UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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, 2012

¨ 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 Green Bay, Wisconsin	54304
(Address of principal executive offices)	(Zip Code)

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 Depositary Shares, each representing a 1/40th interest in a share of 8.00% Perpetual Preferred Stock, Series B Warrants to purchase shares of Common Stock of Associated Banc-Corp	The NASDAQ Stock Market LLC The New York Stock Exchange 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  ¨

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  ¨        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  ¨

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  ¨

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.    ¨

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.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes  ¨        No  þ

As of June 30, 2012, (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 $2,238,794,000. This excludes approximately $24,760,000 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 $58,813,000 of market value representing 2.60% of the outstanding shares of the registrant held in a fiduciary capacity by the trust company subsidiary of the registrant.

As of January 31, 2013, 167,995,851 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Document Proxy Statement for Annual Meeting of Shareholders on April 23, 2013 Part of Form 10-K Into Which Portions of Documents are Incorporated Part III

ASSOCIATED BANC-CORP

2012 FORM 10-K TABLE OF CONTENTS

		Page
PART I
Item 1.	Business		1
Item 1A.	Risk Factors		12
Item 1B.	Unresolved Staff Comments		25
Item 2.	Properties		25
Item 3.	Legal Proceedings		25
Item 4.	Mine Safety Disclosures		26
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities		28
Item 6.	Selected Financial Data		31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		79
Item 8.	Financial Statements and Supplementary Data		80
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		149
Item 9A.	Controls and Procedures		149
Item 9B.	Other Information		151
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		151
Item 11.	Executive Compensation		151
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		151
Item 13.	Certain Relationships and Related Transactions, and Director Independence		151
Item 14.	Principal Accounting Fees and Services		151
PART IV
Item 15.	Exhibits and Financial Statement Schedules		151
Signatures			156

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,” “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. 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 those we described 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:

• credit risks, including changes in economic conditions and risk relating to our allowance for loan losses;

• liquidity and interest rate risks, including the impact of capital markets conditions and changes in monetary policy on our borrowings and net interest income;

• operational risks, including processing, information systems, and business interruption risks;

• strategic and external risks, including economic, political, and competitive forces impacting our business;

• legal, compliance, and reputational risks, including regulatory and litigation risks; 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, please 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”). Our bank subsidiary traces its history back to the founding of the Bank of Neenah in 1861. 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 “Federal Reserve”) to acquire three banks. At December 31, 2012, we owned one nationally chartered commercial bank headquartered in Green Bay, Wisconsin and serving local communities across the upper Midwest, one nationally chartered trust company headquartered in Wisconsin, and 24 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. Measured by total assets reported at December 31, 2012, we are the largest commercial bank holding company headquartered in Wisconsin and one of the top 50, publicly traded, bank holding companies headquartered in the U.S.

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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 240 banking offices serving more than 150 communities, primarily within our three-state branch footprint (Wisconsin, Illinois, and Minnesota). Our business is primarily relationship-driven and is organized into three reportable segments: Commercial Banking, Consumer Banking and Risk Management and Shared Services. See also Note 19, “Segment Reporting,” of the notes to consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” for additional information concerning our reportable segments.

Commercial Banking: The Commercial Banking segment offers loans, deposits, and related banking services to businesses (including regional middle market and larger commercial businesses, governments / municipalities, metro or niche markets, and companies with specialized borrowing needs such as financial institutions, or asset-based borrowers), which 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, insurance related products and services, business credit cards, equipment and machinery leases, and the support to deliver, fund and manage such banking services. To further support business customers and correspondent financial institutions, we provide safe deposit and night depository services, cash management, risk management, international banking, as well as check clearing, safekeeping, and other banking-based services. The segment competes on the basis of relationship manager performance, commitment to local markets and market competitive pricing. This segment focuses on optimizing the go to market approach with emphasis on market alignment, relationship banking and sales excellence.

Consumer Banking: The Consumer Banking segment consists of lending and deposit gathering to individuals and small businesses and also provides a variety of fiduciary, investment management, advisory and corporate agency services to assist customers in building, investing or protecting their wealth, including securities brokerage, and trust / asset management. The segment offers 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, personal and installment loans, checking, savings, money market deposit accounts, IRA accounts, certificates of deposit, and safe deposit boxes; small business checking and deposit products, loans, lines of credit; fixed and variable annuities, full-service, discount and on-line investment brokerage; and trust / asset management, investment management, administration of pension, profit-sharing and other employee benefit plans, personal trusts, and estate planning. The segment competes by offering an extensive breadth and depth of products, an extensive branch network and competitive pricing. The Consumer Banking segment strives toward optimization of value propositions and relationship banking.

Risk Management and Shared Services: The Risk Management and Shared Services segment includes Corporate Risk Management, Finance, Treasury, Facilities Management, Operations and Technology functions, which are key shared functions. The earning assets within this segment include the company’s investment portfolio and capital includes both allocated as well as any remaining unallocated capital.

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, 2012, we had approximately 4,900 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

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markets, internet-based banks, 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

Overview

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

Bank Holding Company Act Requirements

As a registered bank holding company under the BHC Act, we are regulated, supervised, and examined by the Federal Reserve. In connection with applicable requirements, bank holding companies file periodic reports and other information with the Federal Reserve. 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. 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 BHC Act allows 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.

The Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in July 2010, significantly changed the bank regulatory structure and affected the lending, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires the Federal Reserve Board to set minimum capital levels for bank holding companies that are as stringent as those required for insured depository institutions. The legislation also establishes a floor for capital of insured depository institutions that cannot be lower than the standards in effect today, and directs the federal banking regulators to implement new leverage and capital requirements. The new leverage and capital requirements must take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives. Pursuant to 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 the holding company is generally in sound condition and does not pose a foreseeable and material risk to the DIF. In addition, the Dodd-Frank Act contains a wide variety of provisions (many of which are not yet effective) affecting the regulation of depository institutions, including

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restrictions related to mortgage originations, risk retention requirements as to securitized loans and the establishment of the Consumer Financial Protection Bureau (“CFPB”). The full impact of the Dodd-Frank Act on our business and operations will not be known for years until regulations implementing the statute are written and adopted. The Dodd-Frank Act may have a material impact on the Corporation’s and the Bank’s operations, particularly through increased compliance costs resulting from possible future consumer and fair lending regulations. See Part I, Item 1A, “Risk Factors” for a more extensive discussion of this topic.

Regulation of Associated Bank and Trust Company

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 regulation, supervision and examination by the OCC. Associated Bank, our only subsidiary that accepts insured deposits, is also subject to examination by the FDIC. We are subject to the enforcement and rule-making authority of the CFPB regarding consumer financial products. The CFPB has authority to create and enforce consumer protection rules and regulations and has the power to examine us for compliance with such rules and regulations. The CFPB also has the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets, such as Associated Bank. The Dodd-Frank Act weakens the federal preemption available for national banks and gives broader rights to state attorney generals to enforce certain federal consumer protection loans.

Banking Acquisitions

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.

Banking Subsidiary Dividends

The Parent Company is a legal entity separate and distinct from its banking and other subsidiaries. A substantial portion of our revenue comes from dividends paid to us by Associated Bank. The OCC’s prior approval of the payment of dividends by Associated Bank to the Parent Company is required only if the total of all dividends declared by the Bank in any calendar year exceeds the sum of the 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.

Holding Company Dividends

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.

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Capital Requirements

We are subject to various regulatory capital requirements both at the Parent Company and at the Bank level administered by the Federal Reserve and the OCC, respectively. Failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse 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.

Basel III — Capital, Liquidity and Stress Testing Requirements

The Basel Committee on Banking Supervision has drafted frameworks for the regulation of capital and liquidity of internationally active banking organizations, generally referred to as “Basel III”. On June 7, 2012, the Federal Reserve issued a notice of proposed rulemaking that would implement elements of Sections 165 and 166 of the Dodd-Frank Act that encompass certain aspects of Basel III with respect to capital and liquidity. On November 9, 2012, following a public comment period, the U.S. federal banking agencies issued a joint press release announcing that the January 1, 2013 effective date was being delayed so the agencies could consider operational and transitional issues identified in the large volume of public comments received. It is anticipated that the U.S. federal banking agencies will formalize the implementation of the Basel III framework applicable to domestic banks in the United States during 2013. As proposed, the new rules, when implemented and fully phased-in, will require U.S. bank holding companies to maintain higher levels of capital and liquidity than the minimums that currently apply under existing capital regulations.

Capital Requirements

The Basel III final capital framework, among other things, (i) formalizes a capital measure called “Tier 1 Common Equity” (“T1CE”), (ii) specifies that Tier 1 capital consist only of T1CE and certain “Additional Tier 1 capital” instruments meeting specified requirements, (iii) defines T1CE narrowly by requiring that most adjustments to regulatory capital measures be made to T1CE and not to the other components of capital. Requirements to maintain higher levels of capital could adversely impact our return on equity. We believe we would currently meet the fully phased in Basel III capital requirements, if they were applicable to us today.

Liquidity Requirements

Historically, regulation and monitoring of bank and bank holding company liquidity has been addressed as a supervisory matter, without required formulaic measures. However, the Basel III liquidity framework requires banks and bank holding companies to measure their liquidity against specific liquidity tests that, although similar in some respects to liquidity measures historically applied by banks and regulators for management and supervisory purposes, going forward would be required by regulation. While current rules and proposals from the U.S. federal banking agencies do not specifically address the Basel III liquidity requirements, on December 20, 2011, the Federal Reserve proposed a set of enhanced prudential standards and early redemption requirements that included certain liquidity requirements similar to those contemplated in the Basel III liquidity coverage ratio (“LCR”), designed to ensure that the banking entity maintains an adequate level of unencumbered “highly liquid” assets relative to the entity’s projected net cash outflow over various time horizons and under a range of liquidity stress scenarios. The December 20, 2011 notice of proposed rulemaking would only apply to U.S. bank holding companies with total consolidated assets of $50 billion or more. As of December 28, 2012, the Federal Reserve was still considering comments regarding the proposed liquidity requirements. In the event U.S. bank holding

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companies with total consolidated assets between $10 billion and $50 billion are eventually required to comply with liquidity requirements similar to those in the proposed rule described above, it could adversely impact our net income and return on equity. We believe we would currently meet the expected Dodd-Frank Act liquidity requirements, if they were applicable to us today.

Capital Planning and Stress testing Requirements

On October 12, 2012, the Federal Reserve published two Final Rules implementing the company-run stress test requirements mandated by the Dodd-Frank Act: one for U.S. bank holding companies with total consolidated assets of $10 billion to $50 billion, and one for U.S. bank holding companies with total consolidated assets of $50 billion or more. Under the Rule applicable to the Parent Company, which became effective November 15, 2012, we will be required to conduct annual company-run stress tests using data as of September 30 of each year and different scenarios provided by the Federal Reserve. We anticipate final stress test scenarios to be issued in the third quarter of 2013. We also anticipate that our pro forma capital ratios, as reflected in the stress test calculations under the required stress test scenarios, will be an important factor considered by the Federal Reserve Board in evaluating whether proposed payments of dividends or stock repurchases are consistent with its prudential expectations. Requirements to maintain higher levels of capital or liquidity to address potential adverse stress scenarios, could adversely impact our net income and our return on equity.

Enforcement Powers of the Federal Banking Agencies; Prompt Corrective Action

Both the Federal Reserve and the OCC have extensive supervisory authority over their regulated institutions, including, 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 the Parent Company may provide the basis for enforcement action, including misleading or untimely reports.

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.

“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.

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. 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.

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.

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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 December 31, 2012, the Bank satisfied the requirements as “well capitalized”. The imposition of any of the measures described above could have a 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.

Deposit Insurance Premiums

Associated Bank is a member of the FDIC and pays an insurance premium to the FDIC 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. 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. The Dodd-Frank Act also required 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 assessment rate schedule for larger institutions like the Bank (i.e., institutions with at least $10 billion in assets) differentiates 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 DIF 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 large institutions. Premiums for the Bank are now 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 FDIC has 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.

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 2012, the FICO assessment was equal to 0.660 basis points computed on assets as required by the Dodd-Frank Act. 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.

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

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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.

Transactions with Affiliates

Transactions between our national banking subsidiary and its related parties or any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate is any company or entity, which controls, is controlled by or is under common control with the bank. In a holding company context, at a minimum, the parent holding company of a national bank and any companies which are controlled by such parent holding company are affiliates of the bank. Generally, Sections 23A and 23B (i) limit the extent to which an institution or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such institution’s capital stock and surplus, and contain an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus, and (ii) require that all such transactions be on terms substantially the same, or at least as favorable, to the institution or subsidiary as those provided to a nonaffiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and similar types of transactions. Certain types of covered transactions must be collateralized according to a schedule set forth in the statute based on the type of collateral.

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.

Community Reinvestment Act Requirements

Our national bank subsidiary is subject to periodic Community Reinvestment Act (“CRA”) reviews by the OCC. 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. An institution’s CRA assessment may be used by its regulators in their evaluation of certain applications, including a merger, acquisition or the establishment of a branch office. An unsatisfactory rating may be used as the basis for denial of such an application.

Associated Bank underwent a CRA examination by the OCC 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 their privacy policies. In addition, such financial institutions must appropriately safeguard its customers’ nonpublic, personal information.

Bank Secrecy Act / Anti-Money Laundering

The Bank Secrecy Act (“BSA”), which is intended to require financial institutions to develop policies, procedures, and practices to prevent and deter money laundering, mandates that every national bank have a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA.

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The program must, at a minimum: (1) provide for a system of internal controls to assure ongoing compliance; (2) provide for independent testing for compliance; (3) designate an individual responsible for coordinating and monitoring day-to-day compliance; and (4) provide training for appropriate personnel. In addition, national banks are required to adopt a customer identification program as part of its BSA compliance program. National banks are also required to file Suspicious Activity Reports when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.

On February 23, 2012, the Bank entered into a Consent Order with the OCC regarding its BSA compliance. The Consent Order requires, among other things, that the Bank: (1) create a Compliance Committee of at least three directors; (2) create a BSA-focused action plan to supplement existing customer due diligence policies and procedures; (3) review, update and implement an ongoing BSA risk assessment; (4) review and update risk-based processes to obtain and analyze appropriate customer due diligence information at the time of account opening and on an ongoing basis; (5) ensure adherence to a written program of policies and procedures to provide compliance with the BSA; (6) complete independent testing; (7) ensure it has a permanent, qualified, and experienced BSA Officer; (8) develop and implement a comprehensive, ongoing BSA and OFAC training program; and (9) submit certain reports to the OCC. The Bank has been working cooperatively with the OCC and management believes it is in compliance with the provisions of the Consent Order.

In addition to complying with the BSA, the Bank is subject to 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 that financial service companies implement additional policies and procedures and take heightened 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.

Interstate Branching

Pursuant to the Dodd-Frank Act, national and state-chartered banks may open an initial branch in a state other than its home state (e.g., a host state) by establishing a de novo branch at any location in such host state at which a bank chartered in such host state could establish a branch. Applications to establish such branches must still be filed with the appropriate primary federal regulator.

Volcker Rule

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 Tier 1 Capital in private equity and hedge funds (known as the “Volcker Rule”). 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 Parent Company, 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. On October 11, 2011, the federal banking agencies released for comment proposed regulations implementing the Volcker Rule. The public comment period closed on February 13, 2012 and a final rule has not yet been published. The proposal has been criticized and there is no consensus as to what the provisions will ultimately include. The Parent Company 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 the announced compliance date.

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Incentive Compensation Policies and Restrictions

In July 2010, the federal banking agencies issued guidance that applies to all banking organizations supervised by the agencies (thereby including both the Parent Company and the 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, in March 2011, the federal banking agencies, along with the Federal Housing Finance Agency, and the Securities and Exchange Commission, released a proposed rule intended to ensure that regulated financial institutions design their incentive compensation arrangements to account for risk. Specifically, the proposed rule would require compensation practices at the Parent Company and at the Bank to be consistent with the following principles: (1) compensation arrangements appropriately balance risk and financial reward; (2) such arrangements are compatible with effective controls and risk management; and (3) such arrangements are supported by strong corporate governance. In addition, financial institutions with $1 billion or more in assets would be required to have policies and procedures to ensure compliance with the rule and would be required to submit annual reports to their primary federal regulator. The comment period has closed and a final rule has not yet been published; however, the Corporation believes it is in compliance with the rule as currently proposed.

Ability-to-Repay and Qualified Mortgage Rule

Pursuant to the Dodd Frank Act, the CFPB issued a final rule on January 10, 2013 (effective on January 10, 2014), amending Regulation Z as implemented by the Truth in Lending Act, requiring mortgage lenders to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms. Mortgage lenders are required to determine consumers’ ability to repay in one of two ways. The first alternative requires the mortgage lender to consider the following eight underwriting factors when making the credit decision: (1) current or reasonably expected income or assets; (2) current employment status; (3) the monthly payment on the covered transaction; (4) the monthly payment on any simultaneous loan; (5) the monthly payment for mortgage-related obligations; (6) current debt obligations, alimony, and child support; (7) the monthly debt-to-income ratio or residual income; and (8) credit history. Alternatively, the mortgage lender can originate “qualified mortgages,” which are entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements. In general, a “qualified mortgage” is a mortgage loan without negative amortization, interest-only payments, balloon payments, or terms exceeding 30 years. In addition, to be a qualified mortgage the points and fees paid by a consumer cannot exceed 3% of the total loan amount. Qualified mortgages that are “higher-priced” (e.g. subprime loans) garner a rebuttable presumption of compliance with the ability-to-repay rules, while qualified mortgages that are not “higher-priced” (e.g. prime loans) are given a safe harbor of compliance.

Other Banking Regulations

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, Truth in Lending Act, Truth in Savings Act, Equal Credit Opportunity Act, Electronic Funds Transfer Act, Fair Housing Act, Home Mortgage Disclosure Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Expedited Funds Availability (Regulation CC), Reserve Requirements (Regulation D), Insider Transactions (Regulation O), Privacy of Consumer Information (Regulation P), 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, Children’s Online Privacy Protection Act, and the John Warner National Defense Authorization Act.

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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 Federal Reserve. 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 Industry 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 920-491-7059; fax 920-491-7144; or e-mail to shareholders@associatedbank.com. Our Code of Business Conduct and Ethics, Corporate Governance Guidelines, and committee charters for standing committees of the Board 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.

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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

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 the debt owed to us. 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 for loan losses, 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 would result in a decrease in net income, and possibly risk-based capital, and could have a material adverse effect on our financial condition and results of operations.

We are subject to lending concentration risks.    As of December 31, 2012, approximately 61% 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

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$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.

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 which 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 wire transfers, 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.

Liquidity and Interest Rate Risks

Liquidity is essential to our businesses.    The Corporation requires liquidity to meet its deposit and debt obligations as they come due. Access to liquidity could be impaired by an inability to access the capital markets or unforeseen outflows of deposits. Risk factors that could impair our ability to access capital markets include a downturn in our Midwest markets, difficult credit markets, credit rating downgrades, or regulatory actions against the Corporation. The Corporation’s access to deposits can be impacted by the liquidity needs of our customers as a substantial portion of the Corporation’s liabilities are demand while a substantial portion of the Corporation’s assets are loans that cannot be sold in the same timeframe. Historically, the Corporation has been able to meet its cash flow needs as necessary. If a sufficiently large number of depositors sought to withdraw their deposits for whatever reason, the Corporation may be unable to obtain the necessary funding at terms favorable to the Bank.

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

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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 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. Our most significant interest rate risk may be further declines in the absolute level of interest rates or the prolonged continuation of the current low rate environment, as this would generally lead to further compression of our net interest margin, reduced net interest income, and devaluation of our deposit base.

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 residential mortgage-related securities and MSRs can decrease. Each quarter we evaluate our residential mortgage-related securities and MSRs for impairment. 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.

We rely on dividends from our subsidiaries for most of our revenue.    The Parent Company is a separate and distinct legal entity from its banking and other subsidiaries. A substantial portion of the Parent Company’s revenue comes from dividends from its subsidiaries. These dividends are the principal source of funds to pay dividends on the Parent Company’s common and preferred stock, and to pay interest and principal on the Parent Company’s debt. Various federal and / or state laws and regulations limit the amount of 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

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subsidiary’s creditors. In the event our national bank subsidiary is unable to pay 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 dividends from our national bank subsidiary could have a material adverse effect on our business, financial condition, and results of operations.

Operational Risks

We face significant operational risks due to the high volume of transactions we process.    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.

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.

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.

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.

Changes in our accounting policies or in accounting standards could materially affect how we report our financial results.    Our accounting policies are fundamental to understanding our financial results and condition.

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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. 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. During 2012, the annual impairment test in May indicated that 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. At December 31, 2012, we had goodwill of $929 million, representing approximately 32% of stockholders’ equity.

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, including the recent trend of quarterly earnings. 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. The Corporation has concluded that based on the level of positive evidence, it is more likely than not that the deferred tax asset will be realized. At December 31, 2012, net deferred tax assets are approximately $26 million. The impact of each of these impairment matters could have a material adverse effect on our business, results of operations, and financial condition.

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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.

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.

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 and External Risks

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 operations.

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

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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.

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.

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, particularly Wisconsin, Illinois and Minnesota. 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 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

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supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, the strength of the United States economy, and uncertainty in financial markets globally relating to financial crises in the European Union and elsewhere, 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.

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.

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.

Acquisitions may disrupt our business and dilute shareholder value.    As part of our announced growth strategy, 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;

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• 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.

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.

Legal, Compliance and Reputational Risks

We are subject to increasingly extensive government regulation and supervision.    We, primarily through Associated Bank and certain nonbank subsidiaries, are subject to increasingly 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.

Examples of increasing regulatory oversight include the creation of the CFPB, which now has separate examination and supervision authority over the Bank with respect to consumer financial products and services. Further evidence of this oversight include the April 2010 Memorandum of Understanding between the Corporation and the Federal Reserve Bank of Chicago requiring the Corporation to submit various plans and reports and obtain approval prior to taking specified actions, which was terminated in March 2012, and the February 2012 Consent Order between the Bank and the OCC, which is described in detail under Part 1, Item 1, “Business — Supervision and Regulation — Bank Secrecy Act / Anti-Money Laundering.”

The full impact of the recently enacted Dodd-Frank Act is currently unknown given that many 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.

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

• It established the CFPB which directly regulates and supervises the Bank for compliance with the CFPB’s regulations and policies. The creation of the CFPB 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.

• It revised the FDIC’s insurance assessment methodology so that premiums are assessed based upon the average consolidated total assets of the Bank less tangible equity capital.

• It permanently increased deposit insurance coverage to $250,000.

• It authorized 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. Under the final rule issued by the Federal Reserve, there is a cap of 21 cents per transaction (with a maximum of 24 cents per transaction permitted if certain requirements are met). Implementation of these caps went into effect on October 1, 2011.

• 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.

• It requires a phased-in exclusion of trust preferred securities as a component of Tier 1 capital for certain bank holding companies.

• Depository institution holding companies must now act as a “source of strength” for their depository institution subsidiaries (previously, this had been limited to regulatory policy).

• Pursuant to the Dodd-Frank Act, the CFPB recently issued a final rule requiring mortgage lenders to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms, or to originate “qualified mortgages” that meet specific requirements with respect to terms, pricing and fees. The new rule also contains new disclosure requirements at mortgage loan origination and in monthly statements. These requirements will likely require significant personnel resources and could have a material adverse effect on our operations.

Based on the text of the Dodd-Frank Act and the implementing regulations (both published and yet-to-be-published), 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 Consumer Financial Protection Bureau may reshape the consumer financial laws through rulemaking and enforcement of the prohibitions against unfair, deceptive and abusive business practices. Compliance with any such change may impact the business operations of depository institutions offering consumer financial products or services, including the Bank.    The CFPB has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers. The CFPB 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 CFPB has not yet released significant supervisory guidance. Moreover, the Bank will be supervised and examined by the CFPB for compliance with the CFPB’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 may produce significant, material effects on the Bank’s (and the Corporation’s) profitability. As of the date of this filing, the CFPB has not examined the Bank.

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The Bank has not been examined for mortgage-related issues, including mortgage servicing issues and fair lending issues, but such examination is likely imminent.    In the wake of the mortgage crisis of the last few years, federal and state banking regulators are closely examining the mortgage and mortgage servicing activities of depository financial institutions. Although such reviews have now been limited to “larger participants” in the mortgage industry, we believe that our mortgage practices and policies will be examined. Should the OCC or the Federal Reserve have serious concerns with respect to our operations in this regard, the effect of such concerns could have a material adverse effect on our profits.

We may experience unanticipated losses as a result of residential mortgage loan repurchase or reimbursement obligations under agreements with secondary market purchasers.    We may be required to repurchase residential mortgage loans, or to reimburse the purchaser for losses with respect to residential mortgage loans, which have been sold to secondary market purchasers in the event there are breaches of certain representations and warranties contained within the sales agreements, such as representations and warranties related to credit information, loan documentation, collateral and insurability. Consequently, we are exposed to credit risk, and potentially funding risk, associated with sold loans. Although we have only seen a limited number of repurchase and reimbursement claims in prior quarters, this activity has steadily increased and as a result we have established reserves in our consolidated financial statements for potential losses related to the residential mortgage loans we have sold. The adequacy of the reserves and the ultimate amount of losses incurred will depend on, among other things, the actual future mortgage loan performance, the actual level of future repurchase and reimbursement requests, the actual success rate of claimants, actual recoveries on the collateral and macroeconomic conditions. Due to uncertainties relating to these factors, there can be no assurance that the reserves we establish will be adequate or that the total amount of losses incurred will not have a material adverse effect on our financial condition or results of operations.

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. A settlement agreement has been reached with plaintiffs’ counsel that requires payment by the Bank of $13 million for a full and complete release of all claims brought against the Bank. Although we cannot guarantee

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that the court will approve the settlement, it is reasonably likely that the settlement will be approved. 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.

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.

Ethics or conflict of interest issues could damage our reputation.    We have established a Code of Business Conduct and Ethics 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 Business Conduct and Ethics and Related Party Transaction Policies and Procedures could have a material adverse effect on our reputation, business, results of operations, and / or financial condition.

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;

• 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;

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

• recommendations by securities analysts.

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

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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. 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 common stock warrants issued to the U.S. Department of the Treasury (the “UST”) under TARP, which have been sold by the UST in a public offering, would dilute the ownership interest of our existing shareholders. See also 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. 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.

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 prior dividend and liquidation rights of holders of our outstanding preferred stock. 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, bylaws, and certain banking laws may have an anti-takeover effect.    Provisions of our articles of incorporation and 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

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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 June 30, 2013. The Corporation’s largest owned properties are two operation centers located in the Green Bay area and Stevens Point, Wisconsin, with approximately 81,000 and 101,000 square feet, respectively. In early to mid 2013, our corporate headquarters will move into an owned facility in downtown Green Bay. This location will then be our largest location with 120,000 square feet. Our largest leased location, at 102,000 square feet, is our Milwaukee corporate site located in downtown Milwaukee. In late 2013, multiple leased Chicago locations will relocate into one centralized Chicago location with 35,000 square feet. As of December 31, 2012, 64% of our branches were owned and 36% were leased.

At December 31, 2012, our bank subsidiary occupied approximately 240 banking locations serving more than 150 different communities within Illinois, Minnesota, and Wisconsin. The main office of Associated Bank, National Association, in Green Bay, Wisconsin, 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 and are mostly owned. Some bank branch offices are in office towers, supermarket locations or in retirement communities; such properties are generally leased. In addition, we own other real property that, when considered in aggregate, is not material to our financial position.

ITEM 3.    LEGAL PROCEEDINGS

The following is a description of the Corporation’s material pending legal proceedings.

A putative class action lawsuit, Harris v. Associated Bank, N.A. (the “Bank”), was filed in the United States District Court for the Western District of Wisconsin in April 2010, alleging that the Bank unfairly assessed and collected overdraft fees and seeking restitution of the overdraft fees, compensatory, consequential and punitive damages, and costs. The case was subsequently consolidated into the Multi District Litigation (“MDL”), In re: Checking Account Overdraft Litigation MDL No. 2036 in the United States District Court for the Southern District of Florida. A settlement agreement which requires payment by the Bank of $13 million for a full and complete release of all claims brought against the Bank received preliminary approval from the court on July 26, 2012. A final approval hearing on the settlement is scheduled for March 2013. In the second quarter of 2012, the Bank settled with an insurer for $2.5 million as contribution to the settlement amount and received approximately $1.5 million as partial reimbursement for defense costs. By entering into such an agreement, we have not admitted any liability with respect to the lawsuit. The settlement amount was previously accrued for in the financial statements.

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A lawsuit, R.J. ZAYED v. Associated Bank, N.A., was filed in the United States District Court for the District of Minnesota on January 29, 2013. The lawsuit relates to a Ponzi scheme perpetrated by Oxford Global Partners and related entities (“Oxford”) and individuals and was brought by the receiver for Oxford. Oxford was a depository customer of the Bank. The lawsuit claims that the Bank is liable for failing to uncover the Oxford Ponzi scheme, and specifically alleges the Bank aided and abetted the (1) fraudulent scheme; (2) a breach of fiduciary duty; (3) conversion; and (4) false representations and omissions. The lawsuit seeks unspecified consequential and punitive damages. At this early stage of the lawsuit, it is not possible for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss at this time. The Bank intends to vigorously defend this lawsuit. A lawsuit by investors in the same Ponzi scheme, Herman Grad, et al v. Associated Bank, N.A., brought in Brown County, Wisconsin in October 2009 was dismissed by the circuit court, and the dismissal was affirmed by the Wisconsin Court of Appeals in June 2011 in an unpublished opinion.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

INFORMATION ABOUT THE EXECUTIVE OFFICERS

The following is a list of names and ages of executive officers of Associated indicating all positions and offices held by each such person and each such person’s principal occupation(s) or employment during the past five years. Officers are appointed annually by the Board of Directors at the meeting of directors immediately following the annual meeting of shareholders. There are no family relationships among these officers, nor any arrangement or understanding between any officer and any other person pursuant to which the officer was selected. No person other than those listed below has been chosen to become an executive officer of Associated. The information presented below is as of February 1, 2013.

Philip B. Flynn - Age: 55

Philip B. Flynn has been President and Chief Executive Officer of Associated and a member of the Board of Directors since December 2009. Prior to joining Associated, he served as Vice Chairman and Chief Operating Officer of Union Bank. During his nearly 30-year career with Union Bank, he held a broad range of executive positions, including chief credit officer and head of commercial banking, specialized lending and wholesale banking. He served as a member of Union Bank’s board of directors from 2004 to 2009.

Oliver Buechse - Age: 44

Oliver Buechse has been Executive Vice President, Chief Strategy Officer, of Associated and Associated Bank, National Association since February 2010. He is also a director of Associated Banc-Corp Foundation. From February 2004 to January 2010, he was Senior Vice President, Strategy and Special Projects at Union Bank, and from January 2009 to January 2010, he also served as Senior Vice President, Vision and Strategy, North American Strategy Office at The Bank of Tokyo — Mitsubishi UFJ. He began his career at McKinsey & Company, working in the U.S., Germany, and Austria.

Christopher J. Del Moral-Niles - Age: 42

Christopher J. Del Moral-Niles has been Executive Vice President, Chief Financial Officer, of Associated and Associated Bank, National Association since March 2012. He joined Associated in July 2010 and previously served as Associated’s Deputy Chief Financial Officer and as Associated’s Corporate Treasurer. From 2006 to 2010, he held various leadership roles for The First American Corporation and its subsidiaries, including serving as Corporate Treasurer and as divisional President of First American Trust, FSB. From 2003 to 2006, Mr. Niles held various positions with Union Bank, including serving as Senior Vice President and Director of Liability Management. Prior to his time with Union Bank, Mr. Niles spent a decade as a financial services investment banker supporting mergers and acquisitions of financial institutions, bank and thrift capital issuances, and bank funding transactions.

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Patrick J. Derpinghaus - Age: 57

Patrick J. Derpinghaus has been Executive Vice President, Chief Audit Executive, of Associated and Associated Bank, National Association since April 2011. Mr. Derpinghaus has over 33 years of banking experience serving in various executive finance and audit positions. From March 2008 until March 2011, Mr. Derpinghaus served as Audit Director for U.S. Bank in Minneapolis, Minnesota. Prior to his position at U.S. Bank, Mr. Derpinghaus served as Executive Vice President and Chief Financial Officer of The Bankers Bank in Atlanta, Georgia from October 2005 to December 2007.

Judith M. Docter - Age: 51

Judith M. Docter has been Executive Vice President, Chief Human Resources Officer, of Associated and Associated Bank, National Association since November 2005. She is a director of Associated Financial Group, LLC. She was Senior Vice President, Director of Organizational Development, for Associated from May 2002 to November 2005. From March 1992 to May 2002, she served as Director of Human Resources for Associated Bank, National Association, Fox Valley Region and Wealth Management.

Randall J. Erickson - Age: 53

Randall J. Erickson has been Executive Vice President, General Counsel and Corporate Secretary of Associated and Associated Bank, National Association since April 2012. Prior to joining Associated, he served as senior vice president, chief administrative officer and general counsel of Milwaukee-based bank holding company Marshall & Ilsley Corporation from 2002 until it was acquired by BMO Financial in 2011. Upon leaving M&I, he became a member of Milwaukee law firm Godfrey & Kahn’s securities practice group. He had been a partner at Godfrey & Kahn from 1990 to 2002 prior to joining M&I as its general counsel. Mr. Erickson served as a director of Renaissance Learning, Inc., an educational software company, from 2009 until it was acquired by Permira Funds in 2011.

Breck Hanson - Age: 64

Breck Hanson has been the Executive Vice President, Head of Commercial Real Estate, of Associated and Associated Bank, National Association since October 2010. He is also a director of Associated Banc-Corp Foundation. He has more than 30 years of banking experience, including over 20 years of leadership responsibility within the CRE segment. Most recently, he was Executive Vice President, Commercial Real Estate with Bank of America, where he was responsible for all levels of business in the Midwest Commercial Real Estate Group, which included 370 employees and 7 CRE business lines. He spent over two decades in CRE leadership roles with LaSalle Bank prior to its merger with Bank of America.

Arthur G. Heise - Age: 64

Arthur G. Heise has been Executive Vice President, Chief Risk Officer, of Associated and Associated Bank, National Association since April 2011. Mr. Heise brings more than 30 years leadership experience in risk management roles. From October 2007 through March 2011, he held positions of Chief Audit Executive and of Director of Enterprise Risk Services for US Bancorp. Prior to his position at US Bancorp, Mr. Heise served as Director, Business Risk and Control at CitiMortgage from 2004 to 2007.

Scott S. Hickey - Age: 57

Scott S. Hickey has been Executive Vice President, Chief Credit Officer, of Associated and Associated Bank, National Association since October 2008. He was with U.S. Bank from 1985 to 2008, and served as Chief Approval Officer from 2002 to 2008.

Timothy J. Lau - Age: 50

Timothy J. Lau has been Executive Vice President, Head of Private Client and Institutional Services, of Associated and Associated Bank, National Association since December 2010. He is President of Associated

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Trust Company, National Association and oversees Associated’s Private Banking, Trust and Investment Services. He is also a director of Associated Banc-Corp Foundation, Associated Investment Services, Inc. and Associated Financial Group, LLC. He joined Associated in 1989 and has held a number of senior management positions in Consumer and Small Business Banking, Residential Lending, and Commercial Banking.

Donna N. Smith - Age: 61

Donna N. Smith has been Executive Vice President, Head of Commercial Middle Market and Regional Banking, of Associated and Associated Bank, National Association since June 2011. She joined Associated in June 2010, overseeing the commercial and industrial business line for Associated’s southern region, which includes Chicago, southern Illinois, Missouri and Indiana. Prior to joining Associated, she served as a market executive at Bank of America from October 2007 to June 2010 and as a Senior Vice President at one of its predecessors, LaSalle Bank, from March 2003 to October 2007. She has more than 30 years of commercial banking experience, having previously held leadership roles at Bank of America, LaSalle Bank, Harris Bank and Fifth Third.

David L. Stein - Age: 49

David L. Stein has been Executive Vice President, Head of Retail Banking, of Associated and Associated Bank, National Association since June 2007. He is Chairman of Associated Investment Services, Inc. and a director of Associated Financial Group, LLC and Associated Banc-Corp Foundation. He was the President of the Southwest Region of Associated Bank, National Association, from January 2005 until June 2007. He held various positions with J.P. Morgan Chase & Co., and one of its predecessors, Bank One Corporation, from 1989 until joining Associated in 2005.

John A. Utz - Age: 44

John A. Utz has been Executive Vice President, Head of Specialized Industries and Commercial Financial Services, of Associated and Associated Bank, National Association since June 2011. He joined Associated in March 2010 with upwards of 20 years of banking experience, having previously served as President of Union Bank’s UnionBanCal Equities and head of its Capital Markets division from September 2007 to March 2010, and as head of the National Banking and Asset Management teams from October 2002 to September 2007.

James Yee - Age: 60

James Yee has been Executive Vice President, Chief Information and Operations Officer of Associated and Associated Bank, National Association since May 2012. Prior to joining Associated, he was a Senior Executive Vice President and Chief Information Officer at Union Bank, in San Francisco. His experience also includes serving as Chief Information Officer of Banc of America Securities and Stanford University Medical Center.

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 number of shareholders of record of the Corporation’s common stock, $.01 par value, as of January 28, 2013, was approximately 10,000. Certain of the Corporation’s shares are held in “nominee” or “street” name and the number of beneficial owners of such shares is approximately 21,100.

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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 aggregate amount of the quarterly dividends was $0.23 per common share for 2012 and $0.04 per common share for 2011.

Following are the Corporation’s monthly common stock purchases during the fourth quarter of 2012. On November 13, 2012, the Board of Directors authorized the Corporation to repurchase up to an aggregate amount of $125 million of common stock, of which $30 million was subsequently repurchased during the fourth quarter of 2012. The Board authorization permits the Corporation to implement repurchases of common stock through such methods as the officers effecting the repurchases deem appropriate, including, without limitation, through open market purchases, block transactions, privately negotiated transactions, accelerated share repurchase programs or similar facilities. Also during the fourth quarter of 2012, the Corporation repurchased shares for minimum tax withholding settlements on equity compensation. The effect to the Corporation of these transactions was an increase in treasury stock and a decrease in cash of approximately $30 million in the fourth quarter of 2012. For a detailed discussion of the common stock repurchases during 2012 and 2011, 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.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares  that May Yet Be Purchased Under the Plan *
October 1 — October 31, 2012		2,399	$	12.92		—		—
November 1 — November 30, 2012		2,076,300		12.71		2,076,300		—
December 1 — December 31, 2012		285,370		12.90		285,100		—
Total		2,364,069	$	12.73		2,361,400		7,240,854

* On November 13, 2012, the Board of Directors authorized the Corporation to repurchase up to an aggregate amount of $125 million of common stock. After adjusting the common stock repurchase authorization for the $30 million repurchased during the fourth quarter of 2012 under this authorization (i.e. $95 million remains authorized for repurchase) and using the closing stock price on December 31, 2012 of $13.12, a total of approximately 7.2 million common shares remain available to be repurchased under this authorization as of December 31, 2012.

Market Information

The following represents selected market information of the Corporation’s common stock for 2012 and 2011.

					Market Price Range Closing Sales Prices
	Dividends Paid		Book Value		High		Low		Close
2012
4th Quarter	$	0.08	$	16.97	$	13.54	$	12.19	$	13.12
3rd Quarter		0.05		16.82		13.79		12.04		13.16
2nd Quarter		0.05		16.59		13.97		11.76		13.19
1st Quarter		0.05		16.32		14.63		11.43		13.96
2011
4th Quarter	$	0.01	$	16.15	$	11.78	$	9.15	$	11.17
3rd Quarter		0.01		16.07		14.17		8.95		9.30
2nd Quarter		0.01		15.81		15.02		13.06		13.90
1st Quarter		0.01		15.46		15.36		13.83		14.85

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Total Shareholder Return Performance Graph

Set forth below is a line graph (and the underlying data points) comparing the yearly percentage change in the cumulative total shareholder return (change in year-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, 2008, and ending December 31, 2012. The Nasdaq Bank Index is prepared for NASDAQ by the Center for Research in Securities Prices at the University of Chicago. The graph assumes that the value of the investment in Common Stock for each index was $100 on December 31, 2007. Historical stock price performance shown on the graph is not necessarily indicative of the future price performance.

5 Year Trend

Source:Bloomberg	2007		2008		2009		2010		2011		2012
Associated Banc-Corp		100.0		81.9		44.9		62.0		45.9		54.8
S&P 500		100.0		63.4		79.9		91.7		93.7		108.6
Nasdaq Bank Index		100.0		78.8		65.9		75.1		67.2		79.7

The Total Shareholder Return Performance Graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent Associated specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

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ITEM 6.    SELECTED FINANCIAL DATA

TABLE 1: EARNINGS SUMMARY AND SELECTED FINANCIAL DATA

(In thousands, except per share data)

Years Ended December 31,	2012		2011		2010			2009			2008
Interest income	$	718,284	$	741,622	$	806,126		$	981,256		$	1,126,709
Interest expense		92,292		128,791		172,347			255,251			430,561
Net interest income		625,992		612,831		633,779			726,005			696,148
Provision for loan losses		3,000		52,000		390,010			750,645			202,058
Net interest income (loss) after provision for loan losses		622,992		560,831		243,769			(24,640	)		494,090
Noninterest income		313,290		273,119		335,462			336,573			281,018
Noninterest expense		681,823		650,523		620,259			597,032			552,828
Income (loss) before income taxes		254,459		183,427		(41,028	)		(285,099	)		222,280
Income tax expense (benefit)		75,486		43,728		(40,172	)		(153,240	)		53,828
Net income (loss)		178,973		139,699		(856	)		(131,859	)		168,452
Preferred stock dividends and discount accretion		5,200		24,830		29,531			29,348			3,250
Net income (loss) available to common equity	$	173,773	$	114,869	$	(30,387	)	$	(161,207	)	$	165,202
Taxable equivalent adjustment	$	21,046	$	21,374	$	23,635		$	24,820		$	27,711
Earnings (loss) per common share:
Basic(1)	$	1.00	$	0.66	$	(0.18	)	$	(1.26	)	$	1.29
Diluted(1)		1.00		0.66		(0.18	)		(1.26	)		1.29
Cash dividends per share(1)		0.23		0.04		0.04			0.47			1.27
Weighted average common shares outstanding:(1):
Basic		172,255		173,370		171,230			127,858			127,501
Diluted		172,357		173,372		171,230			127,858			127,775
SELECTED FINANCIAL DATA
Year-End Balances:
Loans	$	15,411,022	$	14,031,071	$	12,616,735		$	14,128,625		$	16,283,908
Allowance for loan losses		297,409		378,151		476,813			573,533			265,378
Investment securities		4,966,635		4,937,483		6,101,341			5,835,533			5,143,414
Total assets		23,487,735		21,924,217		21,785,596			22,874,142			24,192,067
Deposits		16,939,865		15,090,655		15,225,393			16,728,613			15,154,796
Short and long-term funding		3,342,285		3,691,556		3,160,987			3,180,851			5,565,583
Tier 1 common equity(2)		1,875,534		1,783,515		1,657,505			1,202,131			1,404,672
Stockholders’ equity		2,936,399		2,865,794		3,158,791			2,738,608			2,876,503
Book value per common share(1)		16.97		16.15		15.28			17.42			18.54
Tangible book value per common share(1)		11.39		10.68		9.77			9.93			10.99
Average Balances:
Loans	$	14,741,785	$	13,278,848	$	13,186,712		$	15,595,636		$	16,080,565
Investment securities		4,469,541		5,497,297		5,439,729			5,502,786			3,522,847
Earning assets		19,613,777		19,442,263		20,568,495			21,337,382			19,839,706
Total assets		21,976,357		21,588,620		22,625,065			23,609,471			22,037,963
Deposits		15,582,369		14,401,127		16,946,301			15,959,046			13,812,072
Interest-bearing liabilities		14,905,735		15,120,824		16,304,220			17,659,282			17,019,832
Stockholders’ equity		2,948,988		2,997,290		3,183,572			2,902,911			2,423,332
Financial Ratios:
Return on average assets		0.81		0.65		—			(0.56	)		0.76
Efficiency ratio(3)		72.92		73.33		65.68			56.65			53.69
Efficiency ratio, fully taxable equivalent(3)		70.42		70.66		63.29			54.42			51.97
Tangible stockholders’ equity to tangible assets(4)		8.84		9.14		10.59			8.12			8.23
Tier 1 common equity to risk-weighted assets(2)		11.61		12.24		12.26			7.85			7.90

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

(2) Tier 1 common equity is Tier 1 capital excluding qualifying perpetual preferred stock and trust preferred securities.

(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.

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TABLE 1A: RECONCILIATION OF NON-GAAP MEASURE

Years Ended December 31,	2012			2011			2010			2009			2008
Efficiency ratio(a)		72.92			73.33			65.68			56.65			53.69
Taxable equivalent adjustment		(1.60	)		(1.72	)		(1.60	)		(1.30	)		(1.41	)
Asset gains /losses, net		(0.90	)		(0.95	)		(0.79	)		(0.93	)		(0.31	)
Efficiency ratio, fully taxable equivalent(b)		70.42			70.66			63.29			54.42			51.97

(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 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 gains / losses, net).

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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 2012 results compared to 2011. Discussion of 2011 results compared to 2010 is predominantly in section “2011 Compared to 2010.”

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 management 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 investment securities), 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.

2012 was a year for execution of growth initiatives and improving credit quality. Net income available to common equity for 2012 was $174 million or $1.00 per common share, an increase of 51% over 2011. Total loans increased $1.4 billion (10%) during 2012 with growth in most loan categories, while total deposits grew $1.8 billion (12%). The net interest margin for 2012 improved to 3.30%, compared to 3.26% for 2011, due to reductions in deposit and funding costs which slightly outpaced reductions in earning asset yields. Credit quality continued to improve with nonaccrual loans down 29% to $253 million and net charge offs down 44% to $84 million. The quarterly dividend increased to $0.05 per common share during the first quarter of 2012 and increased to $0.08 per common share during the fourth quarter of 2012. The Corporation repurchased $60 million, or approximately 4.7 million shares of common stock, at an average cost per share of $12.77 during 2012. For 2013, the Corporation is focused on growing the franchise and creating long-term shareholder value.

Performance Summary

• Net income available to common equity for 2012 was $174 million (compared to net income available to common equity of $115 million for 2011) or diluted earnings per common share of $1.00 (versus diluted earnings per common share of $0.66 for 2011).

• Total loans increased $1.4 billion (10%) between year-end 2012 and 2011, with growth in most loan categories (commercial and business lending was up $916 million, commercial real estate lending was up $414 million, and residential mortgage loans were up $426 million, while retail loans decreased $376 million). On average, loans increased $1.5 billion (11%) primarily in commercial and residential mortgage loans (up $1.2 billion and $510 million, respectively), while retail loans declined $262 million. For 2013, the Corporation expects full year loan growth in the high single digits.

• Total deposits increased $1.8 billion (12%) between year-end 2012 and 2011. Money market deposits and noninterest-bearing demand deposits increased (up 27% and 21%, respectively), while brokered CDs and

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other time deposits decreased (down 27%). On average, total deposits increased $1.2 billion (8%) from 2011. For 2013, the Corporation will focus on growing core customer and commercial deposits, while emphasizing continued disciplined deposit pricing and a sustained focus on treasury management solutions.

• Credit quality continued to improve during 2012. Nonaccrual loans were $253 million at December 31, 2012, a decrease of $104 million (29%) from December 31, 2011. Potential problem loans declined to $361 million, a decrease of $205 million (36%) from December 31, 2011. At December 31, 2012, the allowance for loan losses to total loans ratio was 1.93%, covering 118% of nonaccrual loans, compared to 2.70% at December 31, 2011, covering 106% of nonaccrual loans. The provision for loan losses was $3 million for 2012, with net charge offs to average loans of 0.57% (compared to a provision for loan losses of $52 million and a net charge off ratio of 1.13% for 2011). For 2013, the Corporation expects continuing improvement in credit trends and an increase in the provision for loan losses consistent with new loan growth.

• Taxable equivalent net interest income was $647 million for 2012, $13 million or 2% higher than 2011, including favorable volume variances (increasing taxable equivalent net interest income by $39 million), partially offset by unfavorable rate variances (decreasing taxable equivalent net interest income by $26 million). The net interest margin for 2012 was 3.30%, 4 bp higher than 3.26% in 2011, attributable to a 8 bp increase in interest rate spread, partially offset by a 4 bp lower contribution from net free funds. For 2013, the Corporation anticipates modest compression on the net interest margin over the course of the year.

• Noninterest income was $313 million for 2012, $40 million or 15% higher than 2011. Core fee-based revenues (including trust service fees, service charges on deposit accounts, card-based and other nondeposit fees, insurance commissions, and brokerage and annuity commissions) totaled $220 million for 2012, down $16 million or 7% from $236 million for 2011. Net mortgage banking income was $64 million for 2012, an increase of $51 million from 2011. Collectively, all remaining noninterest income categories were $30 million, up $5 million compared to 2011. For additional discussion concerning noninterest income see section, “Noninterest Income.” For 2013, the Corporation expects modest improvement in core fee-based revenues and lower net mortgage banking revenues.

• Noninterest expense of $682 million grew $31 million (5%) over 2011. Personnel expense was $381 million, up $21 million (6%) versus 2011, while nonpersonnel noninterest expenses on an aggregate basis were up modestly (3%) compared to 2011. The efficiency ratio (as defined under Part II, Item 6, “Selected Financial Data”) was 70.42% for 2012 and 70.66% for 2011, respectively. For additional discussion regarding noninterest expense see section, “Noninterest Expense.” For 2013, the Corporation expects flat year over year noninterest expense with reduced regulatory costs offset by continued investments in the franchise.

• Income tax expense for 2012 was $75 million, compared to income tax expense of $44 million for 2011. The increase in income tax was primarily due to the increase in pretax income between the years. The effective tax rate was 29.7% for 2012, compared to an effective tax rate of 23.8% for 2011. 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 $626 million in 2012 compared to $613 million in 2011. 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 $21 million for both 2012 and 2011, respectively, resulted in fully taxable equivalent net interest income of $647 million in 2012 and $634 million in 2011.

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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, loan prepayment behavior, 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, 2012. 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 $647 million for 2012 was $13 million or 2% higher than 2011. The increase in taxable equivalent net interest income was a function of favorable volume variances (as balance sheet changes in both volume and mix increased taxable equivalent net interest income by $39 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 $26 million). The change in mix and volume of earning assets increased taxable equivalent interest income by $23 million, while the change in volume and composition of interest-bearing liabilities decreased interest expense by $16 million, for a net favorable volume impact of $39 million on taxable equivalent net interest income. Rate changes on earning assets reduced interest income by $47 million, while changes in rates on interest-bearing liabilities lowered interest expense by $21 million, for a net unfavorable rate impact of $26 million. See additional discussion in section “Interest Rate Risk.”

The Federal Reserve left the targeted Federal funds rate unchanged at 0.25% during 2012 and 2011. In December 2012, the Federal Reserve affirmed that it is unlikely that the short-term interest rates will increase until at least mid-2015.

For 2012, the yield on average earning assets of 3.77% was 15 bp lower than 2011. Loan yields decreased 34 bp (to 4.07%), due to the repricing of adjustable rate loans and competitive pricing pressures in a low interest rate environment. The yield on securities and short-term investments decreased 1 bp to 2.86%.

The cost of average interest-bearing liabilities of 0.62% in 2012 was 23 bp lower than 2011. The average cost of interest-bearing deposits was 0.36% in 2012, 24 bp lower than 2011, reflecting the low rate environment and a reduction of higher cost deposit products. The cost of short and long-term funding increased 1 bp to 1.55% for 2012, with short-term funding down 18 bp, while long-term funding increased 27 bp.

Average earning assets of $19.6 billion in 2012 were $172 million (1%) higher than 2011. Average loans increased $1.5 billion (11%), including a $1.2 billion increase in commercial loans and a $510 million increase in residential mortgage loans, partially offset by a $262 million decrease in retail loans. Average securities and short-term investments decreased $1.3 billion, reflecting the Corporation’s strategy of funding loan growth primarily through investment securities run-off.

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Average interest-bearing liabilities of $14.9 billion in 2012 were down $215 million (1%) versus 2011. On average, interest-bearing deposits increased $614 million, while average noninterest-bearing demand deposits (a principal component of net free funds) increased by $568 million. Average short and long-term funding decreased $829 million, consisting of a $580 million decrease in short-term funding and a $249 million decrease in long-term funding.

The net interest margin for 2012 was 3.30%, compared to 3.26% in 2011. The 4 bp improvement in net interest margin was attributable to a 8 bp increase in interest rate spread (the net of a 15 bp decrease in the yield on earning assets and a 23 bp decrease in the cost of interest-bearing liabilities), partially offset by a 4 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).

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

	Years Ended December 31,
	2012								2011								2010
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
	($ in Thousands)
ASSETS
Earning assets:
Loans:(1)(2)(3)
Commercial and business lending	$	5,139,155		$	202,444		3.94	%	$	4,301,377		$	182,362		4.24	%	$	4,257,475		$	187,729		4.41	%
Commercial real estate lending		3,350,190			140,881		4.21			2,973,351			132,789		4.47			3,533,079			151,866		4.30
Total commercial		8,489,345			343,325		4.04			7,274,728			315,151		4.33			7,790,554			339,595		4.36
Residential mortgage		3,330,123			121,399		3.65			2,819,702			116,207		4.12			2,059,156			99,163		4.82
Retail		2,922,317			135,094		4.62			3,184,418			154,793		4.86			3,337,002			173,015		5.18
Total loans		14,741,785			599,818		4.07			13,278,848			586,151		4.41			13,186,712			611,773		4.64
Investment securities:
Taxable		3,676,914			86,945		2.36			4,701,482			123,371		2.62			4,579,182			155,032		3.39
Tax-exempt(1)		792,627			45,848		5.78			795,815			47,899		6.02			860,547			54,264		6.31
Other short-term investments		402,451			6,719		1.67			666,118			5,575		0.84			1,942,054			8,692		0.45
Investments and other		4,871,992			139,512		2.86			6,163,415			176,845		2.87			7,381,783			217,988		2.95
Total earning assets	$	19,613,777		$	739,330		3.77	%	$	19,442,263		$	762,996		3.92	%	$	20,568,495		$	829,761		4.03	%
Allowance for loan losses		(342,313	)							(442,034	)							(582,881	)
Cash and due from banks		352,735								318,650								331,775
Other assets		2,352,158								2,269,741								2,307,676
Total assets	$	21,976,357							$	21,588,620							$	22,625,065
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Savings deposits	$	1,096,692		$	851		0.08	%	$	987,198		$	1,091		0.11	%	$	898,019		$	1,176		0.13	%
Interest-bearing demand deposits		2,148,459			3,741		0.17			1,947,506			3,429		0.18			2,780,525			6,314		0.23
Money market deposits		6,148,663			15,336		0.25			5,147,437			16,385		0.32			6,374,071			33,417		0.52
Time deposits		2,239,709			21,503		0.96			2,937,858			44,843		1.53			3,798,995			65,116		1.71
Total interest-bearing deposits		11,633,523			41,431		0.36			11,019,999			65,748		0.60			13,851,610			106,023		0.77
Federal funds purchased and securities sold under agreements to repurchase		1,177,105			2,687		0.23			1,926,474			6,196		0.32			570,141			7,196		1.26
Other short-term funding		936,376			3,294		0.35			767,230			6,215		0.81			117,216			787		0.67
Total short-term funding		2,113,481			5,981		0.28			2,693,704			12,411		0.46			687,357			7,983		1.16
Total long-term funding		1,158,731			44,880		3.87			1,407,121			50,632		3.60			1,765,253			58,341		3.30
Total short and long-term funding		3,272,212			50,861		1.55			4,100,825			63,043		1.54			2,452,610			66,324		2.70
Total interest-bearing liabilities	$	14,905,735		$	92,292		0.62	%	$	15,120,824		$	128,791		0.85	%	$	16,304,220		$	172,347		1.06	%
Noninterest-bearing demand deposits		3,948,846								3,381,128								3,094,691
Accrued expenses and other liabilities		172,788								89,378								42,582
Stockholders’ equity		2,948,988								2,997,290								3,183,572
Total liabilities and stockholders’ equity	$	21,976,357							$	21,588,620							$	22,625,065
Net interest income and rate spread(1)				$	647,038		3.15	%				$	634,205		3.07	%				$	657,414		2.97	%
Net interest margin(1)							3.30	%							3.26	%							3.20	%
Taxable equivalent adjustment				$	21,046							$	21,374							$	23,635

(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.

37

TABLE 3: Rate/Volume Analysis(1)

	2012 Compared to 2011 Increase (Decrease) Due to									2011 Compared to 2010 Increase (Decrease) Due to
	Volume			Rate			Net			Volume			Rate			Net
	($ in Thousands)
Interest income:
Loans:(2)
Commercial and business lending	$	33,726		$	(13,644	)	$	20,082		$	2,454		$	(7,821	)	$	(5,367	)
Commercial real estate lending		16,186			(8,094	)		8,092			(24,812	)		5,735			(19,077	)
Total commercial		49,912			(21,738	)		28,174			(22,358	)		(2,086	)		(24,444	)
Residential mortgage		19,552			(14,360	)		5,192			32,827			(15,783	)		17,044
Retail		(12,350	)		(7,349	)		(19,699	)		(7,702	)		(10,520	)		(18,222	)
Total loans		57,114			(43,447	)		13,667			2,767			(28,389	)		(25,622	)
Investment securities
Taxable		(30,639	)		(5,787	)		(36,426	)		6,159			(37,820	)		(31,661	)
Tax-exempt(2)		(191	)		(1,860	)		(2,051	)		(3,966	)		(2,399	)		(6,365	)
Other short-term investments		(2,832	)		3,976			1,144			(7,849	)		4,732			(3,117	)
Investments and other		(33,662	)		(3,671	)		(37,333	)		(5,656	)		(35,487	)		(41,143	)
Total earning assets(2)	$	23,452		$	(47,118	)	$	(23,666	)	$	(2,889	)	$	(63,876	)	$	(66,765	)
Interest expense:
Savings deposits	$	112		$	(352	)	$	(240	)	$	110		$	(195	)	$	(85	)
Interest-bearing demand deposits		350			(38	)		312			(1,649	)		(1,236	)		(2,885	)
Money market deposits		2,870			(3,919	)		(1,049	)		(5,600	)		(11,432	)		(17,032	)
Time deposits		(8,589	)		(14,751	)		(23,340	)		(12,999	)		(7,274	)		(20,273	)
Total interest-bearing deposits		(5,257	)		(19,060	)		(24,317	)		(20,138	)		(20,137	)		(40,275	)
Federal funds purchased and securities sold under agreements to repurchase		(2,010	)		(1,499	)		(3,509	)		7,405			(8,405	)		(1,000	)
Other short-term funding		1,159			(4,080	)		(2,921	)		5,233			195			5,428
Total short-term funding		(851	)		(5,579	)		(6,430	)		12,638			(8,210	)		4,428
Total long-term funding		(9,429	)		3,677			(5,752	)		(12,567	)		4,858			(7,709	)
Total short and long-term funding		(10,280	)		(1,902	)		(12,182	)		71			(3,352	)		(3,281	)
Total interest-bearing liabilities	$	(15,537	)	$	(20,962	)	$	(36,499	)	$	(20,067	)	$	(23,489	)	$	(43,556	)
Net interest income(2)	$	38,989		$	(26,156	)	$	12,833		$	17,178		$	(40,387	)	$	(23,209	)

(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.

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

	2012 Average								2011 Average								2010 Average
	Balance		% of Earning Assets			Yield / Rate			Balance		% of Earning Assets			Yield / Rate			Balance		% of Earning Assets			Yield / Rate
	($ in Thousands)
Total loans	$	14,741,785		75.2	%		4.07	%	$	13,278,848		68.3	%		4.41	%	$	13,186,712		64.1	%		4.64	%
Securities and short-term investments		4,871,992		24.8	%		2.86	%		6,163,415		31.7	%		2.87	%		7,381,783		35.9	%		2.95	%
Earning assets	$	19,613,777		100.0	%		3.77	%	$	19,442,263		100.0	%		3.92	%	$	20,568,495		100.0	%		4.03	%
Financed by:
Interest-bearing funds	$	14,905,735		76.0	%		0.62	%	$	15,120,824		77.8	%		0.85	%	$	16,304,220		79.3	%		1.06	%
Noninterest-bearing funds		4,708,042		24.0	%					4,321,439		22.2	%					4,264,275		20.7	%
Total funds sources	$	19,613,777		100.0	%		0.47	%	$	19,442,263		100.0	%		0.66	%	$	20,568,495		100.0	%		0.84	%
Interest rate spread							3.15	%							3.07	%							2.97	%
Contribution from net free funds							0.15	%							0.19	%							0.23	%
Net interest margin							3.30	%							3.26	%							3.20	%
Average prime rate*							3.25	%							3.25	%							3.25	%
Average effective federal funds rate*							0.15	%							0.11	%							0.18	%
Average spread							310	bp							314	bp							307	bp

* Source: Bloomberg

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TABLE 5: Selected Average Balances

	2012		2011		Dollar Change			Percent Change
	($ in Thousands)
ASSETS
Loans:
Commercial and business lending	$	5,139,155	$	4,301,377	$	837,778			19.5	%
Commercial real estate lending		3,350,190		2,973,351		376,839			12.7
Total commercial		8,489,345		7,274,728		1,214,617			16.7
Residential mortgage		3,330,123		2,819,702		510,421			18.1
Retail		2,922,317		3,184,418		(262,101	)		(8.2	)
Total loans		14,741,785		13,278,848		1,462,937			11.0
Investment securities:
Taxable		3,676,914		4,701,482		(1,024,568	)		(21.8	)
Tax-exempt		792,627		795,815		(3,188	)		(0.4	)
Short-term investments		402,451		666,118		(263,667	)		(39.6	)
Securities and short-term investments		4,871,992		6,163,415		(1,291,423	)		(21.0	)
Total earning assets		19,613,777		19,442,263		171,514			0.9
Other assets		2,362,580		2,146,357		216,223			10.1
Total assets	$	21,976,357	$	21,588,620	$	387,737			1.8	%
LIABILITIES & STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
Savings deposits	$	1,096,692	$	987,198	$	109,494			11.1	%
Interest-bearing demand deposits		2,148,459		1,947,506		200,953			10.3
Money market deposits		6,148,663		5,147,437		1,001,226			19.5
Time deposits		2,239,709		2,937,858		(698,149	)		(23.8	)
Total interest-bearing deposits		11,633,523		11,019,999		613,524			5.6
Short-term funding:
Federal funds purchased and securities sold under agreements to repurchase		1,177,105		1,926,474		(749,369	)		(38.9	)
Other short-term funding		936,376		767,230		169,146			22.0
Total short-term funding		2,113,481		2,693,704		(580,223	)		(21.5	)
Total long-term funding		1,158,731		1,407,121		(248,390	)		(17.7	)
Total short and long-term funding		3,272,212		4,100,825		(828,613	)		(20.2	)
Total interest-bearing liabilities		14,905,735		15,120,824		(215,089	)		(1.4	)
Noninterest-bearing demand deposits		3,948,846		3,381,128		567,718			16.8
Accrued expenses and other liabilities		172,788		89,378		83,410			93.3
Stockholders’ equity		2,948,988		2,997,290		(48,302	)		(1.6	)
Total liabilities and stockholders’ equity	$	21,976,357	$	21,588,620	$	387,737			1.8	%

Provision for Loan Losses

The provision for loan losses in 2012 was $3 million, compared to $52 million in 2011. Net charge offs were $84 million (representing 0.57% of average loans) for 2012, compared to $151 million (representing 1.13% of average loans) for 2011. At December 31, 2012, the allowance for loan losses was $297 million. In comparison, the allowance for loan losses was $378 million at December 31, 2011. The ratio of the allowance for loan losses to total loans was 1.93% and 2.70% at December 31, 2012, and 2011, respectively. Nonaccrual loans at December 31, 2012, were $253 million, compared to $357 million at December 31, 2011, representing 1.64% and 2.54% of total loans, respectively.

40

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 $313 million for 2012, up $40 million or 15% from 2011. Core fee-based revenue (as defined in Table 6 below) was $220 million for 2012, down $16 million or 7% versus 2011. Net mortgage banking income was $64 million compared to $13 million for 2011. Net losses on investment securities and asset sales combined were $8 million for 2012, a favorable change of $5 million versus 2011. All other noninterest income categories combined were $37 million, down $1 million compared to 2011. “Fee income” (defined in Table 6 below) as a percentage of “total revenue” (defined as taxable equivalent net interest income plus fee income) was 33% for 2012 compared to 31% for 2011.

TABLE 6: Noninterest Income

	Years Ended December 31,									Change From Prior Year
	2012			2011			2010			$ Change 2012			% Change 2012			$ Change 2011			% Change 2011
	($ in Thousands)
Trust service fees	$	40,737		$	39,145		$	37,853		$	1,592			4.1	%	$	1,292			3.4	%
Service charges on deposit accounts		68,917			75,908			96,740			(6,991	)		(9.2	)		(20,832	)		(21.5	)
Card-based and other nondeposit fees		47,862			57,905			59,299			(10,043	)		(17.3	)		(1,394	)		(2.4	)
Insurance commissions		47,014			45,554			43,829			1,460			3.2			1,725			3.9
Brokerage and annuity commissions		15,643			17,230			17,427			(1,587	)		(9.2	)		(197	)		(1.1	)
Core fee-based revenue		220,173			235,742			255,148			(15,569	)		(6.6	)		(19,406	)		(7.6	)
Mortgage banking income		89,231			45,956			59,145			43,275			94.2			(13,189	)		(22.3	)
Mortgage servicing rights expense		25,731			33,233			26,009			(7,502	)		(22.6	)		7,224			27.8
Mortgage banking, net		63,500			12,723			33,136			50,777			N/M			(20,413	)		(61.6	)
Capital market fees, net		14,241			8,711			6,072			5,530			63.5			2,639			43.5
Bank owned life insurance income		13,952			14,896			15,761			(944	)		(6.3	)		(865	)		(5.5	)
Other		9,259			14,358			12,493			(5,099	)		(35.5	)		1,865			14.9
Subtotal (“fee income”)		321,125			286,430			322,610			34,695			12.1			(36,180	)		(11.2	)
Asset losses, net		(12,096	)		(12,199	)		(12,065	)		103			(0.8	)		(134	)		1.1
Investment securities gains (losses), net		4,261			(1,112	)		24,917			5,373			N/M			(26,029	)		(104.5	)
Total noninterest income	$	313,290		$	273,119		$	335,462		$	40,171			14.7	%	$	(62,343	)		(18.6	)%

N/M=not meaningful

Trust service fees for 2012 were $41 million, up $2 million (4%) from 2011, primarily due to asset management fees on higher account balances as stock market performance improved in 2012. The market value of average assets under management for the years ended December 31, 2012 and 2011, was $6.0 billion and $5.7 billion, respectively. The market value of assets under management at December 31, 2012, was $6.5 billion compared to $5.6 billion at December 31, 2011.

41

Service charges on deposit accounts were $69 million, $7 million (9%) lower than 2011. The decrease was primarily attributable to lower nonsufficient funds / overdraft fees (down $7 million to $31 million), due to changes in customer behavior, recent regulatory changes, and changes in deposit account products.

Card-based and other nondeposit fees were $48 million for 2012, a decrease of $10 million (17%) from 2011. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included a provision, the “Durbin Amendment,” which governs the amount banks can charge as interchange fees. The Durbin Amendment negatively impacted the amount the bank charged in interchange fees beginning in the fourth quarter of 2011. Insurance commissions were $47 million for 2012, up $1 million (3%) from 2011, primarily due to higher insurance premiums on benefit plan related products. Brokerage and annuity commissions were $16 million for 2012, down $2 million (9%) from 2011, attributable to lower fixed annuity commissions.

Net mortgage banking income for 2012 was $64 million, up $51 million compared to 2011. 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, provision for losses on repurchased mortgage loans, and fair value marks on the mortgage derivatives (collectively “gains on sales and related income”)) was $89 million in 2012, an increase of $43 million (94%) compared to 2011. This increase was primarily attributable to a higher volume of loans sold to the secondary market, resulting in higher gains on sales and related income, partially offset by the establishment of a $3 million repurchase reserve for repurchase and loss reimbursement claims on previously sold mortgage loans (see section “Contractual Obligations, Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” and Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to consolidated financial statements for additional information concerning this repurchase reserve). Secondary mortgage production was $2.8 billion for 2012, compared to $1.9 billion for 2011.

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 million for 2012 compared to $33 million for 2011, including a $5 million reduction in expense due to changes in the valuation reserve (comprised of a $2 million addition to the valuation reserve in 2012, compared to a $7 million addition to the valuation reserve during 2011) and $2 million lower 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, 2012, the net mortgage servicing rights asset was $46 million, representing 62 bp of the $7.5 billion portfolio of residential mortgage loans serviced for others, compared to a net mortgage servicing rights asset of $48 million, representing 66 bp of the $7.3 billion mortgage portfolio serviced for others at December 31, 2011. Mortgage servicing rights are considered a critical accounting policy given that estimating their fair value involves a 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,” 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 $14 million, an increase of $6 million (64%) compared to 2011, primarily due to a favorable change in the credit valuation adjustment from improvements in credit quality. Bank owned life insurance (“BOLI”) income was $14 million, down $1 million (6%) from 2011, primarily due to the lower interest rates on the underlying assets of the BOLI investment. Other income was $9 million, a decrease of $5 million (36%) versus 2011 primarily due to a decrease in limited partnership income.

42

Net asset losses of $12 million for 2012 were primarily attributable to write-downs of $8 million on impaired and abandoned software during 2012 and $10 million of losses on sales and other write-downs on other real estate owned, partially offset by a $6 million gain on the sale of three retail branches in rural western Illinois. Net asset losses of $12 million for 2011 were primarily attributable to losses on sales and other write-downs of other real estate owned. Investment securities gains of $4 million for 2012 were primarily attributable to gains on sales of equity, mortgage-related and trust preferred debt securities; while net investment securities losses of $1 million for 2011 were due to credit related other-than-temporary write-downs on a pooled trust preferred debt security.

Noninterest Expense

Noninterest expense for 2012 was $682 million, an increase of $31 million or 5% over 2011. Personnel expense increased $21 million (6%), while nonpersonnel noninterest expenses increased $10 million (3%) compared to 2011.

TABLE 7: Noninterest Expense

	Years Ended December 31,									Change From Prior Year
	2012			2011			2010			$ Change 2012			% Change 2012			$ Change 2011			% Change 2011
	($ in Thousands)
Personnel expense	$	381,404		$	360,144		$	325,063		$	21,260			5.9	%	$	35,081			10.8	%
Occupancy		60,794			55,939			49,937			4,855			8.7			6,002			12.0
Equipment		23,566			19,873			18,371			3,693			18.6			1,502			8.2
Data processing		43,548			32,475			29,714			11,073			34.1			2,761			9.3
Business development and advertising		21,303			23,038			18,385			(1,735	)		(7.5	)		4,653			25.3
Other intangible amortization		4,195			4,714			4,919			(519	)		(11.0	)		(205	)		(4.2	)
Loan expense		12,285			12,008			9,965			277			2.3			2,043			20.5
Legal and professional fees		31,232			18,205			20,439			13,027			71.6			(2,234	)		(10.9	)
Losses other than loans		12,258			17,921			14,793			(5,663	)		(31.6	)		3,128			21.1
Foreclosure / OREO expense		15,069			21,393			23,783			(6,324	)		(29.6	)		(2,390	)		(10.0	)
FDIC expense		19,478			28,484			46,377			(9,006	)		(31.6	)		(17,893	)		(38.6	)
Other		56,691			56,329			58,513			362			0.6			(2,184	)		(3.7	)
Total noninterest expense	$	681,823		$	650,523		$	620,259		$	31,300			4.8	%	$	30,264			4.9	%
Personnel expense to total noninterest expense		55.9	%		55.4	%		52.4	%

Personnel expense (which includes salary-related expenses and fringe benefit expenses) was $381 million for 2012, up $21 million (6%) from 2011. Average full-time equivalent employees were 4,968 for 2012, relatively unchanged from 4,985 employees for 2011. Salary-related expenses increased $15 million (5%). This increase was primarily the result of higher compensation and commissions (up $3 million or 1%, including merit increases between the years and higher compensation related to the vesting of stock options and restricted stock grants), combined with higher performance-based incentives (up $12 million). Fringe benefit expenses increased $6 million (10%), primarily attributable to higher employment taxes and benefit plan expenses.

Nonpersonnel noninterest expenses on a combined basis were $300 million, up $10 million (3%) compared to $290 million for 2011. Occupancy, equipment and data processing were up $20 million (18%) due to strategic investments in our branch network, systems and infrastructure. Legal and professional fees increased $13 million due to other professional consultant costs related to certain BSA regulatory compliance issues. Losses other than loans decreased $6 million primarily due to the $13 million settlement on the Overdraft litigation in 2011 (see Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to

43

consolidated financial statements for additional information concerning this litigation), partially offset by a $7 million increase to the reserve for losses on unfunded commitments (attributable to the year-over-year growth in loans and related lending commitments). Foreclosure / OREO expenses of $15 million decreased $6 million, primarily attributable to a decline in legal and collection expenses related to the improvement in credit quality. FDIC expense decreased $9 million (32%) due to a change in the FDIC expense calculation (from a deposit based calculation to a net asset / risk-based assessment) and an improvement in the Corporation’s overall risk profile. All remaining noninterest expense categories on a combined basis were down $2 million (2%) compared to 2011.

Income Taxes

The Corporation recognized income tax expense of $75 million for 2012 compared to income tax expense of $44 million for 2011. The change in income tax expense was primarily due to the level of pretax income between the years. The effective tax rate was 29.7% for 2012, compared to an effective tax rate of 23.8% for 2011. During 2012, 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. During 2011, the Corporation recorded a $5 million net decrease in the reserve for uncertain tax positions related to the expiration of tax statutes of limitations and a $6 million net decrease in valuation allowance related to changes in tax law. Income tax expense is also impacted by ongoing federal and state income tax audits and changes in tax law.

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 uncertain tax positions 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 balance sheet growth historically was driven by loan growth. See section “Loans.” The Corporation has historically financed its asset 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 (see section “Capital”).

Loans

Total loans were $15.4 billion at December 31, 2012, an increase of $1.4 billion or 10% from December 31, 2011. Commercial loans were $9.3 billion, up $1.3 billion (17%) to represent 61% of total loans at the end of 2012, compared to 57% at year-end 2011. Retail loans were $2.7 billion, down $376 million (12%) and represented 17% of total loans compared to 22% at December 31, 2011, while residential mortgage loans increased $426 million (14%) to represent 22% of total loans at December 31, 2012 and 21% at December 31, 2011.

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TABLE 8: Loan Composition

	As of December 31,
	2012					2011					2010					2009					2008
	Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total
	($ in Thousands)
Commercial and industrial	$	4,502,021		29	%	$	3,724,736		27	%	$	3,049,752		24	%	$	3,450,632		24	%	$	4,388,691		27	%
Commercial real estate — owner occupied		1,219,747		8			1,086,829		8			1,049,798		9			1,198,075		9			1,239,139		7
Lease financing		64,196		1			58,194		—			60,254		—			95,851		1			122,113		1
Commercial and business lending		5,785,964		38			4,869,759		35			4,159,804		33			4,744,558		34			5,749,943		35
Commercial real estate — investor		2,906,759		19			2,563,767		18			2,339,415		18			2,618,991		18			2,327,412		15
Real estate construction		655,381		4			584,046		4			553,069		4			1,397,493		10			2,260,888		13
Commercial real estate lending		3,562,140		23			3,147,813		22			2,892,484		22			4,016,484		28			4,588,300		28
Total commercial		9,348,104		61			8,017,572		57			7,052,288		55			8,761,042		62			10,338,243		63
Home equity		2,219,494		14			2,504,704		18			2,523,057		20			2,546,167		18			2,883,317		18
Installment		466,727		3			557,782		4			695,383		6			873,568		6			827,303		5
Total retail		2,686,221		17			3,062,486		22			3,218,440		26			3,419,735		24			3,710,620		23
Residential mortgage		3,376,697		22			2,951,013		21			2,346,007		19			1,947,848		14			2,235,045		14
Total consumer		6,062,918		39			6,013,499		43			5,564,447		45			5,367,583		38			5,945,665		37
Total loans	$	15,411,022		100	%	$	14,031,071		100	%	$	12,616,735		100	%	$	14,128,625		100	%	$	16,283,908		100	%
Commercial real estate and Real estate construction loan detail:
Farmland	$	17,730		1	%	$	$26,221		1	%	$	$36,741		2	%	$	$47,514		2	%	$	$57,242		3	%
Multi-family		905,372		31			694,056		27			485,977		21			543,936		21			496,059		21
Non-owner occupied		1,983,657		68			1,843,490		72			1,816,697		77			2,027,541		77			1,774,111		76
Commercial real estate — investor	$	2,906,759		100	%	$	2,563,767		100	%	$	2,339,415		100	%	$	2,618,991		100	%	$	2,327,412		100	%
1-4 family construction	$	176,874		27	%	$	$120,170		21	%	$	$96,296		17	%	$	$251,307		18	%	$	$423,137		19	%
All other construction		478,507		73			463,876		79			456,773		83			1,146,186		82			1,837,751		81
Real estate construction	$	655,381		100	%	$	584,046		100	%	$	553,069		100	%	$	1,397,493		100	%	$	2,260,888		100	%

The Corporation has long-term guidelines relative to the proportion of Retail, Commercial and Industrial, and Commercial Real Estate loans within the overall loan portfolio. Furthermore, certain sub-asset classes within the respective portfolios were further defined and dollar limitations were placed on these sub-portfolios. These guidelines and limits have subsequently been, and will continue to be, reviewed quarterly and approved annually by the Enterprise Risk Committee of the Corporation’s Board of Directors. These guidelines and limits are designed to create balance and diversification within the loan portfolios.

The commercial and business lending portfolio, which consists of commercial and business loans and owner occupied commercial real estate loans, was $5.8 billion at the end of 2012, up $916 million (19%) since year-end 2011, and comprised 38% of total loans outstanding at year-end 2012 compared to 35% at year-end 2011. The commercial and business lending classification primarily includes 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 business lending category, commercial and industrial loans were $4.5 billion, an increase of $777 million (21%) from December 31, 2011, and represented 29% of total loans, compared to 27% for the prior year-end. Commercial real estate owner occupied totaled $1.2 billion at December 31, 2012, up $133 million (12%) from December 31, 2011, and comprised 8% of total loans, unchanged from 8% of total loans for year-end 2011. The Corporation formed the Specialized Financial Services Group

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during the second half of 2010 to capitalize on opportunities in several targeted industry segments within its existing portfolios (e.g., insurance, mortgage warehouse, public funds, healthcare, financial institutions) and to expand into several new industry segments (power, oil and gas). During 2012, mortgage warehouse loans increased $167 million to $508 million of loans outstanding, while the newer industry segments combined (power, oil and gas) increased $308 million to $604 million of loans outstanding.

The commercial real estate lending portfolio, which consists of investor commercial real estate and construction loans, totaled $3.6 billion at December 31, 2012, up $414 million (13%) from December 31, 2011, and comprised 23% of total loans, compared to 22% of total loans at year-end 2011. During 2012, the Corporation committed resources to grow this business, including investments to expand into new markets (Cincinnati, Indianapolis, and Detroit). Within the commercial real estate lending portfolio, commercial real estate lending to investors totaled $2.9 billion at December 31, 2012, up $343 million (13%) from December 31, 2011, and comprised 19% of total loans, compared to 18% of total loans at year-end 2011. Commercial real estate primarily includes commercial-based loans to investors that are secured by commercial income properties or multifamily projects. Commercial real estate loans are typically intermediate to long-term financings. 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 were up $71 million (12%) to $655 million, representing 4% of the total loan portfolio at the end of both 2012 and 2011. 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.

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 $2.7 billion at December 31, 2012, down $376 million (12%) compared to 2011, and represented 17% of the 2012 year-end loan portfolio versus 22% at year-end 2011. Loans in this classification include home equity and installment loans. Home equity consists of home equity lines, as well as home equity loans, approximately half 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 $374 million and $448 million of education loans at December 31, 2012 and 2011, 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 $3.4 billion at the end of 2012, up $426 million (14%) from the prior year and comprised 22% of total loans outstanding at December 31, 2012 and 21% at December 31, 2011. Residential

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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 30-year, fixed-rate residential real estate mortgage loans are sold in the secondary market with servicing rights retained. During the second half of 2010, the Corporation made a decision to retain a portion of its 15-year and under, fixed-rate residential real estate mortgages in its loan portfolio. At December 31, 2012, the residential mortgage portfolio was comprised of $1.3 billion of fixed-rate residential real estate mortgages and $2.1 billion of variable-rate residential real estate mortgages, compared to $1.1 billion of fixed-rate mortgages and $1.9 billion variable-rate mortgages at December 31, 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. The average FICO score for new home equity production in 2012 was 780 versus 783 in 2011. 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, and appropriate allowance for loan losses, 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, 2012, no significant concentrations existed in the Corporation’s portfolio in excess of 10% of total loans.

TABLE 9: Commercial Loan Maturity Distribution and Interest Rate Sensitivity

	Maturity(1)
December 31, 2012	Within 1 Year(2)			1-5 Years			After 5 Years			Total
	($ in Thousands)
Commercial and industrial	$	3,610,049		$	695,529		$	196,443		$	4,502,021
Commercial real estate — investor		1,325,916			1,447,962			132,881			2,906,759
Commercial real estate — owner occupied		546,198			558,066			115,483			1,219,747
Real estate construction		402,914			226,320			26,147			655,381
Total	$	5,885,077		$	2,927,877		$	470,954		$	9,283,908
Fixed rate	$	2,006,974		$	1,336,320		$	273,785		$	3,617,079
Floating or adjustable rate		3,878,103			1,591,557			197,169			5,666,829
Total	$	5,885,077		$	2,927,877		$	470,954		$	9,283,908
Percent by maturity distribution		63	%		32	%		5	%		100	%

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(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. Because each of the criteria used is subject to change, the allowance for loan losses is not necessarily indicative of the trend of future loan losses in any particular category. The total allowance for loan losses is available to absorb losses from any segment of the loan portfolio. 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, 2012, the allowance for loan losses was $297 million, compared to $378 million at December 31, 2011. The allowance for loan losses to total loans was 1.93% and 2.70% at December 31, 2012, and 2011, respectively, and the allowance for loan losses covered 118% and 106% of nonaccrual loans at December 31, 2012, and 2011, respectively. Management’s allowance for loan losses 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, 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 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, a provision for loan losses of $3 million was recognized for 2012, compared to a provision for loan losses of $52 million for 2011.

The economy remained fragile during 2012, as stabilizing real estate values and improved (but relatively elevated) levels of unemployment were countered by public sector fiscal concerns in the United States and European economic challenges. The national unemployment rate declined to 7.8% at December 2012 versus 8.5% twelve months earlier. The Midwest jobless rate paralleled that trend in 2012 and remains below the national level, as the Midwest unemployment rate was 7.1% at December 2012 compared with 7.9% at December 2011, according to the Bureau of Labor Statistics.

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Residential real estate markets stabilized nationally during 2012 but remained weaker across the Midwest. Based on the FHFA Conventional and Conforming Home Price Index, residential home prices were flat across the U.S. but declined slightly (2-3%) within the Corporation’s core footprint states. The percentage of distress sales remain relatively high but declined substantially throughout 2012, which should mitigate the downward price pressure of residential home prices going forward. Expectations are for some modest home price improvement in 2013. Commercial real estate values (based on the Moody’s//REAL Commercial Property Price Index) continued to advance nationally during 2012 as evidenced by approximate growth of 6% for all commercial property types; however, commercial property prices remain about 20% below the peak in the fourth quarter of 2007. Multi-family has led the improvement in commercial property prices with a 5% increase in 2012 and a greater than 40% increase since the low in the fourth quarter of 2009. Multi-family prices have benefitted from lower vacancy rates as a result of weak residential home prices. However, other types of commercial investment properties (e.g. retail and office buildings) continue to experience weakness due to the stagnant economy. Commercial property prices as a whole are improving in the Midwest, but far more slowly than in other regions of the U.S.

In a challenging real estate market, such as currently exists as described above, the value of the collateral securing the loans continues to be one of the most important factors in determining the appropriate amount of allowance for estimated loan losses to record at the balance sheet date.

Credit quality, as a result of the modestly improved economy, also continued to improve during 2012. Nonaccrual loans declined to $253 million (representing 1.64% of total loans), down 29% from December 31, 2011, due to organic portfolio improvements, including a lower level of loans moving into the nonaccrual and potential problem loan categories. Loans past due 30-89 days totaled $64 million at December 31, 2012, an increase of 46% from December 31, 2011, while potential problem loans declined to $361 million, a reduction of 36% from year-end 2011.

Gross charge offs were $117 million for 2012 and $190 million for 2011, while recoveries for the corresponding periods were $33 million and $39 million, respectively. As a result, net charge offs were $84 million or 0.57% of average loans for 2012, compared to $151 million or 1.13% of average loans for 2011 (see Table 10). The 2012 decrease in net charge offs of $67 million was comprised of a $44 million decrease in commercial net charge offs, and a $23 million decrease in consumer-related net charge offs. For 2012, 46% of net charge offs came from commercial loans (commercial loans represented 61% of total loans at year-end 2012), compared to 54% for 2011. The continued elevated levels of home equity and residential mortgage loan net charge offs was primarily due to the continued elevated unemployment levels and weak housing market. For 2012, retail loans (which represent 17% of total loans at year-end 2012) accounted for 38% of net charge offs, up from 36% for 2011. Residential mortgages (representing 22% of total loans at year-end 2012) accounted for 16% of 2012 net charge offs, compared to 10% for 2011. Gross charge offs of retail and residential mortgage loans began moderating in 2011 and 2012, as economic conditions improved slightly, however, uncertainty continues to exist as unemployment remains elevated, and high energy prices, rising health care costs, and a weak housing market continue to impact consumer borrowing behavior and ability to pay back debt. Loans charged off are subject to continuous review, and specific efforts are taken to achieve maximum recovery of principal, accrued interest, and related expenses.

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TABLE 10: Loan Loss Experience

	Years Ended December 31,
	2012					2011					2010					2009					2008
	($ in Thousands)
Allowance for loan losses, at beginning of year	$	378,151				$	476,813				$	573,533				$	265,378				$	200,570
Provision for loan losses		3,000					52,000					390,010					750,645					202,058
Loans charged off:
Commercial and industrial		43,240					38,662					121,179					161,260					45,207
Commercial real estate — owner occupied		4,080					9,485					20,871					7,889					4,943
Lease financing		797					173					11,081					1,575					599
Commercial and business lending		48,117					48,320					153,131					170,724					50,749
Commercial real estate — investor		14,000					29,479					96,530					49,399					7,989
Real estate construction		3,588					38,222					204,728					157,752					55,782
Commercial real estate lending		17,588					67,701					301,258					207,151					63,771
Total commercial		65,705					116,021					454,389					377,875					114,520
Home equity		34,125					42,623					51,132					49,674					20,011
Installment		3,057					16,134					9,787					10,364					7,546
Total retail		37,182					58,757					60,919					60,038					27,557
Residential mortgage		14,159					14,954					13,184					14,293					3,749
Total loans charged off (1)(2)		117,046					189,732					528,492					452,206					145,826
Recoveries of loans previously charged off:
Commercial and industrial		18,363					16,350					20,609					5,583					6,000
Commercial real estate — owner occupied		453					2,509					308					537					313
Lease financing		1,899					1,955					25					5					29
Commercial and business lending		20,715					20,814					20,942					6,125					6,342
Commercial real estate — investor		4,796					5,666					10,141					512					78
Real estate construction		2,129					7,521					6,040					555					73
Commercial real estate lending		6,925					13,187					16,181					1,067					151
Total commercial		27,640					34,001					37,123					7,192					6,493
Home equity		3,898					3,201					2,733					884					384
Installment		1,234					1,584					1,669					1,525					1,386
Total retail		5,132					4,785					4,402					2,409					1,770
Residential mortgage		532					284					237					115					313
Total recoveries		33,304					39,070					41,762					9,716					8,576
Total net charge offs (1)(2)		83,742					150,662					486,730					442,490					137,250
Allowance for loan losses, at end of year	$	297,409				$	378,151				$	476,813				$	573,533				$	265,378
Ratios at end of year:
Allowance for loan losses to total loans		1.93	%				2.70	%				3.78	%				4.06	%				1.63	%
Allowance for loan losses to net charge offs		3.6x					2.5x					1.0x					1.3x					1.9x
Net loan charge offs (recoveries):				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial and industrial	$	24,877		63		$	22,312		70		$	100,570		330		$	155,677		401		$	39,207		90
Commercial real estate — owner occupied		3,627		33			6,976		67			20,563		183			7,352		58			4,630		37
Lease financing		(1,102	)	N/M			(1,782	)	N/M			11,056		N/M			1,570		144			570		47
Commercial and business lending		27,402		53			27,506		64			132,189		310			164,599		312			44,407		78
Commercial real estate — investor		9,204		33			23,813		98			86,389		346			48,887		197			7,911		34
Real estate construction		1,459		25			30,701		N/M			198,688		N/M			157,197		N/M			55,709		238
Commercial real estate lending		10,663		32			54,514		183			285,077		N/M			206,084		468			63,620		136
Total commercial		38,065		45			82,020		113			417,266		536			370,683		383			108,027		104
Home equity		30,227		125			39,422		153			48,399		195			48,790		181			19,627		74
Installment		1,823		36			14,550		237			8,118		95			8,839		103			6,160		74
Total retail		32,050		110			53,972		169			56,517		169			57,629		162			25,787		74
Residential mortgage		13,627		41			14,670		52			12,947		63			14,178		60			3,436		16
Total net charge offs (1)(2)	$	83,742		57		$	150,662		113		$	486,730		369		$	442,490		284		$	137,250		85
Commercial real estate and Real estate construction net charge off detail:
Farmland	$	(47	)	(21	)	$	704		225		$	377		89		$	146		28		$	74		13
Multi-family		103		1			4,531		77			13,516		256			6,225		119			1,116		22
Non-owner occupied		9,148		47			18,578		103			72,496		377			42,516		224			6,721		38
Commercial real estate — investor	$	9,204		33		$	23,813		98		$	86,389		346		$	48,887		197		$	7,911		34
1-4 family construction	$	(1,541	)	N/M		$	11,888		N/M		$	41,748		N/M		$	38,662		N/M		$	21,723		495
All other construction		3,000		66			18,813		N/M			156,940		N/M			118,535		N/M			33,986		178
Real estate construction	$	1,459		25		$	30,701		N/M		$	198,688		N/M		$	157,197		N/M		$	55,709		238

(A) Ratio of net charge offs to average loans by loan type in basis points.

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N/M Not meaningful

(1) 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.

(2) Charge offs for the year ended December 31, 2011, include $10 million of write-downs related to installment loans transferred to held for sale.

TABLE 11: Allocation of the Allowance for Loan Losses

	As of December 31,
	2012					2011					2010					2009					2008
	($ in Thousands)
Allowance allocation:				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial and industrial	$	97,852		2.17	%	$	124,374		3.34	%	$	137,770		4.52	%	$	196,637		5.70	%	$	103,198		2.35	%
Commercial real estate — owner occupied *		27,389		2.25			36,200		3.33			54,320		5.17			52,275		4.36			58,202		1.63
Lease financing		3,024		4.71			2,567		4.41			7,396		12.27			8303		8.66			777		0.64
Commercial and business lending		128,265		2.22			163,141		3.35			199,486		4.80			257,215		5.42			162,177
Commercial real estate — investor *		63,181		2.17			86,689		3.38			111,264		4.76			110,162		4.21			—		—
Real estate construction		20,741		3.16			21,327		3.65			56,772		10.26			118,708		8.49			65,991		2.92
Commercial real estate lending		83,922		2.36			108,016		3.43			168,036		5.81			228,870		5.70			65,991
Total commercial		212,187		2.27			271,157		3.38			367,522		5.21			486,085		5.55			228,168		2.21
Home equity		56,826		2.56			70,144		2.80			55,090		2.18			43,783		1.72			20,175		0.70
Installment		4,299		0.92			6,623		1.19			17,328		2.49			11,298		1.29			6,585		0.80
Total retail		61,125		2.28			76,767		2.51			72,418		2.25			55,081		1.61			26,760		0.72
Residential mortgage		24,097		0.71			30,227		1.02			36,873		1.57			32,367		1.66			10,450		0.47
Total consumer		85,222		1.41			106,994		1.78			109,291		1.96			87,448		1.63			37,210		0.63
Total allowance for loan losses	$	297,409		1.93	%	$	378,151		2.70	%	$	476,813		3.78	%	$	573,533		4.06	%	$	265,378		1.63	%
		(B	)	(C	)		(B	)	(C	)		(B	)	(C	)		(B	)	(C	)		(B	)	(C	)
Commercial and industrial		33	%	29	%		33	%	27	%		29	%	24	%		34	%	24	%		39	%	27	%
Commercial real estate — owner occupied *		9		8			10		8			11		9			9		9			22		7
Lease financing		1		1			—		—			2		—			2		1			—		1
Commercial and business lending		43		38			43		35			42		33			45		34			61		35
Commercial real estate — investor *		21		19			23		18			23		18			19		18			—		15
Real estate construction		7		4			6		4			12		4			21		10			25		13
Commercial real estate lending		28		23			29		22			35		22			40		28			25		28
Total commercial		71		61			72		57			77		55			85		62			86		63
Home equity		19		14			18		18			11		20			7		18			8		18
Installment		2		3			2		4			4		6			2		6			2		5
Total retail		21		17			20		22			15		26			9		24			10		23
Residential mortgage		8		22			8		21			8		19			6		14			4		14
Total consumer		29		39			28		43			23		45			15		38			14		37
Total allowance for loan losses		100	%	100	%		100	%	100	%		100	%	100	%		100	%	100	%		100	%	100	%

* A break-down between commercial real estate-owner occupied and commercial real estate-investor is not available for 2008.

(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.

The methodology used for the allocation of the allowance for loan losses at December 31, 2012, 2011, and 2010 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

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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 by the Corporation to be impaired, using discounted cash flows, estimated fair value of underlying collateral, and / or other data available. Second, management allocates the 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 and adjusted to reflect changes in historical loss levels or other risks. 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. 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 allowance allocation at year-end 2012 continues to be significantly weighted to commercial loans, with $212 million or 71% of the total allowance for loan losses allocated to the commercial portfolios, compared to $271 million or 72% at year-end 2011, a reduction of $59 million. The decrease in the commercial loan allocation was due to a $91 million decrease in nonaccrual loans, representing 60% of total nonaccrual loans at year-end 2012 compared to 68% at year-end 2011, and potential problem loans declined from $548 million at year-end 2011 to $348 million at year-end 2012. The allowance allocation to consumer loans was $85 million at year-end 2012, a decrease of $22 million from year-end 2011 and represented 29% of the allowance for loan losses at December 31, 2012, compared to 28% of the allowance for loan losses at December 31, 2011. The decrease in the consumer loan allocation was driven by the lower levels of nonaccrual loans and net charge offs in this portfolio. 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 its 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, 2012.

The allowance allocation at year-end 2011 was significantly weighted to commercial loans, with $271 million or 72% of the total allowance for loan losses allocated to the commercial portfolios, compared to $368 million or 77% at year-end 2010, a reduction of $97 million. The decrease in the allowance allocated to commercial loans was due to a $192 million decrease in nonaccrual loans, representing 68% of total nonaccrual loans at year-end 2011 compared to 76% at year-end 2010, and potential problem loans declined from $941 million at year-end 2010 to $548 million at year-end 2011. The allowance allocation to consumer loans was $107 million at year-end 2011, a decrease of $2 million from year-end 2010 and represented 28% of the allowance for loan losses at December 31, 2011, compared to 23% of the allowance for loan losses at December 31, 2010. The decrease was driven by the lower levels of nonaccrual loans, partially offset by the continued elevated levels of net charge offs in this portfolio. Management believes the level of the allowance for loan losses is appropriate at December 31, 2011.

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

52

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. As an integral part of their examination process, various federal and state regulatory agencies also review the allowance for loan losses. These 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: Nonaccrual loans are considered to be 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, 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 and interest balance of the loan is collectible. If collectability of the principal and interest is in doubt, payments received are applied to loan principal.

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TABLE 12: Delinquent (Past Due) Loans, Potential Problem Loans, Nonperforming Assets, and Other Real Estate Owned

	Years Ended December 31,
	2012					2011					2010					2009					2008
	($ in Thousands)
Nonaccrual loans:
Commercial	$	152,456				$	243,595				$	435,781				$	964,888				$	257,322
Residential mortgage		59,359					63,555					76,319					81,811					45,146
Retail		41,053					49,622					62,256					31,100					24,389
Total nonaccrual loans (NALs)		252,868					356,772					574,356					1,077,799					326,857
Other real estate owned (OREO)		34,900					41,571					44,330					68,441					48,710
Total nonperforming assets (NPAs)	$	287,768				$	398,343				$	618,686				$	1,146,240				$	375,567
Accruing loans past due 90 days or more:
Commercial	$	1,036				$	4,236				$	2,096				$	9,394				$	—
Residential mortgage		144					—					—					—					10
Retail		1,109					689					1,322					15,587					13,801
Total accruing loans past due 90 days or more	$	2,289				$	4,925				$	3,418				$	24,981				$	13,811
Restructured loans (accruing):
Commercial	$	88,182				$	85,084				$	48,124				$	480				$	—
Residential mortgage		22,284					18,115					19,378					13,410					—
Retail		10,621					9,965					12,433					5,147					—
Total restructured loans (accruing)	$	121,087				$	113,164				$	79,935				$	19,037				$	—
Restructured loans included in nonaccrual loans	$	80,590				$	87,493				$	35,939				$	9,393				$	—
Ratios at year end:
Nonaccrual loans to total loans		1.64	%				2.54	%				4.55	%				7.63	%				2.01	%
NPAs to total loans plus OREO		1.86	%				2.83	%				4.89	%				8.07	%				2.30	%
NPAs to total assets		1.23	%				1.82	%				2.84	%				5.01	%				1.55	%
AFLL to nonaccrual loans		118	%				106	%				83	%				53	%				81	%
AFLL to total loans at end of year		1.93	%				2.70	%				3.78	%				4.06	%				1.63	%
Nonperforming assets by type:				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial and industrial	$	39,182		1	%	$	56,075		2	%	$	99,845		3	%	$	230,000		7	%	$	104,664		2	%
Commercial real estate — owner occupied		24,254		2	%		35,718		3	%		59,317		6	%		59,785		5	%		22,999		2	%
Lease financing		3,031		5	%		10,644		18	%		17,080		28	%		19,506		20	%		187		0	%
Commercial and business lending		66,467		1	%		102,437		2	%		176,242		4	%		309,291		7	%		127,850		2	%
Commercial real estate — investor		58,687		2	%		99,352		4	%		164,610		7	%		246,308		9	%		39,424		2	%
Real estate construction		27,302		4	%		41,806		7	%		94,929		17	%		409,289		29	%		90,048		4	%
Commercial real estate lending		85,989		2	%		141,158		4	%		259,539		9	%		655,597		16	%		129,472		3	%
Total commercial		152,456		2	%		243,595		3	%		435,781		6	%		964,888		11	%		257,322		2	%
Home equity		39,215		2	%		46,907		2	%		51,712		2	%		24,452		1	%		18,109		1	%
Installment		1,838		0	%		2,715		0	%		10,544		2	%		6,648		1	%		6,280		1	%
Total retail		41,053		2	%		49,622		2	%		62,256		2	%		31,100		1	%		24,389		1	%
Residential mortgage		59,359		2	%		63,555		2	%		76,319		3	%		81,811		4	%		45,146		2	%
Total consumer		100,412		2	%		113,177		2	%		138,575		2	%		112,911		2	%		69,535		1	%
Total nonaccrual loans		252,868		2	%		356,772		3	%		574,356		5	%		1,077,799		8	%		326,857		2	%
Commercial real estate owned		16,664					24,795					31,830					52,468					28,724
Residential real estate owned		12,748					13,285					9,090					11,572					15,178
Bank properties real estate owned		5,488					3,491					3,410					4,401					4,808
Other real estate owned		34,900					41,571					44,330					68,441					48,710
Total nonperforming assets	$	287,768				$	398,343				$	618,686				$	1,146,240				$	375,567
Commercial real estate & Real estate construction NALs Detail:				(A	)				(A	)				(A	)				(A	)				(A	)
Farmland	$	803		5	%	$	1,907		7	%	$	4,734		13	%	$	1,524		3	%	$	36		0	%
Multi-family		9,328		1	%		7,909		1	%		23,864		5	%		17,867		3	%		10,819		2	%
Non-owner occupied		48,556		2	%		89,536		5	%		136,012		7	%		226,917		11	%		28,569		2	%
Commercial real estate — investor	$	58,687		2	%	$	99,352		4	%	$	164,610		7	%	$	246,308		9	%	$	39,424		2	%
1-4 family construction	$	16,639		9	%	$	21,717		18	%	$	23,963		25	%	$	77,645		31	%	$	38,727		9	%
All other construction		10,663		2	%		20,089		4	%		70,966		16	%		331,644		29	%		51,321		3	%
Real estate construction	$	27,302		4	%	$	41,806		7	%	$	94,929		17	%	$	409,289		29	%	$	90,048		4	%

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

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TABLE 12: Delinquent (Past Due) Loans, Potential Problem Loans, Nonperforming Assets, and Other Real Estate Owned (continued)

	Years Ended December 31,
	2012		2011		2010		2009		2008
	($ in Thousands)
Accruing loans 30-89 days past due by type:
Commercial and industrial	$	11,339	$	8,743	$	33,013	$	64,369	$	40,109
Commercial real estate — owner occupied		11,053		7,092		9,295		30,043		13,179
Lease financing		12		104		132		823		370
Commercial and business lending		22,404		15,939		42,440		95,235		53,658
Commercial real estate — investor		13,472		4,970		37,191		51,932		69,887
Real estate construction		3,155		996		8,016		56,559		25,266
Commercial real estate lending		16,627		5,966		45,207		108,491		95,153
Total commercial		39,031		21,905		87,647		203,726		148,811
Home equity		13,538		12,189		13,886		14,304		16,606
Installment		2,109		2,592		9,624		8,499		9,733
Total retail		15,647		14,781		23,510		22,803		26,339
Residential mortgage		9,403		7,224		8,722		14,226		14,962
Total consumer		25,050		22,005		32,232		37,029		41,301
Total loans past due 30-89 days	$	64,081	$	43,910	$	119,879	$	240,755	$	190,112
Commercial real estate & Real estate construction Past Due Loan Detail:
Farmland	$	101	$	—	$	47	$	1,338	$	892
Multi-family		1,901		407		2,758		7,669		3,394
Non-owner occupied		11,470		4,563		34,386		42,925		65,601
Commercial real estate — investor	$	13,472	$	4,970	$	37,191	$	51,932	$	69,887
1-4 family construction	$	503	$	475	$	930	$	38,555	$	6,150
All other construction		2,652		521		7,086		18,004		19,116
Real estate construction	$	3,155	$	996	$	8,016	$	56,559	$	25,266
Potential problem loans by type:
Commercial and industrial	$	128,434	$	153,306	$	354,284	$	563,836	$	363,285
Commercial real estate — owner occupied		99,592		136,366		193,819		251,312		100,270
Lease financing		264		158		2,617		8,367		1,713
Commercial and business lending		228,290		289,830		550,720		823,515		465,268
Commercial real estate — investor		107,068		230,206		298,959		346,825		143,347
Real estate construction		13,092		27,649		91,618		391,105		312,144
Commercial real estate lending		120,160		257,855		390,577		737,930		455,491
Total commercial		348,450		547,685		941,297		1,561,445		920,759
Home equity		3,670		5,451		3,057		13,400		8,900
Installment		111		233		703		1,524		889
Total retail		3,781		5,684		3,760		14,924		9,789
Residential mortgage		8,762		13,037		18,672		19,150		7,254
Total consumer		12,543		18,721		22,432		34,074		17,043
Total potential problem loans	$	360,993	$	566,406	$	963,729	$	1,595,519	$	937,802

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Nonaccrual loans were $253 million at December 31, 2012, compared to $357 million at December 31, 2011. As shown in Table 12, total nonaccrual loans were down $104 million since year-end 2011, with commercial nonaccrual loans down $91 million and consumer-related nonaccrual loans down $13 million. The ratio of nonaccrual loans to total loans at the end of 2012 was 1.64%, as compared to 2.54% December 31, 2011. The Corporation’s allowance for loan losses to nonaccrual loans was 118% at year-end 2012, up from 106% at year-end 2011.

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, 2012 accruing loans 90 days or more past due totaled $2 million compared to $5 million at December 31, 2011.

Troubled Debt Restructurings (“Restructured Loans”):  Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty. The concessions granted generally involve the modification of terms of the loan, such as changes in payment structure 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. Nonaccrual restructured loans are included and treated with all other nonaccrual loans. In addition, all accruing restructured loans are being reported as troubled debt restructurings, which are considered and accounted for as impaired loans. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). 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.

At December 31, 2012, the Corporation had total restructured loans of $202 million (including $81 million classified as nonaccrual and $121 million performing in accordance with the modified terms), compared to $200 million at December 31, 2011 (including $87 million classified as nonaccrual and $113 million performing in accordance with the modified terms).

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, 2012, potential problem loans totaled $361 million, compared to $566 million at December 31, 2011. The $205 million decrease in potential problem loans since December 31, 2011, was primarily due to a $138 million decrease in commercial real estate lending and a $62 million decrease in commercial and business lending.

Other Real Estate Owned:  Other real estate owned decreased to $35 million at December 31, 2012, compared to $41 million at December 31, 2011, primarily in commercial real estate owned. Net losses on sales of other real estate owned were $2 million for both 2012, and 2011, respectively. Write-downs on other real estate owned were $8 million and $9 million for 2012, and 2011, respectively. Management actively seeks to ensure properties held are monitored to minimize the Corporation’s risk of loss.

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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,
	2012			2011			2010
	($ in Thousands)
Interest income in accordance with original terms	$	24,644		$	31,463		$	40,703
Interest income recognized		(11,726	)		(13,414	)		(15,917	)
Reduction in interest income	$	12,918		$	18,049		$	24,786

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 classifies its investment purchases as available for sale or held to maturity, 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, while investment securities classified as held to maturity are shown at amortized cost in the consolidated balance sheet.

At December 31, 2012, the Corporation’s investment 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 $294 million.

The Corporation did not recognize any credit-related other-than-temporary impairment write-downs during 2012, while during 2011, the Corporation recognized credit-related other-than-temporary impairment write-downs of approximately $1 million, including write-downs on trust preferred debt securities and various 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.

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TABLE 14: Investment Securities Portfolio

	At December 31,
	2012			% of Total			2011		% of Total			2010		% of Total
	($ in Thousands)
Investment Securities Available for Sale:
Amortized Cost:
U.S. Treasury securities	$	1,003			<1	%	$	1,000		<1	%	$	1,199		<1	%
Federal agency securities		—			—			24,031		1			29,791		1
Obligations of state and political subdivisions		755,644			16			797,691		17			829,058		14
Residential mortgage-related securities		3,714,289			77			3,674,696		77			4,831,481		80
Commercial mortgage-related securities		226,420			5			16,647		<1			7,604		<1
Asset-backed securities		—			—			188,439		4			299,459		5
Other securities (debt and equity)		90,622			2			72,896		1			13,384		<1
Total amortized cost	$	4,787,978			100	%	$	4,775,400		100	%	$	6,011,976		100	%
Fair Value:
U.S. Treasury securities	$	1,004			<1	%	$	1,001		<1	%	$	1,208		<1	%
Federal agency securities		—			—			24,049		1			29,767		1
Obligations of state and political subdivisions		801,188			16			847,246		17			838,602		14
Residential mortgage-related securities		3,804,304			77			3,785,590		77			4,910,497		80
Commercial mortgage-related securities		228,166			5			18,543		<1			7,753		<1
Asset-backed securities		—			—			187,732		4			298,841		5
Other securities (debt and equity)		92,096			2			73,322		1			14,673		<1
Total fair value and carrying value	$	4,926,758			100	%	$	4,937,483		100	%	$	6,101,341		100	%
Net unrealized holding gains	$	138,780					$	162,083				$	89,365
Investment Securities Held to maturity:
Amortized Cost:
Obligations of state and political subdivisions	$	39,877			100	%	$	—		—	%	$	—		—	%
Total amortized cost and carrying value	$	39,877			100	%	$	—		—	%	$	—		—	%
Fair Value:
Obligations of state and political subdivisions	$	39,679			100	%	$	—		—	%	$	—		—	%
Total fair value	$	39,679			100	%	$	—		—	%	$	—		—	%
Net unrealized holding losses	$	(198	)				$	—				$	—

Available for Sale

At December 31, 2012, the total carrying value of investment securities available for sale was $4.9 billion, unchanged from December 31, 2011, and represented 21% of total assets, compared to 23% of total assets at December 31, 2011. On average, the investment securities available for sale portfolio was $4.5 billion for 2012, down $1 billion (19%) compared to 2011, and represented 23% and 28% of average earning assets for 2012 and 2011, respectively.

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Obligations of State and Political Subdivisions (Municipal Securities): At December 31, 2012 and 2011, municipal securities were $801 million and $847 million, and represented 16% and 17%, respectively, of total investment securities based on fair value. Municipal bond insurance company downgrades have resulted in credit downgrades in certain municipal securities; however, 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, 2012, the total fair value of municipal securities reflected a net unrealized gain of approximately $46 million.

Residential and Commercial Mortgage-related Securities: At both December 31, 2012 and 2011, residential mortgage-related securities (which include predominantly agency-backed mortgage-backed securities and collateralized mortgage obligations (“CMOs”)) were $3.8 billion and represented 77% of total investment securities based on fair value, while at December 31, 2012 commercial mortgage-related securities were $228 million and represented 5% of total investment securities compared to $19 million at December 31, 2011. 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. At December 31, 2012, over 99% of these securities were guaranteed by Fannie Mae , Freddie Mac, or Ginnie Mae, while $6 million of these securities were considered “non agency” securities. The Corporation regularly assesses valuation and credit quality underlying these securities.

Asset-backed Securities: Asset-backed securities are largely comprised of senior, floating rate, tranches of student loan securities issued by SLM Corp and guaranteed under the Federal Family Education Loan Program. These securities were sold during 2012.

Other Securities (Debt and Equity): At December 31, 2012 and 2011, other securities were $92 million and $73 million, respectively. At December 31, 2012, other securities primarily were comprised of $92 million of debt securities, as the Corporation sold substantially all equity securities during 2012 (less than $0.1 million held at year-end 2012). At December 31, 2011, the Corporation had other securities of $73 million, comprised of debt and equity securities of $65 million and $8 million, respectively. Debt securities primarily include corporate bonds which mature within 3 years and a rating of A or AA, while equity securities include preferred and common equity securities.

Held to Maturity

At December 31, 2012, the total carrying value of investment securities held to maturity was $40 million. During the third quarter of 2012, the Corporation began classifying certain municipal securities purchased as held to maturity in anticipation of the new Basel III requirements.

Regulatory Stock

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stocks: 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 approximates amortized cost. At December 31, 2012, and 2011, the Corporation had FHLB stock of $96 million and $121 million, respectively. The Corporation had Federal Reserve Bank stock of $71 million and $70 million at December 31, 2012 and 2011, respectively.

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 2012, 2011, or 2010, respectively. The FHLB of Chicago initiated tender offers for certain of its shares during 2012, whereby the FHLB would repurchase its shares at par. The Corporation participated in the tender offers and reduced its equity holdings in the FHLB of Chicago by $25 million.

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TABLE 15: Investment Securities Portfolio Maturity Distribution (1) — December 31 2012

	Investment Securities Available for Sale - Maturity Distribution and Weighted Average Yield
	Within one year					After one but within five years					After five but within ten years					After ten years					Mortgage-related and equity securities					Total Amortized Cost					Total Fair Value
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount
	($ in Thousands)
U. S. Treasury securities	$	—		—		$	1,003		0.30	%	$	—		—		$	—		—		$	—		—		$	1,003		0.30	%	$	1,004
Obligations of states and political subdivisions(2)		46,487		5.73	%		126,696		5.77	%		522,815		5.41	%		59,646		5.62	%		—		—			755,644		5.51	%		801,188
Other debt securities		3,118		1.20	%		87,307		1.85	%		—		—			180		2.56	%		—		—			90,605		1.83	%		92,045
Residential mortgage-related securities		—		—			—		—			—		—			—		—			3,714,289		2.83	%		3,714,289		2.83	%		3,804,304
Commercial mortgage-related securities		—		—			—		—			—		—			—		—			226,420		1.77	%		226,420		1.77	%		228,166
Other equity securities		—		—			—		—			—		—			—		—			17		0.00	%		17		0.00	%		51
Total amortized cost	$49,605			5.44	%	$	215,006		4.16	%	$	522,815		5.41	%	$	59,826		5.61	%	$	3,940,726		2.77	%	$	4,787,978		3.19	%	$	4,926,758
Total fair value and carrying value	$48,477					$	223,764				$	557,001				$	64,995				$	4,032,521									$	4,926,758

	Investment Securities Held to Maturity - Maturity Distribution and Weighted Average Yield
	Within one year				After one but within five years				After five but within ten years					After ten years					Mortgage-related and equity securities				Total Amortized Cost					Total Fair Value
	Amount		Yield		Amount		Yield		Amount		Yield			Amount		Yield			Amount		Yield		Amount		Yield			Amount
	($ in Thousands)
Obligations of states and political subdivisions(2)	$	—		—	$	—		—	$	10,917		3.11	%	$	28,960		3.20	%	$	—		—	$	39,877		3.18	%	$	39,679
Total amortized cost and carrying value	$	—		—	$	—		—	$	10,917		3.11	%	$	28,960		3.20	%	$	—		—	$	39,877		3.18	%	$	39,679
Total fair value	$	—			$	—			$	10,884				$	28,795				$	—								$	39,679

(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, 2012. A maturity distribution of certificates of deposits and other time deposits of $100,000 or more at December 31, 2012 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, 2012, deposits were $16.9 billion, up $1.8 billion or 12% from December 31, 2011. The increase in total deposits included a $1.4 billion increase in money market deposits and an $831 million increase in noninterest-bearing demand deposits, offset by a $729 million decrease in total time deposits (Brokered CDs and other time deposits). Net customer deposits

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and funding averaged $15.2 billion for 2012, up $286 million or 2% from 2011. Similar to that seen for period end deposits, the increase in average deposits included a $1.0 billion increase in money market deposits (growing to represent 39% of average deposits for 2012 compared to 36% for 2011) and a $568 million increase in average noninterest-bearing demand deposits (representing 25% of average deposits for 2012 compared to 23% for 2011), offset by a $698 million decrease in time deposits (declining to 15% of average total deposits in 2012 versus 20% of average total deposits in 2011).

TABLE 16: Average Deposits Distribution

	2012					2011					2010
	Amount		% of Total			Amount		% of Total			Amount		% of Total
	($ in Thousands)
Noninterest-bearing demand deposits	$	3,948,846		25	%	$	3,381,128		23	%	$	3,094,691		18	%
Savings deposits		1,096,692		7	%		987,198		7	%		898,019		5	%
Interest-bearing demand deposits		2,148,459		14	%		1,947,506		14	%		2,780,525		17	%
Money market deposits		6,148,663		39	%		5,147,437		36	%		6,374,071		38	%
Time deposits		2,239,709		15	%		2,937,858		20	%		3,798,995		22	%
Total deposits		15,582,369		100	%		14,401,127		100	%		16,946,301		100	%
Customer repo sweeps		624,351					860,831					239,144
Customer repo term		430,264					932,844					—
Total customer funding		1,054,615					1,793,675					239,144
Total deposits and customer funding	$	16,636,984				$	16,194,802				$	17,185,445
Network transaction deposits included above in interest-bearing demand and money market	$	1,343,595				$	952,825				$	2,256,149
Brokered certificates of deposit		55,574					290,226					547,328
Total network and brokered funding	$	1,399,169				$	1,243,051				$	2,803,477
Net customer deposits and funding	$	15,237,815				$	14,951,751				$	14,381,968

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

	December 31, 2012
	Certificates of Deposit		Other Time Deposits		Total Certificates of Deposits and Other Time Deposits
	($ in Thousands)
Three months or less	$	78,035	$	62,717	$	140,752
Over three months through six months		64,878		93,184		158,062
Over six months through twelve months		97,449		54,144		151,593
Over twelve months		122,508		39,178		161,686
Total	$	362,870	$	249,223	$	612,093

Other Funding Sources

Other funding sources, including short-term and long-term funding, were $3.3 billion at December 31, 2012 and $3.7 billion at December 31, 2011. See also section “Liquidity.” Long-term funding at December 31, 2012, was $1.0 billion, a decrease of $162 million from December 31, 2011. The decrease in long-term funding was primarily attributable to the early extinguishment of $211 million of junior subordinated debentures and a decrease of $100 million in FHLB advances, partially offset by the issuance of $155 million in senior notes.

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During 2012, the Corporation issued $155 million of senior notes which mature on March 12, 2014, and have a fixed coupon interest rate of 1.875%. See Note 8, “Long-term Funding,” of the notes to consolidated financial statements for additional information on long-term funding.

Short-term funding is comprised primarily of short-term FHLB advances; securities sold under agreements to repurchase; Federal funds purchased and commercial paper. Short-term funding sources at December 31, 2012 were $2.3 billion, $188 million lower than December 31, 2011 primarily due to a decrease in securities sold under agreements to repurchase (down $681 million), partially offset by a $525 million increase in FHLB advances. The securities sold under agreements to repurchase represent short-term funding which is collateralized by securities of the U.S. Government or its agencies and mature daily. The FHLB advances included in short-term funding are those with original contractual maturities of less than one year. Many short-term funding sources, 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 Funding,” of the notes to consolidated financial statements for additional information on short-term funding, and Table 18 for specific disclosure required for major short-term funding categories.

On average, short and long-term funding totaled $3.3 billion for 2012, down $828 million or 20% from 2011, including a $580 million decrease in short-term funding and a $248 million decrease in long-term funding. Within the short-term funding categories, average federal funds purchased and securities sold under agreements to repurchase decreased $749 million, while average short-term FHLB advances increased $168 million. Key changes within average long-term funding included a $310 million decrease in FHLB advances and a $91 million decrease in subordinated debt, partially offset by a $211 million increase in senior notes.

TABLE 18: Short-Term Funding

	December 31,
	2012			2011			2010
	($ in Thousands)
Securities sold under agreements to repurchase:
Balance end of year	$	679,070		$	1,359,755		$	563,884
Average amounts outstanding during year		1,054,614			1,793,675			239,144
Maximum month-end amounts outstanding		1,212,100			2,078,038			563,884
Average interest rates on amounts outstanding at end of year		0.24	%		0.28	%		0.39	%
Average interest rates on amounts outstanding during year		0.24	%		0.34	%		0.28	%
FHLB advances
Balance end of year	$	1,525,000		$	1,000,000		$	1,000,000
Average amounts outstanding during year		918,962			751,370			32,329
Maximum month-end amounts outstanding		1,575,000			1,150,000			1,000,000
Average interest rates on amounts outstanding at end of year		0.07	%		0.36	%		0.72	%
Average interest rates on amounts outstanding during year		0.35	%		0.83	%		1.90	%

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, and satisfy other operating requirements. In addition to satisfying cash flow requirements in the ordinary course of business, the Corporation actively monitors and manages its liquidity position to ensure sufficient resources are available to meet cash flow requirements in adverse situations.

The Corporation’s internal liquidity management framework includes measurement of several key elements, such as deposit funding as a percent of total assets and liquid asset levels. Strong capital ratios, credit quality, and core

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earnings are essential to maintaining 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. In addition to static liquidity measures, the Corporation performs dynamic scenario analysis in accordance with industry best practices. Measures have been established to ensure the Corporation has sufficient high quality short-term liquidity to meet cash flow requirements under stressed scenarios. At December 31, 2012, 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”), Fitch Investors (“Fitch”), and Dominion Bond Rating Service (“DBRS”). 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 senior credit ratings of the Parent Company and its subsidiary bank are displayed below.

TABLE 19: Credit Ratings

	December 31, 2012
	Moody’s		S&P		Fitch		DBRS
Bank short-term deposits		P2		—		F2		R2H
Bank long-term		A3		BBB+		BBB-		BBBH
Corporation short-term		P2		—		F3		R2M
Corporation long-term		Baa1		BBB		BBB-		BBB
Outlook		Stable		Stable		POS		Stable

The Corporation also has multiple funding sources that could be used to increase liquidity and provide additional financial flexibility. The Parent Company renewed its existing “shelf” registration in January 2012, under which the Parent Company may offer any combination of the following securities, either separately or in units: debt securities, preferred stock, depositary shares, common stock, and warrants. The Corporation issued $430 million of senior notes in 2011. These senior notes are due in 2016 and bear a 5.125% fixed coupon. In September 2011, the Corporation issued $65 million of depositary shares of 8% Series B perpetual preferred stock. In September 2012, the Corporation issued $155 million of senior notes due in March 2014 which bear a 1.875% fixed coupon. The Parent Company also has a $200 million commercial paper program, of which, $51 million was outstanding at December 31, 2012.

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). The Parent Company received dividends of $170 million during 2012 from subsidiaries, and at December 31, 2012, $231 million in additional dividends are available to be paid to the Parent Company by its subsidiaries without obtaining prior regulatory approval, subject to the capital needs of each subsidiary. See Note 17, “Regulatory Matters,” for additional information on regulatory requirements for the Bank.

The Bank has established federal funds lines with counterparty banks and has the ability to borrow from the Federal Home Loan Bank ($1.9 billion of Federal Home Loan Bank advances were outstanding at December 31,

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2012). The Bank also has significant excess loan and investment securities collateral which could be pledged to secure additional deposits or to counterparty banks, the Federal Home Loan Bank or other parties as necessary. Associated Bank also issues institutional certificates of deposit, network transaction deposits, and brokered certificates of deposit.

Investment securities are an important tool to the Corporation’s liquidity objective. As of December 31, 2012, the majority of the investment securities are classified as available for sale, with a very small portion of municipal securities (less than 1%) classified as held to maturity. Of the $5.0 billion investment securities portfolio at December 31, 2012, a portion of these securities were pledged to secure $1.7 billion of collateralized deposits and $679 million of repurchase agreements and for other purposes as required or permitted by law. The majority of the remaining investment securities of $2.3 billion could be pledged or sold to enhance liquidity, if necessary.

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. As evidenced in Table 16, average time deposits were 15% of total average deposits for 2012, compared to 20% of total average deposits for 2011. 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, 2012, net cash provided by operating and financing activities was $350 million and $1.4 billion, respectively, while investing activities used net cash of $1.6 billion, for a net increase in cash and cash equivalents of $121 million since year-end 2011. Generally, during 2012, net assets increased to $23.5 billion (up $1.6 billion or 7%) compared to year-end 2011, primarily due to a $1.4 billion increase in loans. On the funding side, deposits increased $1.8 billion, while short-term funding decreased $188 million and long-term funding decreased $162 million.

For the year ended December 31, 2011, net cash provided by operating activities was $310 million, while investing and financing activities used net cash of $473 million and $89 million, respectively, for a net decrease in cash and cash equivalents of $252 million since year-end 2010. Generally, during 2011, net assets increased to $21.9 billion (up $139 million or 1%) compared to year-end 2010, primarily due to a $1.4 billion increase in loans offset by a $1.2 billion decrease in investment securities. On the funding side, deposits decreased $135 million and long-term funding decreased $237 million, while short-term funding increased $767 million.

Quantitative and Qualitative Disclosures about Market Risk

Market risk and interest rate risk are managed centrally. Market risk is the potential for loss arising from adverse changes in the fair value of fixed income securities, equity securities, other earning assets and derivative financial instruments as a result of changes in interest rates or other factors. Interest rate risk is the potential for reduced net interest income resulting from adverse changes in the level of interest rates. As a financial institution that engages in transactions involving an array of financial products, the Corporation is exposed to both market risk and interest rate risk. In addition to market risk, interest rate risk is measured and managed through a number of methods. The Corporation uses financial modeling simulation 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 (“ALCO”) and approved by the Board of Directors are intended to limit these risks. The Board has delegated ALCO to monitor and manage market and interest rate risk for the Corporation. The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income and to offset the risk of price changes for certain assets recorded at fair value.

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Interest Rate Risk

In order to measure earnings sensitivity to changing rates, the Corporation uses a simulation model to measure the impact of various interest rate shocks and other yield curve scenarios on earnings and the fair value of the financial assets and liabilities of the Corporation. Comparisons between a static balance sheet and balance sheets with projected growth scenarios can help quantify the potential impact on earnings of various balance sheet management and business strategies.

Simulation of earnings:  Determining the sensitivity of short-term future earnings is accomplished through the use of simulation modeling. The earnings simulations model the balance sheet as an ongoing concern. Future business assumptions involving projected balance sheet growth assumptions, market spreads, prepayments for future rate-sensitive balances, and the reinvestment of maturing assets and liabilities are included. These items are incorporated to project net interest income based on running various interest rate scenarios from a baseline scenario. The Corporation runs numerous scenarios including instantaneous and gradual changes to market interest rates as well as yield curve slope changes. It then compares such scenarios to the baseline scenario to quantify its earnings sensitivity. See Table 20 for the resulting simulations at December 31, 2012 and 2011, respectively. As of December 31, 2012, the simulations of earnings results were within the Corporation’s interest rate risk policy.

Market value of equity:  The Corporation uses the market value of equity as a measure to quantify market risk from the impact of interest rates. The market value of equity is the fair value of assets, liabilities, and off-balance sheet financial instruments derived from the present value of the future cash flows. While the net interest income simulation model highlights exposures over a short time horizon, the market value of equity incorporates all cash flows over all of the balance sheet and derivative positions.

These results are based on multiple path simulations using an interest rate simulation model calibrated to market traded instruments. Sensitivities are measured assuming several factors including immediate and sustained parallel and non-parallel changes in market rates, yield curves and rate indexes. These factors quantify yield curve risk, basis risk, options risk, repricing mismatch risk, and market spread risk. The 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 including factors such as future balance sheet growth, changes in yield curve relationships and changing product spreads. As of December 31, 2012, the projected changes for the market value of equity were well 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 to provide more stable spreads between loan yields and the rate on their funding sources. To hedge against rising interest rates, the Corporation may use interest rate swaps, interest rate swaptions, interest rate caps and floors or other derivative financial instruments. 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. Interest rate cap agreements pay the Corporation based on the notional amount the difference between current rates and strike rates. To hedge against falling interest rates, the Corporation may use interest rate floors. Conversely, interest rate floor agreements pay the Corporation based on the notional amount 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

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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.

TABLE 20: Interest Rate Risk - Simulation of Earnings

	December 31, 2012			December 31, 2011
Effect on net interest income:
100 bp increase in interest rates		3.4	%		2.2	%

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 funding, 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, 2012, 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

December 31, 2012	Note Reference		One Year or Less		One to Three Years		Three to Five Years		Over Five Years		Total
	($ in Thousands)
Time deposits		6	$	1,383,498	$	363,740	$	220,454	$	30,202	$	1,997,894
Short-term funding		7		2,326,939		—		—		—		2,326,939
Long-term funding		8		400,042		156,547		432,917		25,840		1,015,346
Operating leases		5		12,192		22,239		20,683		42,441		97,555
Commitments to extend credit		13		3,381,312		1,297,741		1,078,913		120,146		5,878,112
Total			$	7,503,983	$	1,840,267	$	1,752,967	$	218,629	$	11,315,846

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, 2012, the net liability for uncertain tax positions, including associated interest and penalties, was $11 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

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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 $352 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 $520 million of residential mortgage loans to various investors as of December 31, 2012. 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, primarily to the government-sponsored enterprises (“GSEs”). The Corporation’s agreements to sell residential mortgage loans in the normal course of business usually require certain 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. Prior to 2012, the Corporation has seen only a limited number of repurchase and loss reimbursement claims; however, similar to other banks, this activity has steadily increased during 2012, particularly during the second half of 2012. Therefore, management established a repurchase reserve in the fourth quarter of 2012 of $3 million for potential claims relating to loans previously sold. Management will continue to monitor this activity during 2013 and its impact on the reserve. See Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to consolidated financial statements for additional information.

The Corporation may also 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, 2012, there were approximately $79 million of residential mortgage loans sold with limited recourse risk. There have been minimal instances of repurchase for the limited recourse criteria.

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, 2012, there were $321 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 $4 million) of $304 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 $86 million at December 31, 2012. In addition, the Corporation has $5.9 billion of outstanding commitments to extend credit (see Table 21). Given the level of commitments to extend credit and the current credit environment, the Corporation had a reserve for losses on unfunded loan and letters of credit commitments totaling $22 million at December 31, 2012, 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.

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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, 2012, was $35 million, included in other assets on the consolidated balance sheets. Related to these investments, the Corporation had remaining commitments to fund of $18 million at December 31, 2012.

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, 2012, the Corporation’s potential risk exposure was approximately $18 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 $8 million at December 31, 2012.

Capital

Stockholders’ equity at December 31, 2012, was $2.9 billion, up $71 million compared to December 31, 2011. Stockholders’ equity is also described in Note 9, “Stockholders’ Equity,” of the notes to consolidated financial statements. Cash dividends paid in 2012 were $0.23 per common share, compared with $0.04 per common share in 2011. At December 31, 2012, stockholders’ equity included $49 million of accumulated other comprehensive income compared to $66 million of accumulated other comprehensive income at December 31, 2011. The $17 million decrease in accumulated other comprehensive income resulted primarily from the change in the unrealized gain/loss position, net of the tax effect, on investment securities available for sale. Stockholders’ equity to assets at December 31, 2012, was 12.50%, compared to 13.07% at the end of 2011.

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, was an informal agreement between the Corporation and the Reserve Bank. The Memorandum was terminated in March 2012.

On November 13, 2012, the Board of Directors approved the repurchase of up to an aggregate amount of $125 million of common stock to be made available for reissuance in connection with the Corporation’s employee incentive plans and / or for other corporate purposes. During 2012, 4.7 million shares were repurchased for $60 million (or an average cost per common share of $12.77), while no shares were repurchased during 2011 under these authorizations. The Corporation repurchased shares for minimum tax withholding settlements on equity compensation during 2011 and 2012. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issues Purchases of Equity Securities,” for additional information on the shares repurchased for equity compensation for the three months ended December 31, 2012. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities. Such repurchases may occur from time to time in open market purchases, block transactions, privately negotiated transactions, accelerated share repurchase programs, or similar facilities.

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On June 7, 2012, the Board of Governors of the Federal Reserve System approved for publication in the federal register three related notices of proposed rulemaking (the “NPRs”) relating to the implementation of revised capital rules to reflect the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as the Basel III international capital standards. On November 9, 2012, following a public comment period, the U.S. federal banking agencies issued a joint press release announcing that the January 1, 2013 effective date was being delayed so the agencies could consider operational and transitional issues identified in the large volume of public comments received. It is anticipated that the U.S. federal banking agencies will formalize the implementation of the Basel III framework applicable to domestic banks in the United States during 2013. Among other things, the revised rules, if adopted as proposed, would establish a new capital standard consisting of common equity Tier 1 capital; would increase the capital ratios required for certain existing capital categories and would add a requirement for a capital conservation buffer. In addition, proposed changes in regulatory capital standards would phase-out trust preferred securities as a component of Tier 1 capital over a 10-year period, originally scheduled to commence on January 1, 2013. The NPRs contemplate the deduction of more assets from regulatory capital and propose revisions to the methodologies for determining risk weighted assets, including applying a more risk-sensitive treatment to residential mortgage exposures and to past due or nonaccrual loans. The NPRs provide for various phase-in periods over the next several years. Management believes both the Corporation and the Bank would be “well capitalized” if the NPRs were currently effective. However, the NPRs may be changed before they are adopted, and the actual impact of the final rules cannot be predicted with any certainty.

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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. As of December 31, 2012 and 2011, 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. Regulatory capital ratios for the Corporation and its bank subsidiary are included in Note 17, “Regulatory Matters,” of the notes to consolidated financial statements. The Corporation’s capital ratios are summarized in Table 22.

Table 22: Capital

	At or for the Year Ended December 31,
	2012			2011			2010
	(In Thousands, except per share data)
Total stockholders’ equity	$	2,936,399		$	2,865,794		$	3,158,791
Tier 1 capital		1,938,806			2,051,787			2,376,893
Tier 1 common equity		1,875,534			1,783,515			1,657,505
Tangible common equity		1,928,732			1,853,932			1,691,100
Total risk-based capital		2,167,954			2,263,065			2,576,297
Market capitalization		2,221,268			1,938,833			2,622,647
Book value per common share	$	16.97		$	16.15		$	15.28
Tangible book value per common share		11.39			10.68			9.77
Cash dividends per common share		0.23			0.04			0.04
Stock price at end of period		13.12			11.17			15.15
Low closing price for the period		11.43			8.95			11.48
High closing price for the period		14.63			15.36			16.10
Total stockholders’ equity /assets		12.50	%		13.07	%		14.50	%
Tangible common equity /tangible assets(1)		8.56			8.84			8.12
Tangible stockholders’ equity /tangible assets(2)		8.84			9.14			10.59
Tier 1 common equity /risk-weighted assets(3)		11.61			12.24			12.26
Tier 1 leverage ratio		8.98			9.81			11.19
Tier 1 risk-based capital ratio		12.01			14.08			17.58
Total risk-based capital ratio		13.42			15.53			19.05
Return on average equity		6.07	%		4.66	%		(0.03	)%
Return on average Tier 1 common equity		9.45			6.71			(1.95	)
Return on average assets		0.81			0.65			—
Dividend payout ratio(4)		23.00			6.06			N/M
Common shares outstanding (period end)		169,304			173,575			173,112
Basic common shares outstanding (average)		172,255			173,370			171,230
Diluted common shares outstanding (average)		172,357			173,372			171,230

(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 equity to risk-weighted assets = 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.

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

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Segment Review

As discussed in Note 19 of the notes to consolidated financial statements, the Corporation implemented a new risk-based internal profitability measurement system during the first quarter of 2012. As a result, we have reorganized our business segments to provide enhanced transparency given our new system capabilities. The Corporation’s reportable segments have been determined based upon its internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer, and the distribution of those products and services are similar. The reportable segments are Commercial Banking, Consumer Banking and Risk Management and Shared Services.

The financial information of the Corporation’s segments was compiled utilizing the accounting policies described in Note 1 of the notes to consolidated financial statements with certain exceptions as discussed in Note 19, “Segment Reporting,” of the notes to consolidated financial statements. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and unlike financial accounting, are not based on authoritative guidance similar to U.S. generally accepted accounting principles. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in previously reported segment financial data. During 2012, certain organization and methodology changes were made and, accordingly, 2011 and 2010 results have been restated and presented on a comparable basis.

Segment Review 2012 Compared to 2011

The Commercial Banking segment consists of lending and deposit gathering to businesses and governmental units and the support to deliver, fund and manage such banking services. The Commercial Banking segment had net income of $72 million in 2012, down $1 million compared to $73 million in 2011. The Corporation committed resources during the past year to grow this segment, including investments to expand into new markets (Cincinnati, Indianapolis, and Detroit) and new industry lending segments (power, oil and gas). As a result of these investments, segment revenue grew $29 million to $372 million in 2012 compared to $343 million in 2011. The credit provision for loans increased to $46 million in 2012 due to the growth in the segment’s loan balances, partially offset by improvement in credit quality as compared to 2011. Total noninterest expense in 2012 was $216 million, up $25 million from $191 million in 2011 as the segment hired additional commercial bankers to support these new markets and to enhance its presence in existing markets. Average loan balances were $7.4 billion for 2012, up $1.1 billion from an average balance of $6.3 billion for 2011, and average deposit balances were $4.5 billion in 2012, up $1.0 billion from average deposits of $3.5 billion in 2011, reflecting our investments and strategy to expand and grow the Commercial Banking segment. Average allocated capital increased $26 million to $757 million in 2012 reflecting the increase in the segment’s loan balances offset by an improvement in credit quality as compared to 2011.

The Consumer Banking segment consists of lending and deposit gathering to individuals and small businesses and also provides a variety of other wealth management products and services. The Consumer Banking segment had net income of $45 million in 2012, up $10 million compared to $35 million in 2011. Segment revenue grew $7 million to $517 million for 2012 compared to $510 million for 2011, primarily due to much higher mortgage banking income (up $51 million), offset by lower net interest income as a result of the lower rate environment and lower service charge and card-based fee income due to changes in customer behavior and regulatory changes. The credit provision for loans increased $2 million to $20 million for 2012 due to the growth in the segment’s loan balances, partially offset by an improvement in credit quality as compared to 2011. Total noninterest expense for 2012 was $428 million, down $11 million from $439 million in 2011 primarily due to a $17 million reduction in FDIC insurance costs, partially offset by increases in personnel expense of $6 million. Average deposits were $9.6 billion in 2012, down $78 million from 2011. Average loan balances were $7.3 billion in 2012, up $322 million from $7.0 billion in 2011. The segment’s loan growth was primarily in the residential mortgage portfolio. Average allocated capital increased $44 million to $593 million for 2012 reflecting the increase in the segment’s loan balances.

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The Risk Management and Shared Services segment includes Corporate Risk Management, Finance, Treasury, Facilities Management, Operations and Technology functions. Risk Management and Shared Services had net income of $62 million in 2012, up $30 million compared to $32 million in 2011. The primary components of the increase was a $57 million lower credit provision, reflecting the much lower provision at the consolidated total level, offset by a $37 million increase in direct expenses due to unallocated costs incurred to address certain BSA regulatory compliance issues, personnel expense, and other corporate expense items. Average earning asset balances were $4.9 billion for 2012, down $1.3 billion from an average balance of $6.2 billion for 2011, reflecting the reduction in the Corporation’s investment portfolio.

Segment Review 2011 Compared to 2010

The Commercial Banking segment had net income of $73 million in 2011, down $23 million compared to $96 million in 2010. Segment revenue declined $21 million to $343 million in 2011 compared to $364 million in 2010, primarily due to lower net interest income as a result of the lower rate environment and lower average loan balances. The credit provision for loans decreased to $40 million in 2011 due to the declines in the segment’s loan balances as well as improvement in credit quality as compared to 2010. Total noninterest expense in 2011 was $191 million, up $17 million from $174 million in 2010 primarily due to a $15 million increase in personnel expense as the segment began investing in new hiring. Average loan balances were $6.3 billion for 2011, down $555 million from an average balance of $6.9 billion for 2010, due to sales of nonaccrual loans during 2010 and run-off of potential problem loans, and average deposit balances were $3.5 billion in 2011, down $918 million from average deposits of $4.4 billion in 2010. Average allocated capital decreased $176 million to $731 million in 2011 reflecting the decrease in the segment’s loan balances.

The Consumer Banking segment had net income of $35 million in 2011, down $37 million compared to $72 million in 2010. Segment revenue declined $33 million to $510 million for 2011 compared to $543 million for 2010, primarily due to lower service charge and mortgage banking income. The credit provision for loans increased $1 million to $18 million for 2011 due to the growth in the segment’s loan balances, partially offset by an improvement in credit quality as compared to 2010. Total noninterest expense for 2011 was $439 million, up $23 million from $416 million in 2010 primarily due to an $11 million increase in personnel and higher loan and deposit servicing costs. Average deposits were $9.6 billion in 2011, down $82 million from 2010. Average loan balances were $7.0 billion in 2011, up $638 million from $6.3 billion in 2010, primarily in the residential mortgage portfolio. Average allocated capital increased $29 million to $549 million for 2011 reflecting the increase in the segment’s loan balances.

Risk Management and Shared Services had net income of $32 million in 2011, compared to a $169 million net loss in 2010, primarily attributable to the lower credit provision, reflecting the much lower provision at the consolidated total level. Average earning asset balances were $6.2 billion for 2011, down $1.2 billion from an average balance of $7.4 billion for 2010, reflecting the reduction in the Corporation’s investment portfolio.

Fourth Quarter 2012 Results

The Corporation recorded net income of $47 million for the fourth quarter of 2012, compared to net income of $41 million for the fourth quarter of 2011. Net income available to common equity for the fourth quarter of 2012 was $45 million, or $0.26 for both basic and diluted earnings per common share. Comparatively, net income available to common equity was $40 million for the fourth quarter of 2011, or $0.23 for both basic and diluted earnings per common share. See Table 23 for selected quarterly information.

Taxable equivalent net interest income for the fourth quarter of 2012 was $167 million, $10 million higher than the fourth quarter of 2011. Changes in the balance sheet volume and mix increased taxable equivalent net interest income by $12 million, while changes in the rate environment and product pricing lowered net interest income by $2 million. The Federal funds target interest rate was unchanged for both fourth quarter periods. The net interest

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margin between the comparable quarters was up 11 bp to 3.32% in the fourth quarter of 2012, comprised of a 16 bp higher interest rate spread (to 3.19%, as the yield on earning assets declined 11 bp and the rate on interest-bearing liabilities fell 27 bp) and a 5 bp lower contribution from net free funds (to 0.13%, as lower rates on interest-bearing liabilities decreased the value of noninterest-bearing funds).

Average earning assets were $20.0 billion for the fourth quarter of 2012, an increase of $526 million from the fourth quarter of 2011, with average loans up $1.1 billion (predominantly in commercial loans) and investments down $562 million (primarily in mortgage-related securities). On the funding side, average interest-bearing deposits were up $963 million, while average demand deposits increased $794 million. Average short and long-term funding balances decreased $1.2 billion, comprised of an $813 million decrease in repurchase agreements, a $168 million decrease in other short-term funding, and a $237 million decrease in long-term funding.

Credit quality continued to improve during 2012 with nonaccrual loans declining to $253 million (1.64% of total loans) at December 31, 2012, compared to $357 million (2.54% of total loans) at December 31, 2011. Compared to the fourth quarter of 2011, potential problem loans were down 36% to $361 million. Annualized net charge offs represented 0.55% of average loans for the fourth quarter of 2012, compared to 0.64% for the fourth quarter of 2011. The allowance for loan losses to loans at December 31, 2012 was 1.93%, compared to 2.70% at December 31, 2011. See sections, “Loans,” “Allowance for Loan Losses,” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned” for additional discussion.

Noninterest income for the fourth quarter of 2012 increased $6 million (9%) to $78 million versus the fourth quarter of 2011. Core fee-based revenues of $54 million were up $1 million (2%) versus the comparable quarter in 2011, primarily in card-based and other nondeposit fees. Net mortgage banking increased $4 million from the fourth quarter of 2011, predominantly due to a $3 million decline in mortgage servicing rights expense. Asset losses were nominal for the fourth quarter of 2012 compared to asset losses of $2 million in the fourth quarter of 2011, primarily due to lower write-downs of other real estate owned. All remaining noninterest income categories on a combined basis were relatively level (down less than 1%).

On a comparable quarter basis, noninterest expense increased $4 million (2%) to $176 million in the fourth quarter of 2012. Personnel expense increased $8 million (9%) from the fourth quarter of 2011, with salary-related expenses up $4 million and fringe benefit expenses up $4 million. Occupancy expense increased $3 million due to lease breakage expense related to the Corporation’s efficiency initiatives. Losses other than loans decreased $9 million (74%), primarily due to the recognition of litigation reserves on the settlement of a legal matter during the fourth quarter of 2011. All remaining noninterest expense categories on a combined basis were up $2 million (3%).

For the fourth quarter of 2012, the Corporation recognized income tax expense of $13 million, compared to income tax expense of $9 million for the fourth quarter of 2011. The change in income tax was primarily due to the level of pretax income between the comparable quarters, as well as a reversal of certain prior years’ tax reserves during both the fourth quarter of 2012 and 2011.

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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, 2012 and 2011.

	2012 Quarter Ended
	December 31		September 30		June 30		March 31
	(In Thousands, except per share data)
Interest income	$	180,470	$	178,656	$	178,585	$	180,573
Interest expense		19,015		23,054		24,318		25,905
Net interest income		161,455		155,602		154,267		154,668
Provision for loan losses		3,000		—		—		—
Investment securities gains, net		152		3,506		563		40
Income before income taxes		60,032		66,887		64,188		63,352
Net income available to common equity		45,328		45,095		42,017		41,333
Basic earnings per common share	$	0.26	$	0.26	$	0.24	$	0.24
Diluted earnings per common share	$	0.26	$	0.26	$	0.24	$	0.24
Basic weighted average common shares outstanding		170,707		171,650		172,839		173,846
Diluted weighted average common shares outstanding		170,896		171,780		172,841		173,848

	2011 Quarter Ended
	December 31			September 30			June 30			March 31
	(In Thousands, except per share data)
Interest income	$	181,282		$	185,095		$	188,651		$	186,594
Interest expense		29,457			31,935			34,528			32,871
Net interest income		151,825			153,160			154,123			153,723
Provision for loan losses		1,000			4,000			16,000			31,000
Investment securities losses, net		(310	)		(744	)		(36	)		(22	)
Income before income taxes		50,030			58,676			43,992			30,729
Net income available to common equity		39,825			34,034			25,570			15,440
Basic earnings per common share	$	0.23		$	0.20		$	0.15		$	0.09
Diluted earnings per common share	$	0.23		$	0.20		$	0.15		$	0.09
Basic weighted average common shares outstanding		173,523			173,418			173,323			173,213
Diluted weighted average common shares outstanding		173,523			173,418			173,327			173,217

2011 Compared to 2010

The Corporation recorded net income available to common equity for 2011 of $115 million, or diluted earnings per common share of $0.66. For 2010, net loss available to common equity was $30 million, or a net loss of $0.18 for diluted earnings per common share. Cash dividends of $0.04 per common share were paid in 2011, unchanged from cash dividends of $0.04 per common share paid in 2010. Key factors behind these results are discussed below.

Credit quality continued to improve during 2011. Nonaccrual loans were $357 million at December 31, 2011, a decrease of $217 million (38%) from December 31, 2010. Potential problem loans declined to $566 million, a decrease of $398 million (41%) from December 31, 2010. At December 31, 2011, the allowance for loan losses to total loans ratio was 2.70%, covering 106% of nonaccrual loans, compared to 3.78% at December 31, 2010, covering 83% of nonaccrual loans. The provision for loan losses was $52 million for 2011, with net charge offs to average loans of 1.13% (compared to a provision for loan losses of $390 million and a net charge off ratio of 3.69% for 2010).

Taxable equivalent net interest income was $634 million for 2011, $23 million or 4% lower than 2010, including unfavorable rate variances (decreasing taxable equivalent net interest income by $40 million), partially offset by

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favorable volume variances (increasing taxable equivalent net interest income by $17 million). The net interest margin for 2011 was 3.26%, 6 bp higher than 3.20% in 2010. The improvement in net interest margin was attributable to a 10 bp increase in interest rate spread (the net of an 11 bp decrease in the yield on earning assets and a 21 bp decrease in the cost of interest-bearing liabilities) and a 4 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).

Average earning assets of $19.4 billion in 2011 were $1.1 billion (5%) lower than 2010. Average securities and short-term investments decreased $1.2 billion, reflecting the Corporation’s strategy of funding loan growth primarily through investment securities run-off. Average loans increased $92 million (1%), including a $761 million increase in residential mortgage loans, partially offset by a $516 million decrease in commercial loans and a $153 million decrease in retail loans. Average interest-bearing liabilities of $15.1 billion in 2011 were down $1.2 billion (7%) versus 2010. On average, interest-bearing deposits decreased $2.8 billion (consistent with the Corporation’s strategy to reduce noncustomer network and brokered deposits), while average noninterest-bearing demand deposits (a principal component of net free funds) increased by $286 million. Average short and long-term funding increased $1.6 billion, the net of a $2.0 billion increase in short-term funding and a $358 million decrease in long-term funding.

At December 31, 2011, total loans were $14.0 billion, up 11% from year-end 2010, with growth in most loan categories (commercial and business lending was up $710 million, commercial real estate lending was up $255 million, and residential mortgage loans were up $605 million, while retail loans decreased $156 million). Total deposits at December 31, 2011, were $15.1 billion, down 1% from year-end 2010, consistent with the Corporation’s strategy for reducing its utilization of network transaction deposits and brokered deposits.

Noninterest income was $273 million for 2011, $62 million or 19% lower than 2010. Core fee-based revenues totaled $236 million for 2011, down $19 million or 8% from $255 million for 2010. Net mortgage banking income was $13 million for 2011, a decrease of $20 million from 2010, primarily attributable to lower gains on sales of mortgage loans related to the lower secondary mortgage production experienced during 2011. Net investment securities losses were $1 million for 2011, compared to net investment securities gains of $25 million for 2010 (predominantly from gains on sales of mortgage-related securities). Collectively, all remaining noninterest income categories were $26 million, up $4 million compared to 2010.

Noninterest expense for 2011 was $651 million, an increase of $30 million or 5% over 2010. Personnel expense was $360 million, up $35 million (11%) over 2010, reflecting the Corporation’s investment in personnel. While nonpersonnel noninterest expenses on an aggregate basis were down modestly (2%) compared to 2010, including an $18 million decrease in FDIC insurance, partially offset by a $6 million increase in occupancy expense and a $5 million increase in business development and advertising. The efficiency ratio was 70.66% for 2011 and 63.29% for 2010.

Income tax expense for 2011 was $44 million, compared to an income tax benefit of $40 million for 2010. The change in income tax was primarily due to the level of pretax income (loss) between the years.

Recent Developments

On January 22, 2013, the Board of Directors declared a regular quarterly cash dividend of $0.08 per common share, payable on March 15, 2013, to shareholders of record at the close of business on March 1, 2013. The Board of Directors also declared a regular quarterly cash dividend of $0.50 per depositary share on Associated Banc-Corp’s 8.00% Series B Perpetual Preferred Stock, payable on March 15, 2013, to shareholders of record at the close of business on March 1, 2013. These cash dividends have not been reflected in the accompanying consolidated financial statements.

On January 22, 2013, the Board of Directors of Associated Banc-Corp approved amendments to the Corporation’s Supplemental Executive Retirement Plan (the “Plan”). One such amendment reduces the time

75

period required for participants’ benefits under the Plan to vest, from five years of service to immediate vesting. The Plan was also amended as it relates to the timing of contributions to the Corporation’s 401(K) and Retirement Account Plan.

The Corporation repurchased approximately 1.8 million shares of common stock during January 2013.

A lawsuit, R.J. ZAYED v. Associated Bank, N.A., was filed in the United States District Court for the District of Minnesota on January 29, 2013. The lawsuit relates to a Ponzi scheme perpetrated by Oxford Global Partners and related entities (“Oxford”) and individuals and was brought by the receiver for Oxford. Oxford was a depository customer of the Bank. The lawsuit claims that the Bank is liable for failing to uncover the Oxford Ponzi scheme, and specifically alleges the Bank aided and abetted the (1) fraudulent scheme; (2) a breach of fiduciary duty; (3) conversion; and (4) false representations and omissions. The lawsuit seeks unspecified consequential and punitive damages. At this early stage of the lawsuit, it is not possible for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss at this time. The Bank intends to vigorously defend this lawsuit. A lawsuit by investors in the same Ponzi scheme, Herman Grad, et al v. Associated Bank, N.A., brought in Brown County, Wisconsin in October 2009 was dismissed by the circuit court, and the dismissal was affirmed by the Wisconsin Court of Appeals in June 2011 in an unpublished opinion.

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

76

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 as well as the “Allowance for Loan Losses” section.

Goodwill Impairment Assessment:  Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis. In addition, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not 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 2012. In addition, management assessed and determined during the fourth quarter of 2011 that an extended decline in the Corporation’s stock price qualified as a triggering event and as such, performed an interim impairment test. Both the annual impairment test and the interim impairment test during 2011 indicated that the estimated fair value exceeded the carrying value (including goodwill) for each reporting unit. Therefore, a step two analysis was not required. For 2010, 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 and no impairment charge was calculated or recorded. There were no impairment charges recorded in 2012, 2011, or 2010, respectively.

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.

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 independent valuation from a third

77

party which uses a discounted cash flow model to estimate the fair value of its mortgage servicing rights. The use of a 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. While the Corporation believes that the values produced by the discounted cash flow 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 and refinance rates on the value of the mortgage servicing rights asset at December 31, 2012, (holding all other factors unchanged), if refinance rates were to decrease 50 bp, the estimated value of the mortgage servicing rights asset would have been approximately $6 million (or 12%) lower. Conversely, if refinance rates were to increase 50 bp, the estimated value of the mortgage servicing rights asset would have been approximately $7 million (or 15%) higher. The Corporation believes the mortgage servicing rights asset is properly recorded in the consolidated financial statements. See also 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

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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. Quarterly assessments are performed to determine if 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 trend of quarterly earnings. 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. The Corporation has concluded that based on the level of positive evidence, it is more likely than not that the deferred tax asset will be realized. However, there is no guarantee that the tax benefits associated with the 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 2012 are discussed in Note 1, “Summary of Significant Accounting Policies,” of the notes to consolidated financial statements. The expected impact of accounting pronouncements 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 February 2013, the FASB issued an amendment requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. These disclosures may be presented on the face of the income statement or in the notes to consolidated financial statements, depending upon the specific accounting guidance for the reclassification out of accumulated other comprehensive income. The amendments are effective prospectively for reporting periods beginning after December 15, 2012, with early adoption permitted. The Corporation will adopt the accounting standard during 2013, as required.

In July 2012, the FASB issued amendments intended to simplify how entities test the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. The amendments permit an organization to make a qualitative evaluation about the likelihood of impairment of an indefinite-lived intangible asset to determine whether it should apply the quantitative test and calculate the fair value of the indefinite-lived intangible asset. The amendments do not change how an organization measures an impairment loss. Therefore, it is not expected to affect the information reported to users of the financial statements. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The Corporation will adopt the accounting standard during 2013, as required.

In December 2011, the FASB issued amendments to require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements with certain financial instruments and derivative instruments. The amendments are effective for annual reporting periods beginning on or after January 1, 2013, with retrospective application to the disclosures of all comparative periods presented. The Corporation will adopt the accounting standard during 2013, 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.”

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ASSOCIATED BANC-CORP

CONSOLIDATED BALANCE SHEETS

	December 31,
	2012			2011
	(In Thousands, except share and per share data)
ASSETS
Cash and due from banks	$	563,304		$	454,958
Interest-bearing deposits in other financial institutions		147,434			154,562
Federal funds sold and securities purchased under agreements to resell		27,135			7,075
Investment securities held to maturity, at amortized cost		39,877			—
Investment securities available for sale, at fair value		4,926,758			4,937,483
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost		166,774			191,188
Loans held for sale		261,410			249,195
Loans		15,411,022			14,031,071
Allowance for loan losses		(297,409	)		(378,151	)
Loans, net		15,113,613			13,652,920
Premises and equipment, net		253,958			223,736
Goodwill		929,168			929,168
Other intangible assets, net		61,176			67,574
Trading assets		70,711			73,253
Other assets		926,417			983,105
Total assets	$	23,487,735		$	21,924,217
LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing demand deposits	$	4,759,556		$	3,928,792
Interest-bearing deposits		12,180,309			11,161,863
Total deposits		16,939,865			15,090,655
Federal funds purchased and securities sold under agreements to repurchase		750,455			1,514,485
Other short-term funding		1,576,484			1,000,000
Long-term funding		1,015,346			1,177,071
Trading liabilities		76,343			80,046
Accrued expenses and other liabilities		192,843			196,166
Total liabilities		20,551,336			19,058,423
Stockholders’ equity
Preferred equity		63,272			63,272
Common stock		1,750			1,746
Surplus		1,602,136			1,586,401
Retained earnings		1,281,811			1,148,773
Accumulated other comprehensive income		48,603			65,602
Treasury stock, at cost		(61,173	)		—
Total stockholders’ equity		2,936,399			2,865,794
Total liabilities and stockholders’ equity	$	23,487,735		$	21,924,217
Preferred shares issued		65,000			65,000
Preferred shares authorized (par value $1.00 per share)		750,000			750,000
Common shares issued		175,012,686			174,591,841
Common shares authorized (par value $0.01 per share)		250,000,000			250,000,000
Treasury shares of common stock		4,773,146			—

See accompanying notes to consolidated financial statements.

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ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

	For the Years Ended December 31,
	2012			2011			2010
	(In Thousands, except per share data)
INTEREST INCOME
Interest and fees on loans	$	595,965		$	582,739		$	608,487
Interest and dividends on investment securities
Taxable		86,945			123,371			155,032
Tax exempt		28,655			29,937			33,915
Other interest		6,719			5,575			8,692
Total interest income		718,284			741,622			806,126
INTEREST EXPENSE
Interest on deposits		41,431			65,748			106,023
Interest on Federal funds purchased and securities sold under agreements to repurchase		2,687			6,196			7,196
Interest on other short-term funding		3,294			6,215			787
Interest on long-term funding		44,880			50,632			58,341
Total interest expense		92,292			128,791			172,347
NET INTEREST INCOME		625,992			612,831			633,779
Provision for loan losses		3,000			52,000			390,010
Net interest income after provision for loan losses		622,992			560,831			243,769
NONINTEREST INCOME
Trust service fees		40,737			39,145			37,853
Service charges on deposit accounts		68,917			75,908			96,740
Card-based and other nondeposit fees		47,862			57,905			59,299
Insurance commissions		47,014			45,554			43,829
Brokerage and annuity commissions		15,643			17,230			17,427
Mortgage banking, net		63,500			12,723			33,136
Capital market fees, net		14,241			8,711			6,072
Bank owned life insurance income		13,952			14,896			15,761
Asset losses, net		(12,096	)		(12,199	)		(12,065	)
Investment securities gains (losses), net:
Realized gains (losses), net		4,261			(228	)		28,854
Other-than-temporary impairments		(59	)		(2,417	)		(6,058	)
Less: Non-credit portion recognized in other comprehensive income (before taxes)		59			1,533			2,121
Total investment securities gains (losses), net		4,261			(1,112	)		24,917
Other		9,259			14,358			12,493
Total noninterest income		313,290			273,119			335,462
NONINTEREST EXPENSE
Personnel expense		381,404			360,144			325,063
Occupancy		60,794			55,939			49,937
Equipment		23,566			19,873			18,371
Data processing		43,548			32,475			29,714
Business development and advertising		21,303			23,038			18,385
Other intangible amortization		4,195			4,714			4,919
Loan expense		12,285			12,008			9,965
Legal and professional fees		31,232			18,205			20,439
Losses other than loans		12,258			17,921			14,793
Foreclosure / OREO expense		15,069			21,393			23,783
FDIC expense		19,478			28,484			46,377
Other		56,691			56,329			58,513
Total noninterest expense		681,823			650,523			620,259
Income (loss) before income taxes		254,459			183,427			(41,028	)
Income tax expense (benefit)		75,486			43,728			(40,172	)
Net income (loss)		178,973			139,699			(856	)
Preferred stock dividends and discount accretion		5,200			24,830			29,531
Net income (loss) available to common equity	$	173,773		$	114,869		$	(30,387	)
Earnings (loss) per common share:
Basic	$	1.00		$	0.66		$	(0.18	)
Diluted	$	1.00		$	0.66		$	(0.18	)
Average common shares outstanding:
Basic		172,255			173,370			171,230
Diluted		172,357			173,372			171,230

See accompanying notes to consolidated financial statements.

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ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Years Ended December 31,
	2012			2011			2010
	($ in Thousands)
Net income (loss)	$	178,973		$	139,699		$	(856	)
Other comprehensive income (loss), net of tax:
Investment securities available for sale:
Net unrealized gains (losses)		(19,042	)		71,606			(38,278	)
Reclassification adjustment for net (gains) losses realized in net income (loss)		(4,261	)		1,112			(24,917	)
Income tax (expense) benefit		9,651			(28,566	)		24,785
Other comprehensive income (loss) on investment securities available for sale		(13,652	)		44,152			(38,410	)
Defined benefit pension and postretirement obligations:
Prior service cost, net of amortization		242			467			467
Net gain (loss), net of amortization		(6,941	)		(14,810	)		2,271
Income tax (expense) benefit		2,366			5,674			(1,106	)
Other comprehensive income (loss) on pension and postretirement obligations		(4,333	)		(8,669	)		1,632
Derivatives used in cash flow hedging relationships:
Net unrealized gains (losses)		6			(557	)		(4,542	)
Reclassification adjustment for net losses and interest expense for interest differential on derivatives realized in net income (loss)		1,954			4,708			6,013
Income tax expense		(974	)		(1,658	)		(499	)
Other comprehensive income on cash flow hedging relationships		986			2,493			972
Total other comprehensive income (loss)		(16,999	)		37,976			(35,806	)
Comprehensive income (loss)	$	161,974		$	177,675		$	(36,662	)

See accompanying notes to consolidated financial statements.

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ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

																	Accumulated Other Comprehensive Income (Loss)
	Preferred Equity						Common Stock							Retained Earnings						Treasury Stock
	Shares			Amount			Shares		Amount		Surplus												Total
	(In Thousands, except per share data)
Balance, December 31, 2009		525		$	511,107			128,428	$	1,284	$	1,082,335		$	1,081,156		$	63,432		$	(706	)	$	2,738,608
Comprehensive loss:
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 impact of stock-based compensation		—			—			—		—		11			—			—			—			11
Balance, December 31, 2010		525		$	514,388			173,887	$	1,739	$	1,573,372		$	1,041,666		$	27,626		$	—		$	3,158,791
Comprehensive income:
Net income		—			—			—		—		—			139,699			—			—			139,699
Other comprehensive income		—			—			—		—		—			—			37,976			—			37,976
Comprehensive income																								177,675
Common stock issued:
Stock-based compensation plans, net		—			—			704		7		4,350			(785	)		—			659			4,231
Purchase of treasury stock		—			—			—		—		—			—			—			(659	)		(659	)
Cash dividends:
Common stock, $0.04 per share		—			—			—		—		—			(6,977	)		—			—			(6,977	)
Preferred stock		—			—			—		—		—			(14,218	)		—			—			(14,218	)
Issuance of preferred stock		65			63,272			—		—		—						—			—			63,272
Redemption of preferred stock		(525	)		(525,000	)		—		—		—			—			—			—			(525,000	)
Accretion of preferred stock discount		—			10,612			—		—		—			(10,612	)		—			—			—
Stock-based compensation expense, net		—			—			—		—		11,024			—			—			—			11,024
Tax impact of stock-based compensation		—			—			—		—		(2,345	)		—			—			—			(2,345	)
Balance, December 31, 2011		65		$	63,272			174,591	$	1,746	$	1,586,401		$	1,148,773		$	65,602		$	—		$	2,865,794
Comprehensive income:
Net income		—			—			—		—		—			178,973			—			—			178,973
Other comprehensive loss		—			—			—		—		—			—			(16,999	)		—			(16,999	)
Comprehensive income																								161,974
Common stock issued:
Stock-based compensation plans, net		—			—			422		4		761			(1,101	)		—			481			145
Purchase of treasury stock		—			—			—		—		—			—			—			(61,654	)		(61,654	)
Cash dividends:
Common stock, $0.23 per share		—			—			—		—		—			(39,634	)		—			—			(39,634	)
Preferred stock		—			—			—		—		—			(5,200	)		—			—			(5,200	)
Stock-based compensation expense, net		—			—			—		—		15,759			—			—			—			15,759
Tax impact of stock-based compensation		—			—			—		—		(785	)		—			—			—			(785	)
Balance, December 31, 2012		65		$	63,272			175,013	$	1,750	$	1,602,136		$	1,281,811		$	48,603		$	(61,173	)	$	2,936,399

See accompanying notes to consolidated financial statements.

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ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2012			2011			2010
	($ in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	178,973		$	139,699		$	(856	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses		3,000			52,000			390,010
Depreciation and amortization		43,611			33,628			30,108
Addition to valuation allowance on mortgage servicing rights, net		2,383			7,403			3,067
Amortization of mortgage servicing rights		23,348			25,830			22,942
Amortization of other intangible assets		4,195			4,714			4,919
Amortization and accretion on earning assets, funding, and other, net		55,101			65,670			62,714
Deferred income taxes		54,294			34,742			50,808
Tax impact of stock-based compensation		(785	)		(2,345	)		11
(Gain) loss on sales of investment securities, net, and impairment write-downs		(4,261	)		1,112			(24,917	)
Loss on sales of assets and impairment write-downs, net		12,096			12,199			12,065
Gain on mortgage banking activities, net		(60,312	)		(31,628	)		(34,967	)
Mortgage loans originated and acquired for sale		(2,797,431	)		(1,855,037	)		(2,314,557	)
Proceeds from sales of mortgage loans held for sale		2,822,000			1,764,801			2,259,789
Decrease in interest receivable		534			5,062			13,466
Decrease in interest payable		(5,723	)		(1,232	)		(4,051	)
Net change in other assets and other liabilities		19,461			53,169			38,871
Net cash provided by operating activities		350,484			309,787			509,422
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans		(1,637,901	)		(1,754,499	)		616,608
Purchases of:
Investment securities		(2,131,026	)		(777,309	)		(3,369,225	)
Premises, equipment, and software, net of disposals		(83,973	)		(76,648	)		(34,595	)
Other assets		(5,968	)		(3,061	)		(15,516	)
Proceeds from:
Sales of investment securities		299,782			176,267			971,662
Calls and maturities of investment securities		1,723,504			1,776,245			2,027,847
Sales, prepayments, calls and maturities of other assets		70,920			50,417			67,400
Sales of loans originated for investment		130,940			136,051			352,589
Net cash provided by (used in) investing activities		(1,633,722	)		(472,537	)		616,770
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		1,969,055			(134,738	)		(1,503,220	)
Net decrease in deposits due to branch sales		(113,622	)		—			—
Net increase (decrease) in short-term funding		(187,546	)		767,103			520,529
Repayment of long-term funding		(311,621	)		(670,104	)		(940,361	)
Proceeds from issuance of long-term funding		154,738			432,504			400,000
Proceeds from issuance of common stock		—			—			478,358
Proceeds from issuance of preferred stock		—			63,272			—
Redemption of preferred stock		—			(525,000	)		—
Cash dividends on common stock		(39,634	)		(6,977	)		(6,948	)
Cash dividends on preferred stock		(5,200	)		(14,218	)		(26,250	)
Purchase of treasury stock		(61,654	)		(659	)		(830	)
Net cash provided by (used in) financing activities		1,404,516			(88,817	)		(1,078,722	)
Net increase (decrease) in cash and cash equivalents		121,278			(251,567	)		47,470
Cash and cash equivalents at beginning of period		616,595			868,162			820,692
Cash and cash equivalents at end of period	$	737,873		$	616,595		$	868,162
Supplemental disclosures of cash flow information:
Cash paid for interest	$	97,938		$	129,720		$	175,776
Cash received for income taxes		(9,722	)		(10,839	)		(93,723	)
Loans and bank premises transferred to other real estate owned		39,511			48,752			49,427
Capitalized mortgage servicing rights		23,528			17,476			26,165

See accompanying notes to consolidated financial statements.

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ASSOCIATED BANC-CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012, 2011, and 2010

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 wholly-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 cost method of accounting when the Corporation has determined that the cost method is appropriate. Investments not meeting the criteria for cost method accounting are accounted for using the equity 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, while distributions in excess of the investment are recorded in gain on assets.

All significant intercompany balances and transactions have been eliminated in consolidation.

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

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. Management has evaluated subsequent events for potential recognition or disclosure.

Investment Securities

Securities are classified as held to maturity or available for sale at the time of purchase. Investment securities classified as held to maturity, which management has the positive intent and ability to hold to maturity, are reported at amortized cost, adjusted for amortization of premiums and accretion of discounts, using a method that approximates level yield. Investment securities classified as available for sale, which management has the intent and ability to hold for an indefinite period of time, but not necessarily to maturity, 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. 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

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rates or prepayment risks, liquidity needs, or regulatory capital considerations. 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 security has been in an unrealized loss position, changes in security ratings, the financial condition and near-term prospects of the issuer, as well as security and industry specific economic conditions. In addition, the Corporation considers the intent and ability 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 impaired loan 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 consumer 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 and interest of the loan is collectible. If collectability of the principal and interest is in doubt, payments received are applied to loan principal.

While a loan 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

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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.

Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty. The concessions granted generally involve 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. Nonaccrual restructured loans are included and treated with all other nonaccrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings which are considered and accounted for as impaired loans. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). 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 status. 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). At December 31, 2012 and 2011, there was no market valuation adjustment to loans held for sale. 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

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credit losses. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance for loan losses 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 impaired loan 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 and interest 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 changes 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 fair value of the underlying property collateral, less estimated selling costs. This fair value becomes the new cost basis for the foreclosed asset. The initial write-down, if any, will be recorded as a charge off against the allowance for loan losses. Any subsequent write-downs to reflect current fair value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are expensed as incurred. Other real estate owned also includes bank premises formerly but no longer used for banking as well as property originally acquired for future expansion but no longer intended to be used for that purpose. Banking premises are transferred at the lower of carrying value or fair value, less estimated selling costs and any write-down is expensed as incurred. Other real estate owned totaled $35 million and $41 million at December 31, 2012 and 2011, 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 of the loan. Net adjustments to the reserve for unfunded commitments are included in losses other than loans in the consolidated statements of income (loss).

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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 2012 and 2011). 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, instead, is subject to impairment tests on at least an annual basis. In addition, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. 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 reporting unit 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 fall, prepayment speeds are usually faster and the value of the mortgage servicing rights assets 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. 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.,

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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, the amount of taxes paid in available carryback years, 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 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, 2012 and 2011, 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,

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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 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 value of stock options and restricted stock awards are amortized as compensation expense on a straight-line basis over the vesting period of the grants and the fair value of salary shares is recognized as compensation expense on the date of grant. 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 September 2011, the FASB issued amendments intended to simplify how entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining

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whether it is necessary to perform the two-step goodwill impairment test. Under the guidance, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying value. The amendments are effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The Corporation adopted the accounting standard as of January 1, 2012, as required, with no material impact on its results of operations, financial position, and liquidity. See Note 4 for required disclosures on goodwill.

In June 2011, the FASB issued guidance to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The amendments require that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments are effective for interim and annual periods beginning after December 15, 2011 with retrospective application. The Corporation adopted the accounting standard as of January 1, 2012, as required, with no material impact on its results of operations, financial position, and liquidity. In December 2011, the FASB decided that the requirement to present items that are reclassified from other comprehensive income to net income alongside their respective components of net income and other comprehensive income will be deferred. Therefore, those requirements have not been adopted at this time.

In May 2011, the FASB issued guidance on measuring fair value to create common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments change the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements. The amendments also clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements. The amendments are effective for interim and annual periods beginning after December 15, 2011. The Corporation adopted the accounting standard as of January 1, 2012, with no material impact on its results of operations, financial position, and liquidity. See Note 16 for required disclosures on fair value measurements.

In April 2011, the FASB issued guidance that clarifies the definition of effective control for determining whether a repurchase agreement is accounted for as a sale or secured borrowing. The amendments in the guidance remove from the assessment of effective control both the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed upon terms and the collateral maintenance implementation guidance related to that criterion. Other criteria applicable to the assessment of effective control are not changed by the amendments in the update. The guidance is effective for interim and annual periods beginning on or after December 15, 2011. The Corporation adopted the accounting standard as of January 1, 2012, as required, with no material impact on its results of operations, financial position, and liquidity.

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NOTE 2    INVESTMENT SECURITIES:

The amortized cost and fair values of securities available for sale and held to maturity were as follows.

December 31, 2012:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	($ in Thousands)
Investment securities available for sale:
U.S. Treasury securities	$	1,003	$	1	$	—		$	1,004
Obligations of state and political subdivisions (municipal securities)		755,644		45,599		(55	)		801,188
Residential mortgage-related securities		3,714,289		93,742		(3,727	)		3,804,304
Commercial mortgage-related securities		226,420		2,809		(1,063	)		228,166
Other securities (debt and equity)		90,622		1,549		(75	)		92,096
Total investment securities available for sale	$	4,787,978	$	143,700	$	(4,920	)	$	4,926,758
Investment securities held to maturity:
Obligations of state and political subdivisions (municipal securities)	$	39,877	$	98	$	(296	)	$	39,679
Total investment securities held to maturity	$	39,877	$	98	$	(296	)	$	39,679

December 31, 2011:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	($ in Thousands)
Investment securities available for sale:
U. S. Treasury securities	$	1,000	$	1	$	—		$	1,001
Federal agency securities		24,031		18		—			24,049
Obligations of state and political subdivisions (municipal securities)		797,691		49,583		(28	)		847,246
Residential mortgage-related securities		3,674,696		112,357		(1,463	)		3,785,590
Commercial mortgage-related securities		16,647		1,896		—			18,543
Asset-backed securities(1)		188,439		—		(707	)		187,732
Other securities (debt and equity)		72,896		1,891		(1,465	)		73,322
Total investment securities available for sale	$	4,775,400	$	165,746	$	(3,663	)	$	4,937,483

(1) The asset-backed securities position 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.

The amortized cost and fair values of investment securities available for sale and held to maturity at December 31, 2012, 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.

	Available for Sale				Held to Maturity
($ in Thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	49,605	$	48,477	$	—	$	—
Due after one year through five years		215,006		223,764		—		—
Due after five years through ten years		522,815		557,001		10,917		10,884
Due after ten years		59,826		64,995		28,960		28,795
Total debt securities		847,252		894,237		39,877		39,679
Residential mortgage-related securities		3,714,289		3,804,304		—		—
Commercial mortgage-related securities		226,420		228,166		—		—
Equity securities		17		51		—		—
Total investment securities	$	4,787,978	$	4,926,758	$	39,877	$	39,679

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For 2012, net investment securities gains of $4 million were primarily attributable to gains on sales of equity, mortgage-related, and trust preferred debt securities. Net investment securities losses of $1 million for 2011 were primarily attributable to credit-related other-than-temporary write-downs on the Corporation’s holding of various investment securities (including write-downs on trust preferred debt securities and various equity securities). Net investment securities gains of $25 million for 2010 were attributable to gains of $29 million on the sale of residential mortgage-related, federal agency, and municipal securities, partially offset by $4 million of credit-related other-than-temporary write-downs on the Corporation’s holding of various investment securities (including write-downs on trust preferred debt securities and various equity securities).

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

	2012			2011			2010
	($ in Thousands)
Gross gains	$	4,481		$	—		$	28,939
Gross losses		(220	)		(1,112	)		(4,022	)
Investment securities gains (losses), net	$	4,261		$	(1,112	)	$	24,917
Proceeds from sales of investment securities		299,782			176,267			971,662

Pledged securities with a carrying value of approximately $2.6 billion and $3.3 billion at December 31, 2012, and December 31, 2011, 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 and held to maturity, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at December 31, 2012.

	Less than 12 months							12 months or more							Total
December 31, 2012	Number of Securities		Unrealized Losses			Fair Value		Number of Securities		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
	($ in Thousands)
Investment securities available for sale:
Obligations of state and political subdivisions (municipal securities)		15	$	(42	)	$	5,065		1	$	(13	)	$	348	$	(55	)	$	5,413
Residential mortgage-related securities		30		(3,727	)		892,964		—		—			—		(3,727	)		892,964
Commercial mortgage-related securities		2		(1,063	)		102,474		—		—			—		(1,063	)		102,474
Other debt securities		—		—			—		1		(75	)		111		(75	)		111
Total			$	(4,832	)	$	1,000,503			$	(88	)	$	459	$	(4,920	)	$	1,000,962
Investment securities held to maturity:
Obligations of state and political subdivisions (municipal securities)		56	$	(296	)	$	28,265		—	$	—		$	—	$	(296	)	$	28,265
Total			$	(296	)	$	28,265			$	—		$	—	$	(296	)	$	28,265

The Corporation reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment. A determination as to whether a security’s decline in fair value is other-than-

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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 and extent to which the security has been in an unrealized loss position, changes in security ratings, financial condition and near-term prospects 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 unrealized loss at December 31, 2012, represents an other-than-temporary impairment as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions, and not credit deterioration. 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, 2012, the unrealized loss position on other debt securities was attributable to a pooled trust preferred debt security. 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 2011 and 2012.

	Non-agency Mortgage-Related Securities			Trust Preferred Debt Securities			Total
	$ in Thousands
Balance of credit-related other-than-temporary impairment at December 31, 2010	$	(17,556	)	$	(10,019	)	$	(27,575	)
Credit losses on newly identified impairment		(2	)		(816	)		(818	)
Balance of credit-related other-than-temporary impairment at December 31, 2011	$	(17,558	)	$	(10,835	)	$	(28,393	)
Reduction due to credit impaired securities sold		17,026			4,499			21,525
Balance of credit-related other-than-temporary impairment at December 31, 2012	$	(532	)	$	(6,336	)	$	(6,868	)

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, 2011.

	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, 2011
Obligations of state and political subdivisions (municipal securities)	$	(10	)	$	971	$	(18	)	$	348	$	(28	)	$	1,319
Residential mortgage-related securities		(1,443	)		186,954		(20	)		1,469		(1,463	)		188,423
Asset-backed securities		(9	)		4,091		(698	)		174,640		(707	)		178,731
Other securities (debt and equity)		(671	)		45,395		(794	)		522		(1,465	)		45,917
Total	$	(2,133	)	$	237,411	$	(1,530	)	$	176,979	$	(3,663	)	$	414,390

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Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stocks: 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 approximates amortized cost. At December 31, 2012, and 2011, the Corporation had FHLB stock of $96 million and $121 million, respectively. The Corporation had Federal Reserve Bank stock of $71 million and $70 million at December 31, 2012 and 2011, respectively.

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 2012, 2011, or 2010, respectively. The FHLB of Chicago initiated tender offers for certain of its shares during 2012, whereby the FHLB would repurchase its shares at par. The Corporation participated in the tender offers and reduced its equity holdings in the FHLB of Chicago by $25 million.

NOTE 3    LOANS:

Loans at December 31 are summarized below.

	2012		2011
	($ in Thousands)
Commercial and industrial	$	4,502,021	$	3,724,736
Commercial real estate — owner occupied		1,219,747		1,086,829
Lease financing		64,196		58,194
Commercial and business lending		5,785,964		4,869,759
Commercial real estate — investor		2,906,759		2,563,767
Real estate construction		655,381		584,046
Commercial real estate lending		3,562,140		3,147,813
Total commercial		9,348,104		8,017,572
Home equity		2,219,494		2,504,704
Installment		466,727		557,782
Total retail		2,686,221		3,062,486
Residential mortgage		3,376,697		2,951,013
Total consumer		6,062,918		6,013,499
Total loans	$	15,411,022	$	14,031,071

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 below.

	2012
	($ in Thousands)
Balance at beginning of year	$	37,751
New loans		15,010
Repayments		(14,610	)
Changes due to status of executive officers and directors		(1,180	)
Balance at end of year	$	36,971

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A summary of the changes in the allowance for loan losses for the years indicated was as follows.

	2012			2011			2010
	($ in Thousands)
Balance at beginning of year	$	378,151		$	476,813		$	573,533
Provision for loan losses		3,000			52,000			390,010
Charge offs		(117,046	)		(189,732	)		(528,492	)
Recoveries		33,304			39,070			41,762
Net charge offs		(83,742	)		(150,662	)		(486,730	)
Balance at end of year	$	297,409		$	378,151		$	476,813

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. In general, the change in the allowance for loan losses is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge offs, trends in past due and impaired loans, and the level of potential problem loans. Management considers the allowance for loan losses a critical accounting policy, as assessing these numerous factors involves significant judgment.

A summary of the changes in the allowance for loan losses by portfolio segment for the year ended December 31, 2012, was as follows.

$ in Thousands	Commercial and industrial			Commercial real estate — owner occupied			Lease financing			Commercial real estate — investor			Real estate construction			Home equity			Installment			Residential mortgage			Total
Balance at Dec 31, 2011	$	124,374		$	36,200		$	2,567		$	86,689		$	21,327		$	70,144		$	6,623		$	30,227		$	378,151
Provision for loan losses		(1,645	)		(5,184	)		(645	)		(14,304	)		873			16,909			(501	)		7,497			3,000
Charge offs		(43,240	)		(4,080	)		(797	)		(14,000	)		(3,588	)		(34,125	)		(3,057	)		(14,159	)		(117,046	)
Recoveries		18,363			453			1,899			4,796			2,129			3,898			1,234			532			33,304
Balance at Dec 31, 2012	$	97,852		$	27,389		$	3,024		$	63,181		$	20,741		$	56,826		$	4,299		$	24,097		$	297,409
Allowance for loan losses:
Ending balance impaired loans individually evaluated for impairment	$	8,790		$	654		$	—		$	5,241		$	1,079		$	868		$	—		$	155		$	16,787
Ending balance impaired loans collectively evaluated for impairment	$	4,951		$	3,157		$	—		$	4,446		$	2,332		$	23,712		$	1,155		$	12,751		$	52,504
Total impaired loans	$	13,741		$	3,811		$	—		$	9,687		$	3,411		$	24,580		$	1,155		$	12,906		$	69,291
Ending balance all other loans collectively evaluated for impairment	$	84,111		$	23,578		$	3,024		$	53,494		$	17,330		$	32,246		$	3,144		$	11,191		$	228,118
Total	$	97,852		$	27,389		$	3,024		$	63,181		$	20,741		$	56,826		$	4,299		$	24,097		$	297,409
Loans:
Ending balance impaired loans individually evaluated for impairment	$	27,213		$	16,602		$	3,024		$	48,894		$	20,794		$	4,671		$	—		$	11,330		$	132,528
Ending balance impaired loans collectively evaluated for impairment	$	40,109		$	21,504		$	7		$	51,453		$	11,038		$	44,512		$	2,491		$	70,313		$	241,427
Impaired loan subtotal	$	67,322		$	38,106		$	3,031		$	100,347		$	31,832		$	49,183		$	2,491		$	81,643		$	373,955
Ending balance all other loans collectively evaluated for impairment	$	4,434,699		$	1,181,641		$	61,165		$	2,806,412		$	623,549		$	2,170,311		$	464,236		$	3,295,054		$	15,037,067
Total	$	4,502,021		$	1,219,747		$	64,196		$	2,906,759		$	655,381		$	2,219,494		$	466,727		$	3,376,697		$	15,411,022

The allocation methodology used by the Corporation includes allocations for specifically identified impaired loans and loss factor allocations, (used for both criticized and non-criticized loan categories) with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. Management allocates the allowance for loan losses by pools of risk within each loan portfolio.

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At December 31, 2012, the allowance for loan losses declined and the loan portfolio segment allocations also declined relative to December 31, 2011. The change in the allowance for loan losses portfolio allocations was primarily due to improved credit quality metrics. The allocation of the allowance for loan losses by loan portfolio is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular category. The total allowance for loan losses is available to absorb losses from any segment of the loan portfolio.

For comparison purposes, a summary of the changes in the allowance for loan losses by portfolio segment for the year ended December 31, 2011, was as follows.

$ in Thousands	Commercial and industrial			Commercial real estate — owner occupied			Lease financing			Commercial real estate — investor			Real estate construction			Home equity			Installment			Residential mortgage			Total
Balance at Dec 31, 2010	$	137,770		$	54,320		$	7,396		$	111,264		$	56,772		$	55,090		$	17,328		$	36,873		$	476,813
Provision for loan losses		8,916			(11,144	)		(6,611	)		(762	)		(4,744	)		54,476			3,845			8,024			52,000
Charge offs		(38,662	)		(9,485	)		(173	)		(29,479	)		(38,222	)		(42,623	)		(16,134	)		(14,954	)		(189,732	)
Recoveries		16,350			2,509			1,955			5,666			7,521			3,201			1,584			284			39,070
Balance at Dec 31, 2011	$	124,374		$	36,200		$	2,567		$	86,689		$	21,327		$	70,144		$	6,623		$	30,227		$	378,151
Allowance for loan losses:
Ending balance impaired loans individually evaluated for impairment	$	7,619		$	3,608		$	161		$	16,623		$	4,919		$	2,922		$	—		$	957		$	36,809
Ending balance impaired loans collectively evaluated for impairment	$	7,688		$	3,962		$	34		$	8,378		$	4,266		$	27,914		$	2,021		$	13,707		$	67,970
Total impaired loans	$	15,307		$	7,570		$	195		$	25,001		$	9,185		$	30,836		$	2,021		$	14,664		$	104,779
Ending balance all other loans collectively evaluated for impairment	$	109,067		$	28,630		$	2,372		$	61,688		$	12,142		$	39,308		$	4,602		$	15,563		$	273,372
Total	$	124,374		$	36,200		$	2,567		$	86,689		$	21,327		$	70,144		$	6,623		$	30,227		$	378,151
Loans:
Ending balance impaired loans individually evaluated for impairment	$	41,474		$	26,049		$	9,792		$	85,287		$	31,933		$	9,542		$	—		$	11,401		$	215,478
Ending balance impaired loans collectively evaluated for impairment	$	37,153		$	17,807		$	852		$	57,482		$	20,850		$	46,315		$	3,730		$	70,269		$	254,458
Impaired loan subtotal	$	78,627		$	43,856		$	10,644		$	142,769		$	52,783		$	55,857		$	3,730		$	81,670		$	469,936
Ending balance all other loans collectively evaluated for impairment	$	3,646,109		$	1,042,973		$	47,550		$	2,420,998		$	531,263		$	2,448,847		$	554,052		$	2,869,343		$	13,561,135
Total	$	3,724,736		$	1,086,829		$	58,194		$	2,563,767		$	584,046		$	2,504,704		$	557,782		$	2,951,013		$	14,031,071

The following table presents commercial loans by credit quality indicator at December 31, 2012.

	Pass		Special Mention		Potential Problem		Impaired		Total
	($ Thousands)
Commercial and industrial	$	4,208,478	$	97,787		128,434	$	67,322	$	4,502,021
Commercial real estate — owner occupied		1,030,632		51,417		99,592		38,106		1,219,747
Lease financing		58,099		2,802		264		3,031		64,196
Commercial and business lending		5,297,209		152,006		228,290		108,459		5,785,964
Commercial real estate — investor		2,634,035		65,309		107,068		100,347		2,906,759
Real estate construction		603,481		6,976		13,092		31,832		655,381
Commercial real estate lending		3,237,516		72,285		120,160		132,179		3,562,140
Total commercial	$	8,534,725	$	224,291	$	348,450	$	240,638	$	9,348,104

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The following table presents commercial loans by credit quality indicator at December 31, 2011.

	Pass		Special Mention		Potential Problem		Impaired		Total
	($ Thousands)
Commercial and industrial	$	3,283,090	$	209,713		153,306	$	78,627	$	3,724,736
Commercial real estate — owner occupied		853,517		53,090		136,366		43,856		1,086,829
Lease financing		46,570		822		158		10,644		58,194
Commercial and business lending		4,183,177		263,625		289,830		133,127		4,869,759
Commercial real estate — investor		2,055,124		135,668		230,206		142,769		2,563,767
Real estate construction		494,839		8,775		27,649		52,783		584,046
Commercial real estate lending		2,549,963		144,443		257,855		195,552		3,147,813
Total commercial	$	6,733,140	$	408,068	$	547,685	$	328,679	$	8,017,572

The following table presents consumer loans by credit quality indicator at December 31, 2012.

	Performing		30-89 Days Past Due		Potential Problem		Impaired		Total
	($ Thousands)
Home equity	$	2,153,103	$	13,538		3,670	$	49,183	$	2,219,494
Installment		462,016		2,109		111		2,491		466,727
Total retail		2,615,119		15,647		3,781		51,674		2,686,221
Residential mortgage		3,276,889		9,403		8,762		81,643		3,376,697
Total consumer	$	5,892,008	$	25,050	$	12,543	$	133,317	$	6,062,918

The following table presents consumer loans by credit quality indicator at December 31, 2011.

	Performing		30-89 Days Past Due		Potential Problem		Impaired		Total
	($ Thousands)
Home equity	$	2,431,207	$	12,189		5,451	$	55,857	$	2,504,704
Installment		551,227		2,592		233		3,730		557,782
Total retail		2,982,434		14,781		5,684		59,587		3,062,486
Residential mortgage		2,849,082		7,224		13,037		81,670		2,951,013
Total consumer	$	5,831,516	$	22,005	$	18,721	$	141,257	$	6,013,499

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, and appropriate allowance for loan losses, nonaccrual and charge off policies.

For commercial loans, management has determined the pass credit quality indicator to include credits that exhibit acceptable financial statements, cash flow, and leverage. If any risk exists, it is mitigated by the loan 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

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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 impaired loan 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 or if otherwise warranted.

The following table presents loans by past due status at December 31, 2012.

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due*		Total Past Due		Current		Total
	($ in Thousands)
Accruing loans
Commercial and industrial	$	9,557	$	1,782	$	79	$	11,418	$	4,451,421	$	4,462,839
Commercial real estate — owner occupied		10,420		633		308		11,361		1,184,132		1,195,493
Lease financing		—		12		—		12		61,153		61,165
Commercial and business lending		19,977		2,427		387		22,791		5,696,706		5,719,497
Commercial real estate — investor		8,424		5,048		366		13,838		2,834,234		2,848,072
Real estate construction		1,628		1,527		283		3,438		624,641		628,079
Commercial real estate lending		10,052		6,575		649		17,276		3,458,875		3,476,151
Total commercial		30,029		9,002		1,036		40,067		9,155,581		9,195,648
Home equity		10,151		3,387		96		13,634		2,166,645		2,180,279
Installment		1,300		809		1,013		3,122		461,767		464,889
Total retail		11,451		4,196		1,109		16,756		2,628,412		2,645,168
Residential mortgage		8,473		930		144		9,547		3,307,791		3,317,338
Total consumer		19,924		5,126		1,253		26,303		5,936,203		5,962,506
Total accruing loans	$	49,953	$	14,128	$	2,289	$	66,370	$	15,091,784	$	15,158,154
Nonaccrual loans
Commercial and industrial	$	8,559	$	791	$	11,962	$	21,312	$	17,870	$	39,182
Commercial real estate — owner occupied		1,489		1,749		11,819		15,057		9,197		24,254
Lease financing		15		—		9		24		3,007		3,031
Commercial and business lending		10,063		2,540		23,790		36,393		30,074		66,467
Commercial real estate — investor		197		3,072		30,928		34,197		24,490		58,687
Real estate construction		16		—		9,639		9,655		17,647		27,302
Commercial real estate lending		213		3,072		40,567		43,852		42,137		85,989
Total commercial		10,276		5,612		64,357		80,245		72,211		152,456
Home equity		1,456		2,518		28,474		32,448		6,767		39,215
Installment		153		141		586		880		958		1,838
Total retail		1,609		2,659		29,060		33,328		7,725		41,053
Residential mortgage		2,135		4,321		38,739		45,195		14,164		59,359
Total consumer		3,744		6,980		67,799		78,523		21,889		100,412
Total nonaccrual loans	$	14,020	$	12,592	$	132,156	$	158,768	$	94,100	$	252,868
Total loans
Commercial and industrial	$	18,116	$	2,573	$	12,041	$	32,730	$	4,469,291	$	4,502,021
Commercial real estate — owner occupied		11,909		2,382		12,127		26,418		1,193,329		1,219,747
Lease financing		15		12		9		36		64,160		64,196
Commercial and business lending		30,040		4,967		24,177		59,184		5,726,780		5,785,964
Commercial real estate — investor		8,621		8,120		31,294		48,035		2,858,724		2,906,759
Real estate construction		1,644		1,527		9,922		13,093		642,288		655,381
Commercial real estate lending		10,265		9,647		41,216		61,128		3,501,012		3,562,140
Total commercial		40,305		14,614		65,393		120,312		9,227,792		9,348,104
Home equity		11,607		5,905		28,570		46,082		2,173,412		2,219,494
Installment		1,453		950		1,599		4,002		462,725		466,727
Total retail		13,060		6,855		30,169		50,084		2,636,137		2,686,221
Residential mortgage		10,608		5,251		38,883		54,742		3,321,955		3,376,697
Total consumer		23,668		12,106		69,052		104,826		5,958,092		6,062,918
Total loans	$	63,973	$	26,720	$	134,445	$	225,138	$	15,185,884	$	15,411,022

* The recorded investment in loans past due 90 days or more and still accruing totaled $2 million at December 31, 2012 (the same as the reported balances for the accruing loans noted above).

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The following table presents loans by past due status at December 31, 2011.

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due*		Total Past Due		Current		Total
	($ in Thousands)
Accruing loans
Commercial and industrial	$	3,513	$	5,230	$	3,755	$	12,498	$	3,656,163	$	3,668,661
Commercial real estate — owner occupied		6,788		304		—		7,092		1,044,019		1,051,111
Lease financing		31		73		—		104		47,446		47,550
Commercial and business lending		10,332		5,607		3,755		19,694		4,747,628		4,767,322
Commercial real estate — investor		2,770		2,200		—		4,970		2,459,445		2,464,415
Real estate construction		873		123		481		1,477		540,763		542,240
Commercial real estate lending		3,643		2,323		481		6,447		3,000,208		3,006,655
Total commercial		13,975		7,930		4,236		26,141		7,747,836		7,773,977
Home equity		9,399		2,790		—		12,189		2,445,608		2,457,797
Installment		1,784		808		689		3,281		551,786		555,067
Total retail		11,183		3,598		689		15,470		2,997,394		3,012,864
Residential mortgage		6,320		904		—		7,224		2,880,234		2,887,458
Total consumer		17,503		4,502		689		22,694		5,877,628		5,900,322
Total accruing loans	$	31,478	$	12,432	$	4,925	$	48,835	$	13,625,464	$	13,674,299
Nonaccrual loans
Commercial and industrial	$	5,374	$	6,933	$	20,792	$	33,099	$	22,976	$	56,075
Commercial real estate — owner occupied		2,190		185		19,724		22,099		13,619		35,718
Lease financing		—		—		858		858		9,786		10,644
Commercial and business lending		7,564		7,118		41,374		56,056		46,381		102,437
Commercial real estate — investor		2,332		2,730		31,529		36,591		62,761		99,352
Real estate construction		36		482		18,625		19,143		22,663		41,806
Commercial real estate lending		2,368		3,212		50,154		55,734		85,424		141,158
Total commercial		9,932		10,330		91,528		111,790		131,805		243,595
Home equity		2,818		2,408		34,976		40,202		6,705		46,907
Installment		403		373		599		1,375		1,340		2,715
Total retail		3,221		2,781		35,575		41,577		8,045		49,622
Residential mortgage		1,981		4,301		43,153		49,435		14,120		63,555
Total consumer		5,202		7,082		78,728		91,012		22,165		113,177
Total nonaccrual loans	$	15,134	$	17,412	$	170,256	$	202,802	$	153,970	$	356,772
Total loans
Commercial and industrial	$	8,887	$	12,163	$	24,547	$	45,597	$	3,679,139	$	3,724,736
Commercial real estate — owner occupied		8,978		489		19,724		29,191		1,057,638		1,086,829
Lease financing		31		73		858		962		57,232		58,194
Commercial and business lending		17,896		12,725		45,129		75,750		4,794,009		4,869,759
Commercial real estate — investor		5,102		4,930		31,529		41,561		2,522,206		2,563,767
Real estate construction		909		605		19,106		20,620		563,426		584,046
Commercial real estate lending		6,011		5,535		50,635		62,181		3,085,632		3,147,813
Total commercial		23,907		18,260		95,764		137,931		7,879,641		8,017,572
Home equity		12,217		5,198		34,976		52,391		2,452,313		2,504,704
Installment		2,187		1,181		1,288		4,656		553,126		557,782
Total retail		14,404		6,379		36,264		57,047		3,005,439		3,062,486
Residential mortgage		8,301		5,205		43,153		56,659		2,894,354		2,951,013
Total consumer		22,705		11,584		79,417		113,706		5,899,793		6,013,499
Total loans	$	46,612	$	29,844	$	175,181	$	251,637	$	13,779,434	$	14,031,071

* The recorded investment in loans past due 90 days or more and still accruing totaled $5 million at December 31, 2011 (the same as the reported balances for the accruing loans noted above).

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The following table presents impaired loans at December 31, 2012.

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized*
	($ in Thousands)
Loans with a related allowance
Commercial and industrial	$	57,985	$	65,521	$	13,741	$	56,508	$	2,187
Commercial real estate — owner occupied		24,600		27,700		3,811		26,531		1,043
Lease financing		7		7		—		120		—
Commercial and business lending		82,592		93,228		17,552		83,159		3,230
Commercial real estate — investor		80,766		96,581		9,687		85,642		2,891
Real estate construction		16,299		22,311		3,411		19,122		437
Commercial real estate lending		97,065		118,892		13,098		104,764		3,328
Total commercial		179,657		212,120		30,650		187,923		6,558
Home equity		47,113		54,456		24,580		50,334		1,962
Installment		2,491		2,847		1,155		2,773		172
Total retail		49,604		57,303		25,735		53,107		2,134
Residential mortgage		72,408		81,959		12,906		76,989		2,211
Total consumer		122,012		139,262		38,641		130,096		4,345
Total loans	$	301,669	$	351,382	$	69,291	$	318,019	$	10,903
Loans with no related allowance
Commercial and industrial	$	9,337	$	16,339	$	—	$	10,883	$	229
Commercial real estate — owner occupied		13,506		16,582		—		14,425		68
Lease financing		3,024		3,024		—		3,896		—
Commercial and business lending		25,867		35,945		—		29,204		297
Commercial real estate — investor		19,581		28,531		—		20,490		173
Real estate construction		15,533		24,724		—		18,350		109
Commercial real estate lending		35,114		53,255		—		38,840		282
Total commercial		60,981		89,200		—		68,044		579
Home equity		2,070		2,269		—		2,164		36
Installment		—		—		—		—		—
Total retail		2,070		2,269		—		2,164		36
Residential mortgage		9,235		12,246		—		11,566		208
Total consumer		11,305		14,515		—		13,730		244
Total loans	$	72,286	$	103,715	$	—	$	81,774	$	823
Total
Commercial and industrial	$	67,322	$	81,860	$	13,741	$	67,391	$	2,416
Commercial real estate — owner occupied		38,106		44,282		3,811		40,956		1,111
Lease financing		3,031		3,031		—		4,016		—
Commercial and business lending		108,459		129,173		17,552		112,363		3,527
Commercial real estate — investor		100,347		125,112		9,687		106,132		3,064
Real estate construction		31,832		47,035		3,411		37,472		546
Commercial real estate lending		132,179		172,147		13,098		143,604		3,610
Total commercial		240,638		301,320		30,650		255,967		7,137
Home equity		49,183		56,725		24,580		52,498		1,998
Installment		2,491		2,847		1,155		2,773		172
Total retail		51,674		59,572		25,735		55,271		2,170
Residential mortgage		81,643		94,205		12,906		88,555		2,419
Total consumer		133,317		153,777		38,641		143,826		4,589
Total loans	$	373,955	$	455,097	$	69,291	$	399,793	$	11,726

* Interest income recognized included $6 million of interest income recognized on accruing restructured loans for the year ended December 31, 2012.

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The following table presents impaired loans at December 31, 2011.

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized*
	($ in Thousands)
Loans with a related allowance
Commercial and industrial	$	57,380	$	65,945	$	15,307	$	65,042	$	2,265
Commercial real estate — owner occupied		27,456		31,221		7,570		28,938		587
Lease financing		1,176		1,176		195		1,792		40
Commercial and business lending		86,012		98,342		23,072		95,772		2,892
Commercial real estate — investor		101,704		117,469		25,001		107,153		3,552
Real estate construction		30,100		38,680		9,185		35,411		1,220
Commercial real estate lending		131,804		156,149		34,186		142,564		4,772
Total commercial		217,816		254,491		57,258		238,336		7,664
Home equity		52,756		58,221		30,836		56,069		1,909
Installment		3,730		4,059		2,021		4,135		217
Total retail		56,486		62,280		32,857		60,204		2,126
Residential mortgage		74,415		81,215		14,664		77,987		2,197
Total consumer		130,901		143,495		47,521		138,191		4,323
Total loans	$	348,717	$	397,986	$	104,779	$	376,527	$	11,987
Loans with no related allowance
Commercial and industrial	$	21,247	$	27,631	$	—	$	23,514	$	532
Commercial real estate — owner occupied		16,400		20,426		—		18,609		200
Lease financing		9,468		9,468		—		11,436		—
Commercial and business lending		47,115		57,525		—		53,559		732
Commercial real estate — investor		41,065		63,872		—		50,936		242
Real estate construction		22,683		41,636		—		30,937		330
Commercial real estate lending		63,748		105,508		—		81,873		572
Total commercial		110,863		163,033		—		135,432		1,304
Home equity		3,101		5,087		—		3,314		6
Installment		—		—		—		—		—
Total retail		3,101		5,087		—		3,314		6
Residential mortgage		7,255		7,806		—		7,376		117
Total consumer		10,356		12,893		—		10,690		123
Total loans	$	121,219	$	175,926	$	—	$	146,122	$	1,427
Total
Commercial and industrial	$	78,627	$	93,576	$	15,307	$	88,556	$	2,797
Commercial real estate — owner occupied		43,856		51,647		7,570		47,547		787
Lease financing		10,644		10,644		195		13,228		40
Commercial and business lending		133,127		155,867		23,072		149,331		3,624
Commercial real estate — investor		142,769		181,341		25,001		158,089		3,794
Real estate construction		52,783		80,316		9,185		66,348		1,550
Commercial real estate lending		195,552		261,657		34,186		224,437		5,344
Total commercial		328,679		417,524		57,258		373,768		8,968
Home equity		55,857		63,308		30,836		59,383		1,915
Installment		3,730		4,059		2,021		4,135		217
Total retail		59,587		67,367		32,857		63,518		2,132
Residential mortgage		81,670		89,021		14,664		85,363		2,314
Total consumer		141,257		156,388		47,521		148,881		4,446
Total loans	$	469,936	$	573,912	$	104,779	$	522,649	$	13,414

* Interest income recognized included $6 million of interest income recognized on accruing restructured loans for the year ended December 31, 2011.

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For the year ended December 31, 2010, the average recorded investment in impaired loans was $702 million, while the cash basis interest income recognized from impaired loans was $16 million.

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 and interest of the loan is collectible. If collectability of the principal and interest 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.

Troubled Debt Restructurings (“Restructured Loans”):

Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty. The concessions granted generally involve 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. Nonaccrual restructured loans are included and treated with all other nonaccrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings which are considered and accounted for as impaired loans. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). 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 status. The Corporation had a $60 million recorded investment in loans modified in a troubled debt restructuring during the year ended December 31, 2012, of which, $28 million were in accrual status and $32 million were in nonaccrual pending a sustained period of repayment.

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As of December 31, 2012 and December 31, 2011, there were $81 million and $87 million, respectively, of nonaccrual restructured loans, and $121 million and $113 million, respectively, of performing restructured loans, included within impaired loans. As of December 31, 2012, there were $8 million of commitments to lend additional funds to borrowers with restructured loans. All restructured loans are considered impaired in the calendar year of restructuring. In subsequent years, a restructured loan may cease being classified as impaired if the loan was modified at a market rate and has performed according to the modified terms for at least six months. A loan that has been modified at a below market rate will return to performing status if it satisfies the six month performance requirement; however, it will remain classified as a restructured loan. The following table presents nonaccrual and performing restructured loans by loan portfolio.

	December 31, 2012				December 31, 2011
	Performing Restructured Loans		Nonaccrual Restructured Loans*		Performing Restructured Loans		Nonaccrual Restructured Loans*
	($ in Thousands)
Commercial and industrial	$	28,140	$	12,496	$	22,552	$	12,211
Commercial real estate — owner occupied		13,852		11,514		8,138		9,706
Commercial real estate — investor		41,660		25,221		43,417		30,303
Real estate construction		4,530		6,798		10,977		14,253
Home equity		9,968		6,698		8,950		6,268
Installment		653		674		1,015		1,163
Residential mortgage		22,284		17,189		18,115		13,589
	$	121,087	$	80,590	$	113,164	$	87,493

* Nonaccrual restructured loans have been included within nonaccrual loans.

The following table provides the number of loans modified in a troubled debt restructuring by loan portfolio during the years ended December 31, 2012 and 2011, respectively, and the recorded investment and unpaid principal balance as of December 31, 2012 and 2011, respectively.

	Year Ended December 31, 2012						Year Ended December 31, 2011
	Number  of Loans		Recorded Investment(1)		Unpaid Principal Balance(2)		Number of Loans		Recorded Investment(1)		Unpaid Principal Balance(2)
	($ in Thousands)
Commercial and industrial		85	$	12,827	$	15,834		104	$	31,933	$	36,844
Commercial real estate—owner occupied		27		11,978		12,766		22		15,841		19,741
Commercial real estate—investor		25		12,379		13,569		59		42,721		54,132
Real estate construction		31		2,955		3,549		33		18,308		23,802
Home equity		111		4,870		6,143		57		4,886		5,428
Installment		13		298		302		19		1,004		1,048
Residential mortgage		121		14,292		16,787		42		6,113		8,087
		413	$	59,599	$	68,950		336	$	120,806	$	149,082

(1) Represents post-modification outstanding recorded investment.

(2) Represents pre-modification outstanding recorded investment.

Restructured loan modifications may include payment schedule modifications, interest rate concessions, maturity date extensions, modification of note structure (A/B Note), non-reaffirmed Chapter 7 bankruptcies, principal reduction, or some combination of these concessions. For the year ended December 31, 2012, restructured loan modifications of commercial and industrial, commercial real estate, and real estate construction loans primarily

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included maturity date extensions and payment schedule modifications. Restructured loan modifications of home equity and residential mortgage loans primarily included maturity date extensions, interest rate concessions, payment schedule modifications, non-reaffirmed Chapter 7 bankruptcies, or a combination of these concessions for the year ended December 31, 2012.

The following table provides the number of loans modified in a troubled debt restructuring during the previous 12 months which subsequently defaulted during the years ended December 31, 2012 and 2011, respectively, as well as the recorded investment in these restructured loans as of December 31, 2012 and 2011, respectively.

	Year Ended December 31, 2012				Year Ended December 31, 2011
	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
	($ in Thousands)
Commercial and industrial		16	$	1,736		26	$	2,880
Commercial real estate—owner occupied		10		4,729		6		2,094
Commercial real estate—investor		13		10,854		16		9,546
Real estate construction		5		1,695		10		2,846
Home equity		14		2,049		12		1,422
Installment		1		12		1		20
Residential mortgage		10		1,499		10		1,714
		69	$	22,574		81	$	20,522

All loans modified in a troubled debt restructuring are evaluated for impairment. The nature and extent of the impairment of restructured loans, including those which have experienced a subsequent payment default, is considered in the determination of an appropriate level of the allowance for loan losses.

NOTE 4    GOODWILL AND INTANGIBLE ASSETS:

Goodwill:  Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis. In addition, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Corporation conducted its annual impairment testing in May 2012. Management also assessed and determined during the fourth quarter of 2011 that an extended decline in the Corporation’s stock price qualified as a triggering event and as such, performed an interim impairment test. Both the annual impairment test and the interim impairment test indicated that the estimated fair value exceeded the carrying value (including goodwill) for all of the reporting units. Therefore, a step two analysis was not required for these reporting units and no impairment charge was recorded. There were no impairment charges recorded in 2012, 2011, or 2010, respectively. 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, 2012, the Corporation had goodwill of $929 million, including goodwill of $428 million assigned to the Commercial Banking reporting unit and goodwill of $501 million assigned to the Consumer Banking reporting unit. There was no change in the carrying amount of goodwill for the years ended December 31, 2012 or 2011.

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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. For core deposit intangibles and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows.

	2012			2011			2010
	($ in Thousands)
Core deposit intangibles:
Gross carrying amount	$	41,831		$	41,831		$	41,831
Accumulated amortization		(34,044	)		(30,815	)		(27,121	)
Net book value	$	7,787		$	11,016		$	14,710
Amortization during the year	$	3,229		$	3,695		$	3,750
Other intangibles:
Gross carrying amount	$	19,283		$	19,283		$	20,433
Accumulated amortization		(11,843	)		(10,877	)		(11,008	)
Net book value	$	7,440		$	8,406		$	9,425
Amortization during the year	$	966		$	1,019		$	1,169

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 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 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. 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. The Corporation recorded an other-than-temporary impairment of $15 million on mortgage servicing rights by reducing the capitalized costs and the valuation allowance on mortgage servicing rights during 2012 due to the uncertainty of the recoverability of the valuation allowance on mortgage servicing rights associated with the long-term, consistently low rate environment. See Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” for a discussion of the recourse provisions on serviced residential mortgage loans. See Note 16, “Fair Value Measurements,” which further discusses fair value measurement relative to the mortgage servicing rights asset.

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A summary of changes in the balance of the mortgage servicing rights asset and the mortgage servicing rights valuation allowance was as follows.

	2012			2011			2010
	($ in Thousands)
Mortgage servicing rights
Mortgage servicing rights at beginning of year	$	75,855		$	84,209		$	80,986
Additions		23,528			17,476			26,165
Amortization		(23,348	)		(25,830	)		(22,942	)
Other-than-temporary impairment		(14,610	)		—			—
Mortgage servicing rights at end of year	$	61,425		$	75,855		$	84,209
Valuation allowance at beginning of year		(27,703	)		(20,300	)		(17,233	)
Additions, net		(2,383	)		(7,403	)		(3,067	)
Other-than-temporary impairment		14,610			—			—
Valuation allowance at end of year		(15,476	)		(27,703	)		(20,300	)
Mortgage servicing rights, net	$	45,949		$	48,152		$	63,909
Fair value of mortgage servicing rights	$	45,949		$	48,152		$	64,378
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)	$	7,453,000		$	7,321,000		$	7,453,000
Mortgage servicing rights, net to servicing portfolio		0.62	%		0.66	%		0.86	%
Mortgage servicing rights expense(1)	$	25,731		$	33,233		$	26,009

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).

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, 2012. 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,
2013	$	3,100	$	900	$	15,100
2014		2,900		900		11,000
2015		1,400		800		8,100
2016		300		800		6,200
2017	$	100	$	800	$	4,800

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NOTE 5    PREMISES AND EQUIPMENT:

A summary of premises and equipment at December 31 was as follows.

	Estimated Useful Lives		2012						2011
			Cost		Accumulated Depreciation		Net Book Value		Net Book Value
			($ in Thousands)
Land		—	$	46,378	$	—	$	46,378	$	44,581
Land improvements		3 – 15 years		9,973		3,561		6,412		6,309
Buildings		5 – 39 years		234,486		112,990		121,496		100,246
Computers		3 – 5 years		43,482		32,054		11,428		11,991
Furniture, fixtures and other equipment		3 – 15 years		157,375		99,708		57,667		50,892
Leasehold improvements		5 – 30 years		31,639		21,062		10,577		9,717
Total premises and equipment			$	523,333	$	269,375	$	253,958	$	223,736

Depreciation and amortization of premises and equipment totaled $30 million in 2012, $24 million in 2011, and $22 million in 2010.

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)
2013	$	12,192
2014		11,198
2015		11,041
2016		11,068
2017		9,615
Thereafter		42,441
Total	$	97,555

Total rental expense under leases, net of sublease income, totaled $15 million in 2012, $15 million in 2011, and $13 million in 2010, respectively.

NOTE 6    DEPOSITS:

The distribution of deposits at December 31 was as follows.

	2012		2011
	($ in Thousands)
Noninterest-bearing demand deposits	$	4,759,556	$	3,928,792
Savings deposits		1,109,861		986,766
Interest-bearing demand deposits		2,554,479		2,297,454
Money market deposits		6,518,075		5,150,275
Brokered certificates of deposit		26,270		202,948
Other time deposits		1,971,624		2,524,420
Total deposits	$	16,939,865	$	15,090,655

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Time deposits of $100,000 or more were $612 million and $981 million at December 31, 2012 and 2011, respectively.

Aggregate annual maturities of all time deposits at December 31, 2012, are as follows.

Maturities During Year Ending December 31,	($ in Thousands)
2013	$	1,383,498
2014		244,353
2015		119,387
2016		108,844
2017		111,610
Thereafter		30,202
Total	$	1,997,894

NOTE 7    SHORT-TERM FUNDING:

Short-term funding at December 31 was as follows.

	2012		2011
	($ in Thousands)
Federal funds purchased	$	71,385	$	154,730
Securities sold under agreements to repurchase		679,070		1,359,755
FHLB advances		1,525,000		1,000,000
Commercial paper		51,484		—
Total short-term funding	$	2,326,939	$	2,514,485

The FHLB advances included in short-term funding are those with original contractual maturities of less than one year. The securities sold under agreements to repurchase represent short-term funding which is collateralized by securities of the U.S. Government or its agencies and mature daily. During 2012, the Corporation began issuing commercial paper to facilitate a new customer investment product.

NOTE 8    LONG-TERM FUNDING:

Long-term funding (funding with original contractual maturities greater than one year) at December 31 was as follows.

	2012		2011
	($ in Thousands)
FHLB advances	$	400,375	$	500,476
Senior notes, at par		585,000		430,000
Subordinated debt, at par		25,821		25,821
Junior subordinated debentures, at par		—		211,340
Other borrowed funds and capitalized costs		4,150		9,434
Total long-term funding	$	1,015,346	$	1,177,071

FHLB advances:  Long-term advances from the FHLB had maturities through 2020 and had weighted-average interest rates of 1.79%, at both December 31, 2012 and 2011. These advances all had fixed contractual rates at both December 31, 2012, and 2011.

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Senior notes:  In March 2011, the Corporation issued $300 million of senior notes at a discount. In September 2011, the Corporation issued an additional $130 million of senior notes at a premium. The 2011 senior note issuances mature on March 28, 2016 and have a fixed coupon interest rate of 5.125%. In September 2012, the Corporation issued $155 million of senior notes at a discount. The 2012 senior note issuance matures on March 12, 2014 and has a fixed coupon interest rate of 1.875%

Subordinated debt:  In September 2008, the Corporation issued $26 million of 10-year subordinated debt with a 5-year no-call provision. The subordinated debt was issued at a discount, and has a fixed coupon interest rate of 9.25%. 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.

Junior subordinated debentures:  As of December 31, 2011, the Corporation owned 100% of the common securities of three trusts: ASBC Capital I, SFSC Capital I, and SFSC Capital II (the “Trusts”). The Trusts were formed for purposes of issuing trust preferred securities to third-party investors and investing the proceeds from the issuance of the trust preferred securities and common securities solely in junior subordinated debentures issued by the Corporation (or assumed by the Corporation in connection with an acquisition). The junior subordinated debentures are the sole assets of the Trusts. In the consolidated balance sheets, the junior subordinated debentures issued by the Corporation to the Trusts are reported as long-term funding and the common securities of the Trusts, all of which are owned by the Corporation, are included in other assets. The Corporation redeemed all outstanding junior subordinated debentures during 2012.

The table below summarizes the maturities of the Corporation’s long-term funding at December 31, 2012.

Year	($ in Thousands)
2013	$	400,042
2014		154,987
2015		1,560
2016		432,832
2017		85
Thereafter		25,840
Total long-term funding	$	1,015,346

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, 2012, the Corporation had $3.2 billion of residential mortgage and home equity loans pledged as collateral to the FHLB, and approximately $600 million of residential mortgage and home equity loans remained available to pledge to the FHLB.

NOTE 9    STOCKHOLDERS’ EQUITY:

Preferred Equity:  On September 14, 2011, the Corporation issued 2,600,000 depositary shares, each representing a 1/40th interest in a share of the Corporation’s 8.00% Perpetual Preferred Stock, Series B, liquidation preference $1,000 per share (the “Series B Preferred Stock”). The Series B Preferred Stock has no stated maturity and will not be subject to any sinking fund or other obligation of the Corporation. Dividends on the Series B Preferred Stock, if declared, will be payable quarterly in arrears at a rate per annum equal to 8.00%. Dividends on the Series B Preferred Stock initially were cumulative because the Corporation’s previous Articles of Incorporation required that preferred stock dividends be cumulative. During the cumulative period, the Corporation had an obligation to pay any unpaid dividends. Dividends on the Series B Preferred Stock became non-cumulative on April 24, 2012 when the Corporation’s shareholders approved an amendment to the Corporation’s Articles of

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Incorporation to eliminate the requirement that the Corporation’s preferred stock dividends be cumulative. During the non-cumulative dividend period, the Corporation will have no obligation to pay dividends on the Series B Preferred Stock that were undeclared and unpaid during the cumulative dividend period. Shares of the Series B Preferred Stock have priority over the Corporation’s common stock with regard to the payment of dividends and distributions upon liquidation, dissolution or winding up. As such, the Corporation may not pay dividends on or repurchase, redeem, or otherwise acquire for consideration shares of its common stock unless dividends for the Series B Preferred Stock have been declared for that period, and sufficient funds have been set aside to make payment. The Series B Preferred Stock may be redeemed by the Corporation at its option (i) either in whole or in part, from time to time, on any dividend payment date on or after the dividend payment date occurring on September 15, 2016, or (ii) in whole but not in part, at any time within 90 days following certain regulatory capital treatment events, in each case at a redemption price of $1,000 per share (equivalent to $25 per depositary share), plus any applicable dividends. Except in certain limited circumstances, the Series B Preferred Stock does not have any voting rights.

Common Stock Warrants:  In November 2008, under the Capital Purchase Program, the Corporation issued a 10-year warrant to purchase 4 million shares of common stock. 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). On December 6, 2011, the U.S. Department of Treasury closed an underwritten secondary public offering of 4 million warrants, each representing the right to purchase one share of common stock, par value $0.01 per share, of the Corporation. The public offering price and the allocation of the warrants in the secondary public warrant offering by the U.S. Treasury were determined by an auction process and the Corporation received no proceeds from the public offering.

Common Equity:  On January 15, 2010, the Corporation completed 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.

Subsidiary Equity:  At December 31, 2012, subsidiary equity equaled $3.2 billion, of which approximately $231 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:  On November 13, 2012, the Board of Directors approved the repurchase of up to an aggregate amount of $125 million of 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 2011, no shares were repurchased under these authorizations. During 2012, the Corporation repurchased 4.7 million shares for $60 million (or an average cost per share of $12.77). The Corporation also repurchased shares for minimum tax withholding settlements on equity compensation during 2011 and 2012. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” for additional information on the shares repurchased for equity compensation for the three months ended December 31, 2012. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities. Such repurchases may occur from time to time in open market purchases, block transactions, privately negotiated transactions, accelerated share repurchase programs, or similar facilities.

Other Comprehensive Income:  See the Consolidated Statements of Comprehensive Income for a summary of activity in other comprehensive income.

NOTE 10    STOCK-BASED COMPENSATION:

At December 31, 2012, 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.

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The Corporation may issue common stock and common stock units with restrictions to certain key employees (collectively referred to as “restricted stock awards”). 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 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 Plan:

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, 2012, approximately 6 million shares remain available for grants.

On January 23, 2012, the Compensation and Benefits Committee (the “Committee”) of the Corporation’s Board of Directors approved the performance criteria for its short-term cash incentive plan and its long-term incentive performance plan. The approvals were intended to transition the Corporation toward a performance-based short-term and long-term incentive compensation program following the full repayment during 2011 of the U.S. Department of the Treasury’s investment in the Corporation under the Capital Purchase Program. The Committee intends to ensure that further incentive compensation criteria align to the Corporation’s bottom line financial results, on which it believes shareholders measure their investments in the Corporation.

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 value of stock options and restricted stock awards are amortized as compensation expense on a straight-line basis over the vesting period of the grants and the fair value of salary shares is recognized as compensation expense on the date of grant. 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 and implied volatility of the Corporation’s stock. The following assumptions were used in estimating the fair value for options granted in 2012, 2011 and 2010.

	2012			2011			2010
Dividend yield		2.00	%		2.00	%		3.00	%
Risk-free interest rate		1.20	%		2.27	%		2.70	%
Expected volatility		48.94	%		47.24	%		45.38	%
Weighted average expected life		6 years			6 years			6 years
Weighted average per share fair value of options	$	5.03		$	5.56		$	4.60

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.

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A summary of the Corporation’s stock option activity for 2012, 2011, and 2010, is presented below.

Stock Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (000s)
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	$	2,460
Options exercisable at December 31, 2010		5,275,738		$	27.60		3.63	$	63
Outstanding at December 31, 2010		7,301,458			24.33
Granted		1,624,369			14.20
Exercised		(23,437	)		12.66
Forfeited or expired		(1,847,116	)		24.51
Outstanding at December 31, 2011		7,055,274		$	21.99		5.61	$	27
Options exercisable at December 31, 2011		4,623,935		$	26.10		4.01	$	7
Outstanding at December 31, 2011		7,055,274			21.99
Granted		3,060,519			12.97
Exercised		(11,120	)		13.16
Forfeited or expired		(1,464,115	)		21.56
Outstanding at December 31, 2012		8,640,558		$	18.88		6.40	$	570
Options exercisable at December 31, 2012		4,603,963		$	23.80		4.37	$	43

The following table summarizes information about the Corporation’s stock options outstanding at December 31, 2012.

	Options Outstanding		Weighted Average Exercise Price		Remaining     Life (Years)		Options Exercisable		Weighted Average Exercise Price
Range of Exercise Prices:
$0.00 — $10.00		2,000	$	9.26		6.56		2,000	$	9.26
$10.01 — $15.00		5,192,739		13.34		8.38		1,165,384		13.60
$15.01 — $20.00		700,296		17.41		5.69		691,056		17.44
$20.01 — $25.00		909,996		24.30		3.34		909,996		24.30
$25.01 — $30.00		339,887		29.02		1.30		339,887		29.02
Over $30.00		1,495,640		33.21		2.88		1,495,640		33.21
Total		8,640,558	$	18.88		6.40		4,603,963	$	23.80

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The following table summarizes information about the Corporation’s nonvested stock option activity for 2012, 2011, and 2010.

Stock Options	Shares			Weighted Average Grant Date Fair Value
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
Nonvested at December 31, 2010		2,025,720		$	4.09
Granted		1,624,369			5.56
Vested		(955,454	)		3.77
Forfeited		(263,296	)		4.85
Nonvested at December 31, 2011		2,431,339		$	5.11
Nonvested at December 31, 2011		2,431,339		$	5.11
Granted		3,060,519			5.03
Vested		(1,097,571	)		4.88
Forfeited		(357,692	)		5.12
Nonvested at December 31, 2012		4,036,595		$	5.11

For the years ended December 31, 2012, 2011, and 2010, the intrinsic value of stock options exercised was immaterial. (Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option.) The total fair value of stock options that vested was $5 million, $4 million and $4 million, respectively, for the years ended December 31, 2012, 2011, and 2010. For the years ended December 31, 2012, 2011, and 2010, the Corporation recognized compensation expense of $9 million, $5 million, and $3 million respectively, for the vesting of stock options. At December 31, 2012, the Corporation had $13 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 the fourth quarter 2014.

The following table summarizes information about the Corporation’s restricted stock activity for 2012, 2011, and 2010.

Restricted Stock	Shares			Weighted Average Grant Date Fair Value
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
Outstanding at December 31, 2010		772,262		$	13.94
Granted		593,437			14.27
Vested		(169,499	)		17.74
Forfeited		(182,435	)		13.86
Outstanding at December 31, 2011		1,013,765		$	13.79
Outstanding at December 31, 2011		1,013,765		$	13.79
Granted		506,258			13.00
Vested		(533,014	)		13.38
Forfeited		(54,584	)		13.73
Outstanding at December 31, 2012		932,425		$	13.60

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The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant. Restricted stock awards granted during 2012 to the senior executive officers and the next 20 most highly compensated employees will vest ratably over a three year period and the restricted stock award recipient must continue to perform substantial services for the Corporation for at least two years after the date of grant. Expense for restricted stock awards of approximately $7 million, $6 million, and $6 million was recorded for the years ended December 31, 2012, 2011, and 2010, respectively. The Corporation had $5 million of unrecognized compensation expense related to restricted stock awards at December 31, 2012, that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2014.

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. No salary shares were issued during 2012. The Corporation recognized compensation expense of $4 million on the granting of 317,450 salary shares (or an average cost per share of $12.41) during 2011. The Corporation recognized compensation expense of $3 million on the granting of 244,062 salary shares (or an average cost per share of $13.43) during 2010.

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. Such repurchases may occur from time to time in open market purchases, block transactions, privately negotiated transactions, accelerated share repurchase programs, or similar facilities.

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.”

The Corporation 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 Postretirement 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 Postretirement Plan. The Corporation reserves the right to terminate or make changes to the Postretirement Plan at any time.

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The funded status and amounts recognized in the 2012 and 2011 consolidated balance sheets, as measured on December 31, 2012 and 2011, respectively, for the Pension and Postretirement Plans were as follows.

	Pension Plan			Postretirement Plan			Pension Plan			Postretirement Plan
	2012			2012			2011			2011
	($ in Thousands)
Change in Fair Value of Plan Assets
Fair value of plan assets at beginning of year	$	173,422		$	—		$	159,791		$	—
Actual return on plan assets		20,781			—			(2,481	)		—
Employer contributions		40,000			495			26,000			502
Gross benefits paid		(9,777	)		(495	)		(9,888	)		(502	)
Fair value of plan assets at end of year	$	224,426		$	—		$	173,422		$	—
Change in Benefit Obligation
Net benefit obligation at beginning of year	$	136,846		$	3,969		$	129,114		$	4,150
Service cost		10,287			—			9,898			—
Interest cost		6,547			182			6,414			198
Curtailments, Settlements, Special Termination Benefits		42			—			—			—
Actuarial loss		15,803			279			1,308			123
Gross benefits paid		(9,777	)		(495	)		(9,888	)		(502	)
Net benefit obligation at end of year	$	159,748		$	3,935		$	136,846		$	3,969
Funded (unfunded) status	$	64,678		$	(3,935	)	$	36,576		$	(3,969	)
Noncurrent assets	$	67,878		$	—		$	39,802		$	—
Current liabilities		—			(458	)		—			(495	)
Noncurrent liabilities		(3,200	)		(3,477	)		(3,226	)		(3,474	)
Asset (Liability) Recognized in the Consolidated Balance Sheets	$	64,678		$	(3,935	)	$	36,576		$	(3,969	)

Amounts recognized in accumulated other comprehensive income (loss), net of tax, as of December 31, 2012 and 2011 follow.

	Pension Plan		Postretirement Plan		Pension Plan		Postretirement Plan
	2012		2012		2011		2011
	($ in Thousands)
Prior service cost	$	232	$	—	$	274	$	103
Net actuarial (gain) loss		37,240		35		32,932		(135	)
Amount not yet recognized in net periodic benefit cost, but recognized in accumulated other comprehensive income	$	37,472	$	35	$	33,206	$	(32	)

Other changes in plan assets and benefit obligations recognized in other comprehensive income (“OCI”), net of tax, in 2012 and 2011 were as follows.

	Pension Plan 2012			Postretirement Plan 2012			Pension Plan 2011			Postretirement Plan 2011
	($ in Thousands)
Net loss	$	(9,735	)	$	(279	)	$	(16,711	)	$	(123	)
Amortization of prior service cost		72			170			72			395
Amortization of actuarial gain		3,073			—			2,024			—
Income tax (expense) benefit		2,324			42			5,780			(106	)
Total Recognized in OCI	$	(4,266	)	$	(67	)	$	(8,835	)	$	166

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The components of net periodic benefit cost for the Pension and Postretirement Plans for 2012, 2011, and 2010 were as follows.

	Pension Plan 2012			Postretirement Plan 2012		Pension Plan 2011			Postretirement Plan 2011		Pension Plan 2010			Postretirement Plan 2010
						($ in Thousands)
Service cost	$	10,287		$	—	$	9,898		$	—	$	9,622		$	—
Interest cost		6,547			182		6,414			198		6,377			227
Expected return on plan assets		(14,713	)		—		(12,896	)		—		(12,152	)		—
Amortization of:
Prior service cost		72			170		72			395		72			395
Actuarial (gain) loss		2,708			—		2,024			—		1,601			(3	)
Settlement charge		408			—		—			—		—			—
Total net pension cost	$	5,309		$	352	$	5,512		$	593	$	5,520		$	619

As of December 31, 2012, the estimated actuarial losses and prior service cost that will be amortized during 2013 from accumulated other comprehensive income into net periodic benefit cost for the Pension Plan are $4 million and $0.1 million, respectively.

	Pension Plan 2012			Postretirement Plan 2012			Pension Plan 2011			Postretirement Plan 2011
Weighted average assumptions used to determine benefit obligations:
Discount rate		4.00	%		4.00	%		4.90	%		4.90	%
Rate of increase in compensation levels		4.00			N/A			5.00			N/A
Weighted average assumptions used to determine net periodic benefit costs:
Discount rate		4.90	%		4.90	%		5.10	%		5.10	%
Rate of increase in compensation levels		4.00			N/A			5.00			N/A
Expected long-term rate of return on plan assets		7.50			N/A			7.75			N/A

The overall expected long-term rates of return on the Pension Plan assets were 7.50% at December 31, 2012 and 7.75% at December 31, 2011, 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 12.46% and (1.42)% for 2012 and 2011, respectively.

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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, 2012 and 2011 measurement dates, respectively, by asset category were as follows.

Asset Category	2012			2011
Equity securities		66	%		65	%
Debt securities		30			34
Other		4			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, 2012 and 2011.

			Fair Value Measurements Using
	December 31, 2012		Level 1		Level 2		Level 3
	($ in Thousands)
Pension Plan Investments:
Money market account	$	9,958	$	9,958	$	—	$	—
Mutual funds		124,620		124,620		—		—
Common/collective trust funds		89,848		—		89,848		—
Total Pension Plan Investments	$	224,426	$	134,578	$	89,848	$	—
			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
	($ in Thousands)
Pension Plan Investments:
Money market account	$	1,690	$	1,690	$	—	$	—
Mutual funds		92,026		92,026		—		—
Common/collective trust funds		79,706		—		79,706		—
Total Pension Plan Investments	$	173,422	$	93,716	$	79,706	$	—

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 $40 million and $26 million to its Pension Plan during 2012 and 2011, respectively. The Corporation regularly reviews the funding of its Pension Plan. At this time, the Corporation expects to make a contribution of at least $10 million in 2013.

119

The projected benefit payments for the Pension and Postretirement Plans at December 31, 2012, 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:
2013	$	13,176	$	458
2014		12,109		393
2015		12,939		355
2016		12,611		308
2017		12,688		278
2018-2022		67,831		1,232

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 8.5% for 2012, and 0.5% lower in each succeeding year, to an ultimate rate of 5% for 2019 and future years. The health care trend rate assumption for post-65 coverage is 9.5% for 2012, and 0.5% lower in each succeeding year, to an ultimate rate of 5% for 2021 and future years.

A one percentage point change in the assumed health care cost trend rate would have the following effect.

	2012					2011
	100 bp Increase		100 bp Decrease			100 bp Increase		100 bp Decrease
	($ in Thousands)
Effect on total of service and interest cost	$	15	$	(13	)	$	15	$	(13	)
Effect on postretirement benefit obligation	$	364	$	(315	)	$	305	$	(266	)

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 $10 million, $9 million, and $8 million in 2012, 2011, and 2010, respectively.

NOTE 12    INCOME TAXES:

The current and deferred amounts of income tax expense (benefit) were as follows.

	Years Ended December 31,
	2012		2011			2010
	($ in Thousands)
Current:
Federal	$	19,724	$	9,336		$	(91,578	)
State		1,468		(350	)		598
Total current		21,192		8,986			(90,980	)
Deferred:
Federal		41,908		37,553			54,046
State		12,386		(2,811	)		(3,238	)
Total deferred		54,294		34,742			50,808
Total income tax expense (benefit)	$	75,486	$	43,728		$	(40,172	)

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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.

	2012			2011
	($ in Thousands)
Gross deferred tax assets:
Allowance for loan losses	$	115,128		$	146,027
Allowance for other losses		18,205			13,714
Accrued liabilities		6,055			11,506
Deferred compensation		27,073			24,638
Securities valuation adjustment		2,258			17,978
Benefit of tax loss and credit carryforwards		46,376			51,835
Nonaccrual interest		1,112			4,042
Other		8,518			7,017
Total gross deferred tax assets		224,725			276,757
Gross deferred tax liabilities:
FHLB stock dividends		7,602			10,424
Prepaid expenses		55,944			49,828
Intangible amortization		28,478			28,274
Mortgage banking activities		6,257			4,796
Deferred loan fee income		26,800			22,914
State income taxes		16,083			20,418
Leases		2,269			3,955
Depreciation		22,386			23,368
Other		2,225			1,805
Total gross deferred tax liabilities		168,044			165,782
Net deferred tax assets		56,681			110,975
Tax effect of unrealized gain related to available for sale securities		(53,579	)		(62,447	)
Tax effect of unrealized loss related to pension and postretirement benefits		23,586			21,219
		(29,993	)		(41,228	)
Net deferred tax assets including tax effected items	$	26,688		$	69,747

At December 31, 2012 and 2011, there was no valuation allowance for deferred tax assets. The net decrease in the valuation allowance during 2011 was primarily the result of the impact of changes in state tax laws. The change in the valuation allowance was as follows.

	2012		2011
	($ in Thousands)
Valuation allowance for deferred tax assets, beginning of year	$	—	$	5,984
Decrease in current year		—		(5,984	)
Valuation allowance for deferred tax assets, end of year	$	—	$	—

At December 31, 2012, the Corporation had state net operating losses of $498 million (of which, $59 million was acquired from various acquisitions) and federal net operating losses of $0.1 million (of which, all was acquired from various acquisitions) that will expire in the years 2013 through 2030. $479 million of these state net operating loss carryforwards do not begin to expire until after 2015. The Corporation had $6 million of alternative minimum tax credits which have an indefinite life.

121

The effective income tax rate differs from the statutory federal tax rate. The major reasons for this difference were as follows.

	2012			2011			2010
Federal income tax rate at statutory rate		35.0	%		35.0	%		35.0	%
Increases (decreases) resulting from:
Tax-exempt interest and dividends		(4.9	)		(7.0	)		34.1
State income taxes (net of federal income taxes)		3.5			3.8			4.2
Bank owned life insurance		(1.9	)		(2.8	)		13.3
Valuation allowance		—			(3.3	)		(0.5	)
Federal tax credits		(0.3	)		(0.9	)		3.9
Tax reserve adjustments		(1.8	)		(0.6	)		10.8
Compensation deduction limitations		0.3			0.7			(4.8	)
Other		(0.2	)		(1.1	)		1.9
Effective income tax rate		29.7	%		23.8	%		97.9	%

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 million of retained income at December 31, 2012. If income taxes had been provided, the deferred tax liability would have been approximately $40 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 state jurisdictions. The Corporation’s federal income tax returns are open and subject to examination from the 2009 tax return year and forward, while the Corporation’s various state income tax returns are generally open and subject to examination from the 2006 and later tax return years based on individual state statutes of limitation.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows.

	2012			2011
	($ in Millions)
Balance at beginning of year	$	21		$	23
Changes in tax positions for prior years		—			5
Statute expiration		(8	)		(7	)
Balance at end of year	$	13		$	21

At December 31, 2012 and 2011, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $8 million and $14 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, 2012, the Corporation had $5 million of interest and penalties (including a $1 million net reduction of previously accrued interest and penalties during 2012) on unrecognized tax benefits of which $3 million had an impact on the effective tax rate. As of December 31, 2011, the Corporation had $6 million of interest and penalties (the interest accrued, net of reversals, during 2011 was zero) 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.

122

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) as well as derivative instruments (see Note 14). The following is a summary of lending-related commitments at December 31.

	2012		2011
	($ in Thousands)
Commitments to extend credit, excluding commitments to originate residential mortgage loans held for sale(1)(2)	$	5,526,326	$	4,561,210
Commercial letters of credit(1)		85,689		47,699
Standby letters of credit(3)	$	303,705	$	320,375

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, 2012 or 2011.

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 $4 million at both December 31, 2012 and 2011, as an estimate of the fair value of these financial instruments.

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, 2012 and December 31, 2011, the Corporation had a reserve for losses on unfunded commitments totaling $22 million and $15 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

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.

123

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 aggregate carrying value of these investments at December 31, 2012, was $35 million, included in other assets on the consolidated balance sheets, compared to $36 million at December 31, 2011. Related to these investments, the Corporation had remaining commitments to fund of $18 million at December 31, 2012, and $15 million at December 31, 2011, respectively.

Contingent Liabilities

The Corporation is party to various pending and threatened claims and legal proceedings arising in the normal course of business activities, some of which involve claims for substantial amounts. Although there can be no assurance as to the ultimate outcomes, the Corporation believes it has meritorious defenses to the claims asserted against it in its currently outstanding matters, including the matters described below, and with respect to such legal proceedings, intends to continue to defend itself vigorously. The Corporation will consider settlement of cases when, in management’s judgment, it is in the best interests of both the Corporation and its shareholders.

On at least a quarterly basis, the Corporation assesses its liabilities and contingencies in connection with all pending or threatened claims and litigation, utilizing the most recent information available. On a matter by matter basis, an accrual for loss is established for those matters which the Corporation believes it is probable that a loss may be incurred and that the amount of such loss can be reasonably estimated. Once established, each accrual is adjusted as appropriate to reflect any subsequent developments. Accordingly, management’s estimate will change from time to time, and actual losses may be more or less than the current estimate. For matters where a loss is not probable, or the amount of the loss cannot be estimated, no accrual is established.

Resolution of legal claims are inherently unpredictable, and in many legal proceedings various factors exacerbate this inherent unpredictability, including where the damages sought are unsubstantiated or indeterminate, it is unclear whether a case brought as a class action will be allowed to proceed on that basis, discovery is not complete, the proceeding is not yet in its final stages, the matters present legal uncertainties, there are significant facts in dispute, there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants), or there is a wide range of potential results.

A putative class action lawsuit, Harris v. Associated Bank, N.A. (the “Bank”), was filed in the United States District Court for the Western District of Wisconsin in April 2010, alleging that the Bank unfairly assessed and collected overdraft fees and seeking restitution of the overdraft fees, compensatory, consequential and punitive damages, and costs. The case was subsequently consolidated into the Multi District Litigation (“MDL”), In re: Checking Account Overdraft Litigation MDL No. 2036 in the United States District Court for the Southern District of Florida. A settlement agreement which requires payment by the Bank of $13 million for a full and complete release of all claims brought against the Bank received preliminary approval from the court on July 26, 2012. A final approval of the settlement is scheduled for March 2013. During the second quarter of 2012, the Bank settled with an insurer for $2.5 million as contribution to the settlement amount and received approximately $1.5 million as partial reimbursement for defense costs. By entering into such an agreement, we have not admitted any liability with respect to the lawsuit. The settlement amount was previously accrued for in the financial statements.

A lawsuit, R.J. ZAYED v. Associated Bank, N.A., was filed in the United States District Court for the District of Minnesota on January 29, 2013. The lawsuit relates to a Ponzi scheme perpetrated by Oxford Global Partners and related entities (“Oxford”) and individuals and was brought by the receiver for Oxford. Oxford was a depository

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customer of the Bank. The lawsuit claims that the Bank is liable for failing to uncover the Oxford Ponzi scheme, and specifically alleges the Bank aided and abetted the (1) fraudulent scheme; (2) a breach of fiduciary duty; (3) conversion; and (4) false representations and omissions. The lawsuit seeks unspecified consequential and punitive damages. At this early stage of the lawsuit, it is not possible for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss at this time. The Bank intends to vigorously defend this lawsuit. A lawsuit by investors in the same Ponzi scheme, Herman Grad, et al v. Associated Bank, N.A., brought in Brown County, Wisconsin in October 2009 was dismissed by the circuit court, and the dismissal was affirmed by the Wisconsin Court of Appeals in June 2011 in an unpublished opinion.

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. Based upon Visa’s revised liability estimate for litigation, including the current funding of litigation settlements, the Corporation has a Visa indemnification liability (included in other liabilities on the consolidated balance sheets) totaling $2 million at both December 31, 2012 and December 31, 2011. 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 interest in this escrow account (included in other assets on the consolidated balance sheets) was $2 million at both December 31, 2012 and December 31, 2011.

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, primarily to the government-sponsored enterprises (“GSEs”). The Corporation’s agreements to sell residential mortgage loans in the normal course of business usually require certain 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. Prior to 2012, the Corporation has seen only a limited number of repurchase and loss reimbursement claims; however, similar to other banks, this activity has steadily increased during 2012, particularly during the second half of 2012. Therefore, management established a repurchase reserve in the fourth quarter of 2012 of $3 million for potential claims relating to loans previously sold. Management will continue to monitor this activity in 2013 and its impact on the reserve.

The Corporation may also 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, 2012, and December 31, 2011, there were approximately $79 million and $56 million, respectively, of residential mortgage loans sold with such recourse risk. There have been minimal instances of repurchase for recourse under the limited recourse criteria.

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, 2012 and December 31, 2011, there were $321 million and $475 million, respectively, of such residential mortgage loans with credit risk recourse, upon which there have been negligible historical losses to the Corporation.

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

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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, 2012, the Corporation’s potential risk exposure was approximately $18 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 $8 million at both December 31, 2012 and December 31, 2011.

Regulatory Matters

During the first quarter of 2012, the Bank entered into a Consent Order with the OCC regarding its BSA compliance. The Consent Order required the Bank to create a BSA-focused action plan, supplement existing customer due diligence policies and procedures, perform a BSA risk assessment and complete independent testing. The Bank has not been informed that this action includes the assessment of a civil money penalty. The Bank has been working cooperatively with the OCC and management believes it is in compliance with the Consent Order.

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 $70 million of investment securities as collateral at December 31, 2012, and pledged $85 million of investment securities as collateral at December 31, 2011.

The Corporation’s derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. The fair value of the Corporation’s interest rate-related 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 16, “Fair Value Measurements,” for additional fair value information and disclosures.

The table below identifies the balance sheet category and fair values of the Corporation’s derivative instruments designated as cash flow hedges.

								Weighted Average
	Notional Amount		Fair Value			Balance Sheet Category		Receive Rate			Pay Rate			Maturity
	($ in Thousands)
December 31, 2011
Interest rate swap — Federal funds purchased and securities sold under agreements to repurchase	$	100,000	$	(2,011	)		Other liabilities		0.07	%		3.04	%		8 months

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The table below identifies the gains and losses recognized on the Corporation’s derivative instruments designated as cash flow hedges.

($ in Thousands)	Amount of Gain /(Loss) Recognized in OCI on Derivatives (Effective Portion)			Category of (Gain)  /Loss Reclassified from AOCI  into Income (Effective Portion)		Amount of (Gain) /Loss Reclassified from  AOCI  into Income (Effective Portion)		Category of Gain  /(Loss) Recognized in Income on Derivatives (Ineffective Portion)		Gross Amount of Gain /(Loss) Recognized in Income  on Derivatives (Ineffective Portion)
Year Ended December 31, 2012					Interest Expense				Interest Expense
Interest rate swap — Federal funds purchased and securities sold under agreements to repurchase	$	6			Federal funds purchased and securities sold under agreements to repurchase	$	1,954		Federal funds purchased and securities sold under agreements to repurchase	$	33
Year Ended December 31, 2011					Interest Expense				Interest Expense
Interest rate swap — Federal funds purchased and securities sold under agreements to repurchase	$	(557	)		Federal funds purchased and securities sold under agreements to repurchase	$	4,708		Federal funds purchased and securities sold under agreements to repurchase	$	13

Cash flow hedges

The Corporation has variable-rate short-term funding which exposes 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 the third quarter of 2011, one interest rate swap agreement for $100 million matured. In the third quarter of 2012, the remaining interest rate swap agreement for $100 million matured. Hedge effectiveness is determined using regression analysis. 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 Federal funds purchased and securities sold under agreements to repurchase (i.e., the line item in which the hedged cash flows are recorded). At December 31, 2011, accumulated other comprehensive income included a deferred after-tax net loss of $1 million related to these derivatives.

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The table below identifies the balance sheet category and fair values of the Corporation’s derivative instruments not designated as hedging instruments.

	Notional Amount		Fair Value			Balance Sheet Category	Weighted Average
($ in Thousands)							Receive Rate(1)			Pay Rate(1)			Maturity
December 31, 2012
Interest rate-related instruments — customer and mirror	$	1,728,545	$	69,370		Other assets		1.30	%		1.30	%		47 months
Interest rate-related instruments — customer and mirror		1,728,545		(75,131	)	Other liabilities		1.30	%		1.30	%		47 months
Interest rate lock commitments (mortgage)		351,786		7,794		Other assets		—			—			—
Forward commitments (mortgage)		520,000		(147	)	Other liabilities		—			—			—
Foreign currency exchange forwards		39,763		1,341		Other assets		—			—			—
Foreign currency exchange forwards		35,745		(1,212	)	Other liabilities		—			—			—
Purchased options (time deposit)		111,262		3,620		Other assets		—			—			—
Written options (time deposit)		111,262		(3,620	)	Other liabilities		—			—			—
December 31, 2011
Interest rate-related instruments — customer and mirror	$	1,563,831	$	71,143		Other assets		1.66	%		1.66	%		45 months
Interest rate-related instruments — customer and mirror		1,563,831		(78,064	)	Other liabilities		1.66	%		1.66	%		45 months
Interest rate lock commitments (mortgage)		235,375		4,571		Other assets		—			—			—
Forward commitments (mortgage)		437,500		(4,771	)	Other liabilities		—			—			—
Foreign currency exchange forwards		52,973		2,079		Other assets		—			—			—
Foreign currency exchange forwards		44,107		(1,891	)	Other liabilities		—			—			—
Purchased options (time deposit)		54,780		2,854		Other assets
Written options (time deposit)		54,780		(2,854	)	Other liabilities

(1) Reflects the weighted average receive rate and pay rate for the interest rate swap derivative financial instruments only.

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) Recognized in Income	Gain / (Loss) Recognized in Income
	($ in Thousands)
Year ended December 31, 2012
Interest rate-related instruments — customer and mirror, net	Capital market fees, net		1,160
Interest rate lock commitments (mortgage)	Mortgage banking, net		3,223
Forward commitments (mortgage)	Mortgage banking, net		4,624
Foreign currency exchange forwards	Capital market fees, net		(59	)
Covered call options	Interest on investment securities		469
Year ended December 31, 2011
Interest rate-related instruments — customer and mirror, net	Capital market fees, net		(2,443	)
Interest rate lock commitments (mortgage)	Mortgage banking, net		4,649
Forward commitments (mortgage)	Mortgage banking, net		(10,388	)
Foreign currency exchange forwards	Capital market fees, net		(53	)

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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 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).

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.

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.

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.

Written and purchased option derivatives (time deposit)

The Corporation periodically enters into written and purchased option derivative instruments to facilitate an equity linked time deposit product (the “Power CD”). The Power CD is a time deposit that provides the purchaser a guaranteed return of principal at maturity plus a potential equity return (a written option), while the Corporation receives a known stream of funds based on the equity return (a purchased option). The written and purchased options are mirror derivative instruments which are carried at fair value on the consolidated balance sheets.

Other derivatives

During the second quarter of 2012, the Corporation began entering into covered call options. Under covered call options, the Corporation will sell options to a bank or dealer for the right to purchase certain securities held within the Corporation’s investment securities portfolio. These option transactions are designed primarily to increase the total return associated with the investment securities portfolio. These options do not qualify as hedges, and, accordingly, the changes in fair value of these contracts are recognized in interest income. There were no covered call options outstanding as of December 31, 2012.

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NOTE 15    PARENT COMPANY ONLY FINANCIAL INFORMATION:

Presented below are condensed financial statements for the Parent Company.

BALANCE SHEETS

	2012		2011
	($ in Thousands)
ASSETS
Cash and due from banks	$	159,725	$	126,835
Investment securities available for sale, at fair value		200,800		66,769
Notes receivable from subsidiaries		47,455		47,230
Investment in subsidiaries		3,250,667		3,277,693
Other assets		74,507		76,037
Total assets	$	3,733,154	$	3,594,564
LIABILITIES AND STOCKHOLDERS’ EQUITY
Commercial paper	$	51,245	$	—
Senior notes, at par		585,000		430,000
Junior subordinated debentures, at par		—		211,340
Subordinated debt, at par		25,821		25,821
Long-term funding capitalized costs		2,590		7,750
Total long-term funding		613,411		674,911
Accrued expenses and other liabilities		132,099		53,859
Total liabilities		796,755		728,770
Preferred equity		63,272		63,272
Common equity		2,873,127		2,802,522
Total stockholders’ equity		2,936,399		2,865,794
Total liabilities and stockholders’ equity	$	3,733,154	$	3,594,564

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STATEMENTS OF INCOME (LOSS)

	For the Years Ended December 31,
	2012			2011			2010
	($ in Thousands)
INCOME
Dividends from subsidiaries	$	169,500		$	—		$	4,000
Management and service fees from subsidiaries		—			54,242			47,238
Interest income on notes receivable		1,807			2,306			4,951
Other income		5,762			5,289			1,181
Total income		177,069			61,837			57,370
EXPENSE
Interest expense on short and long-term funding		37,066			39,072			30,608
Personnel expense		36			38,258			34,652
Other expense		12,873			16,603			21,210
Total expense		49,975			93,933			86,470
Income (loss) before income tax benefit and equity in undistributed net income of subsidiaries		127,094			(32,096	)		(29,100	)
Income tax benefit		(17,948	)		(17,788	)		(7,137	)
Income (loss) before equity in undistributed net income of subsidiaries		145,042			(14,308	)		(21,963	)
Equity in undistributed net income of subsidiaries		33,931			154,007			21,107
Net income (loss)		178,973			139,699			(856	)
Preferred stock dividends and discount accretion		5,200			24,830			29,531
Net income (loss) available to common equity	$	173,773		$	114,869		$	(30,387	)

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STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2012			2011			2010
	($ in Thousands)
OPERATING ACTIVITIES
Net income (loss)	$	178,973		$	139,699		$	(856	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Increase in equity in undistributed net income of subsidiaries		(33,931	)		(154,007	)		(21,107	)
Depreciation and amortization		132			171			254
(Gain) loss on sales of investment securities, net of impairment write-downs		(530	)		81			799
(Gain) loss on sales of assets, net		1,365			(13	)		—
Net change in other assets and other liabilities		142,900			25,356			40,469
Capital (contributed to) received from subsidiaries		—			—			(200,000	)
Net cash provided by (used in) operating activities		288,909			11,287			(180,441	)
INVESTING ACTIVITIES
Proceeds from sales of investment securities		49,819			14,667			—
Purchase of investment securities		(186,432	)		(75,221	)		—
Net (increase) decrease in notes receivable		(225	)		391,996			(232,499	)
Purchase of other assets, net of disposals		(7,336	)		4,977			(5,204	)
Net cash provided by (used in) investing activities		(144,174	)		336,419			(237,703	)
FINANCING ACTIVITIES
Net increase in short-term funding		51,245			—			—
Proceeds from issuance of long-term funding		154,738			432,504			—
Repayment of long-term funding		(211,340	)		(170,000	)		(30,000	)
Proceeds from issuance of common stock		—			—			478,358
Proceeds from issuance of preferred stock		—			63,272			—
Redemption of preferred stock		—			(525,000	)		—
Cash dividends		(44,834	)		(21,195	)		(33,198	)
Purchase of treasury stock		(61,654	)		(659	)		(830	)
Net cash provided by (used in) financing activities		(111,845	)		(221,078	)		414,330
Net increase (decrease) in cash and cash equivalents		32,890			126,628			(3,814	)
Cash and cash equivalents at beginning of year		126,835			207			4,021
Cash and cash equivalents at end of year	$	159,725		$	126,835		$	207

NOTE 16    FAIR VALUE MEASUREMENTS:

Fair value represents the estimated price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (i.e., an exit price concept). As there is no active market for many of the Corporation’s financial instruments, estimates are made using discounted cash flow or other valuation techniques. Inputs into the valuation methods are subjective in nature, involve uncertainties, and require significant judgment and therefore cannot be determined with precision. Accordingly, the derived fair value estimates presented herein are not necessarily indicative of the amounts the Corporation could realize in a current market exchange. Assets and liabilities are categorized into three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. 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 in which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value

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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. Below is a brief description of each fair value level.

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.

During 2011, the FASB issued guidance on measuring fair value to create common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments change the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements. The amendments also clarified the Board’s intent about the application of existing fair value measurement and disclosure requirements.

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.

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 pooled trust preferred debt 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 instruments (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 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.

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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. In conjunction with the FASB’s fair value measurement guidance, the Corporation made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

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, 2012, and 2011, 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 currency exchange forwards):  The Corporation provides foreign currency exchange services to customers. In addition, the Corporation may enter into a foreign currency exchange 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 currency exchange forwards is determined using quoted prices of foreign currency 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.

Derivative financial instruments (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.

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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 of the residential mortgage loans held for sale was 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 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 impaired loan definition. For individually evaluated impaired loans, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note, which the Corporation classifies as a Level 3 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 utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of its mortgage servicing rights. The valuation model incorporates 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 periodically reviews and assesses the underlying inputs and assumptions used in the model. 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 Other Intangible Assets,” for additional disclosure regarding the Corporation’s mortgage servicing rights.

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The table below presents the Corporation’s investment securities available for sale and derivative financial instruments measured at fair value on a recurring basis as of December 31, 2012 and 2011, 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

	December 31, 2012		Fair Value Measurements Using
			Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	1,004	$	1,004	$	—	$	—
Obligations of state and political subdivisions (municipal securities)		801,188		—		801,188		—
Residential mortgage-related securities		3,804,304		—		3,804,304		—
Commercial mortgage-related securities		228,166		—		228,166		—
Other securities (debt and equity)		92,096		2,841		88,775		480
Total investment securities available for sale	$	4,926,758	$	3,845	$	4,922,433	$	480
Derivatives (trading and other assets)		82,125		—		74,331		7,794
Liabilities:
Derivatives (trading and other liabilities)	$	80,110	$	—	$	79,963	$	147

	December 31, 2011		Fair Value Measurements Using
			Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	1,001	$	1,001	$	—	$	—
Federal agency securities		24,049		41		24,008		—
Obligations of state and political subdivisions (municipal securities)		847,246		—		847,246		—
Residential mortgage-related securities		3,785,590		—		3,785,590		—
Commercial mortgage-related securities		18,543		—		18,543		—
Asset-backed securities		187,732		—		187,732		—
Other securities (debt and equity)		73,322		11,659		60,807		856
Total investment securities available for sale	$	4,937,483	$	12,701	$	4,923,926	$	856
Derivatives (trading and other assets)		80,647		—		76,076		4,571
Liabilities:
Derivatives (trading and other liabilities)	$	89,591	$	—	$	84,820	$	4,771

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The table below presents a rollforward of the balance sheet amounts for the years ended December 31, 2012 and 2011, for financial instruments measured on a recurring basis and classified within Level 3 of the fair value hierarchy.

	Investment Securities Available for Sale			Derivatives
	($ in Thousands)
Balance December 31, 2010	$	1,672		$	5,539
Total net losses included in income:
Impairment losses on investment securities		(816	)		—
Mortgage derivative loss		—			(5,739	)
Balance December 31, 2011	$	856		$	(200	)
Total net gains included in income:
Mortgage derivative gain		—			7,847
Total net gains included in other comprehensive income:
Unrealized investment securities gains		49			—
Sales of investment securities		(425	)		—
Balance December 31, 2012	$	480		$	7,647

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2012, the Corporation utilized the following valuation techniques and significant unobservable inputs.

Investment securities available for sale — other securities (debt and equity):  In valuing the investment securities available for sale classified within Level 3, the Corporation utilized a discounted cash flow model and 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 significant unobservable input used within the discounted cash flow analysis was the discount rate, which was based on the 3 month LIBOR forward curve (the 3 month LIBOR forward ranged from 0.35% to 3.07%) plus the investment security spread, at December 31, 2012.

Derivative financial instruments (mortgage derivative — interest rate lock commitments to originate residential mortgage loans held for sale):  The significant unobservable input used in the fair value measurement of the Corporation’s mortgage derivative interest rate lock commitments (“IRLC”) is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. Typically the higher the closing ratio on the IRLC’s will result in an increase in the fair value if in a gain position or a decrease in fair value if in a loss position. The closing ratio is calculated by our secondary marketing system taking into consideration historical data and loan-level data, (particularly the change in the current interest rates from the time of initial rate lock). The closing ratio is periodically reviewed in the Corporation’s Mortgage Secondary Marketing Department for reasonableness and reported to the Mortgage Risk Management Committee. At December 31, 2012, the closing ratio was 89%.

Impaired loans:  For individually evaluated impaired loans, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note, resulting in discounts of 0% to 50%.

Mortgage servicing rights:  The discounted cash flow analyses that generate expected market prices utilize the observable characteristics of the mortgage servicing rights portfolio, as well as certain unobservable valuation parameters. The significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are the weighted average constant prepayment rate and weighted average discount rate,

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which were 23.3% and 9.7% at December 31, 2012, respectively. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. Although the prepayment rate and discount rate are not directly interrelated, they will generally move in opposite directions.

These parameter assumptions fall within a range that the Corporation, in consultation with an independent third party, believes purchasers of servicing would apply to such portfolios sold into the current secondary servicing market. Discussions are held with members from Treasury and Consumer Banking to reconcile the fair value estimates and the key assumptions used by the respective parties in arriving at those estimates. The Associated Mortgage Group Risk Committee is responsible for providing control over the valuation methodology and key assumptions. To assess the reasonableness of the fair value measurement, the Corporation also compares the fair value and constant prepayment rate to a value calculated by an independent third party on an annual basis.

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, 2012 and 2011, 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

	December 31, 2012		Fair Value Measurements Using
			Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Loans held for sale	$261,410		$	—	$	261,410	$	—
Impaired loans(1)		115,741		—		—		115,741
Mortgage servicing rights	$45,949		$	—	$	—	$	45,949

	December 31, 2011		Fair Value Measurements Using
			Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Loans held for sale	$249,195		$	—	$	249,195	$	—
Impaired loans(1)		178,669		—		—		178,669
Mortgage servicing rights	$48,152		$	—	$	—	$	48,152

(1) Represents individually evaluated impaired loans, net of the related allowance for loan losses.

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.

During 2012 and 2011, 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, less estimated selling costs. 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 $47 million and $54 million for the years ended December 31, 2012 and 2011, 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 $8 million and $9 million to asset losses, net for the years ended December 31, 2012 and 2011, respectively.

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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 were as follows.

	December 31, 2012
	Carrying Amount		Fair Value		Fair Value Measurements Using
					Level 1		Level 2		Level 3
	($ in Thousands)
Financial assets:
Cash and due from banks		$563,304	$	563,304	$	563,304	$	—	$	—
Interest-bearing deposits in other financial institutions		147,434		147,434		147,434		—		—
Federal funds sold and securities purchased under agreements to resell		27,135		27,135		27,135		—		—
Investment securities held to maturity		39,877		39,679		—		39,679		—
Investment securities available for sale		4,926,758		4,926,758		3,845		4,922,433		480
FHLB and Federal Reserve Bank stocks		166,774		166,774		—		166,774		—
Loans held for sale		261,410		265,914		—		265,914		—
Loans, net		15,113,613		14,873,851		—		—		14,873,851
Bank owned life insurance		556,556		556,556		—		556,556		—
Accrued interest receivable		68,386		68,386		68,386		—		—
Interest rate-related agreements(1)		69,370		69,370		—		69,370		—
Foreign currency exchange forwards		1,341		1,341		—		1,341		—
Interest rate lock commitments to originate residential mortgage loans held for sale		7,794		7,794		—		—		7,794
Purchased options (time deposit)		3,620		3,620		—		3,620		—
Financial liabilities:
Noninterest-bearing demand, savings, interest-bearing demand, and money market deposits		$14,941,971	$	14,941,971	$	—	$	—	$	14,941,971
Brokered CDs and other time deposits		1,997,894		1,997,894		—		1,997,894		—
Short-term funding		2,326,939		2,326,939		—		2,326,939		—
Long-term funding		1,015,346		1,041,550		—		1,041,550		—
Accrued interest payable		10,208		10,208		10,208		—		—
Interest rate-related agreements(1)		75,131		75,131		—		75,131		—
Foreign currency exchange forwards		1,212		1,212		—		1,212		—
Standby letters of credit(2)		3,811		3,811		—		3,811		—
Forward commitments to sell residential mortgage loans		147		147		—		—		147
Written options (time deposit)		3,620		3,620		—		3,620		—

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	December 31, 2011
	Carrying Amount		Fair Value		Fair Value Measurements Using
					Level 1		Level 2		Level 3
	($ in Thousands)
Financial assets:
Cash and due from banks		$454,958	$	454,958	$	454,958	$	—	$	—
Interest-bearing deposits in other financial institutions		154,562		154,562		154,562		—		—
Federal funds sold and securities purchased under agreements to resell		7,075		7,075		7,075		—		—
Investment securities available for sale		4,937,483		4,937,483		12,701		4,923,926		856
FHLB and Federal Reserve Bank stocks		191,188		191,188		—		191,188		—
Loans held for sale		249,195		255,201		—		255,201		—
Loans, net		13,652,920		12,751,626		—		—		12,751,626
Bank owned life insurance		544,764		544,764		—		544,764		—
Accrued interest receivable		68,920		68,920		68,920		—		—
Interest rate-related agreements(1)		71,143		71,143		—		71,143		—
Foreign currency exchange forwards		2,079		2,079		—		2,079		—
Interest rate lock commitments to originate residential mortgage loans held for sale		4,571		4,571		—		—		4,571
Purchased options (time deposit)		2,854		2,854		—		2,854		—
Financial liabilities:
Noninterest-bearing demand, savings, interest-bearing demand, and money market deposits		$12,363,287	$	12,363,287	$	—	$	—	$	12,363,287
Brokered CDs and other time deposits		2,727,368		2,727,368		—		2,727,368		—
Short-term funding		2,514,485		2,514,485		—		2,514,485		—
Long-term funding		1,177,071		1,309,687		—		1,309,687		—
Accrued interest payable		15,931		15,931		15,931		—		—
Interest rate-related agreements(1)		80,075		80,075		—		80,075		—
Foreign currency exchange forwards		1,891		1,891		—		1,891		—
Standby letters of credit(2)		3,648		3,648		—		3,648		—
Forward commitments to sell residential mortgage loans		4,771		4,771		—		—		4,771
Written options (time deposit)		2,854		2,854		—		2,854		—

(1) At December 31, 2012 and 2011, the notional amount of cash flow hedge interest rate swap agreements was $0 million and $100 million, respectively. See Note 14 for information on the fair value of derivative financial instruments.

(2) The commitment on standby letters of credit was $304 million and $320 million at December 31, 2012 and 2011, respectively. See Note 13 for additional information on the standby letters of credit and for information on the fair value of lending-related commitments.

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 (held to maturity and available for sale)—The fair value of investment securities 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).

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Loans held for sale—The fair value estimation process for the loans held for sale portfolio is segregated by loan type. The estimated fair value of the residential mortgage loans held for sale was based on what secondary markets are currently offering for portfolios with similar characteristics.

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 (owner occupied and investor), 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 Brokered CDs and other time deposits 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 Brokered CDs and other time deposits is less than the carrying value, the carrying value is reported as the fair value.

Accrued interest payable and short-term funding—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 long-term funding.

Interest rate-related agreements—The fair value of interest rate-related 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 currency exchange forwards is determined using quoted prices of foreign currency 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 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.

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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.

Purchased and written options—The fair value of the Corporation’s purchased and written options is determined using quoted prices of the underlying stocks.

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 $56 million at December 31, 2012.

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, 2012 and 2011, that the Corporation meets all capital adequacy requirements to which it is subject.

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. The Memorandum was terminated in March 2012.

During the first quarter of 2012, the Bank entered into a Consent Order with the OCC regarding its BSA compliance. The Consent Order required the Bank to create a BSA-focused action plan, supplement existing customer due diligence policies and procedures, perform a BSA risk assessment and complete independent testing. The Bank has not been informed that this action includes the assessment of a civil money penalty. The Bank has been working cooperatively with the OCC and management believes it is in compliance with the Consent Order.

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As of December 31, 2012 and 2011, 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. There are no conditions or events since that notification that management believes have changed the institution’s 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 2012 or 2011.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions:(2)
($ In Thousands)	Amount		Ratio(1)			Amount		Ratio(1)			Amount		Ratio(1)
As of December 31, 2012:
Associated Banc-Corp
Total Capital	$	2,167,954		13.42	%	$	1,291,923	³	8.00	%
Tier 1 Capital		1,938,806		12.01			645,962	³	4.00	%
Leverage		1,938,806		8.98			863,674	³	4.00	%
Associated Bank, N.A.
Total Capital	$	2,448,280		15.34	%	$	1,277,222	³	8.00	%	$	1,596,527	³	10.00	%
Tier 1 Capital		2,247,307		14.08			638,611	³	4.00	%		957,916	³	6.00	%
Leverage		2,247,307		10.53			853,553	³	4.00	%		1,066,941	³	5.00	%
As of December 31, 2011:
Associated Banc-Corp
Total Capital	$	2,263,065		15.53	%	$	1,165,466	³	8.00	%
Tier 1 Capital		2,051,787		14.08			582,733	³	4.00	%
Leverage		2,051,787		9.81			836,537	³	4.00	%
Associated Bank, N.A.
Total Capital	$	2,369,363		16.50	%	$	1,148,924	³	8.00	%	$	1,436,155	³	10.00	%
Tier 1 Capital		2,186,776		15.23			574,462	³	4.00	%		861,693	³	6.00	%
Leverage		2,186,776		10.56			828,505	³	4.00	%		1,035,632	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.

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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,
	2012			2011			2010
	(In thousands, except per share data)
Net income (loss)	$	178,973		$	139,699		$	(856	)
Preferred stock dividends and discount accretion		(5,200	)		(24,830	)		(29,531	)
Net income (loss) available to common equity	$	173,773		$	114,869		$	(30,387	)
Common shareholder dividends		(39,462	)		(6,935	)		(6,918	)
Unvested share-based payment awards		(172	)		(42	)		(30	)
Undistributed earnings	$	134,139		$	107,892		$	(37,335	)
Undistributed earnings allocated to common shareholders		133,549			107,231			(37,335	)
Undistributed earnings allocated to unvested share-based payment awards		590			661			—
Undistributed earnings	$	134,139		$	107,892		$	(37,335	)
Basic
Distributed earnings to common shareholders	$	39,462		$	6,935		$	6,918
Undistributed earnings allocated to common shareholders		133,549			107,231			(37,335	)
Total common shareholders earnings, basic	$	173,011		$	114,166		$	(30,417	)
Diluted
Distributed earnings to common shareholders	$	39,462		$	6,935		$	6,918
Undistributed earnings allocated to common shareholders		133,549			107,231			(37,335	)
Total common shareholders earnings, diluted	$	173,011		$	114,166		$	(30,417	)
Weighted average common shares outstanding		172,255			173,370			171,230
Effect of dilutive common stock awards		102			2			—
Diluted weighted average common shares outstanding		172,357			173,372			171,230
Basic earnings (loss) per common share	$	1.00		$	0.66		$	(0.18	)
Diluted earnings (loss) per common share	$	1.00		$	0.66		$	(0.18	)

Options to purchase approximately 9 million and 8 million shares were outstanding at December 31, 2012 and December 31, 2011, respectively, but excluded from the calculation of diluted earnings per common share as the effect would have been anti-dilutive. As a result of the Corporation’s reported net loss for the year ended December 31, 2010, all of the stock options outstanding were excluded from the computation of diluted earnings (loss) per common share.

NOTE 19    SEGMENT REPORTING:

During the first quarter of 2012, the Corporation implemented a new risk-based internal profitability measurement system which provides strategic business unit reporting. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the units. As a result of these changes, we have re-organized our business segments to provide

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enhanced transparency given our new system capabilities. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The reorganization resulted in three reportable segments, in contrast to the two previously reported, with no segment representing more than half of the assets, liabilities or Tier 1 Common Equity of the Corporation as a whole. The three reportable segments are Commercial Banking, Consumer Banking, and Risk Management and Shared Services.

The financial information of the Corporation’s segments has been compiled utilizing the accounting policies described in Note 1, with certain exceptions. The more significant of these exceptions are described herein. The Corporation allocates interest income or interest expense using a funds transfer pricing methodology that charges users of funds (assets) interest expense and credits providers of funds (liabilities, primarily deposits) with income based on the maturity, prepayment and / or repricing characteristics of the assets and liabilities. The net effect of this allocation is recorded in the Risk Management and Shared Services segment. A credit provision is allocated to segments based on long-term annual net charge off rates attributable to the credit risk of loans managed by the segment during the period. In contrast, the level of the consolidated provision for loan losses is determined using the methodologies described in Note 1 to assess the overall appropriateness of the allowance for loan losses. The net effect of the credit provision is recorded in Risk Management and Shared Services. Indirect expenses incurred by certain centralized support areas are allocated to segments based on actual usage (for example, volume measurements) and other criteria. Certain types of administrative expense and bank-wide expense accruals (including amortization of core deposit and other intangible assets associated with acquisitions) are generally not allocated to the Commercial Banking and Consumer Banking segments. Income taxes are allocated to the Commercial Banking and Consumer Banking segments based on the Corporation’s estimated effective tax rate adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the Commercial Banking and Consumer Banking segments based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated with the business of the segment (including interest, credit and operating risk).

The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to U.S. generally accepted accounting principles. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in previously reported segment financial data. Accordingly, 2011 and 2010 results have been restated and presented on a comparable basis.

A description of each business segment is presented below.

Commercial Banking — The Commercial Banking segment offers loans, deposits, and related banking services to businesses (including regional middle market and larger commercial businesses, governments / municipalities, metro or niche markets, and companies with specialized borrowing needs such as financial institutions, or asset-based borrowers), which 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, insurance related products and services, business credit cards, equipment and machinery leases, and the support to deliver, fund and manage such banking services. To further support business customers and correspondent financial institutions, the Corporation provides safe deposit and night depository services, cash management, risk management, international banking, as well as check clearing, safekeeping, and other banking-based services. The segment competes on the basis of relationship manager performance, commitment to local markets and market competitive pricing. This segment focuses on optimizing the go to market approach with emphasis on market alignment, relationship banking and sales excellence.

Consumer Banking — The Consumer Banking segment consists of lending and deposit gathering to individuals and small businesses and also provides a variety of fiduciary, investment management, advisory and corporate agency services to assist customers in building, investing or protecting their wealth, including securities

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brokerage, and trust / asset management. The segment offers 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, personal and installment loans, checking, savings, money market deposit accounts, IRA accounts, certificates of deposit, and safe deposit boxes; small business checking and deposit products, loans, lines of credit; fixed and variable annuities, full-service, discount and on-line investment brokerage; and trust / asset management, investment management, administration of pension, profit-sharing and other employee benefit plans, personal trusts, and estate planning. The segment competes by offering an extensive breadth and depth of products, an extensive branch network and competitive pricing. The Consumer Banking segment strives toward optimization of value propositions and relationship banking.

Risk Management and Shared Services — The Risk Management and Shared Services segment includes Corporate Risk Management, Finance, Treasury, Facilities Management, Operations and Technology functions, which are key shared functions. The segment also includes parent company activity, intersegment eliminations and residual revenue and expenses, representing the difference between actual amounts incurred and the amounts allocated to operating segments, including interest rate risk residuals (ALM mismatches) and credit risk and provision residuals (long-term credit mismatches). The earning assets within this segment include the company’s investment portfolio and capital includes both allocated as well as any remaining unallocated Tier 1 Common Equity (“T1CE”).

Information about the Corporation’s segments is presented below.

Segment Income Statement Data
($ in Thousands)	Commercial Banking			Consumer Banking			Risk Management and Shared Services			Consolidated Total
2012
Net interest income	$	283,411		$	307,661		$	34,920		$	625,992
Noninterest income		88,969			209,081			15,240			313,290
Total revenue		372,380			516,742			50,160			939,282
Credit provision *		46,008			20,018			(63,026	)		3,000
Noninterest expense		215,939			427,736			38,148			681,823
Income before income taxes		110,433			68,988			75,038			254,459
Income tax expense		38,651			24,146			12,689			75,486
Net income	$	71,782		$	44,842		$	62,349		$	178,973
Return on average allocated capital (ROT1CE) **		9.5	%		7.6	%		11.7	%		9.5	%
2011
Net interest income	$	255,069		$	329,249		$	28,513		$	612,831
Noninterest income		88,108			180,758			4,253			273,119
Total revenue		343,177			510,007			32,766			885,950
Credit provision *		40,259			17,988			(6,247	)		52,000
Noninterest expense		191,111			438,572			20,840			650,523
Income before income taxes		111,807			53,447			18,173			183,427
Income tax expense (benefit)		39,133			18,706			(14,111	)		43,728
Net income	$	72,674		$	34,741		$	32,284		$	139,699
Return on average allocated capital (ROT1CE) **		9.9	%		6.3	%		1.7	%		6.7	%
2010
Net interest income	$	283,235		$	320,430		$	30,114		$	633,779
Noninterest income		80,289			222,690			32,483			335,462
Total revenue		363,524			543,120			62,597			969,241
Credit provision *		42,198			16,665			331,147			390,010
Noninterest expense		173,664			415,688			30,907			620,259
Income (loss) before income taxes		147,662			110,767			(299,457	)		(41,028	)
Income tax expense (benefit)		51,681			38,768			(130,621	)		(40,172	)
Net income (loss)	$	95,981		$	71,999		$	(168,836	)	$	(856	)
Return on average allocated capital (ROT1CE) **		10.6	%		13.9	%		(148.3	)%		(1.9	)%

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Segment Balance Sheet Data
($ in Thousands)	Commercial Banking		Consumer Banking		Risk Management and Shared Services		Consolidated Total
2012
Average earning assets	$	7,448,789	$	7,275,028	$	4,889,960	$	19,613,777
Average loans		7,442,314		7,275,028		24,443		14,741,785
Average deposits		4,546,658		9,556,041		1,479,670		15,582,369
Average allocated capital (T1CE) **	$	756,596	$	593,202	$	488,626	$	1,838,424
2011
Average earning assets	$	6,306,204	$	6,953,035	$	6,183,024	$	19,442,263
Average loans		6,302,266		6,953,035		23,547		13,278,848
Average deposits		3,525,584		9,633,821		1,241,722		14,401,127
Average allocated capital (T1CE) **	$	730,741	$	548,539	$	433,875	$	1,713,155
2010
Average earning assets	$	6,863,336	$	6,314,786	$	7,390,373	$	20,568,495
Average loans		6,857,471		6,314,786		14,455		13,186,712
Average deposits		4,443,738		9,716,141		2,786,422		16,946,301
Average allocated capital (T1CE) **	$	906,736	$	519,151	$	133,778	$	1,559,665

* The consolidated credit provision is equal to the actual reported provision for loan losses.

** ROT1CE reflects return on average allocated Tier 1 common equity (“T1CE”). The ROT1CE for the Risk Management and Shared Services segment and the Consolidated Total is inclusive of the annualized effect of the preferred stock dividends and discount accretion.

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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, 2012 and 2011, and the related consolidated statements of income (loss), comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2012. 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, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, 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, 2012, 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, 2013 expressed an unqualified opinion on the effectiveness of Associated Banc-Corp’s internal control over financial reporting.

Chicago, Illinois

February 15, 2013

148

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, 2012, 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, 2012. 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, 2012, 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, 2012, 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, 2012. The report, which expresses an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2012, is included under the heading “Report of Independent Registered Public Accounting Firm.”

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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, 2012, 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, 2012, 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, 2012 and 2011, and the related consolidated statements of income (loss), comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2012, and our report dated February 15, 2013 expressed an unqualified opinion on those consolidated financial statements.

Chicago, Illinois

February 15, 2013

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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 2013 Annual Meeting of Shareholders, which contains information concerning this item under the captions “Election of Directors” and “Information About the Board of Directors”; and information concerning Section 16(a) compliance under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference. Information relating to the Corporation’s executive officers is set forth in Part I of this report.

ITEM 11.    EXECUTIVE COMPENSATION

The information in the Corporation’s definitive Proxy Statement, prepared for the 2013 Annual Meeting of Shareholders, which contains information concerning this item, under the captions “Executive Compensation,” “Director Compensation,” and “Compensation and Benefits Committee Interlocks and Insider Participation,” 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 2013 Annual Meeting of Shareholders, which contains information concerning this item, under the caption “Stock Ownership,” is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information in the Corporation’s definitive Proxy Statement, prepared for the 2013 Annual Meeting of Shareholders, which contains information concerning this item under the captions “Related Person Transactions,” and “Affirmative Determinations Regarding Director Independence,” is incorporated herein by reference.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The information in the Corporation’s definitive Proxy Statement, prepared for the 2013 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, 2012 and 2011

Consolidated Statements of Income (Loss) — For the Years Ended December 31, 2012, 2011, and 2010

Consolidated Statements of Comprehensive Income — For the Years Ended December 31, 2012, 2011, and 2010

151

Consolidated Statements of Changes in Stockholders’ Equity — For the Years Ended December 31, 2012, 2011, and 2010

Consolidated Statements of Cash Flows — For the Years Ended December 31, 2012, 2011, and 2010

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

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(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 of Associated Banc-Corp with respect to its 8.00% Perpetual Preferred Stock, Series B, dated September 12, 2011	Exhibit (3.1) to Report on Form 8-K filed on September 15, 2011
(3)(c)	Articles of Amendment to the Amended and Restated Articles of Incorporation of Associated Banc-Corp regarding the rights and preferences of preferred stock, effective April 25, 2012	Exhibit (3.1, 4.1) to Report on Form 8-K filed on April 25, 2012
(3)(d)	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)	Indenture, dated as of March 14, 2011, between Associated Banc-Corp and The Bank of New York Mellow Trust Company, N.A.	Exhibit (4.1) to Report on Form 8-K filed on March 28, 2011
(4)(c)	Global Note dated as of March 28, 2011 representing $300,000,000 5.125% Senior Notes due 2016	Exhibit (4.2) to Report on Form 8-K filed on March 28, 2011
(4)(d)	Global Note dated as of September 13, 2011 representing $130,000,000 5.125% Senior Notes due 2016	Exhibit (4.4) to Report on Form 8-K filed on September 15, 2011
(4)(e)	Deposit Agreement, dated September 14, 2011, among Associated Banc-Corp, Wells Fargo Bank, N.A. and the holders from time to time of the Depositary Receipts described therein, and Form of Depositary Receipt	Exhibit (4.2) to Report on Form 8-K filed on September 15, 2011
(4)(f)	Warrant Agreement for 3,983,308 Warrants, dated as of November 30, 2011, between Associated Banc-Corp and Wells Fargo Bank, N.A.	Exhibit (4.1) to Report on Form 8-A filed on December 1, 2011

153

Exhibit Number	Description
(4)(g)	Specimen Warrant for 3,983,308 Warrants	Exhibit (4.2) to Report on Form 8-A filed on December 1, 2011
(4)(h)	Global Note dated as of September 12, 2012 representing $155,000,000 1.875% Senior Notes due 2014	Exhibit (4.1) to Report on Form 8-K filed on September 13, 2012
*(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)	Associated Banc-Corp Deferred Compensation Plan	Exhibit (10)(h) to Report on Form 10-K filed on February 26, 2009
*(10)(e)	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)(f)	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)(g)	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)(h)	Associated Banc-Corp 2010 Incentive Compensation Plan	Exhibit (99.1) to Report on Form 8-K filed on April 29, 2010
*(10)(i)	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)(j)	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
*(10)(k)	Form of Restricted Stock Agreement	Exhibit (99.2) to Report on Form 8-K filed on January 27, 2012
*(10)(l)	Form of Non-Qualified Stock Option Agreement	Exhibit (99.3) to Report on Form 8-K filed on January 27, 2012
*(10)(m)	Associated Banc-Corp Change of Control Plan, Restated Effective September 28, 2011	Exhibit (10.1) to Report on Form 8-K filed on September 30, 2011
*(10)(n)	Associated Banc-Corp Supplemental Executive Retirement Plan	Exhibit (99.1) to Report on Form 8-K filed on December 23, 2011
*(10)(o)	Associated Banc-Corp Supplemental Executive Retirement Plan for Philip B. Flynn	Exhibit (99.2) to Report on Form 8-K filed on December 23, 2011

154

Exhibit Number	Description
*(10)(p)	Form of Performance-Based Restricted Stock Unit Agreement	Exhibit (99.1) to Report on Form 8-K filed on January 27, 2012
*(10)(q)	Resignation Agreement and General Release between Associated Banc-Corp and Mark D. Quinlan, dated as of May 1, 2012	Exhibit (10.1) to Report on Form 8-K filed on May 7, 2012
*(10)(r)	Supplemental Executive Retirement Plan, updated as of January 2013	Exhibit (99.1) to Report on Form 8-K filed on January 22, 2013
(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 Christopher J. Del Moral-Niles, 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
(101) **	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income (Loss), (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.	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.

155

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, 2013	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.

Signature	Title	Date
/s/    Philip B. Flynn	President and Chief Executive Officer (Principal Executive Officer)	February 15, 2013
Philip B. Flynn
/s/    Christopher J. Del Moral-Niles	Chief Financial Officer (Principal Financial Officer)	February 15, 2013
Christopher J. Del Moral-Niles
/s/    Bryan R. McKeag	Corporate Controller (Principal Accounting Officer)	February 15, 2013
Bryan R. McKeag

Directors: John F. Bergstrom, Ruth M. Crowley, Philip B. Flynn, Ronald R. Harder, William R. Hutchinson, Robert A. Jeffe, Eileen A. Kamerick, Richard T. Lommen, J. Douglas Quick, Karen T. van Lith and John B. Williams

By:	/s/    Randall J. Erickson
	Randall J. Erickson
	As Attorney-In-Fact*

* Pursuant to authority granted by powers of attorney, copies of which are filed herewith.

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