Critical Analysis: Associated Banc (NYSE:ASB) & Meridian (NASDAQ:MRBK)

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

Dividends

Associated Banc pays an annual dividend of $0.96 per share and has a dividend yield of 3.1%. Meridian pays an annual dividend of $0.56 per share and has a dividend yield of 3.4%. Associated Banc pays out 33.2% of its earnings in the form of a dividend. Meridian pays out 29.3% 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. Associated Banc has increased its dividend for 13 consecutive years. Meridian is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Associated Banc and Meridian, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Associated Banc	0	6	6	0	2.50
Meridian	1	1	2	0	2.25

Associated Banc presently has a consensus price target of $32.70, suggesting a potential upside of 7.09%. Meridian has a consensus price target of $20.00, suggesting a potential upside of 22.32%. Given Meridian’s higher probable upside, analysts plainly believe Meridian is more favorable than Associated Banc.

Earnings & Valuation

This table compares Associated Banc and Meridian”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Associated Banc	$2.46 billion	2.31	$474.78 million	$2.89	10.57
Meridian	$205.49 million	0.95	$21.84 million	$1.91	8.56

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

Institutional & Insider Ownership

83.0% of Associated Banc shares are owned by institutional investors. Comparatively, 58.6% of Meridian shares are owned by institutional investors. 0.7% of Associated Banc shares are owned by insiders. Comparatively, 14.1% of Meridian shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Associated Banc has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500. Comparatively, Meridian has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Associated Banc	19.87%	10.75%	1.13%
Meridian	11.46%	11.37%	0.89%

Summary

Associated Banc beats Meridian on 12 of the 17 factors compared between the two stocks.

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.

About Meridian

Meridian Corporation operates as the holding company for Meridian Bank that provides commercial banking products and services in Pennsylvania, New Jersey, Delaware, Florida, and Maryland. The company offers various deposit products, such as demand non-interest bearing, demand interest bearing, savings accounts, money market accounts, and time deposits. It also provides commercial and industrial loans comprising business lines of credit, term loans, small business lending, lease financing, shared national credits, and other financing; commercial real estate, and land development and construction loans for residential and commercial projects; and consumer and home equity lending, private banking, merchant, and title and land settlement services. In addition, the company operates and originates mortgage loans for 1-4 family dwellings; and offers real estate holding, investment advisory, and equipment leasing services, as well as financial planning and wealth management services. Meridian Corporation was incorporated in 2004 and is headquartered in Malvern, Pennsylvania.