Green Bay-based Associated Banc-Corp plans to acquire Brown Deer-based Bank Mutual Corp. for $482 million. The transaction is expected to close in the first quarter of 2018, pending regulatory approvals and closing conditions.
Bank Mutual’s bank subsidiary will be absorbed by Associated’s bank subsidiary, Associated Bank N.A. The price is based on Associated’s July 19 closing price of $24.60 per share. Both boards of directors have approved the merger. Bank Mutual shareholders would receive 0.422 shares of Associated common stock for each of their Bank Mutual shares at a consideration of $10.38 per common share.
Associated will maintain all the existing business operations and its presence in each geographic market, said Philip Flynn, president and chief executive officer of Associated Banc-Corp, in a call with analysts this afternoon. But the company expects a 45 percent cost savings from the transaction, which it indicated will be drawn from mainly branch consolidations and headcount reductions. About 50 percent of Bank Mutual branches are within one mile of an Associated Bank branch, so there is significant potential for cost savings, he said.
The bank has not released specific information about those potential layoffs and closures.
“Associated anticipates significant, ongoing opportunities for employees of both organizations to contribute to the organization over the long-term,” a spokeswoman said when asked for specifics. “Associated typically has around 300 job openings at any given time, and hopes to fill these with banking professionals already serving our combined customers and communities.”
David Baumgarten, president and CEO of Bank Mutual, will become a consultant to Flynn. Baumgarten will work in client retention, employee engagement and community activities. Michael Crowley, Jr., chairman of Bank Mutual, will become an Associated director.
Associated Bank is the largest bank headquartered in Wisconsin, with $30 billion in assets and 1 million customers in eight states, and Bank Mutual is the largest bank headquartered in the Milwaukee area, with $2.7 billion in total assets and 120,000 customers in Wisconsin and Minnesota.
Associated has been searching for acquisitions for some time and views accretive mergers and acquisitions as a means of capital deployment, Flynn said on the call.
“We’ve focused on situations where we can apply our learnings from the recent branch consolidations we’ve had here at Associated,” Flynn said.
He praised the leadership of Bank Mutual and pointed to the complementary nature of the banks’ footprints and product offerings.
“This transaction will significantly enhance our market presence in western Wisconsin and deepen our roots in eastern Wisconsin,” he said.
The banks already have a detailed integration plan, Flynn said. The systems integration is expected to occur in the third quarter.
Flynn indicated Associated has more acquisitions planned, and expects to continue to see attractive opportunities as the banking industry continues to consolidate, especially in the Midwest.
“Many banks have talked about the fact that consolidation is inevitable across the industry,” he said. “There’s a lot of banks across Wisconsin and other parts of the Midwest.
“We’ve always talked about doing the type of transaction that this represents,” Flynn said. “Lower risk, efficiency driven, which usually means in your footprint. We think there’s more of those type of opportunities out there. As far as how long will this take, we’ll be very focused on making sure this transaction goes well, it’s integrated well.”
Although it is based in Green Bay, Associated Bank has a major presence in Milwaukee and in southeastern Wisconsin. Last year the bank purchased the 28-story Milwaukee Center office tower in downtown Milwaukee for $60.5 million. Associated Bank said it planned to move all of its Milwaukee market employees, except those working at its branches, into the building. When the deal was announced, Flynn said the bank had no plans to move its headquarters to Milwaukee, but also said it essentially considers Milwaukee a second headquarters.
With the acquisition, Associated, which operates 200 branches in the Midwest, will expand into about 12 new communities. It expects the acquisition to be accretive to earnings per common share in 2019, excluding one-time charges, and provide lucrative capital returns.
“We have deep respect for Bank Mutual and its dedicated team of colleagues,” Flynn said. “Both of our organizations are built around customer-centric strategies and understand the importance of delivering increasing value to customers, colleagues, communities and shareholders. The acquisition of Bank Mutual provides significant opportunity to increase our Wisconsin presence and improve the scale of our operations. Ultimately, this positions us to gain efficiencies while also making investments to better support the customer experience.”
“I am confident the merger will benefit our customers and the communities we serve,” Baumgarten said. “In addition, Bank Mutual shareholders should benefit from Associated’s strong and consistent financial performance and the potential growth opportunities going forward.”
Bank Mutual today reported net income of $4.2 million, or 9 cents per share, for the second quarter, up 7.7 percent from $3.9 million, or 9 cents per share, for the second quarter last year. Associated Banc-Corp today reported its first quarter profits increased 32 percent, to $56.3 million year-over-year.
BizTimes Milwaukee will update this story as more information becomes available.