 30, 2024, was $974.3 million, compared to $980.4 million for the same period in 2023, indicating a slight decline of 1%.
Contribution of Different Business Segments to Overall Revenue
| Segment | Q3 2024 Revenue ($ in millions) | Q3 2023 Revenue ($ in millions) | Year-over-Year % Change |
|---|---|---|---|
| Corporate and Commercial Specialty | 193.1 | 177.8 | 9% |
| Community, Consumer, and Business | 218.4 | 220.7 | (1)% |
| Risk Management and Shared Services | (81.8) | (77.7) | 5% |
Analysis of Significant Changes in Revenue Streams
The Corporate and Commercial Specialty segment experienced a notable revenue increase of 9% year-over-year, primarily due to growth in commercial lending. In contrast, the Community, Consumer, and Business segment saw a slight decline of 1%, attributed to decreased residential mortgage lending. The Risk Management and Shared Services segment reported a revenue loss of $81.8 million, reflecting increased interest expenses impacting overall profitability.
Overall, the revenue dynamics indicate a shift towards stronger performance in corporate and commercial services, while consumer segments face challenges in maintaining growth.
A Deep Dive into Associated Banc-Corp (ASB) Profitability
A Deep Dive into Associated Banc-Corp's Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was approximately 61.4%, showing an increase from 60.5% in the third quarter of 2023.
Operating Profit Margin: The operating profit margin for the third quarter of 2024 was 33.6%, compared to 32.5% in the previous year. This indicates improved operational efficiency.
Net Profit Margin: The net profit margin for the third quarter of 2024 stood at 26.7%, up from 25.3% in the same quarter of 2023.
Trends in Profitability Over Time
Over the past year, the company has demonstrated a consistent upward trend in profitability metrics. The following table summarizes key profitability ratios over the past four quarters:
| Quarter | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| Q3 2024 | 61.4% | 33.6% | 26.7% |
| Q2 2024 | 60.9% | 32.9% | 25.5% |
| Q1 2024 | 60.2% | 32.1% | 24.8% |
| Q3 2023 | 60.5% | 32.5% | 25.3% |
Comparison of Profitability Ratios with Industry Averages
When comparing profitability ratios with industry averages, the company performs favorably:
| Metric | Company | Industry Average |
|---|---|---|
| Gross Profit Margin | 61.4% | 58.0% |
| Operating Profit Margin | 33.6% | 30.0% |
| Net Profit Margin | 26.7% | 22.0% |
Analysis of Operational Efficiency
Operational efficiency has improved due to effective cost management strategies. The efficiency ratio for the third quarter of 2024 was 61.33%, a decrease from 61.46% in the previous quarter, indicating better cost control.
Notably, the noninterest expense for the third quarter of 2024 was $201 million, reflecting a 2% increase from the third quarter of 2023, attributed primarily to personnel expenses.
The increase in noninterest income was $67 million in Q3 2024, marking a 3% increase from the previous year, driven largely by enhanced fee-based revenue.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Noninterest Income | $67 million | $65 million |
| Noninterest Expense | $201 million | $196 million |
| Efficiency Ratio | 61.33% | 61.46% |
Debt vs. Equity: How Associated Banc-Corp (ASB) Finances Its Growth
Debt vs. Equity: How Associated Banc-Corp Finances Its Growth
Debt Levels: As of September 30, 2024, the total loans outstanding reached $30.0 billion, distributed between various categories, including commercial and industrial loans, residential mortgages, and consumer loans. The long-term funding primarily consists of Federal Home Loan Bank (FHLB) advances, which were reported at $1.9 billion, while short-term funding increased significantly by 181% to $590 million.
Debt-to-Equity Ratio: The debt-to-equity ratio stands at 7.72, indicating a high reliance on debt financing compared to equity. This ratio is considerably higher than the industry average of approximately 3.0, suggesting a more aggressive growth strategy through leverage.
Recent Debt Issuances: In August 2024, the company issued senior notes, contributing to an increase in other long-term funding by 56% to $844 million. This issuance reflects the company's strategy to secure capital for growth while managing interest rate risks associated with floating-rate borrowings, which comprise 66% of total loans.
Credit Ratings: The company maintains a credit rating of Baa2 from Moody’s, reflecting moderate credit risk. These ratings affect the company’s borrowing costs and its ability to access capital markets for additional funding.
Balancing Debt and Equity Financing: The corporation's approach to financing includes a balanced mix of debt and equity. As of September 30, 2024, stockholders' equity was reported at $4.23 billion, with total liabilities amounting to $41.1 billion. This balance is crucial for maintaining operational flexibility and supporting growth initiatives without over-leveraging the balance sheet.
| Metric | Value |
|---|---|
| Total Loans Outstanding | $30.0 billion |
| Long-Term Funding (FHLB Advances) | $1.9 billion |
| Short-Term Funding Increase | 181% ($590 million) |
| Debt-to-Equity Ratio | 7.72 |
| Industry Average Debt-to-Equity Ratio | 3.0 |
| Senior Notes Issued | August 2024 |
| Credit Rating | Baa2 |
| Stockholders' Equity | $4.23 billion |
| Total Liabilities | $41.1 billion |
Assessing Associated Banc-Corp (ASB) Liquidity
Assessing Associated Banc-Corp's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 1.04, indicating that current assets slightly exceed current liabilities.
Quick Ratio: The quick ratio stands at 0.98, reflecting a solid liquidity position when excluding inventory from current assets.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was reported at approximately $123 million as of September 30, 2024. This is an increase from $101 million at the end of 2023, suggesting improving operational efficiency and liquidity management.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statements reveal the following trends:
- Operating Cash Flow: Net cash provided by operating activities was $373 million.
- Investing Cash Flow: Net cash used in investing activities amounted to $1.2 billion.
- Financing Cash Flow: Net cash provided by financing activities totaled $843 million.
This results in a net increase in cash and cash equivalents of $43 million since year-end 2023.
Potential Liquidity Concerns or Strengths
Liquidity management is bolstered by diverse sources:
- Federal Reserve Bank balance: $405.8 million
- Available FHLB Chicago capacity: $6.2 billion
- Discount window capacity: $3.0 billion
- Total available liquidity: $12.5 billion
Estimated uninsured and uncollateralized deposits were around $7.49 billion, with a coverage ratio of 166% against total funding sources.
| Liquidity Source | Amount ($ millions) |
|---|---|
| Federal Reserve Bank balance | 405.8 |
| Available FHLB capacity | 6,164.5 |
| Discount window capacity | 2,981.2 |
| Total available liquidity | 12,473.3 |
Overall, the corporation's liquidity management practices appear robust, with sufficient liquid assets to meet obligations even under stress scenarios.
Is Associated Banc-Corp (ASB) Overvalued or Undervalued?
Valuation Analysis
Determining whether the company is overvalued or undervalued involves analyzing key financial ratios and market trends. Below are the relevant metrics for the company as of 2024.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 12.5x. This is derived from earnings per share (EPS) of $1.83 for the trailing twelve months.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.2x, which is calculated using the current stock price of $22.00 against book value per share of $18.33.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 8.5x, with an enterprise value of $1.6 billion and EBITDA of $188 million.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $18.00 and a high of $25.00. As of the latest trading session, the stock is priced at $22.00.
Dividend Yield and Payout Ratios
The company has a dividend yield of 4.00%, with an annual dividend of $0.88 per share. The payout ratio is 48.1%, calculated based on net income available to common equity.
Analyst Consensus on Stock Valuation
According to recent analyst ratings, the consensus is a Hold, with 45% of analysts rating it as a buy, 35% as hold, and 20% as sell.
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 12.5x |
| Price-to-Book (P/B) Ratio | 1.2x |
| Enterprise Value-to-EBITDA (EV/EBITDA) Ratio | 8.5x |
| 12-Month Stock Price Low | $18.00 |
| 12-Month Stock Price High | $25.00 |
| Current Stock Price | $22.00 |
| Dividend Yield | 4.00% |
| Annual Dividend | $0.88 |
| Payout Ratio | 48.1% |
| Analyst Consensus | Hold |
Key Risks Facing Associated Banc-Corp (ASB)
Key Risks Facing Associated Banc-Corp
The financial health of Associated Banc-Corp is influenced by various internal and external risk factors that can significantly impact its operations and profitability. Below is a detailed examination of these risks.
Industry Competition
As of September 30, 2024, the banking industry remains highly competitive, with numerous institutions vying for market share. Associated Banc-Corp faces competition from both traditional banks and non-bank financial institutions.
- Average loans decreased by $202 million year-over-year, indicating potential challenges in maintaining market share against competitors who may offer more attractive lending terms.
- Average deposits increased by $1.4 billion, or 4%, from September 30, 2023, showcasing efforts to attract customers amid competitive pressures.
Regulatory Changes
The banking sector is subject to extensive regulation, which can evolve and introduce new compliance costs. Regulatory changes can affect capital requirements, operational guidelines, and consumer protection laws.
- Increased FDIC assessment expenses due to special assessments have raised noninterest expenses by $20 million, or 3%, from the previous year.
Market Conditions
Market fluctuations can affect the bank's financial performance. Interest rate changes, economic downturns, and shifts in consumer behavior all pose risks.
- The provision for credit losses stood at $68 million for the first nine months of 2024, an increase from $62 million in the same period of 2023, reflecting heightened credit risk.
- Net interest income decreased by $9 million, or 1%, from the first nine months of 2023.
Operational Risks
Operational risks, including systems failures, fraud, and inadequate processes, can disrupt business operations and lead to financial losses.
- Noninterest expense was reported at $594 million for the first nine months of 2024, an increase of $20 million, or 3%, driven primarily by personnel and technology costs.
Financial Risks
Financial risks include credit risk, liquidity risk, and market risk, all of which can adversely affect the bank's bottom line.
- Net interest margin decreased to 2.77% from 2.86% in the previous year, indicating a tighter margin environment.
- Average interest-bearing liabilities increased by $1.6 billion, or 6%, compared to the first nine months of 2023.
Strategic Risks
Strategic risks arise from changes in the business environment that could affect the bank's long-term objectives.
- The bank's return on average allocated capital was at 10.53% for the first nine months of 2024, a slight increase from 10.08% in the previous year.
Mitigation Strategies
Associated Banc-Corp has implemented various strategies to mitigate these risks:
- Enhancing risk management frameworks to address credit and operational risks effectively.
- Investing in technology to improve operational efficiency and customer service capabilities.
- Regularly reviewing compliance programs to adapt to regulatory changes proactively.
| Risk Factor | Current Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Decrease in average loans by $202 million | Enhancing customer acquisition strategies |
| Regulatory Changes | Increased FDIC expenses by $20 million | Regular compliance reviews |
| Market Conditions | Provision for credit losses at $68 million | Risk assessment and management frameworks |
| Operational Risks | Noninterest expense at $594 million | Investing in technology and personnel training |
| Financial Risks | Net interest margin decreased to 2.77% | Portfolio diversification and liquidity management |
| Strategic Risks | Return on average allocated capital at 10.53% | Long-term strategic planning initiatives |
Future Growth Prospects for Associated Banc-Corp (ASB)
Future Growth Prospects for Associated Banc-Corp
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Product Innovations: The company has seen an increase in noninterest income, which reached $67 million in Q3 2024, a rise of 3% from the previous quarter, largely due to enhanced fee-based services.
- Market Expansions: Total deposits increased by $108 million from December 31, 2023, totaling $33.6 billion as of September 30, 2024, marking a 4% increase year-over-year.
- Acquisitions: The corporation maintains a proactive strategy in evaluating potential acquisitions to expand its service offerings and market presence.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth projections indicate:
- Net income for Q3 2024 was reported at $88 million, compared to $83 million in Q3 2023, representing a 6% increase.
- For the nine months ended September 30, 2024, net income totaled $284.76 million, up from $273.76 million in 2023, reflecting a growth of 4%.
- Earnings per share for Q3 2024 stood at $0.56, compared to $0.53 in Q3 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Investment in technology and personnel, with noninterest expenses rising to $201 million in Q3 2024, an increase of 2% from Q2 2024.
- Partnerships aimed at enhancing wealth management services, which generated $68.47 million in fees for the nine months ended September 30, 2024, a 11% increase compared to 2023.
Competitive Advantages That Position the Company for Growth
The company’s competitive advantages include:
- Diverse Revenue Streams: With total revenue of $329.73 million in Q3 2024, the company benefits from multiple income sources, including commercial and consumer lending.
- Strong Capital Position: The firm reports an average allocated capital of $1.74 billion, ensuring sufficient capital to support growth initiatives.
- Robust Liquidity: Total available liquidity resources reached $12.47 billion as of September 30, 2024, providing a strong buffer against market fluctuations.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income | $88 million | $83 million | 6% |
| Total Deposits | $33.6 billion | $32.2 billion | 4% |
| Noninterest Income | $67 million | $65 million | 3% |
| Earnings per Share | $0.56 | $0.53 | 5.66% |
| Average Loans | $29.63 billion | $29.88 billion | -0.84% |
These growth opportunities reflect a solid foundation for future expansion and profitability in the current economic landscape.
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Article updated on 8 Nov 2024
Resources:
- Associated Banc-Corp (ASB) Financial Statements – Access the full quarterly financial statements for Q3 2023 to get an in-depth view of Associated Banc-Corp (ASB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Associated Banc-Corp (ASB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.