Fitch Affirms and Withdraws Associated Banc-Corp.'s Ratings at 'BBB'

Thu May 15, 2014 4:34pm EDT

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(The following statement was released by the rating agency) CHICAGO, May 15 (Fitch) Fitch Ratings has affirmed and withdrawn the ratings for Associated Banc-Corp., (ASBC) and its principal banking subsidiary Associated Bank, NA at 'BBB'. Fitch has decided to discontinue the rating, which is uncompensated. A full list of ratings follows at the end of this release. Fitch notes that there has been no material change in ASBC's credit risk profile since the bank's ratings were affirmed at the Midtier Regional Bank committee in February 2014. KEY RATING DRIVERS - IDRS, VRs, AND SENIOR DEBT As indicated in the press release dated Feb. 5 2014, ASBC's ratings are driven by Fitch's expectation that asset quality will remain in line with similarly rated peers going forward. Fitch observes that at first quarter 2014 (1Q'14) ASBC had non-performing assets (NPAs) of 1.9%, below the mid-tier regional peer group average. Management has reduced the dollar volume of NPAs by 17% over the last year, all while keeping net charge-offs (NCOs) below 30 basis points (bps) on average each quarter. Asset quality improvement has coincided the maintenance of strong capital levels even with the bank increasing its quarterly dividend and level of share buybacks. Fitch's expectation that the company will manage capital appropriately and at levels commensurate with growth is reflected in ASBC's 'BBB' rating. ASBC's ratings also reflect Fitch's expectations that core earnings power will continue to be tepid in the current low rate, low growth environment. ASBC's PPNR/AA has averaged under 1.2% over the last five quarters, primarily challenged by a compressing net interest margin (NIM) and higher overhead costs relating to updating technology and branches. While the company has been taking steps to cut overhead, mainly by consolidating branches, its efficiency ratio has remained elevated in the high 60%'s, considerably higher than similarly rated peers. Fitch expects ASBC's return on assets (ROA) will fluctuate between 70 and 75 bps from quarter to quarter going forward. Fitch also expects that the company will gain reasonable efficiencies in coming periods that could result in additional augmentation to the bottom line. This expectation is reflected in the bank's 'BBB' rating. RATING SENSITIVITIES - IDRS, VRs, AND SENIOR DEBT Rating sensitivities are no longer relevant given today's rating withdrawal. KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and other hybrid capital issued by ASBC, and its subsidiaries are all notched down from ASBC's Viability Rating (VR) of 'bbb' in accordance with Fitch's assessment of each instrument's respective non-performance and relative Loss Severity risk profiles, which vary considerably. RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Rating sensitivities are no longer relevant given today's rating withdrawal. KEY RATING DRIVERS - SUSBIDIARY AND AFFILIATED COMPANY Associated Bank, NA is a wholly owned subsidiary of ASBC. Associated Bank, NA's ratings are aligned with ASBC reflecting Fitch's view that the bank subsidiary is core to the franchise. RATING SENSITIVITIES - SUSBIDIARY AND AFFILIATED COMPANY Rating sensitivities are no longer relevant given today's rating withdrawal. KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR ASBC's Support Rating and Support Rating Floor of '5' and 'NF' reflect Fitch's view that the company is unlikely to procure extraordinary support should such support be needed. RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR Rating sensitivities are no longer relevant given today's rating withdrawal. KEY RATING DRIVERS - LONG- AND SHORT-TERM DEPOSITS Associated Bank, NA's long- and short-term deposit ratings reflect Fitch's view of how these deposits would be treated in a liquidation by the FDIC. RATING SENSITIVITIES - LONG AND SHORT TERM DEPOSITS Rating sensitivities are no longer relevant given today's rating withdrawal. Fitch has affirmed and withdrawn the following ratings: Associated Banc-Corp. --Long-term Issuer Default Rating (IDR) at 'BBB'; --Senior unsecured debt at 'BBB'; --Viability at 'bbb'. --Subordinated at 'BBB-'; --Preferred stock at 'B+'; --Short-term IDR at 'F2'; --Commercial paper at 'F2' --Support at '5'; --Support floor at 'NF'. Associated Bank, NA --Long-term IDR at 'BBB'; --Viability at 'bbb'; --Long-term deposits at 'BBB+'; --Short-term deposits at 'F2' --Senior unsecured debt at 'BBB'; --Short-term IDR at 'F2'; --Support at '5'; --Support floor at 'NF'; Associated Trust Company, NA --Long-term IDR at 'BBB'; --Viability at 'bbb'; --Short-term IDR at 'F2' --Support at '5'; --Support floor at 'NF'. Contact: Primary Analyst Bain K. Rumohr, CFA Director +1-312-368-3153 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Justin Fuller, CFA Senior Director Committee Chairperson Joo-Yung Lee Managing Director +1-212-908-0560 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available on www.fitchratings.com. Applicable Criteria and Related Research: --'2014 Outlook: U.S. Banks', Nov. 21, 2013; --'U.S. Banks: Liquidity and Deposit Funding', Aug. 8, 2013 --'U.S. Banks: Interest Rate Risks (What Happens When Rates Rise)', June 18, 2013; --'U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In?', July 11, 2013; --'Fitch Fundamentals Index', Jan. 15, 2014; --'Risk Radar Global - 1Q14', April 1, 2014; --'Global Financial Institutions Rating Criteria', Jan. 31, 2014; --Assessing and Rating Bank Subordinated and Hybrid Securities Criteria', Jan. 31, 2014; --'Rating FI Subsidiaries and Holding Companies', Aug. 10, 2013. Applicable Criteria and Related Research: 2014 Outlook: U.S. Banks here U.S. Banks: Liquidity and Deposit Funding here U.S. Banks: Interest Rate Risks (What Happens When Rates Rise) here U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In? here Fitch Fundamentals Index here Risk Radar Global 1Q14 here Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Rating FI Subsidiaries and Holding Companies here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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