New York, November 20, 2017 -- Moody's Investors Service ("Moody's") affirmed
all the ratings of Associated Banc-Corp and its lead bank subsidiary,
Associated Bank, N.A. (collectively Associated).
Associated Banc-Corp's ratings include its senior unsecured
and subordinated debt ratings of Baa1, its non-cumulative
preferred stock rating of Baa3(hyb) and its commercial paper rating of
Prime-2. The ratings and assessments of Associated Bank,
N.A. include its long-and short-term bank
deposit ratings of A1 and Prime-1, its standalone baseline
credit assessment (BCA) and adjusted BCA of a3, its long-
and short-term Counterparty Risk (CR) Assessments of A2(cr) and
Prime 1(cr). The outlooks were revised to stable from negative.
The following ratings were affirmed:
Issuer: Associated Banc-Corp
....Senior Unsecured Regular Bond/Debenture
affirmed at Baa1, Outlook changed to Stable from Negative
....Subordinate Regular Bond/Debenture affirmed
at Baa1
....Preferred Stock Non-cumulative
affirmed at Baa3(hyb)
....Senior Unsecured Commercial Paper affirmed
at Prime-2
....Senior Unsecured Shelf affirmed at (P)Baa1
....Subordinate Shelf affirmed at (P)Baa1
....Preferred Shelf Non-cumulative
affirmed at (P)Baa3
....Subordinate MTN program affirmed at (P)Baa1
....Outlook, Changed to Stable from
Negative
Issuer: Associated Bank, N.A.
.... Baseline Credit Assessment affirmed at
a3
.... Adjusted Baseline Credit Assessment affirmed
at a3
.... Long-term and Short-term
Counterparty Risk Assessments affirmed at A2(cr)/P-1(cr)
.... Long-term and Short-term
Deposit Ratings affirmed at A1, Outlook Changed to Stable from Negative/Prime-1
....Outlook, Changed to Stable from
Negative
RATINGS RATIONALE
Moody's said Associated's ratings affirmation and return to
stable outlook reflects Associated's modest improvement in profitability,
which is supported by higher interest rates, cost saving initiatives
and stronger asset quality that indicate that loan loss provisions should
be minimal next year. Moody's said that it expects no material
change to the company's liquidity or capital profiles.
Regarding profitability, Associated's net income/tangible
assets ratio improved to 0.8% as of September 2017 from
0.7% as of September 2016, aided by a higher net interest
margin, growing fee income, and control of costs, as
well as lower loan loss provisions. Associated's cost-income
ratio declined to 67% from 71% over the same period.
Moody's expects Associated's loan loss provisions to remain
modest thanks to the improved asset quality performance of Associated's
energy portfolio resulting from the stabilization of oil prices and the
bank's reduced exposure to energy lending. Associated's
energy exposure declined to 27% of Moody's tangible common
equity as of September 2017 from 35% as of September 2016.
Non-performing loans in the energy book also declined, to
16% of energy loans from 18% while net charge-offs
declined to 1.4% from 3.1%. Reserve
coverage remained at 5.2%. Moody's sees the
possibility of a material increase in loan loss provisioning for energy
exposures to be small.
Associated's overall problem loan levels are low, said Moody's.
It defines problem loans as nonperforming loans, and accruing 90
day past due and restructured loans. They declined to 1.4%
as of September 2017 from 1.8% as of September 2016.
With that said, the rating agency pointed out that Associated's
relatively high concentration in commercial real estate lending,
at over two times tangible common equity, continues to be a key
credit challenge.
Moody's said Associated's liquidity is strong thanks to a strong
deposit base stemming from its commercial and consumer clients in its
main footprint centered in Wisconsin, Illinois, and Minnesota.
Moody's said that Associated's tangible common equity/risk-weighted
assets ratio compares unfavorably with those of peers despite a recent
improvement. For Associated, the ratio rose to 9.7%
as of September 2017 from 9.1% as of September 2016,
reflecting its higher earnings and moderate dividend payout and share
repurchases. This level however continues to be weaker than the
a3 BCA-rated peer median of 10.6%.
FACTORS THAT COULD LEAD TO AN UPGRADE
For upward rating pressure to emerge, Associated would need to show
material improvement in its capital ratios as well as sustained improvement
in core profitability.
FACTORS THAT COULD LEAD TO A DOWNGRADE
Downward movement in the BCA could emerge if there is a decline in asset
quality or capitalization.
The principal methodology used in these ratings was Banks published in
September 2017. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jeanne Del Casino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653