Updated 3/6/25
Associated Banc-Corp (ASB) is a regional bank based in Green Bay, Wisconsin, primarily serving the Midwest. It offers commercial and retail banking services along with wealth management solutions. Like many regional banks, ASB has had its share of ups and downs, navigating interest rate changes and economic cycles while striving to maintain strong relationships with its customers.
For income investors, the bank’s dividend is a major attraction. The yield is solid, and management has shown a commitment to returning capital to shareholders. However, a closer look at the financials raises some concerns about sustainability. Let’s break it all down.
🔑 Key Dividend Metrics
📌 Dividend Yield: 3.94%
📌 Annual Dividend: $0.92 per share
📌 Payout Ratio: 123.61% (a potential concern)
📌 5-Year Average Dividend Yield: 4.10%
📌 Recent Dividend Growth: Trailing annual increase of about 3.37%
📌 Ex-Dividend Date: March 3, 2025
📌 Next Dividend Payment Date: March 17, 2025
Dividend Overview
For income-focused investors, ASB’s current dividend yield of 3.94% is quite appealing. It’s been consistently hovering around the 4% mark, which is a strong selling point compared to other regional banks.
The problem? The payout ratio is well over 100%, sitting at 123.61%. That means ASB is paying out more in dividends than it earns in net income. This isn’t necessarily a deal-breaker, but it does raise a red flag. When a company consistently pays out more than it earns, it usually has to rely on retained earnings, debt, or capital reserves to cover dividends—none of which are sustainable long-term solutions.
Dividend Growth and Safety
ASB has been a dependable dividend payer, but growth has been slow. Over the past five years, the dividend yield has remained steady at an average of 4.10%, signaling consistency rather than rapid expansion. While some investors appreciate this reliability, others looking for faster dividend growth might not find ASB as exciting.
The high payout ratio is a real concern when it comes to safety. Ideally, banks keep their payout ratios below 50% to ensure flexibility during economic downturns. At 123.61%, ASB is stretching itself. If earnings don’t improve, a dividend cut is a possibility down the road.
Another factor to consider is profitability. The bank’s return on equity (ROE) is just 2.80%, which is quite low. A strong ROE generally indicates a company is efficiently generating profits from shareholder equity, but ASB’s low number suggests that it may struggle to maintain its current dividend policy if earnings don’t improve.
Chart Analysis
Trend Overview
The price action in this chart shows a noticeable shift in momentum over the past few months. There was a strong rally late last year, with prices breaking well above both the 50-day moving average (orange line) and the 200-day moving average (blue line). That upward move saw a surge in volume, suggesting strong buying interest at the time.
However, after peaking above $27.50, the stock started to lose steam. The 50-day moving average has now rolled over, indicating that short-term momentum is slowing down. Meanwhile, the 200-day moving average is still trending upward, which suggests that the longer-term trend remains intact but is at risk if the stock continues to decline.
Support and Resistance Levels
Over the last few weeks, the price has dropped back toward the 200-day moving average, with the recent close at $23.35 sitting right between the two trend lines. The 50-day moving average has acted as resistance, and the stock has struggled to break back above it. If it fails to reclaim that level, it could lead to further downside pressure.
The 200-day moving average, on the other hand, is an important support level. If the stock holds above this line, it may signal stability and the potential for a bounce. A break below it, however, could lead to a deeper pullback.
Volume and Market Participation
Volume has been relatively stable outside of the sharp spike that occurred during the rally late last year. That big volume surge likely represented a period of high speculative interest or institutional accumulation. Since then, volume has tapered off, suggesting that there’s not as much aggressive buying happening right now.
If another volume surge appears while the stock is near support, it could indicate renewed buying interest. On the flip side, increasing volume on a move lower could confirm further weakness.
Momentum Indicators
The Relative Strength Index (RSI) at the bottom of the chart shows that momentum has been declining. It hit an overbought level during the run-up but has since cooled off, currently sitting in the mid-range. That means the stock isn’t oversold yet, but it’s also not showing signs of strong buying pressure.
If the RSI trends lower and enters oversold territory, it could present a potential buying opportunity if other technical factors align. Conversely, if the RSI remains weak without a recovery, it could signal continued downward pressure.
Analyst Ratings
Associated Banc-Corp (ASB) has recently received a mix of analyst evaluations, reflecting both optimism and caution about its future performance. The general consensus leans toward a Hold rating, with an average 12-month price target of $27.00, suggesting limited upside from current levels.
🔼 Upgrades
📈 Wells Fargo raised its price target from $26 to $27 in late January 2025, signaling a slightly more positive outlook on ASB’s potential growth.
📈 RBC Capital followed suit, adjusting its target from $26 to $27 around the same time, reflecting confidence in the bank’s ability to sustain its operations in a challenging environment.
📈 Keefe, Bruyette & Woods made an even more optimistic revision, increasing their price target from $29 to $30, implying faith in ASB’s long-term resilience.
🔽 Downgrades
📉 Robert W. Baird moved ASB from an Outperform rating to Neutral in mid-2024, maintaining a price target of $27 while expressing concerns about the bank’s ability to outpace its competitors.
📉 Wells Fargo shifted its stance from Overweight to Equal Weight in late 2023, suggesting the stock no longer holds an edge over its peers in terms of growth potential.
These mixed perspectives highlight the uncertainty surrounding ASB. While some analysts see room for gradual improvement, others remain cautious about its ability to outperform in the current banking environment.
Earnings Report Summary
Associated Banc-Corp (ASB) wrapped up 2024 with a mix of challenges and strategic shifts, showing both setbacks and forward-looking adjustments. The bank reported $112 million in net income for the full year, translating to $0.72 per share—a noticeable drop from the $171 million it earned the previous year. The numbers reflect a tough economic climate that made it harder for ASB to maintain the momentum it had in prior years.
Fourth Quarter Shake-Up
The fourth quarter was particularly rough. ASB posted a net loss of $164 million, or $1.03 per share, compared to a $94 million loss in the same quarter of 2023. It was a tough pill to swallow after a profitable third quarter, where earnings came in at $85 million, or $0.56 per share.
A big part of the loss was due to nonrecurring adjustments—one-time moves the bank made to reshape its balance sheet. This included a $130 million loss from selling off a mortgage portfolio, $148 million lost on investment sales, and a $14 million charge related to prepaying Federal Home Loan Bank advances. On the bright side, the bank did recognize a $39 million tax benefit, which softened the blow a bit.
If you strip out all these one-time adjustments, the underlying earnings were actually $91 million for the quarter ($0.57 per share) and $367 million for the full year ($2.38 per share). That suggests ASB’s core business remains solid, even if the numbers at first glance look worse than they really are.
Lending and Deposits
Despite the rough quarter, ASB still grew its lending business. Commercial loans increased by $202 million, ending the year at $18.2 billion, while consumer loans were up $214 million, hitting $11.0 billion. On the deposit side, the bank brought in an additional $3.8 billion, pushing total deposits to $33.4 billion.
Revenue, Expenses, and Credit Losses
Looking at revenue, net interest income climbed by $82 million, reaching $1 billion for the year. However, noninterest income took a big hit, falling by $219 million to just $63 million, mostly because of the asset sales and other one-time losses. Meanwhile, expenses climbed by $67 million, totaling $814 million, which is something investors are watching closely.
Another area of concern was credit losses, which more than doubled from the previous year, rising from $33 million to $83 million. That signals that ASB, like many banks, is bracing for some potential economic headwinds.
Management’s Take
CEO Andy Harmening acknowledged that 2024 wasn’t an easy year but emphasized that ASB made these strategic moves to put itself in a stronger position for the future. He pointed to the bank’s focus on digital transformation and customer service, suggesting that the groundwork has been laid for a stronger performance going forward.
ASB’s earnings report tells a story of a bank navigating a tough market, making some necessary adjustments, and preparing for what’s next. It’s a year of transition, and while the numbers weren’t all positive, there are signs that ASB is working toward a more stable future.
Financial Health and Stability
ASB has some financial strengths but also faces a few challenges that could impact future dividends.
The Positives
- The bank has over $1 billion in cash reserves, which provides a cushion for short-term financial needs.
- The book value per share is $26.92, which means ASB is currently trading below book value with a price-to-book (P/B) ratio of 0.88. This often signals an undervalued stock.
The Concerns
- Profitability is under pressure, with a net profit margin of just 12.92%.
- Revenue has declined by more than 54% year over year, a worrying trend for long-term investors.
- The company holds $3.2 billion in debt. While debt is a normal part of banking, a rising interest rate environment can put additional pressure on borrowing costs.
The bank appears financially stable for now, but declining revenue and weak profitability are things to watch closely.
Valuation and Stock Performance
ASB’s valuation metrics suggest that it’s trading at a discount, but there’s a reason for that.
- Price-to-Book (P/B) Ratio: 0.88 (indicating undervaluation)
- Forward P/E Ratio: 9.65 (modest earnings expectations but some potential upside)
- Trailing P/E Ratio: 32.43 (high due to weak trailing earnings, but not necessarily a sign of overvaluation)
Stock Price Trends
- Current Price: $23.01
- 52-Week Range: $19.76 – $28.18
- 200-Day Moving Average: $23.09
The stock is trading close to its 200-day moving average, indicating some stability. However, given the 1.48% drop in the most recent trading session, short-term volatility remains a factor.
Risks and Considerations
While ASB has an attractive dividend yield, it’s important to consider the risks that come with it.
- High Payout Ratio – With a payout ratio exceeding 100%, ASB is distributing more cash than it earns. If earnings don’t pick up, a dividend cut could become a reality.
- Declining Revenue – A 54% year-over-year drop in revenue is significant. If this trend continues, future profitability and dividend payments could be at risk.
- Regional Bank Pressures – Unlike larger national banks, ASB is more exposed to local economic conditions and interest rate shifts, which can impact earnings unpredictably.
- Weak ROE – A return on equity of 2.80% is on the lower end for banks, suggesting capital is not being deployed as efficiently as it could be.
These risks don’t mean ASB is a bad investment, but they highlight why it’s essential to keep an eye on financial performance and dividend sustainability.
Final Thoughts
ASB offers a solid dividend yield that’s attractive to income-focused investors. However, the high payout ratio and declining revenue raise questions about long-term sustainability.
If the company can turn around its earnings and improve profitability, the dividend could remain intact. But if financial trends continue downward, a dividend cut is something investors should be prepared for.
For those who prioritize yield and are comfortable with some risk, ASB remains an interesting regional bank to watch. But for investors looking for long-term dividend growth and rock-solid stability, it may not be the best option at the moment.
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