The chief executive at Associated Banc-Corp in Green Bay, Wis., said Thursday that new caps on interchange fees that took effect Oct. 1 will reduce gross revenues by $4 million this quarter and between $17 million and $19 million a year.
In a conference call with investors and analysts discussing third-quarter results, Philip B. Flynn said he expects increased mortgage refinancing activity to partially make up for the lost income in the short term, but that the $21.9 billion-asset company needs a long-term plan to mitigate overall pressure on fee revenues.
"We need to figure out an appropriate way to get paid for the services we're providing and we will do that," Flynn said, adding that Associated will provide more detail on its strategies later this quarter.
Buoyed by improved asset quality and moderate loan growth, Associated reported earnings of $34 million for the quarter that ended Sept. 30, up 33% from the prior quarter and nearly 400% from the same period in 2010. Earnings per share also rose 33% quarter over quarter, to 20 cents, in line with estimates of analysts polled by Thomson Reuters.
In a news release, Associated said that its nonaccrual loans fell 14% from the prior quarter, to $403 million — their lowest level in seven quarters. As a result, the company lowered its provision for loan losses by 75% from three months earlier, to $4 million. Associated also said that total loans increased by $414 million, or 3%, between June 30 and Sept. 30, with commercial and owner-occupied commercial real estate loans accounting for nearly half the total.
In the conference call, Flynn said he said the company will look to continue to grow loans by capitalizing on merger-related disruptions in its marketplace. Over the last few months, Associated has hired more than 100 new people in customer-facing roles, many of which came from rival Marshall & Ilsley Bank. Bank of Montreal acquired M&I in July and merged it with its Chicago-based subsidiary, BMO Harris Bank.
"We continue to believe that over the coming quarters, the potential disruption that we'll see from the integration of [M&I] will give us opportunities both on the hiring front, [and] most importantly, an opportunity for us to grow our own business," Flynn said.
