TEXT-Fitch affirms Associated Banc-Corp IDRs at 'BBB-/F3'

Thu Feb 14, 2013 5:44pm EST

Feb 14 - Fitch Ratings has affirmed the long-term and short-term Issuer
Default Ratings (IDRs) of Associated Banc-Corp. and its subsidiaries at
'BBB-/F3'. The Rating Outlook remains Positive. A full list of ratings follows
at the end of this release.

Fitch reviewed Associated Banc-Corp. as part of a peer review that included 16
mid-tier regional banks. The banks in the peer review include: Associated
Banc-Corp., Bank of Hawaii Corporation, BOK Financial Corporation, Cathay
General Bancorp, Cullen/Frost Bankers, Inc., East West Bancorp, Inc., First
Horizon National Corporation, First National of Nebraska, Inc., First Niagara
Financial Group, Inc., Fulton Financial Corporation, Hancock Holding Company,
People's United Financial, Inc, Synovus Financial Corp., TCF Financial
Corporation, UMB Financial Corp., Webster Financial Corporation. Refer to the
release titled 'Fitch Takes Rating Actions on Its Mid-Tier Regional Bank Group
Following Industry Peer Review' for a discussion of rating actions taken on the
entire mid-tier regional bank group.

The mid-tier regional group is comprised of banks with total assets ranging from
$10 billion to $36 billion. IDRs for this group is relatively dispersed with a
low of 'BB-' and a high of 'A+'. Mid-tier regional banks typically lag their
large regional bank counterparts by asset size, geographic footprint and
product/revenue diversification. As such mid-tier regional banks are more
susceptible to idiosyncratic risks such as geographic or single name
concentrations.

Fitch's mid-tier regional bank group has fairly homogenous business strategies.
The institutions are mostly reliant on spread income from loans and investments.
With limited opportunity to improve fee-based income in the near term, Fitch
expects that mid-tier banks will continue to face greater earnings headwinds in
2013 than larger institutions with greater revenue diversification.

Share repurchases is common theme amongst the mid-tier banks. As mid-tier banks
face earnings headwinds, institutions have begun repurchasing common shares to
improve shareholder returns. Fitch anticipates continued repurchase activity in
2013 as the return on equity lags historical norms for the group.

In addition to share repurchases, Fitch has observed that some mid-tier banks
have looked to their investment portfolio to improve returns. Most notably, CLOs
and CMBS have become more popular amongst mid-tier banks. Although such
securities are beneficial to yields and returns, Fitch notes that such purchases
can be a negative ratings driver if the risks are not properly measured,
monitored and controlled.

Asset quality continues to improve throughout the banking sector. Both
nonperforming assets (NPAs) and net charge-offs (NCOs) are down significantly
year over year. Fitch anticipates further asset quality improvement as
nonperforming loan (NPL) inflow slows. Reserve levels have also declined as
asset quality improves, which has been beneficial to earnings in 2012. Fitch
expects further reserve releases in 2013 but at a slower pace.

RATING ACTION AND RATIONALE
Associated Banc-Corp.'s (ASBC) ratings were affirmed at 'BBB-'. The Rating
Outlook remains Positive. The affirmation and continued Positive Outlook reflect
the progress ASBC has made in rebuilding balance sheet strength while improving
operating performance. Fitch notes ASBC's sustained positive trends in asset
quality metrics, reporting NPAs of around 2.77% at fourth quarter of 2012
(4Q'12), significantly down from a year prior. Further, the company has
maintained a strong capital base, especially relative to similarly rated
institutions as risk on the balance sheet has been lessened. The company
reported an 81 basis points (bps) return on assets (ROA) for 2012, a 16 bps
improvement from 2011. While Fitch expects similar results over the next 12 to
18 months, Fitch notes that performance has been augmented through artificially
low provision expense and a historically high level of mortgage banking income.
ASBC has taken just $3 million in allowance provisions since 4Q'11. Moreover,
earnings have been boosted over the last year through the rally in mortgage
rates which has added over $50 million of incremental pre-tax mortgage banking
income to the bottom line relative to the year prior. The level of earnings,
which are below some higher rated institutions, represents the main hurdle for
upwards rating momentum over the intermediate term.

RATING DRIVERS AND SENSITIVITIES - IDRs and VRs
Over the more medium term, ratings could benefit from controlled, strategic
balance sheet growth, combined with costs savings realized through efficiency
measures. Conversely, a sharp reverse in asset quality trends, particularly in
the growing C&I book, could negatively impact both ASBC's rating and outlook.
Further, more aggressive capital management at bank or holding company level
could lead to negative rating actions.

RATING DRIVERS AND SENSITIVITIES - Support Ratings and Support Floor Ratings:
All of the mid-tier regional banks in the peer group have Support Ratings of '5'
and Support Floor Ratings of 'NF'. In Fitch's view, the mid-tier banks are not
considered systemically important and therefore, Fitch believes the probability
of support is unlikely. IDRs and VRs do not incorporate any government support
for any of the banks in the mid-tier regional bank peer group.

RATING DRIVERS AND SENSITIVITIES - Subordinated Debt and Other Hybrid
Securities:
Subordinated debt and hybrid capital instruments issued by the banks are notched
down from the issuers' VRs in accordance with Fitch's assessment of each
instrument's respective non-performance and relative loss severity risk
profiles, which vary considerably. The ratings of subordinated debt and hybrid
securities are sensitive to any change in the banks' VRs or to changes in the
banks' propensity to make coupon payments that are permitted but not compulsory
under the instruments' documentation.

RATING DRIVERS AND SENSITIVITIES - Holding Company:
All of the entities reviewed in the mid-tier regional bank group have a bank
holding company structure with the bank as the main subsidiary. All subsidiaries
are considered core to parent holding company supporting equalized ratings
between bank subsidiaries and bank holding companies. IDRs and VRs are equalized
with those of its operating companies and banks reflecting its role as the bank
holding company, which is mandated in the U.S. to act as a source of strength
for its bank subsidiaries.

RATING DRIVERS AND SENSITIVITIES - Subsidiary and Affiliated Company Rating:
All of the entities reviewed in the mid-tier regional bank group factor in a
high probability of support from parent institutions to its subsidiaries. This
reflects the fact that performing parent banks have very rarely allowed
subsidiaries to default. It also considers the high level of integration, brand,
management, financial and reputational incentives to avoid subsidiary defaults.

Fitch has affirmed the following ratings:

Associated Banc-Corp.
--Long-term IDR at 'BBB-'; Outlook Positive;
--Senior unsecured debt at 'BBB-';
--Viability at 'bbb-'.
--Subordinated at from 'BB+';
--Preferred stock at 'B';
--Short-term IDR at 'F3';
--Commercial paper at 'F3';
--Support at '5';
--Support floor at 'NF'.

Associated Bank, NA
--Long-term IDR at 'BBB-'; Outlook Positive;
--Viability at 'bbb-';
--Long-term deposits at 'BBB';
--Long-term senior debt at 'BBB-';
--Short-term IDR at 'F3';
--Support at '5';
--Support floor at 'NF';
--Short-term deposits at 'F2'.

Associated Trust Company, NA
--Long-term IDR at 'BBB-'; Outlook Positive;
--Viability at 'bbb-';
--Short-term IDR at 'F3'
--Support at '5';
--Support floor at 'NF'.

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

In addition to the source(s) of information identified in Fitch's Master
Criteria, these actions were additionally informed by information provided by
the companies.
Applicable Criteria and Related Research:
--'Risk Radar' (Jan. 16, 2013);
--'U.S. Banks: Rationalizing the Branch Network (Witness the Incredible
Shrinking Branch Network)' (Sept. 17, 2012);
--'U.S. Banks: Mortgage Representations and Warranties (Banks Increase Reserves;
Uncertainty Remains)' (Aug. 20, 2012)
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal
(Pro-Cyclical Capital Policy to Create Greater Capital Volatility for Banks)'
(Aug. 7, 2012);
--'Basel III: Return and Deleveraging Pressures' (May 17, 2012);
--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 05,
2012).

Applicable Criteria and Related Research:
Risk Radar Update
U.S. Banks: Rationalizing the Branch Network (Witness the Incredible Shrinking
Branch Network)
U.S. Banks: Mortgage Representations and Warranties (Banks Increase Reserves;
Uncertainty Remains)
Global Financial Institutions Rating Criteria
Rating FI Subsidiaries and Holding Companies
Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal (Pro-Cyclical
Capital Policy to Create Greater Capital Volatility for Banks)
Basel III: Return and Deleveraging Pressures
Assessing and Rating Bank Subordinated and Hybrid Securities
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