Associated Banc (NYSE:ASB) and First Merchants (NASDAQ:FRME) Head-To-Head Review

First Merchants (NASDAQ:FRME) and Associated Banc (NYSE:ASB) are both mid-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their risk, profitability, earnings, dividends, institutional ownership, analyst recommendations and valuation.

Profitability

This table compares First Merchants and Associated Banc’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Merchants	18.87%	9.58%	1.21%
Associated Banc	19.88%	10.46%	1.10%

Institutional and Insider Ownership

73.9% of First Merchants shares are held by institutional investors. Comparatively, 83.0% of Associated Banc shares are held by institutional investors. 1.8% of First Merchants shares are held by company insiders. Comparatively, 0.7% of Associated Banc shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

First Merchants has a beta of 0.85, suggesting that its stock price is 15% less volatile than the S&P 500. Comparatively, Associated Banc has a beta of 0.77, suggesting that its stock price is 23% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for First Merchants and Associated Banc, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Merchants	0	4	2	0	2.33
Associated Banc	0	6	6	0	2.50

First Merchants currently has a consensus price target of $48.33, suggesting a potential upside of 21.05%. Associated Banc has a consensus price target of $30.30, suggesting a potential upside of 9.13%. Given First Merchants’ higher possible upside, research analysts plainly believe First Merchants is more favorable than Associated Banc.

Valuation & Earnings

This table compares First Merchants and Associated Banc”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Merchants	$1.05 billion	2.39	$226.00 million	$3.40	11.74
Associated Banc	$1.52 billion	3.45	$474.78 million	$2.88	9.64

Associated Banc has higher revenue and earnings than First Merchants. Associated Banc is trading at a lower price-to-earnings ratio than First Merchants, indicating that it is currently the more affordable of the two stocks.

Dividends

First Merchants pays an annual dividend of $1.48 per share and has a dividend yield of 3.7%. Associated Banc pays an annual dividend of $0.96 per share and has a dividend yield of 3.5%. First Merchants pays out 43.5% of its earnings in the form of a dividend. Associated Banc pays out 33.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. First Merchants has raised its dividend for 13 consecutive years and Associated Banc has raised its dividend for 13 consecutive years.

Summary

Associated Banc beats First Merchants on 9 of the 16 factors compared between the two stocks.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.

About Associated Banc

Associated Banc-Corp, a bank holding company, provides various banking and nonbanking products to individuals and businesses in Wisconsin, Illinois, and Minnesota. The company offers lending solutions, including commercial loans and lines of credit, commercial real estate financing, construction loans, letters of credit, leasing, asset based lending and equipment finance, loan syndications products, residential mortgages, home equity loans and lines of credit, personal and installment loans, auto finance and business loans, and business lines of credit. It also provides deposit and cash management solutions, such as commercial checking and interest-bearing deposit products, cash vault and night depository services, liquidity solutions, payables and receivables solutions, and information services; specialized financial services, such as interest rate risk management and foreign exchange solutions; fiduciary services, such as administration of pension, profit-sharing and other employee benefit plans, fiduciary and corporate agency services, and institutional asset management services; and investable funds solutions, including savings, money market deposit accounts, IRA accounts, CDs, fixed and variable annuities, full-service, discount, and online investment brokerage; investment advisory services; and trust and investment management accounts. In addition, the company offers deposit and transactional solutions, including checking, credit, debit and pre-paid cards, online banking and bill pay; and money transfer services. Associated Banc-Corp was founded in 1861 and is headquartered in Green Bay, Wisconsin.