Associated's Local Play: In-Market Deal Aimed at Revenue Diversity

Article excerpt

Associated Banc-Corp of Green Bay, Wis., is betting that the best way to expand its retail and commercial business is to bulk up close to home.

It took a big step toward strengthening its operations in its home state by making a deal, announced Wednesday, to buy the $3.7 billion-asset First Federal Capital Corp. of La Crosse for $613 million.

The $15.5 billion-asset Associated would still have the No. 3 deposit share in Wisconsin, trailing Marshall & Ilsley Corp. of Milwaukee and U.S. Bancorp in Minneapolis. But buying First Federal, which has the No. 8 share, would give Associated considerable heft in key markets, including Madison, the state capital.

In a conference call, Paul S. Beideman, Associated's president and chief executive officer, said it was attracted to First Federal's strong branch network, including its 49 in-store branches, its operations in three growth markets, and its balance sheet, which tilts toward consumer and commercial lending.

The wide branch network, Mr. Beideman said, would also help Associated sell its commercial banking and wealth management over a broader area in the three states where both companies operate: Wisconsin, Minnesota, and Illinois.

"Our strategy is to enhance and diversify our revenue stream," he said.

The acquisition would be the first in more than two years, and the biggest since 1997, for Associated, which had been one of the Midwest's most acquisitive banking companies during the 1990s. The deal is its first under Mr. Beideman, who joined Associated a year ago from Mellon Financial Corp.

First Federal shareholders would receive 0.635 shares of Associated stock, or an equivalent amount of cash, for each of their shares. The deal, expected to close in the fourth quarter, would be roughly 90% stock and 10% cash.

Associated's deposit share in Wisconsin would increase from 6.34% to 8.4%, according to June 30 statistics from the Federal Deposit Insurance Corp.

More significantly, the acquisition would catapult Associated into the No. 1 position in La Crosse and the No. 4 position in Madison; it is currently No. 10 in both market. In Minneapolis-St. Paul, it ranks No. …