ASSOCIATED BANC-CORPASB
ASSOCIATED BANC-CORP Income Taxes Disclosure
Income Taxes
The current and deferred amounts of income tax expense (benefit) were as follows:
| Years Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||
| Current | |||||||||||
| Federal | $ | 62,599 | $ | 38,353 | $ | 29,319 | |||||
| State | 19,289 | 9,436 | 5,283 | ||||||||
| Total current | 81,888 | 47,789 | 34,602 | ||||||||
| Deferred | |||||||||||
| Federal | 25,320 | (30,701) | (8,371) | ||||||||
| State | (4,075) | (5,775) | (3,135) | ||||||||
| Total deferred | 21,245 | (36,475) | (11,506) | ||||||||
| Total income tax expense | $ | 103,133 | $ | 11,314 | $ | 23,097 | |||||
| Total federal | $ | 87,919 | $ | 7,652 | $ | 20,948 | |||||
| Total state | 15,214 | 3,661 | 2,148 | ||||||||
| Total income tax expense | $ | 103,133 | $ | 11,314 | $ | 23,097 | |||||
Income taxes paid (refunded) are as follows:
| Years Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||
| Federal | $ | (3,266) | $ | 6,607 | $ | 42,500 | |||||
| State | 4,787 | 11,142 | 26,917 | ||||||||
| Total | $ | 1,521 | $ | 17,749 | $ | 69,417 | |||||
Income taxes paid (net of refunds) exceeds 5% of total income taxes paid (net of refunds) for the year in the following jurisdictions:
| Years Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||
| Federal | $ | (3,266) | $ | 6,607 | $ | 42,500 | |||||
| State | |||||||||||
| Illinois | 2,589 | 4,054 | 7,250 | ||||||||
| Minnesota | 2,195 | * | 4,000 | ||||||||
| New York | 753 | * | * | ||||||||
| New York City | 443 | * | * | ||||||||
| Iowa | 585 | * | * | ||||||||
| Connecticut | 344 | * | * | ||||||||
| New Jersey | 280 | * | * | ||||||||
| Massachusetts | 118 | * | * | ||||||||
| Indiana | 99 | * | * | ||||||||
| Wisconsin | (2,718) | 1,942 | 10,450 | ||||||||
| Ohio | * | 1,607 | * | ||||||||
*Did not exceed 5% of total income taxes paid (net of refunds).
Temporary differences between the amounts reported on the financial statements and the tax bases of assets and liabilities resulted in deferred taxes. DTAs and liabilities, included in other assets and accrued expenses and other liabilities on the consolidated balance sheets, respectively, were as follows:
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||
| Deferred tax assets | ||||||||
| Allowance for loan losses | $ | 95,867 | $ | 89,295 | ||||
| Allowance for other losses | 10,576 | 9,840 | ||||||
| Accrued liabilities | 33,931 | 26,109 | ||||||
| Deferred compensation | 34,086 | 30,404 | ||||||
| Federal tax credits carryforward | — | 18,160 | ||||||
| Benefit of state tax losses and credit carryforwards | 5,760 | 4,187 | ||||||
| Capital loss | 15,923 | 29,325 | ||||||
| Nonaccrual interest | 1,840 | 1,269 | ||||||
| Partnerships | 38,390 | 37,781 | ||||||
| Lease liability | 9,921 | 8,881 | ||||||
| Basis difference from equity securities and other investments | 4,302 | — | ||||||
| Net unrealized losses on AFS securities | 3,510 | 16,228 | ||||||
| Net unrealized losses on pension and postretirement benefits | 5,879 | 7,995 | ||||||
| Other | 8,510 | 3,353 | ||||||
| Total deferred tax assets | $ | 268,495 | $ | 282,828 | ||||
| Valuation allowance for deferred tax assets | (15,923) | (32,702) | ||||||
| Total deferred tax assets after valuation allowance | $ | 252,572 | $ | 250,126 | ||||
| Deferred tax liabilities | ||||||||
| Prepaid expenses | $ | 102,491 | $ | 83,251 | ||||
| Goodwill | 22,862 | 22,376 | ||||||
| Mortgage banking activities | 21,778 | 21,877 | ||||||
| Deferred loan fee income | 8,270 | 7,836 | ||||||
| Lease financing | 64,171 | 13,213 | ||||||
| Bank premises and equipment | 3,029 | 30,534 | ||||||
| Purchase accounting | 4,374 | 6,246 | ||||||
| Basis difference from equity securities and other investments | — | 3,104 | ||||||
| Total deferred tax liabilities | $ | 226,975 | $ | 188,437 | ||||
| Net deferred tax assets | $ | 25,597 | $ | 61,689 | ||||
At December 31, 2025, the valuation allowance for DTAs was related to capital loss carryovers. The changes in the valuation allowance inclusive of state valuation allowances were as follows:
| (in thousands) | 2025 | 2024 | ||||||
| Valuation allowance for deferred tax assets, beginning of year | $ | (32,702) | $ | — | ||||
| Decrease (increase) in current year | 16,779 | (32,702) | ||||||
| Valuation allowance for deferred tax assets, end of year | $ | (15,923) | $ | (32,702) | ||||
At December 31, 2025, the Corporation had state net operating loss carryforwards of $133.9 million (of which $2.0 million was acquired from various acquisitions) that will begin expiring in 2029.
The effective income tax rate differs from the statutory federal tax rate. The major reasons for this difference were as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (Dollars in thousands) | Dollar | Percent | Dollar | Percent | Dollar | Percent | ||||||||||||||
| Federal income tax rate at statutory rate | $ | 121,361 | 21.0 | % | $ | 28,236 | 21.0 | % | $ | 43,271 | 21.0 | % | ||||||||
| Increases (decreases) resulting from: | ||||||||||||||||||||
State income taxes (net of federal benefit)(a) | 10,105 | 1.9 | % | (1,276) | (0.9) | % | (2,232) | (1.1) | % | |||||||||||
| Tax effect of tax credits and benefits, net of related expenses | ||||||||||||||||||||
| Partnerships | (5,904) | (1.0) | % | (7,400) | (5.5) | % | (7,248) | (3.5) | % | |||||||||||
| Research credits | (992) | (0.2) | % | (1,044) | (0.8) | % | (1,574) | (0.8) | % | |||||||||||
| Other tax credits | — | — | % | — | — | % | (194) | (0.1) | % | |||||||||||
| Nontaxable and nondeductible items | ||||||||||||||||||||
| Tax-exempt interest and dividends | (13,030) | (2.3) | % | (13,921) | (10.4) | % | (15,321) | (7.4) | % | |||||||||||
| Bank owned life insurance | (3,611) | (0.6) | % | (2,830) | (2.1) | % | (2,149) | (1.0) | % | |||||||||||
| Net (benefit) tax from stock-based compensation | (292) | (0.1) | % | (208) | (0.2) | % | 7 | — | % | |||||||||||
Net benefit of portfolio reallocation and legal entity rationalization plan(b) | — | — | % | (29,109) | (21.6) | % | — | — | % | |||||||||||
| FDIC premium | 6,760 | 1.2 | % | 6,500 | 4.8 | % | 6,220 | 3.0 | % | |||||||||||
| Dividends | (318) | (0.1) | % | (336) | (0.2) | % | (334) | (0.2) | % | |||||||||||
| Other | 1,943 | 0.3 | % | 3,610 | 2.7 | % | 2,177 | 1.1 | % | |||||||||||
| Changes in valuation allowance | (14,337) | (2.5) | % | 27,525 | 20.5 | % | — | — | % | |||||||||||
| Changes in unrecognized tax benefits | 1,017 | 0.2 | % | 545 | 0.4 | % | (6) | — | % | |||||||||||
| Other adjustments | 431 | 0.1 | % | 1,022 | 0.7 | % | 480 | 0.2 | % | |||||||||||
| Effective income tax | $ | 103,133 | 17.9 | % | $ | 11,314 | 8.4 | % | $ | 23,097 | 11.2 | % | ||||||||
(a) State taxes from Illinois and Minnesota made up the majority (greater than 50%) of the tax effect in this category during 2025 and from Wisconsin and Illinois during 2024 and 2023.
(b) Related to the previously announced strategic reallocation of the investment portfolio and adoption of a legal entity rationalization plan in the second quarter of 2024.
Savings banks acquired by the Corporation in 1997 and 2004 qualified under provisions of the Internal Revenue Code that permitted them to deduct from taxable income an allowance for bad debts that differed from the provision for such losses charged to income for financial reporting purposes. Accordingly, no provision for income taxes has been made for $100 million of retained income at December 31, 2025. If income taxes had been provided, the deferred tax liability would have been $25.4 million. Management does not expect this amount to become taxable in the future; therefore, no provision for income taxes has been made.
The Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Corporation’s federal income tax returns are open and subject to examination from the 2022 tax return year and forward. The years open to examination by state and local government authorities varies by jurisdiction.
A reconciliation of the beginning and ending amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was as follows:
| (in thousands) | 2025 | 2024 | ||||||
| Balance at beginning of year | $ | 2,772 | $ | 2,227 | ||||
| Changes for tax positions related to prior years | 234 | 83 | ||||||
| Changes for tax positions related to current year | 783 | 462 | ||||||
| Balance at end of year | $ | 3,789 | $ | 2,772 | ||||
The Corporation recognizes interest and penalties accrued related to unrecognized tax benefits in the income tax expense line on the consolidated statements of income. Interest and penalty benefits, as well as accrued interest and penalties, were immaterial at both December 31, 2025 and 2024. At December 31, 2025 and 2024, the Corporation believes it has appropriately accounted for any unrecognized tax benefits. Management does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Feb 8, 2024 | |
| 2022 | Feb 13, 2023 | |
| 2021 | Feb 8, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.