e10vk

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission file number: 001-31343

ASSOCIATED BANC-CORP

(Exact name of registrant as specified in its charter)


Wisconsin		39-1098068
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1200 Hansen Road		54304
Green Bay, Wisconsin		(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (920) 491-7000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT


Title of each class		Name of each exchange on which registered

Common stock, par value $0.01 per share		The Nasdaq Stock Market LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No þ

As of June 30, 2010, (the last business day of the registrant’s most recently completed second fiscal quarter) the aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $2,099,320,000. This excludes approximately $21,104,000 of market value representing the outstanding shares of the registrant owned by all directors and officers who individually, in certain cases, or collectively, may be deemed affiliates. This includes approximately $67,958,000 of market value representing 3.20% of the outstanding shares of the registrant held in a fiduciary capacity by the trust company subsidiary of the registrant.

As of January 31, 2011, 173,177,438 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE


Document Proxy Statement for Annual Meeting of Shareholders on April 26, 2011		Part of Form 10-K Into Which Portions of Documents are Incorporated Part III

Special Note Regarding Forward-Looking Statements

This document, including the documents that are incorporated by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act (the “Exchange Act”). You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. We believe that it is important to communicate our future expectations to our investors. Such forward-looking statements may relate to our financial condition, results of operations, plans, objectives, future performance, or business and are based upon the beliefs and assumptions of our management and the information available to our management at the time these disclosures are prepared. These forward-looking statements involve risks and uncertainties that we may not be able to accurately predict or control and our actual results may differ materially from the expectations we describe in our forward-looking statements. Shareholders should be aware that the occurrence of the events discussed under the heading “Risk Factors” in this document and in the information incorporated by reference herein, could have an adverse effect on our business, results of operations, and financial condition. These factors, many of which are beyond our control, include the following:


•	operating, legal, and regulatory risks, including risks relating to our allowance for loan losses and impairment of goodwill;

•	economic, political, and competitive forces affecting our banking, securities, asset management, insurance, and credit services businesses;

•	integration risks related to acquisitions;

•	impact on net interest income from changes in monetary policy and general economic conditions; and

•	the risk that our analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.

For a discussion of these and other risks that may cause actual results to differ from expectations, refer to the “Risk Factors” section of this document. The forward-looking statements contained or incorporated by reference in this document relate only to circumstances as of the date on which the statements are made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I


ITEM 1.	BUSINESS

General

Associated Banc-Corp (individually referred to herein as the “Parent Company” and together with all of its subsidiaries and affiliates, collectively referred to herein as the “Corporation,” “Associated,” “we,” “us,” or “our”) is a bank holding company registered pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). We were incorporated in Wisconsin in 1964 and were inactive until 1969 when permission was received from the Board of Governors of the Federal Reserve System (the “FRB” or “Federal Reserve”) to acquire three banks. At December 31, 2010, we owned one nationally chartered commercial bank headquartered in Wisconsin serving local communities within our three-state footprint (Wisconsin, Illinois, and Minnesota) and, measured by total assets held at December 31, 2010, were the second largest commercial bank holding company headquartered in Wisconsin. At December 31, 2010, we owned one nationally chartered trust company headquartered in Wisconsin and 29 limited purpose banking and nonbanking subsidiaries either located in or conducting business primarily in our three-state footprint, that are closely related or incidental to the business of banking.

Services

Through our banking subsidiary Associated Bank, National Association (“Associated Bank” or the “Bank”) and various nonbanking subsidiaries, we provide a broad array of banking and nonbanking products and services to individuals and businesses through approximately 280 banking offices serving more than 150 communities. We organize our business into two reportable segments: Banking and Wealth Management. Our banking and wealth management activities are conducted predominantly in Wisconsin, Minnesota, and Illinois, and are primarily delivered through branch facilities in this tri-state area, as well as supplemented through loan production offices, supermarket branches, a customer service call center and 24-hour phone-banking services, an interstate Automated Teller Machine (ATM) network, and internet banking services. See also Note 19, “Segment Reporting,” of the notes to consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data.” As disclosed in Note 19, the banking segment represented 91% of total revenues in 2010. Our profitability is significantly dependent on net interest income, noninterest income, the level of the provision for loan losses, noninterest expense, and related income taxes of our banking segment.

Banking consists of lending and deposit gathering (as well as other banking-related products and services) to businesses, governments, and consumers, and the support to deliver, fund, and manage such banking services. We offer a variety of loan and deposit products to retail customers, including but not limited to: home equity loans and lines of credit, residential mortgage loans and mortgage refinancing, education loans, personal and installment loans, checking, savings, money market deposit accounts, IRA accounts, certificates of deposit, and safe deposit boxes. As part of our management of originating and servicing residential mortgage loans, the majority of our long-term, fixed-rate residential real estate mortgage loans are sold in the secondary market with servicing rights retained. Loans, deposits, and related banking services to businesses (including small and larger businesses, governments/municipalities, metro or niche markets, and companies with specialized lending needs such as floor plan lending or asset-based lending) primarily include, but are not limited to: business checking and other business deposit products, business loans, lines of credit, commercial real estate financing, construction loans, letters of credit, revolving credit arrangements, and to a lesser degree, business credit cards and equipment and machinery leases. To further support business customers and correspondent financial institutions, we provide safe deposit and night depository services, cash management, international banking, as well as check clearing, safekeeping, and other banking-based services.

Lending involves credit risk. Credit risk is controlled and monitored through active asset quality management including the use of lending standards, the thorough review of potential borrowers in our underwriting process, and active asset quality administration. Credit risk management is discussed under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” sections “Critical Accounting Policies,” “Loans,” “Allowance for Loan Losses,” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned,” and under Part II, Item 8, Note 1, “Summary of Significant Accounting Policies,” and Note 3, “Loans,” of the notes to consolidated financial statements. Also see Item 1A, “Risk Factors.”

The wealth management segment provides products and a variety of fiduciary, investment management, advisory and corporate agency services to assist customers in building, investing, or protecting their wealth. Customers include individuals, corporations, small businesses, charitable trusts, endowments, foundations, and institutional investors. The wealth management segment is comprised of a full range of personal and business insurance products and services (including life, property, casualty, credit and mortgage insurance, fixed annuities, and employee group benefits consulting and administration); full-service investment brokerage, variable annuities, and discount and on-line brokerage; and trust/asset management, investment management, administration of pension, profit-sharing and other employee benefit plans, personal trusts, and estate planning. See also Note 19, “Segment Reporting,” of the notes to consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data.” As disclosed in Note 19, the wealth management segment represented 10% of total revenues in 2010, as defined in the note.

We are not dependent upon a single or a few customers, the loss of which would have a material adverse effect on us. No material portion of our business is seasonal.

Employees

At December 31, 2010, we had approximately 4,894 full-time equivalent employees. None of our employees are represented by unions.

Competition

The financial services industry is highly competitive. We compete for loans, deposits, and financial services in all of our principal markets. We compete directly with other bank and nonbank institutions located within our markets, internet-based banks, with out-of-market banks and bank holding companies that advertise or otherwise serve our markets, money market and other mutual funds, brokerage houses, and various other financial institutions. Additionally, we compete with insurance companies, leasing companies, regulated small loan companies, credit unions, governmental agencies, and commercial entities offering financial services products. Competition involves efforts to retain current customers and to obtain new loans and deposits, the scope and type of services offered, interest rates paid on deposits and charged on loans, as well as other aspects of banking. We also face direct competition from members of bank holding company systems that have greater assets and resources than ours.

Supervision and Regulation

Financial institutions are highly regulated both at the federal and state levels. Numerous statutes and regulations affect the business of the Corporation.

As a registered bank holding company under the BHC Act, we are regulated and supervised by the FRB. In addition, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Act (the “Dodd-Frank Act”), the Federal Deposit Insurance Corporation (the “FDIC”) has backup enforcement authority over a depository institution holding company, such as the Corporation, if the conduct or threatened conduct of such holding company poses a risk to the Deposit Insurance Fund (“DIF”), although such authority may not be used if such holding company is generally in sound condition and does not pose a foreseeable and material risk to the DIF. Associated Bank and our nationally chartered trust subsidiary are regulated, supervised and examined by the Office of the Comptroller of the Currency (the “OCC”). The OCC has extensive supervisory and regulatory authority over the operations of the Corporation’s national bank subsidiaries. As part of this authority, the national bank subsidiaries are required to file periodic reports with the OCC and are subject to supervision and examination by the OCC. All of our subsidiaries that accept insured deposits are also subject to examination by the FDIC.

Capital Requirements

We are subject to various regulatory capital requirements administered by the federal banking agencies noted above. Failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (described below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting policies. Our capital amounts and classification are also subject to judgments by the regulators regarding qualitative components, risk weightings, and other factors. We have consistently maintained regulatory capital ratios at or above the well capitalized standards. For further detail on capital and capital ratios see discussion under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” sections, “Liquidity” and “Capital,” and under Part II, Item 8, Note 17, “Regulatory Matters,” of the notes to consolidated financial statements.

Under the risk-based capital requirements for bank holding companies, the minimum requirement for the ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) is 8%. At least half of the total capital (as defined below) is to be composed of common stockholders’ equity, retained earnings, qualifying perpetual preferred stock (in a limited amount in the case of cumulative preferred stock), minority interests in the equity accounts of consolidated subsidiaries, and qualifying trust preferred securities, less goodwill and certain intangibles (“Tier 1 Capital”). The remainder of total capital may consist of qualifying subordinated debt and redeemable preferred stock, qualifying cumulative perpetual preferred stock

and allowance for loan losses (“Tier 2 Capital”, and together with Tier 1 Capital, “Total Capital”). At December 31, 2010, our Tier 1 Capital ratio was 17.58% and Total Capital ratio was 19.05%.

The Federal Reserve has established minimum leverage ratio guidelines for bank holding companies. These requirements provide for a minimum leverage ratio of Tier 1 Capital to adjusted average quarterly assets (“Leverage Ratio”) equal to 3% for bank holding companies that meet specified criteria, including having the highest regulatory rating. All other bank holding companies will generally be required to maintain a leverage ratio of at least 4%. Our Leverage Ratio at December 31, 2010, was 11.19%. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the guidelines indicate that the Federal Reserve will continue to consider a “tangible tier 1 leverage ratio” (deducting all intangibles) in evaluating proposals for expansion or to engage in new activity. On April 6, 2010, the Corporation entered into a Memorandum of Understanding (“Memorandum”) with the Federal Reserve Bank of Chicago (“Reserve Bank”). The Memorandum, which was entered into following the 2008-2009 supervisory cycle, is an informal agreement between the Corporation and the Reserve Bank. As required, management has submitted plans to strengthen board and management oversight and risk management and for maintaining sufficient capital incorporating stress scenarios. As also required, the Corporation has submitted quarterly progress reports, and has obtained, and will in the future continue to obtain, approval prior to payment of dividends and interest or principal payments on subordinated debt, increases in borrowings or guarantees of debt, or the repurchase of common stock. The FRB and the Reserve Bank have not advised us of any specific minimum leverage ratio or tier 1 leverage ratio applicable to us.

The Dodd-Frank Act prohibits insured depository institutions and their holding companies from engaging in proprietary trading except in limited circumstances, and prohibits them from owning equity interests in excess of three percent (3%) of a bank’s Tier 1 Capital in private equity and hedge funds. The Federal Reserve released a final rule on February 9, 2011 (effective on April 1, 2011) which requires a “banking entity,” a term that is defined to include bank holding companies like the Corporation, to bring its proprietary trading activities and investments into compliance with the Dodd-Frank Act restrictions no later than two years after the earlier of: (1) July 21, 2012, or (2) 12 months after the date on which interagency final rules are adopted. Pursuant to the compliance date final rule, banking entities are permitted to request an extension of this timeframe from the Federal Reserve. The Corporation will be reviewing the implications of the interagency rules on its investments once those rules are issued and will plan for any adjustments of its activities or its holdings in order to be in compliance by this announced compliance date.

Our commercial national bank subsidiary is subject to similar capital requirements adopted by the OCC. The risk-based capital requirements identify concentrations of credit risk and certain risks arising from non-traditional activities, and the management of those risks, as important factors to consider in assessing an institution’s overall capital adequacy. Other factors taken into consideration by federal regulators include: interest rate exposure; liquidity, funding and market risk; the quality and level of earnings; the quality of loans and investments; the effectiveness of loan and investment policies; and management’s overall ability to monitor and control financial and operational risks, including the risks presented by concentrations of credit and non-traditional activities.

On November 5, 2009, Associated Bank entered into a Memorandum of Understanding (“MOU”) with the OCC. The MOU, which is an informal agreement between the Bank and the OCC, requires the Bank to develop, implement, and maintain various processes to improve the Bank’s risk management of its loan portfolio and a three-year capital plan providing for maintenance of specified capital levels discussed below, notification to the OCC of dividends proposed to be paid to the Corporation, and the commitment of the Corporation to act as a primary or contingent source of the Bank’s capital. Management believes that it has appropriately addressed all of the conditions of the MOU. The Bank has also agreed with the OCC that until the MOU is no longer in effect, it will maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) — 8% and total capital to risk-weighted assets — 12%. At December 31, 2010, the Bank’s capital ratios were 9.55% and 16.38%, respectively.

Emergency Economic Stabilization Act of 2008

On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008 (“EESA”), giving the United States Department of the Treasury (“UST”) authority to take certain actions to restore liquidity and stability to the U.S. banking markets. Based upon its authority in the EESA, a number of programs were announced, including the following:

Capital Purchase Program (“CPP”). Pursuant to this program, the UST, on behalf of the US government, purchased senior preferred stock, along with warrants to purchase common stock, from certain financial institutions, including bank holding companies, savings and loan holding companies and banks or savings associations not controlled by a holding company. The investment has a dividend rate of 5% per year, until the fifth anniversary of the UST’s investment and a dividend of 9% thereafter. During the time the UST holds securities issued pursuant to this program, participating financial institutions are required to comply with (1) certain provisions regarding executive compensation paid to senior executives and certain other highly compensated employees, and (2) corporate governance disclosure and certification requirements. Participation in this program also imposes certain restrictions upon an institution’s dividends to common shareholders and stock repurchase activities. As described further herein, we elected to participate in the CPP and received $525 million pursuant to the program.

While any senior preferred stock is outstanding, we may pay dividends on our common stock, provided that all accrued and unpaid dividends for all past dividend periods on the senior preferred stock are fully paid. Prior to the third anniversary of the UST’s purchase of the senior preferred stock, unless the senior preferred stock has been redeemed or the UST has transferred all of the senior preferred stock to third parties, the consent of the UST will be required for us to increase our common stock quarterly dividend above $0.32 per share.

Temporary Liquidity Guarantee Program. This program contained both (1) a debt guarantee component (“Debt Guarantee Program”), whereby the FDIC guaranteed certain senior unsecured debt issued by eligible financial institutions; and (2) a transaction account guarantee (“TAG”) component (“TAG Program”), whereby the FDIC insured 100% of noninterest-bearing deposit transaction accounts held at eligible financial institutions, such as payment processing accounts, payroll accounts and working capital accounts. This program is no longer in effect, as the Dodd-Frank Act requires all insured financial institutions, such as Associated Bank, to provide noninterest-bearing deposit transaction accounts with full deposit insurance without limit through December 31, 2012. This coverage is separate from, and in addition to, coverage a depositor has with respect to other accounts at an insured depository institution. Such accounts include only traditional, noninterest demand deposit (or checking) accounts that allow for an unlimited number of transfers and withdrawals at any time, whether held by a business, individual or other type of depositor. Although not encompassed within the Dodd-Frank Act, Interest on Lawyers Trust Accounts were subsequently included by Congress in late 2010 and will also receive full deposit insurance until December 31, 2012. Negotiated Order of Withdrawal (“NOW”) accounts are not provided with this coverage. Insured financial institutions are not permitted to opt out of this insurance program and the FDIC will not charge a separate DIF assessment for this coverage.

FDIC Liquidation Authority under the Dodd-Frank Act

In January 2011, the FDIC issued an interim final rule on depositor preference which clarifies how the FDIC will treat certain creditors’ claims under the FDIC’s new liquidation authority under the Dodd-Frank Act, whereby the FDIC may be appointed as receiver for a financial company if the failure of such company and its liquidation under the Bankruptcy Code or other insolvency proceeding would pose significant risks to U.S. financial stability. Pursuant to the interim final rule, the FDIC will allow additional payments to a creditor in rare circumstances after the FDIC’s board of directors has determined that such payments meet certain statutory standards. The payments would be subject to recoupment, however, if the ultimate recoveries are insufficient to repay any temporary government-provided liquidity support. The interim final rule also (1) provides the FDIC with authority to continue a company’s operations by paying for services provided by employees and others; (2) clarifies how damages will be calculated for creditors’ contingent claims; and (3) describes the application of proceeds from the liquidation of subsidiaries.

Banking Acquisitions

As a bank holding company, we are required to obtain prior Federal Reserve approval before acquiring more than 5% of the voting shares, or substantially all of the assets, of a bank holding company, bank or savings association. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act (“CRA”).

Banking Subsidiary Dividends

The Parent Company is a legal entity separate and distinct from its banking and other subsidiaries. A substantial portion of its revenue comes from dividends paid to us by Associated Bank. As discussed under section, “Capital Requirements,” above, the terms of the MOU require the Bank to notify the OCC of dividends proposed to be paid to the Parent Company. Prior to entering into the MOU, the OCC’s prior approval was required only if the total of all dividends declared by a national bank in any calendar year exceeded the sum of that bank’s net profits for that year and its retained net profits for the preceding two calendar years, less any required transfers to surplus. Federal law also prohibits national banks from paying dividends that would be greater than the bank’s undivided profits after deducting statutory bad debt in excess of the bank’s allowance for loan losses.

In addition, we and our banking subsidiary are subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The appropriate federal regulatory authority is authorized to determine under certain circumstances relating to the financial condition of a bank or bank holding company that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. The appropriate federal regulatory authorities have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings.

Bank Holding Company Act Requirements

We are a registered bank holding company under the BHC Act. As a registered bank holding company, we are subject to regulation, supervision and examination by the Federal Reserve. In connection with applicable requirements, bank holding companies file periodic reports and other information with the Federal Reserve. In addition to supervision and regulation, the BHC Act also governs the activities that are permissible to bank holding companies and their affiliates and permits the Federal Reserve, in certain circumstances, to issue cease and desist orders and other enforcement actions against bank holding companies and their non-banking affiliates to correct and curtail unsafe or unsound banking practices. Under the Dodd-Frank Act and longstanding Federal Reserve Policy, bank holding companies are required to act as a source of financial strength to each of their subsidiaries pursuant to which such holding company may be required to commit financial resources to support such subsidiaries in circumstances when, absent such requirements, they might not otherwise do so. In addition, bank holding companies are generally prohibited from acquiring direct or indirect ownership or control of more than 5% of any class of voting shares of any corporation that is not a bank or bank holding company. The BHC Act also requires the prior approval of the FRB to enable bank holding companies to acquire direct or indirect ownership or control of more than 5% of any class of voting shares of any bank or bank holding company (as discussed above under Banking Acquisitions). The BHC Act further regulates holding company activities, including requirements and limitations relating to capital, transactions with officers, directors and affiliates, securities issuances, dividend payments, inter-affiliate liabilities, extensions of credit, and expansion through mergers and acquisitions.

The Gramm-Leach-Bliley Act of 1999 significantly amended the BHC Act. The amendments, among other things, allow certain qualifying bank holding companies that elect treatment as “financial holding companies” to engage in activities that are financial in nature and that explicitly include the underwriting and sale of insurance. The Parent Company thus far has not elected to be treated as a financial holding company. Bank holding companies that have

not elected such treatment generally must limit their activities to banking activities and activities that are closely related to banking.

Incentive Compensation Policies and Restrictions

In July 2010, the federal banking agencies issued guidance which applies to all banking organizations supervised by the agencies (thereby including both the Corporation and our subsidiary bank). Pursuant to the guidance, to be consistent with safety and soundness principles, a banking organization’s incentive compensation arrangements should: (1) provide employees with incentives that appropriately balance risk and reward; (2) be compatible with effective controls and risk management; and (3) be supported by strong corporate governance including active and effective oversight by the banking organization’s board of directors. Monitoring methods and processes used by a banking organization should be commensurate with the size and complexity of the organization and its use of incentive compensation.

In addition, on February 7, 2011, the federal banking agencies, along with the National Credit Union Administration, the SEC and the Federal Housing Finance Agency, published for comment a proposed rule that would regulate incentive-based compensation for entities deemed to be a “covered financial institution”, which would include both the Corporation and our subsidiary bank. These proposed rules incorporate many of the executive compensation principles described above, including a prohibition on compensation practices that encourage covered persons to take inappropriate risks by providing such person with excessive compensation. Comments are due within 45 days of publication in the Federal Register.

Enforcement Powers of the Federal Banking Agencies; Prompt Corrective Action

The federal regulatory authorities have broad authority to enforce the regulatory requirements imposed on us. The OCC has extensive supervisory authority over its regulated institutions. This authority includes, among other things, the power to compel higher reserves, the ability to assess civil money penalties, the ability to issue cease-and-desist or removal orders and the ability to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations or for unsafe or unsound banking practices. Other actions or inactions by our subsidiary bank may provide the basis for enforcement action, including misleading or untimely reports. The provisions of the Federal Deposit Insurance Act (“FDIA”), and its implementing regulations carry greater enforcement powers. Under the FDIA, all commonly controlled FDIC insured depository institutions may be held liable for any loss incurred by the FDIC resulting from a failure of, or any assistance given by the FDIC to, any commonly controlled institutions.

Federal banking regulators are authorized and, under certain circumstances, required to take certain actions against banks that fail to meet their capital requirements. The federal banking agencies have additional enforcement authority with respect to undercapitalized depository institutions. Under the regulations, an institution is deemed to be (a) “well capitalized” if it has total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio of 6.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and is not subject to any order or final capital directive to meet and maintain a specific capital level for any capital measure; (b) “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0% or more and a Tier 1 leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of well capitalized; (c) “undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less than 4.0% or a Tier 1 leverage capital ratio that is less than 4.0% (3.0% under certain circumstances); (d) “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 3.0% or a Tier 1 leverage capital ratio that is less than 3.0%; and (e) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.

In certain situations, a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized or undercapitalized institution to comply with supervisory actions as if the institution were in the next lower category.

Well capitalized institutions may generally operate without supervisory restriction. With respect to “adequately capitalized” institutions, such banks cannot normally pay dividends or make any capital contributions that would leave it undercapitalized; they cannot pay a management fee to a controlling person if, after paying the fee, it would

be undercapitalized; and they cannot accept, renew or roll over any brokered deposit unless the bank has applied for and been granted a waiver by the FDIC. Once an adequately capitalized institution receives such a waiver, it may not pay an effective yield on any such deposit that exceeds by more than 75 basis points the local market rate or the national rate (which is determined and published by the FDIC and defined to be the “simple average of rates paid by all insured depository institutions and branches for which data are available”). As such, a less-than-well-capitalized institution that has received a waiver from the FDIC to accept, renew and rollover brokered deposits generally may not pay an interest rate on such brokered deposits in excess of the national rate plus 75 basis points.

The federal banking agencies are required to take action to restrict the activities of an “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized” insured depository institution. Any such bank must submit a capital restoration plan that is guaranteed by the parent holding company. Until such plan is approved, it may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions.

Any institution that fails to comply with its capital plan or is “significantly undercapitalized” (i.e., Tier 1 risk-based or core capital ratios of less than 3% or a risk-based capital ratio of less than 6%) must be made subject to one or more of additional specified actions and operating restrictions mandated by the Federal Deposit Insurance Corporation Improvement Act of 1991. These actions and restrictions include requiring the issuance of additional voting securities, limitations on asset growth; mandated asset reduction; changes in senior management; divestiture, merger or acquisition of the association; restrictions on executive compensation; and any other action the appropriate federal banking agency deems appropriate. An institution that becomes “critically undercapitalized” is subject to further mandatory restrictions on its activates in addition to those applicable to significantly undercapitalized associations. In addition, the appropriate banking regulator must appoint a receiver (or conservator with the FDIC’s concurrence) for an institution, with certain limited exceptions, within 90 days after it becomes critically undercapitalized. Any undercapitalized institution is also subject to other possible enforcement actions, including the appointment of a receiver or conservator. The appropriate regulator is also generally authorized to reclassify an institution into a lower capital category and impose restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

Institutions must file a capital restoration plan with the OCC within 45 days of the date it receives a notice from the OCC that it is “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” Compliance with a capital restoration plan must be guaranteed by a parent holding company. In addition, the OCC is permitted to take any one of a number of discretionary supervisory actions, including but not limited to the issuance of a capital directive and the replacement of senior executive officers and directors.

Finally, bank regulatory agencies have the ability to seek to impose higher than normal capital requirements known as individual minimum capital requirement (“IMCR”) for institutions with a high-risk profile.

At this time, the Bank is well capitalized. The imposition of any of the measures described above could have a substantial and material adverse effect on the Corporation and on its profitability and operations. The Corporation’s shareholders do not have preemptive rights and, therefore, if the Corporation is directed by the OCC or the FDIC to issue additional shares of common stock, such issuance may result in dilution in shareholders’ percentage of ownership of the Corporation.

Standards for Safety and Soundness

The federal banking agencies have adopted the Interagency Guidelines for Establishing Standards for Safety and Soundness. The Guidelines establish certain safety and soundness standards for all depository institutions. The operational and managerial standards in the Guidelines relate to the following: (1) internal controls and information systems; (2) internal audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate exposure; (6) asset growth; (7) compensation, fees and benefits; (8) asset quality; and (9) earnings. Rather than providing specific rules, the Guidelines set forth basic compliance considerations and guidance with respect to a depository institution. Failure to meet the standards in the Guidelines, however, could result in a request by the OCC to one of the nationally chartered banks to provide a written compliance plan to demonstrate its efforts to come into

compliance with such Guidelines. Failure to provide a plan or to implement a provided plan requires the appropriate federal banking agency to issue an order to the institution requiring compliance.

Interstate Branching

Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (“Riegle-Neal Act”), an adequately capitalized and managed bank holding company may acquire banks in states other than its home state without regard to the permissibility of such acquisitions under state law, but remain subject to state requirements that a bank has been organized and operating for a period of time. Subject to certain other restrictions, the Riegle-Neal Act also authorizes banks to merge across state lines to create interstate branches. The Riegle-Neal Amendments Act of 1997 and the Regulatory Relief Act of 2006 provides further guidance on the application of host state laws to any branch located outside the host state.

Deposit Insurance Premiums

Associated Bank is a member of the DIF and pays an insurance premium to the fund based upon its assessable deposits on a quarterly basis. Deposits are insured up to applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government.

Under the Dodd-Frank Act, a permanent increase in deposit insurance was authorized to $250,000 (insurance coverage had previously been temporarily raised to that level until December 31, 2013). The coverage limit is per depositor, per insured depository institution for each account ownership category.

The Dodd-Frank Act also set a new minimum DIF reserve ratio at 1.35% of estimated insured deposits. The FDIC is required to attain this ratio by September 30, 2020. In addition, the Dodd-Frank Act will have a significant impact on the calculation of deposit insurance assessment premiums going forward. Specifically, the Dodd-Frank Act generally requires the FDIC to define the deposit insurance assessment base for an insured depository institution as an amount equal to the institution’s average consolidated total assets during the assessment period minus average tangible equity. The FDIC issued a final rule that implements this change to the assessment calculation on February 7, 2011, but has said that the new assessment rate schedule should result in the collection of assessment revenue that is approximately revenue neutral even though the new assessment base under the Dodd-Frank Act is larger than the current assessment base. The assessment rate schedule for larger institutions like the Bank (i.e., institutions with at least $10 billion in assets) will differentiate between such large institutions by use of a “scorecard” that combines an institution’s CAMELS ratings with certain forward-looking financial information to measure the risk to the DIF. Pursuant to this “scorecard” method, two scores (a performance score and a loss severity score) will be combined and converted to an initial base assessment rate. The performance score measures an institution’s financial performance and ability to withstand stress. The loss severity score measures the relative magnitude of potential losses to the FDIC in the event of the institution’s failure. Total scores are converted pursuant to a predetermined formula into an initial base assessment rate. Assessment rates range from 2.5 basis points to 45 basis points for such large institutions. This rule will take effect for the quarter beginning April 1, 2011, and will be reflected in the June 30, 2011 fund balance and the invoices for assessments due September 30, 2011. Premiums for the Bank will be calculated based upon the average balance of total assets minus average tangible equity as of the close of business for each day during the calendar quarter.

The proposed FDIC rule also provides the FDIC’s board with the flexibility to adopt actual rates that are higher or lower than the total base assessment rates adopted without notice and comment, if certain conditions are met.

Currently, the amount of the assessment is a function of the institution’s risk category, of which there are four, and assessment base. An institution’s risk category is determined according to its supervisory ratings and capital levels and is used to determine the institution’s assessment rate. The assessment rate for risk categories are calculated according to a formula, which relies on supervisory ratings and either certain financial ratios or long-term debt ratings. An insured bank’s assessment base is determined by the balance of its insured deposits. Because the system is risk-based, it allows banks to pay lower assessments to the FDIC as their capital level and supervisory ratings improve. By the same token, if these indicators deteriorate, the institution will have to pay higher assessments to the FDIC. As of the date of this filing, deposit insurance premiums for FDIC-insured institutions range from 7 to 77.5 basis points per $100 of assessable deposits based upon assessment rates that are calculated based upon an

institution’s levels of unsecured debt, secured liabilities, and brokered deposits. At December 31, 2010, Associated Bank’s risk category required a quarterly payment of approximately 24 basis points per $100 of assessable deposits.

Under the FDIA, the FDIC Board has the authority to set the annual assessment rate range for the various risk categories within certain regulatory limits and to impose special assessments upon insured depository institutions when deemed necessary by the FDIC’s Board. The FDIC imposed an emergency special assessment on June 30, 2009, which was collected on September 30, 2009. In addition, in September 2009, the FDIC extended the Restoration Plan period to eight years. On November 12, 2009, the FDIC adopted a final rule requiring prepayment of 13 quarters of FDIC premiums. Our required prepayment aggregated $103.4 million in December 2009.

DIF-insured institutions pay a Financing Corporation (“FICO”) assessment in order to fund the interest on bonds issued in the 1980s in connection with the failures in the thrift industry. For the fourth quarter of 2010, the FICO assessment is equal to 1.040 basis points for each $100 in domestic deposits. These assessments will continue until the bonds mature in 2019.

The FDIC is authorized to conduct examinations of and require reporting by FDIC-insured institutions. It is also authorized to terminate a depository bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the bank’s regulatory agency. The termination of deposit insurance for our national bank subsidiary would have a material adverse effect on our earnings, operations and financial condition.

Interagency Appraisal and Evaluation Guidelines

In December 2010, the federal banking agencies issued the Interagency Appraisal and Evaluation Guidelines. This guidance, which updated guidance originally issued in 1994, sets forth the minimum regulatory standards for appraisals. It incorporates previous regulatory issuances affecting appraisals, addresses advances in information technology used in collateral evaluation, and clarifies standards for use of analytical methods and technological tools in developing evaluations. This guidance also requires institutions to utilize strong internal controls to ensure reliable appraisals and evaluations and to monitor and periodically update valuations of collateral for existing real estate loans and transactions.

S.A.F.E. Act Registration Requirements

In connection with implementation of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, the federal banking agencies announced final rules in July 2010 to implement the provisions of the SAFE Act requiring employees of agency-related institutions to register with the Nationwide Mortgage Licensing System and Registry, a database created by the states to support the licensing of mortgage loan originators. Residential mortgage loan originators must register prior to originating residential mortgage loans. The OCC announced that registration is expected to begin in late January 2011. National bank employees affected by the SAFE Act will have 180 days from the date of the OCC’s announcement to register.

Community Reinvestment Act Requirements

Our national bank subsidiary is subject to periodic CRA review by our primary federal regulators. The CRA does not establish specific lending requirements or programs for financial institutions and does not limit the ability of such institutions to develop products and services believed best-suited for a particular community. Note that an institution’s CRA assessment can be used by its regulators in their evaluation of certain applications, including a merger or the establishment of a branch office. An unsatisfactory rating may be used as the basis for denial of such application.

Associated Bank underwent a CRA examination by the Comptroller of the Currency on November 20, 2006, for which it received a Satisfactory rating.

Privacy

Financial institutions, such as our national bank subsidiary, are required by statute and regulation to disclose its privacy policies. In addition, such financial institutions must appropriately safeguard its customers’ nonpublic, personal information.

Anti-Money Laundering

In 2001, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”). The Patriot Act is designed to deny terrorists and criminals the ability to obtain access to the United States’ financial system and has significant implications for depository institutions, brokers, dealers, and other businesses involved in the transfer of money. The Patriot Act mandates financial services companies to implement additional policies and procedures with respect to additional measures designed to address any or all of the following matters: customer identification programs, money laundering, terrorist financing, identifying and reporting suspicious activities and currency transactions, currency crimes, and cooperation between financial institutions and law enforcement authorities.

Department of Defense Credit Regulations

On October 1, 2007, the United States Department of Defense (the “DOD”) regulations implementing the John Warner National Defense Authorization Act for fiscal year 2007 became effective. The regulations impose certain restrictions on provisions found in agreements for consumer credit products provided to “covered borrowers” (generally defined as active duty service members and their dependents) by “creditors”, which term includes our national bank subsidiary. The regulations impose a new Military Annual Percentage Rate (“MAPR”) that must be calculated and provided to covered borrowers. The MAPR is capped at 36%.

Transactions with Affiliates

Our national bank subsidiary must comply with Sections 23A and 23B of the Federal Reserve Act containing certain restrictions on its transactions with affiliates. In general terms, these provisions require that transactions between a banking institution or its subsidiaries and such institution’s affiliates be on terms as favorable to the institution as transactions with non-affiliates. In addition, these provisions contain certain restrictions on loans to affiliates, restricting such loans to a percentage of the institution’s capital. A covered “affiliate,” for purposes of these provisions, would include us and any other company that is under our common control.

The Dodd-Frank Act also changed the definition of “covered transaction” in Sections 23A and 23B and limitations on asset purchases from insiders. With respect to the definition of “covered transaction,” the Dodd-Frank Act defines that term to include the acceptance of debt obligations issued by an affiliate as collateral for a bank’s loan or extension of credit to another person or company. In addition, a “derivative transaction” with an affiliate is now deemed to be a “covered transaction” to the extent that such a transaction causes a bank or its subsidiary to have a credit exposure to the affiliate. A separate provision of the Dodd-Frank Act states that an insured depository institution may not “purchase an asset from, or sell an asset to” a bank insider (or their related interests) unless (1) the transaction is conducted on market terms between the parties, and (2) if the proposed transaction represents more than 10 percent of the capital stock and surplus of the insured institution, it has been approved in advance by a majority of the institution’s non-interested directors.

Certain transactions with our directors, officers or controlling persons are also subject to conflicts of interest regulations. Among other things, these regulations require that loans to such persons and their related interests be made on terms substantially the same as for loans to unaffiliated individuals and must not create an abnormal risk of repayment or other unfavorable features for the financial institution. See Note 3, “Loans,” of the notes to consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for additional information on loans to related parties.

Other Regulation

Our banking subsidiary is also subject to a variety of other regulations with respect to the operation of its businesses, including but not limited to the Dodd-Frank Act, the Truth in Lending Act, the Truth in Savings Act, the Equal Credit Opportunity Act, the Electronic Funds Transfer Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, Expedited Funds Availability (Regulation CC), Reserve Requirements (Regulation D), Insider Transactions (Regulation O), Privacy of Consumer Information (Regulation P), Interest Prohibition on Demand Deposits (Regulation Q), Margin Stock Loans (Regulation U), Right To Financial Privacy Act, Flood Disaster Protection Act, Homeowners Protection Act, Servicemembers Civil Relief Act, Real Estate Settlement Procedures Act, Telephone Consumer Protection Act, CAN-SPAM Act, and Children’s Online Privacy Protection Act.

The laws and regulations to which we are subject are constantly under review by Congress, the federal regulatory agencies, and the state authorities. These laws and regulations could be changed drastically in the future, which could affect our profitability, our ability to compete effectively, or the composition of the financial services industry in which we compete.

Government Monetary Policies and Economic Controls

Our earnings and growth, as well as the earnings and growth of the banking industry, are affected by the credit policies of monetary authorities, including the FRB. An important function of the Federal Reserve is to regulate the national supply of bank credit in order to combat recession and curb inflationary pressures. Among the instruments of monetary policy used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, changes in reserve requirements against member bank deposits, and changes in the Federal Reserve discount rate. These means are used in varying combinations to influence overall growth of bank loans, investments, and deposits, and may also affect interest rates charged on loans or paid for deposits. The monetary policies of the Federal Reserve authorities have had a significant effect on the operating results of commercial banks in the past and are expected to continue to have such an effect in the future.

In view of changing conditions in the national economy and in money markets, as well as the effect of credit policies by monetary and fiscal authorities, including the Federal Reserve, no prediction can be made as to possible future changes in interest rates, deposit levels, and loan demand, or their effect on our business and earnings or on the financial condition of our various customers.

Other Regulatory Authorities

In addition to regulation, supervision and examination by federal banking agencies, the Corporation and certain of its subsidiaries, including those that engage in securities brokerage, dealing and investment advisory activities, are subject to other federal and state securities laws and regulations, and to supervision and examination by other regulatory authorities, including the Securities and Exchange Commission, the Financial Institution Regulatory Authority (“FINRA”), the NASDAQ Global Select Market and others.

Available Information

We file annual, quarterly, and current reports, proxy statements, and other information with the SEC. These filings are available to the public on the Internet at the SEC’s web site at www.sec.gov. Shareholders may also read and copy any document that we file at the SEC’s public reference rooms located at 100 F Street, NE, Washington, DC 20549. Shareholders may call the SEC at 1-800-SEC-0330 for further information on the public reference room.

Our principal Internet address is www.associatedbank.com. We make available free of charge on or through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition, shareholders may request a copy of any of our filings (excluding exhibits) at no cost by writing, telephoning, faxing, or e-mailing us using the following information: Associated Banc-Corp, Attn: Shareholder Relations, 1200 Hansen Road, Green Bay, WI 54304; phone 920-431-8034; fax 920-431-8037; or e-mail to shareholders@associatedbank.com. Our Code of Ethics for

Directors and Executive Officers, Corporate Governance Guidelines, and Board of Directors committee charters are all available on our website, www.associatedbank.com/About Us/Investor Relations/Corporate Governance. We will disclose on our website amendments to or waivers from our Code of Ethics in accordance with all applicable laws and regulations. Information contained on any of our websites is not deemed to be a part of this Annual Report.


ITEM 1A.	RISK FACTORS

An investment in our common stock is subject to risks inherent to our business. The material risks and uncertainties that management believes affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below, together with all of the other information included or incorporated by reference herein. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair our business operations. This report is qualified in its entirety by these risk factors. See also, “Special Note Regarding Forward-Looking Statements.”

If any of the following risks actually occur, our financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our common stock could decline significantly, and you could lose all or part of your investment.

Credit Risks

We are subject to lending concentration risks. As of December 31, 2010, approximately 55% of our loan portfolio consisted of commercial and industrial, real estate construction, commercial real estate loans, and lease financing (collectively, “commercial loans”). Commercial loans are generally viewed as having more inherent risk of default than residential mortgage loans or retail loans. Also, the commercial loan balance per borrower is typically larger than that for residential mortgage loans and retail loans, inferring higher potential losses on an individual loan basis. Because our loan portfolio contains a number of commercial loans with balances over $25 million, the deterioration of one or a few of these loans could cause a significant increase in nonaccrual loans. An increase in nonaccrual loans could result in a loss of interest income from these loans, an increase in the provision for loan losses, and an increase in loan charge offs, all of which could have a material adverse effect on our financial condition and results of operations.

Changes in economic and political conditions could adversely affect our earnings, as our borrowers’ ability to repay loans and the value of the collateral securing our loans decline. Our success depends, to a certain extent, upon economic and political conditions, local and national, as well as governmental monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings. Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral. Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which could have an adverse impact on our earnings. Consequently, any decline in the economy in our market area could have a material adverse effect on our financial condition and results of operations.

Our allowance for loan losses may be insufficient. All borrowers carry the potential to default and our remedies to recover (seizure and/or sale of collateral, legal actions, guarantees, etc.) may not fully satisfy money previously lent. We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable credit losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The level of the allowance for loan losses reflects management’s continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political, and regulatory conditions; and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks using existing qualitative and quantitative information, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem

loans, and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of additional loan charge offs, based on judgments different than those of management. An increase in the allowance for loan losses results in a decrease in net income, and possibly risk-based capital, and may have a material adverse effect on our financial condition and results of operations.

We are subject to environmental liability risk associated with lending activities. A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Although we have policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

Lack of system integrity or credit quality related to funds settlement could result in a financial loss. We settle funds on behalf of financial institutions, other businesses and consumers and receive funds from clients, card issuers, payment networks and consumers on a daily basis for a variety of transaction types. Transactions facilitated by us include debit card, credit card and electronic bill payment transactions, supporting consumers, financial institutions and other businesses. These payment activities rely upon the technology infrastructure that facilitates the verification of activity with counterparties and the facilitation of the payment. If the continuity of operations or integrity of processing were compromised this could result in a financial loss to us due to a failure in payment facilitation. In addition, we may issue credit to consumers, financial institutions or other businesses as part of the funds settlement. A default on this credit by a counterparty could result in a financial loss to us.

Financial services companies depend on the accuracy and completeness of information about customers and counterparties. In deciding whether to extend credit or enter into other transactions, we may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports, and other financial information. We may also rely on representations of those customers, counterparties, or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports, or other financial information could cause us to enter into unfavorable transactions, which could have a material adverse effect on our financial condition and results of operations.

Operational Risks

Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. Our accounting policies are fundamental to understanding our financial results and condition. Some of these policies require use of estimates and assumptions that may affect the value of our assets or liabilities and financial results. Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses.

From time to time the Financial Accounting Standards Board (FASB) and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements. These changes are beyond our control, can be hard to predict and could materially impact how we report our results of operations and financial condition. We could be required to apply a new or revised standard retroactively, resulting in our restating prior period financial statements in material amounts.

Our internal controls may be ineffective. Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition.

Impairment of investment securities, goodwill, other intangible assets, or deferred tax assets could require charges to earnings, which could result in a negative impact on our results of operations. In assessing whether the impairment of investment securities is other-than-temporary, management considers the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain our investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. Under current accounting standards, goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. During 2010, the annual impairment test was completed and the fair value of the reporting units exceeded the fair value of their assets and liabilities. In the event that we conclude that all or a portion of our goodwill may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital. A decline in our stock price or occurrence of a triggering event following any of our quarterly earnings releases and prior to the filing of the periodic report for that period could, under certain circumstances, cause us to perform a goodwill impairment test and result in an impairment charge being recorded for that period which was not reflected in such earnings release. At December 31, 2010, we had goodwill of $929 million, representing approximately 29% of stockholders’ equity, of which $907 million was assigned to the banking segment and $22 million was assigned to the wealth management segment. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Assessing the need for, or the sufficiency of, a valuation allowance requires management to evaluate all available evidence, both negative and positive. Positive evidence necessary to overcome the negative evidence includes whether future taxable income in sufficient amounts and character within the carryback and carryforward periods is available under the tax law, including the use of tax planning strategies. When negative evidence (e.g., cumulative losses in recent years, history of operating loss or tax credit carryforwards expiring unused) exists, more positive evidence than negative evidence will be necessary. As a result of the pre-tax losses incurred during 2009 and 2010, the Corporation is in a cumulative pre-tax loss position for financial statement purposes for the three-year period ended December 31, 2010. If the positive evidence is not sufficient to exceed the negative evidence, a valuation allowance for deferred tax assets is established. At December 31, 2010, net deferred tax assets are approximately $129 million. The impact of each of these impairment matters could have a material adverse effect on our business, results of operations, and financial condition.

We may not be able to attract and retain skilled people. Our success depends, in large part, on our ability to attract and retain skilled people. Competition for the best people in most activities engaged in by us can be intense, and we may not be able to hire sufficiently skilled people or to retain them. The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of our markets, years of industry experience, and the difficulty of promptly finding qualified replacement personnel.

Loss of key employees may disrupt relationships with certain customers. Our business is primarily relationship-driven in that many of our key employees have extensive customer relationships. Loss of a key employee with such customer relationships may lead to the loss of business if the customers were to follow that employee to a competitor. While we believe our relationship with our key personnel is good, we cannot guarantee that all of our key personnel will remain with our organization. Loss of such key personnel, should they enter into an employment relationship with one of our competitors, could result in the loss of some of our customers.

Because the nature of the financial services business involves a high volume of transactions, we face significant operational risks. We operate in many different businesses in diverse markets and rely on the ability of our employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology,

breaches of the internal control system and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity. In the event of a breakdown in the internal control system, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action and suffer damage to our reputation.

We rely on other companies to provide key components of our business infrastructure. Third party vendors provide key components of our business infrastructure such as internet connections, network access and core application processing. While we have selected these third party vendors carefully, we do not control their actions. Any problems caused by these third parties, including as a result of their not providing us their services for any reason or their performing their services poorly, could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Replacing these third party vendors could also entail significant delay and expense.

Revenues from our investment management and asset servicing businesses are significant to our earnings. Generating returns that satisfy clients in a variety of asset classes is important to maintaining existing business and attracting new business. Administering or managing assets in accordance with the terms of governing documents and applicable laws is also important to client satisfaction. Failure in either of the foregoing areas can expose us to liability, and result in a decrease in our revenues and earnings.

Our information systems may experience an interruption or breach in security. We rely heavily on communications and information systems to conduct our business. Any failure, interruption, or breach in security or operational integrity of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems. While we have policies and procedures designed to prevent or limit the effect of the failure, interruption, or security breach of our information systems, we cannot assure you that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions, or security breaches of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

The potential for business interruption exists throughout our organization. Integral to our performance is the continued efficacy of our technical systems, operational infrastructure, relationships with third parties and the vast array of associates and key executives in our day-to-day and ongoing operations. Failure by any or all of these resources subjects us to risks that may vary in size, scale and scope. This includes, but is not limited to, operational or technical failures, ineffectiveness or exposure due to interruption in third party support as expected, as well as the loss of key individuals or failure on the part of key individuals to perform properly. Although management has established policies and procedures to address such failures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Legal/Compliance Risks

We are subject to extensive government regulation and supervision. We, primarily through Associated Bank and certain nonbank subsidiaries, are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds, and the banking system as a whole, not shareholders. These regulations affect our lending practices, capital structure, investment practices, dividend policy, and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes. Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we may offer, and/or increase the ability of nonbanks to offer competing financial services and products, among other things. Failure to comply with laws, regulations, or policies could result in sanctions by

regulatory agencies, civil money penalties, and/or reputation damage, which could have a material adverse effect on our business, financial condition, and results of operations. While we have policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.

The full impact of the recently enacted Dodd-Frank Act is currently unknown given that much of the details and substance of the new laws will be implemented through agency rulemakings. On July 21, 2010, the Dodd-Frank Act was signed into law. The Dodd-Frank Act represents a comprehensive overhaul of the financial services industry within the United States and requires federal agencies to adopt nearly 250 new rules and conduct more than 60 studies over the course of the next few years, ensuring that the federal regulations and implementing policies in these areas will continue to develop for the foreseeable future.

Significantly, the Dodd-Frank Act includes the following provisions which affect the Corporation or the Bank:

(1) it establishes the new Bureau of Consumer Financial Protection (“BCFP”) which will directly regulate and supervise the Bank for compliance with the BCFP’s regulations and policies. The creation of the BCFP will directly impact the scope and cost of products and services offered to consumers by the Bank and may have a significant effect on its financial performance.

(2) it revises the FDIC’s insurance assessment methodology so that premiums will be assessed based upon the average consolidated total assets of the Bank less tangible equity capital. It is expected that this change to the premium calculation will require larger insurance premium payments from FDIC-insured institutions such as the Bank.

(3) it permanently increases deposit insurance coverage to $250,000; in addition, for noninterest-bearing transaction accounts, such accounts will receive unlimited FDIC deposit insurance through January 1, 2013.

(4) it authorizes the Federal Reserve to set debit interchange fees in an amount that is “reasonable and proportional” to the costs incurred by processors and card issuers. Notably, a proposed Federal Reserve rule that would limit this interchange fee to 12 cents per transaction has been announced but, as of the date of publication, has not yet been finalized.

(5) it imposes proprietary trading restrictions on insured depository institutions and their holding companies that prohibit them from engaging in proprietary trading except in limited circumstances, and prevents them from owning equity interests in excess of three percent (3%) of a bank’s Tier 1 capital in private equity and hedge funds.

(6) it requires a phased-in exclusion of trust preferred securities as a component of Tier 1 capital for certain bank holding companies. Notably, preferred stock issued to the U.S. Treasury under the CPP is excluded from this calculation.

(7) it requires federal regulators to establish new minimum leverage and risk-based capital requirements for large banks, bank holding companies and systemically important non-banks. The federal banking agencies issued a proposal to implement this authority whereby the capital requirements applied to other insured depository institutions would not apply to the largest insured depository institutions, which had previously been permitted to use their own models to determine their individual risk-based capital requirements. Finally, the Dodd-Frank Act requires depository institution holding companies to act as a “source of strength” for their depository institution subsidiaries (previously, this had been a regulatory policy but was not codified into law).

Based on the text of the Dodd-Frank Act and the anticipated implementing regulations, including the Durbin amendment, it is anticipated that the costs to banks and their holding companies may increase or fee income may decrease significantly which could adversely affect the Corporation’s results of operations, financial condition or liquidity. Moreover, compliance obligations will expose us to additional noncompliance risk and could divert management’s focus from the business of banking.

The Bureau of Consumer Financial Protection may reshape the consumer financial laws through rulemaking and enforcement of the prohibitions against unfair, deceptive and abusive business practices, which may directly impact the business operations of depository institutions offering consumer financial products or services, including the Bank. The BCFP has broad rulemaking authority to administer and carry out the provisions of the

Dodd-Frank Act with respect to financial institutions that offer to consumers covered financial products and services. The BCFP has also been directed to write rules identifying practices or acts that are unfair, deceptive or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. The concept of what may be considered to be an “abusive” practice is new under the law. The full scope of the impact of this authority has not yet been determined as the implementing rules of the Dodd-Frank Act with respect to the BCFP have not yet been released. Moreover, the Bank will be supervised and examined by the BCFP for compliance with the BCFP’s regulations and policies. The costs and limitations related to this additional regulatory reporting regimen have yet to be fully determined, although they may be material and the limitations and restrictions that will be placed upon the Bank with respect to its consumer product offering and services will also likely produce significant, material effects on the Bank’s (and the Corporation’s) profitability.

Regulatory oversight has increased. On November 5, 2009, Associated Bank entered into a Memorandum of Understanding with the Comptroller of the Currency, its primary banking regulator. The MOU, which is an informal agreement between the Bank and the OCC, requires the Bank to develop, implement, and maintain various processes to improve the Bank’s risk management of its loan portfolio and a three-year capital plan providing for maintenance of specified capital levels discussed below, notification to the OCC of dividends proposed to be paid to us, and our commitment to act as a primary or contingent source of the Bank’s capital. Management believes that it has appropriately addressed all of the conditions of the MOU. The Bank has also agreed with the OCC that until the MOU is no longer in effect, to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) — 8% and total capital to risk-weighted assets — 12%. At December 31, 2010, the Bank’s capital ratios were 9.55% and 16.38%, respectively. As a result of the MOU, the Bank’s lending activities and capital levels are now subject to increased regulatory oversight. The terms of the MOU may affect our liquidity. In connection with the MOU, we committed to serve as a primary or contingent source of capital to the Bank to support the maintenance of the specified higher minimum capital ratios. The dollar amount of this commitment is uncertain at this time. On December 20, 2009, the Bank entered into a written agreement with the OCC requiring the Bank to take corrective action by May 4, 2010 (or such additional time as the OCC may permit), to avoid an order by the OCC requiring the Bank to divest its financial subsidiary which engages in insurance sales. We believe that the Bank has taken corrective steps by such date and it has not received an order of divestiture. We do not believe that a required divestiture of its financial subsidiary would have a material adverse effect on our financial condition or operations. On April 6, 2010, the Corporation entered into a Memorandum of Understanding (“Memorandum”) with the Federal Reserve Bank of Chicago (“Reserve Bank”), its primary banking regulator. The Memorandum, which was entered into with the Reserve Bank following the 2008-2009 supervisory cycle, is an informal agreement between the Corporation and the Reserve Bank. As required, management has submitted plans to strengthen board and management oversight and risk management and for maintaining sufficient capital incorporating stress scenarios. As also required, the Corporation has submitted quarterly progress reports, and has obtained, and will in the future continue to obtain, approval prior to payment of dividends and interest or principal payments on subordinated debt, increases in borrowings or guarantees of debt, or the repurchase of common stock. An action by any of our or the Bank’s regulators could lead to actions by our or the Bank’s other regulators.

We are subject to examinations and challenges by tax authorities. We are subject to federal and state income tax regulations. Income tax regulations are often complex and require interpretation. Changes in income tax regulations could negatively impact our results of operations. In the normal course of business, we are routinely subject to examinations and challenges from federal and state tax authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we have engaged. Recently, federal and state taxing authorities have become increasingly aggressive in challenging tax positions taken by financial institutions. These tax positions may relate to tax compliance, sales and use, franchise, gross receipts, payroll, property and income tax issues, including tax base, apportionment and tax credit planning. The challenges made by tax authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. If any such challenges are made and are not resolved in our favor, they could have a material adverse effect on our financial condition and results of operations.

We are subject to claims and litigation pertaining to fiduciary responsibility. From time to time, customers make claims and take legal action pertaining to the performance of our fiduciary responsibilities. Whether customer claims and legal action related to the performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services, as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

We are a defendant in a variety of litigation and other actions, which may have a material adverse effect on our financial condition and results of operation. We are a defendant in a class action lawsuit alleging that we unfairly assess and collect overdraft fees which seeks restitution of the overdraft fees, compensatory, consequential and punitive damages, and costs. This case has been consolidated into the overdraft fees Multi District Litigation pending in the United States District Court for the Southern District of Florida, Miami Division. We deny all claims and intend to vigorously defend our self. We may be involved from time to time in a variety of other litigation arising out of our business. Our insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on our financial condition and results of operation for any period. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.

External Risks

Our profitability depends significantly on economic conditions in the states within which we do business. Our success depends on the general economic conditions of the specific local markets in which we operate. Local economic conditions have a significant impact on the demand for our products and services, as well as the ability of our customers to repay loans, on the value of the collateral securing loans, and the stability of our deposit funding sources. A significant decline in general local economic conditions, caused by inflation, recession, unemployment, changes in securities markets, changes in housing market prices, or other factors could impact local economic conditions and, in turn, have a material adverse effect on our financial condition and results of operations.

The earnings of financial services companies are significantly affected by general business and economic conditions. Our operations and profitability are impacted by general business and economic conditions in the United States and abroad. These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, and the strength of the United States economy, all of which are beyond our control. A deterioration in economic conditions could result in an increase in loan delinquencies and nonperforming assets, decreases in loan collateral values, and a decrease in demand for our products and services, among other things, any of which could have a material adverse impact on our financial condition and results of operations.

Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies. The policies of the Federal Reserve impact us significantly. The Federal Reserve regulates the supply of money and credit in the United States. Its policies directly and indirectly influence the rate of interest earned on loans and paid on borrowings and interest-bearing deposits and can also affect the value of financial instruments we hold. Those policies determine to a significant extent our cost of funds for lending and investing. Changes in those policies are beyond our control and are difficult to predict. Federal Reserve policies can also affect our borrowers, potentially increasing the risk that they may fail to repay their loans. For example, a tightening of the money supply by the Federal Reserve could reduce the demand for a borrower’s products and services. This could adversely affect the borrower’s earnings and ability to repay its loan, which could have a material adverse effect on our financial condition and results of operation.

We operate in a highly competitive industry and market area. We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and internet banks within the various markets in which we

operate. We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory, and technological changes and continued consolidation. Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Also, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.

Our ability to compete successfully depends on a number of factors, including, among other things:


	•	the ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets;

	•	the ability to expand our market position;

	•	the scope, relevance, and pricing of products and services offered to meet customer needs and demands;

	•	the rate at which we introduce new products and services relative to our competitors;

	•	customer satisfaction with our level of service; and

	•	industry and general economic trends.

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Consumers may decide not to use banks to complete their financial transactions. Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

Severe weather, natural disasters, acts of war or terrorism, and other external events could significantly impact our business. Severe weather, natural disasters, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. Although management has established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Strategic Risks

Our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. Our business strategy includes significant growth plans. We intend to continue pursuing a profitable growth strategy. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in significant growth stages of development. We cannot assure you that we will be able to expand our market presence in our existing markets or successfully enter new markets or that any such expansion will not adversely affect our results of operations. Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations and

could adversely affect our ability to successfully implement our business strategy. Also, if we grow more slowly than anticipated, our operating results could be materially adversely affected.

Our ability to grow successfully will depend on a variety of factors including the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas and our ability to manage our growth. While we believe we have the management resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or growth will be successfully managed.

Acquisitions may disrupt our business and dilute shareholder value. We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. As a result, negotiations may take place and future mergers or acquisitions involving cash, debt, or equity securities may occur at any time. We seek merger or acquisition partners that are culturally similar, have experienced management, and possess either significant market presence or have potential for improved profitability through financial management, economies of scale, or expanded services.

Acquiring other banks, businesses, or branches involves potential adverse impact to our financial results and various other risks commonly associated with acquisitions, including, among other things:


	•	difficulty in estimating the value of the target company;

	•	payment of a premium over book and market values that may dilute our tangible book value and earnings per share in the short and long term;

	•	potential exposure to unknown or contingent liabilities of the target company;

	•	exposure to potential asset quality issues of the target company;

	•	there may be volatility in reported income as goodwill impairment losses could occur irregularly and in varying amounts;

	•	difficulty and expense of integrating the operations and personnel of the target company;

	•	inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits;

	•	potential disruption to our business;

	•	potential diversion of our management’s time and attention;

	•	the possible loss of key employees and customers of the target company; and

	•	potential changes in banking or tax laws or regulations that may affect the target company.

Failure to keep pace with technological change could adversely affect our business. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

New lines of business or new products and services may subject us to additional risk. From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market

preferences, may also impact the successful implementation of a new line of business and/or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business and/or new products or services could have a material adverse effect on our business, results of operations and financial condition.

Reputation Risks

Negative publicity could damage our reputation. Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending or foreclosure practices, corporate governance, regulatory compliance, mergers and acquisitions, and disclosure, sharing or inadequate protection of customer information, and from actions taken by government regulators and community organizations in response to that conduct. Because we conduct most of our business under the “Associated Bank” brand, negative public opinion about one business could affect our other businesses.

Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business. As part of our business, we collect, process and retain sensitive and confidential client and customer information on our behalf and on behalf of other third parties. Despite the security measures we have in place, our facilities and systems, and those of our third party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer information, whether by us or by our vendors, could severely damage our reputation, expose us to the risk of litigation and liability, disrupt our operations and have a material adverse effect on our business.

Ethics or conflict of interest issues could damage our reputation. We have established a Code of Conduct and related policies and procedures to address the ethical conduct of business and to avoid potential conflicts of interest. Any system of controls, however well designed and operated, is based, in part, on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our related controls and procedures or failure to comply with the established Code of Conduct and Related Party Transaction Policies and Procedures could have a material adverse effect on our reputation, business, results of operations, and/or financial condition.

Liquidity Risks

Liquidity is essential to our businesses. Our liquidity could be impaired by an inability to access the capital markets or unforeseen outflows of cash. This situation may arise due to circumstances that we may be unable to control, such as a general market disruption or an operational problem that affects third parties or us. Our credit ratings are important to our liquidity. A reduction or an anticipated reduction in our credit ratings could adversely affect our liquidity and competitive position, increase our borrowing costs, limit our access to the capital markets or trigger unfavorable contractual obligations.

We rely on management fees and dividends from our subsidiaries for most of our revenue. We are a separate and distinct legal entity from our banking and other subsidiaries. A substantial portion of our revenue comes from management fees and dividends from our subsidiaries. These dividends are the principal source of funds to pay dividends on our common and preferred stock, and to pay interest and principal on our debt. Various federal and/or state laws and regulations limit the amount of management fees and dividends that our national bank subsidiary and certain nonbank subsidiaries may pay to us. Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event our national bank subsidiary is unable to pay management fees and dividends to us, we may not be able to service debt, pay obligations, or pay dividends on our common and preferred stock. The inability to receive management fees and dividends from our national bank subsidiary could have a material adverse effect on our business, financial condition, and results of operations.

Interest Rate Risks

We are subject to interest rate risk. Our earnings and cash flows are largely dependent upon our net interest income. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities; and (iii) the average duration of our mortgage-backed securities portfolio and other interest-earning assets. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Although management believes it has implemented effective asset and liability management strategies, including the limited use of derivatives as hedging instruments, to reduce the potential effects of changes in interest rates on our results of operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our balance sheet.

The impact of interest rates on our mortgage banking business can have a significant impact on revenues. Changes in interest rates can impact our mortgage related revenues. A decline in mortgage rates generally increases the demand for mortgage loans as borrowers refinance, but also generally leads to accelerated payoffs. Conversely, in a constant or increasing rate environment, we would expect fewer loans to be refinanced and a decline in payoffs. Although we use models to assess the impact of interest rates on mortgage related revenues, the estimates of revenues produced by these models are dependent on estimates and assumptions of future loan demand, prepayment speeds and other factors which may differ from actual subsequent experience.

Changes in interest rates could also reduce the value of our mortgage servicing rights and earnings. We have a portfolio of mortgage servicing rights. A mortgage servicing right (“MSR”) is the right to service a mortgage loan (i.e, collect principal, interest, escrow amounts, etc.) for a fee. We acquire MSRs when we originate mortgage loans and keep the servicing rights after we sell or securitize the loans or when we purchase the servicing rights to mortgage loans originated by other lenders. We carry MSRs at the lower of amortized cost or estimated fair value. Fair value is the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers.

Changes in interest rates can affect prepayment assumptions and, thus, fair value. When interest rates fall, borrowers are more likely to prepay their mortgage loans by refinancing them at a lower rate. As the likelihood of prepayment increases, the fair value of our MSRs can decrease. Each quarter we evaluate our MSRs for impairment based on the difference between carrying amount and fair value at quarter end. If temporary impairment exists, we establish a valuation allowance through a charge to earnings for the amount the carrying amount exceeds fair value. We also evaluate our MSRs for other-than-temporary impairment. If we determine that other-than-temporary impairment exists, we will recognize a direct write-down of the carrying value of the MSRs.

Risks Related to an Investment in Our Common Stock

Our stock price can be volatile. Stock price volatility may make it more difficult for you to sell your common stock when you want and at prices you find attractive. Our stock price can fluctuate widely in response to a variety of factors including, among other things:


	•	actual or anticipated variations in quarterly results of operations or financial condition;

	•	recommendations by securities analysts;

	•	operating results and stock price performance of other companies that investors deem comparable to us;

	•	news reports relating to trends, concerns, and other issues in the financial services industry;


	•	perceptions in the marketplace regarding us and/or our competitors;

	•	new technology used or services offered by competitors;

	•	significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors;

	•	failure to integrate acquisitions or realize anticipated benefits from acquisitions;

	•	changes in government regulations; and

	•	geopolitical conditions such as acts or threats of terrorism or military conflicts.

General market fluctuations, industry factors, and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, or credit loss trends, could also cause our stock price to decrease regardless of our operating results.

There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock. We are not restricted from issuing additional common stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The issuance of additional shares of common stock or the issuance of convertible securities would dilute the ownership interest of our existing common shareholders. The market price of our common stock could decline as a result of an equity offering, as well as other sales of a large block of shares of our common stock or similar securities in the market after an equity offering, or the perception that such sales could occur.

We are highly regulated, and our regulators could require us to raise additional common equity in the future. Both we and our regulators perform a variety of analyses of our assets, including the preparation of stress case scenarios, and as a result of those assessments we could determine, or our regulators could require us, to raise additional capital.

In addition, the exercise of the warrant issued to the UST under TARP would dilute the ownership interest of our existing shareholders. See also “Liquidity” in Part II, Item , “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 9, “Stockholders’ Equity,” of the notes to consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for additional information on the common stock warrants issued to the UST.

We may eliminate dividends on our common stock. Although we have historically paid a quarterly cash dividend to the holders of our common stock, holders of our common stock are not entitled to receive dividends. Downturns in the domestic and global economies could cause our board of directors to consider, among other things, the elimination of dividends paid on our common stock. This could adversely affect the market price of our common stock. Because of our agreements with the UST as part of the CPP under the TARP, prior to November 21, 2011, or the date on which the UST’s senior preferred stock investment has been fully redeemed or transferred, if earlier, we may not pay quarterly dividends on our common stock greater than $0.32 per share without the UST’s consent. In addition, we may not pay dividends on our common stock unless all accrued and unpaid dividends for all past dividend periods are fully paid on our outstanding preferred stock issued to the UST. Furthermore, as a bank holding company, our ability to pay dividends is subject to the guidelines of the Federal Reserve regarding capital adequacy and dividends, and we are required to consult with the Federal Reserve before declaring or paying any dividends. Dividends also may be limited as a result of safety and soundness considerations.

Our agreements with the UST under the CPP impose restrictions and obligations on us that limit our ability to increase dividends, repurchase our common stock or preferred stock and access the equity capital market. In November 2008, we issued preferred stock and a warrant to purchase our common stock to the UST under TARP. Prior to November 21, 2011, unless we have redeemed all of the preferred stock or the UST has transferred all of the preferred stock to a third party, the consent of the UST will be required for us to, among other things, pay a quarterly common stock dividend greater than $0.32 per share or repurchase our common stock or other preferred stock (with certain exceptions, including the repurchase of our common stock to offset share dilution from equity-based employee compensation awards). We have also granted registration rights and offering facilitation rights to the UST

pursuant to which we have agreed to lock-up periods in connection with an offering by the UST of our securities during which we would be unable to issue equity securities.

The common stock is equity and is subordinate to our existing and future indebtedness and preferred stock and effectively subordinated to all the indebtedness and other non-common equity claims against our subsidiaries. Shares of the common stock are equity interests in us and do not constitute indebtedness. As such, shares of the common stock will rank junior to all of our indebtedness and to other non-equity claims against us and our assets available to satisfy claims against us, including our liquidation. Additionally, holders of our common stock are subject to the prior dividend and liquidation rights of holders of our outstanding preferred stock issued to the UST under TARP. Our board of directors is authorized to issue additional classes or series of preferred stock without any action on the part of the holders of our common stock, and we are permitted to incur additional debt. Upon liquidation, lenders and holders of our debt securities and preferred stock would receive distributions of our available assets prior to holders of our common stock. Furthermore, our right to participate in a distribution of assets upon any of our subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors, including holders of any preferred stock of that subsidiary.

Our articles of incorporation, as amended, amended and restated bylaws, and certain banking laws may have an anti-takeover effect. Provisions of our articles of incorporation, as amended, amended and restated bylaws, and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial to our shareholders. The combination of these provisions may prohibit a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.

An investment in our common stock is not an insured deposit. Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or by any other public or private entity. An investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you may lose some or all of your investment.

An entity holding as little as a 5% interest in our outstanding common stock could, under certain circumstances, be subject to regulation as a “bank holding company.” An entity (including a “group” composed of natural persons) owning or controlling with the power to vote 25% or more of our outstanding common stock, or 5% or more if such holder otherwise exercises a “controlling influence” over us, may be subject to regulation as a “bank holding company” in accordance with the BHC Act. In addition, (1) any bank holding company or foreign bank with a U.S. presence may be required to obtain the approval of the Federal Reserve under the BHC Act to acquire or retain 5% or more of our outstanding common stock, and (2) any person not otherwise defined as a company by the BHC Act and its implementing regulations may be required to obtain the approval of the Federal Reserve under the Change in Bank Control Act to acquire or retain 10% or more of our outstanding common stock. Becoming a bank holding company imposes certain statutory and regulatory restrictions and obligations, such as providing managerial and financial strength for its bank subsidiaries. Regulation as a bank holding company could require the holder to divest all or a portion of the holder’s investment in our common stock or such nonbanking investments that may be deemed impermissible or incompatible with bank holding company status, such as a material investment in a company unrelated to banking.


ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.


ITEM 2.	PROPERTIES

Our headquarters are located in the Village of Ashwaubenon, Wisconsin, in a leased facility with approximately 30,000 square feet of office space. The current lease term expires on August 31, 2011 and there are two one-year extension periods remaining.

At December 31, 2010, our bank subsidiary occupied approximately 280 banking offices serving more than 150 different communities within Illinois, Minnesota, and Wisconsin. The main office of Associated Bank,

National Association, is owned. Most bank subsidiary branch offices are freestanding buildings that provide adequate customer parking, including drive-through facilities of various numbers and types for customer convenience. Some bank branch offices are in supermarket locations or in retirement communities. In addition, we own other real property that, when considered in aggregate, is not material to our financial position.


ITEM 3.	LEGAL PROCEEDINGS

A lawsuit was filed against the Corporation in the United States District Court for the Western District of Wisconsin, on April 6, 2010. The lawsuit is styled as a class action lawsuit with the certification of the class pending. The suit alleges that the Corporation unfairly assesses and collects overdraft fees and seeks restitution of the overdraft fees, compensatory, consequential and punitive damages, and costs. On April 23, 2010, a Multi District Judicial Panel issued a conditional transfer order to consolidate this case into the overdraft fees Multi District Litigation pending in the United States District Court for the Southern District of Florida, Miami Division. The Corporation denies all claims and intends to vigorously defend itself. In addition to the above, in the ordinary course of business, the Corporation may be named as defendant in or be a party to various pending and threatened legal proceedings. Because the Corporation cannot determine based on current information the range of possible outcomes or plaintiffs’ ultimate damage claims, management cannot reasonably determine the probability of a material adverse result or reasonably estimate the timing or specific possible loss or range of loss that may result from certain of these proceedings. Given the indeterminate amounts sought in certain of these matters and the inherent unpredictability of such matters, it is possible that the results of such proceedings will have a material adverse effect on the Corporation’s business, financial position or results of operations in future periods.

PART II


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Information in response to this item is incorporated by reference to the discussion of dividend restrictions in Note 9, “Stockholders’ Equity,” of the notes to consolidated financial statements included under Item 8 of this report. The Corporation’s common stock is traded on the Nasdaq Global Select Market under the symbol ASBC.

The approximate number of equity security holders of record of common stock, $.01 par value, as of February 3, 2011, was 13,000. Certain of the Corporation’s shares are held in “nominee” or “street” name and the number of beneficial owners of such shares is approximately 24,300.

Payment of future dividends is within the discretion of the Board of Directors and will depend, among other factors, on earnings, capital requirements, and the operating and financial condition of the Corporation. The Board of Directors makes the dividend determination on a quarterly basis. The amount of the annual dividend was $0.04 and $0.47 for 2010 and 2009, respectively.

On November 21, 2008, we sold 525,000 shares of our Senior Preferred Stock to the United States Treasury (“UST”) pursuant to the Capital Purchase Program (“CPP”). While any Senior Preferred Stock is outstanding, we may pay dividends on our common stock, provided that all accrued and unpaid dividends for all past dividend periods on the Senior Preferred Stock are fully paid. Prior to the third anniversary of the UST’s purchase of the Senior Preferred Stock, unless the Senior Preferred Stock has been redeemed or the UST has transferred all of the Senior Preferred Stock to third parties, the consent of the UST will be required for us to increase our quarterly common stock dividend above $0.32 per share.

Following are the Corporation’s monthly common stock purchases during the fourth quarter of 2010, which are solely in connection with surrenders for tax withholding related to the vesting of restricted stock awards. Our repurchases of common stock are restricted while any Senior Preferred Stock is outstanding. For a detailed discussion of the common stock repurchases during 2010 and 2009, see section “Capital” included under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this document and Part II, Item 8, Note 9, “Stockholders’ Equity,” of the notes to consolidated financial statements included under Item 8 of this document.


					Total Number of		Maximum Number of
					Shares Purchased as		Shares that May Yet
	Total Number of		Average Price		Part of Publicly		Be Purchased Under
Period	Shares Purchased		Paid per Share		Announced Plans		the Plan

October 1 — October 31, 2010		657	$	12.91		—		—
November 1 — November 30, 2010		—		—		—		—
December 1 — December 31, 2010		607		14.69		—		—


Total		1,264	$	13.76		—		—

During the fourth quarter of 2010, the Corporation repurchased shares for minimum tax withholding settlements on equity compensation. The effect to the Corporation of this transaction was an increase in treasury stock and a decrease in cash of approximately $17,000 in the fourth quarter of 2010.

Market Information

The following represents selected market information of the Corporation for 2010 and 2009.


					Market Price Range
					Closing Sales Prices
	Dividends Paid		Book Value		High		Low		Close

2010
4th Quarter	$	0.01	$	15.28	$	15.49	$	12.57	$	15.15
3rd Quarter		0.01		15.53		13.90		11.96		13.19
2nd Quarter		0.01		15.46		16.10		12.26		12.26
1st Quarter		0.01		15.44		14.54		11.48		13.76


2009
4th Quarter	$	0.05	$	17.42	$	13.00	$	10.37	$	11.01
3rd Quarter		0.05		18.88		12.67		9.21		11.42
2nd Quarter		0.05		18.49		19.00		12.50		12.50
1st Quarter		0.32		18.68		21.39		10.60		15.45

Stock Price Performance Graph

Set forth below are two line graphs (and the underlying data points) comparing the yearly and quarterly percentage change in the cumulative total shareholder return (change in year-end or quarter-end stock price plus reinvested dividends) on Associated’s common stock with the cumulative total return of the Nasdaq Bank Index and the S&P 500 Index for the period of five fiscal years commencing on January 1, 2006, and ending December 31, 2010 and for the period of four quarters commencing on January 1, 2010, and ending on December 31, 2010. The Nasdaq Bank Index is prepared for Nasdaq by the Center for Research in Securities Prices at the University of Chicago. The first graph assumes that the value of the investment in Common Stock for each index was $100 on December 31, 2005 and the second graph assumes that the value of the investment in Common Stock for each index was $100 on December 31, 2009. Historical stock price performance shown on the graph is not necessarily indicative of the future price performance.

5 Year Trend


Source:Bloomberg	2005		2006		2007		2008		2009		2010
Associated Banc-Corp		100.0		110.7		89.8		73.6		40.4		55.7
S&P 500		100.0		115.6		122.0		77.4		97.4		111.9
Nasdaq Bank Index		100.0		113.6		91.4		72.0		60.2		68.6


ITEM 6.	SELECTED FINANCIAL DATA

TABLE 1: EARNINGS SUMMARY AND SELECTED FINANCIAL DATA
(In thousands, except per share data)


				%															5-Year
				Change															Compound
				2009 to															Growth
Years Ended December 31,	2010			2010			2009			2008			2007			2006			Rate(6)


Interest income	$	806,126			(17.8	)%	$	981,256		$	1,126,709		$	1,275,712		$	1,279,379			(5.9	)%
Interest expense		172,347			(32.5	)		255,251			430,561			631,899			609,830			(16.4	)


Net interest income		633,779			(12.7	)		726,005			696,148			643,813			669,549			(1.2	)
Provision for loan losses		390,010			(48.0	)		750,645			202,058			34,509			19,056			97.4


Net interest income (loss) after provision for loan losses		243,769			N/M			(24,640	)		494,090			609,304			650,493			(18.0	)
Noninterest income		345,523			(1.5	)		350,961			285,650			344,781			295,501			3.5
Noninterest expense		630,320			3.1			611,420			557,460			534,891			496,215			5.6


Income (loss) before income taxes		(41,028	)		(85.6	)		(285,099	)		222,280			419,194			449,779			N/M
Income tax expense (benefit)		(40,172	)		(73.8	)		(153,240	)		53,828			133,442			133,134			N/M


Net income (loss)		(856	)		(99.4	)		(131,859	)		168,452			285,752			316,645			N/M
Preferred stock dividends and discount accretion		29,531			0.6			29,348			3,250			—			—			N/M


Net income (loss) available to common equity	$	(30,387	)		(81.2	)%	$	(161,207	)	$	165,202		$	285,752		$	316,645			N/M


Taxable equivalent adjustment	$	23,635			(4.8	)%	$	24,820		$	27,711		$	27,259		$	26,233			(1.5	)%
Earnings (loss) per common share:
Basic(1)	$	(0.18	)		(85.7	)%	$	(1.26	)	$	1.29		$	2.24		$	2.40			N/M
Diluted(1)		(0.18	)		(85.7	)		(1.26	)		1.29			2.22			2.38			N/M
Cash dividends per share(1)		0.04			(91.5	)		0.47			1.27			1.22			1.14			(48.1	)%
Weighted average common shares outstanding(1):
Basic		171,230			33.9			127,858			127,501			127,408			132,006			5.6
Diluted		171,230			33.9			127,858			127,775			128,374			133,035			5.4
SELECTED FINANCIAL DATA
Year-End Balances:
Loans	$	12,616,735			(10.7	)%	$	14,128,625		$	16,283,908		$	15,516,252		$	14,881,526			(3.7	)%
Allowance for loan losses		476,813			(16.9	)		573,533			265,378			200,570			203,481			18.6
Investment securities, available for sale		6,101,341			4.6			5,835,533			5,143,414			3,358,617			3,251,025			6.5
Total assets		21,785,596			(4.8	)		22,874,142			24,192,067			21,592,083			20,861,384			(0.3	)
Deposits		15,225,393			(9.0	)		16,728,613			15,154,796			13,973,913			14,316,071			2.3
Wholesale funding		3,160,987			(0.6	)		3,180,851			5,565,583			5,091,558			4,113,827			(12.1	)
Stockholders’ equity		3,158,791			15.3			2,738,608			2,876,503			2,329,705			2,245,493			6.3
Book value per common share(1)		15.28			(12.3	)		17.42			18.54			18.32			17.44			(2.3	)
Tangible book value per common share(1)		9.77			(1.6	)		9.93			10.99			10.69			10.34			(1.0	)


Average Balances:
Loans	$	13,186,712			(15.4	)%	$	15,595,636		$	16,080,565		$	15,132,634		$	15,370,090			(1.7	)%
Investment securities		5,628,405			(1.1	)		5,690,968			3,707,549			3,480,831			3,825,245			3.3
Total assets		22,625,065			(4.2	)		23,609,471			22,037,963			20,638,005			21,162,099			1.6
Earning assets		20,568,495			(3.6	)		21,337,382			19,839,706			18,644,770			19,229,849			1.4
Deposits		16,946,301			6.2			15,959,046			13,812,072			13,741,803			13,623,703			6.3
Interest-bearing liabilities		16.304.220			(7.7	)		17,659,282			17,019,832			15,886,710			16,434,947			(0.1	)
Stockholders’ equity		3,183,572			9.7			2,902,911			2,423,332			2,253,878			2,279,376			8.7


Financial Ratios:(2)
Return on average equity		(0.03	)%		451			(4.54	)%		6.95	%		12.68	%		13.89	%
Return on average assets		(0.00	)		56			(0.56	)		0.76			1.38			1.50
Efficiency ratio(3)		66.04			880			57.24			53.90			54.56			51.67
Efficiency ratio, fully taxable equivalent(3)		64.32			859			55.73			52.41			53.92			50.31
Net interest margin		3.20			(32	)		3.52			3.65			3.60			3.62
Stockholders’ equity to Total assets		14.50			253			11.97			11.89			10.79			10.76
Tangible stockholders’ equity to tangible assets(4)		10.59			247			8.12			8.23			6.59			6.67
Tier 1 common equity to risk-weighted assets		12.26			441			7.85			7.90			7.88			8.17
Average equity to average assets		14.07			177			12.30			11.00			10.92			10.77
Dividend payout ratio(5)		22.22			N/M			N/M			98.45			54.46			47.50


(1)		Share and per share data adjusted retroactively for stock splits and stock dividends.

(2)		Change in basis points.

(3)		See Table 1A for a reconciliation of this Non-GAAP measure.

(4)		Tangible stockholders’ equity to tangible assets is stockholders’ equity excluding goodwill and other intangible assets divided by assets excluding goodwill and other intangible assets.

(5)		Ratio is based upon basic earnings per common share.

(6)		Base year used in 5-year compound growth rate is 2005 consolidated financial data.

N/M = Not meaningful.

TABLE 1A: RECONCILIATION OF NON-GAAP MEASURE


Years Ended December 31,	2010			2009			2008			2007			2006


Efficiency ratio(a)		66.04			57.24			53.90			54.56			51.67
Taxable equivalent adjustment		(1.59	)		(1.30	)		(1.41	)		(1.48	)		(1.37	)
Asset sale gains / losses, net		(0.13	)		(0.21	)		(0.08	)		0.84			0.01


Efficiency ratio, fully taxable equivalent(b)		64.32			55.73			52.41			53.92			50.31


(a)		Efficiency ratio is defined by the Federal Reserve guidance as noninterest expense divided by the sum of net interest income plus noninterest income, excluding investment securities gains / losses, net.


(b)		Efficiency ratio, fully taxable equivalent, is noninterest expense divided by the sum of taxable equivalent net interest income plus noninterest income, excluding investment securities gains / losses, net and asset sale gains / losses, net. This efficiency ratio is presented on a taxable equivalent basis, which adjusts net interest income for the tax-favored status of certain loans and investment securities. Management believes this measure to be the preferred industry measurement of net interest income as it enhances the comparability of net interest income arising from taxable and tax-exempt sources and it excludes certain specific revenue items (such as investment securities gains / losses, net and asset sale gains / losses, net).


ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is management’s analysis to assist in the understanding and evaluation of the consolidated financial condition and results of operations of the Corporation. It should be read in conjunction with the consolidated financial statements and footnotes and the selected financial data presented elsewhere in this report.

The detailed financial discussion that follows focuses on 2010 results compared to 2009. Discussion of 2009 results compared to 2008 is predominantly in section “2009 Compared to 2008.”

Overview

The Corporation is a bank holding company headquartered in Wisconsin, providing a diversified range of banking and nonbanking financial services to individuals and businesses primarily in its three-state footprint (Wisconsin, Illinois and Minnesota). The Corporation, principally through the Bank, provides a wide range of services, including business and consumer loan and depository services, as well as other traditional banking services. Through its nonbanking subsidiaries, the Corporation’s wealth business provides a variety of products and services to supplement the banking business including insurance, brokerage, and trust/asset management.

The Corporation’s primary sources of revenue, through the Bank, are net interest income (predominantly from loans and deposits, and also from investment securities and other funding sources), and noninterest income, particularly fees and other revenue from financial services provided to customers or ancillary services tied to loans and deposits. Business volumes and pricing drive revenue potential, and tend to be influenced by overall economic factors, including market interest rates, business spending, consumer confidence, economic growth, and competitive conditions within the marketplace.

2010 was a year of significant accomplishment for the Corporation. Progress was made in positioning the Corporation for future profitable growth by enhancing the capital position with an offering of common stock in January 2010 which raised net proceeds of approximately $478 million, improving our credit metrics, and returning the Corporation to profitability during the second half of 2010. In addition, management believes that it has appropriately addressed all of the conditions of the MOU and the Memorandum. The Corporation’s core businesses were evaluated and plans were developed to ensure the ongoing profitable growth of the Corporation. 2011 will be a year of transition as the Corporation executes strategic initiatives, including the hiring of additional talent, enhancing management reporting systems, investing in branch upgrades throughout its three state footprint, and repaying CPP to the U.S. Treasury. These ongoing investments will strengthen core businesses and position the Corporation for the future.

The Corporation’s credit ratings were downgraded by S&P and Fitch in 2009 (to BB+ at December 31, 2009). In early 2010, S&P took further action, lowering the long-term rating to BB- and Moody’s lowered its long-term rating to Baa1. The primary impact of these credit rating downgrades was that unsecured funding became constrained. In order to mitigate the increased liquidity risk associated with these downgrades, the Corporation took steps to proactively increase its cash equivalent levels during much of 2010. In late 2010, Fitch took action to raise the Corporation’s ratings to BBB- and S&P revised its outlook for the Corporation from stable to positive. These credit rating upgrades provided the Corporation with access to alternative lower cost funding. While at December 31, 2010, the Corporation’s cash position was relatively flat compared to December 31, 2009, due to improvements in our credit ratings late in 2010 (with cash equivalents of $868 million at year-end 2010 compared to cash equivalents of $821 million at year-end 2009), the average cash equivalents during 2010 were much higher (with average cash equivalents during 2010 of $2.1 billion compared to average cash equivalents during 2009 of $544 million).

Net loss available to common equity for 2010 was $30 million (compared to net loss available to common equity of $161 million for 2009) or a diluted loss per common share of $0.18 (versus a diluted loss per common share of $1.26 for 2009). Net interest income was $634 million representing a margin of 3.20% (compared to $726 million and a margin of 3.52% for 2009), and the provision for loan losses was $390 million with net charge offs to average loans of 3.69% (compared to a provision of $751 million and a net charge off ratio of 2.84% for 2009).

Total loans decreased $1.5 billion (11%) between year-end 2010 and 2009, with declines in most loan categories (including commercial loans down $1.7 billion and retail loans down $0.2 billion, while residential mortgage loans

increased $0.4 billion). On average, loans declined $2.4 billion (15%) primarily in commercial loans (down $1.9 billion), while residential mortgage loans and retail loans declined $0.3 billion and $0.2 billion, respectively. For 2011, the Corporation expects mid single-digit increases in average loans, with commercial loan growth momentum building as the year progresses.

Total deposits declined $1.5 billion (9%) between year-end 2010 and 2009, consistent with the Corporation’s strategy for reducing its utilization of network transaction deposits and brokered deposits as well as the renewed access to alternative lower cost funding sources noted above. Interest-bearing demand deposits and money market deposits decreased (down 40% and 6%, respectively), while noninterest-bearing demand deposits and savings deposit increased (up 13% and 5%, respectively). On average, total deposits increased $1.0 billion (6%) over 2009, primarily in interest-bearing demand deposits and money market deposits, as the strategy to reduce network transaction deposits and brokered deposits was implemented primarily during the fourth quarter of 2010. For 2011, the Corporation expects modest growth in customer deposits and customer repo sweeps and a continued reduction in network transaction deposits and brokered deposits.

During 2010, the Corporation took action to significantly improve its credit metrics and address the challenges experienced during 2009. Nonaccrual loans were $574 million at December 31, 2010, a decrease of $503 million (47%) from December 31, 2009. Through a combination of loan sales and discounted payoffs (resolutions), the Corporation reduced nonaccrual loans with a net book value totaling $597 million during 2010. At December 31, 2010, the allowance for loan losses to total loans ratio was 3.78%, covering 83% of nonaccrual loans, compared to 4.06% at December 31, 2009, covering 53% of nonaccrual loans. The provision for loan losses was $390 million for 2010, with net charge offs to average loans of 3.69% (compared to a provision for loan losses of $751 million and a net charge off ratio of 2.84% for 2009). As a result of the aggressive efforts to work through credit issues during 2010, the Corporation believes it is well positioned for the future, and for 2011, a significant decrease in provision for loan losses and net charge offs is expected.

Taxable equivalent net interest income was $657.4 million for 2010, $93.4 million or 12.4% lower than 2009, including unfavorable volume/mix variances (decreasing taxable equivalent net interest income by $79.7 million) and unfavorable rate variances (decreasing taxable equivalent net interest income by $13.7 million). The net interest margin for 2010 was 3.20%, 32 bp lower than 3.52% in 2009, attributable to a 30 bp decrease in interest rate spread and a 2 bp lower contribution from net free funds. Assuming a stable rate environment, the net interest margin is expected to expand modestly in 2011, primarily in the second half of the year as projected loan growth begins to contribute more strongly to net interest income and the impact of the declining nonaccrual balances are realized, though earning assets are anticipated to remain flat due to the redeployment of investment securities into loan growth. On the funding side, we believe that the rebalancing and deposit pricing actions we took during the fourth quarter of 2010, will continue to have a positive impact on the Corporation’s net interest margin in the first quarter of 2011.

Noninterest income of $346 million in 2010 was down $5 million (2%) from 2009. Core fee-based revenue (defined as trust service fees, service charges on deposit accounts, card-based and other nondeposit fees, and retail commission income) decreased $16 million (6%), primarily due to lower service charges on deposit accounts reflecting changes in customer behavior and recent regulatory changes. Net mortgage banking declined $8 million (19%) due to lower gains on sales of loans to the secondary market (with secondary mortgage production of $2.3 billion for 2010 compared to $3.7 billion for 2009). For 2011, core fee-based revenues are expected to face challenges related to changes in consumer behavior, the impact of recent consumer banking regulatory changes, and declines in mortgage production volume.

Noninterest expense of $630 million grew $19 million (3%) over 2009. Personnel expense was $323 million, up $19 million (6%) versus 2009, attributable to $9 million (4%) higher base salaries and commissions (principally due to merit increases between the years), an $8 million increase in performance-based incentives, and a $1 million increase in fringe benefit expenses. On average, full time equivalent employees decreased 4% between 2010 and 2009 (from 5,016 for 2009 to 4,809 for 2010). While nonpersonnel noninterest expenses on an aggregate basis were flat compared to 2009, FDIC insurance expense increased $4 million, while foreclosure / OREO expense decreased by $4 million. The efficiency ratio (defined as noninterest expense divided by “total revenue,” with total revenue calculated as the sum of taxable equivalent net interest income plus noninterest income, excluding net asset and

securities gains) was 64.32% for 2010 and 55.73% for 2009. For 2011, the Corporation expects moderate increases in noninterest expenses related to strategic investments in our personnel, systems and infrastructure.

Performance Summary

The Corporation recorded a net loss of $0.9 million for the year ended December 31, 2010, compared to net loss of $131.9 million for the year ended December 31, 2009. Net loss available to common equity was $30.4 million for 2010, or a net loss of $0.18 for both basic and diluted earnings per common share. For 2009, net loss available to common equity was $161.2 million, or $1.26 for both basic and diluted earnings per common share. Earnings for 2010 were primarily impacted by the reduced provision for loan losses (resulting from nonaccrual loan sales during 2010 and a reduction in potential problem loans). Cash dividends of $0.04 per common share were paid in 2010, compared to cash dividends of $0.47 per common share paid in 2009. Key factors behind these results are discussed below.


	•	Nonaccrual loans were $574 million at December 31, 2010, compared to $1.1 billion at December 31, 2009. Net charge offs were $486.7 million in 2010 (or 3.69% of average loans) compared to $442.5 million in 2009 (or 2.84% of average loans). The provision for loan losses was $390.0 million and $750.6 million, respectively, for 2010 and 2009. At year-end 2010, the allowance for loan losses represented 3.78% of total loans (covering 83% of nonaccrual loans), compared to 4.06% (covering 53% of nonaccrual loans) at year-end 2009. For additional discussion regarding charge offs and nonaccrual loans see sections, “Allowance for Loan Losses” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned.”

	•	At December 31, 2010, total loans were $12.6 billion, down 10.7% from year-end 2009, primarily in construction loans (consistent with the Corporation’s strategy of rebalancing the loan portfolio). Total deposits at December 31, 2010, were $15.2 billion, down 9.0% from year-end 2009, consistent with the Corporation’s strategy for reducing its utilization of network transaction deposits and brokered deposits.

	•	Taxable equivalent net interest income was $657.4 million for 2010, $93.4 million or 12.4% lower than 2009. Taxable equivalent interest income decreased $176.3 million, while interest expense decreased $82.9 million. The decrease in taxable equivalent net interest income was a function of unfavorable volume/mix variances (decreasing taxable equivalent net interest income by $79.7 million), combined with unfavorable rate variances (decreasing taxable equivalent net interest income by $13.7 million). See also section, “Net Interest Income” for additional information on taxable equivalent net interest income and net interest margin.

	•	The net interest margin for 2010 was 3.20%, 32 bp lower than 3.52% in 2009. The reduction in net interest margin was attributable to a 30 bp decrease in interest rate spread (the net of a 69 bp decrease in the yield on earning assets and a 39 bp decrease in the cost of interest-bearing liabilities) and a 2 bp lower contribution from net free funds (primarily attributable to lower rates on interest-bearing liabilities reducing the value of noninterest-bearing deposits and other net free funds).

	•	Noninterest income was $345.5 million for 2010, $5.4 million or 1.5% lower than 2009. Core fee-based revenues (including trust service fees, service charges on deposit accounts, card-based and other nondeposit fees, and retail commission income) totaled $243.7 million for 2010, down $15.9 million or 6.1% from $259.6 million for 2009. Net mortgage banking income was $33.1 million for 2010, a decrease of $7.7 million from 2009, primarily attributable to lower gains on sales of mortgage loans related to the lower secondary mortgage production experienced during 2010. Asset and investment securities gains, net combined were $22.9 million for 2010 (predominantly from gains on sales of mortgage-related securities), compared to combined asset and investment securities gains of $4.7 million for 2009 (predominantly from gains on sales of mortgage-related securities, partially offset by higher losses on sales of other real estate owned). Collectively, all remaining noninterest income categories were $45.8 million, relatively unchanged compared to 2009. For additional discussion concerning noninterest income see section, “Noninterest Income.”

	•	Noninterest expense for 2010 was $630.3 million, an increase of $18.9 million or 3.1% over 2009. Personnel expense increased $18.9 million and FDIC expense increased $4.4 million, while foreclosure / OREO


		expenses decreased $4.3 million, and collectively all remaining noninterest expense categories were down $0.1 million compared to 2009. The efficiency ratio (as defined under Part II, Item 6, “Selected Financial Data”) was 64.32% for 2010 and 55.73% for 2009. For additional discussion regarding noninterest expense see section, “Noninterest Expense.”


	•	Income tax benefit for 2010 was $40.2 million, compared to income tax benefit of $153.2 million for 2009. The change in income tax was primarily due to the decrease in pretax loss between the years. In addition, there was a decrease in the valuation allowance on deferred tax assets and reserve for uncertain tax positions of $5 million and $22 million in 2010 and 2009, respectively. For additional discussion concerning income tax see section, “Income Taxes.”

INCOME STATEMENT ANALYSIS

Net Interest Income

Net interest income in the consolidated statements of income (loss) (which excludes the taxable equivalent adjustment) was $633.8 million in 2010 compared to $726.0 million in 2009. The taxable equivalent adjustments (the adjustments to bring tax-exempt interest to a level that would yield the same after-tax income had that income been subject to a taxation using a 35% tax rate) of $23.6 million and $24.8 million for 2010 and 2009, respectively, resulted in fully taxable equivalent net interest income of $657.4 million in 2010 and $750.8 million in 2009.

Net interest income is the primary source of the Corporation’s revenue. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and the interest expense on interest-bearing deposits and other borrowings used to fund interest-earning and other assets or activities. Net interest income is affected by changes in interest rates and by the amount and composition of earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities, repricing frequencies, and the use of interest rate derivative financial instruments.

Interest rate spread and net interest margin are utilized to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on earning assets and the rate paid for interest-bearing liabilities that fund those assets. The net interest margin is expressed as the percentage of net interest income to average earning assets. The net interest margin exceeds the interest rate spread because noninterest-bearing sources of funds (“net free funds”), principally noninterest-bearing demand deposits and stockholders’ equity, also support earning assets. To compare tax-exempt asset yields to taxable yields, the yield on tax-exempt loans and investment securities is computed on a taxable equivalent basis. Net interest income, interest rate spread, and net interest margin are discussed on a taxable equivalent basis.

Table 2 provides average balances of earning assets and interest-bearing liabilities, the associated interest income and expense, and the corresponding interest rates earned and paid, as well as net interest income, interest rate spread, and net interest margin on a taxable equivalent basis for the three years ended December 31, 2010. Tables 3 through 5 present additional information to facilitate the review and discussion of taxable equivalent net interest income, interest rate spread, and net interest margin.

Taxable equivalent net interest income of $657.4 million for 2010 was $93.4 million or 12.4% lower than 2009. The decrease in taxable equivalent net interest income was a function of unfavorable volume variances (as balance sheet changes in both volume and mix decreased taxable equivalent net interest income by $79.7 million) and unfavorable interest rate changes (as the impact of changes in the interest rate environment and product pricing decreased taxable equivalent net interest income by $13.7 million). The change in mix and volume of earning assets decreased taxable equivalent interest income by $107.5 million, while the change in volume and composition of interest-bearing liabilities decreased interest expense by $27.8 million, for a net unfavorable volume impact of $79.7 million on taxable equivalent net interest income. Rate changes on earning assets reduced interest income by $68.8 million, while changes in rates on interest-bearing liabilities lowered interest expense by $55.1 million, for a net unfavorable rate impact of $13.7 million. See additional discussion in section “Interest Rate Risk.”

The net interest margin for 2010 was 3.20%, compared to 3.52% in 2009. The 32 bp reduction in net interest margin was attributable to a 30 bp decrease in interest rate spread (the net of a 69 bp decrease in the yield on earning assets

and a 39 bp decrease in the cost of interest-bearing liabilities), and a 2 bp lower contribution from net free funds (due principally to lower rates on interest-bearing liabilities reducing the value of noninterest-bearing deposits and other net free funds).

The Federal Reserve left the Federal funds rate unchanged at 0.25% during 2010 and 2009.

For 2010, the yield on average earning assets of 4.03% was 69 bp lower than 2009. The yield on securities and short-term investments was down 141 bp to 2.95%, impacted by the Corporation’s excess liquidity position during most of 2010 (to mitigate the liquidity risk associated with the Corporation’s credit rating downgrade, as discussed further in section, “Liquidity”) and prepayment speeds increasing the amortization of mortgage-related investment securities purchased at a premium. Loan yields decreased 20 bp (to 4.64%), due to the higher levels of average nonaccrual loans, as well as the repricing of adjustable rate loans and competitive pricing pressures in a low interest rate environment. Overall, earning asset rate changes reduced interest income by $68.8 million, the combination of $34.3 million lower interest on loans and $34.5 million lower interest on securities and short-term investments.

The cost of average interest-bearing liabilities of 1.06% in 2010 was 39 bp lower than 2009. The average cost of interest-bearing deposits was 0.77% in 2010, 46 bp lower than 2009, reflecting the low rate environment and a targeted reduction of higher cost deposit products. The cost of wholesale funding (comprised of short-term borrowings and long-term funding) increased 64 bp to 2.70% for 2010, with short-term borrowings up 56 bp (primarily attributable to the lower levels of short-term borrowings and the cash flow hedges holding the interest rate on $200 million of short-term borrowings at 3.15%, see Note 14, “Derivative and Hedging Activities,” of the notes to consolidated financial statements for additional information on the cash flow hedge instruments) and long-term funding down 88 bp. The interest-bearing liability rate changes resulted in $55.1 million lower interest expense, with $46.1 million attributable to interest-bearing deposits and $9.0 million due to wholesale funding.

Average earning assets of $20.6 billion in 2010 were $0.8 billion (4%) lower than 2009. Average investments grew $1.6 billion, reflecting the Corporation’s increased liquidity position. Average loans decreased $2.4 billion (15%), including a $1.9 billion decrease in commercial loans, a $311 million decrease in residential mortgage loans, and a $215 million decrease in retail loans. Taxable equivalent interest income in 2010 decreased $107.5 million due to earning asset volume changes, including a decrease of $109.5 million attributable to loans, partially offset by a $2.0 million increase attributable to securities and short-term investments.

Average interest-bearing liabilities of $16.3 billion in 2010 were down $1.4 billion (8%) versus 2009. On average, interest-bearing deposits grew $777 million and average noninterest-bearing demand deposits (a principal component of net free funds) increased by $210 million. Average wholesale funding decreased $2.1 billion, the net of a $2.0 billion decrease in short-term borrowings and a $104 million decrease in long-term funding. As a percentage of total average interest-bearing liabilities, interest-bearing deposits, short-term borrowings, and long-term funding were 85%, 4%, and 11%, respectively, for 2010, compared to 74%, 15%, and 11%, respectively, for 2009. In 2010, interest expense decreased $27.8 million due to volume changes, with a $19.0 million decrease due to wholesale funding and a $8.8 million decrease from interest-bearing deposits.

TABLE 2: Average Balances and Interest Rates (interest and rates on a taxable equivalent basis)


	Years Ended December 31,
	2010								2009								2008

	Average					Average			Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate

	($ in Thousands)

ASSETS
Earning assets:
Loans:(1)(2)(3)
Commercial	$	7,790,554		$	339,595		4.36	%	$	9,673,513		$	435,054		4.50	%	$	10,387,727		$	600,079		5.78	%
Residential mortgage		2,059,156			99,163		4.82			2,369,719			125,475		5.29			2,200,145			129,077		5.87
Retail		3,337,002			173,015		5.18			3,552,404			195,078		5.49			3,492,693			227,368		6.51


Total loans		13,186,712			611,773		4.64			15,595,636			755,607		4.84			16,080,565			956,524		5.95
Investment securities:(4)
Taxable		4,767,858			159,085		3.34			4,846,305			192,766		3.98			2,786,302			132,994		4.77
Tax-exempt(1)		860,547			54,264		6.31			844,663			57,277		6.78			921,247			63,574		6.90
Short-term investments		1,753,378			4,639		0.26			50,778			426		0.84			51,592			1,328		2.57


Securities and short-term investments		7,381,783			217,988		2.95			5,741,746			250,469		4.36			3,759,141			197,896		5.26


Total earning assets	$	20,568,495		$	829,761		4.03	%	$	21,337,382		$	1,006,076		4.72	%	$	19,839,706		$	1,154,420		5.82	%


Allowance for loan losses		(582,881	)							(380,224	)							(230,450	)
Cash and due from banks		331,775								492,794								418,395
Other assets		2,307,676								2,159,519								2,010,312


Total assets	$	22,625,065							$	23,609,471							$	22,037,963



LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Savings deposits	$	898,019		$	1,176		0.13	%	$	880,544		$	1,379		0.16	%	$	890,811		$	4,021		0.45	%
Interest-bearing demand deposits		2,780,525			6,314		0.23			2,154,745			4,794		0.22			1,752,991			15,061		0.86
Money market deposits		6,374,071			33,417		0.52			5,390,782			42,978		0.80			4,231,678			79,057		1.87
Time deposits, excluding Brokered CDs		3,251,667			60,280		1.85			3,880,878			102,490		2.64			3,957,174			148,294		3.75


Total interest-bearing deposits,
excluding Brokered CDs		13,304,282			101,187		0.76			12,306,949			151,641		1.23			10,832,654			246,433		2.27
Brokered CDs		547,328			4,836		0.88			767,424			9,233		1.20			532,805			16,873		3.17


Total interest-bearing deposits		13,851,610			106,023		0.77			13,074,373			160,874		1.23			11,365,459			263,306		2.32
Federal funds purchased and securities sold under agreements to repurchase		570,141			7,196		1.26			1,294,423			8,837		0.68			2,330,426			51,278		2.20
Other short-term borrowings		117,216			787		0.67			1,421,338			7,362		0.52			1,722,944			35,306		2.05
Long-term funding		1,765,253			58,341		3.30			1,869,148			78,178		4.18			1,601,003			80,671		5.04


Total wholesale funding		2,452,610			66,324		2.70			4,584,909			94,377		2.06			5,654,373			167,255		2.96


Total interest-bearing liabilities	$	16,304,220		$	172,347		1.06	%	$	17,659,282		$	255,251		1.45	%	$	17,019,832		$	430,561		2.53	%


Noninterest-bearing demand deposits		3,094,691								2,884,673								2,446,613
Accrued expenses and other liabilities		42,582								162,605								148,186
Stockholders’ equity		3,183,572								2,902,911								2,423,332


Total liabilities and stockholders’ equity	$	22,625,065							$	23,609,471							$	22,037,963


Net interest income and rate spread(1)				$	657,414		2.97	%				$	750,825		3.27	%				$	723,859		3.29	%


Net interest margin(1)							3.20	%							3.52	%							3.65	%


Taxable equivalent adjustment				$	23,635							$	24,820							$	27,711


(1)		The yield on tax-exempt loans and securities is computed on a taxable equivalent basis using a tax rate of 35% for all periods presented and is net of the effects of certain disallowed interest deductions.

(2)		Nonaccrual loans and loans held for sale have been included in the average balances.

(3)		Interest income includes net loan fees.

(4)		Federal Home Loan Bank and Federal Reserve Bank stocks have been included in the average balances.

TABLE 3: Rate/Volume Analysis(1)


	2010 Compared to 2009									2009 Compared to 2008
	Increase (Decrease) Due to									Increase (Decrease) Due to

	Volume			Rate			Net			Volume			Rate			Net

							($ in Thousands)

Interest income:
Loans:(2)
Commercial	$	(82,435	)	$	(13,024	)	$	(95,459	)	$	(39,094	)	$	(125,931	)	$	(165,025	)
Residential mortgage		(15,564	)		(10,748	)		(26,312	)		9,675			(13,277	)		(3,602	)
Retail		(11,484	)		(10,579	)		(22,063	)		3,827			(36,117	)		(32,290	)


Total loans		(109,483	)		(34,351	)		(143,834	)		(25,592	)		(175,325	)		(200,917	)
Investment securities:
Taxable		(3,782	)		(29,899	)		(33,681	)		97,431			(37,659	)		59,772
Tax-exempt(2)		1,061			(4,074	)		(3,013	)		(5,209	)		(1,088	)		(6,297	)
Short-term investments		4,700			(487	)		4,213			(20	)		(882	)		(902	)


Securities and short-term investments		1,979			(34,460	)		(32,481	)		92,202			(39,629	)		52,573


Total earning assets(2)	$	(107,504	)	$	(68,811	)	$	(176,315	)	$	66,610		$	(214,954	)	$	(148,344	)


Interest expense:
Savings deposits	$	26		$	(229	)	$	(203	)	$	(46	)	$	(2,596	)	$	(2,642	)
Interest-bearing demand deposits		1,419			101			1,520			2,847			(13,114	)		(10,267	)
Money market deposits		6,907			(16,468	)		(9,561	)		17,641			(53,720	)		(36,079	)
Time deposits, excluding Brokered CDs		(14,872	)		(27,338	)		(42,210	)		(2,807	)		(42,997	)		(45,804	)


Total interest-bearing deposits, excluding Brokered CDs		(6,520	)		(43,934	)		(50,454	)		17,635			(112,427	)		(94,792	)
Brokered CDs		(2,283	)		(2,114	)		(4,397	)		5,517			(13,157	)		(7,640	)


Total interest-bearing deposits		(8,803	)		(46,048	)		(54,851	)		23,152			(125,584	)		(102,432	)
Federal funds purchased and securities sold under agreements to repurchase		(6,612	)		4,971			(1,641	)		(16,634	)		(25,807	)		(42,441	)
Other short-term borrowings		(8,266	)		1,691			(6,575	)		(5,304	)		(22,640	)		(27,944	)
Long-term funding		(4,154	)		(15,683	)		(19,837	)		12,371			(14,864	)		(2,493	)


Total wholesale funding		(19,032	)		(9,021	)		(28,053	)		(9,567	)		(63,311	)		(72,878	)


Total interest-bearing liabilities	$	(27,835	)	$	(55,069	)	$	(82,904	)	$	13,585		$	(188,895	)	$	(175,310	)


Net interest income(2)	$	(79,669	)	$	(13,742	)	$	(93,411	)	$	53,025		$	(26,059	)	$	26,966


(1)		The change in interest due to both rate and volume has been allocated in proportion to the relationship to the dollar amounts of the change in each.

(2)		The yield on tax-exempt loans and securities is computed on a fully taxable equivalent basis using a tax rate of 35% for all periods presented and is net of the effects of certain disallowed interest deductions.

TABLE 4: Interest Rate Spread and Interest Margin (on a taxable equivalent basis)


	2010 Average								2009 Average								2008 Average

			% of								% of								% of
			Earning			Yield /					Earning			Yield /					Earning			Yield /
	Balance		Assets			Rate			Balance		Assets			Rate			Balance		Assets			Rate

									($ in Thousands)

Total loans	$	13,186,712		64.1	%		4.64	%	$	15,595,636		73.1	%		4.84	%	$	16,080,565		81.1	%		5.95	%
Securities and short-term investments		7,381,783		35.9	%		2.95	%		5,741,746		26.9	%		4.36	%		3,759,141		18.9	%		5.26	%


Earning assets	$	20,568,495		100.0	%		4.03	%	$	21,337,382		100.0	%		4.72	%	$	19,839,706		100.0	%		5.82	%


Financed by:
Interest-bearing funds	$	16,304,220		79.3	%		1.06	%	$	17,659,282		82.8	%		1.45	%	$	17,019,832		85.8	%		2.53	%
Noninterest-bearing funds		4,264,275		20.7	%					3,678,100		17.2	%					2,819,874		14.2	%


Total funds sources	$	20,568,495		100.0	%		0.84	%	$	21,337,382		100.0	%		1.20	%	$	19,839,706		100.0	%		2.17	%


Interest rate spread							2.97	%							3.27	%							3.29	%
Contribution from net free funds							0.23	%							0.25	%							0.36	%

Net interest margin							3.20	%							3.52	%							3.65	%


Average prime rate*							3.25	%							3.25	%							5.08	%
Average federal funds rate*							0.18	%							0.17	%							1.75	%
Average spread							307	bp							308	bp							333	bp


*		Source: Bloomberg

TABLE 5: Selected Average Balances


					Dollar			Percent
	2010		2009		Change			Change

	($ in Thousands)

ASSETS
Loans:
Commercial	$	7,790,554	$	9,673,513	$	(1,882,959	)		(19.5	)%
Residential mortgage		2,059,156		2,369,719		(310,563	)		(13.1	)
Retail		3,337,002		3,552,404		(215,402	)		(6.1	)


Total loans		13,186,712		15,595,636		(2,408,924	)		(15.4	)
Investment securities:
Taxable		4,767,858		4,846,305		(78,447	)		(1.6	)
Tax-exempt		860,547		844,663		15,884			1.9
Short-term investments		1,753,378		50,778		1,702,600			N/M


Securities and short-term investments		7,381,783		5,741,746		1,640,037			28.6


Total earning assets		20,568,495		21,337,382		(768,887	)		(3.6	)
Other assets		2,056,570		2,272,089		(215,519	)		(9.5	)


Total assets	$	22,625,065	$	23,609,471	$	(984,406	)		(4.2	)%



LIABILITIES & STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
Savings deposits	$	898,019	$	880,544	$	17,475			2.0	%
Interest-bearing demand deposits		2,780,525		2,154,745		625,780			29.0
Money market deposits		6,374,071		5,390,782		983,289			18.2
Time deposits, excluding Brokered CDs		3,251,667		3,880,878		(629,211	)		(16.2	)


Total interest-bearing deposits, excluding Brokered CDs		13,304,282		12,306,949		997,333			8.1
Brokered CDs		547,328		767,424		(220,096	)		(28.7	)


Total interest-bearing deposits		13,851,610		13,074,373		777,237			5.9
Short-term borrowings		687,357		2,715,761		(2,028,404	)		(74.7	)
Long-term funding		1,765,253		1,869,148		(103,895	)		(5.6	)


Total interest-bearing liabilities		16,304,220		17,659,282		(1,355,062	)		(7.7	)
Noninterest-bearing demand deposits		3,094,691		2,884,673		210,018			7.3
Accrued expenses and other liabilities		42,582		162,605		(120,023	)		(73.8	)
Stockholders’ equity		3,183,572		2,902,911		280,661			9.7


Total liabilities and stockholders’ equity	$	22,625,065	$	23,609,471	$	(984,406	)		(4.2	)%

Provision for Loan Losses

The provision for loan losses in 2010 was $390.0 million, compared to $750.6 million and $202.1 million for 2009 and 2008, respectively. Net charge offs were $486.7 million for 2010, compared to $442.5 million for 2009 and $137.3 million for 2008. Net charge offs as a percent of average loans were 3.69%, 2.84%, and 0.85% for 2010, 2009, and 2008, respectively. At December 31, 2010, the allowance for loan losses was $476.8 million. In comparison, the allowance for loan losses was $573.5 million at December 31, 2009, and $265.4 million at December 31, 2008. The ratio of the allowance for loan losses to total loans was 3.78%, 4.06%, and 1.63% at December 31, 2010, 2009, and 2008, respectively. Nonaccrual loans at December 31, 2010, were $574 million,

compared to $1.1 billion at December 31, 2009, and $327 million at December 31, 2008, representing 4.55%, 7.63%, and 2.01% of total loans, respectively.

The provision for loan losses is predominantly a function of the Corporation’s reserving methodology and judgments as to other qualitative and quantitative factors used to determine the appropriate level of the allowance for loan losses which focuses on changes in the size and character of the loan portfolio, changes in levels of impaired and other nonaccrual loans, historical losses and delinquencies on each portfolio category, the level of loans sold or transferred to held for sale, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other factors which could affect potential credit losses. See additional discussion under sections, “Allowance for Loan Losses,” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned.”

Noninterest Income

Noninterest income was $345.5 million for 2010, down $5.4 million or 1.5% from 2009. Core fee-based revenue (as defined in Table 6 below) was $243.7 million for 2010, a decrease of $15.9 million or 6.1% versus 2009. Net mortgage banking income was $33.1 million compared to $40.9 million for 2009. Net gains / losses on investment securities and asset sales combined were $22.9 million for 2010, a favorable change of $18.2 million versus 2009. All other noninterest income categories combined were $45.8 million, relatively flat compared to 2009. “Fee income” (defined in Table 6 below) as a percentage of “total revenue” (defined as taxable equivalent net interest income plus fee income) was 32.9% for 2010 compared to 31.6% for 2009.

TABLE 6: Noninterest Income


	Years Ended December 31,									Change From Prior Year

										$ Change			% Change			$ Change			% Change
	2010			2009			2008			2010			2010			2009			2009
	($ in Thousands)

Trust service fees	$	37,853		$	36,009		$	38,420		$	1,844			5.1	%	$	(2,411	)		(6.3	)%
Service charges on deposit accounts		96,740			116,918			118,368			(20,178	)		(17.3	)		(1,450	)		(1.2	)
Card-based and other nondeposit fees		47,850			45,977			48,540			1,873			4.1			(2,563	)		(5.3	)
Retail commission income		61,256			60,678			62,588			578			1.0			(1,910	)		(3.1	)


Core fee-based revenue		243,699			259,582			267,916			(15,883	)		(6.1	)		(8,334	)		(3.1	)
Mortgage banking income		59,145			67,277			37,566			(8,132	)		(12.1	)		29,711			79.1
Mortgage servicing rights expense		26,009			26,395			22,882			(386	)		(1.5	)		3,513			15.4


Mortgage banking, net		33,136			40,882			14,684			(7,746	)		(18.9	)		26,198			178.4
Capital market fees, net		6,072			5,536			7,390			536			9.7			(1,854	)		(25.1	)
Bank owned life insurance (“BOLI”) income		15,761			16,032			19,804			(271	)		(1.7	)		(3,772	)		(19.0	)
Other		23,942			24,226			30,065			(284	)		(1.2	)		(5,839	)		(19.4	)


Subtotal (“fee income”)		322,610			346,258			339,859			(23,648	)		(6.8	)		6,399			1.9
Asset sale losses, net		(2,004	)		(4,071	)		(1,668	)		2,067			(50.8	)		(2,403	)		N/M
Investment securities gains (losses), net		24,917			8,774			(52,541	)		16,143			N/M			61,315			N/M


Total noninterest income	$	345,523		$	350,961		$	285,650		$	(5,438	)		(1.5	)%	$	65,311			22.9	%


N/M = not meaningful

Trust service fees for 2010 were $37.9 million, up $1.8 million (5.1%) from 2009, primarily due to asset management fees on higher account balances as stock market performance improved in 2010. The market value of assets under management at December 31, 2010, was $5.7 billion compared to $5.3 billion at December 31, 2009.

Service charges on deposit accounts were $96.7 million, $20.2 million (17.3%) lower than 2009. The decrease was primarily attributable to lower nonsufficient funds / overdraft fees (down $21.2 million to $58.7 million), due to changes in customer behavior, recent regulatory changes, and overdraft policy changes.

Card-based and other nondeposit fees were $47.9 million for 2010, an increase of $1.9 million (4.1%) from 2009, principally due to higher interchange, letter of credit, and other commercial loan servicing fees. Retail commission income (which includes the commissions from insurance and brokerage product sales) was $61.3 million for 2010, up $0.6 million (1.0%) compared to 2009, including higher brokerage and variable annuity commissions (up $3.3 million to $13.1 million on a combined basis), partially offset by lower fixed annuity commissions (down $2.5 million) and lower insurance commissions (down $0.2 million).

Net mortgage banking income for 2010 was $33.1 million, down $7.7 million compared to 2009. Net mortgage banking income consists of gross mortgage banking income less mortgage servicing rights expense. Gross mortgage banking income (which includes servicing fees and the gain or loss on sales of mortgage loans to the secondary market, related fees, and fair value marks on the mortgage derivatives (collectively “gains on sales and related income”)) was $59.1 million in 2010, a decrease of $8.1 million (12.1%) compared to 2009. This $8.1 million decrease between 2010 and 2009 was primarily attributable to lower volume of loans sold to the secondary market, resulting in lower gains on sales and related income (down $7.6 million). Secondary mortgage production was $2.3 billion for 2010, compared to $3.7 billion for 2009.

Mortgage servicing rights expense includes both the amortization of the mortgage servicing rights asset and changes to the valuation allowance associated with the mortgage servicing rights asset. Mortgage servicing rights expense is affected by the size of the servicing portfolio, as well as the changes in the estimated fair value of the mortgage servicing rights asset. Mortgage servicing rights expense was $26.0 million for 2010 compared to $26.4 million for 2009, with a $3.7 million decrease to the valuation reserve (comprised of a $3.1 million addition to the valuation reserve in 2010, compared to a $6.8 million addition to the valuation reserve during 2009) and $3.3 million higher base amortization. As mortgage interest rates fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. Mortgage servicing rights, net of any valuation allowance, are carried in other intangible assets, net, on the consolidated balance sheets at the lower of amortized cost or estimated fair value. At December 31, 2010, the net mortgage servicing rights asset was $63.9 million, representing 86 bp of the $7.5 billion portfolio of residential mortgage loans serviced for others, compared to a net mortgage servicing rights asset of $63.8 million, representing 83 bp of the $7.7 billion mortgage portfolio serviced for others at December 31, 2009. Mortgage servicing rights are considered a critical accounting policy given that estimating their fair value involves an internal discounted cash flow model and assumptions that involve judgment, particularly of estimated prepayment speeds of the underlying mortgages serviced and the overall level of interest rates. See section “Critical Accounting Policies,” as well as Note 1, “Summary of Significant Accounting Policies,” of the notes to consolidated financial statements for the Corporation’s accounting policy for mortgage servicing rights and Note 4, “Goodwill and Intangible Assets,” of the notes to consolidated financial statements for additional disclosure.

Capital market fees, net (which include fee income from foreign currency and interest rate risk related services provided to our customers) were $6.1 million, an increase of $0.5 million (9.7%) compared to 2009, due to a $0.2 million increase in interest rate risk related fees, combined with a $0.3 million increase in foreign currency related fees. BOLI income was $15.8 million, down $0.3 million (1.7%) from 2009, primarily due to the lower interest rates on the underlying assets of the BOLI investment. Other income was $23.9 million, a decrease of $0.3 million (1.2%) versus 2009, with small decreases in various other noninterest income categories.

Net asset sale losses were $2.0 million for 2010 (primarily due to losses on sales of other real estate owned, partially offset by gains on the sale of educational loans to the U.S. Department of Education), compared to net asset sale losses of $4.1 million for 2009 (primarily due to losses on sales of other real estate owned). Net investment securities gains of $24.9 million for 2010 were attributable to gains of $28.9 million on the sale of residential mortgage-related, federal agency, and municipal securities, partially offset by a $0.1 million loss on the sale of municipal securities and $3.9 million of credit-related other-than-temporary write-downs (including a $3.0 million write-down on trust preferred debt securities, a $0.1 million write-down on a non-agency mortgage-related security, and a $0.8 million write-down on various equity securities). Net investment securities gains of $8.8 million for 2009 were attributable to gains of $14.6 million on the sale of mortgage-related securities, partially offset by a $2.9 million loss on the sale of mortgage-related securities and $2.9 million of credit-related other-than-temporary

write-downs (including a $2.0 million write-down on a trust preferred debt security, a $0.4 million write-down on a non-agency mortgage-related security, and a $0.5 million write-down on various equity securities). For additional data see section, “Investment Securities Portfolio,” and Note 1, “Summary of Significant Accounting Policies,” and Note 2, “Investment Securities,” of the notes to consolidated financial statements.

Noninterest Expense

Noninterest expense for 2010 was $630.3 million, an increase of $18.9 million or 3.1% over 2009. Personnel expense increased $18.9 million and FDIC expense increased $4.4 million, while foreclosure / OREO expense decreased $4.3 million and collectively all other noninterest expenses were down $0.1 million compared to 2009.

TABLE 7: Noninterest Expense


	Years Ended December 31,									Change From Prior Year

										$ Change			% Change			$ Change			% Change
	2010			2009			2008			2010			2010			2009			2009
							($ in Thousands)

Personnel expense	$	323,249		$	304,390		$	309,478		$	18,859			6.2	%	$	(5,088	)		(1.6	)%
Occupancy		49,937			49,341			50,461			596			1.2			(1,120	)		(2.2	)
Equipment		18,371			18,385			19,123			(14	)		(0.1	)		(738	)		(3.9	)
Data processing		29,714			30,893			30,451			(1,179	)		(3.8	)		442			1.5
Business development and advertising		18,385			18,033			21,400			352			2.0			(3,367	)		(15.7	)
Other intangible asset amortization expense		4,919			5,543			6,269			(624	)		(11.3	)		(726	)		(11.6	)
Legal and professional fees		20,439			19,562			14,566			877			4.5			4,996			34.3
Foreclosure / OREO expense		33,844			38,129			13,685			(4,285	)		(11.2	)		24,444			178.6
FDIC expense		46,377			41,934			2,524			4,443			10.6			39,410			N/M
Stationery and supplies		5,575			6,128			7,674			(553	)		(9.0	)		(1,546	)		(20.1	)
Courier expense		4,275			4,691			6,153			(416	)		(8.9	)		(1,462	)		(23.8	)
Postage expense		5,887			7,122			7,702			(1,235	)		(17.3	)		(580	)		(7.5	)
Other		69,348			67,269			67,974			2,079			3.1			(705	)		(1.0	)


Total noninterest expense	$	630,320		$	611,420		$	557,460		$	18,900			3.1	%	$	53,960			9.7	%


Personnel expense to Total noninterest expense		51.3	%		49.8	%		55.5	%
N/M = not meaningful

Personnel expense (which includes salary-related expenses and fringe benefit expenses) was $323.2 million for 2010, up $18.9 million (6.2%) from 2009. Average full-time equivalent employees were 4,809 for 2010, down 4.1% from 5,016 for 2009, while at December 31, 2010, full-time equivalent employees were 4,894, up 2.3% compared to 4,784 at December 31, 2009 (reflecting investments in additional talent during the second half of 2010). Salary-related expenses increased $18.2 million (7.4%). This increase was primarily due to increased compensation and commissions (up $9.2 million or 4.1%, including merit increases between the years) combined with higher performance-based incentives (up $8.0 million). Fringe benefit expenses increased $0.7 million (1.2%), primarily attributable to higher benefit plan expenses related to the increased compensation expense.

Nonpersonnel noninterest expenses on a combined basis were $307.1 million, relatively flat compared to $307.0 million for 2009, with a shift in the mix of certain noninterest expense components. Other intangible asset amortization expense decreased $0.6 million (11.3%), attributable to the full amortization of certain intangible assets during 2009 and 2010. FDIC expense increased $4.4 million with a change in the components as 2010 expense reflected a deposit insurance rate increase and a larger assessable deposit base. Legal and professional expense of $20.4 million increased $0.9 million (4.5%), primarily due to higher legal and other professional consultant costs related to corporate projects initiated in 2010. Foreclosure / OREO expenses of $33.8 million decreased $4.3 million, primarily due to a decline in OREO write-downs. Other expense of $69.3 million increased $2.1 million (3.1%) from 2009, with 2010 including a $3.2 million early termination penalty on the repayment of

$230 million in long-term funding, an increase of $3.2 million to the reserve for losses on unfunded commitments, and an increase of $7 million related to certain ongoing legal matters, while 2009 included a $10.5 million increase to the reserve for losses on unfunded commitments.

Income Taxes

The Corporation recognized an income tax benefit of $40.2 million for 2010 compared to an income tax benefit of $153.2 million for 2009. The change in income tax was primarily due to the level of pretax loss between the years. During 2010, the Corporation recorded a $5 million net decrease in the reserve for uncertain tax positions related to the settlement of a tax issue and the expiration of various statutes of limitations, while during 2009, the Corporation recorded a $22 million net decrease in the valuation allowance on deferred tax assets and reserve for uncertain tax positions related to changes to state deferred tax assets as a result of changes in state tax legislation.

See Note 1, “Summary of Significant Accounting Policies,” of the notes to consolidated financial statements for the Corporation’s income tax accounting policy and section “Critical Accounting Policies.” Income tax expense recorded in the consolidated statements of income (loss) involves the interpretation and application of certain accounting pronouncements and federal and state tax codes, and is, therefore, considered a critical accounting policy. The Corporation undergoes examination by various taxing authorities. Such taxing authorities may require that changes in the amount of tax expense or valuation allowance be recognized when their interpretations differ from those of management, based on their judgments about information available to them at the time of their examinations. See Note 12, “Income Taxes,” of the notes to consolidated financial statements for more information.

BALANCE SHEET ANALYSIS

The Corporation’s growth comes predominantly from loans and investment securities. See sections “Loans” and “Investment Securities Portfolio.” The Corporation has generally financed its growth through increased deposits and issuance of debt (see sections, “Deposits,” “Other Funding Sources,” and “Liquidity”), as well as retention of earnings and the issuance of common and preferred stock, particularly in the case of certain acquisitions (see section “Capital”).

Loans

Total loans were $12.6 billion at December 31, 2010, a decrease of $1.5 billion or 10.7% from December 31, 2009. Commercial loans decreased $1.7 billion (19.5%) to represent 55% of total loans at the end of 2010, compared to 62% at year-end 2009. Retail loans were $3.2 billion, down $0.2 billion (5.9%) and represented 26% of total loans compared to 24% at December 31, 2009, while residential mortgage loans increased $0.4 billion (20.4%) to represent 19% of total loans at December 31, 2010 and 14% at December 31, 2009.

TABLE 8: Loan Composition


	As of December 31,

	2010					2009					2008					2007					2006

			% of					% of					% of					% of					% of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total			Amount		Total

	($ in Thousands)

Commercial and industrial	$	3,049,752		24	%	$	3,450,632		24	%	$	4,388,691		27	%	$	4,281,091		28	%	$	3,677,573		24	%
Commercial real estate		3,389,213		27			3,817,066		27			3,566,551		22			3,635,365		23			3,789,480		25
Real estate construction		553,069		4			1,397,493		10			2,260,888		13			2,260,766		14			2,047,124		14
Lease financing		60,254		—			95,851		1			122,113		1			108,794		1			81,814		1


Total commercial		7,052,288		55			8,761,042		62			10,338,243		63			10,286,016		66			9,595,991		64
Home equity		2,523,057		20			2,546,167		18			2,883,317		18			2,269,122		15			2,164,758		15
Installment		695,383		6			873,568		6			827,303		5			841,136		5			915,747		6


Total retail		3,218,440		26			3,419,735		24			3,710,620		23			3,110,258		20			3,080,505		21
Residential mortgage		2,346,007		19			1,947,848		14			2,235,045		14			2,119,978		14			2,205,030		15


Total loans	$	12,616,735		100	%	$	14,128,625		100	%	$	16,283,908		100	%	$	15,516,252		100	%	$	14,881,526		100	%


Farmland	$	36,741		1	%	$	47,514		1	%	$	57,242		1	%	$	59,590		1	%	$	59,220		2	%
Multi-family		485,977		14			543,936		14			496,059		14			534,679		15			654,238		17
Owner occupied(a)		1,049,798		31			1,198,075		32			1,239,139		35			1,293,217		36
Non-owner occupied(a)		1,816,697		54			2,027,541		53			1,774,111		50			1,747,879		48			3,076,022		81


Commercial real estate	$	3,389,213		100	%	$	3,817,066		100	%	$	3,566,551		100	%	$	3,635,365		100	%	$	3,789,480		100	%


1-4 family construction(b)	$	96,296		17	%	$	251,307		18	%	$	423,137		19	%	$	486,383		22	%
All other construction(b)		456,773		83			1,146,186		82			1,837,751		81			1,774,383		78


Real estate construction	$	553,069		100	%	$	1,397,493		100	%	$	2,260,888		100	%	$	2,260,766		100	%	$	2,047,124		100	%


(a)		A break-down between owner occupied and non-owner occupied commercial real estate is not available for 2006.


(b)		A break-down between 1-4 family and all other real estate construction is not available for 2006.

During 2010, the Corporation undertook a comprehensive risk appetite and portfolio shaping analysis. Long-term goals were established for the composition of the loan portfolio relative to the retail, commercial and industrial, and commercial real estate portfolio guidelines. These guidelines are designed to create balance and diversification in our portfolio and are regularly monitored to manage the Corporation’s credit risk profile.

Commercial loans are generally viewed as having more inherent risk of default than residential mortgage or retail loans. Also, the commercial loan balance per borrower is typically larger than that for residential mortgage and retail loans, inferring higher potential losses on an individual customer basis. Commercial loans declined during 2010 as loan demand remained weak given the continued economic uncertainties and the Corporation further responded to the stricter credit environment (particularly in commercial real estate and real estate construction) through nonaccrual loan sales, discounted resolutions, and loan restructurings.

Commercial and industrial loans were $3.0 billion at the end of 2010, down $401 million (11.6%) since year-end 2009, and comprised 24% of total loans outstanding at both year-end 2010 and year-end 2009. The commercial and industrial loan classification primarily consists of commercial loans to middle market companies and small businesses. Loans of this type are in a diverse range of industries. The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any. Within the commercial and industrial classification, loans to finance agricultural production totaled less than 0.5% of total loans for all periods presented. During the second half of 2010, the Corporation created a specialized financial services group to capitalize on opportunities in targeted industry segments (e.g., insurance, mortgage warehouse, public funds, healthcare, financial institutions, power, oil and gas). While it will take some time to build this group’s business, the Corporation believes this focused approach to these segments will provide an opportunity for diversified growth.

Commercial real estate primarily includes commercial-based loans that are secured by multifamily properties and nonfarm/nonresidential real estate properties. Commercial real estate totaled $3.4 billion at December 31, 2010, down $428 million (11.2%) from December 31, 2009, and comprised 27% of total loans, unchanged from year-end 2009. Commercial real estate loans involve borrower characteristics similar to those discussed for commercial and industrial loans and real estate construction projects. Loans of this type are mainly secured by commercial income properties or multifamily projects. Credit risk is managed in a similar manner to commercial and industrial loans and real estate construction by employing sound underwriting guidelines, lending primarily to borrowers in local markets and businesses, periodically evaluating the underlying collateral, and formally reviewing the borrower’s financial soundness and relationship on an ongoing basis.

Real estate construction loans declined $844 million (60.4%) to $553 million, representing 4% of the total loan portfolio at the end of 2010, compared to 10% at the end of 2009. Loans in this classification are primarily short-term or interim loans that provide financing for the acquisition or development of commercial income properties, multifamily projects or residential development, both single family and condominium. Real estate construction loans are made to developers and project managers who are generally well known to the Corporation, and have prior successful project experience. The credit risk associated with real estate construction loans is generally confined to specific geographic areas but is also influenced by general economic conditions. The Corporation controls the credit risk on these types of loans by making loans in familiar markets to developers, underwriting the loans to meet the requirements of institutional investors in the secondary market, reviewing the merits of individual projects, controlling loan structure, and monitoring project progress and construction advances. Challenges in the real estate loan portfolio arose primarily from concentration risks (i.e., hold positions, product types, and geography). Subsequently, the Corporation has put in place guidelines to mitigate the concentration risks. These policies and concentration guidelines are regularly reviewed by management and the Board.

The Corporation’s current lending standards for commercial real estate and real estate construction lending are determined by property type and specifically address many criteria, including: maximum loan amounts, maximum LTV, requirements for pre-leasing and / or presales, minimum borrower equity, and maximum loan to cost. Currently, the maximum standard for LTV is 80%, with lower limits established for certain higher risk types, such as raw land which has a 50% LTV maximum. The Corporation’s LTV guidelines are in compliance with regulatory supervisory limits. In most cases, for real estate construction loans, the loan amounts include interest reserves, which are built into the loans and sized to fund loan payments through construction and lease up and / or sell out.

Retail loans totaled $3.2 billion at December 31, 2010, down $201 million (5.9%) compared to 2009, and represented 26% of the 2010 year-end loan portfolio versus 24% at year-end 2009. Loans in this classification include home equity and installment loans. Home equity consists of home equity lines, as well as home equity loans, some of which are first lien positions, while installment loans consist of educational loans, as well as short-term and other personal installment loans. The Corporation had $496 million and $615 million of education loans at December 31, 2010 and 2009, respectively, the majority of which are government guaranteed. Credit risk for these types of loans is generally influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral. Risks of loss are generally on smaller average balances per loan spread over many borrowers. Once charged off, there is usually less opportunity for recovery on these smaller retail loans. Credit risk is primarily controlled by reviewing the creditworthiness of the borrowers, monitoring payment histories, and taking appropriate collateral and guaranty positions.

Residential mortgage loans totaled $2.3 billion at the end of 2010, up $398 million (20.4%) from the prior year and comprised 19% of total loans outstanding at December 31, 2010 and 14% at December 31, 2009. Residential mortgage loans include conventional first lien home mortgages and the Corporation generally limits the maximum loan to 80% of collateral value without credit enhancement (e.g. PMI insurance). As part of management’s historical practice of originating and servicing residential mortgage loans, nearly all of the Corporation’s fixed-rate residential real estate mortgage loans are sold in the secondary market with servicing rights retained. However, during the second half of 2010, the Corporation made a decision to change its practice and began retaining 15-year, fixed-rate residential real estate mortgages in its loan portfolio. As a result, approximately $500 million of 15-year, fixed-rate residential real estate mortgage loans were retained by the Corporation in 2010. The Corporation plans to retain an additional $500 million in 2011.

The Corporation’s underwriting and risk-based pricing guidelines for consumer-related real estate loans consist of a combination of both borrower FICO (credit score) and the loan-to-value (“LTV”) of the property securing the loan. Currently, for home equity products, the maximum acceptable LTV is 85% for customers with FICO scores exceeding 710, and 75% LTV for all other customers. The average FICO score for new home equity production in 2010 was 783, compared to 764 in 2009, 765 in 2008, 750 in 2007, and 739 in 2006. Residential mortgage products continue to be underwritten using FHLMC and FNMA secondary marketing guidelines.

Factors that are important to managing overall credit quality are sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, an appropriate allowance for loan losses, and sound nonaccrual and charge off policies.

An active credit risk management process is used for commercial loans to further ensure that sound and consistent credit decisions are made. Credit risk is controlled by detailed underwriting procedures, comprehensive loan administration, and periodic review of borrowers’ outstanding loans and commitments. Borrower relationships are formally reviewed and graded on an ongoing basis for early identification of potential problems. Further analyses by customer, industry, and geographic location are performed to monitor trends, financial performance, and concentrations.

The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas within our core footprint. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At December 31, 2010, no significant concentrations existed in the Corporation’s portfolio in excess of 10% of total loans. However, the Corporation has several areas of larger exposures (less than 10% of total loans) which are being closely monitored, such as $426 million of commercial and industrial leveraged loans, $315 million of residential and land development loans, and $110 million of broker generated home equity loans.

TABLE 9: Loan Maturity Distribution and Interest Rate Sensitivity


	Maturity(1)

December 31, 2010	Within 1 Year(2)			1-5 Years			After 5 Years			Total

	($ in Thousands)

Commercial and industrial	$	2,409,511		$	498,460		$	141,781		$	3,049,752
Real estate construction		441,234			97,957			13,878			553,069


Total	$	2,850,745		$	596,417		$	155,659		$	3,602,821


Fixed rate	$	665,396		$	402,831		$	125,703		$	1,193,930
Floating or adjustable rate		2,185,349			193,586			29,956			2,408,891


Total	$	2,850,745		$	596,417		$	155,659		$	3,602,821


Percent by maturity distribution		79	%		17	%		4	%		100	%


(1)		Based upon scheduled principal repayments.

(2)		Demand loans, past due loans, and overdrafts are reported in the “Within 1 Year” category.

Allowance for Loan Losses

Credit risks within the loan portfolio are inherently different for each loan type. Credit risk is controlled and monitored through the use of lending standards, a thorough review of potential borrowers, and on-going review of loan payment performance. Active asset quality administration, including early problem loan identification and timely resolution of problems, aids in the management of credit risk and minimization of loan losses. Credit risk management for each loan type is discussed briefly in the section entitled “Loans.”

The level of the allowance for loan losses represents management’s estimate of an amount appropriate to provide for probable credit losses in the loan portfolio at the balance sheet date. To assess the appropriateness of the allowance for loan losses, an allocation methodology is applied by the Corporation which focuses on evaluation of many

factors, including but not limited to: evaluation of facts and issues related to specific loans, management’s ongoing review and grading of the loan portfolio, consideration of historical loan loss and delinquency experience on each portfolio category, trends in past due and nonaccrual loans, the level of potential problem loans, the risk characteristics of the various classifications of loans, changes in the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect potential credit losses. Assessing these factors involves significant judgment. Therefore, management considers the allowance for loan losses a critical accounting policy — see section “Critical Accounting Policies” and further discussion in this section. See also management’s allowance for loan losses accounting policy in Note 1, “Summary of Significant Accounting Policies,” and Note 3, “Loans,” of the notes to consolidated financial statements for additional allowance for loan losses disclosures. Table 8 provides information on loan growth and composition, Tables 10 and 11 provide additional information regarding activity in the allowance for loan losses, and Table 12 provides additional information regarding nonperforming assets.

At December 31, 2010, the allowance for loan losses was $476.8 million, compared to $573.5 million at December 31, 2009 and $265.4 million at December 31, 2008. The allowance for loan losses to total loans was 3.78%, 4.06%, and 1.63% at December 31, 2010, 2009 and 2008, respectively, and the allowance for loan losses covered 83%, 53% and 81% of nonaccrual loans at December 31, 2010, 2009 and 2008, respectively. At December 31, 2010, the Corporation had $654 million of impaired loans with an allowance for loan losses allocation of $144 million, while at December 31, 2009, the Corporation had $1.1 billion of impaired loans with an allowance for loan losses allocation of $159 million. The Corporation’s estimate of the appropriate allowance for loan losses does not have a targeted reserve to nonperforming loan coverage ratio. Management’s allowance methodology includes an impairment analysis on specifically identified loans defined as impaired by the Corporation, as well as other qualitative and quantitative factors (including, but not limited to, historical trends, risk characteristics of the loan portfolio, changes in the size and character of the loan portfolio, and existing economic conditions) in determining the overall appropriate level of the allowance for loan losses. Changes in the allowance for loan losses are shown in Table 10. Credit losses, net of recoveries, are deducted from the allowance for loan losses. Finally, the provision for loan losses, a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is appropriate to provide for probable credit losses in the loan portfolio at the balance sheet date. Based on management’s assessment of the appropriate level of the allowance for loan losses given the changes in credit quality metrics, a provision for loan losses of $390.0 million was recognized for 2010, compared to a provision for loan losses of $750.6 million for 2009 and a provision for loan losses of $202.1 million for 2008.

The weakness in the economy during 2009 and into 2010, particularly in the commercial real estate markets, has been evidenced by an approximately 27% decline in average commercial real estate values in the Midwest since the beginning of 2008. Commercial real estate values in the Midwest began to decline in 2008 (down 9-10%) primarily in the fourth quarter of 2008, continued to decline in 2009 (down 20%), and started to show some improvement late in 2010 (up 3-5%). During 2008, vacancy rates for office and retail properties began to increase, up 20-25% by year end 2009 and began to show small improvements by year end 2010, down 2-5%, causing commercial real estate buyers during this period to increase their required rates of return (i.e., capitalization rates) due to the higher cash flow risk, putting downward pressure on commercial real estate values. The value declines in later 2008 and throughout 2009 led to a significant decrease in sales of commercial real estate properties, which on a national level totaled approximately $150 billion in 2008, declining to approximately $50 billion in 2009 and improving to approximately $120 billion in 2010, indicating the high level of illiquidity that existed during this period. Residential real estate markets have also been weak across the Midwest as average property values have declined approximately 5% in Wisconsin and over 10% in both Minnesota and Illinois since the beginning of 2008, with the majority of that decline coming during 2008 and 2009. Finally, as a measure of overall weakness across the Midwestern economy, unemployment rates have increased significantly in each of our footprint states (Wisconsin up 70% to 7.5%, Minnesota up 49% to 7.0%, and Illinois up 69% to 9.3%) since the beginning of 2008. In a challenging real estate market, such as currently exists as described above, the value of the collateral securing the loans has become one of the most important factors in determining the appropriate amount of allowance for estimated loan losses to record at the balance sheet date.

During 2010, the Corporation took action to significantly improve its credit metrics and address the challenges experienced during 2009 (as discussed above). Nonaccrual loans were $574 million (representing 4.55% of total loans) at December 31, 2010, compared to $1.1 billion (representing 7.63% of total loans) at December 31, 2009, a decrease of $503 million (47%). Through a combination of loan sales and discounted payoffs (resolutions), the Corporation reduced nonaccrual loans with a net book value of $597 million during 2010. Sales of nonaccrual loans and discounted payoffs resulted in $189 million of net charge offs at the time of sale. In addition, during 2010 prior to the sale, the Corporation recognized an additional $115 million of net charge offs on these loans. Loans past due 30-89 days decreased to $120 million at year-end 2010, a reduction of over 50% from year-end 2009. Potential problem loans decreased $632 million (40%) to $964 million at December 31, 2010. As a result of the actions taken during 2010, the Corporation experienced elevated levels of net charge offs, though the provision for loan losses was down compared to the prior year.

During 2009, as the credit environment eroded, the Corporation experienced a corresponding deterioration in its credit quality metrics related to the economic trends discussed above. During the year, collateral values were generally declining at an unprecedented rate, which led the Corporation to perform a deeper review of all larger collateral dependent loans, resulting in an increase in impairment, reserves and charge offs during 2009. More specifically, this activity resulted in additional loans being added to the nonaccrual category based on concerns of collectability. In addition to the work performed by credit management, an independent internal review was performed and the Corporation retained a third party valuation advisor to assist in validating collateral valuation estimates. In addition to the collateral value declines in commercial real estate and real estate construction, the Corporation experienced higher loss content on many commercial and industrial loans during 2009, particularly on loans that were enterprise value-based or related to the housing industry. As a result, the Corporation concluded that a significant increase in the allowance for loan losses was appropriate which led to a large increase in the level of provision for loan losses and charge offs in 2009.

Gross charge offs were $528.5 million for 2010, $452.2 million for 2009, and $145.8 million for 2008, while recoveries for the corresponding periods were $41.8 million, $9.7 million, and $8.5 million, respectively. As a result, net charge offs were $486.7 million or 3.69% of average loans for 2010, compared to $442.5 million or 2.84% of average loans for 2009, and $137.3 million or 0.85% of average loans for 2008 (see Table 10). The 2010 increase in net charge offs of $44 million was comprised of a $46 million increase in commercial net charge offs, and a $2 million decrease in retail and residential mortgage net charge offs. The 2010 increase in commercial net charge offs was mainly attributable to the sale or other resolution of nonaccrual loans with a net book value of $597 million, resulting in $189 million of charge offs at the time of sale (primarily in commercial real estate and real estate construction). In addition, during 2010 prior to the sale, the Corporation recognized an additional $115 million of net charge offs on these loans. For 2010, 86% of net charge offs came from commercial loans (and commercial loans represented 55% of total loans at year-end 2010), compared to 84% for 2009 and 79% for 2008. The continued elevated levels of retail home equity and residential mortgage net charge offs was primarily due to the uncertain economic conditions and a weak housing market. For 2010, retail loans (which represent 26% of total loans at year-end 2010) accounted for 11% of net charge offs, down from 13% for 2009 and 19% for 2008. Residential mortgages (representing 19% of total loans at year-end 2010) accounted for 3% of 2010 net charge offs, compared to 3% and 2% for 2009 and 2008, respectively. Gross charge offs of retail and residential mortgage loans have been rising over the past three years, although moderating in 2010, as uncertain economic conditions (unemployment, higher energy prices, rising health care costs, weak housing market), have been impacting the consumer’s borrowing behavior and ability to pay back debt, while recoveries on these loans have remained relatively low. Loans charged off are subject to continuous review, and specific efforts are taken to achieve maximum recovery of principal, accrued interest, and related expenses.

TABLE 10: Loan Loss Experience


	Years Ended December 31,

	2010					2009					2008					2007					2006
	($ in Thousands)

Allowance for loan losses, at beginning of year	$	573,533				$	265,378				$	200,570				$	203,481				$	203,404
Balance related to acquisitions		—					—					—					2,991					—
Provision for loan losses		390,010					750,645					202,058					34,509					19,056
Loans charged off:
Commercial and industrial*		121,179					161,260					45,207					21,574					9,562
Commercial real estate*		117,401					57,288					12,932					4,427					1,918
Real estate construction*		204,728					157,752					55,782					2,559					1,287
Lease financing		11,081					1,575					599					150					140


Total commercial*		454,389					377,875					114,520					28,710					12,907
Home equity		51,132					49,674					20,011					9,732					8,251
Installment		9,787					10,364					7,546					6,501					7,005


Total retail		60,919					60,038					27,557					16,233					15,256
Residential mortgage		13,184					14,293					3,749					2,306					2,344


Total loans charged off*		528,492					452,206					145,826					47,249					30,507
Recoveries of loans previously charged off:
Commercial and industrial		20,609					5,583					6,000					3,595					5,489
Commercial real estate		10,449					1,049					391					804					3,148
Real estate construction		6,040					555					73					252					—
Lease financing		25					5					29					26					23


Total commercial		37,123					7,192					6,493					4,677					8,660
Home equity		2,733					884					384					386					370
Installment		1,669					1,525					1,386					1,530					1,559


Total retail		4,402					2,409					1,770					1,916					1,929
Residential mortgage		237					115					313					245					939


Total recoveries		41,762					9,716					8,576					6,838					11,528


Total net charge offs*		486,730					442,490					137,250					40,411					18,979


Allowance for loan losses, at end of year	$	476,813				$	573,533				$	265,378				$	200,570				$	203,481


Ratios at end of year:
Allowance for loan losses to total loans		3.78	%				4.06	%				1.63	%				1.29	%				1.37	%
Allowance for loan losses to net charge offs		1.0	x				1.3	x				1.9	x				5.0	x				10.7	x


Net loan charge offs (recoveries):				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial and industrial*	$	100,570		330		$	155,677		401		$	39,207		90		$	17,979		46		$	4,073		12
Commercial real estate*		106,952		295			56,239		150			12,541		35			3,623		10			(1,230	)	(3	)
Real estate construction*		198,688		N/M			157,197		816			55,709		238			2,307		11			1,287		6
Lease financing		11,056		N/M			1,570		144			570		47			124		14			117		16


Total commercial*		417,266		536			370,683		383			108,027		104			24,033		25			4,247		4
Home equity		48,399		195			48,790		181			19,627		74			9,346		43			7,881		37
Installment		8,118		95			8,839		103			6,160		74			4,971		57			5,446		57


Total retail		56,517		169			57,629		162			25,787		74			14,317		47			13,327		43
Residential mortgage		12,947		63			14,178		60			3,436		16			2,061		9			1,405		5


Total net charge offs*	$	486,730		369		$	442,490		284		$	137,250		85		$	40,411		27		$	18,979		12


* Charge offs for the year ended December 31, 2010, include $8 million related to write-downs on loans transferred to held for sale and $189 million related to write-downs of commercial loans sold and charge offs of commercial loans resolved through discounted payoff, comprised of $20 million in commercial and industrial, $66 million in commercial real estate, and $111 million in real estate construction.
(A) — Ratio of net charge offs to average loans by loan type in basis points.
N/M = not meaningful
Commercial real estate and Real estate construction net charge off detail:
Farmland	$	377		89		$	146		28		$	74		13		$	1		—		$	42		7
Multi-family		13,516		256			6,225		119			1,116		22			59		1			(144	)	(2	)
Owner occupied(a)		20,563		183			7,352		58			4,630		37			3,317		24
Non-owner occupied(a)		72,496		377			42,516		224			6,721		38			246		1			(1,128	)	(4	)


Commercial real estate	$	106,952		295		$	56,239		150		$	12,541		35		$	3,623		10		$	(1,230	)	(3	)


1-4 family construction(b)	$	41,748		N/M		$	38,662		748		$	21,723		178		$	1,692		4
All other construction(b)		156,940		N/M			118,535		N/M			33,986		495			615		31			1,287


Real estate construction	$	198,688		N/M		$	157,197		816		$	55,709		238		$	2,307		11		$	1,287		6


(a)		A break-down between owner occupied and non-owner occupied commercial real estate is not available for 2006.

(b)		A break-down between 1-4 family and all other real estate construction is not available for 2006.

TABLE 11: Allocation of the Allowance for Loan Losses


	As of December 31,

	2010					2009					2008					2007					2006
	($ in Thousands)

Allowance allocation:				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial & industrial	$	137,770		4.52	%	$	196,637		5.70	%	$	103,198		2.35	%	$	67,941		1.59	%	$	88,112		2.40	%
Commercial real estate		165,584		4.89			162,437		4.26			58,202		1.63			71,172		1.96			65,949		1.74
Real estate construction		56,772		10.26			118,708		8.49			65,991		2.92			24,084		1.07			17,267		0.84
Lease financing		7,396		12.27			8,303		8.66			777		0.64			732		0.67			708		0.87


Total commercial		367,522		5.21			486,085		5.55			228,168		2.21			163,929		1.59			172,036		1.79
Home equity		55,090		2.18			43,783		1.72			20,175		0.70			20,045		0.88			10,452		0.48
Installment		17,328		2.49			11,298		1.29			6,585		0.80			5,353		0.64			10,584		1.16


Total retail		72,418		2.25			55,081		1.61			26,760		0.72			25,398		0.82			21,036		0.68
Residential mortgage		36,873		1.57			32,367		1.66			10,450		0.47			11,243		0.53			10,409		0.47


Total allowance for loan losses	$	476,813		3.78	%	$	573,533		4.06	%	$	265,378		1.63	%	$	200,570		1.29	%	$	203,481		1.37	%


		(B	)	(C	)		(B	)	(C	)		(B	)	(C	)		(B	)	(C	)		(B	)	(C	)
Commercial & industrial		29	%	24	%		34	%	24	%		39	%	27	%		34	%	28	%		43	%	24	%
Commercial real estate		35		27			28		27			22		22			35		23			33		25
Real estate construction		12		4			21		10			25		13			12		14			9		14
Lease financing		1		—			2		1			—		1			—		1			—		1


Total commercial		77		55			85		62			86		63			81		66			85		64
Home equity		11		20			8		18			8		18			10		15			5		15
Installment		4		6			2		6			2		5			3		5			5		6


Total retail		15		26			10		24			10		23			13		20			10		21
Residential mortgage		8		19			5		14			4		14			6		14			5		15


Total allowance for loan losses		100	%	100	%		100	%	100	%		100	%	100	%		100	%	100	%		100	%	100	%


(A)		Allowance for loan losses category as a percentage of total loans by category.


(B)		Allowance for loan losses category as a percentage of total allowance for loan losses.

(C)		Total loans by category as a percentage of total loans.

Determining the appropriate level of the allowance for loan losses is a function of evaluating many factors, including but not limited to, changes in the loan portfolio (see Table 8), net charge offs (see Table 10), nonperforming assets (see Table 12), and evaluating specific credits. Growth and mix of loans impacts the overall inherent risk characteristics of the loan portfolio (see section “Loans” which discusses credit risks related to the different loan types). Total loans were $12.6 billion at December 31, 2010, down $1.5 billion or 10.7% from December 31, 2009, including a change in the mix of loans. Retail loans grew to represent 26% of total loans (compared to 24% and 23% at year-end 2009 and year-end 2008, respectively), while commercial loans decreased to represent 55%, 62%, and 63% of total loans at December 31, 2010, 2009, and 2008, respectively (primarily due to a decrease in real estate construction loans, which declined to represent 4% of total loans at December 31, 2010 compared to 10% and 13% at December 31, 2009 and 2008, respectively). Residential mortgage loans represented 19% of total loans at year-end 2010, compared to 14% of total loans at both year-end 2009 and 2008. Nonaccrual, potential problem, and criticized loans have decreased over the past year, as the Corporation worked to sell or otherwise resolve many problem loans. Nonaccrual loans decreased $503 million to $574 million (compared to $1.1 billion at year-end 2009), and declined as a percentage of total loans (from 7.63% at year-end 2009 to 4.55% at year-end 2010), with commercial nonaccrual loans down $529 million and consumer-related nonaccrual loans up $26 million. Nonaccrual loans were $327 million and represented 2.01% of total loans at December 31, 2008. See Table 12 and section “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned” for additional details and discussion.

The Corporation’s process, designed to assess the appropriateness of the allowance for loan losses, includes an allocation methodology, as well as management’s ongoing review and grading of the loan portfolio into criticized loan categories (defined as specific loans warranting either specific allocation, or a criticized status of special mention, substandard, doubtful, or loss) and non-criticized loan categories (which include watch rated loans). The allocation methodology focuses on evaluation of facts and issues related to specific loans, management’s ongoing review and grading of the loan portfolio, consideration of historical loan loss and delinquency experience on each portfolio category, trends in past due and nonaccrual loans, the level of potential problem loans, the risk characteristics of the various classifications of loans, changes in the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect potential credit losses. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the portfolio. The allocation of the Corporation’s allowance for loan losses for the last five years is shown in Table 11.

The allocation methodology used at December 31, 2010, 2009, and 2008 was comparable, whereby the Corporation segregated its loss factors allocations (used for both criticized and non-criticized loans) into a component primarily based on historical loss rates and a component primarily based on other qualitative factors that may affect loan collectability. Management allocates the allowance for loan losses for credit losses by pools of risk. First, as reflected in Note 3, “Loans,” of the notes to consolidated financial statements, a valuation allowance estimate is established for specifically identified commercial and consumer loans determined to be impaired by the Corporation, using discounted cash flows, estimated fair value of underlying collateral, and/or other data available. Second, management allocates allowance for loan losses with loss factors, for criticized loan pools by loan type as well as for non-criticized loan pools by loan type, primarily based on historical loss rates after considering loan type, historical loss and delinquency experience, and industry statistics. Loans that have been criticized are considered to have a higher risk of default than non-criticized loans, as circumstances were present to support the lower loan grade, warranting higher loss factors. The loss factors applied in the methodology are periodically re-evaluated. Loss factors assigned to criticized and non-criticized loan pools by type were similar between 2010, 2009, and 2008, but with refinements made in each year to loss factors assigned to certain criticized and non-criticized loss factors to align closer to historical loss levels. And third, management allocates allowance for loan losses to absorb unrecognized losses that may not be provided for by the other components due to other factors evaluated by management, such as limitations within the credit risk grading process, known current economic or business conditions that may not yet show in trends, industry or other concentrations with current issues that impose higher inherent risks than are reflected in the loss factors, and other relevant considerations.

The largest portion of the allowance at year-end 2010 was allocated to commercial real estate loans and was $165.6 million (up $3.1 million), representing 35% of the allowance for loan losses at year-end 2010 (versus 28% at year-end 2009). The increase in the amount allocated to commercial real estate was attributable to the higher percentage of nonaccrual commercial real estate loans (39% of total nonaccrual loans at year-end 2010 compared to 28% at year-end 2009), a higher percentage of commercial real estate loans in criticized categories (46% at December 31, 2010 versus 36% at December 31, 2009), and a higher percentage of these loans in potential problem loans (51% at year-end 2010 versus 37% at year-end 2009). The allowance allocated to commercial and industrial loans was $137.8 million at year-end 2010, a decrease of $58.9 million from year-end 2009, and represented 29% of the allowance for loan losses at year-end 2010 (versus 34% at year-end 2009). The decrease in the commercial and industrial allocation was due to a decrease in nonaccrual commercial and industrial loans (17% of total nonaccrual loans at year-end 2010 compared to 21% at year-end 2009) and was unchanged as a percent of total loans (24% at both year-end 2010 and 2009), while the level of these loans in criticized categories increased (34% at year-end 2010 versus 31% at year-end 2009), and commercial and industrial potential problem loans declined (from $564 million at year-end 2009 to $354 million at year-end 2010), though these loans represented a higher percentage of potential problem loans given the overall decline in total potential problem loans (37% at year-end 2010 versus 35% at year-end 2009). At December 31, 2010, the allowance allocated to real estate construction was $56.8 million (down $61.9 million), representing 12% of the allowance for loan losses (versus 21% at December 31, 2009). The lower allocation to real estate construction was based on these loans representing a lower percentage of criticized loans (from 26% at year-end 2009 to 11% at year-end 2010), a lower percentage of these loans in potential

problem loans (from 25% at December 31, 2009 to 10% at December 31, 2010), a decline in real estate construction loans as a percentage of total loans (to 4% at year-end 2010 from 10% at year-end 2009), and a decrease in nonaccrual real estate construction loans (17% of total nonaccrual loans at year-end 2010 compared to 38% at year-end 2009). The allowance allocation to residential mortgage increased (from 5% at December 31, 2009 to 8% at December 31, 2010) and the allowance allocation to home equity also increased (from 8% at year-end 2009 to 11% at year-end 2010), given the change in residential mortgage and home equity as a percentage of nonaccrual loans and net charge offs. The allowance allocation to installment loans increased to 4% at year-end 2010 (compared to 2% for year-end 2009) given the increase in nonaccrual installment loans and continued elevation of installment loan net charge offs. Management performs ongoing intensive analyses of its loan portfolios to allow for early identification of customers experiencing financial difficulties, maintains prudent underwriting standards, understands the economy in our core footprint, and considers the trend of deterioration in loan quality in establishing the level of the allowance for loan losses. Management believes the level of the allowance for loan losses is appropriate at December 31, 2010.

The largest portion of the allowance at year-end 2009 was allocated to commercial and industrial loans and was $196.6 million (up $93.4 million), representing 34% of the allowance for loan losses at year-end 2009 (versus 39% at year-end 2008). Although the amount allocated to commercial and industrial loans was higher it represented a lower percentage of the total allowance for loan losses for 2009, as the level of these loans in criticized categories remained the same (33% at year-end 2009 versus 32% at year-end 2008), while there was a decrease in nonaccrual commercial and industrial loans (21% of total nonaccrual loans at year-end 2009 compared to 32% at year-end 2008), a lower percentage of these loans in potential problem loans (35% at year-end 2009 versus 39% at year-end 2008), and comprised a lower percent of total loans (24% at year-end 2009 versus 27% at year-end 2008). The amount allocated to commercial real estate loans was $162.4 million (up $104.2 million), representing 28% of the allowance for loan losses at year-end 2009 versus 22% at year-end 2008. The increase in the amount allocated to commercial real estate was attributable to the higher percentage of nonaccrual commercial real estate loans (28% of total nonaccrual loans at year-end 2009 compared to 19% at year-end 2008), a higher percentage of commercial real estate loans in criticized categories (38% at December 31, 2009 versus 26% at December 31, 2008), a higher percentage of these loans in potential problem loans (37% at year-end 2009 versus 26% at year-end 2008), as well as an increase as a percentage of total loan mix (27% at year-end 2009 versus 22% at year-end 2008). At December 31, 2009, the allowance allocated to real estate construction was $118.7 million (up $52.7 million), representing 21% of the allowance for loan losses (versus 25% at December 31, 2008). Although the amount of allocation for this portfolio increased, on a relative basis, the allocation to real estate construction decreased primarily based on a lower percentage of these loans in criticized categories (from 34% at year-end 2008 to 27% at year-end 2009), a lower percentage of these loans in potential problem loans (from 33% at December 31, 2008 to 25% at December 31, 2009), a decline in real estate construction loans as a percentage of total loans (to 10% at year-end 2009 from 13% at year-end 2008), while nonaccrual real estate construction loans increased (38% of total nonaccrual loans at year-end 2009 compared to 28% at year-end 2008). The allowance allocation to residential mortgage increased (from 4% at December 31, 2008 to 5% at December 31, 2009), while the allowance allocation to home equity remained level (8% at both year-end 2008 and year-end 2009), given the change in residential mortgage and home equity as a percentage of nonaccrual loans and net charge offs. The allowance allocation to installment loans was unchanged at 2% for both year-end 2008 and year-end 2009 given the minimal change in installment loans as a percentage of total loan mix (6% at year-end 2009 versus 5% year-end 2008), as well as the small increase in net charge offs and nonaccrual installment loans.

Consolidated net income and stockholders’ equity could be affected if management’s estimate of the allowance for loan losses is subsequently materially different, requiring additional or less provision for loan losses to be recorded. Management carefully considers numerous detailed and general factors, its assumptions, and the likelihood of materially different conditions that could alter its assumptions. While management uses currently available information to recognize losses on loans, future adjustments to the allowance for loan losses may be necessary based on newly received appraisals, updated commercial customer financial statements, rapidly deteriorating customer cash flow, and changes in economic conditions that affect our customers. Additionally, larger credit relationships (defined by management as over $25 million) do not inherently create more risk, but can create wider fluctuations in net charge offs and asset quality measures compared to the Corporation’s longer historical trends. As an integral part of their examination process, various federal and state regulatory agencies also review the allowance

for loan losses. Such agencies may require additions to the allowance for loan losses or may require that certain loan balances be charged off or downgraded into criticized loan categories when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination.

Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned

Management is committed to a proactive nonaccrual and problem loan identification philosophy. This philosophy is implemented through the ongoing monitoring and review of all pools of risk in the loan portfolio to ensure that problem loans are identified quickly and the risk of loss is minimized. Table 12 provides detailed information regarding nonperforming assets, which include nonaccrual loans and other real estate owned.

Nonaccrual loans are considered one indicator of potential future loan losses. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, management may place such loans on nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due. Previously accrued and uncollected interest on such loans is reversed, amortization of related loan fees is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan principal.

TABLE 12: Nonperforming Assets


	Years Ended December 31,
	2010					2009					2008					2007					2006
	($ in Thousands)

Nonaccrual loans:
Commercial	$	435,781				$	964,888				$	257,322				$	105,780				$	108,129
Residential mortgage		76,319					81,811					45,146					33,737					19,290
Retail		62,256					31,100					24,389					13,011					9,315


Total nonaccrual loans (NALs)		574,356					1,077,799					326,857					152,528					136,734
Other real estate owned (OREO)		44,330					68,441					48,710					26,489					14,417


Total nonperforming assets (NPAs)	$	618,686				$	1,146,240				$	375,567				$	179,017				$	151,151


Accruing loans past due 90 days or more:
Commercial	$	2,096				$	9,394				$	—				$	3,039				$	1,631
Residential mortgage		—					—					10					—					—
Retail		1,322					15,587					13,801					7,079					4,094


Total accruing loans past due 90 days or more	$	3,418				$	24,981				$	13,811				$	10,118				$	5,725


Restructured loans (accruing):
Commercial	$	48,124				$	480				$	—				$	—				$	26
Residential mortgage		19,378					13,410					—					—					—
Retail		12,433					5,147					—					—					—


Total restructured loans (accruing)	$	79,935				$	19,037				$	—				$	—				$	26


Ratios at year end:
Nonaccrual loans to total loans		4.55	%				7.63	%				2.01	%				0.98	%				0.92	%
NPAs to total loans plus OREO		4.89	%				8.07	%				2.30	%				1.15	%				1.01	%
NPAs to total assets		2.84	%				5.01	%				1.55	%				0.83	%				0.72	%
AFLL to Nonaccrual loans		83	%				53	%				81	%				131	%				149	%
AFLL to total loans at end of year		3.78	%				4.06	%				1.63	%				1.29	%				1.37	%


Nonperforming assets by type:				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial and industrial	$	99,845		3	%	$	230,000		7	%	$	104,664		2	%	$	32,610		1	%	$	40,023		1	%
Commercial real estate		223,927		7	%		306,093		8	%		62,423		2	%		34,386		1	%		36,573		1	%
Real estate construction		94,929		17	%		409,289		29	%		90,048		4	%		37,461		2	%		31,385		2	%
Leasing		17,080		28	%		19,506		20	%		187		0	%		1,323		1	%		148		0	%


Total commercial		435,781		6	%		964,888		11	%		257,322		2	%		105,780		1	%		108,129		1	%
Home equity		51,712		2	%		24,452		1	%		18,109		1	%		9,713		0	%		6,180		0	%
Installment		10,544		2	%		6,648		1	%		6,280		1	%		3,298		0	%		3,135		0	%


Total retail		62,256		2	%		31,100		1	%		24,389		1	%		13,011		0	%		9,315		0	%
Residential mortgage		76,319		3	%		81,811		4	%		45,146		2	%		33,737		2	%		19,290		1	%


Total nonaccrual loans		574,356		5	%		1,077,799		8	%		326,857		2	%		152,528		1	%		136,734		1	%
Commercial real estate owned		31,830					52,468					28,724					8,465					2,390
Residential real estate owned		9,090					11,572					15,178					10,308					6,382
Bank properties real estate owned		3,410					4,401					4,808					7,716					5,645


Other real estate owned		44,330					68,441					48,710					26,489					14,417


Total nonperforming assets	$	618,686				$	1,146,240				$	375,567				$	179,017				$	151,151


Commercial real estate & Real estate construction NALs				(A	)				(A	)				(A	)				(A	)				(A	)
Detail:
Farmland	$	4,734		13	%	$	1,524		3	%	$	36		0	%	$	616		1	%	$	472		1	%
Multi-family		23,864		5	%		17,867		3	%		10,819		2	%		4,768		1	%		7,109		1	%
Owner occupied(b)		59,317		6	%		59,785		5	%		22,999		2	%		14,888		1	%
Non-owner occupied(b)		136,012		7	%		226,917		11	%		28,569		2	%		14,114		1	%		28,992		1	%


Commercial real estate	$	223,927		7	%	$	306,093		8	%	$	62,423		2	%	$	34,386		1	%	$	36,573		1	%


1-4 family construction(c)	$	23,963		25	%	$	77,645		31	%	$	38,727		9	%	$	11,557		2	%
All other construction(c)		70,966		16	%		331,644		29	%		51,321		3	%		25,904		1	%		31,385


Real estate construction	$	94,929		17	%	$	409,289		29	%	$	90,048		4	%	$	37,461		2	%	$	31,385		2	%




(a)		Ratio of nonaccrual loans by type to total loans by type.


(b)		A break-down between owner occupied and non-owner occupied commercial real estate is not available for 2006.

(c)		A break-down between 1-4 family and all other real estate construction is not available for 2006.

TABLE 12: Nonperforming Assets (continued)


	Years Ended December 31,
	2010		2009		2008		2007		2006
	($ in Thousands)

Loans 30-89 days past due by type:
Commercial and industrial	$	33,013	$	64,369	$	40,109	$	44,073	$	69,463
Commercial real estate		46,486		81,975		83,066		54,524		49,991
Real estate construction		8,016		56,559		25,266		18,813		35,868
Leasing		132		823		370		6,032		7


Total commercial		87,647		203,726		148,811		123,442		155,329
Home equity		13,886		14,304		16,606		15,323		6,208
Installment		9,624		8,499		9,733		9,030		7,281


Total retail		23,510		22,803		26,339		24,353		13,489
Residential mortgage		8,722		14,226		14,962		9,875		16,443


Total loans past due 30-89 days	$	119,879	$	240,755	$	190,112	$	157,670	$	185,261


Commercial real estate & Real estate construction Past Due Loan Detail:
Farmland	$	47	$	1,338	$	892	$	509	$	204
Multi-family		2,758		7,669		3,394		10,551		7,301
Owner occupied(a)		9,295		30,043		13,179		22,613
Non-owner occupied(a)		34,386		42,925		65,601		20,851		42,486


Commercial real estate	$	46,486	$	81,975	$	83,066	$	54,524	$	49,991


1-4 family construction(b)	$	930	$	38,555	$	6,150	$	3,560
All other construction(b)		7,086		18,004		19,116		15,253		35,868


Real estate construction	$	8,016	$	56,559	$	25,266	$	18,813	$	35,868


Potential problem loans by type:
Commercial and industrial	$	354,284	$	563,836	$	363,285	$	172,734	$	164,692
Commercial real estate		492,778		598,137		243,617		230,721		203,075
Real estate construction		91,618		391,105		312,144		121,953		21,692
Leasing		2,617		8,367		1,713		1,332		1,449


Total commercial		941,297		1,561,445		920,759		526,740		390,908
Home equity		3,057		13,400		8,900		6,665		6,498
Installment		703		1,524		889		530		1,255


Total retail		3,760		14,924		9,789		7,195		7,753
Residential mortgage		18,672		19,150		7,254		11,793		6,779


Total potential problem loans	$	963,729	$	1,595,519	$	937,802	$	545,728	$	405,440


(a)		A break-down between owner occupied and non-owner occupied commercial real estate is not available for 2006.


(b)		A break-down between 1-4 family and all other real estate construction is not available for 2006.

The following table shows, for those loans accounted for on a nonaccrual basis and restructured loans for the years ended as indicated, the approximate gross interest that would have been recorded if the loans had been current in accordance with their original terms and the amount of interest income that was included in interest income for the period.

TABLE 13: Foregone Loan Interest


	Years Ended December 31,
	2010			2009			2008
	($ in Thousands)

Interest income in accordance with original terms	$	40,703		$	70,852		$	32,499
Interest income recognized		(15,917	)		(41,098	)		(13,589	)


Reduction in interest income	$	24,786		$	29,754		$	18,910

Nonaccrual loans were $574 million, $1.1 billion, and $327 million at December 31, 2010, 2009, and 2008, respectively, reflecting the continued impact of the economy on the Corporation’s customers. The ratio of nonaccrual loans to total loans at the end of 2010 was 4.55%, as compared to 7.63% and 2.01% at December 31, 2009 and 2008, respectively. The Corporation’s allowance for loan losses to nonaccrual loans was 83% at year-end 2010, up from 53% at year-end 2009 and 81% at year-end 2008. Commercial nonaccrual loans represented 76%, 90%, and 79% of total nonaccrual loans at year-end 2010, 2009, and 2008, respectively, while consumer-related nonaccrual loans (including residential mortgage and retail nonaccrual loans) represented 24%, 10%, and 21%, respectively, for the same periods.

As shown in Table 12, total nonaccrual loans were down $503 million since year-end 2009, with commercial nonaccrual loans down $529 million while consumer-related nonaccrual loans were up $26 million. Between 2009 and 2008, total nonaccrual loans increased $751 million, with commercial nonaccrual loans up $708 million, while consumer-related nonaccrual loans increased $43 million. The addition of larger individual commercial credit relationships during 2008 and 2009 was the primary cause for the decline in the ratio of the allowance for loan losses to nonaccrual loans during those years. The Corporation’s estimate of the appropriate allowance for loan losses does not have a targeted reserve to nonaccrual loan coverage ratio. However, management’s allowance methodology at December 31, 2010, including an impairment analysis on specifically identified commercial and consumer loans defined by the Corporation as impaired, incorporated the level of specific reserves for these credit relationships, as well as other factors, in determining the overall appropriate level of the allowance for loan losses.

Accruing Loans Past Due 90 Days or More: Loans past due 90 days or more but still accruing interest are classified as such where the underlying loans are both well secured (the collateral value is sufficient to cover principal and accrued interest) and are in the process of collection. At December 31, 2010 accruing loans 90 days or more past due totaled $3 million compared to $25 million at December 31, 2009 and $14 million at December 31, 2008.

Restructured: Restructured loans involve the granting of some concession to the borrower involving the modification of terms of the loan, such as changes in payment schedule or interest rate, which generally would not otherwise be considered. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains on nonaccrual. During 2009, as a result of the Corporation’s continued efforts to support foreclosure prevention in the markets it serves, the Corporation introduced a modification program (similar to the government modification programs available), in which the Corporation works with its mortgage customers to provide them with an affordable monthly payment through extension of the maturity date, reduction in interest rate, and / or partial principal forbearance. During the second quarter of 2010, the Corporation began utilizing a multiple note structure as a workout alternative for certain commercial loans. The multiple note structure restructures a troubled loan into two notes, where the first note is reasonably assured of repayment and performance according to the prudently modified terms and the portion of the troubled loan that is not reasonably assured of repayment is

charged off. To date, the Corporation’s use of the multiple note structure has not been material, but use of this structure could increase in future periods. At December 31, 2010, the Corporation had total restructured loans of $116 million (including $36 million classified as nonaccrual and $80 million performing in accordance with the modified terms), compared to $28 million at December 31, 2009 (including $9 million classified as nonaccrual).

Potential Problem Loans: The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the appropriate level of the allowance for loan losses. Potential problem loans are generally defined by management to include loans rated as substandard by management but that are not considered impaired (i.e., nonaccrual loans and accruing troubled debt restructurings); however, there are circumstances present to create doubt as to the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that the Corporation expects losses to occur, but that management recognizes a higher degree of risk associated with these loans. The loans that have been reported as potential problem loans are predominantly commercial loans covering a diverse range of businesses and real estate property types. At December 31, 2010, potential problem loans totaled $964 million, compared to $1.6 billion at December 31, 2009. The $632 million decrease in potential problem loans since December 31, 2009, was primarily due to a $300 million decrease in real estate construction, a $210 million decrease in commercial and industrial, and a $105 million decrease in commercial real estate. The level of potential problem loans highlights management’s continued heightened level of uncertainty of the pace at which a commercial credit may deteriorate, the duration of asset quality stress, and uncertainty around the magnitude and scope of economic stress that may be felt by the Corporation’s customers and on underlying real estate values (both residential and commercial).

Other Real Estate Owned: Other real estate owned decreased to $44.3 million at December 31, 2010, compared to $68.4 million at December 31, 2009 and $48.7 million at December 31, 2008. The $24.1 million decrease in other real estate owned during 2010 was primarily attributable to a $20.6 million decrease in commercial real estate owned, a $2.5 million decrease in residential real estate owned and a $1.0 million decrease to bank premises no longer used for banking and reclassified into other real estate owned. The $19.7 million increase in other real estate owned during 2009 was primarily attributable to a $23.7 million increase in commercial real estate owned (with $20.2 million attributable to 4 larger commercial foreclosures), partially offset by a $3.6 million decrease in residential real estate owned and a $0.4 million decrease to bank premises no longer used for banking and reclassified into other real estate owned. Net losses on sales of other real estate owned were $4.1 million, $4.9 million, and $2.4 million for 2010, 2009, and 2008, respectively. Write-downs on other real estate owned were $10.1 million, $14.4 million, and $4.6 million for 2010, 2009, and 2008, respectively. Management actively seeks to ensure properties held are monitored to minimize the Corporation’s risk of loss.

Investment Securities Portfolio

The investment securities portfolio is intended to provide the Corporation with adequate liquidity, flexibility in asset/liability management, a source of stable income, and is structured with minimum credit exposure to the Corporation. At the time of purchase, the Corporation generally classifies its investment purchases as available for sale, consistent with these investment objectives, including possible securities sales in response to changes in interest rates or prepayment risk, the need to manage liquidity or regulatory capital, and other factors. Investment securities classified as available for sale are carried at fair value in the consolidated balance sheet.

At December 31, 2010, the total carrying value of investment securities was $6.1 billion, up $266 million or 4.6% compared to December 31, 2009, and represented 28% of total assets, compared to 26% of total assets at December 31, 2009. During 2010, the Corporation purchased approximately $3.4 billion in Federal agency or agency guaranteed fixed and floating rate securities and high grade, bank qualified municipal securities with an estimated duration of approximately 3 years and a taxable equivalent yield of 2.40%. The 2010 investment securities purchases were due to the reinvestment of cash flows from the investment securities portfolio and the redeployment of excess cash into higher yielding investment securities. On average, the investment portfolio was $5.4 billion for 2010, down $0.1 billion compared to 2009, and represented 26% of average earning assets for both 2010 and 2009. The total carrying value of investment securities at December 31, 2008, was $5.1 billion and represented 21% of total assets.

TABLE 14: Investment Securities Portfolio


	At December 31,
	2010		% of Total			2009		% of Total			2008		% of Total
	($ in Thousands)

Investment Securities Available for Sale:
Amortized Cost:
U.S. Treasury securities	$	1,199		<1	%	$	3,896		<1	%	$	4,985		<1	%
Federal agency securities		29,791		1			41,980		1			75,816		2
Obligations of state and political subdivisions (municipal securities)		829,058		14			865,111		15			913,216		18
Residential mortgage-related securities		4,831,481		80			4,751,033		84			4,032,784		79
Commercial mortgage-related securities		7,604		<1			—		—			—		—
Asset-backed securities		299,459		5			—		—			—		—
Other securities (debt and equity)		13,384		<1			20,954		<1			58,272		1


Total amortized cost	$	6,011,976		100	%	$	5,682,974		100	%	$	5,085,073		100	%


Fair Value:
U.S. Treasury securities	$	1,208		<1	%	$	3,875		<1	%	$	4,966		<1	%
Federal agency securities		29,767		1			43,407		1			77,010		2
Obligations of state and political subdivisions (municipal securities)		838,602		14			885,165		15			925,603		18
Residential mortgage-related securities		4,910,497		80			4,882,519		84			4,077,431		79
Commercial mortgage-related securities		7,753		<1			—		—			—		—
Asset-backed securities		298,841		5			—		—			—		—
Other securities (debt and equity)		14,673		<1			20,567		<1			58,404		1


Total fair value and carrying value	$	6,101,341		100	%	$	5,835,533		100	%	$	5,143,414		100	%


Net unrealized holding gains	$	89,365				$	152,559				$	58,341

At December 31, 2010, the Corporation’s securities portfolio did not contain securities of any single issuer that were payable from and secured by the same source of revenue or taxing authority where the aggregate carrying value of such securities exceeded 10% of stockholders’ equity or approximately $316 million. At December 31, 2010, approximately 99% of the investment securities portfolio was rated investment grade.

During 2010, the Corporation recognized credit-related other-than-temporary impairment write-downs of $3.9 million, including a $3.0 million write-down on trust preferred debt securities, a $0.1 million write-down on a non-agency mortgage-related security, and a $0.8 million write-down on various equity securities. During 2009, the Corporation recognized credit-related other-than-temporary impairment write-downs of $2.9 million, including a $2.0 million write-down on a trust preferred debt security, a $0.4 million write-down on a non-agency mortgage-related security, and a $0.5 million write-down on various equity securities. The Corporation recognized other-than temporary write-downs of $52.5 million during 2008, including a $31.1 million write-down on a non-agency mortgage-related security, a $13.2 million write-down on FHLMC and FNMA preferred stocks, a $6.8 million write-down on trust preferred debt securities pools, and a $1.4 million write-down on four common equity securities. See Note 1, “Summary of Significant Accounting Policies,” and Note 2, “Investment Securities,” of the notes to consolidated financial statements for additional information.

Obligations of State and Political Subdivisions (Municipal Securities): At December 31, 2010 and 2009, municipal securities were $839 million and $885 million, respectively, and represented 14% and 15%, respectively, of total investment securities based on fair value. Municipal bond insurance company downgrades have resulted in credit downgrades in certain municipal securities; however, it has been determined that due to the large number of small

investments in these obligations (general obligation, essential services, etc.) the loss exposure on any particular obligation is mitigated. As of December 31, 2010, the total fair value of municipal securities reflected a net unrealized gain of approximately $10 million.

Residential and Commercial Mortgage-related Securities: At December 31, 2010 and 2009, residential and commercial mortgage-related securities (which include predominantly mortgage-backed securities and collateralized mortgage obligations (CMOs)) were $4.9 billion, for both years and represented 80% and 84%, respectively, of total investment securities based on fair value. Of the $4.9 billion mortgage-related investment securities at December 31, 2010, approximately 99% were agency guaranteed. The fair value of mortgage-related securities is subject to inherent risks based upon the future performance of the underlying collateral (i.e. mortgage loans) for these securities, such as prepayment risk and interest rate changes. The Corporation regularly assesses valuation and credit quality underlying these securities. As a result of these risks, and as noted above, the Corporation recorded a $0.1 million other-than-temporary write-down on a non-agency mortgage-related security during 2010 and a $0.4 million other-than-temporary write-down on the same non-agency mortgage-related security during 2009.

Asset-backed Securities: At December 31, 2010, asset-backed securities were $299 million (which is largely comprised of senior, floating rate, tranches of student loan securities issued by SLM Corp and guaranteed under the Federal Family Education Loan Program) and represented 5% of total investment securities based on fair value. The fair value of asset-backed securities is subject to inherent risks based upon the future performance of the underlying collateral (i.e. student loans) for these securities, such as prepayment risk and interest rate changes. As of December 31, 2010, the total fair value of asset-backed securities reflected a net unrealized loss of approximately $0.6 million.

Other Securities (Debt and Equity): At December 31, 2010 and 2009, other securities were $14.7 million and $20.6 million, respectively, and represented less than 1% of total investment securities based on fair value. As of December 31, 2010, other securities of $14.7 million included debt and equity securities of $5.6 million and $9.1 million, respectively, compared to debt and equity securities of $11.4 million and $9.2 million, respectively, for a total of $20.6 million at December 31, 2009. Debt securities include trust preferred debt securities pools, commercial paper, corporate bonds, and money market mutual funds, while equity securities include preferred and common equity securities. At December 31, 2010, the Corporation had $1.5 million of trust preferred debt securities pools, compared to $4.1 million at December 31, 2009. The continued negative sentiment toward banks due to numerous bank failures has resulted in depressed prices for the Corporation’s investments in bank trust preferred debt securities, resulting in $3.0 million and $2.0 million in other-than-temporary write-downs during 2010 and 2009, respectively. Likewise, the downturn in the economy has resulted in depressed prices for common equity securities resulting in write-downs of $0.8 million and $0.5 million in 2010 and 2009, respectively. All credit sensitive sectors in the investment portfolio, which include trust preferred securities pools and common equity securities, have been under severe credit and liquidity stress which has resulted in distressed prices and the risk of further write-downs.

The FHLB of Chicago announced in October 2007 that it was under a consensual cease and desist order with its regulator, which among other things, restricts various future activities of the FHLB of Chicago. Such restrictions may limit or stop the FHLB from paying dividends or redeeming stock without prior approval. The FHLB of Chicago last paid a dividend in the third quarter of 2007; however, in February 2011, the FHLB of Chicago announced it intended to begin paying dividends prospectively, beginning in the first quarter of 2011. Associated Bank is a member of the FHLB Chicago. Accounting guidance indicates that an investor in FHLB Chicago capital

stock should recognize impairment if it concludes that it is not probable that it will ultimately recover the par value of its shares. The decision of whether impairment exists is a matter of judgment that should reflect the investor’s view of FHLB Chicago’s long-term performance, which includes factors such as its operating performance, the severity and duration of declines in the market value of its net assets related to its capital stock amount, its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance, the impact of legislation and regulatory changes on FHLB Chicago, and accordingly, on the members of FHLB Chicago and its liquidity and funding position. After evaluating all of these considerations, the Corporation believes the cost of the investment will be recovered, and no impairment has been recorded on these securities during 2010, 2009, and 2008. Future evaluations of these factors could result in a different conclusion. See also section “Liquidity.”

TABLE 15: Investment Securities Portfolio Maturity Distribution (1) — At December 31, 2010


	Investment Securities Available for Sale - Maturity Distribution and Weighted Average Yield
						After one but					After five but										Mortgage-related					Total					Total
	Within one year					within five years					within ten years					After ten years					and equity securities					Amortized Cost					Fair Value

	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount

	($ in Thousands)

U. S. Treasury securities	$	201		0.27	%	$	998		1.31	%	$	—		—	%	$	—		—	%	$	—		—	%	$	1,199		1.14	%	$	1,208
Federal agency securities		—		—			51		3.61			29,740		0.68			—		—			—		—			29,791		0.69			29,767
Obligations of states and political subdivisions (municipal securities)(2)		49,150		6.16			113,680		5.75			517,692		5.75			148,536		5.87			—		—			829,058		5.80			838,602
Other debt securities		2,973		1.66			1,100		1.76			—		—			2,125		2.33			—		—			6,198		1.90			5,578
Residential mortgage-related securities		—		—			—		—			—		—			—		—			4,831,481		3.55			4,831,481		3.55			4,910,497
Commercial mortgage-related securities		—		—			—		—			—		—			—		—			7,604		5.70			7,604		5.70			7,753
Asset-backed securities		—		—			—		—			—		—			—		—			299,459		0.43			299,459		0.43			298,841
Other equity securities		—		—			—		—			—		—			—		—			7,186		5.69			7,186		5.69			9,095


Total amortized cost	$	52,324		5.88	%	$	115,829		5.68	%	$	547,432		5.48	%	$	150,661		5.82	%	$	5,145,730		3.37	%	$	6,011,976		3.69	%	$	6,101,341


Total fair value and carrying value	$	52,698				$	119,870				$	555,682				$	146,905				$	5,226,186									$	6,101,341


(1)		Expected maturities will differ from contractual maturities, as borrowers may have the right to call or repay obligations with or without call or prepayment penalties.

(2)		Yields on tax-exempt securities are computed on a taxable equivalent basis using a tax rate of 35% and have not been adjusted for certain disallowed interest deductions.

Deposits

Deposits are the Corporation’s largest source of funds. Selected period-end deposit information is detailed in Note 6, “Deposits,” of the notes to consolidated financial statements, including a maturity distribution of all time deposits at December 31, 2010. A maturity distribution of certificates of deposits and other time deposits of $100,000 or more at December 31, 2010 is shown in Table 17. Table 16 summarizes the distribution of average deposit balances. See also section “Liquidity.”

The Corporation competes with other bank and nonbank institutions for deposits, as well as with a growing number of non-deposit investment alternatives available to depositors, such as mutual funds, money market funds, annuities, and other brokerage investment products. Competition for deposits remains high. Challenges to deposit growth include a usual cyclical decline in deposits historically experienced during the first quarter (noted as a challenge since the return of deposit balances may not be timely or by as much as the outflow), price changes on deposit products given movements in the rate environment and other competitive pricing pressures, and customer choices to higher-costing deposit products or to non-deposit investment alternatives.

At December 31, 2010, deposits were $15.2 billion, down $1.5 billion or 9.0% from December 31, 2009, consistent with the Corporation’s strategy for reducing its utilization of network transaction deposits and brokered deposits. The decrease in total deposits included a $1.2 billion decrease in interest-bearing demand deposits and a $0.7 billion decrease in other time deposits, partially offset by a $0.4 billion increase in noninterest-bearing demand deposits. As a result of the strategy noted above, network transaction deposits declined $0.8 billion to represent 8% of total

deposits at December 31, 2010 (compared to 12% at year-end 2009), while noninterest-bearing demand deposits increased to 24% of total deposits (versus 20% last year end).

On average, deposits were $16.9 billion for 2010, up $987 million or 6.2% over the average for 2009. Similar to that seen for period end deposits, the mix of average deposits was also impacted by the economy and shift in customer preferences, predominantly toward the product design and pricing features of money market deposits (up $983 million on average between 2010 and 2009). For 2010 and 2009 as presented in Table 16, money market deposits grew to 38% of total average deposits for 2010, while other time deposits declined to 19% of total average deposits for 2010.

TABLE 16: Average Deposits Distribution


	2010					2009					2008
	Amount		% of Total			Amount		% of Total			Amount		% of Total
	($ in Thousands)

Noninterest-bearing demand deposits	$	3,094,691		18	%	$	2,884,673		18	%	$	2,446,613		18	%
Interest-bearing demand deposits		2,780,525		17			2,154,745		13			1,752,991		13
Savings deposits		898,019		5			880,544		6			890,811		6
Money market deposits		6,374,071		38			5,390,782		34			4,231,678		30
Brokered certificates of deposit		547,328		3			767,424		5			532,805		4
Other time and certificates of deposit		3,251,667		19			3,880,878		24			3,957,174		29


Total deposits	$	16,946,301		100		$	15,959,046		100	%	$	13,812,072		100	%

TABLE 17: Maturity Distribution-Certificates of Deposit and Other Time Deposits of $100,000 or More


	December 31, 2010
					Total Certificates
	Certificates		Other		of Deposits and Other
	of Deposit		Time Deposits		Time Deposits
	($ in Thousands)

Three months or less	$	149,019	$	145,789	$	294,808
Over three months through six months		138,487		89,296		227,783
Over six months through twelve months		146,577		45,283		191,860
Over twelve months		231,068		28,215		259,283


Total	$	665,151	$	308,583	$	973,734

Other Funding Sources

Other funding sources, including short-term borrowings and long-term funding (“wholesale funding”), were $3.2 billion at both December 31, 2010 and December 31, 2009. See also section “Liquidity.” Long-term funding at December 31, 2010, was $1.4 billion, a decrease of $0.5 billion from December 31, 2009, primarily attributable to a decrease of $0.5 billion in long-term repurchase agreements. See Note 8, “Long-term Funding,” of the notes to consolidated financial statements for additional information on long-term funding.

Short-term borrowings are comprised primarily of Federal funds purchased and securities sold under agreements to repurchase; Federal Reserve discount window; short-term FHLB advances; and treasury, tax, and loan notes. Short-term borrowings at December 31, 2010 were $1.7 billion, $0.5 billion higher than December 31, 2009 (primarily short-term FHLB advances and Federal funds purchased and securities sold under agreements to repurchase). The FHLB advances included in short-term borrowings are those with original contractual maturities of less than one year, while the Federal Reserve funds represent short-term borrowings through the Term Auction Facility. The securities sold under agreements to repurchase are short-term borrowings collateralized by securities of the

U.S. Government or its agencies and mature daily. The treasury, tax, and loan notes are demand notes representing secured borrowings from the U.S. Treasury, collateralized by qualifying securities and loans. This funding program provides funds at the discretion of the U.S. Treasury that may be called at any time. Many short-term borrowings, particularly Federal funds purchased and securities sold under agreements to repurchase, are expected to be reissued and, therefore, do not represent an immediate need for cash. See Note 7, “Short-term Borrowings,” of the notes to consolidated financial statements for additional information on short-term borrowings, and Table 18 for specific disclosure required for major short-term borrowing categories.

TABLE 18: Short-Term Borrowings


	December 31,
	2010			2009			2008
	($ in Thousands)

Federal funds purchased and securities sold under agreements to repurchase:
Balance end of year	$	718,694		$	598,488		$	1,590,738
Average amounts outstanding during year		570,141			1,294,423			2,330,426
Maximum month-end amounts outstanding		718,694			2,525,461			2,658,608
Average interest rates on amounts outstanding at end of year*		0.71	%		1.21	%		1.02	%
Average interest rates on amounts outstanding during year*		1.26	%		0.68	%		2.20	%
Federal Reserve Term Auction Facility:
Balance end of year	$	—		$	600,000		$	500,000
Average amounts outstanding during year		67,397			942,973			596,721
Maximum month-end amounts outstanding		600,000			1,400,000			1,000,000
Average interest rates on amounts outstanding at end of year		—	%		0.24	%		1.41	%
Average interest rates on amounts outstanding during year		0.25	%		0.25	%		2.20	%


*		As discussed in Note 14, “Derivative and Hedging Activities,” of the notes to consolidated financial statements, the Corporation has entered into a cash flow hedge to manage the interest rate risk related to these short-term borrowings.

On average, wholesale funding was $2.5 billion for 2010, down $2.1 billion or 46.5% from 2009, including a $2.0 billion decrease in short-term borrowings and a $0.1 billion decrease in long-term funding. The mix of wholesale funding continued to shift in 2010 from short-term borrowing instruments to long-term funding instruments, with average long-term funding increasing to 72.0% of wholesale funding compared to 40.8% in 2009. Average long-term funding was down $0.1 billion overall, reflecting a $0.2 billion decrease in long-term repurchase agreements and a $0.1 million increase in long-term FHLB advances. Within the short-term borrowing categories, average Federal funds purchased and securities sold under agreements to repurchase decreased $0.7 billion (reflecting a decrease in the reliance on Federal funds during the first quarter of 2009), short-term FHLB advances were down $0.4 billion (attributable to balances outstanding during most of 2009, while nothing was outstanding during 2010 until the fourth quarter), and the Federal Reserve discount window decreased $0.9 billion.

Liquidity

The objective of liquidity management is to ensure that the Corporation has the ability to generate sufficient cash or cash equivalents in a timely and cost-effective manner to satisfy the cash flow requirements of depositors and borrowers and to meet its other commitments as they fall due, including the ability to pay dividends to shareholders, service debt, invest in subsidiaries or acquisitions, repurchase common stock, and satisfy other operating requirements.

Funds are available from a number of basic banking activity sources, primarily from the core deposit base and from loans and investment securities repayments and maturities. Additionally, liquidity is provided from the sale of investment securities, securities repurchase agreements and lines of credit with counterparty banks, the ability to acquire large, network, and brokered deposits, and the ability to securitize or package loans for sale. The

Corporation regularly evaluates the creation of additional funding capacity based on market opportunities and conditions, as well as corporate funding needs, and is currently exploring options to replace the subordinated notes which mature in August 2011. The Corporation’s capital can be a source of funding and liquidity as well (see section “Capital”). On January 15, 2010, the Corporation closed its underwritten public offering of 44.8 million shares of its common stock which provided net proceeds of approximately $478 million.

The Corporation’s internal liquidity management framework includes measurement of several key elements, such as wholesale funding as a percent of total assets and liquid assets to short-term wholesale funding. Strong capital ratios, credit quality, and core earnings are essential to retaining high credit ratings and, consequently, cost-effective access to wholesale funding markets. A downgrade or loss in credit ratings could have an impact on the Corporation’s ability to access wholesale funding at favorable interest rates. As a result, capital ratios, asset quality measurements, and profitability ratios are monitored on an ongoing basis as part of the liquidity management process. At December 31, 2010, the Corporation was in compliance with its internal liquidity objectives.

While core deposits and loan and investment securities repayments are principal sources of liquidity, funding diversification is another key element of liquidity management. Diversity is achieved by strategically varying depositor type, term, funding market, and instrument. The Parent Company and its subsidiary bank are rated by Moody’s, Standard and Poor’s (“S&P”), and Fitch. Credit ratings by these nationally recognized statistical rating agencies are an important component of the Corporation’s liquidity profile. Credit ratings relate to the Corporation’s ability to issue debt securities and the cost to borrow money, and should not be viewed as an indication of future stock performance or a recommendation to buy, sell, or hold securities. Among other factors, the credit ratings are based on financial strength, credit quality and concentrations in the loan portfolio, the level and volatility of earnings, capital adequacy, the quality of management, the liquidity of the balance sheet, the availability of a significant base of core deposits, and the Corporation’s ability to access a broad array of wholesale funding sources. Adverse changes in these factors could result in a negative change in credit ratings and impact not only the ability to raise funds in the capital markets but also the cost of these funds. Ratings are subject to revision or withdrawal at any time and each rating should be evaluated independently.

The Corporation’s credit ratings were downgraded by S&P and Fitch in 2009. In early 2010, S&P took further action, lowering the long-term rating to BB- and Moody’s lowered its long-term rating to Baa1. The primary impact of these credit rating downgrades was that unsecured short-term funding became constrained. In order to mitigate the increased liquidity risk associated with these downgrades, the Corporation took steps to proactively increase its cash equivalent levels during much of 2010. In late 2010, Fitch took action to raise the Corporation’s ratings to BBB- and S&P revised its outlook for the Corporation from stable to positive. The credit ratings of the Parent Company and its subsidiary bank are displayed below.

TABLE 19: Credit Ratings

December 31, 2010

December 31, 2009

Moody’s

S&P

Fitch

Moody’s

S&P

Fitch

Bank short-term

—

Bank long-term

BB+

BBB-

Corporation short-term

—

Corporation long-term

Baa1

BB-

BBB-

BB+

Subordinated debt long-term

Baa2

BB+

BB-

The Corporation has multiple funding sources that could be used to increase liquidity and provide additional financial flexibility. In December 2008, the Parent Company filed a “shelf” registration under which the Parent Company may offer any combination of the following securities, either separately or in units: trust preferred securities, debt securities, preferred stock, depositary shares, common stock, and warrants. In May 2002, $175 million of trust preferred securities were issued, bearing a 7.625% fixed coupon rate. In September 2008, the Parent Company issued $26 million in a subordinated note offering, bearing a 9.25% fixed coupon rate, 5-year no-call provision, and 10-year maturity, while in August 2001, the Parent Company issued $200 million in a subordinated note offering, bearing a 6.75% fixed coupon rate and 10-year maturity, of which, $170 million remains outstanding at December 31, 2010. In addition, the Corporation repurchased $7 million of the August 2001

subordinated note during January 2011. The Parent Company also has a $200 million commercial paper program, of which, no commercial paper was outstanding at December 31, 2010. The availability under the commercial paper program was temporarily suspended due to the S&P downgrade in 2009 noted above.

In November 2008, under the CPP, the Corporation issued 525,000 shares of Senior Preferred Stock (with a par value of $1.00 per share and a liquidation preference of $1,000 per share) and a 10-year warrant to purchase approximately 4.0 million shares of common stock (“Common Stock Warrants”), for aggregate proceeds of $525 million. The allocated carrying value of the Senior Preferred Stock and Common Stock Warrants on the date of issuance (based on their relative fair values) was $507.7 million and $17.3 million, respectively. Cumulative dividends on the Senior Preferred Stock are payable at 5% per annum for the first five years and at a rate of 9% per annum thereafter on the liquidation preference of $1,000 per share. The Common Stock Warrants have a term of 10 years and are exercisable at any time, in whole or in part, at an exercise price of $19.77 per share (subject to certain anti-dilution adjustments). While any Senior Preferred Stock is outstanding, the Corporation may pay dividends on common stock, provided that all accrued and unpaid dividends for all past dividend periods on the Senior Preferred Stock are fully paid. Prior to the third anniversary of the UST’s purchase of the Senior Preferred Stock, unless the Senior Preferred Stock has been redeemed or the UST has transferred all of the Senior Preferred Stock to third parties, the consent of the UST will be required for the Corporation to pay quarterly dividends on its common stock.

While dividends and service fees from subsidiaries and proceeds from issuance of capital are primary funding sources for the Parent Company, these sources could be limited or costly (such as by regulation or subject to the capital needs of its subsidiaries or by market appetite for bank holding company stock). Dividends received in cash from subsidiaries totaled $4 million in 2010, and at December 31, 2010, $39 million in additional dividends are available to be paid to the Parent Company by its subsidiaries without obtaining prior banking regulatory approval, subject to the capital needs of the Bank.

As discussed in Item 1, the subsidiary bank is subject to regulation and, among other things, may be limited in its ability to pay dividends or transfer funds to the Parent Company. On November 5, 2009, Associated Bank, National Association (the “Bank”) entered into a Memorandum of Understanding (“MOU”) with the Comptroller of the Currency (“OCC”), its primary banking regulator. The MOU requires the Bank to develop, implement, and maintain various processes to improve the Bank’s risk management of its loan portfolio and a three year capital plan providing for maintenance of specified capital levels, notification to the OCC of dividends proposed to be paid to the Corporation and the commitment of the Corporation to act as a primary or contingent source of the Bank’s capital. On April 6, 2010, the Corporation entered into a Memorandum of Understanding (“Memorandum”) with the Federal Reserve Bank of Chicago (“Reserve Bank”). The Memorandum requires the Corporation to obtain approval prior to the payment of dividends and interest or principal payments on subordinated debt, increases in borrowings or guarantees of debt, or the repurchase of common stock. See section “Capital” for additional discussion.

A bank note program associated with Associated Bank was established during 2000. Under this program, short-term and long-term debt may be issued. As of December 31, 2010, no bank notes were outstanding and $225 million was available under the 2000 bank note program. A new bank note program was instituted during 2005, of which $2 billion was available at December 31, 2010. The Bank has also established federal funds lines with counterparty banks and the ability to borrow from the Federal Home Loan Bank ($2.0 billion of Federal Home Loan Bank advances were outstanding at December 31, 2010). Associated Bank also issues institutional certificates of deposit, network transaction deposits, brokered certificates of deposit, and accepts Eurodollar deposits.

Investment securities are an important tool to the Corporation’s liquidity objective. As of December 31, 2010, all investment securities are classified as available for sale and are reported at fair value on the consolidated balance sheet. Of the $6.1 billion investment securities portfolio at December 31, 2010 (representing 28% of total assets), $3.0 billion was pledged to secure certain deposits or for other purposes as required or permitted by law. The majority of the remaining investment securities could be pledged or sold to enhance liquidity, if necessary.

In addition, the Corporation has $191 million of Federal Reserve and FHLB stock combined, which is “restricted” in nature and less liquid than other tradable equity securities (see section “Investment Securities Portfolio” and Note 2, “Investment Securities,” of the notes to consolidated financial statements). The FHLB of Chicago

announced in October 2007 that it was under a consensual cease and desist order with its regulator, which among other things, restricts various future activities of the FHLB of Chicago. Such restrictions may limit or stop the FHLB from paying dividends or redeeming stock without prior approval. The FHLB of Chicago last paid a dividend in the third quarter of 2007; however, in February 2011, the FHLB of Chicago announced it intended to begin paying dividends prospectively, beginning in the first quarter of 2011. An investor in FHLB Chicago capital stock should recognize impairment if it concludes that it is not probable that it will ultimately recover the par value of its shares. The decision of whether impairment exists is a matter of judgment that should reflect the investor’s view of FHLB Chicago’s long-term performance, which includes factors such as its operating performance, the severity and duration of declines in the market value of its net assets related to its capital stock amount, its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance, the impact of legislation and regulatory changes on FHLB Chicago, and accordingly, on the members of FHLB Chicago and its liquidity and funding position. During 2009, the Corporation redeemed $24.9 million of FHLB stock at par. After evaluating all of these considerations, the Corporation believes the cost of the investment will be recovered.

As reflected in Table 21, the Corporation has various financial obligations, including contractual obligations and other commitments, which may require future cash payments. The time deposits with shorter maturities could imply near-term liquidity risk if such deposit balances do not rollover at maturity into new time or non-time deposits at the Corporation. However, the relatively short maturities in time deposits are not out of the ordinary to the Corporation’s historical experience of its customer base preference. As evidenced in Table 16, average other time and certificates of deposit were 19% of total average deposits for 2010, compared to 24% and 29% of total average deposits for 2009 and 2008, respectively. Many short-term borrowings, also shown in Table 21, particularly Federal funds purchased and securities sold under agreements to repurchase, can be reissued and, therefore, do not represent an immediate need for cash. See additional discussion in sections, “Net Interest Income,” “Investment Securities Portfolio,” and “Interest Rate Risk,” and in Note 2, “Investment Securities,” of the notes to consolidated financial statements. As a financial services provider, the Corporation routinely enters into commitments to extend credit. While contractual obligations represent future cash requirements of the Corporation, a significant portion of commitments to extend credit may expire without being drawn upon.

For the year ended December 31, 2010, net cash provided by operating and investing activities was $0.5 billion and $0.6 billion, respectively, while financing activities used net cash of $1.1 billion, for a net increase in cash and cash equivalents of $47 million since year-end 2009. Generally, during 2010, net assets decreased to $21.8 billion (down $1.1 billion or 4.8%) compared to year-end 2009, primarily due to a $1.5 billion decrease in loans and a $0.3 billion increase in investment securities. On the funding side, deposits decreased $1.5 billion and long-term funding decreased $0.5 billion, while short-term borrowings increased $0.5 billion.

For the year ended December 31, 2009, net cash provided by operating and investing activities was $0.1 billion and $1.0 billion, respectively, while financing activities used net cash of $0.9 billion, for a net increase in cash and cash equivalents of $250 million since year-end 2008. Generally, during 2009, assets decreased to $22.9 billion (down 5.4%) compared to year-end 2008, including a decrease in loans (down $2.2 billion), partially offset by an increase in investment securities (up $0.7 billion). The $1.6 billion increase in deposits was predominantly used to fund the change in assets and repay wholesale funding.

Quantitative and Qualitative Disclosures about Market Risk

Market risk arises from exposure to changes in interest rates, exchange rates, commodity prices, and other relevant market rate or price risk. The Corporation faces market risk in the form of interest rate risk through other than trading activities. Market risk from other than trading activities in the form of interest rate risk is measured and managed through a number of methods. The Corporation uses financial modeling techniques that measure the sensitivity of future earnings due to changing rate environments to measure interest rate risk. Policies established by the Corporation’s Asset/Liability Committee and approved by the Board of Directors are intended to limit exposure of earnings at risk. General interest rate movements are used to develop sensitivity as the Corporation feels it has no primary exposure to a specific point on the yield curve. These limits are based on the Corporation’s exposure to a 100 bp and 200 bp immediate and sustained parallel rate move, either upward or downward.

Interest Rate Risk

In order to measure earnings sensitivity to changing rates, the Corporation uses three different measurement tools: static gap analysis, simulation of earnings, and economic value of equity. These three measurement tools represent static (i.e., point-in-time) measures that do not take into account changes in management strategies and market conditions, among other factors.

Static gap analysis: The static gap analysis starts with contractual repricing information for assets, liabilities, and off-balance sheet instruments. These items are then combined with repricing estimations for administered rate (interest-bearing demand deposits, savings, and money market accounts) and non-rate related products (demand deposit accounts, other assets, and other liabilities) to create a baseline repricing balance sheet. In addition to the contractual information, residential mortgage whole loan products and mortgage-backed securities are adjusted based on industry estimates of prepayment speeds that capture the expected prepayment of principal above the contractual amount based on how far away the contractual coupon is from market coupon rates.

The following table represents the Corporation’s consolidated static gap position as of December 31, 2010.

TABLE 20: Interest Rate Sensitivity Analysis


	December 31, 2010
	Interest Sensitivity Period
										Total Within
	0-90 Days			91-180 Days			181-365 Days			1 Year			Over 1 Year		Total

	($ in Thousands)

Earning assets:
Loans held for sale	$	144,808		$	—		$	—		$	144,808		$	—	$	144,808
Investment securities, at fair value		1,036,549			323,478			463,664			1,823,691			4,468,618		6,292,309
Loans		6,397,898			743,284			1,034,087			8,175,269			4,441,466		12,616,735
Other earning assets		548,675			—			—			548,675			—		548,675


Total earning assets	$	8,127,930		$	1,066,762		$	1,497,751		$	10,692,443		$	8,910,084	$	19,602,527


Interest-bearing liabilities:
Deposits(1)(2)	$	2,902,961		$	1,752,269		$	2,924,985		$	7,580,215		$	7,202,538	$	14,782,753
Other interest-bearing liabilities(2)		1,842,702			315,058			572,550			2,730,310			873,317		3,603,627
Interest rate swap		(200,000	)		—			100,000			(100,000	)		100,000		—


Total interest-bearing liabilities	$	4,545,663		$	2,067,327		$	3,597,535		$	10,210,525		$	8,175,855	$	18,386,380


Interest sensitivity gap	$	3,582,267		$	(1,000,565	)	$	(2,099,784	)	$	481,918		$	734,229	$	1,216,147
Cumulative interest sensitivity gap	$	3,582,267		$	2,581,702		$	481,918
12 Month cumulative gap as a percentage of earning assets at December 31, 2010		18.3	%		13.2	%		2.5	%


(1)		The interest rate sensitivity assumptions for demand deposits, savings accounts, money market accounts, and interest-bearing demand deposit accounts are based on current and historical experiences regarding portfolio retention and interest rate repricing behavior. Based on these experiences, a portion of these balances are considered to be long-term and fairly stable and are, therefore, included in the “Over 1 Year” category.

(2)		For analysis purposes, Brokered CDs of $443 million have been included with other interest-bearing liabilities and excluded from deposits.

The static gap analysis in Table 20 provides a representation of the Corporation’s earnings sensitivity to changes in interest rates. It is a static indicator that may not necessarily indicate the sensitivity of net interest income in a changing interest rate environment. As of December 31, 2010, the 12-month cumulative gap results were within the Corporation’s interest rate risk policy.

At December 31, 2010, the Corporation was in an asset sensitive position, due to the common stock issuance in January 2010 and the implementation of the liquidity plan, while at December 31, 2009, the Corporation was in a liability sensitive position. (Liability sensitive means that liabilities will reprice faster than assets, while asset sensitive means that assets will reprice faster than liabilities. In a rising rate environment, an asset sensitive bank will generally benefit.) For 2011, the Corporation’s objective is to remain in an asset sensitive position. However, the interest rate position is at risk to changes in other factors, such as the slope of the yield curve, competitive pricing pressures, changes in balance sheet mix from management action and/or from customer behavior relative to loan or deposit products. See also section “Net Interest Income.”

Interest rate risk of embedded positions (including prepayment and early withdrawal options, lagged interest rate changes, administered interest rate products, and cap and floor options within products) require a more dynamic measuring tool to capture earnings risk. Earnings simulation and economic value of equity are used to more completely assess interest rate risk.

Simulation of earnings: Along with the static gap analysis, determining the sensitivity of short-term future earnings to a hypothetical plus or minus 100 bp and 200 bp parallel rate shock can be accomplished through the use of simulation modeling. In addition to the assumptions used to create the static gap, simulation of earnings included the modeling of the balance sheet as an ongoing entity. Future business assumptions involving administered rate products, prepayments for future rate-sensitive balances, and the reinvestment of maturing assets and liabilities are included. These items are then modeled to project net interest income based on a hypothetical change in interest rates. The resulting net interest income for the next 12-month period is compared to the net interest income amount calculated using flat rates. This difference represents the Corporation’s earnings sensitivity to a plus or minus 100 bp parallel rate shock.

The resulting simulations for December 31, 2010, projected that net interest income would increase by approximately 1.7% if rates rose by a 100 bp shock. At December 31, 2009, the 100 bp shock up was projected to decrease net interest income by approximately 0.3%. As of December 31, 2010, the simulation of earnings results were within the Corporation’s interest rate risk policy.

Economic value of equity: Economic value of equity is another tool used to measure the impact of interest rates on the value of assets, liabilities, and off-balance sheet financial instruments. This measurement is a longer-term analysis of interest rate risk as it evaluates every cash flow produced by the current balance sheet.

These results are based solely on immediate and sustained parallel changes in market rates and do not reflect the earnings sensitivity that may arise from other factors. These factors may include changes in the shape of the yield curve, the change in spread between key market rates, or accounting recognition of the impairment of certain intangibles. The above results are also considered to be conservative estimates due to the fact that no management action to mitigate potential income variances is included within the simulation process. This action could include, but would not be limited to, delaying an increase in deposit rates, extending liabilities, using financial derivative products to hedge interest rate risk, changing the pricing characteristics of loans, or changing the growth rate of certain assets and liabilities. As of December 31, 2010, the projected changes for the economic value of equity were within the Corporation’s interest rate risk policy.

The Corporation uses interest rate derivative financial instruments as an asset/liability management tool to hedge mismatches in interest rate exposure indicated by the net interest income simulation described above. They are used to modify the Corporation’s exposures to interest rate fluctuations and provide more stable spreads between loan yields and the rate on their funding sources. Interest rate swaps involve the exchange of fixed- and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated. To hedge against rising interest rates, the Corporation may use interest rate caps. Counterparties to these interest rate cap agreements pay the Corporation based on the notional amount and the difference between current rates and strike rates. To hedge against falling interest rates, the Corporation may use interest rate floors. Like caps, counterparties to interest rate floor agreements pay the Corporation based on the notional amount and the difference between current rates and strike rates.

The Corporation also enters into various derivative contracts (i.e. interest rate swaps, caps, collars, and corridors) which are designated as free standing derivative contracts. These derivative contracts are not designated against

specific assets and liabilities on the balance sheet or forecasted transactions and, therefore, do not qualify for hedge accounting treatment. Free standing derivatives are entered into primarily for the benefit of commercial customers through providing derivative products which enables the customer to manage their exposures to interest rate risk. The Corporation’s market risk from unfavorable movements in interest rates related to these derivative contracts is generally economically hedged by concurrently entering into offsetting derivative contracts. The offsetting derivative contracts have identical notional values, terms and indices. Derivative financial instruments are further discussed in Note 14, “Derivative and Hedging Activities,” of the notes to consolidated financial statements.

Contractual Obligations, Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities

Through the normal course of operations, the Corporation has entered into certain contractual obligations and other commitments, including but not limited to those most usually related to funding of operations through deposits or debt, commitments to extend credit, derivative contracts to assist management of interest rate exposure, and to a lesser degree leases for premises and equipment. Table 21 summarizes significant contractual obligations and other commitments at December 31, 2010, at those amounts contractually due to the recipient, including any unamortized premiums or discounts, hedge basis adjustments, or other similar carrying value adjustments. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.

Table 21: Contractual Obligations and Other Commitments


	Note		One Year		One to		Three to		Over
At December 31, 2010:	Reference		or Less		Three Years		Five Years		Five Years		Total

	($ in Thousands)

Time deposits		6	$	2,210,704	$	1,053,000	$	83,689	$	268	$	3,347,661
Short-term borrowings		7		1,747,382		—		—		—		1,747,382
Long-term funding		8		669,912		500,129		1,813		241,751		1,413,605
Operating leases		5		11,775		21,918		15,857		29,313		78,863
Commitments to extend credit		13		2,915,203		767,970		252,265		56,147		3,991,585


Total			$	7,554,976	$	2,343,017	$	353,624	$	327,479	$	10,579,096

The Corporation also has obligations under its retirement plans as described in Note 11, “Retirement Plans,” of the notes to consolidated financial statements. To a lesser degree, the Corporation also has commitments to fund various investments and other projects as discussed further in Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to consolidated financial statements.

As of December 31, 2010, the net liability for uncertain tax positions, including associated interest and penalties, was $17 million. This liability represents an estimate of tax positions that the Corporation has taken in its tax returns which may ultimately not be sustained upon examination by the tax authorities. Since the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty, this estimated liability has been excluded from Table 21. See Note 12, “Income Taxes,” of the notes to consolidated financial statements for additional information and disclosure related to uncertain tax positions.

The Corporation may have a variety of financial transactions that, under generally accepted accounting principles, are either not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts.

The Corporation’s interest rate derivative contracts, under which the Corporation is required to either receive cash from or pay cash to counterparties depending on changes in interest rates applied to notional amounts, are carried at fair value on the consolidated balance sheet with the fair value representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. In addition, the fair value measurement of interest rate derivative instruments also includes a nonperformance / credit risk component. Because neither the derivative assets and liabilities, nor their notional amounts, represent the amounts that may ultimately be paid under these contracts, they are not included in Table 21. Related to the Corporation’s mortgage derivatives, both of which are derivatives carried on the consolidated balance sheet at their fair value (see Note 14, “Derivative and Hedging Activities,” of the notes to

consolidated financial statements), the Corporation had outstanding $129 million interest rate lock commitments to originate residential mortgage loans held for sale (included in Table 21 as part of commitments to extend credit) and forward commitments to sell $281 million of residential mortgage loans to various investors as of December 31, 2010. For further information and discussion of derivative contracts, see section “Interest Rate Risk,” and Note 1, “Summary of Significant Accounting Policies,” and Note 14, “Derivative and Hedging Activities,” of the notes to consolidated financial statements.

The Corporation does not have significant off-balance sheet arrangements such as the use of special-purpose entities or securitization trusts. Residential mortgage loans sold to others (i.e., the off-balance sheet loans underlying the mortgage servicing rights asset) are predominantly conventional residential first lien mortgages originated under our usual underwriting procedures, and are most often sold on a nonrecourse basis. The Corporation’s agreements to sell residential mortgage loans in the normal course of business usually require general representations and warranties on the underlying loans sold, related to credit information, loan documentation, collateral, and insurability, which if subsequently are untrue or breached, could require the Corporation to repurchase certain loans affected. In addition, the nonaccrual loans sold during 2010 also included general representations and warranties on the underlying loans sold, which if violated could require the Corporation to repurchase certain loans affected. There have been insignificant instances of repurchase under representations and warranties. To a much lesser degree, the Corporation may sell residential mortgage loans with limited recourse (limited in that the recourse period ends prior to the loan’s maturity, usually after certain time and/or loan paydown criteria have been met), whereby repurchase could be required if the loan had defined delinquency issues during the limited recourse periods. At December 31, 2010, there were approximately $58 million of residential mortgage loans sold with such recourse risk, upon which there have been insignificant instances of repurchase.

In October 2004, the Corporation acquired a thrift. Prior to the acquisition, this thrift retained a subordinate position to the FHLB in the credit risk on the underlying residential mortgage loans it sold to the FHLB in exchange for a monthly credit enhancement fee. The Corporation has not sold loans to the FHLB with such credit risk retention since February 2005. At December 31, 2010, there were $700 million of such residential mortgage loans with credit risk recourse, upon which there have been negligible historical losses to the Corporation.

The Corporation also has standby letters of credit (guarantees for payment to third parties of specified amounts if customers fail to pay, carried on-balance sheet at an estimate of their fair value of $3.9 million) of $362 million, and commercial letters of credit (off-balance sheet commitments generally authorizing a third party to draw drafts on us up to a stated amount and typically having underlying goods shipments as collateral) of $38 million at December 31, 2010. Given the credit environment during 2010, the Corporation had a reserve for losses on unfunded commitments totaling $17.4 million at December 31, 2010, included in other liabilities on the consolidated balance sheets. Since most of these commitments, as well as commitments to extend credit, are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. See section, “Liquidity” and Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to consolidated financial statements for further information.

The Corporation has principal investment commitments to provide capital-based financing to private and public companies through either direct investments in specific companies or through investment funds and partnerships. The timing of future cash requirements to fund such commitments is generally dependent on the investment cycle, whereby privately held companies are funded by private equity investors and ultimately sold, merged, or taken public through an initial offering, which can vary based on overall market conditions, as well as the nature and type of industry in which the companies operate. The Corporation also invests in low-income housing, small-business commercial real estate, new market tax credit projects, and historic tax credit projects to promote the revitalization of low-to-moderate-income neighborhoods throughout the local communities of its bank subsidiary. As a limited partner in these unconsolidated projects, the Corporation is allocated tax credits and deductions associated with the underlying projects. The Corporation is currently evaluating the potential impact of the Dodd-Frank Act on these investments. The aggregate carrying value of these investments at December 31, 2010, was $45 million, included in other assets on the consolidated balance sheets, compared to $39 million at December 31, 2009. Related to these investments, the Corporation had remaining commitments to fund of $11 million at December 31, 2010, and $15 million at December 31, 2009.

The Corporation, as a member bank of Visa, Inc. (“Visa”) prior to Visa’s completion of their initial public offering (“IPO”) in March 2008, had certain indemnification obligations pursuant to Visa’s certificate of incorporation and bylaws and in accordance with their membership agreements. In accordance with Visa’s bylaws prior to the IPO, the Corporation could have been required to indemnify Visa for the Corporation’s proportional share of losses based on the pre-IPO membership interests. In contemplation of the IPO, Visa announced that it had completed restructuring transactions during the fourth quarter of 2007. As part of this restructuring, the Corporation’s indemnification obligation was modified to include only certain known litigation as of the date of the restructuring. This modification triggered a requirement to recognize a $2.3 million liability (included in other liabilities in the consolidated balance sheets) in 2007 equal to the fair value of the indemnification obligation. During 2009, the Corporation reduced the litigation reserves by $0.5 million to recognize its share of litigation settlements, resulting in a $1.8 million reserve for unfavorable litigation losses related to Visa at December 31, 2009. Based upon Visa’s revised liability estimate for litigation, including the current funding of litigation settlements, the Corporation recorded a $0.3 million reduction in the reserve for litigation losses and a corresponding reduction in the Visa escrow receivable during 2010. At December 31, 2010, the remaining reserve for unfavorable litigation losses related to Visa was $1.5 million.

In connection with the IPO in 2008, Visa retained a portion of the proceeds to fund an escrow account in order to resolve existing litigation settlements as well as to fund potential future litigation settlements. The Corporation’s initial interest in this escrow account was $2 million (included in other assets in the consolidated balance sheets). During 2009 and 2010, Visa announced it had deposited additional amounts into the litigation escrow account, of which, the Corporation’s pro-rata share was $0.3 million and $0.6 million, respectively for the periods. At December 31, 2010, the remaining receivable related to the Visa escrow account was $1.3 million. For additional discussion of Visa matters see Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to consolidated financial statements.

For certain mortgage loans originated by the Corporation, borrowers may be required to obtain Private Mortgage Insurance (PMI) provided by third-party insurers. The Corporation entered into reinsurance treaties with certain PMI carriers which provided, among other things, for a sharing of losses within a specified range of the total PMI coverage in exchange for a portion of the PMI premiums. The Corporation’s reinsurance treaties typically provide that the Corporation will assume liability for losses once they exceed 5% of the aggregate risk exposure up to a maximum of 10% of the aggregate risk exposure. At December 31, 2010, the Corporation’s potential risk exposure was approximately $25 million. As of January 1, 2009, the Corporation discontinued providing reinsurance coverage for new loans in exchange for a portion of the PMI premium. The Company’s liability for reinsurance losses, including estimated losses incurred but not yet reported, was $4.5 million and $2.4 million at December 31, 2010 and December 31, 2009, respectively.

Capital

Stockholders’ equity at December 31, 2010, was $3.2 billion, up $420 million compared to $2.7 billion at December 31, 2009. Stockholders’ equity is also described in Note 9, “Stockholders’ Equity,” of the notes to consolidated financial statements. The increase in stockholders’ equity for 2010 was primarily attributable to the completion of a common equity offering on January 15, 2010, which resulted in a net increase in stockholders’ equity of $478 million and a 44.8 million increase in the number of common shares outstanding. Cash dividends paid in 2010 were $0.04 per common share, compared with $0.47 per common share in 2009. At December 31, 2010, stockholders’ equity included $27.6 million of accumulated other comprehensive income compared to $63.4 million of accumulated other comprehensive income at December 31, 2009. The $35.8 million decline in accumulated other comprehensive income resulted primarily from the change in the unrealized gain/loss position, net of the tax effect, on securities available for sale (i.e., from net unrealized gains of $94 million at December 31, 2009, to net unrealized gains of $56 million at December 31, 2010). Stockholders’ equity to assets at December 31, 2010, was 14.50%, compared to 11.97% at the end of 2009.

TABLE 22: Capital


	At or for the Year Ended December 31,
	2010			2009			2008
	(In Thousands, except per share data)

Total stockholders’ equity	$	3,158,791		$	2,738,608		$	2,876,503
Tier 1 capital		2,376,893			1,918,238			2,117,680
Total capital		2,576,297			2,180,959			2,446,597
Market capitalization		2,622,647			1,407,915			2,674,059


Book value per common share	$	15.28		$	17.42		$	18.54
Tangible book value per common share		9.77			9.93			10.99
Cash dividends per common share		0.04			0.47			1.27
Stock price at end of period		15.15			11.01			20.93
Low closing price for the period		11.48			9.21			14.85
High closing price for the period		16.10			21.39			29.23


Total stockholders’ equity / assets		14.50	%		11.97	%		11.89	%
Tangible common equity / tangible assets(1)		8.12			5.79			6.05
Tangible stockholders’ equity / tangible assets(2)		10.59			8.12			8.23
Tier 1 common equity / risk-weighted assets(3)		12.26			7.85			7.90
Tier 1 leverage ratio		11.19			8.76			9.75
Tier 1 risk-based capital ratio		17.58			12.52			11.91
Total risk-based capital ratio		19.05			14.24			13.76


Common shares outstanding (period end)		173,112			127,876			127,762
Basic common shares outstanding (average)		171,230			127,858			127,501
Diluted common shares outstanding (average)		171,230			127,858			127,775


(1)		Tangible common equity to tangible assets = Common stockholders’ equity excluding goodwill and other intangible assets divided by assets excluding goodwill and other intangible assets. This is a non-GAAP financial measure.

(2)		Tangible stockholders’ equity to tangible assets = Total stockholders’ equity excluding goodwill and other intangible assets divided by assets excluding goodwill and other intangible assets. This is a non-GAAP financial measure.

(3)		Tier 1 common capital ratio = Tier 1 capital excluding qualifying perpetual preferred stock and qualifying trust preferred securities divided by risk-weighted assets. This is a non-GAAP financial measure.

Management actively reviews capital strategies for the Corporation and each of its subsidiaries in light of perceived business risks, future growth opportunities, industry standards, and compliance with regulatory requirements. The assessment of overall capital adequacy depends on a variety of factors, including asset quality, liquidity, stability of earnings, changing competitive forces, economic condition in markets served, and strength of management.

The Corporation and its bank subsidiary continue to have a strong capital base. As of December 31, 2010 and 2009, the tier 1 risk-based capital ratios, total risk-based capital (tier 1 and tier 2) ratios, and tier 1 leverage ratios for the Corporation and its bank subsidiary were in excess of regulatory minimum requirements. It is management’s intent to exceed the minimum requisite capital levels. Regulatory capital ratios for the Corporation and its significant subsidiary are included in Note 17, “Regulatory Matters,” of the notes to consolidated financial statements.

source of the Bank’s capital. Management believes that it has appropriately addressed all of the conditions of the MOU. The Bank has also agreed with the OCC that until the MOU is no longer in effect, it will maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) — 8% and total capital to risk-weighted assets — 12%. At December 31, 2010, the Bank’s capital ratios were 9.55% and 16.38%, respectively. On April 6, 2010, the Corporation entered into a Memorandum of Understanding (“Memorandum”) with the Federal Reserve Bank of Chicago (“Reserve Bank”). The Memorandum, which was entered into following the 2008-2009 supervisory cycle, is an informal agreement between the Corporation and the Reserve Bank. As required, management has submitted plans to strengthen board and management oversight and risk management and for maintaining sufficient capital incorporating stress scenarios. As also required, the Corporation has submitted quarterly progress reports, and has obtained, and will in the future continue to obtain, approval prior to payment of dividends and interest or principal payments on subordinated debt, increases in borrowings or guarantees of debt, or the repurchase of common stock.

The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock to be made available for re-issuance in connection with the Corporation’s employee incentive plans and/or for other corporate purposes. During 2010 and 2009, no shares were repurchased. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities, and is subject to the restrictions under the CPP.

On October 14, 2008, the UST announced details of the CPP, whereby the UST makes direct equity investments into qualifying financial institutions in the form of senior preferred stock and common stock warrants providing an immediate influx of Tier 1 capital into the banking system. Participants must adopt the UST’s standards for executive compensation and corporate governance, for the period during which the UST holds equity issued under this program.

On November 21, 2008, the Corporation announced that it sold $525 million of Senior Preferred Stock and related Common Stock Warrants to the UST under the CPP. Under the CPP, prior to the third anniversary of the UST’s purchase of the Senior Preferred Stock (November 21, 2011), unless the Senior Preferred Stock has been redeemed or the UST has transferred all of the Senior Preferred Stock to third parties, the consent of the UST will be required for us to redeem, purchase or acquire any shares of our common stock or other capital stock or other equity securities of any kind, other than (i) redemptions, purchases or other acquisitions of the Senior Preferred Stock; (ii) redemptions, purchases or other acquisitions of shares of our common stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice; and (iii) certain other redemptions, repurchases or other acquisitions as permitted under the CPP.

On January 15, 2010, the Corporation announced it had closed its underwritten public offering of 44.8 million shares of its common stock at $11.15 per share. The net proceeds from the offering were approximately $478 million after deducting underwriting discounts and commissions. The Corporation used the net proceeds of this offering to support continued growth and for working capital and other general corporate purposes.

Segment Review

As described in Part I, Item I, section “Services,” and in Note 19, “Segment Reporting,” of the notes to consolidated financial statements, the Corporation’s primary reportable segment is banking. Banking consists of lending and deposit gathering (as well as other banking-related products and services) to businesses, governmental units, and consumers and the support to deliver, fund, and manage such banking services. The Corporation’s wealth management segment provides products and a variety of fiduciary, investment management, advisory, and Corporate agency services to assist customers in building, investing, or protecting their wealth, including insurance, brokerage, and trust/asset management.

Note 19, “Segment Reporting,” of the notes to consolidated financial statements, indicates that the banking segment represents 91% of total revenues in 2010, as defined. The Corporation’s profitability is predominantly dependent on net interest income, noninterest income, the level of the provision for loan losses, noninterest expense, and taxes of its banking segment. The consolidated discussion, therefore, predominantly describes the banking segment results. The critical accounting policies primarily affect the banking segment, with the exception of goodwill impairment

assessment and income tax accounting, which affects both the banking and wealth management segments (see section “Critical Accounting Policies”).

The contribution from the wealth management segment compared to consolidated total revenues (as defined and disclosed in Note 19, “Segment Reporting,” of the notes to consolidated financial statements) was 10%, 9%, and 10%, for 2010, 2009, and 2008, respectively. Wealth management segment revenues were up $2.2 million (2%) between 2010 and 2009, and down $8.0 million (8%) between 2009 and 2008. Wealth management segment expenses were up $0.7 million (1%) between 2010 and 2009, and down $0.4 million between 2009 and 2008. Wealth management segment assets (which consist predominantly of cash equivalents, investments, customer receivables, goodwill and intangibles) were up $10 million (8%) between year-end 2010 and 2009, and up $10 million (9%) between year-end 2009 and 2008. The $2.2 million increase in wealth management segment revenues between 2010 and 2009 was attributable principally to higher trust service fees and brokerage commissions, while the $8.0 million decrease in wealth management segment revenues between 2009 and 2008 was attributable principally to lower insurance commissions and trust service fees. The $10 million increase in wealth segment assets from 2008 to 2009 and 2009 to 2010 were comprised largely of higher levels of cash equivalents and investments. The major components of wealth management revenues are trust fees, insurance fees and commissions, and brokerage commissions, which are individually discussed in section “Noninterest Income.” The major expenses for the wealth management segment are personnel expense (between 63% and 65% of expense for 2010, 2009, and 2008), as well as occupancy, processing, and other costs, which are covered generally in the consolidated discussion in section “Noninterest Expense.” See also Note 4, “Goodwill and Intangible Assets,” of the notes to consolidated financial statements for additional disclosure.

Fourth Quarter 2010 Results

Net income available to common equity for fourth quarter 2010 was $6.6 million, compared to net loss available to common equity of $180.6 million in the fourth quarter of 2009. For fourth quarter 2010, basic and diluted earnings per common share was $0.04, compared to basic and diluted loss per common share of $1.41, for the fourth quarter of 2009. See Table 23 for selected quarterly information.

Net interest income for fourth quarter 2010 of $151 million was $27 million lower than fourth quarter 2009 and taxable equivalent net interest income of $157 million was $28 million lower between the fourth quarter periods. Volume variances and changes in the mix of earning assets and interest-bearing liabilities decreased taxable equivalent net interest income by $13.4 million, while unfavorable rate changes resulted in a $14.6 million decrease (as lower yields on earning assets decreased taxable equivalent interest income by $18.9 million, while lower costs on interest-bearing liabilities decreased interest expense by $4.3 million).

Average earning assets were $20.0 billion for fourth quarter 2010, a decrease of $0.5 billion from fourth quarter 2009, with average loans down $2.0 billion, while investments were up $1.5 billion. The decline in average loans was comprised primarily of decreases in commercial loans (down $1.9 billion) and retail loan balances (down $0.2 billion), while residential mortgage loans increased (up $0.1 billion). Growth in average investments was principally due to the Corporation’s increased liquidity position. Average demand deposits were up $212 million (7%) while interest-bearing deposits were down $166 million (1%). Average wholesale funding balances decreased $1.0 billion, primarily due to decreases in short-term borrowings.

The Federal Reserve left rates unchanged during 2010 and 2009, resulting in an average Federal funds rate of 0.25% for both fourth quarter 2010 and 2009. The net interest margin was 3.13% in the fourth quarter of 2010, 46 bp lower than the same quarter in 2009, attributable to a 2 bp decrease in contribution from net free funds (as lower rates on interest-bearing liabilities decreased the value of noninterest-bearing deposits and other net free funds) and a 44 bp decrease in interest rate spread. The reduction in interest rate spread was the result of a 70 bp decrease in the yield on earning assets (to 3.89% in fourth quarter 2010), offset by a 26 bp decrease in the cost of interest-bearing liabilities (to 0.98%). The decrease in earning asset yield in fourth quarter 2010 was attributable to lower total investment and other short-term investment yields (down 169 bp, to 2.58%, impacted by the Corporation’s strong liquidity position), and lower loan yields (down 7 bp, to 4.65%). The 26 bp decrease in the cost of interest-bearing liabilities for the fourth quarter of 2010 consisted of lower rates on interest-bearing deposits (down 25 bp, due to the lower rate environment), offset by increased wholesale funding costs (up 19 bp).

The provision for loan losses was $63.0 million for fourth quarter 2010 compared to $394.8 million for fourth quarter 2009, with fourth quarter 2010 provision less than net charge offs by $45.2 million and fourth quarter 2009 provision exceeding net charge offs by $161.0 million. Net charge offs were $108.2 million, representing 3.41% of average loans for fourth quarter 2010, versus $233.8 million, representing 6.35% of average loans, for fourth quarter 2009. See sections, “Loans,” “Allowance for Loan Losses,” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned” for additional discussion.

Noninterest income in fourth quarter 2010 was $84.7 million, relatively unchanged from fourth quarter 2009. Core fee-based revenues (as defined in Table 6) were lower by $9.4 million, mortgage banking, net was higher by $4.0 million, and capital market fees, net were up $4.9 million, while all other noninterest income categories were up $0.5 million on a combined basis. Regarding core-fee based revenues in the fourth quarter of 2010, service charges on deposits accounts were lower by $8.8 million, principally due to lower nonsufficient funds / overdraft fees, retail commission income was down $0.9 million, and card-based and other nondeposit fees and trust service fees were relatively flat between the comparable quarters. Net mortgage banking income was up $4.0 million between fourth quarter periods, primarily attributable to a $2.2 million favorable change in gains on sales and related income and $1.8 million lower mortgage servicing rights expense (with fourth quarter 2010 including a $3.0 million recovery to the valuation allowance compared to a $0.7 million recovery to the valuation allowance for fourth quarter 2009, offset by $0.5 million higher base amortization). The $4.9 million increase in capital market fees, net was primarily due to credit valuation adjustments related to changes in the fair value of credit (nonperformance) risk of the Corporation’s interest-rate related derivative instruments (customer and mirror positions).

Net losses on investment securities were $1.9 million in the fourth quarter of 2010, attributable to credit-related other-than-temporary write-downs on the Corporation’s holding of a trust preferred debt security and various equity securities, compared to net losses of $0.4 million in fourth quarter 2009, comprised of credit-related other-than-temporary write-downs on the Corporation’s holding of a trust preferred debt security, a non-agency mortgage-related security and an equity security. Asset sale gains were $0.5 million in the fourth quarter of 2010, compared to asset sale losses of $1.6 million in the fourth quarter of 2009, primarily due to lower losses on sales of other real estate owned.

Noninterest expense for the fourth quarter of 2010 was $166.8 million, $7.8 million or 4.9% higher than the fourth quarter of 2009. Personnel expense increased $11.3 million (15.5%), with salary-related expenses up $12.0 million (principally due to higher compensation and higher formal / discretionary bonuses) and fringe benefit expenses down $0.7 million. All other noninterest expenses combined were $3.5 million or 4.0% lower than the fourth quarter of 2009, including a $9.4 million decrease in the reserve for losses on unfunded commitments (with a $10.5 million increase to the reserve for losses on unfunded commitments in fourth quarter 2009 compared to a $1.1 million increase in fourth quarter 2010), partially offset by a $1.5 million increase in FDIC expense and an increase in other expense related to the resolution of certain ongoing legal matters. The efficiency ratio (as defined under the section, “Overview”) was 68.76% for the fourth quarter of 2010 compared to 58.63% for the fourth quarter of 2009.

The Corporation recorded an income tax benefit of $8.3 million for fourth quarter 2010, compared to income tax benefit of $117.5 million for the comparable quarter in 2009. The change in income tax was primarily due to the level of pretax income / loss between the comparable fourth quarter periods. Of the $8.3 million tax benefit for the fourth quarter of 2010, $4.4 million related to the resolution of uncertain tax matters, closing of certain statute of limitations, and changes in the valuation allowance on deferred tax assets which occurred during the quarter.

TABLE 23: Selected Quarterly Financial Data

The following is selected financial data summarizing the results of operations for each quarter in the years ended December 31, 2010 and 2009:


	2010 Quarter Ended
	December 31			September 30		June 30			March 31

	(In thousands, except per share data)

Interest income	$	189,092		$	196,216	$	204,878		$	215,940
Interest expense		38,232			42,312		45,085			46,718


Net interest income		150,860			153,904		159,793			169,222
Provision for loan losses		63,000			64,000		97,665			165,345
Investment securities gains (losses), net		(1,883	)		3,365		(146	)		23,581
Income (loss) before income taxes		5,714			15,221		(12,019	)		(49,944	)
Net income (loss) available to common equity	$	6,608		$	6,915	$	(10,156	)	$	(33,754	)


Basic earnings (loss) per common share	$	0.04		$	0.04	$	(0.06	)	$	(0.20	)
Diluted earnings (loss) per common share	$	0.04		$	0.04	$	(0.06	)	$	(0.20	)
Basic weighted average common shares outstanding		173,068			172,989		172,921			165,842
Diluted weighted average common shares outstanding		173,072			172,990		172,921			165,842


	2009 Quarter Ended
	December 31			September 30			June 30			March 31

	(In thousands, except per share data)

Interest income	$	230,210		$	238,651		$	249,910		$	262,485
Interest expense		51,857			59,415			70,772			73,207


Net interest income		178,353			179,236			179,138			189,278
Provision for loan losses		394,789			95,410			155,022			105,424
Investment securities gains (losses), net		(395	)		(42	)		(1,385	)		10,596
Income (loss) before income taxes		(290,716	)		18,024			(43,974	)		31,567
Net income (loss) available to common equity	$	(180,591	)	$	8,652		$	(24,672	)	$	35,404


Basic earnings (loss) per common share	$	(1.41	)	$	0.07		$	(0.19	)	$	0.28
Diluted earnings (loss) per common share	$	(1.41	)	$	0.07		$	(0.19	)	$	0.28
Basic weighted average common shares outstanding		127,869			127,863			127,861			127,839
Diluted weighted average common shares outstanding		127,869			127,863			127,861			127,845

2009 Compared to 2008

The Corporation recorded a net loss of $131.9 million for the year ended December 31, 2009, compared to net income of $168.5 million for the year ended December 31, 2008. Net loss available to common equity was $161.2 million for 2009, or a net loss of $1.26 for both basic and diluted earnings per common share. For 2008, net income available to common equity was $165.2 million, or $1.29 for both basic and diluted earnings per common share. Earnings for 2009 were primarily impacted by the higher provision for loan losses (resulting from continued deterioration in the real estate markets and the economy). Cash dividends of $0.47 per common share were paid in 2009, compared to cash dividends of $1.27 per common share paid in 2008. Key factors behind these results are discussed below.

The market conditions in 2008 and 2009 were marked with general economic and industry declines with a pervasive impact on consumer confidence, business and personal financial performance, and commercial and residential real estate markets, resulting in an increase in nonaccrual loans, net charge offs, and provision for loan losses. Nonaccrual loans were $1.1 billion at December 31, 2009, compared to $327 million at December 31, 2008. Net charge offs were $442.5 million in 2009 (or 2.84% of average loans) compared to $137.3 million in 2008 (or 0.85%

of average loans). The provision for loan losses was $750.6 million and $202.1 million, respectively, for 2009 and 2008. At year-end 2009, the allowance for loan losses represented 4.06% of total loans (covering 53% of nonaccrual loans), compared to 1.63% (covering 81% of nonaccrual loans) at year-end 2008. For additional discussion regarding charge offs and nonaccrual loans see sections, “Allowance for Loan Losses” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned.”

Taxable equivalent net interest income was $750.8 million for 2009, $27.0 million or 3.7% higher than 2008. Taxable equivalent interest income decreased $148.3 million, while interest expense decreased by $175.3 million. As shown in Table 3, the increase in taxable equivalent net interest income was a function of favorable volume/mix variances (increasing taxable equivalent net interest income by $53.0 million), partially offset by unfavorable rate variances (decreasing taxable equivalent net interest income by $26.0 million). The change in the mix and volume of earning assets increased taxable equivalent interest income by $66.6 million, while the change in volume and composition of interest-bearing liabilities increased taxable equivalent interest expense by $13.6 million, for a net favorable volume impact of $53.0 million on taxable equivalent net interest income. Rate changes on earning assets reduced interest income by $214.9 million, while changes in rates on interest-bearing liabilities lowered interest expense by $188.9 million, for a net unfavorable rate impact of $26.0 million.

The net interest margin for 2009 was 3.52%, 13 bp lower than 3.65% in 2008. The reduction in net interest margin was attributable to a 2 bp decrease in interest rate spread (the net of a 108 bp decrease in the cost of interest-bearing liabilities and a 110 bp decrease in the yield on earning assets) and an 11 bp lower contribution from net free funds (primarily attributable to lower rates on interest-bearing liabilities reducing the value of noninterest-bearing deposits and other net free funds).

Year-over-year changes in the average balance sheet were impacted by the preferred stock issuance of $525 million in the fourth quarter of 2008 and the levering of the balance sheet through the investment in mortgage-related securities. As a result, average earning assets of $21.3 billion in 2009 were $1.5 billion (8%) higher than 2008. Average investments grew $2.0 billion as a result of mortgage-related investment securities purchases. Average loans decreased $0.5 billion (3.0%), with a $714 million decrease in commercial loans, partially offset by a $170 million increase in residential mortgage loans and a $60 million increase in retail loans. Average interest-bearing liabilities of $17.7 billion in 2009 were up $0.6 billion (4%) versus 2008, attributable to higher average deposit balances. On average, interest-bearing deposits grew $1.7 billion, while average noninterest-bearing demand deposits (a principal component of net free funds) increased by $0.4 billion. Average wholesale funding decreased $1.1 billion, the net of a $1.3 billion decrease in short-term borrowings and a $0.2 billion increase in long-term funding.

At December 31, 2009, total loans were $14.1 billion, down 13.2% from year-end 2008, primarily in commercial loans. Total deposits at December 31, 2009, were $16.7 billion, up 10.4% from year-end 2008, primarily attributable to higher money market deposits and interest-bearing demand deposits.

As shown in Table 6, noninterest income was $351.0 million for 2009, $65.3 million or 22.9% higher than 2008. Core fee-based revenues (including trust service fees, service charges on deposit accounts, card-based and other nondeposit fees, and retail commission income) totaled $259.6 million for 2009, down $8.3 million or 3.1% from $267.9 million for 2008. Net mortgage banking income was $40.9 million for 2009, compared to $14.7 million in 2008, an increase of $26.2 million from 2008, primarily attributable to a $27.2 million increase in the gain on sales of mortgage loans related to the higher secondary mortgage production experienced during 2009. Asset and investment securities gains, net combined were $4.7 million for 2009 (predominantly from gains on sales of mortgage-related securities, partially offset by higher losses on sales of other real estate owned), compared to combined asset and investment securities losses of $54.2 million for 2008 (primarily attributable to other-than-temporary write-downs on investment securities). Collectively, all remaining noninterest income categories were $45.8 million, down $11.5 million compared to 2008.

As shown in Table 7, noninterest expense for 2009 was $611.4 million, an increase of $54.0 million or 9.7% over 2008. FDIC expense increased $39.4 million, legal and professional fees increased $5.0 million, and foreclosure / OREO expenses increased $24.4 million, while personnel expense was down $5.1 million and collectively all remaining noninterest expense categories were down $9.7 million compared to 2008. The efficiency ratio (as defined under Part II, Item 6, “Selected Financial Data”) was 55.73% for 2009 and 52.41% for 2008.

Income tax benefit for 2009 was $153.2 million, compared to income tax expense of $53.8 million for 2008. The change in income tax was primarily due to the level of pretax income/loss between the years.

Recent Developments

On January 25, 2011, the Board of Directors declared a $0.01 per common share dividend payable on February 16, 2011, to shareholders of record as of February 7, 2011. This cash dividend has not been reflected in the accompanying consolidated financial statements.

Critical Accounting Policies

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Estimates that are particularly susceptible to significant change include the determination of the allowance for loan losses, goodwill impairment assessment, mortgage servicing rights valuation, derivative financial instruments and hedging activities, and income taxes.

The consolidated financial statements of the Corporation are prepared in conformity with U.S. generally accepted accounting principles and follow general practices within the industries in which it operates. This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Management believes the following policies are both important to the portrayal of the Corporation’s financial condition and results of operations and require subjective or complex judgments and, therefore, management considers the following to be critical accounting policies. The critical accounting policies are discussed directly with the Audit Committee of the Corporation’s Board of Directors.

Allowance for Loan Losses: Management’s evaluation process used to determine the appropriateness of the allowance for loan losses is subject to the use of estimates, assumptions, and judgments. The evaluation process combines many factors: management’s ongoing review and grading of the loan portfolio, consideration of historical loan loss and delinquency experience, trends in past due and nonaccrual loans, risk characteristics of the various classifications of loans, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect probable credit losses. Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the appropriateness of the allowance for loan losses, could change significantly. As an integral part of their examination process, various regulatory agencies also review the allowance for loan losses. Such agencies may require additions to the allowance for loan losses or may require that certain loan balances be charged off or downgraded into criticized loan categories when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination. The Corporation believes the level of the allowance for loan losses is appropriate as recorded in the consolidated financial statements. See Note 1, “Summary of Significant Accounting Policies,” and Note 3, “Loans,” of the notes to consolidated financial statements and section “Allowance for Loan Losses.”

Goodwill Impairment Assessment: Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. The impairment testing process is conducted by assigning net assets and goodwill to each reporting unit. The fair value of each reporting unit is compared to the recorded book value, “step one”. If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired and “step two” is not considered necessary. If the carrying value of a reporting unit exceeds its fair value, the impairment test continues (“step two”) by comparing the carrying value of the reporting unit’s goodwill to the implied fair value of goodwill. The implied fair value is computed by adjusting all assets and liabilities of the reporting unit to current fair value with the offset adjustment to goodwill. The adjusted goodwill balance is the implied fair value of the goodwill.

An impairment charge is recognized if the carrying fair value of goodwill exceeds the implied fair value of goodwill.

The Corporation conducted its annual impairment testing in May 2010 and May 2009. In addition, during 2009, quarterly impairment tests were completed. The step one analysis conducted for the wealth segment indicated that the estimated fair value exceeded its carrying value (including goodwill). Therefore, a step two analysis was not required for this reporting unit. The step one analysis completed for the banking segment indicated that the carrying value (including goodwill) of the reporting unit exceeded its estimated fair value. Therefore, a step two analysis was performed for this segment, which indicated that the implied fair value of the goodwill of the banking segment exceeded the carrying value (including goodwill) and no impairment charge was recorded. The Corporation engaged an independent valuation firm to assist in the computation of the fair value estimates of each reporting unit as part of its impairment assessment. The valuation utilized market and income approach methodologies and applied a weighted average to each in order to determine the fair value of each reporting unit. Goodwill impairment testing is considered a “critical accounting estimate” as estimates and assumptions are made about future performance and cash flows, as well as other prevailing market factors. In the event that we conclude that all or a portion of our goodwill may be impaired, a noncash charge for the amount of such impairment would be recorded in earnings. Such a charge would have no impact on tangible capital. A decline in our stock price or occurrence of a triggering event following any of our quarterly earnings releases and prior to the filing of the periodic report for that period could, under certain circumstances, cause us to re-perform a goodwill impairment test and result in an impairment charge being recorded for that period which was not reflected in such earnings release.

In connection with obtaining an independent third party valuation, management provides certain information and assumptions that is utilized in the implied fair value calculation. Assumptions critical to the process include discount rates, asset and liability growth rates, and other income and expense estimates. The Corporation provided the best information currently available to estimate future performance for each reporting unit; however, future adjustments to these projections may be necessary if conditions differ substantially from the assumptions utilized in making these assumptions. See also, Note 4 “Goodwill and Intangible Assets,” of the notes to the consolidated financial statements.

At December 31, 2010, we had goodwill of $929 million, representing approximately 29% of stockholders’ equity, of which $907 million was assigned to the banking segment and $22 million was assigned to the wealth management segment.

Mortgage Servicing Rights Valuation: The fair value of the Corporation’s mortgage servicing rights asset is important to the presentation of the consolidated financial statements since the mortgage servicing rights are carried on the consolidated balance sheet at the lower of amortized cost or estimated fair value. Mortgage servicing rights do not trade in an active open market with readily observable prices. As such, like other participants in the mortgage banking business, the Corporation relies on an internal discounted cash flow model to estimate the fair value of its mortgage servicing rights. The use of an internal discounted cash flow model involves judgment, particularly of estimated prepayment speeds of underlying mortgages serviced and the overall level of interest rates. Loan type and note interest rate are the predominant risk characteristics of the underlying loans used to stratify capitalized mortgage servicing rights for purposes of measuring impairment. The Corporation periodically reviews the assumptions underlying the valuation of mortgage servicing rights. In addition, the Corporation consults periodically with third parties as to the assumptions used and to determine that the Corporation’s valuation is consistent with the third party valuation. While the Corporation believes that the values produced by its internal model are indicative of the fair value of its mortgage servicing rights portfolio, these values can change significantly depending upon key factors, such as the then current interest rate environment, estimated prepayment speeds of the underlying mortgages serviced, and other economic conditions. The proceeds that might be received should the Corporation actually consider a sale of some or all of the mortgage servicing rights portfolio could differ from the amounts reported at any point in time.

Mortgage servicing rights are carried at the lower of amortized cost or estimated fair value and are assessed for impairment at each reporting date. Impairment is assessed based on the fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates

fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. However, the extent to which interest rates impact the value of the mortgage servicing rights asset depends, in part, on the magnitude of the changes in market interest rates and the differential between the then current market interest rates for mortgage loans and the mortgage interest rates included in the mortgage servicing portfolio. Management recognizes that the volatility in the valuation of the mortgage servicing rights asset will continue. To better understand the sensitivity of the impact of prepayment speeds on the value of the mortgage servicing rights asset at December 31, 2010 (holding all other factors unchanged), if prepayment speeds were to increase 25%, the estimated value of the mortgage servicing rights asset would have been approximately $7.6 million (or 12%) lower, while if prepayment speeds were to decrease 25%, the estimated value of the mortgage servicing rights asset would have been approximately $7.7 million (or 12%) higher. The Corporation believes the mortgage servicing rights asset is properly recorded in the consolidated financial statements. See Note 1, “Summary of Significant Accounting Policies,” and Note 4, “Goodwill and Intangible Assets,” of the notes to consolidated financial statements and section “Noninterest Income.”

Derivative Financial Instruments and Hedging Activities: In various aspects of its business, the Corporation uses derivative financial instruments to modify exposures to changes in interest rates and market prices for other financial instruments. Derivative instruments are required to be carried at fair value on the balance sheet with changes in the fair value recorded directly in earnings. To qualify for and maintain hedge accounting, the Corporation must meet formal documentation and effectiveness evaluation requirements both at the hedge’s inception and on an ongoing basis. The application of the hedge accounting policy requires strict adherence to documentation and effectiveness testing requirements, judgment in the assessment of hedge effectiveness, identification of similar hedged item groupings, and measurement of changes in the fair value of hedged items. If in the future derivative financial instruments used by the Corporation no longer qualify for hedge accounting, the impact on the consolidated results of operations and reported earnings could be significant. When hedge accounting is discontinued, the Corporation would continue to carry the derivative on the balance sheet at its fair value; however, for a cash flow derivative, changes in its fair value would be recorded in earnings instead of through other comprehensive income, and for a fair value derivative, the changes in fair value of the hedged asset or liability would no longer be recorded through earnings. See also Note 1, “Summary of Significant Accounting Policies,” Note 14, “Derivative and Hedging Activities,” and Note 16 “Fair Value Measurements,” of the notes to consolidated financial statements and section “Interest Rate Risk.”

Income Taxes: The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the consolidated results of operations and reported earnings. For financial reporting purposes, a valuation allowance has been recognized at December 31, 2010 and 2009, to offset deferred tax assets related to state net operating loss carryforwards of certain subsidiaries. Quarterly assessments are performed to determine if additional valuation allowances are necessary. Assessing the need for, or sufficiency of, a valuation allowance requires management to evaluate all available evidence, both positive and negative, including the recent quarterly losses. Positive evidence necessary to overcome the negative evidence includes whether future taxable income in sufficient amounts and character within the carryback and carryforward periods is available under the tax law, including the use of tax planning strategies. When negative evidence (e.g., cumulative losses in recent years, history of operating loss or tax credit carryforwards expiring unused) exists, more positive evidence than negative evidence will be necessary. As a result of the pre-tax losses incurred during 2009 and 2010, the Corporation is in a cumulative pre-tax loss position for financial statement purposes for the three-year period ended December 31, 2010. This represents significant negative evidence in the assessment of whether the deferred tax assets will be realized. However, the Corporation has concluded that based on the weight given to other positive evidence, it is more likely than not that the deferred tax asset will be realized, exclusive of the $6 million valuation allowance on state net operating losses. In making this determination, the Corporation has considered the positive evidence associated with future taxable income, tax planning strategies, and reversing taxable temporary differences in future periods. Most significantly, the Corporation relied upon its ability to generate future taxable income, exclusive of reversing temporary differences, over a

relatively short time period. However, there is no guarantee that the tax benefits associated with the remaining deferred tax assets will be fully realized. The Corporation believes the tax assets and liabilities are properly recorded in the consolidated financial statements. See Note 1, “Summary of Significant Accounting Policies,” and Note 12, “Income Taxes,” of the notes to consolidated financial statements and section “Income Taxes.”

Future Accounting Pronouncements

New accounting policies adopted by the Corporation during 2010 are discussed in Note 1, “Summary of Significant Accounting Policies,” of the notes to consolidated financial statements. The expected impact of accounting policies recently issued or proposed but not yet required to be adopted are discussed below. To the extent the adoption of new accounting standards materially affects the Corporation’s financial condition, results of operations, or liquidity, the impacts are discussed in the applicable sections of this financial review and the notes to consolidated financial statements.

In December 2010, the FASB issued guidance which modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. In accordance with the guidance, for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not if a goodwill impairment exists, the guidance states an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The guidance is effective for reporting periods beginning after December 15, 2010. The Corporation will adopt the accounting standard at the beginning of 2011, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this item is set forth in Item 7 under the captions “Quantitative and Qualitative Disclosures about Market Risk” and “Interest Rate Risk.”


ITEM 8.	*Financial Statements and Supplementary Data*

ASSOCIATED BANC-CORP
CONSOLIDATED BALANCE SHEETS


	December 31,
	2010			2009
	(In Thousands,
	except share and
	per share data)

ASSETS
Cash and due from banks	$	319,487		$	770,816
Interest-bearing deposits in other financial institutions		546,125			26,091
Federal funds sold and securities purchased under agreements to resell		2,550			23,785
Investment securities available for sale, at fair value		6,101,341			5,835,533
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost		190,968			181,316
Loans held for sale		144,808			81,238
Loans		12,616,735			14,128,625
Allowance for loan losses		(476,813	)		(573,533	)


Loans, net		12,139,922			13,555,092
Premises and equipment, net		190,533			186,564
Goodwill		929,168			929,168
Other intangible assets, net		88,044			92,807
Other assets		1,132,650			1,191,732


Total assets	$	21,785,596		$	22,874,142


LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing demand deposits	$	3,684,965		$	3,274,973
Interest-bearing deposits, excluding Brokered certificates of deposit		11,097,788			13,311,672
Brokered certificates of deposit		442,640			141,968


Total deposits		15,225,393			16,728,613
Short-term borrowings		1,747,382			1,226,853
Long-term funding		1,413,605			1,953,998
Accrued expenses and other liabilities		240,425			226,070


Total liabilities		18,626,805			20,135,534


Stockholders’ equity
Preferred equity		514,388			511,107
Common stock		1,739			1,284
Surplus		1,573,372			1,082,335
Retained earnings		1,041,666			1,081,156
Accumulated other comprehensive income		27,626			63,432
Treasury stock, at cost		—			(706	)


Total stockholders’ equity		3,158,791			2,738,608


Total liabilities and stockholders’ equity	$	21,785,596		$	22,874,142


Preferred shares issued		525,000			525,000
Preferred shares authorized (par value $1.00 per share)		750,000			750,000
Common shares issued		173,887,504			128,428,814
Common shares authorized (par value $0.01 per share)		250,000,000			250,000,000
Treasury shares of common stock		—			25,251

See accompanying notes to consolidated financial statements.

ASSOCIATED BANC-CORP
CONSOLIDATED STATEMENTS OF INCOME (LOSS)


	For the Years Ended December 31,
	2010			2009			2008
	(In Thousands,
	except per share data)

INTEREST INCOME
Interest and fees on loans	$	608,487		$	752,265		$	952,653
Interest and dividends on investment securities:
Taxable		159,085			192,766			132,994
Tax-exempt		33,915			35,799			39,734
Other interest		4,639			426			1,328


Total interest income		806,126			981,256			1,126,709


INTEREST EXPENSE
Interest on deposits		106,023			160,874			263,306
Interest on short-term borrowings		7,983			16,199			86,584
Interest on long-term funding		58,341			78,178			80,671


Total interest expense		172,347			255,251			430,561


NET INTEREST INCOME		633,779			726,005			696,148
Provision for loan losses		390,010			750,645			202,058


Net interest income (loss) after provision for loan losses		243,769			(24,640	)		494,090


NONINTEREST INCOME
Trust service fees		37,853			36,009			38,420
Service charges on deposit accounts		96,740			116,918			118,368
Card-based and other nondeposit fees		47,850			45,977			48,540
Retail commission income		61,256			60,678			62,588
Mortgage banking, net		33,136			40,882			14,684
Capital market fees, net		6,072			5,536			7,390
Bank owned life insurance income		15,761			16,032			19,804
Asset sale losses, net		(2,004	)		(4,071	)		(1,668	)
Investment securities gains (losses), net:
Realized gains, net		28,854			11,705			5
Other-than-temporary impairments		(6,058	)		(4,406	)		(52,546	)
Less: Non-credit portion recognized in other comprehensive income (before taxes)		2,121			1,475			—


Total investment securities gains (losses), net		24,917			8,774			(52,541	)
Other		23,942			24,226			30,065


Total noninterest income		345,523			350,961			285,650


NONINTEREST EXPENSE
Personnel expense		323,249			304,390			309,478
Occupancy		49,937			49,341			50,461
Equipment		18,371			18,385			19,123
Data processing		29,714			30,893			30,451
Business development and advertising		18,385			18,033			21,400
Other intangible asset amortization expense		4,919			5,543			6,269
Legal and professional fees		20,439			19,562			14,566
Foreclosure / OREO expense		33,844			38,129			13,685
FDIC expense		46,377			41,934			2,524
Other		85,085			85,210			89,503


Total noninterest expense		630,320			611,420			557,460


Income (loss) before income taxes		(41,028	)		(285,099	)		222,280
Income tax expense (benefit)		(40,172	)		(153,240	)		53,828


Net income (loss)		(856	)		(131,859	)		168,452
Preferred stock dividends and discount accretion		29,531			29,348			3,250


Net income (loss) available to common equity	$	(30,387	)	$	(161,207	)	$	165,202


Earnings (loss) per common share:
Basic	$	(0.18	)	$	(1.26	)	$	1.29
Diluted	$	(0.18	)	$	(1.26	)	$	1.29
Weighted average common shares outstanding:
Basic		171,230			127,858			127,501
Diluted		171,230			127,858			127,775

See accompanying notes to consolidated financial statements.

ASSOCIATED BANC — CORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


														Accumulated
														Other
	Preferred Equity				Common Stock						Retained			Comprehensive			Treasury
	Shares		Amount		Shares		Amount		Surplus		Earnings			Income (Loss)			Stock			Total
	(In Thousands, except per share data)

Balance, December 31, 2007		—	$	—		127,753	$	1,278	$	1,040,694	$	1,305,136		$	(2,498	)	$	(14,905	)	$	2,329,705
Adjustment for adoption of EITFs 06-4 and 06-10		—		—		—		—		—		(2,515	)		—			—			(2,515	)


Balance, January 1, 2008, as adjusted		—	$	—		127,753	$	1,278	$	1,040,694	$	1,302,621		$	(2,498	)	$	(14,905	)	$	2,327,190


Comprehensive income:
Net income		—		—		—		—		—		168,452			—			—			168,452
Other comprehensive income		—		—		—		—		—		—			2,553			—			2,553

Comprehensive income																					171,005

Issuance of preferred stock		525		507,675		—		—		—		—			—			—			507,675
Issuance of common stock warrants		—		—		—		—		17,325		—			—			—			17,325
Accretion of preferred stock discount		—		333		—		—		—		(333	)		—			—			—
Common stock issued:
Stock-based compensation plans, net		—		—		363		3		5,981		(11,535	)		—			14,905			9,354
Cash dividends:
Common stock, $1.27 per share		—		—		—		—		—		(162,347	)		—			—			(162,347	)
Preferred stock		—		—		—		—		—		(2,917	)		—			—			(2,917	)
Stock-based compensation expense, net		—		—		—		—		6,988		—			—			—			6,988
Tax benefit of stock options		—		—		—		—		2,230		—			—			—			2,230


Balance, December 31, 2008		525	$	508,008		128,116	$	1,281	$	1,073,218	$	1,293,941		$	55		$	—		$	2,876,503


April 1, 2009, adjustment for adoption of accounting standard related to other-than-temporary impairment		—		—		—		—		—		9,745			(9,745	)		—			—
Comprehensive income:
Net loss		—		—		—		—		—		(131,859	)		—			—			(131,859	)
Other comprehensive income		—		—		—		—		—		—			73,122			—			73,122

Comprehensive loss																					(58,737	)

Common stock issued:
Stock-based compensation plans, net		—		—		312		3		1,157		(972	)		—			(107	)		81
Purchase of treasury stock		—		—		—		—		—		—			—			(599	)		(599	)
Cash dividends:
Common stock, $0.47 per share		—		—		—		—		—		(60,350	)		—			—			(60,350	)
Preferred stock		—		—		—		—		—		(26,250	)		—			—			(26,250	)
Accretion of preferred stock discount		—		3,099		—		—		—		(3,099	)		—			—			—
Stock-based compensation expense, net		—		—		—		—		7,959		—			—			—			7,959
Tax benefit of stock options		—		—		—		—		1		—			—			—			1


Balance, December 31, 2009		525	$	511,107		128,428	$	1,284	$	1,082,335	$	1,081,156		$	63,432		$	(706	)	$	2,738,608


Comprehensive income:
Net loss		—		—		—		—		—		(856	)		—			—			(856	)
Other comprehensive loss		—		—		—		—		—		—			(35,806	)		—			(35,806	)

Comprehensive loss																					(36,662	)

Common stock issued:
Issuance of common stock		—		—		44,843		448		477,910		—			—			—			478,358
Stock-based compensation plans, net		—		—		616		7		4,080		(2,155	)		—			1,536			3,468
Purchase of treasury stock		—		—		—		—		—		—			—			(830	)		(830	)
Cash dividends:
Common stock, $0.04 per share		—		—		—		—		—		(6,948	)		—			—			(6,948	)
Preferred stock		—		—		—		—		—		(26,250	)		—			—			(26,250	)
Accretion of preferred stock discount		—		3,281		—		—		—		(3,281	)		—			—			—
Stock-based compensation expense, net		—		—		—		—		9,036		—			—			—			9,036
Tax benefit of stock options		—		—		—		—		11		—			—			—			11


Balance, December 31, 2010		525	$	514,388		173,887	$	1,739	$	1,573,372	$	1,041,666		$	27,626		$	—		$	3,158,791

See accompanying notes to consolidated financial statements.

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Years Ended December 31,
	2010			2009			2008
	($ in Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(856	)	$	(131,859	)	$	168,452
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses		390,010			750,645			202,058
Depreciation and amortization		30,108			30,623			28,941
Addition to valuation allowance on mortgage servicing rights, net		3,067			6,776			6,825
Amortization of mortgage servicing rights		22,942			19,619			16,057
Amortization of other intangible assets		4,919			5,543			6,269
Amortization and accretion on earning assets, funding, and other, net		62,714			56,734			4,878
Deferred income taxes		50,808			(134,827	)		(41,552	)
Tax benefit from exercise of stock options		11			1			2,230
Excess tax benefit from stock-based compensation		—			—			(919	)
Gain on sales of investment securities, net and impairment write-downs		(24,917	)		(8,774	)		52,541
Loss on sales of assets, net		2,004			4,071			1,668
Gain on mortgage banking activities, net		(34,967	)		(45,926	)		(17,726	)
Mortgage loans originated and acquired for sale		(2,314,557	)		(3,724,441	)		(1,413,995	)
Proceeds from sales of mortgage loans held for sale		2,259,789			3,731,633			1,416,617
Decrease in interest receivable		13,466			10,887			10,753
Decrease in interest payable		(4,051	)		(10,734	)		(7,435	)
Net change in other assets and other liabilities		45,464			(438,209	)		2,194


Net cash provided by operating activities		505,954			121,762			437,856


CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans		616,608			1,612,146			(1,017,570	)
Purchases of:
Investment securities		(3,369,225	)		(3,684,541	)		(2,709,851	)
Premises, equipment, and software, net of disposals		(34,595	)		(22,794	)		(31,471	)
Other assets		(15,516	)		(6,273	)		(9,233	)
Proceeds from:
Sales of investment securities		971,662			690,762			3,550
Calls and maturities of investment securities		2,027,847			2,380,569			1,198,153
Sales of other assets		67,400			56,314			83,761
Sales of loans originated for investment		352,589			—			—


Net cash provided by (used in) investing activities		616,770			1,026,183			(2,482,661	)


CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		(1,503,220	)		1,573,817			1,180,882
Net increase (decrease) in short-term borrowings		520,529			(2,477,083	)		477,149
Repayment of long-term funding		(940,361	)		(707,597	)		(528,395	)
Proceeds from issuance of long-term funding		400,000			800,000			525,822
Proceeds from issuance of common stock		478,358			—			—
Proceeds from issuance of preferred stock and common stock warrants		—			—			525,000
Cash dividends on common stock		(6,948	)		(60,350	)		(162,347	)
Cash dividends on preferred stock		(26,250	)		(26,250	)		—
Proceeds from exercise of stock options, net		3,468			81			9,354
Purchase of common stock		(830	)		(599	)		—
Excess tax benefit from stock-based compensation		—			—			919


Net cash provided by (used in) financing activities		(1,075,254	)		(897,981	)		2,028,384


Net increase (decrease) in cash and cash equivalents		47,470			249,964			(16,421	)
Cash and cash equivalents at beginning of year		820,692			570,728			587,149


Cash and cash equivalents at end of year	$	868,162		$	820,692		$	570,728


Supplemental disclosures of cash flow information:
Cash paid for interest	$	175,776		$	265,501		$	437,995
Cash (received) paid for income taxes		(93,723	)		46,213			85,952
Loans and bank premises transferred to other real estate owned		49,427			73,754			49,241
Capitalized mortgage servicing rights		26,165			44,580			17,263

See accompanying notes to consolidated financial statements.

ASSOCIATED BANC-CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010, 2009, and 2008


NOTE 1	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The accounting and reporting policies of the Corporation conform to U.S. generally accepted accounting principles and to general practice within the financial services industry. The following is a description of the more significant of those policies.

Business

Associated Banc-Corp (individually referred to herein as the “Parent Company” and together with all of its subsidiaries and affiliates, collectively referred to herein as the “Corporation”) is a bank holding company headquartered in Wisconsin. The Corporation provides a full range of banking and related financial services to individual and corporate customers through its network of bank and nonbank subsidiaries. The Corporation is subject to competition from other financial and non-financial institutions that offer similar or competing products and services. The Corporation is regulated by federal and state agencies and is subject to periodic examinations by those agencies.

Basis of Financial Statement Presentation

The consolidated financial statements include the accounts of the Parent Company and its majority-owned subsidiaries. Investments in unconsolidated entities (none of which are considered to be variable interest entities in which the Corporation is the primary beneficiary) are accounted for using the equity method of accounting when the Corporation has determined that the equity method is appropriate. Investments not meeting the criteria for equity method accounting are accounted for using the cost method of accounting. Investments in unconsolidated entities are included in other assets, and the Corporation’s share of income or loss is recorded in other noninterest income.

All significant intercompany balances and transactions have been eliminated in consolidation. Results of operations of companies purchased are included from the date of acquisition.

Certain amounts in the consolidated financial statements of prior periods have been reclassified to conform with the current period’s presentation.

Investment Securities Available for Sale

At the time of purchase, investment securities are classified as available for sale, as management has the intent and ability to hold such securities for an indefinite period of time, but not necessarily to maturity. Any decision to sell investment securities available for sale would be based on various factors, including, but not limited to, asset/liability management strategies, changes in interest rates or prepayment risks, liquidity needs, or regulatory capital considerations. Investment securities available for sale are carried at fair value, with unrealized gains and losses, net of related deferred income taxes, included in stockholders’ equity as a separate component of other comprehensive income. Premiums and discounts are amortized or accreted into interest income over the estimated life (earlier of call date, maturity, or estimated life) of the related security, using a prospective method that approximates level yield. Declines in the fair value of investment securities available for sale (with certain exceptions for debt securities noted below) that are deemed to be other-than-temporary are charged to earnings as a realized loss, and a new cost basis for the securities is established. In evaluating other-than-temporary impairment, management considers the

length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. Declines in the fair value of debt securities below amortized cost are deemed to be other-than-temporary in circumstances where: (1) the Corporation has the intent to sell a security; (2) it is more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis; or (3) the Corporation does not expect to recover the entire amortized cost basis of the security. If the Corporation intends to sell a security or if it is more likely than not that the Corporation will be required to sell the security before recovery, an other-than-temporary impairment write-down is recognized in earnings equal to the difference between the security’s amortized cost basis and its fair value. If an entity does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the other-than-temporary impairment write-down is separated into an amount representing credit loss, which is recognized in earnings, and an amount related to all other factors, which is recognized in other comprehensive income. Realized securities gains or losses on securities sales (using specific identification method) and declines in value judged to be other-than-temporary are included in investment securities gains (losses), net, in the consolidated statements of income (loss). See Note 2 for additional information on investment securities.

Loans

Loans are classified as held for investment when management has both the intent and ability to hold the loan for the foreseeable future, or until maturity or payoff. Loans are carried at the principal amount outstanding, net of any unearned income and unamortized deferred fees and costs on originated loans. Loan origination fees and certain direct loan origination costs are deferred, and the net amount is amortized into net interest income over the contractual life of the related loans or over the commitment period as an adjustment of yield.

Management considers a loan to be impaired when it is probable that the Corporation will be unable to collect all amounts due according to the original contractual terms of the note agreement, including both principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this definition.

Interest income on loans is based on the principal balance outstanding computed using the effective interest method. The accrual of interest income for commercial loans is discontinued when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, while the accrual of interest income for retail loans is discontinued when loans reach specific delinquency levels. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments, unless the loan is well secured and in the process of collection. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on a nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is reversed, amortization of related deferred loan fees or costs is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan principal. A nonaccrual loan is returned to accrual status when all delinquent principal and interest payments become current in accordance with the terms of the loan agreement, the borrower has demonstrated a period of sustained performance and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

A loan is accounted for as a troubled debt restructuring if the Corporation, for economic or legal reasons related to the borrower’s financial condition, grants a significant concession to the borrower that it would not otherwise consider. A troubled debt restructuring may involve the receipt of assets from the debtor in partial or full satisfaction of the loan, or a modification of terms such as a reduction of the stated interest rate or face amount of the loan, a reduction of accrued interest, an extension of the maturity date at a stated interest rate lower than the current market rate for a new loan with similar risk, or some combination of these concessions. Troubled debt restructurings generally remain on nonaccrual status until a six-month payment history is sustained. See Allowance for Loan Losses below for further policy discussion and see Note 3 for additional information on loans.

Loans Held for Sale

Loans held for sale, which consist generally of current production of certain fixed-rate, first-lien residential mortgage loans, are carried at the lower of cost or estimated fair value as determined on an aggregate basis. The amount by which cost exceeds estimated fair value is accounted for as a market valuation adjustment to the carrying value of the loans. Changes, if any, in the market valuation adjustment are included in mortgage banking, net, in the consolidated statements of income (loss). The carrying value of loans held for sale included a market valuation adjustment of $2.0 million at December 31, 2010 and $0.3 million at December 31, 2009. Holding costs are treated as period costs.

Allowance for Loan Losses

The allowance for loan losses is a reserve for estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the loan portfolio, and is based on quarterly evaluations of the collectability and historical loss experience of loans. Actual credit losses, net of recoveries, are deducted from the allowance for loan losses. A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is appropriate to absorb probable losses in the loan portfolio.

The allocation methodology applied by the Corporation, designed to assess the appropriateness of the allowance for loan losses, includes an allocation methodology, as well as management’s ongoing review and grading of the loan portfolio into criticized loan categories (defined as specific loans warranting either specific allocation, or a criticized status of special mention, substandard, doubtful, or loss). The allocation methodology focuses on evaluation of several factors, including but not limited to: evaluation of facts and issues related to specific loans, management’s ongoing review and grading of the loan portfolio, consideration of historical loan loss and delinquency experience on each portfolio category, trends in past due and nonaccrual loans, the level of potential problem loans, the risk characteristics of the various classifications of loans, changes in the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect potential credit losses. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the portfolio.

Management, judging current information and events regarding the borrowers’ ability to repay their obligations, considers a loan to be impaired when it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the note agreement, including both principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this definition. When an individual loan is determined to be impaired, the allowance for loan losses attributable to the loan is allocated based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flows, as well as evaluation of legal options available to the Corporation. The amount of impairment is measured based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the fair value of the underlying collateral less applicable selling costs, or the observable market price of the loan. If foreclosure is probable or the loan is collateral dependent, impairment is measured using the fair value of the loan’s collateral, less costs to sell. Large groups of homogeneous loans, such as residential mortgage, home equity and installment loans, are collectively evaluated for impairment. Interest income on impaired loans is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible.

Management believes that the level of the allowance for loan losses is appropriate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses. Such agencies may require additions to the allowance for loan losses or may require that certain loan balances be charged off or downgraded into criticized loan categories when their credit evaluations differ from those of management based on

their judgments about information available to them at the time of their examinations. See Loans above for further policy discussion and see Note 3 for additional information on the allowance for loan losses.

Other Real Estate Owned

Other real estate owned is included in other assets in the consolidated balance sheets and is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure, and loans classified as in-substance foreclosure. Other real estate owned is recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value of the underlying property collateral, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are treated as period costs. Other real estate owned also includes bank premises formerly but no longer used for banking. Banking premises are transferred at the lower of carrying value or estimated fair value, less estimated selling costs. Other real estate owned totaled $44.3 million and $68.4 million at December 31, 2010 and 2009, respectively.

Reserve for Unfunded Commitments

A reserve for unfunded commitments is maintained at a level believed by management to be sufficient to absorb estimated probable losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit) and is included in other liabilities in the consolidated balance sheets. The determination of the appropriate level of the reserve is based upon an evaluation of the unfunded credit facilities, including an assessment of historical commitment utilization experience and credit risk grading. Net adjustments to the reserve for unfunded commitments are included in other noninterest expense in the consolidated statements of income (loss).

Premises and Equipment and Software

Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the related assets or the lease term. Maintenance and repairs are charged to expense as incurred, while additions or major improvements are capitalized and depreciated over the estimated useful lives. Estimated useful lives of the assets range predominantly as follows: 3 to 15 years for land improvements, 5 to 39 years for buildings, 3 to 5 years for computers, and 3 to 15 years for furniture, fixtures, and other equipment. Leasehold improvements are amortized on a straight-line basis over the lesser of the lease terms or the estimated useful lives of the improvements. Software, included in other assets in the consolidated balance sheets, is amortized on a straight-line basis over the lesser of the contract terms or the estimated useful life of the software. See Note 5 for additional information on premises and equipment.

Goodwill and Intangible Assets

Goodwill and Other Intangible Assets: The excess of the cost of an acquisition over the fair value of the net assets acquired consists primarily of goodwill, core deposit intangibles, and other identifiable intangibles (primarily related to customer relationships acquired). Core deposit intangibles have estimated finite lives and are amortized on an accelerated basis to expense over a 10-year period. The other intangibles have estimated finite lives and are amortized on an accelerated basis to expense over their weighted average life (a weighted average life of 14 years for both 2010 and 2009). The Corporation reviews long-lived assets and certain identifiable intangibles for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in which case an impairment charge would be recorded.

Goodwill is not amortized but is subject to impairment tests on at least an annual basis or earlier whenever an event occurs indicating that goodwill may be impaired. Any impairment of goodwill or other intangibles will be recognized as an expense in the period of impairment and such impairment could be material. The Corporation completes the annual goodwill impairment test by segment as of May 1 of each year. Note 4 includes a summary of the Corporation’s goodwill, core deposit intangibles, and other intangibles.

Mortgage Servicing Rights: The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. Upon sale, a mortgage servicing rights asset is capitalized, which

represents the then current fair value of future net cash flows expected to be realized for performing servicing activities. Mortgage servicing rights, when purchased, are initially recorded at fair value. As the Corporation has not elected to subsequently measure any class of servicing assets under the fair value measurement method, the Corporation follows the amortization method. Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income, and assessed for impairment at each reporting date. Mortgage servicing rights are carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value, and are included in other intangible assets, net in the consolidated balance sheets.

The Corporation periodically evaluates its mortgage servicing rights asset for impairment. Impairment is assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. A valuation allowance is established, through a charge to earnings, to the extent the amortized cost of the mortgage servicing rights exceeds the estimated fair value by stratification. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation is reduced through a recovery to earnings. An other-than-temporary impairment (i.e., recoverability is considered remote when considering interest rates and loan pay off activity) is recognized as a write-down of the mortgage servicing rights asset and the related valuation allowance (to the extent a valuation allowance is available) and then against earnings. A direct write-down permanently reduces the carrying value of the mortgage servicing rights asset and valuation allowance, precluding subsequent recoveries. See Note 4 for additional information on mortgage servicing rights.

Income Taxes

Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income taxes, which arise principally from temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities, are included in the amounts provided for income taxes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and tax planning strategies which will create taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and, if necessary, tax planning strategies in making this assessment.

The Corporation files a consolidated federal income tax return and individual or consolidated state income tax returns. Accordingly, amounts equal to tax benefits of those subsidiaries having taxable federal losses or credits are offset by other subsidiaries that incur federal tax liabilities.

It is the Corporation’s policy to provide for uncertain tax positions as a part of income tax expense and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. At December 31, 2010 and 2009, the Corporation believes it has appropriately accounted for any unrecognized tax benefits. To the extent the Corporation prevails in matters for which a liability for an unrecognized tax benefit is established or is required to pay amounts in excess of the liability, the Corporation’s effective tax rate in a given financial statement period may be effected. See Note 12 for additional information on income taxes.

Derivative Financial Instruments and Hedging Activities

Derivative instruments, including derivative instruments embedded in other contracts, are carried at fair value on the consolidated balance sheets with changes in the fair value recorded to earnings or accumulated other comprehensive income, as appropriate. On the date the derivative contract is entered into, the Corporation designates the derivative as a fair value hedge (i.e., a hedge of the fair value of a recognized asset or liability), a cash flow hedge (i.e., a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability), or a free-standing derivative instrument. For a derivative designated as a fair value hedge, the changes in the fair value of the derivative instrument and the changes in the fair value of the hedged asset or liability are recognized in current period earnings

as an increase or decrease to the carrying value of the hedged item on the balance sheet and in the related income statement account. For a derivative designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative instrument are recorded in other comprehensive income and the ineffective portions of changes in the fair value of a derivative instrument are recognized in current period earnings as an adjustment to the related income statement account. Amounts within accumulated other comprehensive income are reclassified into earnings in the period the hedged item affects earnings. If a derivative is designated as a free-standing derivative instrument, changes in fair value are reported in current period earnings.

To qualify for and maintain hedge accounting, the Corporation must meet formal documentation and effectiveness evaluation requirements both at the hedge’s inception and on an ongoing basis. The application of the hedge accounting policy requires strict adherence to documentation and effectiveness testing requirements, judgment in the assessment of hedge effectiveness, identification of similar hedged item groupings, and measurement of changes in the fair value of hedged items. If it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Corporation discontinues hedge accounting prospectively. When hedge accounting is discontinued on a fair value hedge because it is determined that the derivative no longer qualifies as an effective hedge, the Corporation continues to carry the derivative on the consolidated balance sheet at its fair value and no longer adjusts the hedged asset or liability for changes in fair value. The adjustment to the carrying amount of the hedged asset or liability is amortized over the remaining life of the hedged item, beginning no later than when hedge accounting ceases. When hedge accounting is discontinued on a cash flow hedge because it is determined that the derivative no longer qualifies as an effective hedge, the Corporation records the changes in the fair value of the derivative in earnings rather than through accumulated other comprehensive income and when the cash flows associated with the hedged item are realized, the gain or loss is reclassified out of other comprehensive income and included in the same income statement account of the item being hedged.

The Corporation measures the effectiveness of its hedges, where applicable, at inception and each quarter on an on-going basis. For a fair value hedge, the cumulative change in the fair value of the hedge instrument attributable to the risk being hedged versus the cumulative fair value change of the hedged item attributable to the risk being hedged is considered to be the “ineffective” portion, which is recorded as an increase or decrease in the related income statement classification of the item being hedged (i.e., net interest income). For a cash flow hedge, the ineffective portions of changes in the fair value are recognized immediately in the related income statement account. See Note 14 for additional information on derivative financial instruments and hedging activities.

Stock-Based Compensation

The Corporation recognizes compensation expense for the fair value of stock grants on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in personnel expense in the consolidated statements of income (loss). See Note 10 for additional information on stock-based compensation.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, cash and cash equivalents are considered to include cash and due from banks, interest-bearing deposits in other financial institutions, and federal funds sold and securities purchased under agreements to resell.

Per Share Computations

Earnings per share are calculated utilizing the two class method. Basic earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards (outstanding stock options, unvested restricted stock, and outstanding stock warrants). Also see Notes 9 and 18.

New Accounting Pronouncements Adopted

In July 2010, the FASB issued guidance for improving disclosures about an entity’s allowance for loan losses and the credit quality of its loans. The guidance requires additional disclosure to facilitate financial statement users’ evaluation of the following: (1) the nature of credit risk inherent in the entity’s loan portfolio, (2) how that risk is analyzed and assessed in arriving at the allowance for loan losses, and (3) the changes and reasons for those changes in the allowance for loan losses. The increased disclosures as of the end of a reporting period are effective for periods ending on or after December 15, 2010. Increased disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 31, 2010. The Corporation adopted the accounting standard, except for the activity-related disclosures which are required to be adopted in 2011, as of December 31, 2010, with no material impact on the its results of operations, financial position, and liquidity. See Note 3 for additional disclosures required under this accounting standard.

In April 2010, the FASB issued guidance which clarifies the accounting for acquired loans that have evidence of deterioration in credit quality since origination. In accordance with this guidance, an entity may not apply troubled debt restructuring accounting guidance to individual loans that are part of a pool, even if the modification of those loans would otherwise be considered a troubled debt restructuring. Once a pool is established, individual loans should not be removed from the pool unless the entity sells, forecloses, or writes off the loan. Entities would continue to consider whether the pool of loans is impaired if expected cash flows for the pool change. Loans that are accounted for individually would continue to be subject to the troubled debt restructuring accounting guidance. A one-time election to terminate accounting for loans as a pool, which may be made on a pool-by-pool basis, is provided upon adoption of this guidance. The guidance is effective for reporting periods ending after July 15, 2010. The Corporation adopted the accounting standard for the period ending September 30, 2010 with no material impact on its results of operations, financial position, and liquidity.

In March 2010, the FASB issued a clarification on the scope exception for embedded credit derivatives. The guidance eliminates the scope exception for bifurcation of embedded credit derivatives in interests in securitized financial assets, unless they are created solely by subordination of one financial debt instrument to another. The guidance is effective beginning in the first reporting periods after June 15, 2010, with earlier adoption permitted for the quarter beginning after March 31, 2010. The Corporation adopted the accounting standard for the period ending December 31, 2010 with no material impact on its results of operations, financial position, and liquidity.

In January 2010, the FASB issued an accounting standard providing additional guidance relating to fair value measurement disclosures. Specifically, companies will be required to separately disclose significant transfers into and out of Level 1 and Level 2 measurements in the fair value hierarchy and the reasons for those transfers. Significance should generally be based on earnings and total assets or liabilities, or when changes are recognized in other comprehensive income, based on total equity. Companies may take different approaches in determining when to recognize such transfers, including using the actual date of the event or change in circumstances causing the transfer, or using the beginning or ending of a reporting period. For Level 3 fair value measurements, the new guidance requires presentation of separate information about purchases, sales, issuances and settlements. Additionally, the FASB also clarified existing fair value measurement disclosure requirements relating to the level of disaggregation, inputs, and valuation techniques. This accounting standard was effective at the beginning of 2010, except for the detailed Level 3 disclosures, which will be effective at the beginning of 2011. The Corporation adopted the accounting standard, except for the detailed Level 3 disclosures, at the beginning of 2010, with no material impact on its results of operations, financial position, and liquidity. See Note 16 for additional disclosures required under this accounting standard.

In June 2009, the FASB issued an accounting standard which requires a qualitative rather than a quantitative analysis to determine the primary beneficiary of a variable interest entity (“VIE”) for consolidation purposes. The primary beneficiary of a VIE is the enterprise that has: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits of the VIE that could potentially be significant to the VIE. This accounting standard was effective as of the beginning of the first annual reporting period beginning after November 15, 2009. The Corporation adopted this accounting standard at the beginning of 2010, with no material impact on its results of operations, financial position, and liquidity.

In June 2009, the FASB issued an accounting standard which amends current generally accepted accounting principles related to the accounting for transfers and servicing of financial assets and extinguishments of liabilities, including the removal of the concept of a qualifying special-purpose entity. This new accounting standard also clarifies that a transferor must evaluate whether it has maintained effective control of a financial asset by considering its continuing direct or indirect involvement with the transferred financial asset. This accounting standard was effective as of the beginning of the first annual reporting period beginning after November 15, 2009. The Corporation adopted this accounting standard at the beginning of 2010, with no material impact on its results of operations, financial position, and liquidity.


NOTE 2	INVESTMENT SECURITIES:

The amortized cost and fair values of securities available for sale at December 31, 2010 and 2009, were as follows:


	2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	($ in Thousands)

U. S. Treasury securities	$	1,199	$	9	$	—		$	1,208
Federal agency securities		29,791		1		(25	)		29,767
Obligations of state and political subdivisions (municipal securities)		829,058		14,894		(5,350	)		838,602
Residential mortgage-related securities		4,831,481		117,530		(38,514	)		4,910,497
Commercial mortgage-related securities		7,604		149		—			7,753
Asset-backed securities(1)		299,459		3		(621	)		298,841
Other securities (debt and equity)		13,384		2,603		(1,314	)		14,673


Total securities available for sale	$	6,011,976	$	135,189	$	(45,824	)	$	6,101,341


(1)		Asset-backed securities position are largely comprised of senior, floating rate, tranches of student loan securities issued by SLM Corp (“Sallie Mae”) and guaranteed under the Federal Family Education Loan Program (“FFELP”).


	2009
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	($ in Thousands)

U. S. Treasury securities	$	3,896	$	7	$	(28	)	$	3,875
Federal agency securities		41,980		1,428		(1	)		43,407
Obligations of state and political subdivisions (municipal securities)		865,111		20,960		(906	)		885,165
Residential mortgage-related securities		4,751,033		144,776		(13,290	)		4,882,519
Other securities (debt and equity)		20,954		1,274		(1,661	)		20,567


Total securities available for sale	$	5,682,974	$	168,445	$	(15,886	)	$	5,835,533

The amortized cost and fair values of investment securities available for sale at December 31, 2010, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	2010
	Amortized		Fair
	Cost		Value
	($ in Thousands)

Due in one year or less	$	52,324	$	52,698
Due after one year through five years		115,829		119,870
Due after five years through ten years		547,432		555,682
Due after ten years		150,661		146,905


Total debt securities		866,246		875,155
Residential mortgage-related securities		4,831,481		4,910,497
Commercial mortgage-related securities		7,604		7,753
Asset-backed securities		299,459		298,841
Equity securities		7,186		9,095


Total securities available for sale	$	6,011,976	$	6,101,341

Net investment securities gains of $24.9 million for 2010 were attributable to gains of $28.9 million on the sale of residential mortgage-related, federal agency, and municipal securities, partially offset by losses of $0.1 million on the sale of municipal securities and $3.9 million of credit-related other-than-temporary write-downs on the Corporation’s holding of various investment securities (including a $3.0 million write-down on trust preferred debt securities, a $0.1 million write-down on a non-agency mortgage-related security and an $0.8 million write-down on various equity securities). Net investment securities gains of $8.8 million for 2009 were attributable to gains of $14.6 million on the sale of mortgage-related securities, partially offset by a $2.9 million loss on the sale of mortgage-related securities and $2.9 million of credit-related other-than-temporary write-downs on the Corporation’s holding of various investment securities (including a $2.0 million write-down on a trust preferred debt security, a $0.4 million write-down on a non-agency mortgage-related security, and a $0.5 million write-down on various equity securities). Investment securities losses of $52.5 million for 2008 were attributable to other-than-temporary write-downs on the Corporation’s holdings of various investment securities (including a $31.1 million write-down on a non-agency mortgage-related security, a $13.2 million write-down on FHLMC and FNMA preferred stocks, a $6.8 million write-down on trust preferred debt securities pools, and a $1.4 million write-down on common equity securities).

Total proceeds and gross realized gains and losses from sales and write-downs of investment securities available for sale (with other-than-temporary write-downs on securities included in gross losses) for each of the three years ended December 31 were:


	2010			2009			2008
	($ in Thousands)

Gross gains	$	28,939		$	14,597		$	5
Gross losses		(4,022	)		(5,823	)		(52,546	)


Investment securities gains (losses), net	$	24,917		$	8,774		$	(52,541	)
Proceeds from sales of investment securities available for sale		971,662			690,762			3,550

Pledged securities with a carrying value of approximately $3.0 billion and $2.3 billion at December 31, 2010, and December 31, 2009, respectively, were pledged to secure certain deposits, FHLB advances, or for other purposes as required or permitted by law.

The following represents gross unrealized losses and the related fair value of investment securities available for sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at December 31, 2010.


	Less than 12 months					12 months or more					Total

	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value

	($ in Thousands)

December 31, 2010:
Federal agency securities	$	(25	)	$	29,716	$	—		$	—	$	(25	)	$	29,716
Obligations of state and political subdivisions (municipal securities)		(4,983	)		237,902		(367	)		2,543		(5,350	)		240,445
Residential mortgage-related securities		(36,280	)		1,613,498		(2,234	)		43,306		(38,514	)		1,656,804
Asset-backed securities		(621	)		293,568		—			—		(621	)		293,568
Other securities (debt and equity)		(1	)		100		(1,313	)		864		(1,314	)		964


Total	$	(41,910	)	$	2,174,784	$	(3,914	)	$	46,713	$	(45,824	)	$	2,221,497

The Corporation reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment that may result due to the current adverse economic conditions. A determination as to whether a security’s decline in market value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in the other-than-temporary impairment analysis include, the length of time the security has been in an unrealized loss position, changes in security ratings, financial condition of the issuer, as well as security and industry specific economic conditions. In addition, with regards to its debt securities, the Corporation may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds, and the value of any underlying collateral. For certain debt securities in unrealized loss positions, the Corporation prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

Based on the Corporation’s evaluation, management does not believe any remaining unrealized loss at December 31, 2010, represents an other-than-temporary impairment as these unrealized losses are primarily attributable to changes in interest rates and the current volatile market conditions, and not credit deterioration. At December 31, 2010, the number of investment securities in an unrealized loss position for less than 12 months for federal agency, municipal, residential mortgage-related and asset-backed securities was 3, 354, 81 and 33, respectively. For investment securities in an unrealized loss position for 12 months or more, the number of individual securities in the municipal and residential mortgage-related categories was 3 and 11, respectively. The unrealized losses reported for residential mortgage-related securities relate to non-agency residential mortgage-related securities as well as residential mortgage-related securities issued by government agencies such as the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). At December 31, 2010, the $1.3 million unrealized loss position on other securities was primarily comprised of 3 individual trust preferred debt securities pools. The Corporation currently does not intend to sell nor does it believe that it will be required to sell the securities contained in the above unrealized losses table before recovery of their amortized cost basis.

The following is a summary of the credit loss portion of other-than-temporary impairment recognized in earnings on debt securities during 2009 and 2010.


	Non-agency
	Mortgage-Related			Trust Preferred
	Securities			Debt Securities			Total
	$ in Thousands

Balance of credit-related other-than-temporary impairment at April 1, 2009	$	(17,026	)	$	(5,027	)	$	(22,053	)
Credit losses on newly identified impairment		(446	)		(2,000	)		(2,446	)


Balance of credit-related other-than-temporary impairment at December 31, 2009		(17,472	)		(7,027	)		(24,499	)
Credit losses on newly identified impairment		(84	)		(2,992	)		(3,076	)


Balance of credit-related other-than-temporary impairment at December 31, 2010	$	(17,556	)	$	(10,019	)	$	(27,575	)

For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2009, respectively.


	Less than 12 months					12 months or more					Total

	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value

	($ in Thousands)

December 31, 2009:
U. S. Treasury securities	$	(28	)	$	2,871	$	—		$	—	$	(28	)	$	2,871
Federal agency securities		—			—		(1	)		46		(1	)		46
Obligations of state and political subdivisions (municipal securities)		(593	)		45,388		(313	)		8,334		(906	)		53,722
Residential mortgage-related securities		(10,507	)		184,069		(2,783	)		41,663		(13,290	)		225,732
Other securities (debt and equity)		(1,661	)		4,410		—			—		(1,661	)		4,410


Total	$	(12,789	)	$	236,738	$	(3,097	)	$	50,043	$	(15,886	)	$	286,781

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stocks: At December 31, 2010, the Corporation had FHLB stock of $121.1 million and Federal Reserve Bank stock of $69.9 million, compared to FHLB stock of $121.1 million and Federal Reserve Bank stock of $60.2 million at December 31, 2009. During 2010, the Corporation purchased $9.7 million of Federal Reserve stock, while during 2009 the Corporation redeemed $24.9 million of FHLB stock at par. The Corporation is required to maintain Federal Reserve stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. The Corporation reviewed these securities for impairment, including but not limited to, consideration of operating performance, the severity and duration of market value declines, as well as its liquidity and funding position. After evaluating all of these considerations, the Corporation believes the cost of these investments will be recovered and no impairment has been recorded on these securities during 2010, 2009, or 2008.


NOTE 3	LOANS:

Loans at December 31 are summarized below.


	2010		2009
	($ in Thousands)

Commercial and industrial	$	3,049,752	$	3,450,632
Commercial real estate		3,389,213		3,817,066
Real estate construction		553,069		1,397,493
Lease financing		60,254		95,851

Total commercial		7,052,288		8,761,042
Home equity		2,523,057		2,546,167
Installment		695,383		873,568

Total retail		3,218,440		3,419,735
Residential mortgage		2,346,007		1,947,848

Total consumer		5,564,447		5,367,583

Total loans	$	12,616,735	$	14,128,625

The Corporation has granted loans to their directors, executive officers, or their related interests. These loans were made on substantially the same terms, including rates and collateral, as those prevailing at the time for comparable transactions with other unrelated customers, and do not involve more than a normal risk of collection. These loans to related parties are summarized as follows:


	2010
	($ in Thousands)

Balance at beginning of year	$	48,487
New loans		43,131
Repayments		(19,484	)
Changes due to status of executive officers and directors		(21,385	)

Balance at end of year	$	50,749

The Corporation serves the credit needs of its customers by offering a wide variety of loan programs to customers, primarily in our core footprint. The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to multiple numbers of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At December 31, 2010, no significant concentrations existed in the Corporation’s loan portfolio in excess of 10% of total loans. However, the Corporation has several areas of larger exposures (less than 10% of total loans) which are being closely monitored, such as $426 million of commercial and industrial leveraged loans, $315 million of residential and land development loans, and $110 million of broker generated home equity loans.

A summary of the changes in the allowance for loan losses for the years indicated is as follows:


	2010			2009			2008
	($ in Thousands)

Balance at beginning of year	$	573,533		$	265,378		$	200,570
Provision for loan losses		390,010			750,645			202,058
Charge offs		(528,492	)		(452,206	)		(145,826	)
Recoveries		41,762			9,716			8,576

Net charge offs		(486,730	)		(442,490	)		(137,250	)

Balance at end of year	$	476,813		$	573,533		$	265,378

The following table presents nonaccrual loans, accruing loans past due 90 days or more, and restructured loans at December 31:


	2010		2009
	($ in Thousands)

Nonaccrual loans	$	574,356	$	1,077,799
Accruing loans past due 90 days or more		3,418		24,981
Restructured loans (accruing)		79,935		19,037

The following table presents nonaccrual loans at December 31, 2010 and 2009.


	2010		2009
	($ in Thousands)

Commercial and industrial	$	99,845	$	230,000
Commercial real estate		223,927		306,093
Real estate construction		94,929		409,289
Lease financing		17,080		19,506

Total commercial		435,781		964,888
Home equity		51,712		24,452
Installment		10,544		6,648

Total retail		62,256		31,100
Residential mortgage		76,319		81,811

Total consumer		138,575		112,911

Total loans	$	574,356	$	1,077,799

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments, unless the loan is well secured and in the process of collection. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is reversed, amortization of related deferred loan fees or costs is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan principal.

While an asset is in nonaccrual status, some or all of the cash interest payments received may be treated as interest income on a cash basis as long as the remaining recorded investment in the asset (i.e., after charge off of identified losses, if any) is deemed to be fully collectible. The determination as to the ultimate collectability of the asset’s remaining recorded investment must be supported by a current, well documented credit evaluation of the borrower’s financial condition and prospects for repayment, including consideration of the borrower’s sustained historical repayment performance and other relevant factors. A nonaccrual loan is returned to accrual status when all delinquent principal and interest payments become current in accordance with the terms of the loan agreement, the borrower has demonstrated a period of sustained performance, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. A sustained period of repayment performance generally would be a minimum of six months.

Restructured loans involve the granting of some concession to the borrower involving the modification of terms of the loan, such as changes in payment schedule or interest rate, which generally would not otherwise be considered. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing

100

whether the borrower can meet the new terms and whether the loan should be returned to or maintained on accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains on nonaccrual. During 2009, the Corporation introduced a modification program (similar to the government modification programs available), in which the Corporation works with our mortgage customers to provide them with an affordable monthly payment through extension of the maturity date, reduction in interest rate, and / or partial principal forbearance. During 2010, the Corporation began utilizing a multiple note structure as a workout alternative for certain commercial loans. The multiple note structure restructures a troubled loan into two notes, where the first note is reasonably assured of repayment and performance according to the prudently modified terms and the portion of the troubled loan that is not reasonably assured of repayment is charged off.

The following table presents commercial loans by credit quality indicator at December 31, 2010.


			Special		Potential
	Pass		Mention		Problem		Impaired		Total
	($ in Thousands)

Commercial and industrial	$	2,363,554	$	222,089	$	354,284	$	109,825	$	3,049,752
Commercial real estate		2,429,339		227,557		492,778		239,539		3,389,213
Real estate construction		311,810		32,180		91,618		117,461		553,069
Lease financing		40,101		456		2,617		17,080		60,254

Total commercial	$	5,144,804	$	482,282	$	941,297	$	483,905	$	7,052,288

The following table presents consumer loans by credit quality indicator at December 31, 2010.


			30-89 Days		Potential
	Performing		Past Due		Problem		Impaired		Total
	($ in Thousands)

Home equity	$	2,442,661	$	13,886	$	3,057	$	63,453	$	2,523,057
Installment		673,820		9,624		703		11,236		695,383

Total retail		3,116,481		23,510		3,760		74,689		3,218,440
Residential mortgage		2,222,916		8,722		18,672		95,697		2,346,007

Total consumer	$	5,339,397	$	32,232	$	22,432	$	170,386	$	5,564,447

For commercial loans, management has determined pass to include credits that exhibit acceptable financial statements, cash flow, and leverage. If any risk exists, it is mitigated by their structure, collateral, monitoring, or control. For consumer loans, performing loans include credits that are performing in accordance with the original contractual terms. Special mention credits have potential weaknesses that deserve management’s attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit. Potential problem loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These loans generally have a well-defined weakness, or weaknesses, that may jeopardize liquidation of the debt and are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected. Lastly, management considers a loan to be impaired when it is probable that the Corporation will be unable to collect all amounts due according to the original contractual terms of the note agreement, including both principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this definition. Commercial loans classified as special mention, potential problem, and impaired are reviewed at a minimum on a quarterly basis, while pass and performing rated credits are reviewed on an annual basis or more frequently if the loan renewal is less than one year.

101

The following table presents loans by past due status at December 31, 2010.


	30-89 Days		90 Days or More
	Past Due		Past Due		Total Past Due		Current		Total

	($ in Thousands)

Accruing loans
Commercial and industrial	$	33,013	$	—	$	33,013	$	2,916,894	$	2,949,907
Commercial real estate		46,486		2,096		48,582		3,116,704		3,165,286
Real estate construction		8,016		—		8,016		450,124		458,140
Lease financing		132		—		132		43,042		43,174


Total commercial		87,647		2,096		89,743		6,526,764		6,616,507
Home equity		13,886		796		14,682		2,456,663		2,471,345
Installment		9,624		526		10,150		674,689		684,839


Total retail		23,510		1,322		24,832		3,131,352		3,156,184
Residential mortgage		8,722		—		8,722		2,260,966		2,269,688


Total consumer		32,232		1,322		33,554		5,392,318		5,425,872


Total loans	$	119,879	$	3,418	$	123,297	$	11,919,082	$	12,042,379


Nonaccrual loans
Commercial and industrial	$	3,426	$	57,215	$	60,641	$	39,204	$	99,845
Commercial real estate		12,429		82,675		95,104		128,823		223,927
Real estate construction		297		56,443		56,740		38,189		94,929
Lease financing		283		998		1,281		15,799		17,080


Total commercial		16,435		197,331		213,766		222,015		435,781
Home equity		5,727		37,169		42,896		8,816		51,712
Installment		1,091		7,141		8,232		2,312		10,544


Total retail		6,818		44,310		51,128		11,128		62,256
Residential mortgage		8,249		50,609		58,858		17,461		76,319


Total consumer		15,067		94,919		109,986		28,589		138,575


Total loans	$	31,502	$	292,250	$	323,752	$	250,604	$	574,356


Total loans
Commercial and industrial	$	36,439	$	57,215	$	93,654	$	2,956,098	$	3,049,752
Commercial real estate		58,915		84,771		143,686		3,245,527		3,389,213
Real estate construction		8,313		56,443		64,756		488,313		553,069
Lease financing		415		998		1,413		58,841		60,254


Total commercial		104,082		199,427		303,509		6,748,779		7,052,288
Home equity		19,613		37,965		57,578		2,465,479		2,523,057
Installment		10,715		7,667		18,382		677,001		695,383


Total retail		30,328		45,632		75,960		3,142,480		3,218,440
Residential mortgage		16,971		50,609		67,580		2,278,427		2,346,007


Total consumer		47,299		96,241		143,540		5,420,907		5,564,447


Total loans	$	151,381	$	295,668	$	447,049	$	12,169,686	$	12,616,735

102

The following table presents impaired loans at December 31, 2010.


			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized

	($ in Thousands)

Loans with a related allowance
Commercial and industrial	$	80,507	$	100,297	$	29,900	$	93,966	$	2,399
Commercial real estate		137,808		151,723		33,487		146,880		3,224
Real estate construction		77,312		85,173		29,098		64,049		920
Lease financing		16,680		16,680		6,364		18,832		74


Total commercial		312,307		353,873		98,849		323,727		6,617
Home equity		59,975		61,894		28,933		62,805		1,652
Installment		11,231		11,649		7,776		12,481		294


Total retail		71,206		73,543		36,709		75,286		1,946
Residential mortgage		86,163		91,749		8,832		92,602		2,514


Total consumer		157,369		165,292		45,541		167,888		4,460


Total loans	$	469,676	$	519,165	$	144,390	$	491,615	$	11,077


Loans with no related allowance
Commercial and industrial	$	29,318	$	35,841	$	—	$	28,831	$	806
Commercial real estate		101,731		119,963		—		111,267		2,203
Real estate construction		40,149		58,662		—		55,376		1,483
Lease financing		400		400		—		745		—


Total commercial		171,598		214,866		—		196,219		4,492
Home equity		3,478		3,483		—		3,414		102
Installment		5		5		—		7		—


Total retail		3,483		3,488		—		3,421		102
Residential mortgage		9,534		11,267		—		10,675		246


Total consumer		13,017		14,755		—		14,096		348


Total loans	$	184,615	$	229,621	$	—	$	210,315	$	4,840


Total
Commercial and industrial	$	109,825	$	136,138	$	29,900	$	122,797	$	3,205
Commercial real estate		239,539		271,686		33,487		258,147		5,427
Real estate construction		117,461		143,835		29,098		119,425		2,403
Lease financing		17,080		17,080		6,364		19,577		74


Total commercial		483,905		568,739		98,849		519,946		11,109
Home equity		63,453		65,377		28,933		66,219		1,754
Installment		11,236		11,654		7,776		12,488		294


Total retail		74,689		77,031		36,709		78,707		2,048
Residential mortgage		95,697		103,016		8,832		103,277		2,760


Total consumer		170,386		180,047		45,541		181,984		4,808


Total loans	$	654,291	$	748,786	$	144,390	$	701,930	$	15,917

104


NOTE 4	GOODWILL AND INTANGIBLE ASSETS:

Goodwill: Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis. Consistent with prior years, the Corporation has elected to conduct its annual impairment testing in May. The annual review of goodwill indicated that the carrying value of the banking segment exceeded its estimated fair value. Therefore, a step two analysis was performed for this segment, which indicated that the implied fair value of the goodwill of the banking segment exceeded the carrying value of the banking segment. Therefore, no impairment charge was recorded. There were no impairment charges recorded in 2010, 2009, or 2008. During 2009, management also completed interim reviews of goodwill and these interim reviews of goodwill indicated that the carrying value of the banking segment exceeded its estimated fair value. Therefore, a step two analysis was performed for this segment, which indicated that the implied fair value of the banking segment exceeded the carrying value of the banking segment. Therefore, no impairment charge was recorded. It is possible that a future conclusion could be reached that all or a portion of the Corporation’s goodwill may be impaired, in which case a non-cash charge for the amount of such impairment would be recorded in earnings. Such a charge, if any, would have no impact on tangible capital and would not affect the Corporation’s “well-capitalized” designation.

At December 31, 2010, the Corporation had goodwill of $929 million, including goodwill of $907 million assigned to the banking segment and goodwill of $22 million assigned to the wealth management segment. There was no change in the carrying amount of goodwill for the years ended December 31, 2010, 2009, and 2008.

Other Intangible Assets: The Corporation has other intangible assets that are amortized, consisting of core deposit intangibles, other intangibles (primarily related to customer relationships acquired in connection with the Corporation’s insurance agency acquisitions), and mortgage servicing rights. The core deposit intangibles and mortgage servicing rights are assigned to the Corporation’s banking segment, while the other intangibles are assigned to the wealth management segment as of December 31, 2010. For core deposit intangibles and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows.


	2010			2009			2008
	($ in Thousands)

Core deposit intangibles:


Gross carrying amount(1)	$	41,831		$	47,748		$	47,748
Accumulated amortization		(27,121	)		(29,288	)		(25,165	)


Net book value	$	14,710		$	18,460		$	22,583


Amortization during the year		3,750			4,123			4,585
Other intangibles:


Gross carrying amount	$	20,433		$	20,433		$	20,433
Accumulated amortization		(11,008	)		(9,839	)		(8,419	)


Net book value	$	9,425		$	10,594		$	12,014


Deductions during the year(2)		—			—			167
Amortization during the year		1,169			1,420			1,684


(1)		Other intangibles of $5.9 million were fully amortized during 2009 and have been removed from both the gross carrying amount and the accumulated amortization for 2010.

(2)		The $0.2 million deduction during 2008 was attributable to the write-off of unamortized customer list intangible related to the sale of third party business contracts.

The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. Upon sale, a mortgage servicing rights asset is capitalized, which represents the then current fair value of future net cash flows expected to be realized for performing servicing activities. Mortgage servicing rights, when purchased, are initially recorded at fair value. As the Corporation has not elected to subsequently measure any class of servicing assets under the fair value measurement method, the Corporation follows the amortization method. Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income, and assessed for impairment at each reporting date. Mortgage servicing rights are carried at the lower of the

105

initial capitalized amount, net of accumulated amortization, or estimated fair value, and are included in other intangible assets, net in the consolidated balance sheets.

The Corporation periodically evaluates its mortgage servicing rights asset for impairment. Impairment is assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. Conversely, as mortgage interest rates fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. A valuation allowance is established, through a charge to earnings, to the extent the amortized cost of the mortgage servicing rights exceeds the estimated fair value by stratification. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation is reduced through a recovery to earnings. An other-than-temporary impairment (i.e., recoverability is considered remote when considering interest rates and loan pay off activity) is recognized as a write-down of the mortgage servicing rights asset and the related valuation allowance (to the extent a valuation allowance is available) and then against earnings. A direct write-down permanently reduces the carrying value of the mortgage servicing rights asset and valuation allowance, precluding subsequent recoveries. See Note 16 which further discusses fair value measurement relative to the mortgage servicing rights asset.

Mortgage servicing rights expense is a component of mortgage banking, net, in the consolidated statements of income (loss). The $26.0 million mortgage servicing rights expense for 2010 was comprised of $22.9 million of base amortization and a $3.1 million addition to the valuation reserve. For 2009, the $26.4 million mortgage servicing rights expense was comprised of $19.6 million of base amortization and a $6.8 million addition to the valuation allowance, while for 2008, the $22.9 million mortgage servicing rights expense included $16.1 million base amortization and a $6.8 million addition to the valuation allowance.

A summary of changes in the balance of the mortgage servicing rights asset and the mortgage servicing rights valuation allowance was as follows.


Mortgage servicing rights	2010			2009			2008
	($ in Thousands)

Mortgage servicing rights at beginning of year	$	80,986		$	56,025		$	54,819
Additions		26,165			44,580			17,263
Amortization		(22,942	)		(19,619	)		(16,057	)


Mortgage servicing rights at end of year	$	84,209		$	80,986		$	56,025


Valuation allowance at beginning of year		(17,233	)		(10,457	)		(3,632	)
Additions, net		(3,067	)		(6,776	)		(6,825	)


Valuation allowance at end of year		(20,300	)		(17,233	)		(10,457	)


Mortgage servicing rights, net	$	63,909		$	63,753		$	45,568


Fair value of Mortgage servicing rights	$	64,378		$	66,710		$	52,882
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)	$	7,453,000		$	7,667,000		$	6,606,000
Mortgage servicing rights, net to servicing portfolio		0.86	%		0.83	%		0.69	%
Mortgage servicing rights expense(1)	$	26,009		$	26,395		$	22,882


(1)		Includes the amortization of mortgage servicing rights and additions/recoveries to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net in the consolidated statements of income (loss).

106

The following table shows the estimated future amortization expense for amortizing intangible assets. The projections of amortization expense for the next five years are based on existing asset balances, the current interest rate environment, and prepayment speeds as of December 31, 2010. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable.


Estimated amortization expense	Core Deposit Intangibles		Other Intangibles		Mortgage Servicing Rights
	($ in Thousands)

Year ending December 31,
2011	$	3,700	$	1,000	$	21,400
2012		3,200		1,000		17,400
2013		3,100		900		13,800
2014		2,900		900		10,800
2015		1,400		800		8,200


NOTE 5	PREMISES AND EQUIPMENT:

A summary of premises and equipment at December 31 was as follows:



			2010						2009
	Estimated				Accumulated		Net Book		Net Book
	Useful Lives		Cost		Depreciation		Value		Value
	($ in Thousands)
Land		—	$	43,744	$	—	$	43,744	$	43,770
Land improvements		3 – 15 years		5,514		2,734		2,780		2,364
Buildings		5 – 39 years		201,560		105,784		95,776		98,571
Computers		3 – 5 years		38,857		28,960		9,897		7,539
Furniture, fixtures and other equipment		3 – 15 years		128,350		96,486		31,864		27,087
Leasehold improvements		5 – 30 years		25,907		19,435		6,472		7,233

Total premises and equipment			$	443,932	$	253,399	$	190,533	$	186,564

Depreciation and amortization of premises and equipment totaled $21.6 million in 2010, $21.8 million in 2009, and $22.3 million in 2008.

The Corporation and certain subsidiaries are obligated under noncancelable operating leases for other facilities and equipment, certain of which provide for increased rentals based upon increases in cost of living adjustments and other operating costs. The approximate minimum annual rentals and commitments under these noncancelable agreements and leases with remaining terms in excess of one year are as follows:


	($ in Thousands)

2011	$	11,775
2012		11,985
2013		9,933
2014		8,460
2015		7,397
Thereafter		29,313

Total	$	78,863

Total rental expense under leases, net of sublease income, totaled $13.4 million in 2010, $13.2 million in 2009, and $16.8 million in 2008.

107


NOTE 6	DEPOSITS:

The distribution of deposits at December 31 was as follows:


	2010		2009
	($ in Thousands)

Noninterest-bearing demand deposits	$	3,684,965	$	3,274,973
Savings deposits		887,236		845,509
Interest-bearing demand deposits		1,870,664		3,099,358
Money market deposits		5,434,867		5,806,661
Brokered certificates of deposit		442,640		141,968
Other time deposits		2,905,021		3,560,144


Total deposits	$	15,225,393	$	16,728,613

Time deposits of $100,000 or more were $1.0 billion and $1.3 billion at December 31, 2010 and 2009, respectively.

Aggregate annual maturities of all time deposits at December 31, 2010, are as follows:


Maturities During Year Ending December 31,	($ in Thousands)

2011	$	2,210,704
2012		952,094
2013		100,906
2014		70,904
2015		12,785
Thereafter		268

Total	$	3,347,661


NOTE 7	SHORT-TERM BORROWINGS:

Short-term borrowings at December 31 were as follows:


	2010		2009
	($ in Thousands)

Federal funds purchased and securities sold under agreements to repurchase	$	718,694	$	598,488
Federal Reserve Term Auction Facility		—		600,000
FHLB advances		1,000,000		—
Treasury, tax, and loan notes		28,688		28,365


Total short-term borrowings	$	1,747,382	$	1,226,853

The FHLB advances included in short-term borrowings are those with original contractual maturities of less than one year, while the Federal Reserve funds represent short-term borrowings through the Term Auction Facility. The securities sold under agreements to repurchase are short-term borrowings collateralized by securities of the U.S. Government or its agencies and mature daily. The treasury, tax, and loan notes are demand notes representing secured borrowings from the U.S. Treasury, collateralized by qualifying securities and loans.

108


NOTE 8	LONG-TERM FUNDING:

Long-term funding (funding with original contractual maturities greater than one year) at December 31 was as follows:


	2010		2009
	($ in Thousands)

Federal Home Loan Bank (“FHLB”) advances	$	1,000,528	$	1,010,576
Repurchase agreements		—		500,000
Subordinated debt, net		195,436		225,247
Junior subordinated debentures, net		215,848		216,069
Other borrowed funds		1,793		2,106


Total long-term funding	$	1,413,605	$	1,953,998

FHLB advances: At December 31, 2010, long-term advances from the FHLB had maturities through 2020 and had weighted-average interest rates of 1.66% and 2.22% at December 31, 2010, and 2009, respectively. These advances all had fixed contractual rates at both December 31, 2010 and 2009.

Repurchase agreements: There were no outstanding repurchase agreements at December 31, 2010. At December 31, 2009, the repurchase agreements had weighted-average interest rates of 2.60%. These repurchase agreements were 80% fixed rate at December 31, 2009. During the first quarter of 2010, the Corporation paid an early termination penalty of $2.5 million (included in other noninterest expense on the consolidated statements of income (loss)) on the repayment of $200 million of long-term repurchase agreements, while the remaining $300 million of long-term repurchase agreements matured during 2010.

Subordinated debt: In September 2008, the Corporation issued $26 million of 10-year subordinated debt with a 5-year no-call provision, and in August 2001, the Corporation issued $200 million of 10-year subordinated debt. The subordinated notes were each issued at a discount, and the September 2008 debt has a fixed coupon interest rate of 9.25%, while the August 2001 debt has a fixed coupon interest rate of 6.75%. The Corporation retired $30 million of the August 2001 debt in the third quarter of 2010 and paid an early termination penalty of $0.7 million (included in other noninterest expense on the consolidated statements of income (loss)). Subordinated debt qualifies under the risk-based capital guidelines as Tier 2 supplementary capital for regulatory purposes, and is discounted in accordance with regulations when the debt has five years or less remaining to maturity. The August 2001 notes are due and payable in August 2011 and, in accordance with regulatory guidelines, no longer qualify as Tier 2 capital.

Junior subordinated debentures: The Corporation has $180.4 million of junior subordinated debentures (“ASBC Debentures”), which carry a fixed rate of 7.625% and mature on June 15, 2032. Beginning May 30, 2007, the Corporation has had the right to redeem the ASBC Debentures, at par, and none were redeemed during 2010 and 2009. The carrying value of the ASBC Debentures was $179.7 million at both December 31, 2010 and 2009. With its October 2005 acquisition, the Corporation acquired variable rate junior subordinated debentures at a premium (the “SFSC Debentures”), from two equal issuances (contractually $30.9 million on a combined basis), of which one pays a variable rate adjusted quarterly based on the 90-day LIBOR plus 2.80% (or 3.09% at December 31, 2010) and matures April 23, 2034, and the other which pays a variable rate adjusted quarterly based on the 90-day LIBOR plus 3.45% (or 3.74% at December 31, 2010) and matures November 7, 2032. The Corporation has the right to redeem the SFSC Debentures, at par, on a quarterly basis and none were redeemed during 2010 and 2009. The carrying value of the SFSC Debentures was $36.2 million at December 31, 2010 and $36.4 million at December 31, 2009.

109

The table below summarizes the maturities of the Corporation’s long-term funding at December 31, 2010:


Year	($ in Thousands)

2011	$	669,912
2012		100,067
2013		400,062
2014		20
2015		1,793
Thereafter		241,751

Total long-term funding	$	1,413,605

Under agreements with the Federal Home Loan Bank of Chicago, FHLB advances (short-term and long-term) are secured by qualifying mortgages of the subsidiary bank (such as residential mortgage, residential mortgage loans held for sale, home equity, and commercial real estate) and by specific investment securities for certain FHLB advances. At December 31, 2010, approximately $2.7 billion and $0.9 billion of residential mortgage and home equity loans, respectively, were pledged to the FHLB.


NOTE 9	STOCKHOLDERS’ EQUITY:

Preferred Equity: The Corporation’s Articles of Incorporation, as amended, authorize the issuance of 750,000 shares of preferred stock at a par value of $1.00 per share. In November 2008, under the CPP, the Corporation issued 525,000 shares of senior preferred stock (with a par value of $1.00 per share and a liquidation preference of $1,000 per share) and a 10-year warrant to purchase approximately 4.0 million shares of common stock (see section “Common Stock Warrants” below for additional information), for aggregate proceeds of $525 million. The proceeds received were allocated between the Senior Preferred Stock and the Common Stock Warrants based upon their relative fair values, which resulted in the recording of a discount on the Senior Preferred Stock upon issuance that reflects the value allocated to the Common Stock Warrants. The discount will be accreted using a level-yield basis over five years. Upon issuance, the fair values of the Preferred Stock and Common Stock Warrants (discussed below) were computed as if the securities were issued on a stand-alone basis. The fair value of the Preferred Stock was estimated based on the net present value of the future Preferred Stock cash flows using a discount rate of 12%. The allocated carrying value of the Senior Preferred Stock and Common Stock Warrants on the date of issuance (based on their relative fair values) were $507.7 million and $17.3 million, respectively. Cumulative dividends on the Senior Preferred Stock are payable at 5% per annum for the first five years and at a rate of 9% per annum thereafter on the liquidation preference of $1,000 per share. The Corporation is prohibited from paying any dividend with respect to shares of common stock unless all accrued and unpaid dividends are paid in full on the Senior Preferred Stock for all past dividend periods. The Senior Preferred Stock is non-voting, other than class voting rights on matters that could adversely affect the Senior Preferred Stock. The Senior Preferred Stock is callable at par after three years. Prior to the end of three years, the Senior Preferred Stock may be redeemed with the proceeds from one or more qualified equity offerings of any Tier 1 perpetual preferred or common stock of at least $131 million (each a “Qualified Equity Offering”). The UST may also transfer the Senior Preferred Stock to a third party at any time.

Common Stock Warrants: The Common Stock Warrants have a term of 10 years and are exercisable at any time, in whole or in part, at an exercise price of $19.77 per share (subject to certain anti-dilution adjustments). The UST may not exercise or transfer the Common Stock Warrants with respect to more than half of the initial shares of common stock underlying the common stock warrants prior to the earlier of (a) the date on which the Corporation receives aggregate gross proceeds of not less than $525 million from one or more Qualified Equity Offerings, and (b) December 31, 2009.

Upon issuance, the fair values of the Preferred Stock (discussed above) and Common Stock Warrants were computed as if the securities were issued on a stand-alone basis. The fair value of the Common Stock Warrants was estimated using a Black-Scholes option pricing model, which incorporates the following assumptions: weighted average life, risk-free interest rate, stock price volatility, and dividend yield. The weighted average expected life of the Common Stock Warrants represents the period of time that common stock warrants are expected to be

110

outstanding (consistent with the term of the Common Stock Warrants). The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility was based on the historical volatility of the Corporation’s stock. The following assumptions were used in estimating the fair value for the Common Stock Warrants: a weighted average expected life of 10 years, a risk-free interest rate of 3.14%, an expected volatility of 32.28%, and a dividend yield of 5%. Based on these assumptions, the estimated fair value of the Common Stock Warrants was $2.70 per warrant.

Common Equity: On January 15, 2010, the Corporation announced it had closed its underwritten public offering of 44.8 million shares of its common stock at $11.15 per share. The net proceeds from the offering were approximately $478.3 million after deducting underwriting discounts and commissions. The Corporation used the net proceeds of this offering, which will qualify as tangible common equity and Tier 1 capital, to support continued growth and for working capital and other general corporate purposes.

Subsidiary Equity: At December 31, 2010, subsidiary equity equaled $3.0 billion, of which approximately $39 million could be paid to the Parent Company in the form of cash dividends without prior regulatory approval, subject to the capital needs of each subsidiary. See Note 17 for additional information on regulatory requirements for the Bank.

Stock Repurchases: The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock to be made available for re-issuance in connection with the Corporation’s employee incentive plans and/or for other corporate purposes. During 2010 and 2009, no shares were repurchased under these authorizations. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities, and is subject to the restrictions under the CPP.

Under the CPP, prior to the third anniversary of the UST’s purchase of the Senior Preferred Stock (November 21, 2011), unless the Senior Preferred Stock has been redeemed or the UST has transferred all of the Senior Preferred Stock to third parties, the consent of the UST will be required for us to redeem, purchase or acquire any shares of our common stock or other capital stock or other equity securities of any kind, other than (i) redemptions, purchases or other acquisitions of the Senior Preferred Stock; (ii) redemptions, purchases or other acquisitions of shares of our common stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice; and (iii) certain other redemptions, repurchases or other acquisitions as permitted under the CPP.

111

Other Comprehensive Income: A summary of activity in accumulated other comprehensive income follows.


	Years Ended December 31,
	2010			2009			2008
	($ in Thousands)

Net income (loss)	$	(856	)	$	(131,859	)	$	168,452
Other comprehensive income (loss), net of tax:
Investment securities available for sale:
Net unrealized gains (losses)		(38,278	)		113,455			(8,817	)
Reclassification adjustment for net (gains) losses realized in net income		(24,917	)		(8,774	)		52,541
Income tax (expense) benefit		24,785			(37,534	)		(16,559	)


Other comprehensive income (loss) on investment securities available for sale		(38,410	)		67,147			27,165
Defined benefit pension and postretirement obligations:
Prior service cost, net of amortization		467			467			472
Net gain (loss), net of amortization		2,271			2,736			(29,362	)
Income tax (expense) benefit		(1,106	)		(1,236	)		11,556


Other comprehensive income (loss) on pension and postretirement obligations		1,632			1,967			(17,334	)
Derivatives used in cash flow hedging relationships:
Net unrealized losses		(4,542	)		(1,814	)		(16,679	)
Reclassification adjustment for net losses and interest expense for
interest differential on derivative instruments realized in net income		6,013			8,540			4,343
Income tax (expense) benefit		(499	)		(2,718	)		5,058


Other comprehensive income (loss) on cash flow hedging relationships		972			4,008			(7,278	)


Total other comprehensive income (loss)		(35,806	)		73,122			2,553


Comprehensive income (loss)	$	(36,662	)	$	(58,737	)	$	171,005


NOTE 10	STOCK-BASED COMPENSATION:

At December 31, 2010, the Corporation had one stock-based compensation plan (discussed below). All stock awards granted under this plan have an exercise price that is established at the closing price of the Corporation’s stock on the date the awards were granted. The stock incentive plans of acquired companies were terminated as to future option grants at each respective merger date. Option holders under such plans received the Corporation’s common stock, options to buy the Corporation’s common stock, or cash, based on the conversion terms of the various merger agreements.

The Corporation may issue common stock with restrictions to certain key employees. The shares are restricted as to transfer, but are not restricted as to dividend payment or voting rights. The transfer restrictions lapse over one, two, three, or five years, depending upon whether the awards are salary shares, service-based or performance-based. Service-based awards are contingent upon continued employment, and performance-based awards are based on earnings per share performance goals and continued employment.

Stock-Based Compensation Plans:

In 1987 (as amended subsequently, and most recently in 2005), the Board of Directors, with subsequent approval of the Corporation’s shareholders, approved the Amended and Restated Long-Term Incentive Stock Plan (“Stock

112

Plan”). Options are generally exercisable up to 10 years from the date of grant and vest ratably over three years. This plan expired during 2010, and as of December 31, 2010, there are no shares available for grants.

In January 2003 (as amended subsequently, and most recently in 2009), the Board of Directors, with subsequent approval of the Corporation’s shareholders, approved the adoption of the 2003 Long-Term Incentive Plan (“2003 Plan”), which provides for the granting of options or other stock awards (e.g., restricted stock awards and salary shares) to key employees. Options are generally exercisable up to 10 years from the date of grant and vest ratably over three years. This plan expired during 2010, and as of December 31, 2010, there are no shares available for grants.

In March 2010, the Board of Directors, with subsequent approval of the Corporation’s shareholders, approved the adoption of the 2010 Incentive Compensation Plan (“2010 Plan”). Options are generally exercisable up to 10 years from the date of grant and vest ratably over three years. As of December 31, 2010, approximately 12.1 million shares remain available for grants.

Accounting for Stock-Based Compensation:

The fair value of stock options granted is estimated on the date of grant using a Black-Scholes option pricing model, while the fair value of restricted stock awards and salary shares is their fair market value on the date of grant. The fair values of stock grants are amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in personnel expense in the consolidated statements of income (loss).

Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock option represents the period of time that stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the historical volatility of the Corporation’s stock. The following assumptions were used in estimating the fair value for options granted in 2010, 2009 and 2008.


	2010			2009			2008

Dividend yield		3.00	%		4.95	%		5.12	%
Risk-free interest rate		2.70	%		1.87	%		2.77	%
Expected volatility		45.38	%		36.00	%		21.32	%
Weighted average expected life		6 years			6 years			6 years
Weighted average per share fair value of options	$	4.60		$	3.60		$	2.74

The Corporation is required to estimate potential forfeitures of stock grants and adjust compensation expense recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

113

A summary of the Corporation’s stock option activity for 2010, 2009, and 2008, is presented below.


						Weighted Average		Aggregate
				Weighted Average		Remaining		Intrinsic
Stock Options	Shares			Exercise Price		Contractual Term		Value (000s)


Outstanding at December 31, 2007		6,319,413		$	27.43
Granted		1,256,790			24.35
Exercised		(576,685	)		18.20
Forfeited or expired		(417,816	)		30.55


Outstanding at December 31, 2008		6,581,702		$	27.45		5.87		—


Options exercisable at December 31, 2008		4,770,537		$	27.44		4.77		—


Outstanding at December 31, 2008		6,581,702		$	27.45
Granted		975,548			17.05
Exercised		(945	)		16.70
Forfeited or expired		(847,687	)		25.73


Outstanding at December 31, 2009		6,708,618		$	26.16		5.61		—


Options exercisable at December 31, 2009		4,811,626		$	27.73		4.50		—


Outstanding at December 31, 2009		6,708,618		$	26.16
Granted		1,348,474			13.24
Exercised		(14,868	)		12.71
Forfeited or expired		(740,766	)		20.95


Outstanding at December 31, 2010		7,301,458		$	24.33		5.01		—


Options exercisable at December 31, 2010		5,275,738		$	27.60		3.63		—

The following table summarizes information about the Corporation’s stock options outstanding at December 31, 2010:


	Options		Weighted Average		Remaining		Options		Weighted Average
	Outstanding		Exercise Price		Life (Years)		Exercisable		Exercise Price

Range of Exercise Prices:
$9.26 — $15.40		1,278,279	$	13.23		9.11		23,250	$	12.43
$17.26 — $19.98		1,219,292		18.10		5.41		714,853		18.60
$20.01 — $24.89		1,834,635		23.40		3.79		1,571,353		23.15
$26.39 — $32.83		1,492,582		31.01		3.38		1,489,612		31.02
$33.03 — $34.27		1,476,670		33.48		4.26		1,476,670		33.48


TOTAL		7,301,458	$	24.33		5.01		5,275,738	$	27.60

114

The following table summarizes information about the Corporation’s nonvested stock option activity for 2010, 2009, and 2008.


				Weighted Average
Stock Options	Shares			Grant Date Fair Value

Nonvested at December 31, 2007		1,030,125		$	6.03
Granted		1,256,790			2.74
Vested		(337,557	)		6.06
Forfeited		(138,193	)		4.66

Nonvested at December 31, 2008		1,811,165		$	3.85

Nonvested at December 31, 2008		1,811,165		$	3.85
Granted		975,548			3.60
Vested		(650,629	)		4.07
Forfeited		(239,092	)		4.26

Nonvested at December 31, 2009		1,896,992		$	3.60

Nonvested at December 31, 2009		1,896,992		$	3.60
Granted		1,348,474			4.60
Vested		(920,969	)		3.93
Forfeited		(298,777	)		3.78

Nonvested at December 31, 2010		2,025,720		$	4.09

For the year ended December 31, 2010 and 2009, the intrinsic value of stock options exercised was less than $0.1 million, while for the year ended December 31, 2008, the intrinsic value of stock options exercised was $3.8 million. (Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option.) During 2010, less than $0.2 million was received for the exercise of stock options. The total fair value of stock options that vested was $3.6 million, $2.6 million and $2.0 million, respectively, for the years ended December 31, 2010, 2009, and 2008. The Corporation recognized compensation expense of $3.4 million, $3.6 million, and $3.0 million for 2010, 2009, and 2008, respectively, for the vesting of stock options. At December 31, 2010, the Corporation had $5.1 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2012.

115

The following table summarizes information about the Corporation’s restricted stock awards activity (excluding salary shares) for 2010, 2009, and 2008.


				Weighted Average
Restricted Stock	Shares			Grant Date Fair Value


Outstanding at December 31, 2007		164,840		$	33.14
Granted		265,900			24.43
Vested		(69,074	)		32.47
Forfeited		(7,339	)		32.21

Outstanding at December 31, 2008		354,327		$	26.75

Outstanding at December 31, 2008		354,327		$	26.75
Granted		371,643			16.48
Vested		(146,320	)		27.96
Forfeited		(52,519	)		21.80

Outstanding at December 31, 2009		527,131		$	19.67

Outstanding at December 31, 2009		527,131		$	19.67
Granted		604,343			12.38
Vested		(205,239	)		21.68
Forfeited		(153,973	)		17.12

Outstanding at December 31, 2010		772,262		$	13.94

The Corporation amortizes the expense related to restricted stock awards as compensation expense over the requisite vesting period specified in the grant. Restricted stock awards granted during 2010 to the senior executive officers and the next 20 most highly compensated employees will vest in two years after the grant date when all funds received under the Capital Purchase Program (“CPP”) have been paid in full. When the CPP funds have been repaid, the shares will vest in 25% increments as the funds are repaid (i.e., 0% vest when less than 25% is repaid, 25% vest when 25-49% is repaid, 50% vest when 50-74% is repaid, 75% vest when 75-99% is repaid, and 100% vest when the full amount is repaid). Expense for restricted stock awards of approximately $5.6 million, $4.3 million, and $4.0 million was recorded for the years ended December 31, 2010, 2009, and 2008, respectively. At December 31, 2010, the Corporation had $5.8 million of unrecognized compensation expense related to restricted stock awards that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2012.

The Corporation recognizes expense related to salary shares as compensation expense. Each share is fully vested as of the date of grant and is subject to restrictions on transfer that lapse over a period of 9 to 28 months based on the month of grant. The Corporation recognized compensation expense of $3.3 million on the granting of 244,062 salary shares (or an average cost per share of $13.43) during 2010 and $0.1 million on the granting of 5,841 salary shares (or an average cost per share of $11.06) for the three months ended December 31, 2009.

The Corporation issues shares from treasury, when available, or new shares upon the exercise of stock options, granting of restricted stock awards, and the granting of salary shares. The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock each quarter in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities, and is subject to restrictions under the CPP.

116


NOTE 11	RETIREMENT PLANS:

The Corporation has a noncontributory defined benefit retirement plan (the Retirement Account Plan (“RAP”)) covering substantially all full-time employees. The benefits are based primarily on years of service and the employee’s compensation paid. Employees of acquired entities generally participate in the RAP after consummation of the business combinations. The plans of acquired entities are typically merged into the RAP after completion of the mergers, and credit is usually given to employees for years of service at the acquired institution for vesting and eligibility purposes. In connection with the First Federal acquisition in October 2004, the Corporation assumed the First Federal pension plan (the “First Federal Plan”). The First Federal Plan was frozen on December 31, 2004, and qualified participants in the First Federal Plan became eligible to participate in the RAP as of January 1, 2005. Additional discussion and information on the RAP and the First Federal Plan are collectively referred to below as the “Pension Plan.”

Associated also provides healthcare access for eligible retired employees in its Postretirement Plan (the “Postretirement Plan”). Retirees who are at least 55 years of age with 5 years of service are eligible to participate in the plan. Additionally, with the rise in healthcare costs for retirees under the age of 65, the Corporation changed its postretirement benefits to include a subsidy for those employees who are at least age 55 but less than age 65 with at least 15 years of service as of January 1, 2007. The Corporation has no plan assets attributable to the plan. The Corporation reserves the right to terminate or make changes to the plan at any time.

The funded status and amounts recognized in the 2010 and 2009 consolidated balance sheets, as measured on December 31, 2010 and 2009, respectively, for the Pension and Postretirement Plans were as follows.


	Pension			Postretirement			Pension			Postretirement
	Plan			Plan			Plan			Plan

	2010			2010			2009			2009

	($ in Thousands)
Change in Fair Value of Plan Assets
Fair value of plan assets at beginning of year	$	133,554		$	—		$	109,111		$	—
Actual return on plan assets		14,477			—			22,105			—
Employer contributions		20,000			610			10,000			560
Gross benefits paid		(8,240	)		(610	)		(7,662	)		(560	)


Fair value of plan assets at end of year	$	159,791		$	—		$	133,554		$	—


Change in Benefit Obligation
Net benefit obligation at beginning of year	$	119,935		$	4,429		$	105,202		$	4,562
Service cost		9,622			—			8,649			—
Interest cost		6,377			227			6,261			261
Actuarial loss		1,420			104			7,485			166
Gross benefits paid		(8,240	)		(610	)		(7,662	)		(560	)


Net benefit obligation at end of year	$	129,114		$	4,150		$	119,935		$	4,429


Funded status	$	30,677		$	(4,150	)	$	13,619		$	(4,429	)


Noncurrent assets	$	31,274		$	—		$	13,971		$	—
Current liabilities		—			(587	)		—			(610	)
Noncurrent liabilities		(597	)		(3,563	)		(352	)		(3,819	)


Asset (Liability) Recognized in the Consolidated Balance Sheet	$	30,677		$	(4,150	)	$	13,619		$	(4,429	)

117

Amounts recognized in accumulated other comprehensive income, net of tax, as of December 31, 2010 and 2009 follow:


	Pension		Postretirement			Pension		Postretirement
	Plan		Plan			Plan		Plan

	2010		2010			2009		2009

			($ in Thousands)
Prior service cost	$	320	$	347		$	365	$	589
Net actuarial (gain) loss		24,050		(212	)		25,460		(277	)


Amount not yet recognized in net periodic benefit cost, but recognized in accumulated other comprehensive income	$	24,370	$	135		$	25,825	$	312

Other changes in plan assets and benefit obligations recognized in other comprehensive income (“OCI”), net of tax, in 2010 and 2009 were as follows:


	Pension Plan			Postretirement Plan			Pension Plan			Postretirement Plan
	2010			2010			2009			2009

				($ in Thousands)
Net gain (loss)	$	777		$	(104	)	$	2,420		$	(181	)
Amortization of prior service cost		72			395			72			395
Amortization of actuarial gain (loss)		1,601			(3	)		551			(54	)
Income tax expense		(995	)		(111	)		(1,174	)		(62	)


Total Recognized in OCI	$	1,455		$	177		$	1,869		$	98

The components of net periodic benefit cost for the Pension and Postretirement Plans for 2010, 2009, and 2008 were as follows:


	Pension Plan			Postretirement Plan			Pension Plan			Postretirement Plan			Pension Plan			Postretirement Plan
	2010			2010			2009			2009			2008			2008

	($ in Thousands)
Service cost	$	9,622		$	—		$	8,649		$	—		$	9,362		$	—
Interest cost		6,377			227			6,262			261			6,174			271
Expected return on plan assets		(12,152	)		—			(11,520	)		—			(11,768	)		—
Amortization of:
Prior service cost		72			395			72			395			77			395
Actuarial (gain) loss		1,601			(3	)		551			(54	)		258			(27	)


Total net periodic benefit cost	$	5,520		$	619		$	4,014		$	602		$	4,103		$	639
Settlement charge		—			—			—			—			267			—


Total net pension cost	$	5,520		$	619		$	4,014		$	602		$	4,370		$	639

118

As of December 31, 2010, the estimated actuarial losses and prior service cost that will be amortized during 2011 from accumulated other comprehensive income into net periodic benefit cost for the Pension Plan are $1.8 million and $0.1 million, respectively. An estimated $0.4 million in prior service cost is expected to be amortized from accumulated other comprehensive income into net benefit cost during 2011 for the Postretirement Plan.


	Pension Plan			Postretirement Plan			Pension Plan			Postretirement Plan
	2010			2010			2009			2009

Weighted average assumptions used to determine benefit obligations:
Discount rate		5.10	%		5.10	%		5.50	%		5.50	%
Rate of increase in compensation levels		5.00			N/A			5.00			N/A
Weighted average assumptions used to determine net periodic benefit costs:
Discount rate		5.50	%		5.50	%		6.10	%		6.10	%
Rate of increase in compensation levels		5.00			N/A			5.00			N/A
Expected long-term rate of return on plan assets		8.00			N/A			8.25			N/A

The overall expected long-term rates of return on the Pension Plan assets were 8.00% at December 31, 2010 and 8.25% at December 31, 2009, respectively. The expected long-term (more than 20 years) rate of return was estimated using market benchmarks for equities and bonds applied to the Pension Plan’s anticipated asset allocations. The expected return on equities was computed utilizing a valuation framework, which projected future returns based on current equity valuations rather than historical returns. The actual rate of return for the Pension Plan assets was 12.04% and 20.06% for 2010 and 2009, respectively.

The Pension Plan’s investments are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risks associated with certain investments and the level of uncertainty related to changes in the value of the investments, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported. The investment objective for the Pension Plan is to maximize total return with a tolerance for average risk. The plan has a diversified portfolio that will provide liquidity, current income, and growth of income and principal, with anticipated asset allocation ranges of: equity securities 55-65%, debt securities 35-45%, other cash equivalents 0-5%, and alternative securities 0-15%. Given current market conditions, the Corporation could be outside of the allocation ranges for brief periods of time. The asset allocation for the Pension Plan as of the December 31, 2010 and 2009 measurement dates, respectively, by asset category were as follows.


Asset Category	2010			2009

Equity securities		64	%		61	%
Debt securities		35			38
Other		1			1

Total		100	%		100	%

The Pension Plan assets include cash equivalents, such as money market accounts, mutual funds, and common / collective trust funds (which include investments in equity and bond securities). Money market accounts are stated at cost plus accrued interest, mutual funds are valued at quoted market prices and investments in common / collective trust funds are valued at the amount at which units in the funds can be withdrawn. Based on these inputs, the following table summarizes the fair value of the Pension Plan’s investments as of December 31, 2010 and 2009.


			Fair Value Measurements Using
	December 31, 2010		Level 1		Level 2		Level 3
			($ in Thousands)

Pension Plan Investments:
Money market account	$	861	$	861	$	—	$	—
Mutual funds		78,046		78,046		—		—
Common / collective trust funds		80,884		—		80,884		—


Total Pension Plan Investments	$	159,791	$	78,907	$	80,884	$	—

119


			Fair Value Measurements Using
	December 31, 2009		Level 1		Level 2		Level 3
			($ in Thousands)

Pension Plan Investments:
Money market account	$	664	$	664	$	—	$	—
Mutual funds		53,032		53,032		—		—
Common / collective trust funds		79,858		—		79,858		—


Total Pension Plan Investments	$	133,554	$	53,696	$	79,858	$	—

The Corporation’s funding policy is to pay at least the minimum amount required by the funding requirements of federal law and regulations, with consideration given to the maximum funding amounts allowed. The Corporation contributed $20 million and $10 million to its Pension Plan during 2010 and 2009, respectively. The Corporation regularly reviews the funding of its Pension Plans. At this time, the Corporation expects to make a contribution of up to $6 million in 2011.

The projected benefit payments for the Pension and Postretirement Plans at December 31, 2010, reflecting expected future services, were as follows. The projected benefit payments were calculated using the same assumptions as those used to calculate the benefit obligations listed above.


	Pension Plan		Postretirement Plan
	($ in Thousands)

Estimated future benefit payments:
2011	$	11,763	$	587
2012		9,882		565
2013		10,132		500
2014		10,669		382
2015		11,695		323
2016-2020		62,816		1,156

The health care trend rate is an assumption as to how much the Postretirement Plan’s medical costs will increase each year in the future. The health care trend rate assumption for pre-65 coverage is 7% for 2010, and 1% lower in each succeeding year, to an ultimate rate of 5% for 2012 and future years. The health care trend rate assumption for post-65 coverage is 8% for 2010, and 1% lower in each succeeding year, to an ultimate rate of 5% for 2013 and future years.

A one percentage point change in the assumed health care cost trend rate would have the following effect.


	2010					2009
	100 bp Increase		100 bp Decrease			100 bp Increase		100 bp Decrease
			($ in Thousands)

Effect on total of service and interest cost	$	17	$	(16	)	$	20	$	(19	)
Effect on postretirement benefit obligation	$	343	$	(317	)	$	366	$	(338	)

The Corporation also has a 401(k) and Employee Stock Ownership Plan (the “401(k) plan”). The Corporation’s contribution is determined by the Compensation and Benefits Committee of the Board of Directors. Total expense related to contributions to the 401(k) plan was $7.7 million, $7.6 million, and $6.2 million in 2010, 2009, and 2008, respectively.

120


NOTE 12	INCOME TAXES:

The current and deferred amounts of income tax expense (benefit) were as follows:


	Years Ended December 31,
	2010			2009			2008

	($ in Thousands)

Current:
Federal	$	(91,578	)	$	(45,496	)	$	97,707
State		598			27,083			(2,327	)


Total current		(90,980	)		(18,413	)		95,380
Deferred:
Federal		54,046			(91,136	)		(44,986	)
State		(3,238	)		(43,691	)		3,434


Total deferred		50,808			(134,827	)		(41,552	)


Total income tax expense (benefit)	$	(40,172	)	$	(153,240	)	$	53,828

Temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities resulted in deferred taxes. Deferred tax assets and liabilities at December 31 were as follows:


	2010			2009
	($ in Thousands)

Gross deferred tax assets:
Allowance for loan losses	$	160,786		$	231,553
Allowance for other losses		12,154			10,136
Accrued liabilities		6,548			8,180
Deferred compensation		23,188			20,887
Securities valuation adjustment		18,964			17,264
Benefit of tax loss and credit carryforwards		78,968			35,448
Nonaccrual interest		7,460			9,362
Other		4,185			3,327


Total gross deferred tax assets		312,253			336,157
Valuation allowance for deferred tax assets		(5,984	)		(5,935	)


		306,269			330,222
Gross deferred tax liabilities:
FHLB stock dividends		10,276			10,221
Prepaid expenses		43,467			23,646
Intangible amortization		27,382			27,137
Mortgage banking activity		14,213			13,707
Deferred loan fee income		21,850			20,784
State income taxes		22,656			21,497
Leases		5,246			6,103
Other		15,462			10,602


Total gross deferred tax liabilities		160,552			133,697


Net deferred tax assets		145,717			196,525


Tax effect of unrealized gain related to available for sale securities		(32,092	)		(56,379	)
Tax effect of unrealized loss related to pension and postretirement benefits		15,482			16,588


		(16,610	)		(39,791	)


Net deferred tax assets including tax effected items	$	129,107		$	156,734

121

For financial reporting purposes, a valuation allowance has been recognized to offset deferred tax assets related to state net operating loss carryforwards of certain subsidiaries. If it is subsequently determined that all or a portion of these deferred tax assets will be realized, the tax benefit for these items will be used to reduce deferred tax expense for that period. In addition, a valuation allowance has been established through purchase accounting related to acquired net operating loss carryforwards. If it is subsequently determined that all or a portion of these deferred tax assets will be realized, the tax benefit for these items will be reflected through current period income.

At December 31, 2010, the valuation allowance for deferred tax assets of $6.0 million was related to the deferred tax benefit of specific states tax loss carryforwards of $49.9 million at certain subsidiaries, while at December 31, 2009, the valuation allowance for deferred tax assets of $5.9 million was related to the deferred tax benefit of specific state tax loss carryforwards of $35.4 million. The net increase in the valuation allowance during 2010 was primarily the result of an additional valuation allowance on specific state tax losses. The net decrease in the valuation allowance during 2009 was primarily the result of the impact of changes in state laws and the expiration of the tax statute on certain state tax losses for which a valuation allowance was previously established. The change in the valuation allowance was as follows:


	2010		2009
	($ in Thousands)

Valuation allowance for deferred tax assets, beginning of year	$	5,935	$	25,182
Increase (decrease) in current year		49		(19,247	)


Valuation allowance for deferred tax assets, end of year	$	5,984	$	5,935

As a result of the pre-tax losses incurred during 2009 and 2010, the Corporation is in a cumulative pre-tax loss position for financial statement purposes for the three-year period ended December 31, 2010. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and, if necessary, tax planning strategies in making this assessment. Based upon the projections for future taxable income and tax planning strategies which will create taxable income over the period that the deferred tax assets are deductible, management believes it is more likely than not the Corporation will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2010 and 2009.

At December 31, 2010, the Corporation had state net operating losses of $632 million (of which, $59 million was acquired from various acquisitions) and federal net operating losses of $30 million (of which, $1 million was acquired from various acquisitions) that will expire in the years 2011 through 2030. $594 million of these state net operating loss carryforwards do not begin to expire until after 2015.

122

The effective income tax rate differs from the statutory federal tax rate. The major reasons for this difference were as follows:


	2010			2009			2008

Federal income tax rate at statutory rate		35.0	%		35.0	%		35.0	%
Increases (decreases) resulting from:
Tax-exempt interest and dividends		34.1			5.1			(7.3	)
State income taxes (net of federal income taxes)		4.2			3.8			0.3
Bank owned life insurance		13.3			1.9			(3.1	)
Valuation Allowance		(0.5	)		6.1			2.3
Federal Tax Credits		3.9			0.6			(0.5	)
Tax Reserve Adjustments		10.8			2.4			(2.4	)
Compensation Deduction Limitations		(4.8	)		(0.4	)		0.0
Other		1.9			(0.7	)		(0.1	)


Effective income tax rate		97.9	%		53.8	%		24.2	%

Savings banks acquired by the Corporation in 1997 and 2004 qualified under provisions of the Internal Revenue Code that permitted them to deduct from taxable income an allowance for bad debts that differed from the provision for such losses charged to income for financial reporting purposes. Accordingly, no provision for income taxes has been made for $100.3 million of retained income at December 31, 2010. If income taxes had been provided, the deferred tax liability would have been approximately $40.3 million. Management does not expect this amount to become taxable in the future, therefore, no provision for income taxes has been made.

The Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states jurisdictions. The Corporation’s federal income tax returns are open and subject to examination from the 2007 tax return year and forward, while the Corporation’s various state income tax returns are generally open and subject to examination from the 1999 and later tax return years based on individual state statutes of limitation.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2010			2009
	($ in Millions)

Balance at beginning of year	$	30		$	38
Changes in tax positions for prior years		—			(5	)
Settlements		(1	)		—
Statute expiration		(6	)		(3	)

Balance at end of year	$	23		$	30

At December 31, 2010 and 2009, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $15 million and $19 million, respectively.

The Corporation recognizes interest and penalties accrued related to unrecognized tax benefits in the income tax expense line of the consolidated statements of income (loss). As of December 31, 2010, the Corporation had $6 million of interest and penalties (including $1 million of interest accrued during 2010) on unrecognized tax benefits of which $2 million had an impact on the effective tax rate. As of December 31, 2009, the Corporation had $6 million of interest and penalties (including $1 million of interest accrued during 2009) on unrecognized tax benefits of which $3 million had an impact on the effective tax rate. Management does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.

123


NOTE 13	COMMITMENTS, OFF-BALANCE SHEET ARRANGEMENTS, AND CONTINGENT LIABILITIES:

The Corporation utilizes a variety of financial instruments in the normal course of business to meet the financial needs of its customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include lending-related and other commitments (see below) and derivative instruments (see Note 14). The following is a summary of lending-related commitments at December 31.


	2010		2009
	($ in Thousands)

Commitments to extend credit, excluding commitments to originate residential mortgage loans held for sale(1)(2)	$	3,862,208	$	4,095,336
Commercial letters of credit(1)		37,872		19,248
Standby letters of credit(3)		362,275		473,554
Purchase obligations(4)		—		145,248


(1)		These off-balance sheet financial instruments are exercisable at the market rate prevailing at the date the underlying transaction will be completed and, thus, are deemed to have no current fair value, or the fair value is based on fees currently charged to enter into similar agreements and is not material at December 31, 2010 or 2009.

(2)		Interest rate lock commitments to originate residential mortgage loans held for sale are considered derivative instruments and are disclosed in Note 14.

(3)		The Corporation has established a liability of $3.9 million and $3.1 million at December 31, 2010 and 2009, respectively, as an estimate of the fair value of these financial instruments.

(4)		The purchase obligations include forward commitments to purchase mortgage-related investment securities issued by government agencies.

Lending-related Commitments

As a financial services provider, the Corporation routinely enters into commitments to extend credit. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Corporation, with each customer’s creditworthiness evaluated on a case-by-case basis. The commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amount of those instruments. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the customer. Since a significant portion of commitments to extend credit are subject to specific restrictive loan covenants or may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements. As of December 31, 2010 and December 31, 2009, the Corporation had a reserve for losses on unfunded commitments totaling $17.4 million and $14.2 million, respectively, included in other liabilities on the consolidated balance sheets.

Lending-related commitments include commitments to extend credit, commitments to originate residential mortgage loans held for sale, commercial letters of credit, and standby letters of credit. Commitments to extend credit are agreements to lend to customers at predetermined interest rates, as long as there is no violation of any condition established in the contracts. Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded on the consolidated balance sheets. The Corporation’s derivative and hedging activity is further described in Note 14. Commercial and standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party, while standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

Other Commitments

124

public through an initial offering, which can vary based on overall market conditions, as well as the nature and type of industry in which the companies operate. The Corporation also invests in low-income housing, small-business commercial real estate, new market tax credit projects, and historic tax credit projects to promote the revitalization of low-to-moderate-income neighborhoods throughout the local communities of its bank subsidiary. As a limited partner in these unconsolidated projects, the Corporation is allocated tax credits and deductions associated with the underlying projects. The aggregate carrying value of these investments at December 31, 2010, was $45 million, included in other assets on the consolidated balance sheets, compared to $39 million at December 31, 2009. Related to these investments, the Corporation had remaining commitments to fund of $11 million at December 31, 2010, and $15 million at December 31, 2009.

Contingent Liabilities

Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages originated under our usual underwriting procedures, and are most often sold on a nonrecourse basis. The Corporation’s agreements to sell residential mortgage loans in the normal course of business usually require general representations and warranties on the underlying loans sold, related to credit information, loan documentation, collateral,

125

and insurability, which if subsequently are untrue or breached, could require the Corporation to repurchase certain loans affected. In addition, the nonaccrual loan sales during 2010 also included general representations and warranties on the underlying loans sold, which if violated could require the Corporation to repurchase certain loans affected. There have been insignificant instances of repurchase under representations and warranties. To a much lesser degree, the Corporation may sell residential mortgage loans with limited recourse (limited in that the recourse period ends prior to the loan’s maturity, usually after certain time and/or loan paydown criteria have been met), whereby repurchase could be required if the loan had defined delinquency issues during the limited recourse periods. At December 31, 2010, and December 31, 2009, there were approximately $58 million and $106 million, respectively, of residential mortgage loans sold with such recourse risk, upon which there have been insignificant instances of repurchase. Given that the underlying loans delivered to buyers are predominantly conventional residential first lien mortgages originated or purchased under our usual underwriting procedures, and that historical experience shows negligible losses and insignificant repurchase activity, management believes that losses and repurchases under the limited recourse provisions will continue to be insignificant.

In October 2004, the Corporation acquired a thrift. Prior to the acquisition, this thrift retained a subordinate position to the FHLB in the credit risk on the underlying residential mortgage loans it sold to the FHLB in exchange for a monthly credit enhancement fee. The Corporation has not sold loans to the FHLB with such credit risk retention since February 2005. At December 31, 2010 and December 31, 2009, there were $0.7 billion and $0.9 billion, respectively, of such residential mortgage loans with credit risk recourse, upon which there have been negligible historical losses to the Corporation.

At December 31, 2010 and December 31, 2009, the Corporation provided a credit guarantee on contracts related to specific commercial loans to unrelated third parties in exchange for a fee. In the event of a customer default, pursuant to the credit recourse provided, the Corporation is required to reimburse the third party. The maximum amount of credit risk, in the event of nonperformance by the underlying borrowers, is limited to a defined contract liability. In the event of nonperformance, the Corporation has rights to the underlying collateral value securing the loan. The Corporation has an estimated fair value of approximately $0.1 million and $0.2 million related to these credit guarantee contracts at December 31, 2010 and December 31, 2009, respectively, recorded in other liabilities on the consolidated balance sheets.


NOTE 14	DERIVATIVE AND HEDGING ACTIVITIES:

The Corporation uses derivative instruments primarily to hedge the variability in interest payments or protect the value of certain assets and liabilities recorded on its consolidated balance sheet from changes in interest rates. The predominant derivative and hedging activities include interest rate-related instruments (swaps, caps, collars, and corridors), foreign currency exchange forwards, and certain mortgage banking activities. The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. The Corporation is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. To mitigate the counterparty risk, interest rate-related instruments generally contain language outlining collateral pledging requirements for each counterparty. Collateral must be posted when the market value exceeds certain threshold limits which are determined from the credit ratings of each counterparty. The Corporation was required to pledge $94 million of investment securities as collateral at December 31, 2010, and pledged $87 million of investment securities and cash equivalents as collateral at December 31, 2009.

The Corporation’s derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. See Note 16, “Fair Value Measurements,” for additional fair value information and disclosures.

126

The table below identifies the balance sheet category and fair values of the Corporation’s derivative instruments designated as cash flow hedges.


	Notional					Balance Sheet		Weighted Average
December 31, 2010	Amount		Fair Value			Category		Receive Rate			Pay Rate			Maturity

	($ in Thousands)

Interest rate swap — short-term borrowings	$	200,000	$	(6,295	)		Other liabilities		0.19	%		3.15	%		14 months


December 31, 2009
Interest rate swap — short-term borrowings	$	200,000	$	(7,588	)		Other liabilities		0.12	%		3.15	%		26 months

The table below identifies the gains and losses recognized on the Corporation’s derivative instruments designated as cash flow hedges.

Gross

Amount of

Category of

Amount of

Category of

Amount of

Gain / (Loss)

(Gain) /Loss

Gain / (Loss)

Recognized in

Reclassified

Recognized in

OCI on

from AOCI into

Income on

Derivatives

Income

Derivatives

(Effective

(Ineffective

Portion)

($ in Thousands)

Year Ended December 31, 2010

Interest
Expense

Interest rate swap — short-term borrowings

(4,542

)

Short-term
borrowings

6,013

Short-term
borrowings

(201

)

Year Ended December 31, 2009

Interest
Expense

Interest rate swap — short-term borrowings

(1,814

)

Short-term
borrowings

8,540

Short-term
borrowings

(359

)

Cash flow hedges

The Corporation has variable-rate short-term and long-term borrowings which expose the Corporation to variability in interest payments due to changes in interest rates. To manage the interest rate risk related to the variability of these interest payments, the Corporation has entered into various interest rate swap agreements.

During the third quarter of 2008, the Corporation entered into two interest rate swap agreements which hedge the interest rate risk in the cash flows of certain short-term, variable-rate borrowings. In September 2007, the Corporation entered into an interest rate swap which hedged the interest rate risk in the cash flows of a long-term, variable-rate FHLB advance, which matured in June 2009. Hedge effectiveness is determined using regression analysis. The Corporation recognized combined ineffectiveness of $0.2 million for full year 2010 (which increased interest expense) and $0.3 million for full year 2009 (which increased interest expense) relating to these cash flow hedge relationships. No components of the derivatives change in fair value were excluded from the assessment of hedge effectiveness. Derivative gains and losses reclassified from accumulated other comprehensive income to current period earnings are included in interest expense on short-term borrowings or long-term funding (i.e., the line item in which the hedged cash flows are recorded). At December 31, 2010, accumulated other comprehensive income included a deferred after-tax net loss of $3.5 million related to these derivatives, compared to a deferred after-tax net loss of $4.5 million at December 31, 2009. The net after-tax derivative loss included in accumulated other comprehensive income at December 31, 2010, is projected to be reclassified into net interest income in conjunction with the recognition of interest payments on the variable-rate, short-term borrowings through September 2012.

Free Standing Derivatives

The Corporation enters into various derivative contracts which are designated as free standing derivative contracts. These derivative contracts are not designated against specific assets and liabilities on the balance sheet or forecasted

127

transactions and, therefore, do not qualify for hedge accounting treatment. Such derivative contracts are carried at fair value on the consolidated balance sheets with changes in the fair value recorded as a component of Capital market fees, net, and typically include interest rate-related instruments (swaps, caps, collars, and corridors). The net impact for 2010 was a $1.9 million net loss, compared to a net loss of $1.1 million for 2009.

Free standing derivatives are entered into primarily for the benefit of commercial customers through providing derivative products which enables the customer to manage their exposures to interest rate risk. The Corporation’s market risk from unfavorable movements in interest rates related to these derivative contracts is generally economically hedged by concurrently entering into offsetting derivative contracts. The offsetting derivative contracts have identical notional values, terms and indices.

The table below identifies the balance sheet category and fair values of the Corporation’s derivative instruments not designated as hedging instruments.


	Notional					Balance Sheet	Weighted Average
	Amount		Fair Value			Category	Receive Rate			Pay Rate			Maturity

	($ in Thousands)

December 31, 2010
Interest rate-related instruments — customer and mirror	$	1,268,502		54,154		Other assets		1.78	%		1.78	%		41 months
Interest rate-related instruments — customer and mirror		1,268,502		(58,632	)	Other liabilities		1.78	%		1.78	%		41 months
Interest rate lock commitments (mortgage)		129,377		(78	)	Other liabilities		—			—			—
Forward commitments (mortgage)		281,000		5,617		Other assets		—			—			—
Foreign currency exchange forwards		56,584		1,530		Other assets		—			—			—
Foreign currency exchange forwards		48,652		(1,289	)	Other liabilities		—			—			—


December 31, 2009
Interest rate-related instruments — customer and mirror	$	1,126,222		49,445		Other assets		2.07	%		2.07	%		44 months
Interest rate-related instruments — customer and mirror		1,126,222		(52,047	)	Other liabilities		2.07	%		2.07	%		44 months
Interest rate lock commitments (mortgage)		245,948		(1,371	)	Other liabilities		—			—			—
Forward commitments (mortgage)		336,485		4,512		Other assets		—			—			—
Foreign currency exchange forwards		32,271		1,221		Other assets		—			—			—
Foreign currency exchange forwards		22,331		(671	)	Other liabilities		—			—			—

The table below identifies the income statement category of the gains and losses recognized in income on the Corporation’s derivative instruments not designated as hedging instruments.


	Income Statement Category of	Gain / (Loss)
	Gain / (Loss) Recognized in Income	Recognized in Income

	($ in Thousands)

Year ended December 31, 2010
Interest rate-related instruments — customer and mirror, net	Capital market fees, net	$	(1,876	)
Interest rate lock commitments (mortgage)	Mortgage banking, net		1,293
Forward commitments (mortgage)	Mortgage banking, net		1,105
Foreign exchange forwards	Capital market fees, net		(309	)


Year ended December 31, 2009
Interest rate-related instruments — customer and mirror, net	Capital market fees, net	$	(1,104	)
Interest rate lock commitments (mortgage)	Mortgage banking, net		(8,001	)
Forward commitments (mortgage)	Mortgage banking, net		7,012
Foreign exchange forwards	Capital market fees, net		1,278

128

Mortgage derivatives

Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded on the consolidated balance sheets with the changes in fair value recorded as a component of mortgage banking, net. The fair value of the mortgage derivatives at December 31, 2010, was a net gain of $5.5 million, comprised of the net loss of $0.1 million on interest rate lock commitments to originate residential mortgage loans held for sale to individual borrowers of approximately $129 million and the net gain of $5.6 million on forward commitments to sell residential mortgage loans to various investors of approximately $281 million. The fair value of the mortgage derivatives at December 31, 2009, was a net gain of $3.1 million, comprised of the net loss of $1.4 million on interest rate lock commitments to originate residential mortgage loans held for sale to individual borrowers of approximately $246 million and the net gain of $4.5 million on forward commitments to sell residential mortgage loans to various investors of approximately $336 million.

Foreign currency derivatives

The Corporation provides foreign exchange services to customers. The Corporation may enter into a foreign currency forward to mitigate the exchange rate risk attached to the cash flows of a loan or as an offsetting contract to a forward entered into as a service to our customer. At December 31, 2010, the Corporation had $5 million in notional balances of foreign currency forwards related to loans, and $50 million in notional balances of foreign currency forwards related to customer transactions (with mirror foreign currency forwards of $50 million), which on a combined basis had a fair value of $0.3 million net gain. At December 31, 2009, the Corporation had $5 million in notional balances of foreign currency forwards related to loans, and $25 million in notional balances of foreign currency forwards related to customer transactions (with mirror foreign currency forwards of $25 million), which on a combined basis had a fair value of $0.5 million net gain.

129

STATEMENTS OF INCOME (LOSS)


	For the Years Ended December 31,

	2010			2009			2008

	($ in Thousands)

INCOME
Dividends from subsidiaries	$	4,000		$	9,900		$	133,000
Management and service fees from subsidiaries		47,238			44,596			69,468
Interest income on notes receivable		4,951			9,543			7,050
Other income		1,181			1,429			2,395


Total income		57,370			65,468			211,913


EXPENSE
Interest expense on borrowed funds		30,608			31,289			32,121
Provision for loan losses		—			(230	)		—
Personnel expense		34,652			29,359			42,595
Other expense		21,210			16,416			27,557


Total expense		86,470			76,834			102,273


Income (loss) before income tax benefit and equity in
undistributed net income (loss)		(29,100	)		(11,366	)		109,640
Income tax benefit		(7,137	)		(4,319	)		(5,815	)


Income (loss) before equity in undistributed net income of subsidiaries		(21,963	)		(7,047	)		115,455
Equity in undistributed net income (loss) of subsidiaries		21,107			(124,812	)		52,997


Net income (loss)		(856	)		(131,859	)		168,452
Preferred stock dividends and discount accretion		29,531			29,348			3,250


Net income (loss) available to common equity	$	(30,387	)	$	(161,207	)	$	165,202

131

STATEMENTS OF CASH FLOWS


	For the Years Ended December 31,

	2010			2009			2008

	($ in Thousands)

OPERATING ACTIVITIES
Net income (loss)	$	(856	)	$	(131,859	)	$	168,452
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Increase) decrease in equity in undistributed
net income (loss) of subsidiaries		(21,107	)		124,812			(52,997	)
Depreciation and amortization		254			300			357
Loss on sales of investment securities, net and impairment write-downs		799			477			1,429
(Increase) decrease in interest receivable and other assets		30,183			(6,164	)		(3,393	)
Increase (decrease) in interest payable and other liabilities		6,818			(3,471	)		11,665
Excess tax benefit from stock-based compensation		—			—			(919	)
Capital contributed to subsidiaries		(200,000	)		(100,000	)		—


Net cash provided by (used in) operating activities		(183,909	)		(115,905	)		124,594


INVESTING ACTIVITIES
Proceeds from sales of investment securities		—			—			254
Net cash paid in acquisition of subsidiary’s stock		—			(200,000	)		—
Net (increase) decrease in notes receivable		(232,499	)		411,517			(486,309	)
Purchase of other assets, net of disposals		(5,204	)		(4,667	)		(4,281	)


Net cash provided by (used in) investing activities		(237,703	)		206,850			(490,336	)


FINANCING ACTIVITIES
Net decrease in short-term borrowings		—			—			(35,000	)
Net increase (decrease) in long-term funding		(30,000	)		—			25,821
Proceeds from issuance of preferred stock and common stock warrants		—			—			525,000
Proceeds from issuance of common stock		478,358			—			—
Cash dividends		(33,198	)		(86,600	)		(162,347	)
Proceeds from exercise of stock options		3,468			81			9,354
Purchase of common stock		(830	)		(599	)		—
Excess tax benefit from stock-based compensation		—			—			919


Net cash provided by (used in) financing activities		417,798			(87,118	)		363,747


Net increase (decrease) in cash and cash equivalents		(3,814	)		3,827			(1,995	)
Cash and cash equivalents at beginning of year		4,021			194			2,189


Cash and cash equivalents at end of year	$	207		$	4,021		$	194


NOTE 16	FAIR VALUE MEASUREMENTS:

Fair Value Measurements:

The FASB issued an accounting standard (subsequently codified into ASC Topic 820, “Fair Value Measurements and Disclosures”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This accounting standard applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard amends numerous accounting pronouncements but does not require any new fair value measurements of reported

132

balances. The standard also emphasizes that fair value (i.e., the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. When considering the assumptions that market participants would use in pricing the asset or liability, this accounting standard establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.

Level 1 inputs Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Corporation has the ability to access.

Level 2 inputs Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.

Level 3 inputs Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Following is a description of the valuation methodologies used for the Corporation’s more significant instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy. While the Corporation considered the unfavorable impact of recent economic challenges (including but not limited to weakened economic conditions, disruptions in capital markets, troubled or failed financial institutions, government intervention and actions) on quoted market prices for identical and similar financial instruments, and on inputs or assumptions used, the Corporation accepted the fair values determined under its valuation methodologies.

Investment securities available for sale: Where quoted prices are available in an active market, investment securities are classified in Level 1 of the fair value hierarchy. Level 1 investment securities primarily include U.S. Treasury, certain Federal agency, and exchange-traded debt and equity securities. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate, and are classified in Level 2 of the fair value hierarchy. Examples of these investment securities include certain Federal agency securities, obligations of state and political subdivisions, mortgage-related securities, asset-backed securities, and other debt securities. Lastly, in certain cases where there is limited activity or less transparency around inputs to the estimated fair value, securities are classified within Level 3 of the fair value hierarchy. Level 3 securities primarily include trust preferred securities. To validate the fair value estimates, assumptions, and controls, the Corporation looks to transactions for similar instruments and utilizes independent pricing provided by third-party vendors or brokers and relevant market indices. While none of these sources are solely indicative of fair value, they serve as directional indicators for the appropriateness of the Corporation’s fair value estimates. The Corporation has determined that the fair value measures of its investment securities are classified predominantly within Level 1 or 2 of the fair value hierarchy. See Note 2, “Investment Securities,” for additional disclosure regarding the Corporation’s investment securities.

Derivative financial instrument (interest rate-related instruments): The Corporation uses interest rate swaps to manage its interest rate risk. In addition, the Corporation offers customer interest rate swaps, caps, collars, and

133

corridors to service our customers’ needs, for which the Corporation simultaneously enters into offsetting derivative financial instruments (i.e., mirror interest rate swaps, caps, collars, and corridors) with third parties to manage its interest rate risk associated with these financial instruments. The valuation of the Corporation’s derivative financial instruments is determined using discounted cash flow analysis on the expected cash flows of each derivative and, also includes a nonperformance / credit risk component (credit valuation adjustment). See Note 14, “Derivative and Hedging Activities,” for additional disclosure regarding the Corporation’s derivative financial instruments.

The discounted cash flow analysis component in the fair value measurements reflects the contractual terms of the derivative financial instruments, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. More specifically, the fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments), with the variable cash payments (or receipts) based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. Likewise, the fair values of interest rate options (i.e., interest rate caps, collars, and corridors) are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (or rise above) the strike rate of the floors (or caps), with the variable interest rates used in the calculation of projected receipts on the floor (or cap) based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative financial instruments for the effect of nonperformance risk, the Corporation has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

While the Corporation has determined that the majority of the inputs used to value its derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Corporation has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions as of December 31, 2010, and December 31, 2009, and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. Therefore, the Corporation has determined that the fair value measures of its derivative financial instruments in their entirety are classified within Level 2 of the fair value hierarchy.

Derivative financial instruments (foreign exchange): The Corporation provides foreign exchange services to customers. In addition, the Corporation may enter into a foreign currency forward to mitigate the exchange rate risk attached to the cash flows of a loan or as an offsetting contract to a forward entered into as a service to our customer. The valuation of the Corporation’s foreign exchange forwards is determined using quoted prices of foreign exchange forwards with similar characteristics, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate, and are classified in Level 2 of the fair value hierarchy.

Mortgage derivatives: Mortgage derivatives include interest rate lock commitments to originate residential mortgage loans held for sale to individual customers and forward commitments to sell residential mortgage loans to various investors. The Corporation relies on an internal valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups. The Corporation also relies on an internal valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e., an estimate of what the Corporation would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available. While there are Level 2 and 3 inputs used in the valuation models, the Corporation has determined that the majority of the inputs significant in the valuation of both of the mortgage derivatives fall within Level 3 of the fair value hierarchy. See Note 14, “Derivative and Hedging Activities,” for additional disclosure regarding the Corporation’s mortgage derivatives.

134

Following is a description of the valuation methodologies used for the Corporation’s more significant instruments measured on a nonrecurring basis at the lower of amortized cost or estimated fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

Loans Held for Sale: Loans held for sale, which consist generally of current production of certain fixed-rate, first-lien residential mortgage loans, are carried at the lower of cost or estimated fair value. The estimated fair value is based on what secondary markets are currently offering for portfolios with similar characteristics, which the Corporation classifies as a Level 2 nonrecurring fair value measurement.

Impaired Loans: The Corporation considers a loan impaired when it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the note agreement, including principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this impaired loan definition, with the amount of impairment based upon the loan’s observable market price, the estimated fair value of the collateral for collateral-dependent loans, or alternatively, the present value of the expected future cash flows discounted at the loan’s effective interest rate. The use of observable market price or estimated fair value of collateral on collateral-dependent loans is considered a fair value measurement subject to the fair value hierarchy. Appraised values are generally used on real estate collateral-dependent impaired loans, which the Corporation classifies as a Level 2 nonrecurring fair value measurement.

Mortgage servicing rights: Mortgage servicing rights do not trade in an active, open market with readily observable prices. While sales of mortgage servicing rights do occur, the precise terms and conditions typically are not readily available to allow for a “quoted price for similar assets” comparison. Accordingly, the Corporation relies on an internal discounted cash flow model to estimate the fair value of its mortgage servicing rights. The Corporation uses a valuation model in conjunction with third party prepayment assumptions to project mortgage servicing rights cash flows based on the current interest rate scenario, which is then discounted to estimate an expected fair value of the mortgage servicing rights. The valuation model considers portfolio characteristics of the underlying mortgages, contractually specified servicing fees, prepayment assumptions, discount rate assumptions, delinquency rates, late charges, other ancillary revenue, costs to service, and other economic factors. The Corporation reassesses and periodically adjusts the underlying inputs and assumptions used in the model to reflect market conditions and assumptions that a market participant would consider in valuing the mortgage servicing rights asset. In addition, the Corporation compares its fair value estimates and assumptions to observable market data for mortgage servicing rights, where available, and to recent market activity and actual portfolio experience. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the fair value hierarchy. The Corporation uses the amortization method (i.e., lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, for its mortgage servicing rights assets. See Note 4, “Goodwill and Intangible Assets,” for additional disclosure regarding the Corporation’s mortgage servicing rights.

135

The table below presents the Corporation’s investment securities available for sale, derivative financial instruments, and mortgage derivatives measured at fair value on a recurring basis as of December 31, 2010, and December 31, 2009, aggregated by the level in the fair value hierarchy within which those measurements fall.

Assets and Liabilities Measured at Fair Value on a Recurring Basis


			Fair Value Measurements Using

	December 31, 2010		Level 1		Level 2		Level 3

	($ in Thousands)

Assets:
Investment securities available for sale:
U.S. Treasury securities	$	1,208	$	1,208	$	—	$	—
Federal agency securities		29,767		51		29,716		—
Obligations of state and political subdivisions		838,602		—		838,602		—
Residential mortgage-related securities		4,910,497		—		4,910,497		—
Commercial mortgage-related securities		7,753		—		7,753		—
Asset-backed securities		298,841		—		298,841		—
Other securities (debt and equity)		14,673		12,002		999		1,672


Total Investment securities available for sale	$	6,101,341	$	13,261	$	6,086,408	$	1,672
Derivatives (other assets)		61,301		—		55,684		5,617
Liabilities:
Derivatives (other liabilities)	$	66,294	$	—	$	66,216	$	78

Assets and Liabilities Measured at Fair Value on a Recurring Basis


			Fair Value Measurements Using
	December 31, 2009		Level 1		Level 2		Level 3
	($ in Thousands)

Assets:
Investment securities available for sale:
U.S. Treasury securities	$	3,875	$	3,875	$	—	$	—
Federal agency securities		43,407		43,407		—		—
Obligations of state and political subdivisions		885,165		—		885,165		—
Residential mortgage-related securities		4,882,519		—		4,882,519		—
Other securities (debt and equity)		20,567		13,613		6,954		—


Total Investment securities available for sale	$	5,835,533	$	60,895	$	5,774,638	$	—
Derivatives (other assets)		55,178		—		50,666		4,512
Liabilities:
Derivatives (other liabilities)	$	61,677		—	$	60,306	$	1,371

136

The table below presents a rollforward of the balance sheet amounts for the years ended December 31, 2010 and 2009, for financial instruments measured on a recurring basis and classified within Level 3 of the fair value hierarchy.


Assets and Liabilities Measured at Fair Value
Using Significant Unobservable Inputs (Level 3)
	Investment Securities
	Available for Sale			Derivatives
	($ in Thousands)

Balance December 31, 2008	$	—		$	4,130
Net transfer in		2,000
Total net losses included in income:
Net impairment losses on investment securities		(2,000	)		—
Mortgage derivative loss, net		—			(989	)


Balance December 31, 2009	$	—		$	3,141
Transfers in		4,663			—
Total gains included in income:
Impairment losses on investment securities		(2,991	)		—
Mortgage derivative gain, net		—			2,398


Balance December 31, 2010	$	1,672		$	5,539

In valuing the investment securities available for sale classified within Level 3, the Corporation incorporated its own assumptions about future cash flows and discount rates adjusting for credit and liquidity factors. The Corporation also reviewed the underlying collateral and other relevant data in developing the assumptions for these investment securities.

The table below presents the Corporation’s loans held for sale, impaired loans, and mortgage servicing rights measured at fair value on a nonrecurring basis as of December 31, 2010 and 2009, aggregated by the level in the fair value hierarchy within which those measurements fall.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis


			Fair Value Measurements Using
	December 31, 2010		Level 1		Level 2		Level 3
	($ in Thousands)

Assets:
Loans held for sale	$	144,808	$	—	$	144,808	$	—
Loans(1)		279,179		—		279,179		—
Mortgage servicing rights		63,909		—		—		63,909


			Fair Value Measurements Using
	December 31, 2009		Level 1		Level 2		Level 3
	($ in Thousands)

Assets:
Loans held for sale	$	81,238	$	—	$	81,238	$	—
Loans(1)		605,341		—		605,341		—
Mortgage servicing rights		63,753		—		—		63,753


(1)		Represents collateral-dependent impaired loans, net, which are included in loans.

Certain nonfinancial assets measured at fair value on a nonrecurring basis include other real estate owned (upon initial recognition or subsequent impairment), nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other nonfinancial long-lived assets measured at fair value for impairment assessment.

137

During 2010 and 2009, certain other real estate owned, upon initial recognition, was re-measured and reported at fair value through a charge off to the allowance for loan losses based upon the estimated fair value of the other real estate owned. The fair value of other real estate owned, upon initial recognition or subsequent impairment, was estimated using appraised values, which the Corporation classifies as a Level 2 nonrecurring fair value measurement. Other real estate owned measured at fair value upon initial recognition totaled approximately $55 million and $74 million for the years ended December 31, 2010 and 2009, respectively. In addition to other real estate owned measured at fair value upon initial recognition, the Corporation also recorded write-downs to the balance of other real estate owned for subsequent impairment of $10 million and $14 million to noninterest expense for the years ended December 31, 2010 and 2009, respectively.

Fair Value of Financial Instruments:

The Corporation is required to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Corporation’s financial instruments.

The estimated fair values of the Corporation’s financial instruments on the balance sheet at December 31 were as follows:


	2010						2009
	Carrying						Carrying
	Amount			Fair Value			Amount			Fair Value
	($ in Thousands)

Financial assets:
Cash and due from banks	$	319,487		$	319,487		$	770,816		$	770,816
Interest-bearing deposits in other financial institutions		546,125			546,125			26,091			26,091
Federal funds sold and securities purchased under agreements to resell		2,550			2,550			23,785			23,785
Accrued interest receivable		73,982			73,982			87,447			87,447
Interest rate-related agreements(1)		54,154			54,154			49,445			49,445
Foreign currency exchange forwards		1,530			1,530			1,221			1,221
Investment securities available for sale		6,101,341			6,101,341			5,835,533			5,835,533
Federal Home Loan Bank and Federal Reserve Bank stocks		190,968			190,968			181,316			181,316
Loans held for sale		144,808			144,808			81,238			81,238
Loans, net		12,139,922			10,568,980			13,555,092			12,167,223
Bank owned life insurance		533,069			533,069			520,751			520,751
Financial liabilities:
Deposits		15,225,393			15,225,393			16,728,613			16,728,613
Accrued interest payable		17,163			17,163			21,214			21,214
Short-term borrowings		1,747,382			1,747,382			1,226,853			1,226,853
Long-term funding		1,413,605			1,491,786			1,953,998			2,028,042
Interest rate-related agreements(1)		64,927			64,927			59,635			59,635
Foreign currency exchange forwards		1,289			1,289			671			671
Standby letters of credit(2)		3,943			3,943			3,096			3,096
Interest rate lock commitments to originate residential mortgage loans held for sale		(78	)		(78	)		(1,371	)		(1,371	)
Forward commitments to sell residential mortgage loans		5,617			5,617			4,512			4,512


(1)		At both December 31, 2010 and 2009, the notional amount of cash flow hedge interest rate swap agreements was $200 million. See Note 14 for information on the fair value of derivative financial instruments.

(2)		The commitment on standby letters of credit was $0.4 and $0.5 billion at December 31, 2010 and 2009, respectively. See Note 13 for additional information on the standby letters of credit and for information on the fair value of lending-related commitments.

138

Cash and due from banks, interest-bearing deposits in other financial institutions, federal funds sold and securities purchased under agreements to resell, and accrued interest receivable—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Investment securities available for sale—The fair value of investment securities available for sale is based on quoted prices in active markets, or if quoted prices are not available for a specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.

Federal Home Loan Bank and Federal Reserve Bank stocks—The carrying amount is a reasonable fair value estimate for the Federal Reserve Bank and Federal Home Loan Bank stocks given their “restricted” nature (i.e., the stock can only be sold back to the respective institutions (Federal Home Loan Bank or Federal Reserve Bank) or another member institution at par).

Loans held for sale—The fair value estimation process for the loans held for sale portfolio is segregated by loan type. Fair value is estimated using the prices of the Corporation’s existing commitments to sell such loans and/or the quoted market prices for commitments to sell similar loans.

Loans, net—The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Corporation believes are consistent with liquidity discounts in the market place. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial and industrial, real estate construction, commercial real estate, lease financing, residential mortgage, home equity, and other installment. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. The fair value analysis also included other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate.

Bank owned life insurance—The fair value of bank owned life insurance approximates the carrying amount, because upon liquidation of these investments, the Corporation would receive the cash surrender value which equals the carrying amount.

Deposits—The fair value of deposits with no stated maturity such as noninterest-bearing demand deposits, savings, interest-bearing demand deposits, and money market accounts, is equal to the amount payable on demand as of the balance sheet date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. However, if the estimated fair value of certificates of deposit is less than the carrying value, the carrying value is reported as the fair value of the certificates of deposit.

Accrued interest payable and short-term borrowings—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Long-term funding—Rates currently available to the Corporation for debt with similar terms and remaining maturities are used to estimate the fair value of existing borrowings.

Interest rate-related agreements—The fair value of interest rate swap, cap, collar, and corridor agreements is determined using discounted cash flow analysis on the expected cash flows of each derivative. The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

Foreign currency exchange forwards—The fair value of the Corporation’s foreign exchange forwards is determined using quoted prices of foreign exchange forwards with similar characteristics, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate.

Standby letters of credit—The fair value of standby letters of credit represent deferred fees arising from the related off-balance sheet financial instruments. These deferred fees approximate the fair value of these instruments and are based on several factors, including the remaining terms of the agreement and the credit standing of the customer.

Interest rate lock commitments to originate residential mortgage loans held for sale—The Corporation relies on an internal valuation model to estimate the fair value of its interest rate lock commitments to originate residential

139

mortgage loans held for sale, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups.

Forward commitments to sell residential mortgage loans—The Corporation relies on an internal valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e., an estimate of what the Corporation would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available.

Limitations—Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Corporation’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.


NOTE 17	REGULATORY MATTERS:

Restrictions on Cash and Due From Banks

The Corporation’s bank subsidiary is required to maintain certain vault cash and reserve balances with the Federal Reserve Bank to meet specific reserve requirements. These requirements approximated $31 million at December 31, 2010.

Regulatory Capital Requirements

The Corporation and its subsidiary bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation to maintain minimum amounts and ratios (set forth in the table below) of total and tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2010 and 2009, that the Corporation meets all capital adequacy requirements to which it is subject.

On November 5, 2009, Associated Bank, National Association (the “Bank”) entered into a Memorandum of Understanding (“MOU”) with the Comptroller of the Currency (“OCC”), its primary banking regulator. The MOU, which is an informal agreement between the Bank and the OCC, requires the Bank to develop, implement, and maintain various processes to improve the Bank’s risk management of its loan portfolio and a three year capital plan providing for maintenance of specified capital levels discussed below, notification to the OCC of dividends proposed to be paid to the Corporation and the commitment of the Corporation to act as a primary or contingent source of the Bank’s capital. At December 31, 2010, management believes that it has appropriately addressed all of the conditions of the MOU. The Bank has also agreed with the OCC that until the MOU is no longer in effect, it will maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) — 8% and total capital to risk-weighted assets — 12%. At December 31, 2010, the Bank’s capital ratios were 9.55% and 16.38%, respectively. On April 6, 2010, the

140

Corporation entered into a Memorandum of Understanding (“Memorandum”) with the Federal Reserve Bank of Chicago (“Reserve Bank”). The Memorandum, which was entered into following the 2008-2009 supervisory cycle, is an informal agreement between the Corporation and the Reserve Bank. As required, management has submitted plans to strengthen board and management oversight and risk management and for maintaining sufficient capital incorporating stress scenarios. As also required, the Corporation has submitted quarterly progress reports, and has obtained, and will in the future continue to obtain, approval prior to payment of dividends and interest or principal payments on subordinated debt, increases in borrowings or guarantees of debt, or the repurchase of common stock.

As of December 31, 2010 and 2009, the most recent notifications from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation categorized the subsidiary bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the subsidiary bank must maintain minimum total risk-based, tier 1 risk-based, and tier 1 leverage ratios as set forth in the table, and in accordance with the MOU (as discussed above). There are no conditions or events since that notification that management believes have changed the institutions’ category. The actual capital amounts and ratios of the Corporation and its significant subsidiary are presented below. No deductions from capital were made for interest rate risk in 2010 or 2009.


											To Be Well Capitalized
						For Capital Adequacy					Under Prompt Corrective
	Actual					Purposes(3)					Action Provisions:(2)
($ In Thousands)	Amount		Ratio(1)			Amount		Ratio(1)			Amount		Ratio(1)

As of December 31, 2010:
Associated Banc-Corp
Total Capital	$	2,576,297		19.05	%	$	1,081,706		³8.00	%
Tier 1 Capital		2,376,893		17.58			540,853		³4.00	%
Leverage		2,376,893		11.19			849,819		³4.00	%
Associated Bank, N.A.
Total Capital	$	2,182,244		16.38	%	$	1,065,614		³8.00	%	$	1,332,017		³10.00	%
Tier 1 Capital		2,011,381		15.10			532,807		³4.00	%		799,210		³ 6.00	%
Leverage		2,011,381		9.55			842,053		³4.00	%		1,052,567		³ 5.00	%
As of December 31, 2009:
Associated Banc-Corp
Total Capital	$	2,180,959		14.24	%	$	1,225,539		³8.00	%
Tier 1 Capital		1,918,238		12.52			612,770		³4.00	%
Leverage		1,918,238		8.76			875,906		³4.00	%
Associated Bank, N.A.
Total Capital	$	1,972,224		13.16	%	$	1,199,305		³8.00	%	$	1,499,131		³10.00	%
Tier 1 Capital		1,779,593		11.87			599,652		³4.00	%		899,478		³ 6.00	%
Leverage		1,779,593		8.26			861,389		³4.00	%		1,076,736		³ 5.00	%


(1)		— Total Capital ratio is defined as tier 1 capital plus tier 2 capital divided by total risk-weighted assets. The Tier 1 Capital ratio is defined as tier 1 capital divided by total risk-weighted assets. The leverage ratio is defined as tier 1 capital divided by the most recent quarter’s average total assets.

(2)		— Prompt corrective action provisions are not applicable at the bank holding company level.

(3)		— The Bank has agreed with the OCC that until the MOU is no longer in effect, it will maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) — 8% and total capital to risk-weighted assets (total capital ratio) — 12%.

141


NOTE 18	EARNINGS PER COMMON SHARE:

Earnings per share are calculated utilizing the two-class method. Basic earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards (outstanding stock options, unvested restricted stock, and outstanding stock warrants). Presented below are the calculations for basic and diluted earnings per common share.


	For the Years Ended December 31,
	2010			2009			2008
	(In Thousands, except per share data)

Net income (loss)	$	(856	)	$	(131,859	)	$	168,452
Preferred stock dividends and discount accretion		(29,531	)		(29,348	)		(3,250	)


Net income (loss) available to common equity	$	(30,387	)	$	(161,207	)	$	165,202


Common shareholder dividends		(6,918	)		(60,102	)		(161,913	)
Unvested share-based payment awards		(30	)		(248	)		(434	)


Undistributed earnings	$	(37,335	)	$	(221,557	)	$	2,855


*Basic*
Distributed earnings to common shareholders	$	6,918		$	60,102		$	161,913
Undistributed earnings to common shareholders		(37,335	)		(221,557	)		2,847


Total common shareholders earnings, basic	$	(30,417	)	$	(161,455	)	$	164,760


*Diluted*
Distributed earnings to common shareholders	$	6,918		$	60,102		$	161,913
Undistributed earnings to common shareholders		(37,335	)		(221,557	)		2,847


Total common shareholders earnings, diluted	$	(30,417	)	$	(161,455	)	$	164,760


Weighted average common shares outstanding		171,230			127,858			127,501
Effect of dilutive common stock		—			—			274


Diluted weighted average common shares outstanding		171,230			127,858			127,775
Basic earnings (loss) per common share	$	(0.18	)	$	(1.26	)	$	1.29


Diluted earnings (loss) per common share	$	(0.18	)	$	(1.26	)	$	1.29

As a result of the Corporation’s reported net loss for the years ended December 31, 2010 and December 31, 2009, all of the stock options outstanding were excluded from the computation of diluted earnings (loss) per common share. Options to purchase approximately 5 million shares were outstanding at December 31, 2008 but excluded from the calculation of diluted earnings per common share as the effect would have been anti-dilutive.


NOTE 19	SEGMENT REPORTING:

Selected financial and descriptive information is required to be provided about reportable operating segments, considering a “management approach” concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the enterprise for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the enterprise’s internal organization, focusing on financial information that an enterprise’s chief operating decision-makers use to make decisions about the enterprise’s operating matters.

The Corporation’s primary segment is banking, conducted through its bank and lending subsidiaries. For purposes of segment disclosure, as allowed by the governing accounting statement, these entities have been combined as one segment that have similar economic characteristics and the nature of their products, services, processes, customers, delivery channels, and regulatory environment are similar. Banking consists of lending and deposit gathering (as well as other

142

banking-related products and services) to businesses, governmental units, and consumers (including mortgages, home equity lending, and card products) and the support to deliver, fund, and manage such banking services.

The wealth management segment provides products and a variety of fiduciary, investment management, advisory, and Corporate agency services to assist customers in building, investing, or protecting their wealth, including insurance, brokerage, and trust/asset management. The other segment includes intersegment eliminations and residual revenues and expenses, representing the difference between actual amounts incurred and the amounts allocated to operating segments. The accounting policies of the segments are the same as those described in Note 1.


				Wealth						Consolidated
	Banking			Management			Other			Total
	($ in Thousands)

2010
Net interest income	$	633,050		$	729		$	—		$	633,779
Provision for loan losses		390,010			—			—			390,010
Noninterest income		274,383			99,286			(5,204	)		368,465
Depreciation and amortization		56,731			1,238			—			57,969
Other noninterest expense		519,631			80,866			(5,204	)		595,293
Income tax expense (benefit)		(47,336	)		7,164			—			(40,172	)


Net income (loss)	$	(11,603	)	$	10,747		$	—		$	(856	)


Percent of consolidated net income (loss)		N/M			N/M			N/M			N/M
Total assets	$	21,726,210		$	135,438		$	(76,052	)	$	21,785,596


Percent of consolidated total assets		100	%		—	%		—	%		100	%
Total revenues*	$	907,433		$	100,015		$	(5,204	)	$	1,002,244
Percent of consolidated total revenues		91	%		10	%		(1	)%		100	%
2009
Net interest income	$	725,164		$	841		$	—		$	726,005
Provision for loan losses		750,645			—			—			750,645
Noninterest income		277,876			96,944			(4,240	)		370,580
Depreciation and amortization		54,468			1,317			—			55,785
Other noninterest expense		499,423			80,071			(4,240	)		575,254
Income tax expense (benefit)		(159,799	)		6,559			—			(153,240	)


Net income (loss)	$	(141,697	)	$	9,838		$	—		$	(131,859	)


Percent of consolidated net income (loss)		N/M			N/M			N/M			N/M
Total assets	$	22,817,934		$	125,687		$	(69,479	)	$	22,874,142


Percent of consolidated total assets		100	%		—	%		—	%		100	%
Total revenues*	$	1,003,040		$	97,785		$	(4,240	)	$	1,096,585
Percent of consolidated total revenues		91	%		9	%		—	%		100	%
2008
Net interest income	$	695,370		$	778		$	—		$	696,148
Provision for loan losses		202,058			—			—			202,058
Noninterest income		200,515			105,043			(3,851	)		301,707
Depreciation and amortization		49,799			1,468			—			51,267
Other noninterest expense		445,809			80,292			(3,851	)		522,250
Income tax expense		44,204			9,624			—			53,828


Net income	$	154,015		$	14,437		$	—		$	168,452


Percent of consolidated net income		91	%		9	%		—	%		100	%
Total assets	$	24,133,439		$	115,690		$	(57,062	)	$	24,192,067


Percent of consolidated total assets		100	%		—	%		—	%		100	%
Total revenues*	$	895,885		$	105,821		$	(3,851	)	$	997,855
Percent of consolidated total revenues		90	%		10	%		—	%		100	%

N/M = Not meaningful.


*		Total revenues for this segment disclosure are defined to be the sum of net interest income plus noninterest income, net of mortgage servicing rights amortization.

143

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Associated Banc-Corp:

We have audited the accompanying consolidated balance sheets of Associated Banc-Corp and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Associated Banc-Corp and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Associated Banc-Corp’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 15, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

KPMG LLP

Chicago, Illinois

February 15, 2011

144


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.	CONTROLS AND PROCEDURES

The Corporation maintains disclosure controls and procedures as required under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2010, the Corporation’s management carried out an evaluation, under the supervision and with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on the foregoing, its Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of December 31, 2010. No changes were made to the Corporation’s internal control over financial reporting (as defined Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of Associated Banc-Corp (the “Corporation”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Corporation’s financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

As of December 31, 2010, management assessed the effectiveness of the Corporation’s internal control over financial reporting based on criteria for effective internal control over financial reporting established in “Internal Control—Integrated Framework,” issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). Based on this assessment, management has determined that the Corporation’s internal control over financial reporting as of December 31, 2010, was effective.

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Corporation included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2010. The report, which expresses an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2010, is included under the heading “Report of Independent Registered Public Accounting Firm.”

145

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Associated Banc-Corp:

We have audited Associated Banc-Corp’s (the Company) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Associated Banc-Corp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Associated Banc-Corp and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated February 15, 2011 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

Chicago, Illinois

February 15, 2011

146


ITEM 9B.	OTHER INFORMATION

None.

PART III


ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information in the Corporation’s definitive Proxy Statement, prepared for the 2011 Annual Meeting of Shareholders, which contains information concerning directors of the Corporation under the captions “Election of Directors” and “Information About the Board of Directors”; information concerning executive officers of the Corporation under the caption “Information About the Executive Officers,”; and information concerning Section 16(a) compliance under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference.


ITEM 11.	EXECUTIVE COMPENSATION

The information in the Corporation’s definitive Proxy Statement, prepared for the 2011 Annual Meeting of Shareholders, which contains information concerning this item, under the caption “Executive Compensation,” is incorporated herein by reference.


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information in the Corporation’s definitive Proxy Statement, prepared for the 2011 Annual Meeting of Shareholders, which contains information concerning this item, under the caption “Stock Ownership,” is incorporated herein by reference.

Equity Compensation Plan Information

The following table provides information as of December 31, 2010, regarding shares outstanding and available for issuance under the Corporation’s existing equity compensation plans. Additional information regarding stock-based compensation is presented in Note 10, “Stock-Based Compensation,” of the notes to consolidated financial statements within Part II, Item 8, “Financial Statements and Supplementary Data.”

(c)

Number of

Securities

(a)

Remaining Available

Number of

for Future Issuance

Securities to be

(b)

Under Equity

Issued Upon

Weighted-Average

Compensation Plans

Exercise of

Exercise Price of

(excluding

Outstanding

securities

Options, Warrants

reflected in column

Plan Category

and Rights

(a))

Equity compensation plans approved
by security holders

7,301,458

24.33

12,061,447

Equity compensation plans not approved
by security holders

—

Total

7,301,458

24.33

12,061,447

147


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information in the Corporation’s definitive Proxy Statement, prepared for the 2011 Annual Meeting of Shareholders, which contains information concerning this item under the caption “Related Person Transactions,” is incorporated herein by reference.


ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

The information in the Corporation’s definitive Proxy Statement, prepared for the 2011 Annual meeting of Shareholders, which contains information concerning this item under the caption “Fees Paid to Independent Registered Public Accounting Firm,” is incorporated herein by reference.

PART IV


ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


(a)	1 and 2 Financial Statements and Financial Statement Schedules

The following financial statements and financial statement schedules are included under a separate caption “Financial Statements and Supplementary Data” in Part II, Item 8 hereof and are incorporated herein by reference.

Consolidated Balance Sheets—December 31, 2010 and 2009

Consolidated Statements of Income (Loss)—For the Years Ended December 31, 2010, 2009, and 2008

Consolidated Statements of Changes in Stockholders’ Equity—For the Years Ended December 31, 2010, 2009, and 2008

Consolidated Statements of Cash Flows—For the Years Ended December 31, 2010, 2009, and 2008

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

148


(a)	3 Exhibits Required by Item 601 of Regulation S-K


Exhibit
Number	Description

(3)(a)	Amended and Restated Articles of Incorporation	Exhibit (3) to Report on Form 10-Q filed on May 8, 2006
(3)(b)	Articles of Amendment to the Amended and Restated Articles of Incorporation (TARP Capital Purchase Program Fixed Rate Cumulative Perpetual Preferred Stock, Series A)	Exhibit (3.1) to Report on Form 8-K filed on November 21, 2008
(3)(c)	Amended and Restated Bylaws	Exhibit (3.1) to Report on Form 8-K filed on July 28, 2010
(4)	Instruments Defining the Rights of Security Holders, Including Indentures
	The Parent Company, by signing this report, agrees to furnish the SEC, upon its request, a copy of any instrument that defines the rights of holders of long-term debt of the Corporation and its consolidated and unconsolidated subsidiaries for which consolidated or unconsolidated financial statements are required to be filed and that authorizes a total amount of securities not in excess of 10% of the total assets of the Corporation on a consolidated basis
(4)(b)	Warrant for Purchase of Common Stock, issue date November 21, 2008 (TARP Capital Purchase Program)	Exhibit (4.1) to Report on Form 8-K filed on November 21, 2008
*(10)(a)	Associated Banc-Corp 1987 Long-Term Incentive Stock Plan, Amended and Restated Effective January 1, 2008	Exhibit (10)(a) to Report on Form 10-K filed on February 26, 2009
*(10)(b)	Associated Banc-Corp 1999 Long-Term Incentive Stock Plan, Amended and Restated Effective January 1, 2008	Exhibit (10)(b) to Report on Form 10-K filed on February 26, 2009
*(10)(c)	Associated Banc-Corp 2003 Long-Term Incentive Stock Plan, Amended and Restated Effective January 1, 2008	Exhibit (10)(c) to Report on Form 10-K filed on February 26, 2009
*(10)(d)	Form of Incentive Stock Option Agreement Pursuant to Associated Banc-Corp 2003 Long-Term Incentive Stock Plan, Amended and Restated Effective January 1, 2008	Exhibit (10)(d) to Report on Form 10-K filed on February 26, 2009
*(10)(e)	Form of Non Qualified Stock Option Agreement Pursuant to Associated Banc-Corp 2003 Long-Term Incentive Stock Plan, Amended and Restated Effective January 1, 2008	Exhibit (10)(e) to Report on Form 10-K filed on February 26, 2009
*(10)(f)	Form of Restricted Stock Agreement—Performance Based Restricted Shares Pursuant to Associated Banc-Corp 2003 Long-Term Incentive Stock Plan, Amended and Restated Effective January 1, 2008	Exhibit (10)(f) to Report on Form 10-K filed on February 26, 2009
*(10)(g)	Form of Restricted Stock Agreement—Service Based Restricted Shares Pursuant to Associated Banc-Corp 2003 Long-Term Incentive Stock Plan, Amended and Restated Effective January 1, 2008	Exhibit (10)(g) to Report on Form 10-K filed on February 26, 2009

149


Exhibit
Number	Description

*(10)(h)	Associated Banc-Corp Deferred Compensation Plan	Exhibit (10)(h) to Report on Form 10-K filed on February 26, 2009
*(10)(i)	Associated Banc-Corp Directors’ Deferred Compensation Plan, Restated Effective January 1, 2008	Exhibit (10)(i) to Report on Form 10-K filed on February 26, 2009
*(10)(j)	Associated Banc-Corp Cash Incentive Compensation Plan, Amended and Restated Effective January 1, 2008	Exhibit (10)(j) to Report on Form 10-K filed on February 26, 2009
*(10)(k)	Associated Banc-Corp Supplemental Executive Retirement Plan, Restated Effective January 1, 2008	Exhibit (10)(k) to Report on Form 10-K filed on February 26, 2009
*(10)(l)	Change of Control Plan of the Corporation, Restated Effective January 1, 2008	Exhibit (10)(l) to Report on Form 10-K filed on February 26, 2009
(10)(m)	Letter Agreement, dated November 21, 2008, between Associated Banc-Corp and the United States Department of the Treasury, which includes the Securities Purchase Agreement attached thereto, with respect to the issuance and sale of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A and Warrant to purchase Common Stock (TARP Capital Purchase Program)	Exhibit (10.1) to Report on Form 8-K filed on November 21, 2008
*(10)(n)	Form of Senior Executive Officer Compensation Waiver (TARP Capital Purchase Program)	Exhibit (10.2) to Report on Form 8-K filed on November 21, 2008
*(10)(o)	Form of TARP Capital Purchase Program Compliance, Amendment and Consent Agreement (including Clawback Policy)	Exhibit (10.3) to Report on Form 8-K filed on November 21, 2008
*(10)(p)	Separation and General Release Agreement, dated as of May 15, 2009, by and between Associated Banc-Corp and Lisa B. Binder	Exhibit (99.1) to Report on Form 8-K filed on May 15, 2009
*(10)(q)	Employment Agreement, dated November 16, 2009, by and between Associated Banc-Corp and Philip B. Flynn	Exhibit (99.1) to Report on Form 8-K filed on November 16, 2009
*(10)(r)	Amendment to Associated Banc-Corp 2003 Long-Term Incentive Stock Plan effective November 15, 2009	Exhibit (99.2) to Report on Form 8-K filed on November 16, 2009
*(10)(s)	Form of Restricted Stock Unit Grant Agreement	Exhibit (99.3) to Report on Form 8-K filed on November 16, 2009
*(10)(t)	Letter Agreement, dated November 25, 2009, by and between Associated Banc-Corp and Paul S. Beideman	Exhibit (99.1) to Report on Form 8-K filed on November 27, 2009
*(10)(u)	Form of Restricted Stock Grant Agreement	Exhibit (99.1) to Report on Form 8-K filed on January 29, 2010
*(10)(v)	Associated Banc-Corp 2010 Incentive Compensation Plan	Exhibit (99.1) to Report on Form 8-K filed on April 29, 2010
*(10)(w)	Form of Non-Qualified Stock Option Agreement Pursuant to Associated Banc-Corp 2010 Incentive Compensation Plan	Exhibit (99.2) to Report on Form 8-K filed on July 28, 2010

150


Exhibit
Number	Description

*(10)(x)	Form of Restricted Stock Agreement (for grantees not subject to TARP restrictions) Pursuant to Associated Banc-Corp 2010 Incentive Compensation Plan	Exhibit (99.3) to Report on Form 8-K filed on July 28, 2010
*(10)(y)	Form of Restricted Stock Agreement (for grantees subject to TARP restrictions) Pursuant to Associated Banc-Corp 2010 Incentive Compensation Plan	Exhibit (99.4) to Report on Form 8-K filed on July 28, 2010
*(10)(z)	Form of Share Salary Agreement Pursuant to Associated Banc-Corp 2010 Incentive Compensation Plan	Exhibit (99.5) to Report on Form 8-K filed on April 29, 2010
*(10)(aa)	Form of Restricted Stock Unit Agreement Pursuant to Associated Banc-Corp 2010 Incentive Compensation Plan	Exhibit (99.6) to Report on Form 8-K filed on April 29, 2010
(11)	Statement Re Computation of Per Share Earnings	See Note 18 in Part II Item 8
(21)	Subsidiaries of Associated Banc-Corp	Filed herewith
(23)	Consent of Independent Registered Public Accounting Firm	Filed herewith
(24)	Powers of Attorney	Filed herewith
(31.1)	Certification Under Section 302 of Sarbanes-Oxley by Philip B. Flynn, Chief Executive Officer	Filed herewith
(31.2)	Certification Under Section 302 of Sarbanes-Oxley by Joseph B. Selner, Chief Financial Officer	Filed herewith
(32)	Certification by the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley.	Filed herewith
(99.1)	Certification of Chief Executive Officer Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008	Filed herewith
(99.2)	Certification of Chief Financial Officer Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008	Filed herewith
(101)**	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Changes in Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements tagged as blocks of text.	Filed herewith


*		Management contracts and arrangements.

**		As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

Schedules and exhibits other than those listed are omitted for the reasons that they are not required, are not applicable or that equivalent information has been included in the financial statements, and notes thereto, or elsewhere within.

151

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		ASSOCIATED BANC-CORP

Date: February 15, 2011		By: /s/ PHILIP B. FLYNN Philip B. Flynn President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.





/s/ Philip B. Flynn Philip B. Flynn President and Chief Executive Officer		/s/ William R. Hutchinson* William R. Hutchinson Chairman



/s/ Joseph B. Selner Joseph B. Selner Chief Financial Officer Principal Financial Officer and Principal Accounting Officer



/s/ John F. Bergstrom * John F. Bergstrom Director		/s/ Richard T. Lommen * Richard T. Lommen Director



/s/ Ruth M. Crowley * Ruth M. Crowley Director		/s/ J. Douglas Quick * J. Douglas Quick Director



/s/ Ronald R. Harder * Ronald R. Harder Director		/s/ John C. Seramur * John C. Seramur Director



/s/ Eileen A. Kamerick * Eileen A. Kamerick Director		/s/ Karen T. Van Lith * Karen T. Van Lith (formerly Beckwith) Director



*By: /s/ Brian R. Bodager Brian R. Bodager Attorney-in-Fact Pursuant to Powers of Attorney filed as Exhibit 24

Date: February 15, 2011

152


		Page

PART I
Item 1.	Business		3
Item 1A.	Risk Factors		15
Item 1B.	Unresolved Staff Comments		27
Item 2.	Properties		27
Item 3.	Legal Proceedings		28

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities		28
Item 6.	Selected Financial Data		32
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		83
Item 8.	Financial Statements and Supplementary Data		84
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		145
Item 9A.	Controls and Procedures		145
Item 9B.	Other Information		147

PART III
Item 10.	Directors, Executive Officers and Corporate Governance		147
Item 11.	Executive Compensation		147
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		147
Item 13.	Certain Relationships and Related Transactions, and Director Independence		148
Item 14.	Principal Accounting Fees and Services		148

PART IV
Item 15.	Exhibits, Financial Statement Schedules		148
Signatures			152
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32
EX-99.1
EX-99.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


Source:Bloomberg	4Q09		1Q10		2Q10		3Q10		4Q10
Associated Banc-Corp		100.0		125.1		111.5		120.1		138.0
S&P 500		100.0		105.4		93.4		103.9		115.0
Nasdaq Bank Index		100.0		113.7		102.8		101.5		114.1