Rebalancing Act: Associated Cites Progress

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Associated Banc-Corp of Green Bay Wis., has made an effort in recent years to be less reliant on mortgage banking revenue and to diversify its balance sheet.

Analysts said that despite the bank holding company's roots as a commercial banking company, its acquisition of two thrift companies in 1997 and 2004 made its balance sheet more thrift-like.

Paul Beideman, who became Associated's president and chief executive three years ago after heading Mellon Financial Corp.'s Middle Atlantic retail and private banking operations, said he has been trying to sign up more commercial and retail customers and get more out of the ones already on the books.

"That doesn't mean I want the mortgage to contribute less," he said. "I want the others to contribute more." Mortgage banking "should not be the primary driver of revenue at the moment."

Associated, which has assets of $22 billion and 324 branches in Wisconsin, Illinois, and Minnesota, appears to have made strides.

"Our approach to the business has been to enhance the performance of our core banking," Mr. Beideman said last week in an interview with American Banker.

When he arrived at Associated, fees from mortgage banking, excluding expenses from servicing rights, represented 36% of net income. In 2005, mortgage banking contributed 16% of the income, regulatory filings show. Associated reported 2005 earnings of $320 million, up 24%.

Mr. Beideman said that he is changing the loan portfolio's mix, including making more small-business and home equity loans, and that he wants Associated to gather more deposits from commercial, retail, and small-business customers.

At the end of last year, 60% of Associated's average loan book of $14.3 billion was commercial, while residential mortgages made up 20% of the portfolio. Consumer loans, including home equity, made up just under 20%, according to regulatory filings. The company also began repositioning its balance sheet in last year's third quarter of last year, with the aim of reducing exposure to wholesale funding.

Mr. Beideman would not specify how much he wants Associated's loans and deposits to increase. To bring in more deposits, it is developing a sales-oriented culture that evaluates performance and holds employees accountable, while emphasizing cross-selling and adding new products, he said.

"We've invested a lot in our people and our products," he said. "The most important thing for us is pricing discipline and growing demand deposits." Associated has refined its checking account offerings and added features such as identity theft protection and the use of personal photos on debit cards.

Last year deposits rose 6% from 2004, to $13.6 billion. However, excluding deposits gained from its acquisition that year of the $1.5 billion-asset State Financial Services Corp. of Milwaukee, a 29-branch commercial bank, deposits fell 2% for the year.

Associated does not break out demand deposits. …