Associated Banc-Corp slashes dividend as bad loans trigger $181 million 4th-quarter loss

Associated Banc-Corp 4Q loss swells to $181 M

GREEN BAY, Wis. — Associated Banc-Corp said on Monday that more than $405 million in charges related to bad loans triggered a nearly $181 million loss in its fourth quarter, and the regional bank cut its upcoming quarterly dividend.

Associated Banc-Corp also said it plans to offer stock to raise $400 million. Shares of the regional bank sank nearly 8 percent in midday trading.

The Green Bay-based bank reported a loss to common shareholders of $180.6 million, or $1.41 per share, for the three months ended Dec. 31. In the same period a year earlier, Associated Banc-Corp recorded net income of $13.6 million, or 11 cents per share.

Associated Banc-Corp, whose CEO and President Philip Flynn took over Dec. 1, said the bank took “additional steps late in the quarter to perform a more extensive review” of troubled loans on its books. The review focused in part on construction and commercial real estate loans.

The review resulted in charges of $405.1 million during the latest quarter, including a $394.8 million loan loss provision and $10.3 million increase in its reserve. Credit-related charges more than quadrupled from $95.4 million the previous quarter.

The company’s allowance for loan losses rose to $573.5 million, or nearly 4.1 percent of total outstanding loans at year’s end, compared with nearly 2.8 percent at the end of September and about 1.6 percent at Dec. 31, 2008.

Associated Banc-Corp said its board approved cutting its dividend to a penny per common share, down from 5 cents per share. The dividend will be paid on Feb. 17, 2010 to shareholders of record on Feb. 8.

Flynn said cutting the dividend and increasing the loan loss allowance are key parts of a strategy for “getting out in front of our credit issues.”

Proceeds of up to $400 million from the planned common stock offering will provide additional capital and support continued growth and other general corporate purposes.

Associated Banc-Corp intends to grant the underwriters a 30-day option to buy up to an additional 15 percent of shares to cover any overallotments. Credit Suisse Securities (USA) is the sole bookrunning manager for the offering.

Shares of Associated Banc-Corp fell 92 cents to $11.41 in midday trading.

Associated Banc-Corp is a holding company with total assets of $23 billion and 291 bank offices in Wisconsin, Illinois and Minnesota.