Associated Bank earnings fall on tax write-off

Expects $40 million in Bank Mutual acquisition costs

The Milwaukee offices of Associated Banc-Corp.

Green Bay-based Associated Banc-Corp reported fourth quarter net income of $50 million, or 31 cents per diluted share, down 9 percent from $54.8 million, or 34 cents per share, in the fourth quarter of 2016.

The Milwaukee offices of Associated Banc-Corp.

For the full year, Associated reported net income of $229.3 million, or $1.42 per diluted share, up 14 percent from $200.3 million, or $1.26 per share, in 2016.

Both the fourth quarter and the full year were impacted by a $15 million expense on a partial write-down of deferred tax assets related to the new Tax Cuts and Jobs Act of 2017. Adjusted fourth quarter earnings, excluding the tax impact, were $63 million, or 41 cents per share. Adjusted 2017 earnings were $235 million, or $1.52 per share.

The company reported fourth quarter noninterest income of $84.5 million, down from $92.3 million in the fourth quarter of 2016, driven entirely by lower mortgage banking income as the mortgage market contracts. Its net interest income was $187 million in the fourth quarter, up 4 percent from the year-ago quarter, driven by a higher yield on commercial loans.

Associated Banc-Corp has $30.5 billion in total assets and operates more than 200 Associated Bank branches in Wisconsin, Illinois and Minnesota. It is in the process of completing its $482 million acquisition of Brown Deer-based Bank Mutual Corp., which is slated to close Feb. 1.

In its call with analysts related to the earnings, Associated outlined the specifics of its expected restructuring costs, which will total about $40 million. Change of control and severance, and merger advisors and consultants are each expected to cost about $10 million in the first quarter; facilities and other, and contract terminations are both expected to cost $10 million from the first to third quarters.

The company plans to complete its systems conversion in late June or July, then close redundant branches in the third quarter. In the fourth quarter, it expects to achieve its planned 45 percent cost savings.

“During 2017, Associated continued to grow its customer deposit market share across its footprint. The pending acquisition of Bank Mutual will further enhance our Wisconsin and Minnesota network and we look forward to welcoming Bank Mutual’s customers to Associated on February 1,” said Philip Flynn, president and chief executive officer of Associated. “Our 2017 financial results reflect strong underlying credit quality, growing fee-based revenue, and the ongoing benefits of our technology and efficiency initiatives. For 2018, we expect to fund over $1 billion in new loans, to improve our net interest margin modestly, and to further reduce our efficiency ratio, driving increasing returns on capital for our shareholders.”

Flynn also remained open to the possibility of additional acquisitions down the road.

“There’s a favorable regulatory environment when it comes to M&A right now, so we’ll be open-minded as we move through the year in terms of other opportunities,” he said.

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Molly Dill, former BizTimes Milwaukee managing editor.

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