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Regional banks in 2026? Plenty of investors want nothing to do with them. Deposit competition, office real estate worries, a Fed that is raising rates again.
You've read the headlines. But while a lot of money ran elsewhere, one Midwest lender put its head down, closed a major acquisition, and kept raising its dividend. The stock hasn't caught up yet.
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Meet the Pick
Associated Banc-Corp (NYSE: ASB) is the biggest bank headquartered in Wisconsin. It runs branches across Wisconsin, Illinois, and Minnesota, and the April 1 acquisition of Omaha-based American National added Nebraska and more Twin Cities scale.
Commercial, retail, wealth, and mortgage all sit under one roof. Sounds dull. Isn't.
You're buying it at under 10 times forward earnings, and management just bumped the dividend again, to $0.25 a quarter from $0.24.
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Why a Wisconsin Bank Is Worth a Second Look
Regional banks have been a hard sell for investors for three years now. That's exactly the point.
While the sector traded as one hated group, ASB's management kept grinding through its plan: pay down pricey wholesale funding, grow cheaper core deposits, hire commercial bankers in Chicago and the Twin Cities, and invest in digital.
Then it bought American National, which closed on April 1. Watch what they're building.
And it's showing up. Third-quarter net interest income rose 24% from a year earlier to $377 million, with a 3.20% net interest margin.
Total loans reached $36.5 billion and core customer deposits grew 21% year over year, much of it from the acquisition. Adjusted earnings came in at $0.81 a share.
Here's what matters for you. Regional bank valuations tend to climb when the market sees a few clean quarters of steady margins and no credit surprises.
With the American National integration costs rolling off, ASB has a path to deliver exactly that heading into 2027.
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The Math Behind the Discount
ASB's business is banking 101. Take in core deposits. Lend into commercial real estate, business loans, and residential mortgages.
Clip a spread. With the Fed raising rates again (the funds rate sits at 3.75% to 4.00%, and futures lean toward another hike in December), loan and securities yields keep repricing higher. The flip side is deposit costs, which can climb just as fast if competition heats up.
Shares go for about 9 times forward earnings. The new $0.25 quarterly dividend works out to $1.00 a year, roughly 31% of $0.81 annualized adjusted quarterly earnings.
That leaves plenty of room for more dividend hikes and loan growth. And management is putting its own money where its mouth is: it repurchased $100 million of stock last quarter at an average of $30.88 a share.
Action: Start building inside the Entry Zone in the Setup Scorecard below, ahead of the fourth-quarter report expected in late January 2027.
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The Chicago and Twin Cities Push
The piece you might miss? The push south and west. ASB has been opening offices and hiring commercial relationship managers in metro Chicago and the Twin Cities, two markets the big national banks have owned for decades.
A mid-sized bank with real local decision-making can actually win share there.
Commercial and industrial loans stood at $13.8 billion at the end of September, up 19% from a year earlier with American National folded in.
Organic growth was slower last quarter, so the next few reports need to show the new markets adding loans on their own.
You don't need a higher multiple for this to work. Loan growth plus a steady margin plus the dividend can deliver a solid total return even if the P/E sits still.
Credit Quality and the Capital Story
Here's what the bears tend to miss. Net charge-offs ran at an annualized 0.19% of average loans last quarter, and the allowance for credit losses covers 1.34% of total loans.
Losses have stayed contained, with office real estate the main pocket to watch. The reserve is sized for a tougher economy than the one we have today.
That cushion gives management room to raise the dividend, buy back stock, and fund loan growth at the same time. Many regionals have to pick one.
That combination is exactly what you should want to own, and the stock still prices it like a laggard.
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A Dividend You Can Actually Rely On
ASB now pays $0.25 a share quarterly, $1.00 annualized, a trailing yield of about 3.2%. The next payment goes out December 15 to shareholders of record on December 1. That's well above what the S&P 500 pays.
Be honest about the history, though. ASB slashed its dividend to a penny a quarter during the 2009 financial crisis. Since late 2011, it has rebuilt the payout steadily, raising it in most years, and the latest bump marks another step up.
Today's payout ratio of roughly 31% gives you a real cushion. One ugly quarter doesn't blow up your income.
Action: If you don't need the income now, reinvest the dividend and treat ASB as a 3- to 5-year compounder. Yield, buybacks, modest loan growth. That combo does the heavy lifting.
Where the Thesis Could Break
A few things to know before you buy.
One, CRE exposure. ASB carries meaningful commercial real estate, and office is the problem child across the whole industry. A nastier cycle there means higher provisions you'll feel.
Two, deposit costs. If depositors demand higher rates as the Fed keeps tightening, funding costs can rise faster than loan yields and squeeze the margin.
Three, integration and expansion costs. Folding in American National and hiring in Chicago and the Twin Cities costs real money upfront. If revenue doesn't follow, the efficiency ratio gets ugly in a hurry.
Four, regionals still trade at a discount because the market hasn't forgotten 2023. A sector-wide scare can drag ASB down with everyone else even when its own numbers are fine.
None of these are thesis-killers. All of them are reasons to size the position sensibly and leg in instead of backing up the truck.
The Case in One Paragraph
If you're hunting income with real upside, ASB checks boxes most dividend names don't. A yield above 3% from a bank that just raised its payout again.
A valuation under 10 times forward earnings. A management team buying back stock and doing what it said it would do. Credit losses that remain contained.
The next catalyst is the fourth-quarter report expected in late January 2027, which gives you the next read on margins, loan growth, and integration costs.
Confirm the trajectory and the discount to peers can close. Miss it, and you collect the dividend and wait. That's the kind of asymmetric setup you want heading into 2027.
Setup Scorecard
Entry Zone: $29 to $32
Target: $38 to $42 over 12 to 18 months
Stop Loss: Reassess below $26
Catalyst Timeline: Q4 2026 earnings expected in late January 2027; American National integration progress; next dividend review in late 2027
Confidence Level: Medium-High. The discount is real, and the operating trajectory is improving, but regional bank sentiment can still flip on a single sector headline.
That’s all for today’s edition of the Dividend Brief.
Thanks for reading, and if you have any feedback or dividend stocks you want me to take a look at, just reply to this email!
—Noah Zelvis
DividendBrief.com
