CORRESP 1 filename1.htm Document


433 Main Street
Green Bay, Wisconsin 54301
920-491-7007 PHONE
seccorrespondencelett_image1.jpg

July 25, 2017

Mr. David Irving
United States Securities and Exchange Commission
Washington, D.C. 20549

Re: Associated Banc-Corp
Form 10-K for the Fiscal Year Ended December 31, 2016
Filed February 6, 2017
File No. 001-31343

Dear Mr. Irving:

The response of Associated Banc-Corp (the “Corporation” or “Associated”) to the comments in the Securities and Exchange Commission (the “SEC” or “Commission”) comment letter dated June 29, 2017 (the “Comment Letter”) related to the Corporation’s annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “2016 Form 10-K”) follows. For reference purposes, the text of the Comment Letter has been reproduced below in bold followed by Associated’s response. Proposed disclosures for future filings are included in the responses and italicized.

Form 10-K for the Fiscal Year Ended December 31, 2016

Item 8: Financial Statements and Supplementary Data, page 71

1


Note 4 (Indicated as Note 5 of the original SEC comment letter), Loans, page 97

1.
We note on page 97 that you present impaired loans with and without a related allowance of $221.0 million and $134.1 million, respectively, and a related allowance of $46.5 million. We also note on page 101, that you present loans individually evaluated for impairment and the related allowance of $214.4 million and $24.1 million, respectively. Please explain this difference in your response, as well as any differences in the impaired loan disclosures in subsequent 10-Q’s, and revise future filings as necessary.

Response to Item #1:

The Corporation acknowledges the tables on pages 97 and 101 differ based on the information being shown. The table on page 97, the Impaired Loans Table, presents only impaired loans, which are defined on page 82 of the 2016 Form 10-K as commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring. Impaired loans may include loans individually evaluated for impairment as well as homogeneous groups of loans collectively evaluated for impairment. In comparison, the table on page 101, the Allowance for Loan Losses Table, currently shows the allowance for loan losses and related loan balances for the total loan portfolio, which includes both impaired and non-impaired loans. Additionally, the Table on page 101, the Allowance for Loan Losses Table, does not segregate the allowance for loan losses and related loan balances of impaired loans collectively evaluated from the remaining loans collectively evaluated.
For future filings, the Corporation will expand the Allowance for Loan Losses Table to show additional detail regarding impaired loans collectively evaluated and non-impaired loans collectively evaluated, as well as add a row titled “Total Impaired Loans” to make the comparison between the Allowance for Loan Losses and Impaired Loans Tables more intuitive and easily reconcilable.

2


Shown below is the expanded Allowance for Loan Losses Table the Corporation proposes to use in future filings, as well as the Impaired Loans Table presented in the 2016 Form 10-K. The expanded Allowance for Loan Losses Table is intended to allow easy reconciliation between this table and the Impaired Loans Table. All figures shown are from or related to the 2016 Form 10-K.
Allowance for Loan Losses Table, Page 101
$ in Thousands
Commercial
and
industrial
Commercial
real estate
— owner
occupied
Commercial
real
estate —
investor
Real estate
construction
Residential
mortgage
Home
equity
Other consumer
Total
December 31, 2015
$
129,959

$
18,680

$
43,018

$
25,266

$
28,261

$
23,555

$
5,525

$
274,264

Charge offs
(71,016
)
(512
)
(1,504
)
(558
)
(4,332
)
(4,686
)
(3,831
)
(86,439
)
Recoveries
14,543

74

1,624

203

755

3,491

820

21,510

Net charge offs
(56,473
)
(438
)
120

(355
)
(3,577
)
(1,195
)
(3,011
)
(64,929
)
Provision for loan losses
66,640

(4,208
)
2,147

2,021

2,362

(1,996
)
2,034

69,000

December 31, 2016
$
140,126

$
14,034

$
45,285

$
26,932

$
27,046

$
20,364

$
4,548

$
278,335

 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
Impaired loans:
 
 
 
 
 
 
 
 
Individually evaluated
$
20,836

$
—

$
3,117

$
—

$
147

$
3

$
—

$
24,103

Collectively evaluated
781

295

424

441

10,944

9,309

186

22,380

Total impaired loans
21,617

295

3,541

441

11,091

9,312

186

46,483

Non-impaired loans:
 
 
 
 
 
 
 
 
Collectively evaluated
118,509

13,739

41,744

26,491

15,955

11,052

4,362

231,852

Total
$
140,126

$
14,034

$
45,285

$
26,932

$
27,046

$
20,364

$
4,548

$
278,335

 
 
 
 
 
 
 
 
 
Period end loan balances:
 
 
 
 
 
 
 
 
Impaired loans:
 
 
 
 
 
 
 
 
Individually evaluated
$
180,965

$
8,439

$
17,322

$
—

$
7,033

$
650

$
—

$
214,409

Collectively evaluated
34,290

6,595

16,018

1,203

61,303

20,107

1,235

140,751

Total impaired loans
215,255

15,034

33,340

1,203

68,336

20,757

1,235

355,160

Non-impaired loans:
 
 
 
 
 
 
 
 
Collectively evaluated
6,273,759

882,690

3,541,392

1,431,294

6,263,991

913,686

392,744

19,699,556

Total
$
6,489,014

$
897,724

$
3,574,732

$
1,432,497

$
6,332,327

$
934,443

$
393,979

$
20,054,716


3


Impaired Loans Table, Page 97
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
 
Average Recorded Investment
 
Interest Income Recognized
 
($ in Thousands)
Loans with a related allowance
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
101,770

 
$
107,813

 
$
21,617

 
$
111,211

 
$
2,512

Commercial real estate — owner occupied
6,595

 
8,641

 
295

 
7,111

 
274

 Commercial and business lending
108,365

 
116,454

 
21,912

 
118,322

 
2,786

Commercial real estate — investor
27,196

 
27,677

 
3,541

 
31,142

 
2,124

Real estate construction
1,203

 
1,566

 
441

 
1,321

 
67

 Commercial real estate lending
28,399

 
29,243

 
3,982

 
32,463

 
2,191

  Total commercial
136,764

 
145,697

 
25,894

 
150,785

 
4,977

Residential mortgage
62,362

 
67,090

 
11,091

 
63,825

 
2,263

Home equity
20,651

 
22,805

 
9,312

 
21,825

 
1,114

Other consumer
1,235

 
1,284

 
186

 
1,294

 
29

  Total consumer
84,248

 
91,179

 
20,589

 
86,944

 
3,406

   Total loans
$
221,012

 
$
236,876

 
$
46,483

 
$
237,729

 
$
8,383

Loans with no related allowance
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
113,485

 
$
134,863

 
$
—

 
$
117,980

 
$
1,519

Commercial real estate — owner occupied
8,439

 
9,266

 
—

 
8,759

 
138

 Commercial and business lending
121,924

 
144,129

 
—

 
126,739

 
1,657

Commercial real estate — investor
6,144

 
6,478

 
—

 
7,092

 
—

Real estate construction
—

 
—

 
—

 
—

 
—

 Commercial real estate lending
6,144

 
6,478

 
—

 
7,092

 
—

  Total commercial
128,068

 
150,607

 
—

 
133,831

 
1,657

Residential mortgage
5,974

 
6,998

 
—

 
6,610

 
184

Home equity
106

 
107

 
—

 
107

 
4

Other consumer
—

 
—

 
—

 
—

 
—

  Total consumer
6,080

 
7,105

 
—

 
6,717

 
188

   Total loans
$
134,148

 
$
157,712

 
$
—

 
$
140,548

 
$
1,845

Total
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
215,255

 
$
242,676

 
$
21,617

 
$
229,191

 
$
4,031

Commercial real estate — owner occupied
15,034

 
17,907

 
295

 
15,870

 
412

 Commercial and business lending
230,289

 
260,583

 
21,912

 
245,061

 
4,443

Commercial real estate — investor
33,340

 
34,155

 
3,541

 
38,234

 
2,124

Real estate construction
1,203

 
1,566

 
441

 
1,321

 
67

 Commercial real estate lending
34,543

 
35,721

 
3,982

 
39,555

 
2,191

  Total commercial
264,832

 
296,304

 
25,894

 
284,616

 
6,634

Residential mortgage
68,336

 
74,088

 
11,091

 
70,435

 
2,447

Home equity
20,757

 
22,912

 
9,312

 
21,932

 
1,118

Other consumer
1,235

 
1,284

 
186

 
1,294

 
29

  Total consumer
90,328

 
98,284

 
20,589

 
93,661

 
3,594

   Total impaired loans
$
355,160

 
$
394,588

 
$
46,483

 
$
378,277

 
$
10,228


4


Note 18, Fair Value Measurements, page 127

2.
You noted provision for credit losses of $75.2 million from non-recurring changes in the fair value of impaired loans of $79.3 million in the table on page 131 disclosing details concerning assets and liabilities measured at fair value on a nonrecurring basis. Please address the following:
•
Revise future filings to enhance your description of the inputs used in the fair value measurement, including quantitative information about the significant unobservable inputs. Refer to ASC 820-10-50-2.bbb; and
•
Explain how the provision for credit losses of $75.2 million reconciles with the total provision for credit losses of $70.0 million included in the Consolidated Statements of Income.

Response to Item #2:

Although narratively disclosed on pages 130 and 131 of the 2016 Form 10-K, future filings will expand Note 18 to include a table which outlines the quantitative information regarding the significant unobservable inputs used for fair value measurements categorized in Level 3 of the fair value hierarchy. Shown is the table the Corporation proposes to include in future filings utilizing financial information as of our 2016 Form 10-K filing.

 
 
 
 
 
 
December 31, 2016
Valuation Technique
 
Significant Unobservable Input
 
Weighted Average Input Applied
Mortgage servicing rights
Discounted cash flow
 
Constant prepayment rate
 
11%
Mortgage servicing rights
Discounted cash flow
 
Discount rate
 
10%
Impaired Loans
Appraisals / Discounted cash flow
 
Collateral / Discount factor
 
20%

The Corporation acknowledges the $70.0 million and $75.2 million provision for credit losses differ based on the information presented. The provision for credit losses figure of $70.0 million shows the consolidated provision for credit losses, which includes impaired loans, non-impaired loans, and unfunded loan commitments, consistent with the Corporation’s policies described on pages 83 and 84 of the 2016 Form 10-K. The provision for credit losses figure of $75.2 million shows the income statement impact of the fair value change from period to period on only individually evaluated impaired loans. The $5.2 million difference is reflective of net recoveries, improvement in the credit quality, and changes in the total loan portfolio from period to period.

For future filings, the Corporation will revise the footnote to the table currently on page 131 of the 2016 Form 10-K to clearly state only individually evaluated impaired loans are included in the provision for credit losses amount included in the table.

On behalf of Associated, and as requested in your letter, the Corporation acknowledges that:

•
Associated is responsible for the adequacy and accuracy of the disclosure in its filings;
•
Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
•
Associated may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

5


We believe this letter is responsive to your comments. Please feel free to contact me at 920-491-7007 if you have any questions or need further information.

Sincerely,

/s/ Christopher J. Del Moral-Niles

Christopher J. Del Moral-Niles
Chief Financial Officer
Associated Banc-Corp

/s/ Tammy C. Stadler

Tammy C. Stadler
Principal Accounting Officer
Associated Banc-Corp

6