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Running head: ASSOCIATED BANK
Associated Bank:
An Historical and Financial Analysis
Dustin Gaddis
University of Wisconsin – Eau Claire
Author Note
This paper was prepared for ECON 321, Section 001, Fall 2014, taught by Doctor Carroll.
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Associated Bank:
An Historical and Financial Analysis
After a Sunday filled with NFL football and watching the Green Bay Packers, many
Wisconsinites tune in to the post-game press conference to hear some candid thoughts from the
likes of Coach Mike McCarthy and quarterback Aaron Rodgers, hoping to gain some insight into
that day’s performance. Many also recognize the two green logos on the background behind the
interviewee, that of the Green Bay Packers and Associated Bank [AB]. Founded in 1970, AB
was originally formed from three other Wisconsin banks and has continued grow until this day.
As a result of this growth, AB is now the largest bank in Wisconsin, with $26 billion in assets
and 4,400 employees to serve its one million customers in Wisconsin, Minnesota, and Illinois
(Associated Bank, 2014, Who We Are section).
Thanks to the bank’s broad service area and large number of customers, its assets have
grown from $20,532,484,000 to $23,932,159 from the period of 2006 to 2013. Additionally, its
capital has increased from $2,363,419,000 to $$3,123,882 during the same period, with
capital/asset ratios of 11.51 and 13.05, respectively. However, return on assets has fallen from
1.41% to 0.90%, return on equity from 12.41% to 7.22%, and yield on earning assets from
7.22% to 3.43%. While all three of these areas have fallen, cost of funding earning assets has
dropped from 3.15% to 0.18%, clearly showing that interest expense has lowered significantly.
This change in growth, in and of itself, over an eight-year period is not necessarily
astounding, but considering the highly destructive effects of the Great Recession, this expansion
and improvement is acceptable. As Love and Mattern (2011) have contented, the Great
Recession was caused by increasing default and foreclosures in sub-prime mortgage markets,
which had a domino effect, causing falls in other mortgage markets, corporate bonds, and
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commercial real estate (p. 401). Given these massive defaults and foreclosures, many banks
became highly vulnerable to the extent that some of them failed. These events caused worldwide
panic, promoting uncertainty and pessimism within banking and finance industries. As a result,
the Federal Reserve was forced to step in provide financial backing for certain existing banks,
increased regulation to prevent further catastrophes, and methods to stimulate the economy into
order to quell fears of an international financial meltdown.
The extent of the Great Recession, which officially began in December 2007 and ended
in June 2009, was devastating to not only AB, but to its peer group (banks with assets exceeding
$10 billion) as well. Relative to the peer group, AB did worse in some areas, but better in others.
For example, AB’s return on assets plummeted to -0.50% in 2009, while the peer group’s only
fell to -0.06% the same year; the peer group’s return on assets have also recovered at a higher
rate in the years following 2009. Secondly, in the same year, AB’s return on equity dipped down
to -4.35%, while peer group suffered a much smaller decline, down to -0.54%. For this metric,
the peer group again recovered at a faster rate than AB.
On the other hand, Associated Bank out-performed its peer group in other important
measures from 2006 to 2013. Throughout this entire period, AB has maintained a higher capital
as total assets percentage (e.g., 14.86% vs 11.25% in 2009). Furthermore, AB maintained a
surplus of about 1-3% more (as percentage of total equity capital) greater than the peer group
every year from 2006 to 2013 (e.g., 10.72% vs 9.00% in 2010).
Although there are many similarities in terms of performance between AB and the peer
group, there are a few differences that can account for the discrepancy in various metrics. First,
the peer group held two to three times the amount (e.g., 9.37% vs 2.29% in 2008) of cash and
due from depository institutions as a percentage as total assets every year from 2006 to 2013.
Second, the amount of certain other assets held by AB and the peer group were quite different.
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That is, in 2006 AB held 72.24% of assets as net leases and loans vs the peer group’s 56.17%. In
the same year, AB held 0.06% as assets as federal funds sold & reverse repurchase agreements
vs the peer group’s 5.73%. Finally, the peer group also held 7.91% as trading account assets,
while AB held 0.
Considering these disparities, AB’s performance during the Great Recession and slow
recovery afterward (relative to the peer group) can be attributed to riskier behavior, like holding
a higher amount of net leases and loans, holding a significantly smaller amount of cash and due
from depository institutions, and holding a notably smaller amount of less risky assets (i.e.,
federal funds sold). Two interesting differences between AB and the peer group—and ones that
likely contributed to its relatively sluggish performance—are loss allowance to non-current loans
and leases and other borrowed funds as a percentage of total liabilities. AB’s allowance to
noncurrent loans and leases increased from 50.57% in 2009 to 132.85% in 2013, while the peer
group’s has stayed much lower, 60.17% to 62.33%. Lastly, despite other borrowed funds being a
source of trouble for banks during the Great Recession, Associated Bank held 11.28% of other
borrowed funds as total liabilities in 2013, and the peer group only held 5.97% the same year.
Thankfully, even while engaging in riskier behavior, AB did manage to protect itself somewhat
by employing high capital/asset ratio and a surplus (as percentage of total equity capital) from
2006 to 2013.
Ultimately, AB, when compared to similarly sized institutions within the bank industry,
has chosen over the period of 2006 to 2013 to hold more riskier assets (net loans and leases) and
fewer safe assets (federal funds sold). Due to this high-risk, high-return strategy, AB has faced a
slower recovery and smaller growth than its peer group after the Great Recession. However, this
bank has survived, is still growing today, and is an important part of everyday life for millions.
With lessons learned and new strategies implemented post-recession, the future is bright for AB.
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Appendix
Figure 1
Figure 2
Figure 3
$18,000,000
$19,000,000
$20,000,000
$21,000,000
$22,000,000
$23,000,000
$24,000,000
$25,000,000
2006 2007 2008 2009 2010 2011 2012 2013
AB Total Assets 2006 - 2013
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
2006 2007 2008 2009 2010 2011 2012 2013
AB Capital 2006 - 2013
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Figure 4
0
2
4
6
8
10
12
14
16
2006 2007 2008 2009 2010 2011 2012 2013
AB Capital/Asset Ratio 2006 - 2013
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Figure 5
Figure 6
% -6.00
% -4.00
-2.00 %
% 0.00
% 2.00
4.00 %
6.00 %
8.00 %
10.00 %
12.00 %
% 14.00
1
AB Return on Equity 2006 - 2013
2006 2007 2008 2009 2010 2011 2012 2013
% 0.00
1.00 %
2.00 %
3.00 %
% 4.00
5.00 %
% 6.00
7.00 %
% 8.00
2006 2007 2008 2009 2010 2011 2012 2013
AB Yield on Earning Assets 2006 - 2013
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Figure 7
AB Cost of Funding Earning Assets 2006-2013
3.50%
3.00% 2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Figure 8
% -1.00
-0.50 %
% 0.00
0.50 %
% 1.00
% 1.50
2.00 %
2006 2007 2008 2009 2010 2011 2012 2013
AB and Peer Group - Return on Assets 2006 - 2013
AB ROA Peer Group ROA
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Figure 9
Figure 10
% -6.00 % -4.00 % -2.00
0.00 % 2.00 % 4.00 % 6.00 % 8.00 %
10.00 % 12.00 % 14.00 % 16.00 %
2006 2007 2008 2 009 2010 2011 2012 2013
AB and Peer Group - Return on Equity 2006 - 2013
AB ROE Peer Group ROE
0.00 % % 2.00 % 4.00 % 6.00
8.00 % 10.00 %
% 12.00 % 14.00
16.00 %
2006 2007 2008 2009 2010 2011 2012 2013
AB and Peer Group - Equity Capital as % of Total Assets 2006 - 2013
Equity Capital as % of Total Assets - AB
Equity Capital as % of Total Assets - Peer Group
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Figure 11
Figure 12
% 0.00
2.00 %
4.00 %
6.00 %
8.00 %
10.00 %
12.00 %
2006 2007 2008 2009 2010 2011 2012 2013
AB and Peer Group - Surplus (as % Total Equity Capital
AB Surplus (as % Total Equity Capital) Peer Group Surplus (as % Total Equity Capital)
% 0.00
5.00 %
10.00 %
% 15.00
2006 2007 2008 2009 2010 2011 2012 2013
AB and Peer Group - Cash and Due from Depository Institutions ( % Total Assets )
AB Cash and and Due from Depository Institutions (% Total Assets)
Peer Group Cash and Due from Depository Institutions (% Total Assets)
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Figure 13
Figure 14
% 0.00 % 10.00 20.00 % 30.00 % 40.00 % 50.00 % % 60.00 70.00 % 80.00 %
Cash and due from depository institutions Interest-bearing balances
Securities Federal funds sold & reverse repurchase…
Net loans & leases Loan loss allowance
Trading account assets Bank premises and fixed assets
Other real estate owned Goodwill and other intangibles
All other assets
AB vs Peer Group - Asset Breakdown (2006)
Peer Group Assets (2006) AB Assets (2006)
0.00 % % 20.00
40.00 % % 60.00
80.00 % 100.00 % 120.00 % 140.00 % 160.00 %
2006 2007 2008 2009 2010 2011 2012 2013
AB vs Peer Group - Loss Allowance to Non - current Loans and Leases
AB Loss Allowance to Non-current Loans & Leases
Peer Group Loss Allowance to Non-current Loans and Leases
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Figure 15
% 0.00
% 2.00
% 4.00
% 6.00
% 8.00
% 10.00
12.00 %
% 14.00
% 16.00
2006 2007 2008 2009 2010 2011 2012 2013
AB vs Peer Group Other Borrowed Funds
AB Other Borrowed Funds Peer Group Other Borrowed Funds
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References
Associated Bank. (2014). Who we are. Retrieved from
https://www.associatedbank.com/aboutus/who-we-are
Love, N. S., & Mattern, M. (2011). The great recession: Causes, consequences, and responses.
New Political Science, 33(4), 401.
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