November 13, 2012 / 3:35 PM / in 5 years

TEXT-Fitch revises Associated Banc-Corp outlook to positive

Nov 13 - Fitch Ratings has revised the Rating Outlook to Positive from
Stable for Associated Banc-Corp, (ASBC) and its principal banking
subsidiary Associated Bank, NA. At the same time, Fitch has affirmed ASBC's
long-term Issuer Default Rating (IDR) and short-term IDR at 'BBB-/F3',
respectively. A full list of ratings is provided at the end of this release.

Today's rating action is reflective of the continued maintenance of strong
capital and liquidity profiles in addition to further improvements in ASBC's
asset quality metrics.

Fitch notes that ASBC has sustained strong capital levels in conjunction with
double digit loan growth over the last year. Regulatory capital ratios have
remained strong, with the company reporting a Tier 1 Leverage Ratio of 9.99% and
a Total Risk Based Capital ratio of 15.00% at 3Q'12. Moreover, Fitch believes
ASBC is well-positioned for proposed Basel III requirements.

Additionally, at the third quarter of 2012 (3Q'12), ASBC reported non-performing
assets (NPAs), inclusive of troubled debt restructurings (TDRs), at $452 million
or 3.02% of total loans and other real estate owned (OREO). This represents a
decline from the prior year when NPAs were $560 million or 4.13% of total loans
and OREO. Further, the company's year-to-date net charge offs (NCOs) are a
relatively low 0.58% through 3Q'12 compared to year-to-date NCOs of 1.32%
through 3Q'11. Fitch expects asset quality trends to continue to improve, albeit
at a slower pace over the next 12 to 18 months.

While the company's return on average assets (ROA) has improved since Fitch's
last review, overall performance has been augmented through reserve releases.
Fitch notes that ASBC has not taken a provision since 4Q'11. Further, earnings
have been boosted over the last year through the rally in mortgage rates which
has added $47 million of incremental pre-tax mortgage banking income to the
bottom line.

Fitch believes that when normalizing provision expense, mortgage banking income,
as well as taking into account various efficiency initiatives such as branch
consolidation, ASBC's ROA would be in the 65-75 basis points (bps) range, as
opposed to the recently reported year-to-date ROA of 81 bps through 3Q'12.. The
level of earnings, which are below some higher rated institutions, represents
the main hurdle for upwards rating momentum over the intermediate term.

Going forward, the company's primary focus will be driving additional loan
growth, similar to most other banks. ASBC has increased loan balances 11% from a
year ago with the majority of the growth coming from residential mortgages.
Management intends to retain a portion of 15-year fixed-rate mortgages on the
balance sheet.

Rating Drivers and Sensitivities

Improved earnings performance could lead to positive rating actions for ASBC,
although Fitch views a near-term upgrade as less likely as ASBC's core earnings
ratios still lag peer averages. 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 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.

ASBC has reported moderate growth in oil and gas lending. Given growth in this
sector and ASBC's upper Midwestern footprint, Fitch remains sensitive to credit
quality in the portfolio. Oil and gas lending, as well as C&I lending in
general, has become an increasingly competitive asset class. Deterioration in
the underlying asset quality of the O&G book would likely pressure ASBC's Rating
Outlook. Moreover, excessive growth in this portfolio relative to the overall
portfolio and capital could adversely impact the company's rating over time.

ASBC is a $22.7 billion bank holding company with operations primarily 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 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-';
--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-';
--Viability at 'bbb-';
--Short-term IDR at 'BBB-'
--Support at '5';
--Support floor at 'NF'.

The Rating Outlook revised to Positive from Stable.

Additional information is available at ''. 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. 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Treatment of Hybrids in Bank Capital Analysis' (July 09, 2012).

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Rating FI Subsidiaries and Holding Companies
Treatment of Hybrids in Bank Capital Analysis
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