New York, February 24, 2010 -- Moody's Investors Service downgraded the ratings of Associated Banc-Corp
(Associated) and its subsidiaries. The holding company was lowered
to Baa2 from A3 for subordinated debt. Its short-term rating
was lowered to Prime-2 from Prime-1. The lead bank,
Associated Bank, N.A., had its bank financial
strength rating (BFSR) lowered to C from B- and its long-term
deposit rating lowered to A3 from A1. The bank's short-term
rating was also lowered to Prime-2 from Prime-1.
Following the rating action, the outlook on Associated and its subsidiaries
is stable. This concludes Moody's review for possible downgrade
that began on December 23, 2009.
The two notch downgrade incorporates Moody's view that Associated's credit
profile has been materially weakened by its significant asset quality
challenges. Moreover, the impact of those credit challenges
will continue to be felt in 2010, in the form of continued elevated
loan loss provisions. However, the rating agency noted that
further rating pressure is mitigated by Associated's sizable common equity
raise in January.
More specifically, the recent economic and real estate market downturns
exposed weaknesses in Associated's commercial loan portfolio, including
in its C&I, commercial real estate and construction books.
These portfolios accounted for 62% of Associated's loan book at
year-end 2009. As a result, its overall charge-off
and nonperforming asset levels are quite high. Moreover,
despite absorbing a very high level of provisions and charge-offs
in 2009, Moody's believes that Associated faces another several
quarters, at least, of significant credit costs. These
costs will make it difficult for Associated to generate positive net income
this year, in Moody's opinion.
Nonetheless, the ability of Associated's strengthened capital position
to withstand even a more stressed environment while still maintaining
healthy levels of capital supports a stable rating outlook, in Moody's
view. Moreover, on a pre-provision, pre-tax
basis, Associated's earnings generation is good. In addition,
Associated's liquidity position, at both the parent company and
the bank, is currently robust, as evidenced by Associated's
core funded balance sheet, its sizable holdings of unpledged securities,
and, at the parent, the proceeds from Associated's recent
capital raise.
Going forward, Associated's ability to maintain those franchise
strengths while at the same time working to reduce its asset quality issues
will influence the direction of its ratings.
Moody's last rating action on Associated was on February 17, 2010
when Associated's trust preferred securities, issued by its ASBC
Capital I subsidiary, were downgraded as part of the implementation
of Moody's updated guidelines for rating bank hybrid securities.
The principal methodologies used in rating this issuer were Moody's "Bank
Financial Strength Ratings: Global Methodology", published
in February 2007, and "Incorporation of Joint-Default Analysis
into Moody's Bank Ratings: A Refined Methodology", published
in March 2007, and available on www.moodys.com in
the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Downgrades:
..Issuer: ASBC Capital I
....Preferred Stock Preferred Stock,
Downgraded to Baa3 from Baa1
..Issuer: ASBC Capital II
....Preferred Stock Shelf, Downgraded
to (P)Baa3 from (P)Baa1
..Issuer: ASBC Capital III
....Preferred Stock Shelf, Downgraded
to (P)Baa3 from (P)Baa1
..Issuer: Associated Banc-Corp
....Junior Subordinated Shelf, Downgraded
to (P)Baa3 from (P)Baa1
....Multiple Seniority Shelf, Downgraded
to (P)Baa1, (P)Baa2, (P)Baa3, (P)Ba1 from (P)A2,
(P)A3, (P)Baa1, (P)Baa2
....Subordinate Medium-Term Note Program,
Downgraded to Baa2 from A3
....Subordinate Regular Bond/Debenture,
Downgraded to Baa2 from A3
....Senior Unsecured Commercial Paper,
Downgraded to P-2 from P-1
..Issuer: Associated Bank, N.A.
....Bank Financial Strength Rating,
Downgraded to C from B-
....OSO Rating, Downgraded to P-2
from P-1
....Deposit Rating, Downgraded to P-2
from P-1
....OSO Senior Unsecured OSO Rating,
Downgraded to A3 from A1
....Multiple Seniority Bank Note Program,
Downgraded to P-2, A3, Baa1 from P-1,
A1, A2
....Senior Unsecured Deposit Rating,
Downgraded to A3 from A1
Outlook Actions:
..Issuer: ASBC Capital I
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: ASBC Capital II
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: ASBC Capital III
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Associated Banc-Corp
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Associated Bank, N.A.
....Outlook, Changed To Stable From
Rating Under Review
Associated Banc-Corp, headquartered in Green Bay, Wisconsin,
reported total assets of $23 billion at December 31, 2009.
New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Allen H. Tischler
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades Associated Banc-Corp (sub debt to Baa2)