Fitch Affirms Associated Banc-Corp's L-T IDR at 'BBB-'; Outlook Stable

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CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the long- and short-term Issuer Default Ratings (IDRs) for Associated Banc-Corp (ASBC) at 'BBB-/F3'. The Rating Outlook is Stable. A full list of ratings is provided at the end of this release.

The affirmation is supported by continued expected improvement in ASBC's asset quality metrics. ASBC's non-performing assets (NPAs) as a percentage of gross loans plus other real estate owned (OREO) was 4.13% as of Sept. 30, 2011, down from 4.76% at June 30, 2011 and 5.00% at March 31, 2011. Similarly, net-charge-offs (NCOs) have declined over the course of the year, and as of the quarter ending Sept. 30, 2011 amounted to 0.90% on an annualized basis.

Fitch's action is further supported by the maintenance ASBC's good capitalization levels while the company was able to repurchase its $525m of TARP shares in two parts over the course of the past year. This was facilitated by two issuances of senior unsecured debt over the course of the year that collectively amounted to $430 million, as well as a preferred issuance of $65 million.

The Rating Outlook is stable, because notwithstanding the increased indebtedness from the TARP repayment, ASBC's tangible common equity (TCE) ratio increased to 8.77%, up from 8.49% at June 30, 2011 due to continued profitability. Fitch Core Capital amounted to $1.66 billion at Sept. 30, 2011, or 7.95% of tangible assets. Fitch further notes that ASBC's capitalization levels are generally inline with similarly rated entities, which further supports the Stable Outlook.

Over the course of the last year, ASBC has improved its profitability primarily through lower provision expense. Net interest income over the last few quarters has been relatively stable as has non-interest income. Expenses have been up and down over the last few quarters, but the efficiency ratio is still on the higher side relative to similarly rated entities at 71.89% as of Sept. 30 2011.

Going forward ASBC's main challenge and focus will be to drive additional loan growth, which is not unlike the current focus of most other banks. To this end, ASBC has had some success in growing gross loans which increased to $13.5 billion as of 3Q'11, up 3% from the sequential quarter. The growth was primarily due to more commercial and industrial (C&I) loans, non-owner occupied commercial real estate loans, and residential mortgage loans.

Fitch notes that given slower growth profile of ASBC's upper Midwestern footprint, the company is looking to grow loans in some adjacent areas such as Chicago, Cincinnati, and Indianapolis. Given the current overall level of elevated competition to provide loans to creditworthy customers, coupled with ASBC's relative newness to some of its markets, Fitch would be concerned if growth were to accelerate for a sustained period above industrywide trends.

Fitch views ASBC's ratings to be at the lower end of their potential range. Fitch notes that should the company be able to measurably improve core earnings power over a sustained number of quarters while maintaining capital ratios at or above similarly rated entities, there could be some upside to current ratings. Although not anticipated, ratings could be negatively impacted should asset quality trends reverse course and significantly deteriorate.

ASBC is a $21.9 billion regional bank with a large presence in Wisconsin, Illinois, and Minnesota. It offers consumer and commercial banking services, trust and investment management services, insurance, and mortgage banking products.

Fitch has affirmed the following ratings:

Associated Banc-Corp

--Long-term IDR at 'BBB-';

--Senior unsecured debt at 'BBB-';

--Viability at 'bbb-';

--Subordinated debt at 'BB+'

--Preferred stock at 'BB';

--Short-term IDR at 'F3';

--Commercial Paper at 'F3';

--Individual at 'C';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

Associated Bank, N.A.

--Long-term IDR at 'BBB-';

--Viability at 'bbb-';

--Long-term deposits at 'BBB';

--Long-term senior debt at 'BBB-';

--Short-term IDR at 'F3';

--Individual at 'C';

--Short-term deposits at 'F2';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

Associated Trust Company, N.A.

--Long-term IDR at 'BBB-';

--Viability at 'bbb-';

--Short-term IDR at 'F3';

--Individual at 'C';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

ASBC Capital I

--Preferred stock at 'BB'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'. The ratings above were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research

--Global Financial Institutions Rating Criteria, Aug. 16, 2011;

--Bank Holding Company Criteria, Aug. 16, 2011;

--Troubled Debt Restructurings, May 16, 2011;

--Exposure Draft - Treatment of Hybrids in Bank Capital Analysis, July 11, 2011.

--Global Financial Institutions Snapshot (Aug. 15, 2011)

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

Bank Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648612

Troubled Debt Restructurings (Accounting Standards Update Set to Increase TDR Recognition)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=628437

Treatment of Hybrids in Bank Capital Analysis

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=641269

Global Financial Institutions Snapshot

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=609947

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