10-K

________________________________________________________________________________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004

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

Commission file number: 0-5519

ASSOCIATED BANC-CORP

(Exact name of registrant as specified in its charter)

Wisconsin	39-1098068
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification no.)
1200 Hansen Road Green Bay, Wisconsin (Address of principal executive offices)	54304 (Zip code)

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

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

None

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

Common stock, par value — $0.01 per share

(Title of Class)

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  X  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 an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes  X  No    

As of June 30, 2004, (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 $3,083,051,000. Excludes approximately $177,661,000 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. Includes approximately $208,750,000 of market value representing 6.40% of the outstanding shares of the registrant held in a fiduciary capacity by the trust company subsidiary of the registrant.

As of February 28, 2005, 129,633,078 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

	Part of Form 10-K Into Which
Document	Portions of Documents are Incorporated
Proxy Statement for Annual Meeting of	Part III
Shareholders on April 27, 2005

ASSOCIATED BANC-CORP

2004 FORM 10-K TABLE OF CONTENTS

		Page
PART I
Item 1.	Business		3
Item 2.	Properties		7
Item 3.	Legal Proceedings		8
Item 4.	Submission of Matters to a Vote of Security Holders		8
PART II
Item 5.	Market for the Corporation’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		8
Item 6.	Selected Financial Data		9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		50
Item 8.	Financial Statements and Supplementary Data		51
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		93
Item 9A.	Controls and Procedures		93
Item 9B.	Other Information		97
PART III
Item 10.	Directors and Executive Officers of the Registrant		97
Item 11.	Executive Compensation		97
Item 12.	Security Ownership of Certain Beneficial Owners and Management		97
Item 13.	Certain Relationships and Related Transactions		97
Item 14.	Principal Accounting Fees and Services		97
PART IV
Item 15.	Exhibits and Financial Statement Schedules		98
Signatures			101
Directors' Deferred Compensation Plan
Incentive Compensation Plan
Separation Agreement and General Release
Noncompete Agreement
Consulting Agreement
2005 Compensation of Named Executive Officers
2005 Cash Compensation for Non-Management Directors
Subsidiaries of the Parent Company
Consent of Independent Registered Public Accounting Firm
Power of Attorney
Certification Under Section 302 of CEO
Certification Under Section 302 of CFO
Certification of CEO and CFO Pursuant to Section 906

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Special Note Regarding Forward-Looking Statements

Statements made in this document and in documents that are incorporated by reference which are not purely historical are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, including any statements regarding descriptions of management’s plans, objectives, or goals for future operations, products or services, and forecasts of its revenues, earnings, or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements may be identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “should,” “will,” “intend,” or similar expressions.

Shareholders should note that many factors, some of which are discussed elsewhere in this document and in the documents that are incorporated by reference, could affect the future financial results of Associated Banc-Corp and could cause those results to differ materially from those expressed in forward-looking statements contained or incorporated by reference in this document. These factors, many of which are beyond Associated Banc-Corp’s control, include the following:

•  operating, legal, and regulatory risks;

•  economic, political, and competitive forces affecting Associated Banc-Corp’s banking, securities, asset management, and credit services businesses;

•  integration risks related to integration of First Federal Capital Corp and other acquisitions;

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

•  the risk that Associated Banc-Corp’s analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.

These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made. Associated Banc-Corp undertakes 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”) is a bank holding company registered pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). It was incorporated in Wisconsin in 1964 and was inactive until 1969 when permission was received from the Board of Governors of the Federal Reserve System (the “FRB” or “Federal Reserve”) to acquire three banks. At December 31, 2004, the Parent Company owned three commercial banks located in Illinois, Minnesota, and Wisconsin and one thrift located in Wisconsin, serving their respective local communities and, measured by total assets held at December 31, 2004, was the second largest commercial bank holding company headquartered in Wisconsin. The Parent Company also owned 26 limited purpose banking and nonbanking subsidiaries located in Arizona, California, Illinois, Minnesota, Nevada, Vermont, and Wisconsin, that are closely related or incidental to the business of banking.

On October 29, 2004, we consummated our acquisition of First Federal Capital Corp (“First Federal”), a $4 billion thrift that had over 90 offices, predominantly in Wisconsin. The Corporation plans to complete the integration of First Federal’s operations with its own in the first quarter of 2005 and collapse the thrift charter into one of its commercial banks.

The Parent Company provides its subsidiaries with leadership, as well as financial and managerial assistance in areas such as corporate development, auditing, marketing, legal/ compliance, human resources management,

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risk management, facilities management, security, purchasing, credit administration, asset and liability management and other treasury-related activities, budgeting, accounting and other finance support.

Responsibility for the management of the subsidiaries remains with their respective boards of directors and officers. Services rendered to the subsidiaries by the Parent Company are intended to assist the local management of these subsidiaries to expand the scope of services offered by them. At December 31, 2004, bank and thrift subsidiaries of the Parent Company provided services through 307 locations in 173 communities.

Services

Through its banking subsidiaries and various nonbanking subsidiaries, the Corporation provides a diversified range of banking and nonbanking products and services to individuals and businesses in the communities it serves. The Corporation organizes its business into two reportable segments: Banking and Wealth Management. The Corporation’s banking and wealth management activities are conducted predominantly in Wisconsin, Minnesota, and Illinois, and are primarily delivered through branch facilities in this tri-state area, as well as supplemented through loan production offices, supermarket branches, a customer service call center and 24-hour phone-banking services, an interstate Automated Teller Machine (ATM) network, and internet banking services. See also Note 19, “Segment Reporting,” of the notes to consolidated financial statements within Part II, Item 8. As disclosed in Note 19, the banking segment represents 90% of total revenues, as defined in the note. The Corporation’s profitability is predominantly dependent on net interest income, noninterest income, the level of the provision for loan losses, noninterest expense, and taxes of its banking segment.

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

Lending involves credit risk. Credit risk is controlled and monitored through active asset quality management including the use of lending standards, thorough review of potential borrowers, and active asset quality administration. Credit risk management is discussed under Part II sections “Critical Accounting Policies,” “Loans,” “Allowance for Loan Losses,” and “Nonperforming Loans, Potential Problem Loans, and Other Real Estate Owned,” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and under Note 1, “Summary of Significant Accounting Policies,” and Note 4, “Loans,” of the notes to consolidated financial statements.

The wealth management segment provides products and a variety of fiduciary, investment management, advisory and corporate agency services to assist customers in building, investing, or protecting their wealth. Customers include individuals, corporations, small businesses, charitable trusts, endowments, foundations, and institutional investors. The wealth management segment is comprised of a) a full range of personal and business insurance products and services (including life, property, casualty, credit and mortgage insurance, fixed annuities, and employee group benefits consulting and administration), b) full-service investment brokerage, variable annuities, and discount and on-line brokerage, and c) trust/ asset management, investment

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management, administration of pension, profit-sharing and other employee benefit plans, personal trusts, and estate planning.

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

Employees

At December 31, 2004, the Corporation had 5,158 full-time equivalent employees.

Competition

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

Supervision and Regulation

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

As a registered bank holding company under the BHC Act, the Parent Company and its nonbanking subsidiaries are regulated and supervised by the FRB. The nationally chartered bank subsidiaries are supervised and examined by the Office of the Comptroller of the Currency (the “OCC”). The sole state chartered bank subsidiary is supervised and examined by the applicable Illinois state banking agency and by the Federal Deposit Insurance Corporation (the “FDIC”). The thrift subsidiary is regulated by the Office of Thrift Supervision (the “OTS”). All subsidiaries of the Parent Company that accept insured deposits are subject to examination by the FDIC.

The Corporation and the subsidiary banks and thrift are subject to various regulatory capital requirements administered by the federal banking agencies noted above. Failure to meet minimum capital requirements can initiate certain mandatory and possibly 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 policies. The Corporation’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The Corporation and the subsidiary banks have consistently maintained regulatory capital ratios at or above the well capitalized standards. For further detail on capital and capital ratios see sections, “Liquidity” and “Capital,” and Note 17, “Regulatory Matters,” of the notes to consolidated financial statements.

The Gramm-Leach-Bliley Act of 1999 significantly amended the BHC Act. The amendments, among other things, allow certain qualifying bank holding companies to engage in activities that are financial in nature and that explicitly include the underwriting and sale of insurance. The BHC Act’s provisions governing the scope and manner of the FRB’s supervision of bank holding companies, the manner in which activities may be found to be financial in nature, and the extent to which state laws on insurance will apply to insurance activities of banks and bank subsidiaries were also amended. The FRB has issued regulations implementing these provisions. The BHC Act, as amended, allows for the expansion of activities by banking organizations and permits consolidation among financial organizations generally. Under the BHC Act, the Parent Company is

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required to act as a source of financial strength to each of its subsidiaries pursuant to which it may be required to commit financial resources to support such subsidiaries in circumstances when, absent such requirements, it might not otherwise do so. The BHC Act also requires the prior approval of the FRB to enable the Parent Company to acquire direct or indirect control of more than five percent of any class of voting shares of any bank or bank holding company. The BHC Act further regulates the Corporation’s 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 federal regulatory authorities have broad authority to enforce the regulatory requirements imposed on the Corporation. In particular, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) and the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), and their implementing regulations, carry greater enforcement powers. Under FIRREA, all commonly controlled FDIC insured depository institutions may be held liable for any loss incurred by the FDIC resulting from a failure of, or any assistance given by the FDIC to, any commonly controlled institutions. Pursuant to certain provisions under FDICIA, the federal regulatory agencies have broad powers to take prompt corrective action if a depository institution fails to maintain certain capital levels. Prompt corrective action may include, without limitation, restricting the ability of the Corporation to pay dividends, restricting acquisitions or other activities, and placing limitations on asset growth.

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

The FDIC maintains the Bank Insurance Fund (“BIF”) and the Savings Association Insurance Fund (“SAIF”) by assessing depository institutions an insurance premium twice a year. The amount each institution is assessed is based both on the balance of insured deposits held during the preceding two quarters, as well as on the degree of risk the institution poses to the insurance fund. FDIC assesses higher rates on those institutions that pose greater risks to the insurance funds. Effective April 1, 2000, the FDIC Board of Directors (“FDIC Board”) adopted revisions to the FDIC’s regulation governing deposit insurance assessments which it believed enhanced the system by allowing institutions with improving capital positions to benefit from the improvement more quickly while requiring those with failing capital to pay a higher assessment sooner. The Federal Deposit Insurance Act governs the authority of the FDIC Board to set BIF and SAIF assessment rates and directs the FDIC Board to establish a risk-based assessment system for insured depository institutions and set assessments to the extent necessary to maintain the reserve ratio at 1.25%.

The banking and thrift subsidiaries of the Corporation are subject to periodic Community Reinvestment Act (“CRA”) review by their respective primary federal regulators. Associated Bank, National Association, underwent a CRA examination by the Comptroller of the Currency on November 10, 2003, for which it received a Satisfactory rating. Associated Bank Chicago underwent a CRA examination by the FDIC on December 1, 2003, and received a Satisfactory rating. Associated Bank Minnesota, National Association, formerly known as Signal Bank, National Association, underwent a CRA examination by the Comptroller of the Currency on October 2, 2000, for which it received a Satisfactory rating. Prior to its merger with Signal Bank, Associated Bank Minnesota had a CRA examination by the FDIC for which it received an Outstanding rating.

In 2001, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001 (the “Patriot Act”). The Patriot Act is designed to deny terrorists and criminals the ability to obtain access to the United States’ financial system and has significant implications for depository institutions, brokers, dealers, and other businesses involved in the transfer of money. The Patriot Act mandates financial services companies to implement additional policies

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and procedures with respect to additional measures designed to address any or all of the following matters: money laundering, terrorist financing, identifying and reporting suspicious activities and currency transactions, and currency crimes.

The laws and regulations to which the Corporation is 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 the profitability of the Corporation, its ability to compete effectively, or the composition of the financial services industry in which the Corporation competes.

Government Monetary Policies and Economic Controls

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

In view of changing conditions in the national economy and in the 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 the business and earnings of the Corporation.

Available Information

The Corporation files annual, quarterly, and current reports, proxy statements, and other information with the SEC. These filings are available to the public over the Internet at the SEC’s web site at www.sec.gov. Shareholders may also read and copy any document that the Corporation files at the SEC’s public reference room located at 450 Fifth Street, NW, Washington, DC 20549. Shareholders may call the SEC at 1-800-SEC-0330 for further information on the public reference room.

The Corporation’s principal Internet address is www.associatedbank.com. The Corporation makes available free of charge on or through its website its 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 the Corporation electronically files such material with, or furnishes it to, the SEC. In addition, shareholders may request a copy of any of the Corporation’s filings (excluding exhibits) at no cost by writing, telephoning, faxing, or e-mailing the Corporation at the following address, telephone number, fax number or e-mail address: Associated Banc-Corp, Attn: Shareholder Relations, 1200 Hansen Road, Green Bay, WI 54304; phone 920-491-7006; fax 920-491-7010; or e-mail to shareholders@associatedbank.com. The Corporation’s Code of Ethics for Directors and Executive Officers, corporate governance guidelines and Board of Directors committee charters are all available on the Corporation’s website.

Information contained on any of the Corporation’s websites is not deemed to be a part of this Annual Report.

ITEM 2.     PROPERTIES

The Corporation’s headquarters are located in the Village of Ashwaubenon, Wisconsin, in a leased facility with approximately 30,000 square feet of office space. The space is subject to a five-year lease with one consecutive five-year extension.

At December 31, 2004, the bank subsidiaries occupied 307 offices in 173 different communities within Illinois, Minnesota, and Wisconsin. The main offices of Associated Bank, National Association, and First Federal

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Capital Bank are owned. The bank subsidiary main offices in downtown Chicago and Minneapolis are located in leased space in the lobbies of multistory office buildings. Most bank subsidiary branch offices are freestanding buildings that provide adequate customer parking, including drive-through facilities of various numbers and types for customer convenience. Some bank subsidiaries also have branch offices in supermarket locations or in retirement communities. In addition, the Corporation owns other real property that, when considered in the aggregate, is not material to its financial position.

ITEM 3.     LEGAL PROCEEDINGS

In the ordinary course of business, the Corporation may be named as defendant in or be a party to various pending and threatened legal proceedings. Since it is not possible to formulate a meaningful opinion as to the range of possible outcomes and plaintiffs’ ultimate damage claims, management cannot estimate the specific possible loss or range of loss that may result from these proceedings. Management believes, based upon advice of legal counsel and current knowledge, that liabilities arising out of any such current proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Corporation.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2004.

PART II

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

Information in response to this item is incorporated by reference to the table “Market Information” on Page 93 and the discussion of dividend restrictions in Note 10, “Stockholders’ Equity,” of the notes to consolidated financial statements included under Item 8 of this document. The Corporation’s common stock is traded on The Nasdaq Stock Market under the symbol ASBC.

The approximate number of equity security holders of record of common stock, $.01 par value, as of February 28, 2005, was 10,860. Certain of the Corporation’s shares are held in “nominee” or “street” name and the number of beneficial owners of such shares is approximately 32,581.

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. At the present time, the Corporation expects that dividends will continue to be paid in the future.

Following are the Corporation’s monthly common stock purchases during the fourth quarter of 2004. For a detailed discussion of the common stock repurchase authorizations and repurchases during the period, see section “Capital” included under Item 7 of this document and Note 10, “Stockholders’ Equity,” of the notes to consolidated financial statements included under Item 8 of this document.

	Total Number of		Average Price Paid
Period	Shares Purchased		per Share
October 1, 2004 - October 31, 2004		—	$	—
November 1, 2004 - November 30, 2004		220,000		33.76
December 1, 2004 - December 31, 2004		156,000		32.53
Total		376,000	$	33.25

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ITEM 6.     SELECTED FINANCIAL DATA

TABLE 1: EARNINGS SUMMARY AND SELECTED FINANCIAL DATA

(In Thousands, except per share data)

					%															5-Year
					Change															Compound
					2003 to															Growth
Years ended December 31,		2004			2004			2003			2002			2001			2000			Rate (4)
Interest income		$	767,122			5.5	%	$	727,364		$	792,106		$	880,622		$	931,157			(1.2	)%
Interest expense			214,495			(1.0	)		216,602			290,840			458,637			547,590			(12.5	)
Net interest income			552,627			8.2			510,762			501,266			421,985			383,567			6.9
Provision for loan losses			14,668			(68.7	)		46,813			50,699			28,210			20,206			(5.3	)
	Net interest income after provision for loan losses		537,959			16.0			463,949			450,567			393,775			363,361			7.4
Noninterest income			210,247			(3.1	)		216,882			185,347			172,355			174,194			5.2
Noninterest expense			377,869			5.2			359,115			339,588			315,121			307,734			4.6
Income before income taxes			370,337			15.1			321,716			296,326			251,009			229,821			9.3
Income tax expense			112,051			20.4			93,059			85,607			71,487			61,838			9.1
NET INCOME		$	258,286			13.0	%	$	228,657		$	210,719		$	179,522		$	167,983			9.4	%
Basic earnings per share(1)		$	2.28			10.1	%	$	2.07		$	1.88		$	1.65		$	1.49			9.8	%
Diluted earnings per share(1)			2.25			9.8			2.05			1.86			1.64			1.49			9.6
Cash dividends per share(1)			0.98			10.1			0.89			0.81			0.74			0.67			8.9
Weighted average shares outstanding(1):
	Basic		113,532			2.6			110,617			112,027			108,881			112,507			(0.3	)
	Diluted		115,025			2.9			111,761			113,240			109,751			112,877			(0.2	)
SELECTED FINANCIAL DATA
Year-End Balances:
Loans		$	13,881,887			34.9	%	$	10,291,810		$	10,303,225		$	9,019,864		$	8,913,379			10.7	%
Allowance for loan losses			189,762			6.8			177,622			162,541			128,204			120,232			10.9
Investment securities			4,815,344			27.6			3,773,784			3,362,669			3,197,021			3,260,205			8.0
Total assets			20,520,136			34.6			15,247,894			15,043,275			13,604,374			13,128,394			10.4
Deposits			12,786,239			30.6			9,792,843			9,124,852			8,612,611			9,291,646			8.0
Long-term funding			2,604,540			28.0			2,034,160			2,096,956			1,103,395			122,420			154.7
Stockholders’ equity			2,017,419			49.6			1,348,427			1,272,183			1,070,416			968,696			17.3
Book value per share(1)			15.55			26.8			12.26			11.42			9.93			8.88			14.4
Average Balances:
Loans		$	11,174,856			5.2	%	$	10,622,499		$	10,002,478		$	9,092,699		$	8,688,086			7.5	%
Investment securities			3,983,416			20.6			3,302,460			3,262,843			3,143,787			3,317,499			5.0
Total assets			16,365,762			9.3			14,969,860			14,297,418			13,103,754			12,810,235			6.9
Deposits			10,144,528			9.1			9,299,506			8,912,534			8,581,233			9,102,940			3.3
Stockholders’ equity			1,499,606			15.3			1,300,990			1,231,977			1,037,158			920,169			10.4
Financial Ratios:(2)
Return on average equity			17.22	%		(35	)		17.58	%		17.10	%		17.31	%		18.26	%
Return on average assets			1.58			5			1.53			1.47			1.37			1.31
Net interest margin			3.80			(4	)		3.84			3.95			3.62			3.36
Average equity to average assets			9.16			47			8.69			8.62			7.91			7.18
Dividend payout ratio(3)			42.84			1			42.83			42.97			44.81			45.04

(1)	Share and per share data adjusted retroactively for stock splits and stock dividends.
(2)	Change in basis points.
(3)	Ratio is based upon basic earnings per share.
(4)	Base year used in 5-year compound growth rate is 1999 consolidated financial data.

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 financial discussion that follows may refer to the effect of the Corporation’s business combination activity, detailed under section, “Business Combinations,” and Note 2, “Business Combinations,” of the notes to

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consolidated financial statements. The detailed financial discussion focuses on 2004 results compared to 2003. Discussion of 2003 results compared to 2002 is predominantly in section “2003 Compared to 2002.”

On April 28, 2004, the Board of Directors declared a 3-for-2 stock split, effected in the form of a stock dividend, payable May 12 to shareholders of record at the close of business on May 7. All share and per share data in the accompanying consolidated financial statements has been adjusted to reflect the effect of this stock split.

Certain amounts in the 2003 and 2002 consolidated financial statements have been reclassified to conform with the 2004 Form 10-K presentation. In particular, for presentation purposes and greater comparability with industry practice, mortgage servicing rights expense in the consolidated statements of income, which was previously presented in noninterest expense, was reclassified into mortgage banking income. These reclassifications resulted in a decrease to both noninterest income and noninterest expense of $29.6 million in 2003 and $30.5 million in 2002. The reclassifications had no effect on stockholders’ equity or net income as previously reported.

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, 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 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.

Allowance for Loan Losses: Management’s evaluation process used to determine the adequacy of the allowance for loan losses is subject to the use of estimates, assumptions, and judgments. The evaluation process combines several factors: management’s ongoing review and grading of the loan portfolio, consideration of past loan loss and delinquency experience, trends in past due and nonperforming loans, risk characteristics of the various classifications of loans, 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 adequacy of the allowance, 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 that certain loan balances be charged off 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 allowance for loan losses is adequate as recorded in the consolidated financial statements. See Note 1, “Summary of Significant Accounting Policies,” and Note 4, “Loans,” of the notes to consolidated financial statements and section “Allowance for Loan Losses.”

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

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participants in the mortgage banking business, the Corporation relies on an internal discounted cash flow model to estimate the fair value of its mortgage servicing rights and consults periodically with third parties as to the assumptions used and that the resultant valuation is within the context of the market. In addition, the Corporation periodically reviews the assumptions underlying the valuation of mortgage servicing rights. As part of this review, beginning with the third quarter 2004 valuation, the Corporation changed the external service provider of prepayment speeds to a source management believed to provide a better representation of market value. The impact of this change at the time of the change (September 30, 2004) was an increase in fair value of mortgage servicing rights of $0.8 million. While the Corporation believes that the values produced by its internal model are indicative of the fair value of its mortgage servicing rights portfolio, these values can change significantly depending upon key factors, such as the then current interest rate environment, estimated prepayment speeds of the underlying mortgages serviced, and other economic conditions. To better understand the sensitivity of the impact on prepayment speeds to changes in interest rates, if mortgage interest rates moved up 50 basis points (“bp”) at year end 2004 (holding all other factors unchanged), it is anticipated that prepayment speeds would have slowed and the modeled estimated value of mortgage servicing rights could have been $4 million higher than that determined at year-end 2004 (leading to more valuation allowance reversal and an increase in mortgage banking income). Conversely, if mortgage interest rates moved down 50 bp, prepayment speeds would have likely increased and the modeled estimated value of mortgage servicing rights could have been $7 million lower (leading to adding more valuation allowance and a decrease in mortgage banking income). The proceeds that might be received should the Corporation actually consider a sale of the mortgage servicing rights portfolio could differ from the amounts reported at any point in time. The Corporation believes the mortgage servicing rights asset is properly recorded in the consolidated financial statements. See Note 1, “Summary of Significant Accounting Policies,” and Note 5, “Goodwill and Intangible Assets,” of the notes to consolidated financial statements and section “Noninterest Income.”

Derivative Financial Instruments and Hedge Accounting: 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. Substantially all of these derivative financial instruments are designated as hedges for financial reporting purposes. The application of the hedge accounting policy requires judgment in the assessment of hedge effectiveness, identification of similar hedged item groupings, and measurement of changes in the fair value of hedged items. However, if in the future the derivative financial instruments used by the Corporation no longer qualify for hedge accounting treatment and, consequently, the change in the fair value of hedged items could be recognized in earnings, the impact on the consolidated results of operations and reported earnings could be significant. The Corporation believes hedge effectiveness is evaluated properly in the consolidated financial statements. See Note 1, “Summary of Significant Accounting Policies,” and Note 14, “Derivative and Hedging Activities,” of the notes to consolidated financial statements and section “Interest Rate Risk.”

Income Tax Accounting: The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgments concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the consolidated results of operations and reported earnings. The Corporation believes the tax assets and liabilities are adequate and 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.”

Business Combinations

The Corporation’s business combination activity is summarized in Note 2, “Business Combinations,” of the notes to consolidated financial statements. All the Corporation’s business combinations since 2002 were accounted for under the purchase method of accounting; thus, the results of operations of the acquired institutions prior to their respective consummation dates were not included in the accompanying consolidated financial statements.

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In 2004 there were two completed business combinations: First Federal Capital Corp (“First Federal”): On October 29, 2004, the Corporation consummated its acquisition of 100% of the outstanding shares of First Federal, based in La Crosse, Wisconsin. As of the acquisition date, First Federal operated a $4 billion savings bank with over 90 banking locations serving more than 40 communities in Wisconsin, northern Illinois, and southern Minnesota, building upon and complementing the Corporation’s footprint. As a result of the acquisition, the Corporation will enhance its current branch distribution (including supermarket locations which are new to the Corporation’s distribution model), improve its operational and managerial efficiencies, increase revenue streams, and strengthen its community banking model. Subsequent to year-end 2004, the Corporation merged First Federal into its Associated Bank, National Association banking subsidiary during February 2005.

Per the definitive agreement signed on April 27, 2004, First Federal shareholders received 0.9525 shares (restated for the Corporation’s 3-for-2 stock split in May 2004) of the Corporation’s common stock for each share of First Federal common stock held, an equivalent amount of cash, or a combination thereof. Further, the aggregate consideration paid by the Corporation for the First Federal outstanding common stock must be equal to 90% stock and 10% cash, with the cash consideration based upon the Corporation’s closing stock price on the effective date of the merger. The value of the common stock consideration was based upon the Corporation’s average market price surrounding the date of signing and announcing the definitive agreement. Based upon the aforementioned values for the 90% stock/10% cash, the consummation of the transaction included the issuance of approximately 19.4 million shares of common stock (valued at approximately $535 million) and $75 million in cash. Goodwill of approximately $447 million, a core deposit intangible of approximately $17 million, and other intangibles of $4 million recognized at acquisition were assigned to the banking segment.

Jabas Group, Inc. (“Jabas”): On April 1, 2004, the Corporation (through its subsidiary, Associated Financial Group, LLC) consummated its cash acquisition of 100% of the outstanding shares of Jabas. Jabas is an insurance agency specializing in employee benefit products headquartered in Kimberly, Wisconsin, and was acquired to enhance the Corporation’s existing insurance business. Jabas operates as part of Associated Financial Group, LLC. The acquisition was individually immaterial to the consolidated financial results. Goodwill of approximately $8 million and other intangibles of approximately $6 million recognized in the transaction at acquisition were assigned to the wealth management segment. In addition, goodwill may increase up to $8 million in the future as contingent payments may be made to the former Jabas shareholders through December 31, 2007, if Jabas exceeds certain performance targets. Goodwill during 2004 was increased by approximately $0.7 million for contingent consideration paid in 2004 per the agreement.

In 2003 there was one completed business combination. On April 1, 2003, the Corporation consummated its cash acquisition of 100% of the outstanding shares of CFG Insurance Services, Inc. (“CFG”), a closely held insurance agency headquartered in Minnetonka, Minnesota. Effective in June 2003, CFG operated as Associated Financial Group, LLC. CFG, an independent, full-line insurance agency, was acquired to enhance the growth of the Corporation’s existing insurance business. The acquisition was individually immaterial to the consolidated financial results. Goodwill of approximately $12 million and other intangibles of approximately $15 million recognized initially in the transaction were assigned to the wealth management segment.

In 2002 there was one completed business combination. On February 28, 2002, the Corporation consummated its acquisition of 100% of the outstanding common shares of Signal Financial Corporation (“Signal”), a financial holding company headquartered in Mendota Heights, Minnesota. Signal operated banking branches in nine locations in the Twin Cities and Eastern Minnesota. As a result of the acquisition, the Corporation expanded its Minnesota presence, particularly in the Twin Cities area. The Signal transaction was consummated through the issuance of approximately 6.1 million shares of common stock and $58 million in cash for a purchase price of $193 million. The value of the shares was determined using the closing stock price of the Corporation’s stock on September 10, 2001, the initiation date of the transaction. Goodwill of approximately $120 million and a core deposit intangible of approximately $6 million recognized initially in the transaction were assigned to the banking segment.

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Segment Review

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

Note 19, “Segment Reporting,” of the notes to consolidated financial statements, indicates that the banking segment represents 90% of total revenues, as defined in the Note. The Corporation’s profitability is predominantly dependent on net interest income, noninterest income, the level of the provision for loan losses, noninterest expense, and taxes of its banking segment. The consolidated discussion is therefore predominantly describing the banking segment results. The critical accounting policies primarily affect the banking segment, with the exception of income tax accounting, which affects both the banking and wealth management segments (see section “Critical Accounting Policies”).

Overview

The Corporation is a multi-bank holding company headquartered in Wisconsin, providing a diversified range of banking and nonbanking services to individuals and businesses primarily in its three-state footprint (Wisconsin, Illinois and Minnesota).

The Corporation’s primary sources of revenue are net interest income (predominantly from loans and deposits, and also from investments and other funding sources), and noninterest income, particularly fees and other revenue from financial services provided to customers. 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 as well.

Net interest income, including two months of contribution from the First Federal acquisition, increased in 2004 compared to 2003, primarily due to an increase in average earning assets. The net interest margin declined from 3.84% in 2003 to 3.80% in 2004. The Corporation has been asset-sensitive for 2003 and 2004, positioned to benefit from rising rates. However, the flattening of the yield curve and competitive pricing pressures substantially offset the benefits to the margin from the interest rate increases that occurred through the second half of 2004. The Corporation continues to be positioned to benefit from rising rates, assuming anticipated rate increases by the Federal Reserve and a steepening of the yield curve.

Noninterest income declined in 2004 compared to 2003, particularly from lower net mortgage banking income. The Corporation anticipated mortgage originations to fall dramatically in 2004, and as such also expected lower net mortgage banking income (down $33.2 million or 62% versus 2003). During 2003, interest rates reached record lows, resulting in an unprecedented volume of mortgage loan originations and refinances and strong net mortgage banking income for 2003. A rapid rise in mortgage interest rates, particularly during late third quarter of 2003, slowed mortgage loan volume, and industry expectations were for mortgage originations to fall dramatically in 2004, which materialized. The Corporation’s 2004 insurance agency acquisition and organic growth from its 2003 insurance agency acquisition aided growth in retail commissions (up $21.6 million or 84% compared to 2003). Noninterest income sources continue to be diversified, cross-selling of services remains a focus, and pricing is routinely evaluated. Full year contributions in 2005 from the Jabas and First Federal acquisitions are expected to further enhance noninterest revenues.

Commercial loans and home equity loans were strategically emphasized in 2004 and showed momentum particularly in the second half of 2004. Period end loans at December 31, 2004, were $13.9 billion, up 35% over year-end 2003, with commercial, home equity, residential mortgage and installment loans up 27%, 64%, 37%, and 51%, respectively. Excluding the First Federal acquisition, total loans grew 8%, with commercial loans up 11%, home equity up 22%, and residential mortgages and installment loans down 2% and 7%, respectively, compared to year-end 2003. The Corporation’s loan mix changed during 2004, with emphasis on

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commercial and home equity loan growth, but influenced as well from the First Federal acquisition. The mix of loans at December 31, 2004, including First Federal, was 59% commercial (versus 63% last year), 20% residential mortgage (versus 19% last year), 13% home equity (compared to 11% a year ago), and 8% installment loans (versus 7% last year). The loan mix at year-end 2004 excluding the First Federal acquisition would have been 65%, 17%, 12%, and 6% commercial, residential mortgage, home equity, and installment, respectively. Increases in business spending and consumer confidence in 2005 and strategic growth objectives are expected to create an environment for increased earnings from loans.

Period end deposits at December 31, 2004, were $12.8 billion, up 31% over the prior year end, with minimal shift in deposit mix. The Corporation’s deposit mix at December 31, 2004, including First Federal, was 19% noninterest-bearing demand (compared to 18% last year end), 34% time deposits (versus 33% last year) and 47% interest-bearing transaction accounts (versus 49% last year), where transaction accounts include savings, money market, and interest-bearing demand deposits. Excluding the First Federal acquisition, period end deposits grew 3% compared to year-end 2003. Competition for deposits has been high for many years. Deposit retention is most at risk in the first year following acquisition. Further, there will be competitive pressures in 2005, such as pricing deposits up in the anticipated rising rate environment and potential disintermediation to improving stock markets. Rational and balanced deposit growth initiatives will be used in 2005.

The Corporation anticipated that, among other factors, improving credit quality indicators and favorable workouts of credits, if sustained, could lead to a lower provision for loan losses for 2004. Asset quality administration activities in 2004 resulted in early identification of potential problem credits, favorable resolution to problem credits, lower nonperforming loans as a percentage of loans, and net charge offs to average loans of 0.15%. As a result, the 2004 provision for loan losses was reduced to $14.7 million, compared to $46.8 million for 2003. At December 31, 2004, an allowance for loan losses to loans ratio of 1.37% (impacted in part by the acquisition of First Federal’s thrift loan mix and lower ratio of allowance for loan losses to loans) was deemed adequate by management, covering 165% of nonperforming loans at year-end 2004, compared to 1.73% at December 31, 2003, covering 146% of nonperforming loans. Certain economic indicators suggest that business spending has begun to increase and that business and consumer financial positions are improving in line with recent economic improvements. Conversely, it is unknown how rising interest rates, particularly seen in the second half of 2004 and anticipated for 2005, will ultimately impact profitability of businesses or the ability to service potentially rising debt of businesses and consumers for 2005. Management expects that the 2005 provision for loan losses will be higher than in 2004, but anticipates it will be commensurate with credit quality indicators, net charge off levels, and unique circumstances of individual credits.

Noninterest expenses rose 5% year-over-year, reflecting the larger operating base attributable to the 2004 acquisitions. Excluding only First Federal, noninterest expense for 2004 would have been unchanged from last year, evidencing that noninterest expenses remained both well controlled and a critical focus of 2004. The efficiency ratio (defined as noninterest expense divided by the sum of taxable equivalent net interest income plus noninterest income, excluding net asset and securities gains) was 48.04% for 2004 and 47.86% for 2003. The Corporation has and will continue to monitor costs, and anticipates certain cost savings from integrating First Federal onto centralized operating systems in first quarter 2005.

Performance Summary

The Corporation recorded net income of $258.3 million for the year ended December 31, 2004, an increase of $29.6 million or 13.0% over the $228.7 million earned in 2003. Basic earnings per share for 2004 were $2.28, a 10.1% increase over 2003 basic earnings per share of $2.07. Earnings per diluted share were $2.25, a 9.8% increase over 2003 diluted earnings per share of $2.05. Return on average assets and return on average equity for 2004 were 1.58% and 17.22%, respectively, compared to 1.53% and 17.58%, respectively, for 2003. Cash dividends of $0.98 per share paid in 2004 increased by 10.1% over 2003. Key factors behind these results are discussed below.

•  Taxable equivalent net interest income was $578.2 million for 2004, $42.5 million or 7.9% higher than 2003. Taxable equivalent interest income increased $40.4 million, while interest expense decreased by $2.1 mil-

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	lion. The increase in taxable equivalent net interest income was attributable to favorable volume variances (with balance sheet growth and differences in the mix of average earning assets and average interest-bearing liabilities adding $50.6 million to taxable equivalent net interest income), offset partly by unfavorable rate variances (as the impact of changes in the interest rate environment reduced taxable equivalent net interest income by $8.1 million). Average earning assets increased $1.3 billion to $15.2 billion, while interest-bearing liabilities increased $1.0 billion to $12.9 billion.
•	Net interest income and net interest margin were impacted by generally stable and historically low interest rates during 2003 and the first half of 2004. Since mid-year 2004, the Federal Reserve raised interest rates five times. The average Federal funds rate of 1.34% in 2004 was 22 bp higher than the 1.12% average rate in 2003.
•	The net interest margin for 2004 was 3.80%, compared to 3.84% in 2003. The 4 bp decrease in net interest margin was attributable to a 2 bp decrease in interest rate spread (the net of an 18 bp decrease in the yield on earning assets, substantially offset by a 16 bp lower cost of interest-bearing liabilities), and a 2 bp lower contribution from net free funds.
•	Total loans were $13.9 billion at December 31, 2004, up $3.6 billion over December 31, 2003, attributable largely to the $2.7 billion First Federal loans acquired. Excluding First Federal, total loans grew 8.2%, with commercial loans up $692 million (10.7%), home equity up $253 million (22.2%), and with both residential mortgage and installment loans down, $47 million and $49 million, respectively. Total deposits were $12.8 billion at December 31, 2004, up $3.0 billion over year-end 2003, attributable largely to the $2.7 billion First Federal deposits acquired. Excluding First Federal, total deposits grew 3.0% over December 31, 2003.
•	Asset quality during 2003 was affected by the impact of challenging economic conditions on customers, while 2004 benefited from general economic improvements and resolution of problem credits. Nonperforming loans were $115.0 million, representing 0.83% of total loans at year-end 2004, compared to $121.5 million or 1.18% of total loans at year-end 2003. Net charge offs were $17.3 million, a decrease of $14.4 million from 2003, with the majority of the decrease attributable to lower charge offs in the commercial loan portfolio. Net charge offs were 0.15% of average loans compared to 0.30% in 2003. Given asset quality improvements, favorable resolution to problem credits, and an adequate level of allowance for loan losses, the provision for loan losses decreased to $14.7 million compared to $46.8 million in 2003. The ratio of allowance for loan losses to loans was 1.37% and 1.73% at December 31, 2004 and 2003, respectively.
•	Noninterest income was $210.2 million for 2004, $6.6 million or 3.1% lower than 2003, impacted by significantly less net mortgage banking. Net mortgage banking income decreased $33.2 million (62.0%) to $20.3 million, driven by reduced secondary mortgage production and resultant loan sales. Retail commissions grew $21.6 million (84.5%) over 2003, primarily attributable to the acquisitions of the Jabas and CFG insurance agencies in April 2004 and 2003, respectively (see section “Business Combinations”).
•	Noninterest expense was $377.9 million, up $18.8 million or 5.2% over 2003, reflecting the larger operating base attributable to the 2004 acquisitions. Personnel expense rose $16.5 million or 7.9% over 2003, while all remaining noninterest expense categories increased 1.5% on a combined basis.
•	Income tax expense increased to $112.1 million, up $19.0 million from 2003. The effective tax rate increased to 30.3% in 2004 compared to 28.9% in 2003, primarily attributable to the increase in income before tax and the acquisitions of First Federal and Jabas, with both having higher effective tax rates than the Corporation prior to the acquisitions.

INCOME STATEMENT ANALYSIS

Net Interest Income

Net interest income in the consolidated statements of income (which excludes the taxable equivalent adjustment) was $552.6 million, compared to $510.8 million in 2003. 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

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been subject to taxation using a 35% tax rate) of $25.6 million for 2004 and $24.9 million for 2003 resulted in fully taxable equivalent net interest income of $578.2 million and $535.7 million, respectively.

Net interest income is the primary source of the Corporation’s revenue. Net interest income is the difference between interest income on earning assets, such as loans and 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. Additionally, net interest income is impacted by the sensitivity of the balance sheet to changes in interest rates, which factors in characteristics such as the fixed or variable nature of the financial instruments, contractual maturities, repricing frequencies, and the use of interest rate swaps and caps.

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 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 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, 2004. 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 was $578.2 million for 2004, an increase of $42.5 million or 7.9% from 2003. Taxable equivalent interest income increased $40.4 million and interest expense decreased by $2.1 million. The increase in taxable equivalent net interest income was attributable to a higher level of earning assets, offset by unfavorable interest rate changes. As shown in the rate/volume analysis in Table 3, volume changes added $50.6 million to taxable equivalent net interest income, while rate changes resulted in an $8.1 million decrease, for a net increase of $42.5 million. The growth and change in mix of earning assets added $60.3 million to taxable equivalent net interest income in 2004, while the growth and composition of interest-bearing liabilities cost an additional $9.7 million. Rate changes on earning assets reduced interest income by $19.9 million, while the changes in rates on interest-bearing liabilities lowered interest expense by $11.8 million, for a net unfavorable impact of $8.1 million. The Corporation has been asset-sensitive for 2003 and 2004, positioned to benefit from rising rates. However, the flattening of the yield curve and competitive pricing pressures substantially offset the benefits to the margin from the interest rate increases that occurred through the second half of 2004. See additional discussion in section “Interest Rate Risk.”

The net interest margin for 2004 was 3.80%, compared to 3.84% in 2003. The 4 bp compression in net interest margin was attributable to a 2 bp decrease in interest rate spread (with an 18 bp decrease in the yield on earning assets, substantially offset by a 16 bp lower cost of interest-bearing liabilities), and a 2 bp lower contribution from net free funds (a function of the overall decrease in the cost of interest-bearing liabilities). Interest rates were generally stable and historically low during 2003 and the first half of 2004. Since mid-year 2004, the Federal government raised interest rates five times, each time by 25 bp. At December 31, 2004 the Federal Funds rate was 2.25%, 125 bp higher than the 45-year low of 1.00% at December 31, 2003. On average, the Federal funds rate was 1.34% for 2004, 22 bp higher than for 2003.

For 2004, the yield on earning assets fell 18 bp to 5.21%, comprised of a 30 bp decrease in the yield on securities and other short-term investments (to 4.89%) and a 13 bp decline in loan yield (to 5.33%). The yield on investment securities decreased as maturities and principal paydowns were reinvested in securities with lower yields. Competitive pricing on new and refinanced loans, the portion of the loan portfolio that is fixed rate and the lag in repricing of variable rate loans in the rising interest rate environment put pressure on loan yields in 2004, resulting in the 13 bp decline in yield. The earning asset rate changes reduced interest income

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by $19.9 million, a combination of $13.9 million lower interest on loans and $6.0 million lower interest on securities and short-term investments combined.

For 2004, the cost of interest-bearing liabilities of 1.67% was 16 bp lower than 2003, aided by the continued low rate environment during the first half of 2004 and the lag in repricing of deposit products in the second half of 2004. The combined average cost of interest-bearing deposits was 1.43%, down 19 bp from 2003, benefiting from a larger mix of lower-costing transaction accounts, as well as timing differences in repricing interest-bearing deposit products as interest rates began to rise. The cost of wholesale funds (comprised of all short-term borrowings and long-term funding) decreased 11 bp to 2.10% for 2004, benefiting from a favorable mix of lower costing short-term borrowings and timing of the maturity of and reinvestment in higher-rate long-term funds during the year. The interest-bearing liability rate changes resulted in $11.8 million lower interest expense, with $10.2 million attributable to interest-bearing deposits and $1.6 million due to wholesale funding.

Average earning assets were $15.2 billion in 2004, an increase of $1.3 billion, or 9.0%, from 2003. The majority (54%) of the growth in average earning assets was organic, with the remainder attributable to the acquisition of First Federal. Balances of average securities and short-term investments combined grew $704 million, or 21.2%, partly due to the First Federal acquisition but more reflective of a corporate decision to increase the investment portfolio as a percent of earning assets. For 2004, securities and short-term investments combined represented 26.5% of average earning assets compared to 23.8% for 2003. Taxable equivalent interest income on securities and short-term investments for 2004 increased $30.4 million from volume changes, but decreased $6.0 million due to the impact of the rate environment, for a net $24.4 million increase to taxable equivalent interest income. As previously noted, the majority of securities growth occurred in early 2004, when yields were lower than the second half of 2004. Loans increased $552 million, or 5.2%, to $11.2 billion on average in 2004 and represented 73.5% of average earning assets compared to 76.2% for 2003. Taxable equivalent interest income on loans increased $29.8 million from growth, but decreased $13.9 million due to rate changes (as described above), for a net increase of $15.9 million versus last year.

Average interest-bearing liabilities increased $1.0 billion, or 8.5%, from 2003, while net free funds increased $243 million, both supporting the growth in earning assets. Approximately half of the increase in average interest-bearing liabilities was attributable to the First Federal acquisition. Average interest-bearing deposits grew $656 million, or 8.6%, to $8.3 billion and average noninterest-bearing demand deposits (a component of net free funds) increased by $189 million, or 11.3%. Interest expense on interest-bearing deposits for 2004 decreased $10.2 million from the impact of the rate environment but increased $5.3 million from volume and mix changes, for a net $4.9 million decrease to interest expense. Average wholesale funding sources increased by $357 million, principally in short-term borrowings. The Corporation decreased its average long-term funding by $98 million to 15.5% of average interest-bearing liabilities (compared to 17.7% for 2003). For 2004, interest expense on wholesale funding increased by $4.4 million due to volume changes and decreased by $1.6 million from lower rates, for a net increase of $2.8 million versus the prior year.

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

				Years Ended December 31,
				2004								2003								2002
				Average					Average			Average					Average			Average					Average
				Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
				($ in Thousands)
ASSETS
Earning assets:
Loans:(1)(2)(3)(4)
Commercial				$	6,928,494		$	350,889		5.06	%	$	6,450,523		$	329,695		5.11	%	$	5,929,113		$	348,082		5.87	%
		Residential mortgage			2,170,600			122,453		5.64			2,377,438			142,359		5.99			2,378,990			163,629		6.88
		Retail			2,075,762			122,406		5.90			1,794,538			107,808		6.01			1,694,375			115,791		6.83
			Total loans		11,174,856			595,748		5.33			10,622,499			579,862		5.46			10,002,478			627,502		6.27
	Investment securities:
		Taxable			3,110,907			130,774		4.20			2,474,791			108,394		4.38			2,431,713			125,299		5.15
		Tax exempt(1)			872,509			65,286		7.48			827,669			63,617		7.69			831,130			62,719		7.55
	Short-term investments				44,620			842		1.89			21,873			394		1.80			29,270			658		2.25
		Securities and short-term investments			4,028,036			196,902		4.89			3,324,333			172,405		5.19			3,292,113			188,676		5.73
Total earning assets				$	15,202,892		$	792,650		5.21	%	$	13,946,832		$	752,267		5.39	%	$	13,294,591		$	816,178		6.14	%
Allowance for loan losses					(181,297	)							(174,703	)							(148,801	)
Cash and due from banks					307,888								289,866								302,856
Other assets					1,036,279								907,865								848,772
Total assets				$	16,365,762							$	14,969,860							$	14,297,418
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
	Savings deposits			$	967,930		$	3,487		0.36	%	$	928,147		$	4,875		0.53	%	$	891,105		$	6,813		0.76	%
	Interest-bearing demand deposits				2,406,280			19,874		0.83			1,827,304			15,348		0.84			1,118,546			9,581		0.86
	Money market deposits				1,628,208			14,259		0.88			1,623,438			15,085		0.93			1,876,988			24,717		1.32
	Time deposits, excluding Brokered CDs				3,042,933			76,930		2.53			3,063,873			84,957		2.77			3,263,766			122,181		3.74
		Total interest-bearing deposits, excluding Brokered CDs			8,045,351			114,550		1.42			7,442,762			120,265		1.62			7,150,405			163,292		2.28
	Brokered CDs				232,066			3,686		1.59			178,853			2,857		1.60			264,023			5,729		2.17
		Total interest-bearing deposits			8,277,417			118,236		1.43			7,621,615			123,122		1.62			7,414,428			169,021		2.28
Federal funds purchased and securities sold under agreements to repurchase					2,038,981			28,984		1.42			1,821,220			23,288		1.28			2,058,163			42,143		2.05
Other short-term borrowings					553,658			9,956		1.80			315,599			5,868		1.86			250,919			9,229		3.68
Long-term funding					1,998,314			57,319		2.87			2,096,802			64,324		3.07			1,673,071			70,447		4.21
		Total wholesale funding			4,590,953			96,259		2.10			4,233,621			93,480		2.21			3,982,153			121,819		3.06
Total interest-bearing liabilities				$	12,868,370		$	214,495		1.67	%	$	11,855,236		$	216,602		1.83	%	$	11,396,581		$	290,840		2.55	%
Noninterest-bearing demand deposits					1,867,111								1,677,891								1,498,106
Accrued expenses and other liabilities					130,675								135,743								170,754
Stockholders’ equity					1,499,606								1,300,990								1,231,977
Total liabilities and stockholders’ equity				$	16,365,762							$	14,969,860							$	14,297,418
Net interest income and rate spread(1)							$	578,155		3.54	%				$	535,665		3.56	%				$	525,338		3.59	%
Net interest margin(1)										3.80	%							3.84	%							3.95	%
Taxable equivalent adjustment							$	25,528							$	24,903							$	24,072

(1)	The yield on tax-exempt loans and securities is computed on a taxable equivalent basis using a tax rate of 35% for all periods presented and is net of the effects of certain disallowed interest deductions.
(2)	Nonaccrual loans and loans held for sale have been included in the average balances.
(3)	Interest income includes net loan fees.
(4)	Commercial includes commercial, financial, and agricultural, real estate construction, commercial real estate, and lease financing; residential mortgage includes residential mortgage first liens; retail includes home equity lines, residential mortgage junior liens, and installment loans (such as educational and other consumer loans).

18

TABLE 3: Rate/ Volume Analysis(1)

				2004 Compared to 2003									2003 Compared to 2002
				Increase (Decrease) Due to Increase (Decrease) Due to
				Volume			Rate			Net			Volume			Rate			Net
				($ in Thousands)
Interest income:
Loans:(2)
		Commercial		$	24,911		$	(3,717	)	$	21,194		$	25,599		$	(43,986	)	$	(18,387	)
		Residential mortgage			(11,119	)		(8,787	)		(19,906	)		(1,827	)		(19,443	)		(21,270	)
		Retail			16,008			(1,410	)		14,598			6,109			(14,092	)		(7,983	)
	Total loans				29,800			(13,914	)		15,886			29,881			(77,521	)		(47,640	)
Investment securities:
			Taxable		26,716			(4,336	)		22,380			1,805			(18,710	)		(16,905	)
			Tax-exempt(2)		3,385			(1,716	)		1,669			(259	)		1,157			898
Short-term investments					345			103			448			(92	)		(172	)		(264	)
	Securities and short-term investments				30,446			(5,949	)		24,497			1,454			(17,725	)		(16,271	)
Total earning assets(2)				$	60,246		$	(19,863	)	$	40,383		$	31,335		$	(95,246	)	$	(63,911	)
Interest expense:
		Savings deposits		$	201		$	(1,589	)	$	(1,388	)	$	195		$	(2,133	)	$	(1,938	)
		Interest-bearing demand deposits			4,786			(260	)		4,526			5,953			(186	)		5,767
		Money market deposits			44			(870	)		(826	)		(2,356	)		(7,276	)		(9,632	)
		Time deposits, excluding Brokered CDs			(577	)		(7,450	)		(8,027	)		(5,543	)		(31,681	)		(37,224	)
			Total interest-bearing deposits, excluding Brokered CDs		4,454			(10,169	)		(5,715	)		(1,751	)		(41,276	)		(43,027	)
	Brokered CDs				846			(17	)		829			(1,361	)		(1,511	)		(2,872	)
			Total interest-bearing deposits		5,300			(10,186	)		(4,886	)		(3,112	)		(42,787	)		(45,899	)
Federal funds purchased and securities sold under agreements to repurchase					2,984			2,712			5,696			(3,030	)		(15,825	)		(18,855	)
Other short-term borrowings					4,303			(215	)		4,088			1,203			(4,564	)		(3,361	)
Long-term funding					(2,898	)		(4,107	)		(7,005	)		14,639			(20,762	)		(6,123	)
			Total wholesale funding		4,389			(1,610	)		2,779			12,812			(41,151	)		(28,339	)
Total interest-bearing liabilities				$	9,689		$	(11,796	)	$	(2,107	)	$	9,700		$	(83,938	)	$	(74,238	)
Net interest income(2)				$	50,557		$	(8,067	)	$	42,490		$	21,635		$	(11,308	)	$	10,327

(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.

19

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

		2004 Average							2003 Average							2002 Average
				% of							% of							% of
				Earning							Earning							Earning
		Balance		Assets			Yield/Rate		Balance		Assets			Yield/Rate		Balance		Assets			Yield/Rate
		($ in Thousands)
Total loans		$	11,174,856		73.5	%		5.33%	$	10,622,499		76.2	%		5.46%	$	10,002,478		75.2	%		6.27%
Securities and short-term investments			4,028,036		26.5	%		4.89%		3,324,333		23.8	%		5.19%		3,292,113		24.8	%		5.73%
	Earning assets	$	15,202,892		100.0	%		5.21%	$	13,946,832		100.0	%		5.39%	$	13,294,591		100.0	%		6.14%
Financed by:
Interest-bearing funds		$	12,868,370		84.6	%		1.67%	$	11,855,236		85.0	%		1.83%	$	11,396,581		85.7	%		2.55%
Noninterest-bearing funds			2,334,522		15.4	%				2,091,596		15.0	%				1,898,010		14.3	%
	Total funds sources	$	15,202,892		100.0	%		1.41%	$	13,946,832		100.0	%		1.55%	$	13,294,591		100.0	%		2.19%
Interest rate spread								3.54%							3.56%							3.59%
Contribution from net free funds								0.26%							0.28%							0.36%
Net interest margin								3.80%							3.84%							3.95%
Average prime rate*								4.35%							4.12%							4.68%
Average federal funds rate*								1.34%							1.12%							1.67%
Average spread								301bp							300bp							301bp

*  Source: Bloomberg

20

TABLE 5: Selected Average Balances

							Dollar			Percent
			2004		2003		Change			Change
			($ in Thousands)
ASSETS
Loans:
	Commercial		$	6,928,494	$	6,450,523	$	477,971			7.4	%
	Residential mortgage			2,170,600		2,377,438		(206,838	)		(8.7	)
	Retail			2,075,762		1,794,538		281,224			15.7
		Total loans		11,174,856		10,622,499		552,357			5.2
Investment securities:
	Taxable			3,110,907		2,474,791		636,116			25.7
	Tax-exempt			872,509		827,669		44,840			5.4
Short-term investments				44,620		21,873		22,747			104.0
	Securities and short-term investments			4,028,036		3,324,333		703,703			21.2
Total earning assets				15,202,892		13,946,832		1,256,060			9.0
Other assets				1,162,870		1,023,028		139,842			13.7
Total assets			$	16,365,762	$	14,969,860	$	1,395,902			9.3	%
LIABILITIES & STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
	Savings deposits		$	967,930	$	928,147	$	39,783			4.3	%
	Interest-bearing demand deposits			2,406,280		1,827,304		578,976			31.7
	Money market deposits			1,628,208		1,623,438		4,770			0.3
	Time deposits, excluding Brokered CDs			3,042,933		3,063,873		(20,940	)		(0.7	)
		Total interest-bearing deposits, excluding Brokered CDs		8,045,351		7,442,762		602,589			8.1
	Brokered CDs			232,066		178,853		53,213			29.8
		Total interest-bearing deposits		8,277,417		7,621,615		655,802			8.6
Short-term borrowings				2,592,639		2,136,819		455,820			21.3
Long-term funding				1,998,314		2,096,802		(98,488	)		(4.7	)
Total interest-bearing liabilities				12,868,370		11,855,236		1,013,134			8.5
Noninterest-bearing demand deposits				1,867,111		1,677,891		189,220			11.3
Accrued expenses and other liabilities				130,675		135,743		(5,068	)		(3.7	)
Stockholders’ equity				1,499,606		1,300,990		198,616			15.3
Total liabilities and stockholders’ equity			$	16,365,762	$	14,969,860	$	1,395,902			9.3	%

Provision for Loan Losses

The provision for loan losses in 2004 was $14.7 million, lower than last year given asset quality improvements and favorable resolution of problem credits. The provision for loan losses for 2003 was $46.8 million and $50.7 million for 2002. Net charge offs were $17.3 million for 2004, compared to $31.7 million for 2003 and $28.3 million for 2002. Net charge offs as a percent of average loans were 0.15%, 0.30%, and 0.28% for 2004, 2003, and 2002, respectively. Nonperforming loans at December 31, 2004, were $115.0 million (including approximately $16 million acquired from First Federal at year-end), compared to $121.5 million at December 31, 2003, and $99.3 million at December 31, 2002, representing 0.83%, 1.18%, and 0.96% of total loans, respectively. At December 31, 2004, the allowance for loan losses was $189.8 million (including $14.8 million from First Federal at acquisition), compared to $177.6 million at December 31, 2003, and $162.5 million at December 31, 2002. The ratio of the allowance for loan losses to total loans was 1.37% (influenced in part by the acquisition of the First Federal thrift balance sheet), down from 1.73% at December 31, 2003, and 1.58% at December 31, 2002.

21

The provision for loan losses is predominantly a function of the methodology and other qualitative and quantitative factors used to determine the adequacy 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 nonperforming loans, historical losses and delinquencies on each portfolio category, 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 “Nonperforming Loans, Potential Problem Loans, and Other Real Estate Owned.”

Noninterest Income

Noninterest income was $210.2 million for 2004, $6.6 million or 3.1% lower than 2003. Fee income as a percentage of total revenues (defined as total noninterest income less gains or losses on asset and investment sales (“fee income”) divided by taxable equivalent net interest income plus fee income) was 26.5% for 2004 compared to 28.6% for 2003. The comparison of noninterest income between 2004 and 2003 was affected by significantly less net mortgage banking income (down $33.2 million or 62.0%), while retail commissions were up ($21.6 million or 84.5%) aided by the 2004 Jabas and the 2003 CFG insurance agency acquisitions.

TABLE 6: Noninterest Income

										% Change
										From Prior
			Years Ended December 31,							Year
			2004		2003		2002			2004			2003
			($ in Thousands)
Trust service fees			$	31,791	$	29,577	$	27,875			7.5	%		6.1	%
Service charges on deposit accounts				56,153		50,346		46,059			11.5			9.3
Mortgage banking income				37,070		83,037		66,415			(55.4	)		25.0
Mortgage servicing rights expense				16,739		29,553		30,473			(43.4	)		(3.0	)
	Mortgage banking, net			20,331		53,484		35,942			(62.0	)		48.8
Credit card and other nondeposit fees				26,181		23,669		27,492			10.6			(13.9	)
Retail commissions				47,171		25,571		18,264			84.5			40.0
Bank owned life insurance (“BOLI”) income				13,101		13,790		13,841			(5.0	)		(0.4	)
Other				13,701		18,174		15,644			(24.6	)		16.2
	Subtotal (“fee income”)		$	208,429	$	214,611	$	185,117			(2.9	)%		15.9	%
Asset sale gains, net				1,181		1,569		657			N/M			N/M
Investment securities gains (losses), net				637		702		(427	)		N/M			N/M
		Total noninterest income	$	210,247	$	216,882	$	185,347			(3.1	)%		17.0	%

N/ M = not meaningful

Trust service fees for 2004 were $31.8 million, up $2.2 million (7.5%) from 2003. The change was the result of new business, increases in the fee structure on personal trust accounts that started in mid-2003, and an improving stock market. The market value of assets under management at December 31, 2004, was $4.6 billion compared to $4.1 billion at December 31, 2003, primarily reflecting higher year-end equity values compared to 2003. More than half this growth between year ends was from employee benefits business, which earns fixed fees. Equities represented over 60% of the market value of assets under management for 2004 and 2003.

Service charges on deposit accounts were $56.2 million, $5.8 million (11.5%) higher than 2003. The increase was a function of higher volumes associated with the larger deposit account base (particularly including First Federal), and moderate fee increases in second quarter 2004 related to account service charges and nonsufficient funds.

22

Net mortgage banking income was $20.3 million, $33.2 million (62.0%) lower than 2003. 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 and other related fees) was $37.1 million in 2004, a decrease of $46.0 million (55.4%) compared to 2003. The lower income was primarily the result of significantly reduced secondary mortgage loan production (mortgage loan production to be sold to the secondary market) and resultant sales. Secondary mortgage loan production was $1.6 billion for 2004, down 62.1% from the $4.3 billion for 2003. Gains on loan sales and fees were down $48.4 million (including a $4.8 million lower reduction in the fair value of the mortgage derivatives position between year ends — see also, Note 14, “Derivative and Hedging Activities,” of the notes to consolidated financial statements). On the other hand, mortgage servicing fees increased $2.4 million (16.5%) over 2003. The average mortgage portfolio serviced for others was approximately 17% higher for 2004 compared to 2003.

Mortgage servicing rights expense includes both the base amortization of the mortgage servicing rights asset and increases or decreases to the valuation allowance associated with the mortgage servicing rights asset. Mortgage servicing rights expense was $16.7 million for 2004, $12.8 million lower than 2003. Base amortization was $17.9 million (up $0.7 million from last year), while a $1.2 million recovery to the valuation allowance was recorded in 2004 (compared to a $12.3 million addition to the valuation allowance during 2003). The favorable change to the valuation allowance was principally due to slower loan prepayment speeds in 2004 versus 2003, a predominant valuation factor used in the Corporation’s internal discounted cash flow model, increasing the recorded value of the mortgage servicing rights asset and requiring less valuation reserve.

Mortgage servicing rights, net of any valuation allowance, are carried in intangible assets on the consolidated balance sheets at the lower of amortized cost or estimated fair value. At December 31, 2004, mortgage servicing rights (including $31.8 million from First Federal at acquisition) were $76.2 million, net of a $15.5 million valuation allowance, and represented 80 bp of the $9.5 billion mortgage portfolio serviced for others (including the $3.5 billion servicing portfolio from First Federal). In comparison, at December 31, 2003, mortgage servicing rights were $42.5 million, net of a $22.6 million valuation allowance, and represented 72 bp of the $5.9 billion portfolio of residential mortgage loans serviced for others. Mortgage servicing rights are considered a critical accounting policy given that estimating their fair value involves an internal discounted cash flow model and assumptions that involve judgment, particularly of estimated prepayment speeds of the underlying mortgages serviced and the overall level of interest rates. See section “Critical Accounting Policies,” as well as Note 1, “Summary of Significant Accounting Policies,” of the notes to consolidated financial statements for the Corporation’s accounting policy for mortgage servicing rights and Note 5, “Goodwill and Intangible Assets,” of the notes to consolidated financial statements for additional disclosure.

Credit card and other nondeposit fees were $26.2 million for 2004, an increase of $2.5 million or 10.6% from 2003. Credit card related fees were $15.7 million, up slightly (1.5%) over 2003, primarily due to the inclusion of First Federal. Without First Federal, credit card revenues were down, particularly lower merchant fees given the merchant processing sale and services agreement consummated in March 2003. In February 2003, the Corporation entered into a 10-year agreement with an outside vendor to provide merchant processing services for the Corporation’s merchant customers. The agreement resulted in a gain of $3.4 million (recorded in other noninterest income in 2003) and replaces gross merchant discount fees with revenue sharing on new and existing merchant business over the life of the agreement. Other nondeposit fees were up $2.3 million, from increased pricing and volumes on retail and commercial service charges, as well as increased CFG-related insurance advisory fees.

Retail commission income (which includes commissions from insurance and brokerage product sales) was $47.2 million, up $21.6 million or 84.5% compared to 2003, primarily due to a full year contribution from CFG and the April 2004 Jabas acquisition. Other insurance revenues were up $17.5 million, primarily due to the CFG and Jabas insurance agency acquisitions. Fixed annuities commissions increased $3.1 million compared to 2003, benefiting from targeted sales campaigns in 2004 and increased customer interest given rising rates in the second half of 2004 following the prolonged low-rate environment, and the recent recovery in the equity markets. Brokerage commissions, including variable annuities, were up $1.0 million, reflecting renewed customer interest in the recently improving stock market.

23

BOLI income was $13.1 million, down $0.7 million from 2003. During 2004, the mid-year repricing of a large investment of BOLI reduced income by approximately $2.3 million, but was partly offset by a number of BOLI death claim gains of approximately $1.6 million. Other income was $13.7 million, a decrease of $4.5 million versus 2003, primarily from non-recurring gains in 2003. Other income for 2003 included a $1.5 million gain on the sale of out-of-market credit card accounts and a $3.4 million gain recognized in connection with the aforementioned credit card merchant processing sale and services agreement.

Asset sale gains for 2004 were $1.2 million, including a $0.8 million net premium on the sales of $20 million in deposits from two branches, and a $0.6 million net gain on the sale of three larger commercial other real estate owned properties. Asset sale gains for 2003 were $1.6 million, including a $1.3 million net premium on the sales of $17 million in deposits from two branches and a $0.4 million net gain on the sale of other real estate owned properties. Investment securities net gains for 2004 were $0.6 million, which included gains on sales of Sallie Mae stock during 2004 of $2.6 million, as well as a $2.2 million other-than-temporary impairment charge taken in the fourth quarter on the Corporation’s holdings of Federal Home Loan Mortgage Corporation (“FHLMC”) preferred stock securities (bringing their carrying value to $8.4 million at year-end 2004). For 2003, investment securities net gains were $0.7 million, attributable to a $1.0 million gain on the sale of Sallie Mae stock, partially offset by a $0.3 million other-than-temporary write down on a collateralized mortgage obligation security. For additional data see section, “Investment Securities Portfolio,” and Note 1, “Summary of Significant Accounting Policies,” and Note 3, “Investment Securities,” of the notes to consolidated financial statements.

Noninterest Expense

Total noninterest expense for 2004 was $377.9 million, an increase of $18.8 million or 5.2% over 2003, reflecting the substantially larger operating base attributable to the 2004 acquisitions. Personnel expense, the largest noninterest expense category, increased 7.9% over 2003, and all remaining categories combined increased 1.5%. Excluding only First Federal, total noninterest expense for 2004 would have been approximately $359 million, unchanged from 2003.

TABLE 7: Noninterest Expense

								% Change
								From Prior
		Years Ended December 31,						Year
		2004		2003		2002		2004			2003
		($ in Thousands)
Personnel expense		$	224,548	$	208,040	$	189,066		7.9	%		10.0	%
Occupancy			29,572		28,077		26,049		5.3			7.8
Equipment			12,754		12,818		14,835		(0.5	)		(13.6	)
Data processing			23,632		23,273		21,024		1.5			10.7
Business development and advertising			14,975		15,194		13,812		(1.4	)		10.0
Stationery and supplies			5,436		6,705		7,044		(18.9	)		(4.8	)
Intangible amortization expense			4,350		2,961		2,283		46.9			29.7
Loan expense			6,536		7,550		14,555		(13.4	)		(48.1	)
Other			56,066		54,497		50,920		2.9			7.0
	Total noninterest expense	$	377,869	$	359,115	$	339,588		5.2	%		5.8	%

Personnel expense (which includes salary-related expenses and fringe benefit expenses) increased $16.5 million or 7.9% over 2003. Average full-time equivalent employees were 4,190 for 2004, up 1.6% compared to 4,123 for 2003, despite the addition of approximately 75 and 1,286 full-time equivalent employees upon acquisition for Jabas and First Federal, respectively. Total salary-related expenses were up $11.1 million or 6.9% in 2004, with increases from the timing of acquisitions, merit increases between the years, and higher commission-based pay (particularly related to insurance and brokerage). Fringe benefits increased $5.4 million or 11.6% in 2004, primarily attributable to the increased cost of premium-based benefits (up $2.4 million

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or 15.6%). Particularly, First Federal accounted for approximately $8.0 million in salary-related expenses and $2.9 million to fringe benefits expense, as these employees remained under pre-existing plans and benefits.

Occupancy expense increased $1.5 million or 5.3% to support the larger branch and office network, particularly attributable to the First Federal acquisition. Equipment expense declined slightly despite the inclusion of First Federal, primarily due to aging equipment and lower replacement and rental costs. Data processing costs increased by $0.4 million, due to processing for a larger base operation, but offset largely by lower mortgage processing costs given lower production volumes compared to last year. Compared to 2003, business development and advertising decreased by $0.2 million and stationery and supplies decreased $1.3 million, primarily given controlled discretionary spending efforts in 2004.

Intangible amortization expense increased $1.4 million, primarily due to additional core deposit and other intangible assets resulting from the 2004 First Federal and Jabas acquisitions. Loan expense was down $1.0 million from 2003, predominantly due to lower mortgage loan-related activity, and to a lesser degree lower merchant processing costs given the sale of merchant processing during the first quarter of 2003 (as noted in section “Noninterest Income”). Other expense was up $1.6 million compared to 2003, largely due to the inclusion of First Federal and higher bank insurance coverage costs. Other expense for 2003 included non-recurring charges of $2.5 million on a commercial letter of credit given the deterioration of the financial condition of a borrower, and a $0.5 million write down on one commercial other real estate owned property.

Income Taxes

Income tax expense for 2004 was $112.1 million, up $19.0 million from 2003 income tax expense of $93.1 million. The Corporation’s effective tax rate (income tax expense divided by income before taxes) was 30.3% in 2004 and 28.9% in 2003. The increase in the effective tax rate was primarily attributable to the increase in income before tax and the acquisitions of First Federal and Jabas, with both having higher effective tax rates than the Corporation prior to the acquisitions.

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

BALANCE SHEET ANALYSIS

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

Loans

Total loans were $13.9 billion at December 31, 2004, an increase of $3.6 billion or 34.9% over December 31, 2003, largely attributable to the First Federal acquisition, which added $2.7 billion in loans at consummation. Excluding First Federal, total loans grew 8.2%, with commercial loans up $692 million (10.7%), home equity up $253 million (22.2%), and with both residential mortgage and installment loans down, $47 million (2.4%) and $49 million (7.1%), respectively. Commercial loans and home equity were strategically emphasized in 2004. Including First Federal, the mix of loans shifted. Commercial loans were $8.2 billion, up $1.8 billion or 27.3%, and represented 59% of total loans at the end of 2004, compared to 63% at year-end 2003. Retail loans grew $1.1 billion or 59.1% to represent 21% of total loans compared to 18% at December 31, 2003, while

25

residential mortgage loans increased $739 million or 37.4% to represent 20% of total loans versus 19% for the prior year.

TABLE 8: Loan Composition

		As of December 31,
		2004					2003					2002					2001					2000
				% of					% of					% of					% of					% of
		Amount		Total			Amount		Total			Amount		Total			Amount		Total			Amount		Total
		($ in Thousands)
Commercial, financial, and agricultural		$	2,803,333		20	%	$	2,116,463		21	%	$	2,213,986		22	%	$	1,783,300		20	%	$	1,657,512		19	%
Real estate construction			1,459,629		11			1,077,731		10			910,581		9			801,887		9			664,111		7
Commercial real estate			3,933,131		28			3,246,954		32			3,128,826		30			2,626,811		29			2,284,380		26
Lease financing			50,718		—			38,968		—			38,352		—			11,629		—			14,854		—
	Commercial		8,246,811		59			6,480,116		63			6,291,745		61			5,223,627		58			4,620,857		52
	Residential mortgage		2,714,580		20			1,975,661		19			2,221,682		22			2,319,709		26			2,903,658		33
Home equity(1)			1,866,485		13			1,138,311		11			1,073,695		10			813,744		9			764,039		8
Installment			1,054,011		8			697,722		7			716,103		7			662,784		7			624,825		7
	Retail		2,920,496		21			1,836,033		18			1,789,798		17			1,476,528		16			1,388,864		15
Total loans		$	13,881,887		100	%	$	10,291,810		100	%	$	10,303,225		100	%	$	9,019,864		100	%	$	8,913,379		100	%

(1)  Home equity includes home equity lines and residential mortgage junior liens.

Commercial, financial, and agricultural loans were $2.8 billion at the end of 2004, up $687 million or 32.5% since year-end 2003, and comprised 20% of total loans outstanding, down from 21% at the end of 2003. The commercial, financial, and agricultural loan classification primarily consists of commercial loans to middle market companies and small businesses. Loans of this type are in a diverse range of industries. The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any. Borrower demand in this loan sector improved during 2004, and price competition has been strong. Within the commercial, financial, and agricultural classification, loans to finance agricultural production totaled less than 0.5% for all periods presented.

Real estate construction loans grew $382 million or 35.4% to $1.5 billion, representing 11% of the total loan portfolio at the end of 2004, compared to $1.1 billion or 10% at the end of 2003. Loans in this classification are primarily short-term interim loans that provide financing for the acquisition or development of commercial real estate, such as multifamily or other commercial development projects. Real estate construction loans are made to developers and project managers who are well known to the Corporation, have prior successful project experience, and are well capitalized. Projects undertaken by these developers are carefully reviewed by the Corporation to ensure that they are economically viable. Loans of this type are primarily made to customers based in the Corporation’s tri-state market in which the Corporation has a thorough knowledge of the local market economy. 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.

Commercial real estate includes commercial-based loans that are secured by multifamily properties and nonfarm/nonresidential real estate properties, and to a lesser degree by farmland. Commercial real estate totaled $3.9 billion at December 31, 2004, up $686 million or 21.1% over December 31, 2003, and comprised 28% of total loans outstanding versus 32% at year-end 2003. Commercial real estate loans involve borrower characteristics similar to those discussed above for commercial loans and real estate construction projects. Loans of this type are mainly for business and industrial properties, multifamily properties, and community purpose properties. Loans are primarily made to customers based in Wisconsin, Illinois, and Minnesota. Credit risk is managed in a similar manner to commercial loans and real estate construction by employing sound

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underwriting guidelines, lending 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. In many cases the Corporation will take additional real estate collateral to further secure the overall lending relationship.

Residential mortgage loans totaled $2.7 billion at the end of 2004, up $739 million or 37.4% from the prior year and comprised 20% of total loans outstanding versus 19% at year-end 2003. Residential mortgage loans include conventional first lien home mortgages and generally limit the maximum loan to 80% of collateral value.

Retail loans totaled $2.9 billion at December 31, 2004, up $1.1 billion or 59.1% compared to 2003, and represented 21% of the 2004 year-end loan portfolio versus 18% at year-end 2003. Loans in this classification include home equity and installment loans. Home equity consists of home equity lines and residential mortgage junior liens, while installment loans consist of educational loans, and short-term and other personal installment loans, such as direct and indirect automobile loans, recreational vehicle loans, credit card loans, and other personal loans. Individual borrowers may be required to provide related collateral or a satisfactory endorsement or guaranty from another person, depending on the specific type of loan and the creditworthiness of the borrower. Credit risk for these types of loans is generally greatly influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral. Credit risk is primarily controlled by reviewing the creditworthiness of the borrowers as well as taking appropriate collateral and guaranty positions.

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

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

The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas within our primary three-state area. 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, 2004, no significant concentrations existed in the Corporation’s portfolio in excess of 10% of total loans.

TABLE 9: Loan Maturity Distribution and Interest Rate Sensitivity

		Maturity(1)
December 31, 2004
		Within 1 Year(2)			1-5 Years			After 5 Years			Total
		($ in Thousands)
Commercial, financial, and agricultural		$	2,323,902		$	439,913		$	39,518		$	2,803,333
Real estate construction			1,261,132			151,328			47,169			1,459,629
	Total	$	3,585,034		$	591,241		$	86,687		$	4,262,962
Fixed rate		$	709,765		$	468,692		$	84,845		$	1,263,302
Floating or adjustable rate			2,875,269			122,549			1,842			2,999,660
	Total	$	3,585,034		$	591,241		$	86,687		$	4,262,962
Percent by maturity distribution			84	%		14	%		2	%		100	%

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

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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 allowance for loan losses represents management’s estimate of an amount adequate to provide for probable credit losses in the loan portfolio at the balance sheet date. To assess the adequacy of the allowance for loan losses, an allocation methodology is applied by the Corporation which focuses on changes in the size and character of the loan portfolio, changes in levels of impaired or other nonperforming loans, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, historical losses and delinquencies on each portfolio category, and other qualitative and quantitative factors which could affect probable credit losses. Assessing these factors involves significant judgment. 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 4, “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 loans and assets.

At December 31, 2004, the allowance for loan losses was $189.8 million, compared to $177.6 million at December 31, 2003, and $162.5 million at year-end 2002. As of December 31, 2004, the allowance for loan losses to total loans was 1.37% and covered 165% of nonperforming loans, compared to 1.73% and 146%, respectively, at December 31, 2003, and 1.58% and 164%, respectively, at December 31, 2002. The decline in the ratio of allowance to total loans at year-end 2004 compared to year-end 2003 was in part a result of acquiring the First Federal thrift balance sheet, which added $14.8 million allowance for loan losses and $2.7 billion of loans (or 0.54% allowance to total loans ratio) at consummation.

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. A direct increase to the allowance for loan losses comes from acquisitions at consummation. Finally, the provision for loan losses, a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio. With favorable resolution to problem credits in 2004, lower net charge off and nonperforming loans ratios, and management’s assessment of the adequacy of the allowance for loan losses, the provision for loan losses of $14.7 million for 2004 was less than 2003 of $46.8 million, and 2002 of $50.7 million.

Net charge offs were $17.3 million or 0.15% of average loans for 2004, compared to $31.7 million or 0.30% of average loans for 2003, and $28.3 million or 0.28% of average loans for 2002 (see Table 10). The $14.4 million decrease in net charge offs for 2004 versus 2003 was primarily due to lower commercial net charge offs. The sluggish and varied economic conditions of 2003 and 2002 particularly affected the Corporation’s commercial borrowers, peaking commercial net charge offs in 2003, while 2004 benefited from general economic improvements and resolution to certain problem credits. Commercial net charge offs as a percent of total net charge offs were 53%, 77%, and 73% for 2004, 2003 and 2002, respectively. Commercial net charge offs for 2004 were $9.2 million, lower than $24.4 million for 2003 and $20.8 million for 2002. More specifically, net charge offs of commercial real estate loans were $6.2 million, $13.0 million, and $5.3 million for 2004, 2003, and 2002, respectively, and net charge offs of commercial, financial, and agricultural loans were $2.8 million, $9.8 million, and $13.9 million for the same respective years. Six commercial credits in a variety of industries accounted for approximately $6.6 million of the 2004 net charge offs. Five commercial credits in the construction and hospitality industries accounted for approximately $16.5 million of the 2003 net charge offs. Several commercial credits with greater than $0.5 million charged off accounted for approximately $13.0 mil-

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lion of the 2002 net charge offs. Loans charged off are subject to continuous review, and specific efforts are taken to achieve maximum recovery of principal, accrued interest, and related expenses.

TABLE 10: Loan Loss Experience

			Years Ended December 31,
			2004			2003			2002			2001			2000
			($ in Thousands)
Allowance for loan losses, at beginning of year			$	177,622		$	162,541		$	128,204		$	120,232		$	113,196
Balance related to acquisitions				14,750			—			11,985			—			—
Decrease from sale of credit card receivables				—			—			—			—			(4,216	)
Provision for loan losses				14,668			46,813			50,699			28,210			20,206
Loans charged off:
	Commercial, financial, and agricultural			4,640			12,858			15,497			11,328			2,424
	Real estate construction			16			1,140			1,402			1,631			38
	Commercial real estate			7,677			13,659			6,124			3,578			795
	Lease financing			245			385			268			78			3
	Residential mortgage(1)			924			1,080			1,757			591			2,176
	Home equity(1)			2,571			2,196			1,535			671			747
	Installment			6,129			5,789			5,596			4,762			4,972
		Total loans charged off		22,202			37,107			32,179			22,639			11,155
Recoveries of loans previously charged off:
	Commercial, financial, and agricultural			1,873			3,054			1,622			1,045			851
	Real estate construction			—			3			3			—			—
	Commercial real estate			1,498			633			787			242			153
	Lease financing			3			—			74			—			—
	Residential mortgage(1)			303			233			52			109			195
	Home equity(1)			107			126			89			83			102
	Installment			1,140			1,326			1,205			922			900
		Total recoveries		4,924			5,375			3,832			2,401			2,201
Net loans charged off				17,278			31,732			28,347			20,238			8,954
Allowance for loan losses, at end of year			$	189,762		$	177,622		$	162,541		$	128,204		$	120,232
Ratio of allowance for loan losses to net charge offs				11.0			5.6			5.7			6.3			13.4
Ratio of net charge offs to average loans				0.15	%		0.30	%		0.28	%		0.22	%		0.10	%
Ratio of allowance for loan losses to total loans at end of year				1.37	%		1.73	%		1.58	%		1.42	%		1.35	%

(1)  For 2004, 2003, and 2002, home equity includes home equity lines and residential mortgage junior liens; for 2001 and 2000 home equity includes only home equity lines as the residential mortgage junior liens were included in residential mortgage and a separate breakdown is not available for these years.

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TABLE 11: Allocation of the Allowance for Loan Losses

		As of December 31,
					% of						% of						% of						% of						% of
					Loan						Loan						Loan						Loan						Loan
					Type to						Type to						Type to						Type to						Type to
					Total						Total						Total						Total						Total
		2004			Loans			2003			Loans			2002			Loans			2001			Loans			2000			Loans
		($ in Thousands)
Allowance allocation:
Commercial, financial, & agricultural		$	79,882			20	%	$	63,939			21	%	$	64,965			22	%	$	44,071			20	%	$	45,571			19	%
Real estate construction			12,263			11			10,777			10			9,106			9			7,977			9			6,531			7
Commercial real estate			62,200			28			69,947			32			57,010			30			47,810			29			25,925			26
Lease financing			502			—			234			—			230			—			327			—			149			—
Residential real estate(1)			23,668			33			15,784			30			17,778			32			14,084			35			25,236			41
Installment			11,247			8			7,449			7			4,613			7			5,683			7			6,194			7
Unallocated			—			—			9,492			—			8,839			—			8,252			—			10,626			—
	Total allowance for loan losses	$	189,762			100	%	$	177,622			100	%	$	162,541			100	%	$	128,204			100	%	$	120,232			100	%
Allowance category as a percent of total allowance:
Commercial, financial, & agricultural			42	%					36	%					40	%					34	%					38	%
Real estate construction			6						6						6						6						5
Commercial real estate			33						39						35						37						22
Lease financing			—						—						—						—						—
Residential real estate			13						9						11						11						21
Installment			6						4						3						5						5
Unallocated			—						6						5						7						9
Total allowance for loan losses			100	%					100	%					100	%					100	%					100	%

(1)  Residential real estate includes home equity lines, residential mortgage junior liens, and residential mortgage loans for all periods presented.

Determining the adequacy of the allowance for loan losses is a function of evaluating a number of factors, including but not limited to changes in the loan portfolio (see Table 8), net charge offs (see Table 10), nonperforming loans (see Table 12), and evaluating specific credits. As previously discussed, 2004 net charge offs as a percent of average loans steadied after two years of higher than historical levels, particularly in commercial charge offs. As discussed under section “Loans,” total loans were $13.9 billion at December 31, 2004, up $3.6 billion over December 31, 2003, attributable largely to the $2.7 billion First Federal loans acquired. Excluding First Federal, total loans grew 8.2%, with commercial loans up $692 million (10.7%), home equity up $253 million (22.2%), and with both residential mortgage and installment loans down, $47 million and $49 million, respectively. Despite the strong growth in commercial loans, the mix of loans including First Federal shifted at year-end 2004, as evidenced in Table 8, with commercial loans representing 59% of total loans (compared to 63% year-end 2003 and 61% year-end 2002). Growth and mix of loans impacts the overall inherent risk characteristics of the loan portfolio (see section “Loans” which discusses credit risks related to the different loan types). Nonperforming loans moved similarly to net charge off activity, representing 0.83% of total loans at December 31, 2004, down from 1.18% and 0.96% at year-end 2003 and 2002, respectively. Nonperforming loans were $115.0 million at December 31, 2004 (including approximately $16 million acquired from First Federal at year-end and the addition of a $16 million commercial credit in the food industry during December 2004), down from $121.5 million at year-end 2003 and up from $99.3 million at year-end 2002. The majority of the improvement in nonperforming loans in 2004 compared to year-end 2003 was attributable to the paydowns or other resolutions on several large problem credits (totaling approximately $27 million). The impact of the sluggish economy on various commercial borrowers was a key contributor to the rise in nonperforming loans for 2003 over 2002. See Table 12 and section “Nonperforming Loans, Potential Problem Loans, and Other Real Estate Owned” for additional details and discussion.

The Corporation’s process designed to assess the adequacy 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 watch, special mention, substandard, doubtful or loss). The allocation methodology focuses on evaluation of facts and issues related to specific loans, the risk inherent in specific loans, changes in the size and character of

30

the loan portfolio, changes in levels of impaired and other nonperforming loans, concentrations of loans to specific borrowers or industries, existing economic conditions, underlying collateral, historical losses and delinquencies on each portfolio category, and other qualitative and quantitative factors. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the portfolio. The allocation of the Corporation’s allowance for loan losses for the last five years is shown in Table 11.

The allocation methodology was similar for all years, with a refinement beginning in 2004, whereby the Corporation segregated its loss factors allocations (used for both criticized and non-criticized loans) into a component primarily based on historical loss rates and a component primarily based on other qualitative factors that may affect loan collectibility. Management does not believe the refined method produced a significantly different result from the prior year’s method. The following describes the Corporation’s process for 2004. Management allocates the allowance for loan losses for credit losses by pools of risk. First, a valuation allowance estimate is established for specifically identified commercial and commercial real estate loans determined to be impaired by the Corporation, using discounted cash flows, estimated fair value of underlying collateral, and/or other data available. Second, management allocates allowance for loan losses with loss factors, for criticized loan pools by loan type as well as for non-criticized loan pools by loan type, primarily based on historical loss rates after considering loan type, historical loss and delinquency experience, and industry statistics. Loans that have been criticized are considered to have greater inherent risk of loss 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 expected to be relatively static year-over-year but are periodically re-evaluated. Between 2004 and 2003, loss factors assigned to criticized and non-criticized loan pools by type were similar (but with reductions made in factors for commercial real estate and residential real estate types to align closer to historical loss levels). And third, management allocates allowance for loan losses to absorb unrecognized losses that may not be provided for by the other components due to other factors evaluated by management, such as limitations within the credit risk grading process, known current economic or business conditions that may not yet show in trends, industry or other concentrations with current issues that impose higher inherent risks than are reflected in the loss factors, and other relevant considerations. At December 31, 2004, this third allocation, which was previously noted in Table 11 as unallocated, was completely assigned to loan types, as reflected in Table 11.

At year-end 2004, 45% of the allowance for loan losses (compared to 57% at year-end 2003) was allocated to criticized loans, including $10 million of allowance identified for a previously disclosed commercial manufacturing credit ($15 million outstanding at December 31, 2004) for which management had doubts concerning the future collectibility of the loan. The primary shift in the allowance allocation between 2004 and 2003 was from commercial real estate to commercial, financial, and agricultural. The amount allocated to commercial real estate loans at year-end 2004 was $62.2 million, representing 33% (down from 39% at year-end 2003) of the allowance for loan losses, partly due to applying lower loss factors to this loan type in 2004 versus 2003 as mentioned earlier. Supporting this lower allocation was: a) a lesser amount of these loans in criticized categories (7% versus 10% at year-end 2003); b) lower gross charge offs ($7.7 million compared to $13.7 million for 2003); and c) fewer commercial real estate loans in nonperforming loans (33% compared to 44% at year-end 2003). On the other hand, the allowance allocated to commercial, financial, and agricultural loans was $79.9 million at year-end 2004, representing 42% (versus 36% at year-end 2003) of the allowance for loan losses. While certain indicators were relatively steady for commercial, financial and agricultural loans, such as minimal change in their percentage of total loans (20% at year-end 2004 versus 21%) or of their percentage of nonperforming loans (35% compared to 36% last year end), and lower gross charge offs, the higher allocation was made given additional loans which are currently not criticized but exhibit concerns to management due to industry issues or the slower than expected improvement in the individual credit relationships. Allowance allocations were higher to residential real estate (particularly influenced by the growth of home equity) and to installment loans as current economic conditions of rising rates and growing consumer debt carried uncertainties requiring management’s judgment as to the impact on individual borrowers.

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The allocation methods used for December 31, 2003 and 2002 were comparable. Factors used for criticized loans, as well as for non-criticized loan categories, were unchanged between the years. At both December 31, 2003 and 2002, current economic conditions carried various uncertainties requiring management’s judgment as to the impact on the business results of numerous individual borrowers and certain industries. Additionally, the pace at which the financial results of a borrower’s company can take a downturn from challenging and varied economic conditions continued to be a factor for both years. At year-end 2003, 57% of the allowance (compared to 55% at year-end 2002) was allocated to criticized loans, including $10 million of allowance identified for a previously disclosed commercial manufacturing credit ($17 million outstanding at December 31, 2003) for which management had doubts concerning the future collectibility of the loan. The primary shift in the allowance allocation was the amount allocated to commercial real estate loans at year-end 2003, which was $69.9 million, representing 39% (compared to 35% at year-end 2002) of the allowance for loan losses. A greater amount of these loans were in criticized categories (10% versus 9% at year-end 2002); charge offs of this loan type increased (to $13.7 million for 2003, more than double) between the years; these loans represented 44% of nonperforming loans (compared to 24% at year-end 2002); and commercial real estate loans grew to represent 32% of total loans at December 31, 2003 (compared to 30% at year-end 2002). As noted under the section “Loans,” the credit risk of this loan category is largely influenced by the impact on borrowers of general economic conditions, which have been noted to be challenging and uncertain. The allowance allocated to commercial, financial, and agricultural loans was $63.9 million at year-end 2003, representing 36% (versus 40% at year-end 2002) of the allowance for loan losses. Commercial, financial and agricultural loans declined 4.4% since year-end 2002, to represent 21% of total loans at December 31, 2003 compared to 22% at December 31, 2002; net charge offs were $9.8 million (down $4.1 million); and as a percent of nonperforming loans, these loans represented 36% (versus 49% at year-end 2002).

Management believes the allowance for loan losses to be adequate at December 31, 2004.

Consolidated net income could be affected if management’s estimate of the allowance for loan losses is subsequently materially different, requiring additional or less provision for loan losses to be recorded. Management carefully considers numerous detailed and general factors, its assumptions, and the likelihood of materially different conditions that could alter its assumptions. While management uses currently available information to recognize losses on loans, future adjustments to the allowance for loan losses may be necessary based on changes in economic conditions and the impact of such change on the Corporation’s borrowers. Additionally, the number of large credit relationships over the Corporation’s $25 million internal hurdle has been increasing over 2004. Larger credits do not inherently create more risk, but can create wider fluctuations in asset quality measures. As an integral part of their examination process, various regulatory agencies also review the allowance for loan losses. Such agencies may require that certain loan balances be charged off when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination.

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

Management is committed to an aggressive 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.

Nonperforming loans are considered one indicator of potential future loan losses. Nonperforming loans are defined as nonaccrual loans, loans 90 days or more past due but still accruing, and restructured loans. The Corporation specifically excludes from its definition of nonperforming loans student loan balances that are 90 days or more past due and still accruing and that have contractual government guarantees as to collection of principal and interest. The Corporation had approximately $14.5 million, $13.0 million, and $20.2 million at December 31, 2004, 2003, and 2002, respectively, of nonperforming student loans.

Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectibility 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

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due. Previously accrued and uncollected interest on such loans is reversed, amortization of related loan fees is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectibility of the principal is in doubt, payments received are applied to loan principal.

Loans past due 90 days or more but still accruing interest are also included in nonperforming loans. Loans past due 90 days or more but still accruing 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. Also included in nonperforming loans are “restructured” loans. Restructured loans involve the granting of some concession to the borrower involving the modification of terms of the loan, such as changes in payment schedule or interest rate.

TABLE 12: Nonperforming Loans and Other Real Estate Owned

		December 31,
		2004			2003			2002			2001			2000
		($ in Thousands)
Nonaccrual loans		$	112,761		$	113,944		$	94,132		$	48,238		$	41,045
Accruing loans past due 90 days or more			2,153			7,495			3,912			3,649			6,492
Restructured loans			37			43			1,258			238			159
	Total nonperforming loans	$	114,951		$	121,482		$	99,302		$	52,125		$	47,696
Other real estate owned			3,915			5,457			11,448			2,717			4,032
	Total nonperforming assets	$	118,866		$	126,939		$	110,750		$	54,842		$	51,728
Ratios at year end:
Nonperforming loans to total loans			0.83	%		1.18	%		0.96	%		0.58	%		0.54	%
Nonperforming assets to total assets			0.58	%		0.83	%		0.74	%		0.40	%		0.39	%
Allowance for loan losses to nonperforming loans			165	%		146	%		164	%		246	%		252	%
Allowance for loan losses to total loans at end of year			1.37	%		1.73	%		1.58	%		1.42	%		1.35	%

Nonperforming loans at December 31, 2004, were $115.0 million, compared to $121.5 million at December 31, 2003, and $99.3 million at December 31, 2002. The ratio of nonperforming loans to total loans at the end of 2004 was 0.83%, as compared to 1.18% and 0.96% at December 31, 2003 and 2002, respectively. Of the $6.5 million decrease in nonperforming loans between year-end 2003 and 2004, nonaccrual loans decreased $1.2 million and accruing loans past due 90 days or more decreased $5.3 million. Of the $22.2 million increase in nonperforming loans between year-end 2002 and 2003, nonaccrual loans increased $19.8 million and accruing loans past due 90 days or more increased $3.6 million, while restructured loans decreased $1.2 million. The Corporation’s allowance for loan losses to nonperforming loans was 165% at year-end 2004, up from 146% at year-end 2003 and 164% at year-end 2002.

The improving trend in nonperforming loans was primarily due to decreases in commercial nonperforming loans (primarily attributable to the payment or resolution of specific larger commercial credits), despite approximately $16 million in nonperforming loans acquired with First Federal at year-end and the addition of a $16 million commercial credit in the food industry in late 2004. Subsequent to year-end, the Corporation received a substantial paydown on the $16 million food industry commercial credit, reducing the balance outstanding to approximately $3 million as of the end of February 2005. Commercial nonaccrual loans were $86.0 million at December 31, 2004 (down $9.8 million from year-end 2003), and represented 76%, 84%, and 78% of total nonaccrual loans at year-end 2004, 2003, and 2002, respectively. Additionally, accruing commercial loans past due 90 days or more were $0.7 million at December 31, 2004 (down $5.1 million from year-end 2003), and represented 31%, 77%, and 27% of total accruing loans past due 90 days or more at year-end 2004, 2003 and 2002, respectively.

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For year-end 2004 versus 2003, the $9.8 million improvement in commercial nonaccrual loans was predominantly attributable to the paydowns or other resolutions on several large problem credits (including resolutions of the two credits totaling $20 million at year-end 2003, which at December 31, 2004 one credit was paid in full and the other credit had a remaining outstanding balance of $0.6 million), net of the addition of a $16 million commercial credit in the food industry (see previous paragraph for details on a paydown received subsequent to year-end) and acquired First Federal commercial nonaccrual loans of approximately $9 million at year-end. The $5.3 million decrease from year-end 2003 to year-end 2004 in accruing loans past due 90 days or more was primarily attributable to one large commercial credit ($2.5 million at December 31, 2003), which was subsequently transferred to nonaccrual status.

For year-end 2003 versus 2002, the $22.8 million increase in commercial nonaccrual loans was predominantly attributable to the addition, during the second quarter of 2003, of two large commercial credits (totaling approximately $20 million at December 31, 2003, one in the construction industry and one in the hospitality industry). The $3.6 million increase from year-end 2002 to year-end 2003 in accruing loans past due 90 days or more was primarily attributable to one large commercial credit ($2.5 million at December 31, 2003), while the decrease in restructured loans was due to one large commercial credit that was transferred to nonaccrual status and subsequently charged off during 2003.

Other real estate owned decreased to $3.9 million at December 31, 2004, compared to $5.5 million and $11.4 million at year-end 2003 and 2002, respectively. The change in other real estate owned was predominantly due to the addition and subsequent sale of commercial real estate properties. An $8.0 million property was added during 2002, three commercial properties (at $1.1 million, $1.5 million, and $2.7 million) were added during 2003, and a $1.3 million commercial property was added during first quarter 2004. During 2004 the $1.1 million property was sold (at a net gain of $0.4 million) and the $1.3 million property was sold (at a net loss of $0.2 million). During 2003 the $1.5 million property was sold (at a net loss of $0.6 million), the $8.0 million property was sold (at a net gain of $1.0 million), and the $2.7 million property was sold (at a small gain). Also during 2003, a $0.5 million write down was recorded in other noninterest expense on another commercial property in other real estate owned, which was subsequently sold in 2004 (at a small loss). Net gains on sales of other real estate owned were $661,000, $472,000, and $53,000 for 2004, 2003, and 2002, respectively. Management actively seeks to ensure properties held are monitored to minimize the Corporation’s risk of loss.

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,
	2004			2003			2002
	($ in Thousands)
Interest income in accordance with original terms	$	7,427		$	7,620		$	6,866
Interest income recognized		(2,866	)		(2,898	)		(4,313	)
Reduction in interest income	$	4,561		$	4,722		$	2,553

Potential problem loans are certain loans bearing criticized loan risk ratings by management but that are not in nonperforming status; 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 level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in the determination of the level of the allowance for loan losses. The loans that have been reported as potential problem loans are not concentrated in a particular industry but rather cover a diverse range of businesses. At

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December 31, 2004, potential problem loans totaled $234 million, compared to $245 million at December 31, 2003. The $11 million decrease from December 31, 2003 to December 31, 2004, is primarily attributable to the paydown or other resolution during 2004 of several larger commercial credits in potential problem loans at year-end 2003.

Investment Securities Portfolio

The investment securities portfolio is intended to provide the Corporation with adequate liquidity, flexibility in asset/liability management, a source of stable income, and is structured with minimum credit exposure to the Corporation. At the time of purchase, the Corporation generally classifies its investment purchases as available for sale, consistent with these investment objectives, including possible securities sales in response to changes in interest rates or prepayment risk, the need to manage liquidity or regulatory capital, and other factors. Investment securities classified as available for sale are carried at fair market value in the consolidated balance sheet. At December 31, 2004, the total carrying value of investment securities was $4.8 billion, up $1.0 billion or 27.6% over year-end 2003 (with $665 million from First Federal at acquisition), representing 23% of total assets, compared to 25% at year-end 2003. On average, the investment portfolio represented 26% and 24% of average earning assets for 2004 and 2003, respectively, growing in response to a corporate decision to increase the investment portfolio, particularly during first quarter 2004. The Corporation primarily purchased mortgage-related securities to achieve this objective.

TABLE 14: Investment Securities Portfolio

		At December 31,
				% of					% of					% of
		2004		Total			2003		Total			2002		Total
		($ in Thousands)
Investment Securities Available for Sale:
U.S. Treasury securities		$	33,177		1	%	$	36,588		1	%	$	44,967		1	%
Federal agency securities			175,290		4			167,859		4			222,787		7
Obligations of state and political subdivisions			876,208		18			868,974		24			851,710		26
Mortgage-related securities			3,238,502		68			2,232,920		61			1,672,542		52
Other securities (debt and equity)			413,938		9			368,388		10			440,126		14
	Total amortized cost	$	4,737,115		100	%	$	3,674,729		100	%	$	3,232,132		100	%
U.S. Treasury securities		$	33,023		1	%	$	36,759		1	%	$	45,882		1	%
Federal agency securities			176,064		4			172,713		4			233,930		7
Obligations of state and political subdivisions			921,713		19			927,485		25			904,023		27
Mortgage-related securities			3,237,485		67			2,233,412		59			1,705,236		51
Other securities (debt and equity)			447,059		9			403,415		11			473,598		14
	Total fair value and carrying value	$	4,815,344		100	%	$	3,773,784		100	%	$	3,362,669		100	%
Net unrealized holding gains		$	78,229				$	99,055				$	130,537

At December 31, 2004, the Corporation’s securities portfolio did not contain securities of any single issuer that were payable from and secured by the same source of revenue or taxing authority where the aggregate carrying value of such securities exceeded 10% of stockholders’ equity or approximately $202 million.

At December 31, 2004 and 2003, mortgage-related securities (which include predominantly mortgage-backed securities and collateralized mortgage obligations (CMOs)) represented 67% and 59%, respectively, of total investment securities based on carrying value. 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.

During 2004, the Corporation’s FHLMC preferred stock securities (included in other securities) were determined to have other-than-temporary impairment that resulted in a write-down on these securities of

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$2.2 million. At December 31, 2004, the carrying value of the FHLMC preferred stock was $8.4 million. A CMO (included in mortgage-related securities) was determined to have other-than-temporary impairment that resulted in write downs on the security of $0.8 million during 2002, $0.3 million during 2003, and $0.2 million during 2004, based on continued evaluation. At December 31, 2004, this CMO had a carrying value of $1.0 million. See Note 1, “Summary of Significant Accounting Policies,” and Note 3, “Investment Securities,” of the notes to consolidated financial statements for additional information.

TABLE 15: Investment Securities Portfolio Maturity Distribution(1)— At December 31, 2004

	Investment Securities Available for Sale - Maturity Distribution and Weighted Average Yield
						After one					After five										Mortgage-related
	Within					but within					but within					After					and					Total Amortized					Total Fair
	one year					five years					ten years					ten years					equity securities					Cost					Value
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount
	($ in Thousands)
U. S. Treasury securities	$	1,199		2.55	%	$	31,978		2.52	%	$	—		—		$	—		—		$	—		—		$	33,177		2.52	%	$	33,023
Federal agency securities		19,127		6.60			96,105		4.28			60,058		3.52	%		—		—			—		—			175,290		4.27			176,064
Obligations of states and political subdivisions(2)		80,555		7.45			250,347		6.91			269,950		7.07			275,356		7.23	%		—		—			876,208		7.11			921,713
Other debt securities		79,631		3.44			104,423		6.08			200		4.00			10,000		3.20			—		—			194,254		4.85			199,748
Mortgage-related securities		—		—			—		—			—		—			—		—			3,238,502		4.25	%		3,238,502		4.25			3,237,485
Equity securities		—		—			—		—			—		—			—		—			219,684		5.48			219,684		5.48			247,311
Total amortized cost	$	180,512		5.56	%	$	482,853		5.92	%	$	330,208		6.43	%	$	285,356		7.09	%	$	3,458,186		4.32	%	$	4,737,115		4.85	%	$	4,815,344
Total fair value and carrying value	$	182,134				$	501,858				$	346,053				$	300,503				$	3,484,796									$	4,815,344

(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 7, “Deposits,” of the notes to consolidated financial statements, including a maturity distribution of all time deposits at December 31, 2004. A maturity distribution of certificates of deposits and other time deposits of $100,000 or more at December 31, 2004 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, as well as with investment alternatives such as money market or other mutual funds and brokerage houses, for deposits. The Corporation’s nonbrokered deposit growth was impacted by competitive factors, as well as other investment opportunities available to customers. During both 2004 and 2003, the Corporation has actively marketed its transaction accounts (business demand deposits, interest-bearing demand deposits, and money market accounts), which offer competitive, market-indexed rates and greater customer flexibility.

At December 31, 2004, deposits were $12.8 billion, up $3.0 billion or 30.6% over December 31, 2003, including $2.7 billion added from First Federal at acquisition. Excluding First Federal, total deposits grew 3.0% over December 31, 2003. The sale of two branches during 2004 reduced deposits by $20 million, while the sale of two branches during 2003 reduced deposits by $17 million.

The mix of period-end deposits changed slightly, affected in part by the First Federal acquisition. At December 31, 2004, noninterest-bearing demand deposits were 19% of deposits compared to 18% at year-end 2003, total time deposits were 34% of deposits versus 33% at year-end 2003, and interest-bearing transaction accounts (savings, interest-bearing demand, and money market deposits) were 47% of deposits versus 49% at the end of 2003.

The mix of average deposits shifted. Average deposits were $10.1 billion for 2004, up $845 million or 9.1% over the average for 2003. Average nonbrokered deposits for 2004 were $9.9 billion, up $792 million or 8.7%

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compared to 2003. Given the lower interest rate environment, total average time deposits declined to 32% of average deposits for 2004 compared to 35% for 2003, shifting into interest-bearing transaction accounts at 50% for 2004 versus 47% for 2003.

TABLE 16: Average Deposits Distribution

	2004					2003					2002
	Amount		% of Total			Amount		% of Total			Amount		% of Total
	($ in Thousands)
Noninterest-bearing demand deposits	$	1,867,111		18	%	$	1,677,891		18	%	$	1,498,106		17	%
Interest-bearing demand deposits		2,406,280		24			1,827,304		20			1,118,546		12
Savings deposits		967,930		10			928,147		10			891,105		10
Money market deposits		1,628,208		16			1,623,438		17			1,876,988		21
Brokered certificates of deposit		232,066		2			178,853		2			264,023		3
Other time and certificates of deposit		3,042,933		30			3,063,873		33			3,263,766		37
Total deposits	$	10,144,528		100	%	$	9,299,506		100	%	$	8,912,534		100	%
Nonbrokered deposits	$	9,912,462		98	%	$	9,120,653		98	%	$	8,648,511		97	%

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

	December 31, 2004
					Total Certificates of
	Certificates				Deposits and Other
	of Deposit		Other Time Deposits		Time Deposits
	($ in Thousands)
Three months or less	$	581,203	$	41,085	$	622,288
Over three months through six months		173,552		35,172		208,724
Over six months through twelve months		186,512		35,400		221,912
Over twelve months		332,336		—		332,336
Total	$	1,273,603	$	111,657	$	1,385,260

Other Funding Sources

Other funding sources, including short-term borrowings and long-term funding (“wholesale funds”), were $5.5 billion at December 31, 2004, up $1.5 billion from $4.0 billion at December 31, 2003. See also section “Liquidity.” Short-term borrowings increased $998 million, primarily in Federal funds purchased and securities sold under agreements to repurchase. Short-term borrowings are primarily comprised of Federal funds purchased; securities sold under agreements to repurchase; short-term Federal Home Loan Bank advances; notes payable to banks; and treasury, tax, and loan notes. The Federal Home Loan Bank advances included in short-term borrowings are generally those with original maturities of less than one year. The treasury, tax, and loan notes are demand notes representing secured borrowings from the U.S. Treasury, collateralized by qualifying securities and loans. This funding program provides funds at the discretion of the U.S. Treasury that may be called at any time. Many short-term borrowings, particularly Federal funds purchased and securities sold under agreements to repurchase, are expected to be reissued and, therefore, do not represent an immediate need for cash. See Note 8, “Short-term Borrowings,” of the notes to consolidated financial statements for additional information on short-term borrowings, and Table 18 for specific disclosure required for major short-term borrowing categories. Long-term debt at December 31, 2004, was $2.6 billion, up $570 million from December 31, 2003, due primarily to the issuance of $996 million of long-term Federal Home Loan Bank advances (including $396 million acquired with the First Federal acquisition), $450 million of long-term repurchase agreements, and $350 million of bank notes, net of the repayments of $750 million of

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long-term Federal Home Loan Bank advances, $329 million of long-term repurchase agreements, and $150 million of bank notes. See Note 9, “Long-term Funding,” of the notes to consolidated financial statements for additional information on long-term funding.

Wholesale funds on average were $4.6 billion for 2004, up $357 million or 8.4% over 2003. The mix of wholesale funding shifted toward short-term borrowing instruments, with average long-term funding declining to 43.5% of wholesale funds compared to 49.5% in 2003, in response to certain asset/liability objectives and low interest rates. Within the short-term borrowing categories, average Federal funds purchased and securities sold under agreements to repurchase increased $218 million, while other short-term borrowing sources were up $238 million.

TABLE 18: Short-Term Borrowings

		December 31,
		2004			2003			2002
		($ in Thousands)
Federal funds purchased and securities sold under agreements to repurchase:
	Balance end of year	$	2,437,088		$	1,340,996		$	2,240,286
	Average amounts outstanding during year		2,038,981			1,821,220			2,058,163
	Maximum month-end amounts outstanding		2,509,956			2,235,928			2,264,557
	Average interest rates on amounts outstanding at end of year		2.13	%		1.05	%		1.49	%
	Average interest rates on amounts outstanding during year		1.42	%		1.28	%		2.05	%

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, repurchase common stock, and satisfy other operating requirements.

Funds are available from a number of basic banking activity sources, primarily from the core deposit base and from loans and securities repayments and maturities. Additionally, liquidity is provided from sales of the securities portfolio, lines of credit with major banks, the ability to acquire large and brokered deposits, and the ability to securitize or package loans for sale. The Corporation’s capital can be a source of funding and liquidity as well. See section “Capital.”

The Corporation’s internal liquidity management framework includes measurement of several key elements, such as wholesale funding as a percent of total assets and liquid assets to short-term wholesale funding. Strong capital ratios, credit quality, and core earnings are essential to retaining high credit ratings and, consequently, cost-effective access to the wholesale funding markets. A downgrade or loss in credit ratings could have an impact on the Corporation’s ability to access wholesale funding at favorable interest rates. As a result, capital ratios, asset quality measurements, and profitability ratios are monitored on an ongoing basis as part of the liquidity management process. At December 31, 2004, the Corporation was in compliance with its liquidity objectives.

The Corporation’s liquidity framework also incorporates contingency planning to assess the nature and volatility of funding sources and to determine alternatives to these sources. The contingency plan would be activated to ensure the Corporation’s funding commitments could be met in the event of general market disruption or adverse economic conditions.

While core deposits and loan and investment repayment 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. As noted below, the Parent Company and certain subsidiary

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banks are rated by Moody’s, Standard and Poor’s (S&P), and Fitch. These ratings, along with the Corporation’s other ratings, provide opportunity for greater funding capacity and funding alternatives.

TABLE 19: Credit Ratings at December 31, 2004

						Fitch
	Moody’s		S&P			Ratings
Bank short-term		P1		A2			F1
Bank long-term		A2		A-			A-
Corporation short-term		P2		A2			F1
Corporation long-term		A3		BBB	+		A-
Subordinated debt long-term		Baa1		BBB			BBB	+

The Parent Company’s primary funding sources are dividends and service fees from subsidiaries and proceeds from the issuance of equity. Dividends received in cash from subsidiaries totaled $124.5 million in 2004. At December 31, 2004, $210.8 million in dividends could be paid to the parent by its subsidiaries without obtaining prior regulatory approval, subject to the capital needs of the banks. As discussed in Item 1, the subsidiary banks are subject to regulation and, among other things, may be limited in their ability to pay dividends or transfer funds to the Parent Company. Accordingly, consolidated cash flows as presented in the consolidated statements of cash flows may not represent cash immediately available for the payment of cash dividends to the shareholders or for other cash needs.

The Parent Company also has multiple funding sources that could be used to increase liquidity and provide additional financial flexibility. These sources include two shelf registrations to issue debt and preferred securities or a combination thereof and, used to a lesser degree, a revolving credit facility and commercial paper issuances. The Parent Company has available a $100 million revolving credit facility with established lines of credit from nonaffiliated banks, of which $100 million was available at December 31, 2004. In addition, $200 million of commercial paper was available at December 31, 2004, under the Parent Company’s $200 million commercial paper program.

In May 2002, the Parent Company filed a “shelf” registration statement under which the Parent Company may offer up to $300 million of trust preferred securities. In May 2002 $175 million of trust preferred securities were issued, bearing a 7.625% fixed coupon rate. At December 31, 2004, $125 million was available under the trust preferred shelf. In May 2001, the Parent Company filed a “shelf” registration statement whereby the Parent Company may offer up to $500 million of any combination of the following securities, either separately or in units: debt securities, preferred stock, depositary shares, common stock, and warrants. In August 2001, the Parent Company issued $200 million in a subordinated note offering, bearing a 6.75% fixed coupon rate and 10-year maturity. At December 31, 2004, $300 million was available under the shelf registration.

Investment securities are an important tool to the Corporation’s liquidity objective. As of December 31, 2004, all securities are classified as available for sale and are reported at fair value on the consolidated balance sheet. Of the $4.8 billion investment portfolio, $2.5 billion were pledged to secure certain deposits, Federal Home Loan Bank advances, or for other purposes as required or permitted by law. The majority of remaining securities could be pledged or sold to enhance liquidity, if necessary.

The bank and thrift subsidiaries have a variety of funding sources (in addition to key liquidity sources, such as core deposits, loan and investment portfolio repayments and maturities, and loan and investment portfolio sales) available to increase financial flexibility. A $2 billion bank note program associated with Associated Bank, National Association, was established during 2000. Under this program, short-term and long-term debt may be issued. As of December 31, 2004, $500 million of long-term bank notes and $200 million of short-term bank notes were outstanding. The banks have also established federal funds lines with major banks and the ability to borrow from the Federal Home Loan Bank ($1.3 billion was outstanding at December 31, 2004). In addition, the bank subsidiaries also issue institutional certificates of deposit, from time to time offer brokered certificates of deposit, and to a lesser degree, accept Eurodollar deposits.

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As reflected in Table 22, the Corporation has various financial obligations, including contractual obligations and other commitments, which may require future cash payments. Shorter maturities of time deposits seen in Table 22 could imply near-term liquidity risk if such deposit balances do not rollover at maturity into new time or non-time deposits at the Corporation. However, the relatively shorter maturities in time deposits are not out of the ordinary to the Corporation’s experience of its customer base preference and there has been growth in deposits. Continued strategic emphasis on deposit growth should further support this liquidity source. Many short-term borrowings, particularly Federal funds purchased and securities sold under agreements to repurchase, are expected to be reissued and, therefore, do not represent an immediate need for cash. The Corporation has been purposely extending its long-term funding sources primarily to take advantage of extending maturities in the lower rate environment. While this commits the Corporation contractually to future cash payments, it is supportive of interest rate risk and liquidity management strategies. 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, 2004, net cash provided from operating and financing activities was $383.5 million and $968.2 million, respectively, while investing activities used net cash of $1.3 billion, for a net increase in cash and cash equivalents of $58.2 million since year-end 2003. In general, net asset growth since year-end 2003 was strong, primarily due to the First Federal acquisition, as well as organic growth. Therefore, various funding sources were utilized to support the net asset growth, particularly deposits, short-term borrowings, and long-term funding. These funding sources partially financed the First Federal and Jabas acquisitions, provided for the repayment of short-term borrowings and long-term funding, common stock repurchases, and the payment of cash dividends to the Corporation’s shareholders.

For the year ended December 31, 2003, net cash provided from operating and financing activities was $496.8 million and $9.1 million, respectively, while investing activities used net cash of $551.0 million, for a net decrease in cash and cash equivalents of $45.1 million since year-end 2002. Generally, during 2003, deposit growth was strong, while net asset growth since year-end 2002 was moderate (up 1.4%). Thus, the reliance on other funding sources was reduced, particularly short-term borrowings and long-term debt. The deposit growth provided for the repayment of short-term borrowings and long-term debt, common stock repurchases, and the payment of cash dividends to the Corporation’s shareholders.

Quantitative and Qualitative Disclosures about Market Risk

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

Interest Rate Risk

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

Static gap analysis: The static gap analysis starts with contractual repricing information for assets, liabilities, and off-balance sheet instruments. These items are then combined with repricing estimations for administered

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rate (interest-bearing demand deposits, savings, and money market accounts) and non-rate related products (demand deposit accounts, other assets, and other liabilities) to create a baseline repricing balance sheet. In addition to the contractual information, residential mortgage whole loan products and mortgage-backed securities are adjusted based on industry estimates of prepayment speeds that capture the expected prepayment of principal above the contractual amount based on how far away the contractual coupon is from market coupon rates.

The following table represents the Corporation’s consolidated static gap position as of December 31, 2004.

TABLE 20: Interest Rate Sensitivity Analysis

		December 31, 2004
		Interest Sensitivity Period
											Total Within
		0-90 Days			91-180 Days			181-365 Days			1 Year		Over 1 Year			Total
		($ in Thousands)
Earning assets:
	Loans held for sale	$	64,964		$	—		$	—		$	64,964	$	—		$	64,964
	Investment securities, at fair value		619,348			300,309			594,211			1,513,868		3,301,476			4,815,344
	Loans		7,732,006			563,394			2,124,700			10,420,100		3,461,787			13,881,887
	Interest rate swaps		305,881			(5,201	)		(13,235	)		287,445		(287,445	)		—
	Other earning assets		68,761			—			—			68,761		—			68,761
Total earning assets		$	8,790,960		$	858,502		$	2,705,676		$	12,355,138	$	6,475,818		$	18,830,956
Interest-bearing liabilities:
	Interest-bearing deposits(1)(2)	$	1,779,534		$	1,566,301		$	2,493,044		$	5,838,879	$	6,585,801		$	12,424,680
	Other interest-bearing liabilities(2)		4,250,399			231,729			289,690			4,771,818		1,120,997			5,892,815
	Interest rate swaps(3)		175,000			—			—			175,000		(175,000	)		—
Total interest-bearing liabilities		$	6,204,933		$	1,798,030		$	2,782,734		$	10,785,697	$	7,531,798		$	18,317,495
Interest sensitivity gap		$	2,586,027		$	(939,528	)	$	(77,058	)	$	1,569,441	$	(1,055,980	)	$	513,461
Cumulative interest sensitivity gap		$	2,586,027		$	1,646,499		$	1,569,441
12 Month cumulative gap as a percentage of earning assets at December 31, 2004			13.7	%		8.7	%		8.3	%

(1)	The interest rate sensitivity assumptions for demand deposits, savings accounts, money market accounts, and interest-bearing demand deposit accounts are based on current and historical experiences regarding portfolio retention and interest rate repricing behavior. Based on these experiences, a portion of these balances is considered to be long-term and fairly stable and is, therefore, included in the “Over 1 Year” category.
(2)	For analysis purposes, Brokered CDs of $362 million have been included with other interest-bearing liabilities and excluded from interest-bearing deposits.
(3)	Interest rate swaps on funding are presented on a net basis.

The static gap analysis in Table 20 provides a representation of the Corporation’s earnings sensitivity to changes in interest rates. It is a static indicator that does not reflect various repricing characteristics and may not necessarily indicate the sensitivity of net interest income in a changing interest rate environment. As of December 31, 2004, the 12-month cumulative gap results were within the Corporation’s interest rate risk policy.

At the end of 2003, the Corporation’s balance sheet was asset sensitive to interest rate movements. (Asset sensitive means that assets will reprice faster than liabilities. In a rising rate environment, an asset sensitive bank will generally benefit.) During 2004, the Corporation remained asset sensitive as a result of issuing long-term funding, growth in demand deposits, and shortening of the mortgage portfolio and investment portfolio due to faster prepayment experience. However, the flattening of the yield curve and competitive pricing pressures substantially offset the benefits to net interest income from the interest rate increases that occurred during the second half of 2004. For 2005, the Corporation is positioned to benefit from rising rates, assuming

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anticipated increases by the Federal Reserve and a steepening of the yield curve. See also section “Net Interest Income.”

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

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

The resulting simulations for December 31, 2004, projected that net interest income would increase by approximately 1.2% of budgeted net interest income if rates rose by a 100 bp shock, and projected that the net interest income would decrease by approximately 2.6% if rates fell by a 100 bp shock. At December 31, 2003, the 100 bp shock up was projected to increase budgeted net interest income by approximately 1.7%, and the 100 bp shock down was projected to decrease budgeted net interest income by approximately 1.1%. As of December 31, 2004, the simulation of earnings results was within the Corporation’s interest rate risk policy.

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

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

The projected changes for earnings simulation and economic value of equity for both 2004 and 2003 were within the Corporation’s interest rate risk policy.

The Corporation uses interest rate derivative financial instruments as an asset/liability management tool to hedge mismatches in interest rate exposure indicated by the net interest income simulation described above. They are used to modify the Corporation’s exposures to interest rate fluctuations and provide more stable spreads between loan yields and the rate on their funding sources. Derivative financial instruments are also discussed in Note 14, “Derivative and Hedging Activities,” of the notes to consolidated financial statements.

In 2004, the Corporation entered into $58 million in notional amounts of new interest rate swaps to reduce interest rate risk. 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. Not included in the table below were customer swaps and caps with a notional amount of $118.0 million as of December 31, 2004, for which the Corporation has mirror swaps and caps. The change in fair value of these customer swaps and caps is recorded in earnings. The net impact of these swaps and caps for 2004 was immaterial.

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Table 21:  Interest Rate Swap Hedging Portfolio Notional Balances and Yield by Maturity Date at December 31, 2004

			Weighted Average			Weighted Average
Maturity	Notional Amount		Rate Received			Rate Paid
	($ in Thousands)
Less than 1 year	$	33,552		4.60	%		6.40	%
1 - 5 years		217,698		4.55			6.26
5 - 10 years		457,890		4.46			4.80
Over 10 years		186,857		7.39			3.68
	$	895,997		5.10	%		4.98	%

To hedge against rising interest rates, the Corporation may use interest rate caps. Counterparties to these interest cap agreements pay the Corporation based on the notional amount and the difference between current rates and strike rates. At December 31, 2004, there were $200 million of interest rate caps outstanding, which have a six-month LIBOR strike of 4.72%. To hedge against falling interest rates, the Corporation may use interest rate floors. Like caps, counterparties to interest rate floor agreements pay the Corporation based on the notional amount and the difference between current rates and strike rates. There were no floors outstanding at December 31, 2004.

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

Through the normal course of operations, the Corporation has entered into certain contractual obligations and other commitments, including but not limited to those most usually related to funding of operations through deposits or debt, commitments to extend credit, derivative contracts to assist management of interest rate exposure, and to a lesser degree leases for premises and equipment. Table 22 summarizes significant contractual obligations and other commitments at December 31, 2004, at those amounts contractually due to the recipient, not including any interest, 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 22: Contractual Obligations and Other Commitments

		Note		One Year		One to		Three to		Over Five
		Reference		or Less		Three Years		Five Years		Years		Total
		($ in Thousands)
Time deposits			7	$	2,819,989	$	1,226,389	$	209,174	$	121,366	$	4,376,918
Short-term borrowings			8		2,926,716		—		—		—		2,926,716
Long-term funding			9		374,111		1,671,866		115,948		431,239		2,593,164
Operating leases			6		11,155		19,729		13,296		22,558		66,738
Commitments to extend credit			13		3,436,354		620,125		322,453		57,927		4,436,859
	Total			$	9,568,325	$	3,538,109	$	660,871	$	633,090	$	14,400,395

The Corporation also has obligations under its retirement plans as described in Note 11, “Retirement Plans,” of the notes to consolidated financial statements.

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 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 net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of the contracts changes daily as market interest rates change. Because neither the derivative assets and

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liabilities, nor their notional amounts, do not represent the amounts that may ultimately be paid under these contracts, they are not included in the Table 22. For further information and discussion of derivative contracts, see section “Interest Rate Risk,” and Table 21, 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. Related to the $125.9 million commitments to originate residential mortgage loans in Table 22, the Corporation had outstanding forward commitments to sell $148.6 million of loans to various investors as of December 31, 2004, both of which are derivatives (see Note 14, “Derivative and Hedging Activities,” of the notes to consolidated financial statements). Residential mortgage loans sold to others are sold on a nonrecourse basis, though First Federal retained the credit risk on the underlying loans it sold to the Federal Home Loan Bank (“FHLB”), prior to its acquisition by the Corporation, in exchange for a monthly credit enhancement fee. At December 31, 2004, there were $2.4 billion of such loans with credit risk recourse, upon which there have been negligible historical losses. 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 $409.2 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 $22.8 million at December 31, 2004. Since most of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. See section, “Liquidity.” See also Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to consolidated financial statements for further information.

Capital

On April 28, 2004, the Board of Directors declared a 3-for-2 stock split, effected in the form of a stock dividend, payable May 12 to shareholders of record at the close of business on May 7. All share and per share data in the accompanying consolidated financial statements has been adjusted to reflect the effect of this stock split. As a result of the stock split, the Corporation distributed approximately 37 million shares of common stock. Any fractional shares resulting from the dividend were paid in cash.

Stockholders’ equity at December 31, 2004, increased $669 million to $2.0 billion, or $15.55 per share compared with $12.26 per share at the end of 2003. Book value per share increased at year-end 2004, primarily due to recording the shares issued in the First Federal transaction at market value, as prescribed by the purchase accounting method. Stockholders’ equity is also described in Note 10, “Stockholders’ Equity,” of the notes to consolidated financial statements.

The increase in stockholders’ equity for 2004 was primarily composed of the issuance of common stock in connection with the First Federal acquisition, the retention of earnings, and the exercise of stock options, with offsetting decreases to stockholders’ equity from the payment of cash dividends and the repurchase of common stock. Additionally, stockholders’ equity at year-end 2004 included $41.2 million of accumulated other comprehensive income versus $52.1 million at December 31, 2003. The decrease in accumulated other comprehensive income was predominantly related to a lower level of unrealized gains on securities available for sale, net of lower unrealized losses on cash flow hedges and the related tax effect. Stockholders’ equity to assets at December 31, 2004 was 9.83%, compared to 8.84% at the end of 2003.

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TABLE 23: Capital

	At December 31,
	2004			2003			2002
	(In Thousands, except per share data)
Total stockholders’ equity	$	2,017,419		$	1,348,427		$	1,272,183
Tier 1 capital		1,420,386			1,221,647			1,165,481
Total capital		1,817,016			1,572,770			1,513,424
Market capitalization		4,312,257			3,137,330			2,521,480
Book value per common share	$	15.55		$	12.26		$	11.42
Cash dividends per common share		0.9767			0.8867			0.8079
Stock price at end of period		33.23			28.53			22.63
Low closing price for the period		27.09			21.43			18.13
High closing price for the period		34.85			28.75			25.50
Total equity / assets		9.83	%		8.84	%		8.46	%
Tier 1 leverage ratio		7.79			8.37			7.94
Tier 1 risk-based capital ratio		9.64			10.86			10.52
Total risk-based capital ratio		12.33			13.99			13.66
Shares outstanding (period end)		129,770			109,966			111,422
Basic shares outstanding (average)		113,532			110,617			112,027
Diluted shares outstanding (average)		115,025			111,761			113,240

Cash dividends paid in 2004 were $0.9767 per share, compared with $0.8867 per share in 2003, an increase of 10.1%. Cash dividends per share have increased at an 8.9% compounded rate during the past five years.

The adequacy of the Corporation’s capital is regularly reviewed to ensure that sufficient capital is available for current and future needs and is in compliance with regulatory guidelines. The assessment of overall capital adequacy depends on a variety of factors, including asset quality, liquidity, stability of earnings, changing competitive forces, economic condition in markets served, and strength of management.

The Corporation and its bank and thrift subsidiaries continue to have a strong capital base. As of December 31, 2004, 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 and thrift subsidiaries were in excess of regulatory minimum requirements and above well capitalized requirements for its bank subsidiaries. It is management’s intent to exceed the minimum requisite capital levels. Capital ratios for the Corporation and its significant subsidiaries are included in Note 17, “Regulatory Matters,” of the notes to consolidated financial statements.

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. For the Corporation’s employee incentive plans, the Board of Directors authorized the repurchase of up to 3.0 million shares (750,000 shares per quarter) in 2004 and up to 2.4 million shares (600,000 shares per quarter) in 2003. Of these authorizations, approximately 1.1 million shares were repurchased for $33.7 million during 2004 at an average cost of $30.45 per share (with approximately 1.0 million shares reissued in connection with stock options exercised), while none were repurchased during 2003 (with approximately 1.6 million shares reissued in connection with stock options exercised). Additionally, under two separate actions in 2000 and one action in 2003, the Board of Directors authorized the repurchase and cancellation of the Corporation’s outstanding shares, not to exceed approximately 16.5 million shares on a combined basis. Under these authorizations, approximately 3.1 million shares were repurchased for $74.5 million during 2003 at an average cost of $24.11 per share, while none were repurchased during 2004. At December 31, 2004, approximately 5.6 million shares remain authorized to repurchase. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities.

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Shares repurchased and not retired are held as treasury stock and, accordingly, are accounted for as a reduction of stockholders’ equity.

Management believes that a strong capital position is necessary to take advantage of opportunities for profitable geographic and product expansion, and to provide depositor and investor confidence. 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 regulatory requirements. It is management’s intent to maintain an optimal capital and leverage mix for growth and for shareholder return.

Fourth Quarter 2004 Results

Net income for fourth quarter 2004 was $70.9 million, $15.3 million (27.4%) higher than the $55.6 million earned in the fourth quarter of 2003, in part due to the inclusion of the Jabas and First Federal acquisitions in fourth quarter 2004 results. Basic and diluted earnings per share for fourth quarter 2004 were both $0.57, compared to $0.51 and $0.50, respectively, for fourth quarter 2003. See Table 24 for selected quarterly information.

Net interest income for fourth quarter 2004 was $158.5 million, $31.3 million higher than fourth quarter 2003. Taxable equivalent net interest income for fourth quarter 2004 was $164.8 million, $31.4 million higher than $133.4 million for fourth quarter 2003. Volume variances (from both the First Federal acquisition and organic growth) were favorable, adding $32.9 million to taxable equivalent net interest income, while rate variances were unfavorable by $1.5 million (with increased rates favorable on earning assets adding $3.4 million to taxable equivalent net interest income, but unfavorable on interest-bearing liabilities costing $4.9 million more). The Corporation continues to be positioned to benefit from rising rates, though the flattening of the yield curve and competitive pressures substantially offset benefits to taxable equivalent net interest income from the interest rate increases that occurred in 2004.

Average earning assets increased to $17.4 billion, up $3.6 billion, including a $2.5 billion increase in average loans and a $1.1 billion increase in average securities and short-term investments between the fourth quarter periods. With the increase in securities, loans as a percentage of average earning assets declined to 73.7% (compared to 74.9% for fourth quarter 2003). Average interest-bearing liabilities increased to $14.8 billion, up $3.1 billion, including a $1.5 billion increase in average interest-bearing deposits and a $1.6 billion increase in wholesale funding. Average net free funds increased $0.5 billion, funding the remaining earning asset growth. With the modest increase in deposits and strong earning asset growth, wholesale funds as a percentage of average interest-bearing liabilities grew to 36.0% (compared to 32.1% for fourth quarter 2003).

To better understand the impact of acquiring First Federal, taxable equivalent net interest income for fourth quarter 2004 excluding First Federal was approximately $143 million, or $10 million (7%) higher than the comparable quarter in 2003. Average earning assets excluding First Federal grew approximately $1.3 billion (10%), with loans increasing $0.7 billion (6%) and securities and short-term investments increasing $0.6 billion (18%), as the Corporation employed leveraging in early 2004 to increase overall earning assets. Total average deposits excluding First Federal grew approximately $0.2 billion (2%) over the comparable quarter in 2003, funding 28% of the loan growth. The remainder of the growth in earning assets was funded predominantly by wholesale borrowings (up approximately $1.1 billion).

The Federal Reserve raised rates by 25 bp five times since mid-year 2004, resulting in an average Federal funds rate for fourth quarter 2004 of 1.94%, 94 bp higher than fourth quarter 2003. For fourth quarter 2004, the net interest margin was 3.74%, down 7 bp compared to fourth quarter 2003, the net result of an 8 bp lower interest rate spread and a 1 bp higher contribution from net free funds. The yield on earning assets for fourth quarter 2004 was 5.31% or 9 bp higher than fourth quarter 2003, primarily attributable to higher loan yields (up 29 bp) though offset partly by lower securities yields (down 48 bp, particularly impacted by the flatter yield curve during 2004). The rate on interest-bearing liabilities was up 17 bp, with the cost of funds repricing upward in the rising rate environment. Interest-bearing deposits cost 8 bp more, and wholesale funding cost 26 bp more than the comparable quarter of 2003, comprised of short-term borrowings up 80 bp and long-term funding down 8 bp between comparable fourth quarter periods.

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The provision for loan losses was $3.6 million for fourth quarter 2004 compared to $9.6 million for fourth quarter 2003, reflecting year-over-year improvement in asset quality. Net charge offs declined to $3.6 million (0.11% of average loans), compared to $8.2 million (0.31% of average loans) for fourth quarter 2003. Nonperforming loans to total loans improved to 0.83% at December 31, 2004, compared to 1.18% a year earlier. The allowance for loan losses at December 31, 2004, represented 1.37% of total loans (influenced by the acquisition of the First Federal thrift balance sheet) and covered 165% of nonperforming loans. At December 31, 2003, the allowance for loan losses represented 1.73% of total loans and covered 146% of nonperforming loans. See sections, “Loans,” “Allowance for Loan Losses,” and “Nonperforming Loans, Potential Problem Loans, and Other Real Estate Owned” for additional discussion.

Noninterest income in fourth quarter 2004 was $59.0 million (up $7.3 million or 14.1% over fourth quarter 2003), which included the 2004 acquisitions of Jabas and First Federal. Primary increases were seen in retail commissions (up $4.7 million), service charges on deposits (up $4.2 million), and credit card and other nondeposit fees (up $2.5 million), while primary decreases occurred in net mortgage banking income (down $3.0 million) and BOLI income (down $0.9 million). Retail commission income benefited from both the acquisitions and organic growth, with insurance commissions up $3.8 million and fixed annuities income up $0.7 million. Both service charges on deposits and credit card and other nondeposit fees benefited from the additional First Federal account volumes, as well as from mid-2004 fee increases related to deposit service charges and nonsufficient funds, increased pricing on nondeposit retail and commercial service charges, and higher insurance-related advisory fees. Gross mortgage banking income was up $2.6 million, with $2.0 million higher servicing fees (particularly given the addition of First Federal’s $3.5 billion servicing portfolio), and $0.6 million increased gains on sale and other income. Mortgage servicing rights expense, however, rose $5.6 million, with $1.1 million more base amortization on the larger mortgage servicing rights asset, and an addition to the valuation reserve in fourth quarter 2004 of $1.0 million versus a recovery to the valuation reserve in fourth quarter 2003 of $3.5 million. Thus, net mortgage banking income was down $3.0 million between fourth quarter periods. BOLI income was down due to the 2004 mid-year repricing of a large investment of BOLI.

Noninterest expense for fourth quarter 2004 was $110.0 million (up $16.6 million or 17.8% over fourth quarter 2003), which reflects the inclusion of the 2004 acquisitions of Jabas and First Federal. Personnel expense was up $10.8 million and all remaining noninterest expenses increased $5.8 million collectively. To isolate the impact of First Federal, personnel expense excluding First Federal was unchanged between comparable quarters and all other noninterest expenses excluding First Federal were down $1.9 million (2%), particularly given controlled discretionary spending efforts of the Corporation during 2004. Income tax expense was up $12.8 million between the fourth quarters, with approximately $7.5 million due to higher net income before taxes and approximately $5.3 million due to a higher effective tax rate. The effective tax rate rose to 31.8% for fourth quarter 2004 from 26.7% for fourth quarter 2003, resulting from the acquisitions in 2004 of Jabas and First Federal.

47

TABLE 24: Selected Quarterly Financial Data

The following is selected financial data summarizing the results of operations for each quarter in the years ended December 31, 2004 and 2003:

		2004 Quarter Ended
		December 31			September 30			June 30			March 31
		(In Thousands, except per share data)
Interest income		$	227,550		$	184,475		$	178,551		$	176,546
Interest expense			69,093			51,259			46,672			47,471
	Net interest income		158,457			133,216			131,879			129,075
Provision for loan losses			3,603			—			5,889			5,176
Investment securities gains (losses), net			(719	)		(6	)		(569	)		1,931
Income before income tax expense			103,923			91,344			91,869			83,201
Net income			70,854			63,367			64,506			59,559
Basic net income per share		$	0.57		$	0.58		$	0.59		$	0.54
Diluted net income per share			0.57			0.57			0.58			0.53
Basic weighted average shares			123,509			110,137			110,116			110,294
Diluted weighted average shares			125,296			111,699			111,520			111,830

		2003 Quarter Ended
		December 31		September 30		June 30		March 31
		(In Thousands, except per share data)
Interest income		$	176,458	$	181,819	$	183,704	$	185,383
Interest expense			49,321		52,843		56,509		57,929
	Net interest income		127,137		128,976		127,195		127,454
Provision for loan losses			9,603		12,118		12,132		12,960
Investment securities gains (losses), net			—		1		1,027		(326	)
Income before income tax expense			75,891		82,975		81,304		81,546
Net income			55,609		58,386		56,669		57,993
Basic net income per share		$	0.51	$	0.53	$	0.51	$	0.52
Diluted net income per share			0.50		0.52		0.51		0.52
Basic weighted average shares			109,965		110,209		110,938		111,378
Diluted weighted average shares			111,499		111,485		112,025		112,461

2003 Compared to 2002

The Corporation recorded net income of $228.7 million for the year ended December 31, 2003, an increase of $18.0 million or 8.5% over the $210.7 million earned in 2002. Basic earnings per share for 2003 were $2.07, compared to 2002 basic earnings per share of $1.88. Earnings per diluted share were $2.05, a 10.2% increase over 2002 diluted earnings per share of $1.86. Return on average assets and return on average equity for 2003 were 1.53% and 17.58%, respectively, compared to 1.47% and 17.10%, respectively, for 2002. Cash dividends of $0.89 per share paid in 2003 increased by 9.9% over 2002. Table 1 shows additional selected financial data of 2003 compared to 2002. Key factors behind 2003 results compared to 2002 are discussed below.

Net interest income in the consolidated income statements (which excludes the taxable equivalent adjustment) was $510.8 million for 2003, compared to $501.3 million in 2002. Taxable equivalent net interest income was $535.7 million for 2003, $10.3 million or 2.0% higher than 2002. The increase in taxable equivalent net interest income was a function of higher volumes of earning assets, offset by unfavorable interest rate changes. As shown in the rate/volume analysis in Table 3, volume changes added $21.6 million to taxable equivalent net interest income (with growth and composition of earning assets adding $31.3 million, net of interest-bearing liability changes costing an additional $9.7 million), while rate changes resulted in an $11.3 million decrease to net interest income (with rate changes on earning assets reducing interest income by $95.2 million, but lowering interest expense cost of interest-bearing liabilities by $83.9 million).

48

As shown in Table 2, average earning assets increased $652 million (4.9%) to $13.9 billion for 2003 compared to 2002, with loans accounting for the majority of the growth (increasing $620 million, or 6.2%). Average interest-bearing liabilities increased $459 million (4.0%) to $11.9 billion for 2003, while net free funds increased $194 million, both supporting the growth in earning assets. Average noninterest-bearing demand deposits (a component of net free funds) increased by $180 million (12.0%), while interest-bearing deposits grew $207 million (2.8%). Wholesale funding sources increased $251 million, and the Corporation continued its shift toward longer-term funding given the continued low interest rate environment, bringing its average long-term funding to 17.7% of average interest-bearing liabilities for 2003 (compared to 14.7% for 2002).

Net interest income and net interest margin were impacted in 2003 by the sustained low interest rate environment, competitive pricing pressures, higher earning asset balances, and total deposit growth. Interest rates were generally stable and historically low during both 2003 and 2002. Comparatively, the Federal funds rate at December 31, 2003, was at a 45-year low of 1.00%, 25 bp lower than at December 31, 2002, while the average Federal funds rate for 2003 was 55 bp lower than the average for 2002 (see Table 4).

As shown in Table 2, the net interest margin for 2003 was 3.84%, compared to 3.95% in 2002. The 11 bp decrease in net interest margin was attributable to a 3 bp decrease in interest rate spread (the net of a 75 bp decrease in the yield on earning assets, substantially offset by a 72 bp lower cost of interest-bearing liabilities), and an 8 bp lower contribution from net free funds (impacted by the lower 2003 rate environment). The yield on average earning assets fell 75 bp to 5.39%, driven primarily by an 81 bp decline in the loan yield to 5.46% for 2003 compared to 2002. Competitive pricing on new and refinanced loans and the repricing of variable rate loans in the lower interest rate environment put downward pressure on loan yields in 2003. The cost of interest-bearing liabilities decreased 72 bp to 1.83%, aided by the lower rate environment. The average cost of interest-bearing deposits was down 66 bp from 2002, benefiting from a larger mix of lower-costing transaction accounts, as well as lower rates on deposit products in general. The cost of wholesale funds decreased 85 bp, favorably impacted by lower rates year-over-year and the maturity of higher-rate wholesale funds during the year.

Total loans were $10.3 billion at December 31, 2003, relatively unchanged from year-end 2002. The Corporation’s loan mix changed during 2003 (see Table 8). Commercial loan balances grew $188 million (3.0%) and represented 63% of total loans at December 31, 2003, versus 61% at year-end 2002. Residential mortgage loans decreased $246 million, strongly influenced by high refinance activity. Home equity (an area of emphasis for 2003 and an attractive product to consumers given the low rate environment) and installment loans combined grew $46 million. Total deposits were $9.8 billion at December 31, 2003, an increase of $668 million or 7.3% from year-end 2002, particularly in lower-costing transaction deposits. This growth reflects a number of strategic initiatives to grow the deposit base, as well as customer preference to keep funds more liquid in this prolonged low interest rate environment.

Asset quality was affected by the impact of challenging economic conditions on customers, and asset quality administration was active during 2003 with early identification of potential problems and progress on several larger problem credits. Net charge offs were $31.7 million, an increase of $3.4 million over 2002, with the majority of the increase attributable to charge offs in the commercial loan portfolio. Net charge offs were 0.30% of average loans compared to 0.28% in 2002. The provision for loan losses decreased to $46.8 million compared to $50.7 million in 2002. The ratio of allowance for loan losses to loans was 1.73% and 1.58% at December 31, 2003 and 2002, respectively. Nonperforming loans were $121.5 million, representing 1.18% of total loans at year-end 2003, higher than historic levels, compared to $99.3 million or 0.96% of total loans at year-end 2002. See sections “Allowance for Loan Losses” and “Nonperforming Loans, Potential Problem Loans, and Other Real Estate Owned” for additional discussions of 2003 compared to 2002.

As shown in Table 6, noninterest income was $216.9 million for 2003, $31.5 million or 17.0% higher than 2002, led by strong results in mortgage banking and retail commissions. During 2003, interest rates reached record lows, resulting in an unprecedented volume of mortgage loan originations and refinances and resultant loan sales. As a result, net mortgage banking income was $53.5 million for 2003, up $17.5 million (48.8%) over 2002. Retail commissions were $25.6 million, up $7.3 million (40.0%) over 2002, primarily attributable to the CFG insurance agency acquisition in April 2003 (see section “Business Combinations”). Service charges

49

on deposits of $50.3 million (up $4.3 million or 9.3%) and trust service fees of $29.6 million (up $1.7 million or 6.1%), both benefited from increased business volumes and fee increases during 2003. Credit card and nondeposit fees of $23.7 million for 2003 were down $3.8 million from 2002, primarily due to lower merchant fees given the merchant processing sale and services agreement consummated in March 2003. Other income was $18.2 million for 2003, which included a non-recurring $1.5 million gain on the sale of out-of-market credit card accounts and $3.4 million gain recognized in connection with the aforementioned credit card merchant processing sale and services agreement. Other income was $15.6 million for 2002, which included a $0.5 million gain on sale of stock in a regional ATM network. Asset sale gains for 2003 were $1.6 million, including a $1.3 million net premium on the sales of $17 million in deposits from two branches and a $0.4 million net gain on the sale of other real estate owned properties. Asset sale gains for 2002 were $0.7 million. Investment securities net gains for 2003 were $0.7 million, attributable to a $1.0 million gain on the sale of Sallie Mae stock, partially offset by a $0.3 million other-than-temporary write down on a CMO security. The 2002 investment securities net losses of $0.4 million included a $0.8 million other-than-temporary write down on the same CMO security.

As shown in Table 7, noninterest expense was $359.1 million, up $19.5 million or 5.8% over 2002, due principally to personnel expense. Personnel expense was $208.0 million for 2003, up $19.0 million or 10.0%, primarily due to the timing of acquisitions, increased severance, increased cost of premium-based benefits, and merit increases between the years. All other nonpersonnel categories combined were $151.1 million, relatively unchanged (up $0.6 million) from 2002, despite the increased operating base from acquisitions. The efficiency ratio was 47.86% for 2003 and 47.80% for 2002.

Income tax expense increased to $93.1 million, up $7.5 million from 2002. The increase was primarily attributable to higher net income before tax as the effective tax rate was unchanged at 28.9%.

Subsequent Event

On January 26, 2005, the Board of Directors declared a $0.25 per share dividend payable on February 15, 2005, to shareholders of record as of February 7, 2005.

Future Accounting Pronouncements

Note 1, “Summary of Significant Accounting Policies,” of the notes to consolidated financial statements discusses new accounting policies adopted by the Corporation during 2004 and the expected impact of accounting policies recently issued or proposed but not yet required to be adopted. 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.

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.”

50

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ASSOCIATED BANC-CORP

CONSOLIDATED BALANCE SHEETS

			December 31,
			2004			2003
			(In Thousands,
			except share data)
ASSETS
Cash and due from banks			$	389,311		$	389,140
Interest-bearing deposits in other financial institutions				13,321			7,434
Federal funds sold and securities purchased under agreements to resell				55,440			3,290
Investment securities available for sale, at fair value				4,815,344			3,773,784
Loans held for sale				64,964			104,336
Loans				13,881,887			10,291,810
Allowance for loan losses				(189,762	)		(177,622	)
		Loans, net		13,692,125			10,114,188
Premises and equipment				184,944			131,315
Goodwill				679,993			224,388
Other intangible assets				119,440			63,509
Other assets				505,254			436,510
		Total assets	$	20,520,136		$	15,247,894
LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing demand deposits			$	2,347,611		$	1,814,446
Interest-bearing deposits, excluding Brokered certificates of deposit				10,077,069			7,813,267
Brokered certificates of deposit				361,559			165,130
		Total deposits		12,786,239			9,792,843
Short-term borrowings				2,926,716			1,928,876
Long-term funding				2,604,540			2,034,160
Accrued expenses and other liabilities				185,222			143,588
		Total liabilities		18,502,717			13,899,467
Stockholders’ equity
	Preferred stock (Par value $1.00 per share, authorized 750,000 shares, no shares issued)			—			—
	Common stock (Par value $0.01 per share, authorized 250,000,000 shares, issued 130,042,415, and 110,163,832 shares at December 31, 2004 and 2003, respectively)			1,300			734
	Surplus			1,127,205			575,975
	Retained earnings			858,847			724,356
	Accumulated other comprehensive income			41,205			52,089
	Deferred compensation			(2,122	)		(1,981	)
	Treasury stock, at cost (272,355 shares in 2004 and 122,863 shares in 2003)			(9,016	)		(2,746	)
		Total stockholders’ equity		2,017,419			1,348,427
		Total liabilities and stockholders’ equity	$	20,520,136		$	15,247,894

See accompanying notes to consolidated financial statements.

51

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF INCOME

		For the Years Ended December 31,
		2004		2003		2002
		(In Thousands, except
		per share data)
INTEREST INCOME
Interest and fees on loans		$	594,702	$	578,816	$	626,378
Interest and dividends on investment securities and deposits with other financial institutions:
	Taxable		131,020		108,624		125,568
	Tax-exempt		40,804		39,761		39,771
Interest on federal funds sold and securities purchased under agreements to resell			596		163		389
	Total interest income		767,122		727,364		792,106
INTEREST EXPENSE
Interest on deposits			118,236		123,122		169,021
Interest on short-term borrowings			38,940		29,156		51,372
Interest on long-term funding			57,319		64,324		70,447
	Total interest expense		214,495		216,602		290,840
NET INTEREST INCOME			552,627		510,762		501,266
Provision for loan losses			14,668		46,813		50,699
Net interest income after provision for loan losses			537,959		463,949		450,567
NONINTEREST INCOME
Trust service fees			31,791		29,577		27,875
Service charges on deposit accounts			56,153		50,346		46,059
Mortgage banking, net			20,331		53,484		35,942
Credit card and other nondeposit fees			26,181		23,669		27,492
Retail commissions			47,171		25,571		18,264
Bank owned life insurance income			13,101		13,790		13,841
Asset sale gains, net			1,181		1,569		657
Investment securities gains (losses), net			637		702		(427	)
Other			13,701		18,174		15,644
	Total noninterest income		210,247		216,882		185,347
NONINTEREST EXPENSE
Personnel expense			224,548		208,040		189,066
Occupancy			29,572		28,077		26,049
Equipment			12,754		12,818		14,835
Data processing			23,632		23,273		21,024
Business development and advertising			14,975		15,194		13,812
Stationery and supplies			5,436		6,705		7,044
Intangible amortization expense			4,350		2,961		2,283
Loan expense			6,536		7,550		14,555
Other			56,066		54,497		50,920
	Total noninterest expense		377,869		359,115		339,588
Income before income taxes			370,337		321,716		296,326
Income tax expense			112,051		93,059		85,607
Net income		$	258,286	$	228,657	$	210,719
Earnings per share:
	Basic	$	2.28	$	2.07	$	1.88
	Diluted	$	2.25	$	2.05	$	1.86
Average shares outstanding:
	Basic		113,532		110,617		112,027
	Diluted		115,025		111,761		113,240

See accompanying notes to consolidated financial statements.

52

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

																Accumulated
				Common Stock												Other
													Retained			Comprehensive			Deferred			Treasury
				Shares			Amount			Surplus			Earnings			Income			Compensation			Stock			Total
				(In Thousands, except per share data)
Balance, December 31, 2001					66,174		$	662		$	289,751		$	760,031		$	47,176		$	—		$	(27,204	)	$	1,070,416
Comprehensive income:
	Net income				—			—			—			210,719			—			—			—			210,719
	Net unrealized loss on derivative instruments arising during the year, net of taxes of $13.3 million				—			—			—			—			(19,834	)		—			—			(19,834	)
	Add: reclassification adjustment to interest expense for interest differential, net of taxes of $5.4 million				—			—			—			—			8,027			—			—			8,027
Change in minimum pension obligation, net of taxes of $4.7 million					—			—			—			—			(7,024	)		—			—			(7,024	)
	Net unrealized holding gains on available for sale securities arising during the year, net of taxes of $18.1 million				—			—			—			—			31,712			—			—			31,712
	Add: reclassification adjustment for net losses on available for sale securities realized in net income, net of taxes of $0.2 million				—			—			—			—			256			—			—			256
			Comprehensive income																							223,856
Cash dividends, $0.8079 per share					—			—			—			(90,166	)		—			—			—			(90,166	)
Common stock issued:
		Business combinations			3,690			37			133,892			—			—			—			—			133,929
		Incentive stock options			—			—			—			(14,000	)		—			—			30,564			16,564
		10% stock dividend			6,975			70			258,570			(258,640	)		—			—			—			—
Purchase and retirement of treasury stock					(1,336	)		(14	)		(44,032	)		—			—			—			—			(44,046	)
Purchase of treasury stock					—			—			—			—			—			—			(44,145	)		(44,145	)
Tax benefits of stock options					—			—			5,775			—			—			—			—			5,775
Balance, December 31, 2002					75,503		$	755		$	643,956		$	607,944		$	60,313		$	—		$	(40,785	)	$	1,272,183
Comprehensive income:
	Net income				—			—			—			228,657			—			—			—			228,657
	Net unrealized loss on derivative instruments arising during the year, net of taxes of $1.7 million				—			—			—			—			(2,612	)		—			—			(2,612	)
	Add: reclassification adjustment to interest expense for interest differential, net of taxes of $3.1 million				—			—			—			—			4,603			—			—			4,603
Change in minimum pension obligation, net of taxes of $6.2 million					—			—			—			—			9,252			—			—			9,252
	Net unrealized holding losses on available for sale securities arising during the year, net of taxes of $11.8 million				—			—			—			—			(19,018	)		—			—			(19,018	)
	Less: reclassification adjustment for net gains on available for sale securities realized in net income, net of taxes of $0.3 million				—			—			—			—			(449	)		—			—			(449	)
			Comprehensive income																							220,433
Cash dividends, $0.8867 per share					—			—			—			(98,169	)		—			—			—			(98,169	)
Common stock issued:
		Incentive stock options			—			—			—			(14,076	)		—			—			38,907			24,831
Purchase and retirement of treasury stock					(2,061	)		(21	)		(74,512	)		—			—			—			—			(74,533	)
Purchase of treasury stock					—			—			—			—			—			—			(868	)		(868	)
Restricted stock awards granted, net of amortization					—			—			313			—			—			(1,981	)		—			(1,668	)
Tax benefits of stock options					—			—			6,218			—			—			—			—			6,218
Balance, December 31, 2003					73,442		$	734		$	575,975		$	724,356		$	52,089		$	(1,981	)	$	(2,746	)	$	1,348,427

(continued on next page)

53

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)

														Accumulated
				Common Stock										Other
											Retained			Comprehensive			Deferred			Treasury
				Shares		Amount		Surplus			Earnings			Income			Compensation			Stock			Total
				(In Thousands, except per share data)
Balance, December 31, 2003					73,442	$	734	$	575,975		$	724,356		$	52,089		$	(1,981	)	$	(2,746	)	$	1,348,427
Comprehensive income:
	Net income				—		—		—			258,286			—			—			—			258,286
	Net unrealized loss on derivative instruments arising during the year, net of taxes of $0.8 million				—		—		—			—			(1,201	)		—			—			(1,201	)
	Add: reclassification adjustment to interest expense for interest differential, net of taxes of $2.9 million				—		—		—			—			4,359			—			—			4,359
	Net unrealized holding losses on available for sale securities arising during the year, net of taxes of $6.5 million				—		—		—			—			(13,660	)		—			—			(13,660	)
	Less: reclassification adjustment for net gains on available for sale securities realized in net income, net of taxes of $0.3 million				—		—		—			—			(382	)		—			—			(382	)
			Comprehensive income																					247,402
Cash dividends, $0.9767 per share					—		—		—			(112,565	)		—			—			—			(112,565	)
Common stock issued:
		Business combinations			19,447		194		537,803			—			—			—			—			537,997
		3-for-2 stock split effected in the form of a stock dividend			36,819		369		(369	)		—			—			—			—			—
		Incentive stock options			334		3		7,699			(11,230	)		—			—			27,385			23,857
Purchase of treasury stock					—		—		—			—			—			—			(33,655	)		(33,655	)
Deferred compensation expense					—		—		141			—			—			(141	)		—			—
Tax benefits of stock options					—		—		5,956			—			—			—			—			5,956
Balance, December 31, 2004					130,042	$	1,300	$	1,127,205		$	858,847		$	41,205		$	(2,122	)	$	(9,016	)	$	2,017,419

See accompanying notes to consolidated financial statements.

54

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

			For the Years Ended December 31,
			2004			2003			2002
			($ in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income		$	258,286		$	228,657		$	210,719
Adjustments to reconcile net income to net cash provided by operating activities:
	Provision for loan losses			14,668			46,813			50,699
	Depreciation and amortization			16,387			16,364			18,696
	Provision for (reversal of) valuation allowance on mortgage servicing rights			(1,193	)		12,341			17,642
	Amortization (accretion) of:
		Mortgage servicing rights		17,932			17,212			12,831
		Intangible assets		4,350			2,961			2,283
		Premiums and discounts on investments, loans and funding		26,114			18,860			14,861
	Deferred income taxes			(23,100	)		(13,202	)		(14,878	)
	(Gain) loss on sales of investment securities, net			(637	)		(702	)		427
	Gain on sales of assets, net			(1,181	)		(1,569	)		(657	)
	Gain on sales of loans held for sale, net			(15,054	)		(55,500	)		(35,172	)
	Mortgage loans originated and acquired for sale			(1,620,680	)		(4,273,406	)		(3,185,531	)
	Proceeds from sales of mortgage loans held for sale			1,700,142			4,530,406			3,233,679
	(Increase) decrease in interest receivable and other assets			15,361			(12,237	)		(13,351	)
	Decrease in interest payable and other liabilities			(7,894	)		(20,197	)		(13,664	)
Net cash provided by operating activities				383,501			496,801			298,584
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans				(882,063	)		(36,062	)		(547,159	)
Additions to mortgage servicing rights				(18,732	)		(39,707	)		(30,730	)
Purchases of:
	Securities available for sale			(1,327,686	)		(1,761,282	)		(1,621,096	)
	Premises and equipment, net of disposals			(14,965	)		(13,290	)		(12,864	)
Proceeds from:
	Sales of securities available for sale			132,639			1,263			27,793
	Maturities of securities available for sale			776,582			1,298,426			1,626,013
	Sales of other assets			11,480			17,650			5,214
Net cash received (paid) in acquisition of subsidiaries				29,274			(18,025	)		17,982
Net cash used in investing activities				(1,293,471	)		(551,027	)		(534,847	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits				313,011			685,143			(271,203	)
Net cash paid in sales of branch deposits				(19,540	)		(15,845	)		—
Net increase (decrease) in short-term borrowings				526,460			(460,731	)		(357,007	)
Repayment of long-term debt				(1,229,469	)		(558,114	)		(235,675	)
Proceeds from issuance of long-term funding				1,500,079			507,363			1,101,518
Cash dividends				(112,565	)		(98,169	)		(90,166	)
Proceeds from exercise of incentive stock options				23,857			24,831			16,564
Purchase and retirement of treasury stock				—			(74,533	)		(44,046	)
Purchase of treasury stock				(33,655	)		(868	)		(44,145	)
Net cash provided by financing activities				968,178			9,077			75,840
Net increase (decrease) in cash and cash equivalents				58,208			(45,149	)		(160,423	)
Cash and cash equivalents at beginning of year				399,864			445,013			605,436
Cash and cash equivalents at end of year			$	458,072		$	399,864		$	445,013
Supplemental disclosures of cash flow information:
Cash paid during the year for:
	Interest		$	208,201		$	223,233		$	298,207
	Income taxes			89,397			110,423			91,098
Supplemental schedule of noncash investing activities:
	Loans transferred to other real estate			10,283			11,654			14,158
	Acquisitions:
		Fair value of assets acquired, including cash and cash equivalents	$	4,168,800		$	31,400		$	1,155,200
		Value ascribed to intangibles		481,300			27,000			125,300
		Liabilities assumed		3,522,900			10,500			962,700

See accompanying Notes to Consolidated Financial Statements.

55

ASSOCIATED BANC-CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

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

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 subsidiaries, all of which are wholly owned. All significant intercompany balances and transactions have been eliminated in consolidation. Results of operations of companies purchased are included from the date of acquisition. Certain amounts in the 2003 and 2002 consolidated financial statements have been reclassified to conform with the 2004 Form 10-K presentation. In particular, for presentation purposes and greater comparability with industry practice, mortgage servicing rights expense in the consolidated statements of income, which was previously presented in noninterest expense, was reclassified into mortgage banking income. These reclassifications resulted in a decrease to both noninterest income and noninterest expense of $29.6 million in 2003 and $30.5 million in 2002. The reclassifications had no effect on stockholders’ equity or net income as previously reported.

On April 28, 2004, the Board of Directors declared a 3-for-2 stock split, effected in the form of a stock dividend, payable May 12 to shareholders of record at the close of business on May 7. All share and per share data in the accompanying consolidated financial statements has been adjusted to reflect the effect of this stock split.

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, mortgage servicing rights, derivative financial instruments and hedging activities, and income taxes.

Investment Securities Available for Sale

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

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term prospects of the issuer, and the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. 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.

Loans

Loans and leases are carried at the principal amount outstanding, net of any unearned income. Loan origination fees and certain direct loan origination costs are deferred, and the net amount is amortized over the contractual life of the related loans or over the commitment period as an adjustment of yield.

Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectibility 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. Previously accrued and uncollected interest on such loans is reversed, amortization of related deferred loan fees or costs is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectibility of the principal is in doubt, payments received are applied to loan principal. A nonaccrual loan is returned to accrual status when the obligation has been brought current and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. Management has defined commercial, financial, and agricultural loans, commercial real estate loans, and real estate construction loans that have nonaccrual status or have had their terms restructured as impaired loans.

Loans Held for Sale

Loans held for sale, which consist generally of current production of certain fixed-rate first-lien mortgage loans, are carried at the lower of cost or estimated market value as determined on an aggregate basis. The amount by which cost exceeds estimated market value is accounted for as a valuation adjustment to the carrying value of the loans. Changes, if any, in the valuation adjustment are included in mortgage banking income in the consolidated statements of income. The carrying value of loans held for sale includes a valuation adjustment of $97,000 at December 31, 2004. Holding costs are treated as period costs.

Allowance for Loan Losses

The allowance for loan losses is a reserve for estimated credit losses. 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 adequate to absorb probable losses in the loan portfolio.

The allocation methodology applied by the Corporation, designed to assess the adequacy 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 watch, special mention, substandard, doubtful or loss). The allocation methodology focuses on evaluation of facts and issues related to specific loans, the risk inherent in specific loans, changes in the size and character of the loan portfolio, changes in levels of impaired and other nonperforming loans, concentrations of loans to specific borrowers or industries, existing economic conditions, underlying collateral, historical losses and delinquencies on each portfolio category, and other qualitative and quantitative factors. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the portfolio.

Management, considering 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 principal and interest.

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Management has determined that commercial, financial, and agricultural loans, commercial real estate loans, and real estate construction loans that are on nonaccrual status or have had their terms restructured meet this definition. The amount of impairment is measured based upon the loan’s observable market price, the estimated fair value of the collateral for collateral-dependent loans, or alternatively, the present value of expected future cash flows discounted at the loan’s effective interest rate. 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 when cash is received and only if principal is considered to be collectible.

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

Other Real Estate Owned

Other real estate owned is included in other assets in the consolidated balance sheets and is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure, and loans classified as in-substance foreclosure. Other real estate owned is recorded at the lower of recorded investment in the loans at the time of acquisition or the fair value of the properties, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are treated as period costs. Other real estate owned totaled $3.9 million and $5.5 million at December 31, 2004 and 2003, respectively.

Premises and Equipment

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 their estimated useful lives. Estimated useful lives of the assets are 3 to 20 years for land improvements, 5 to 40 years for buildings, 3 to 5 years for computers, and 3 to 20 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.

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 periods of 7 to 10 years. The other intangibles have estimated finite lives and are amortized on an accelerated basis to expense over a weighted average life of 13 years. The Corporation reviews long-lived assets and certain identifiable intangibles for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in which case an impairment charge would be recorded.

Goodwill is not amortized but is subject to impairment tests on at least an annual basis. Any impairment of goodwill or intangibles will be recognized as an expense in the period of impairment. The Corporation completes the annual goodwill impairment test by reporting unit as of May 1 of each year and no impairment has been recognized. Note 5 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,

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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 cost. 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 intangible assets in the consolidated balance sheets. Mortgage servicing rights are amortized in proportion to and over the period of estimated servicing income.

The Corporation periodically evaluates its mortgage servicing rights asset for impairment. Impairment is assessed using estimated prepayment speeds of the underlying mortgages serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). The value of mortgage servicing rights is adversely affected when mortgage interest rates decline and mortgage loan prepayments increase. 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 allowance 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 reserve 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.

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 period in which certain income and expenses are recognized for financial accounting purposes and the period in which they affect taxable income, 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 during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and, if necessary, tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the period that the deferred tax assets are deductible, management believes it is more likely than not the Corporation will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2004.

The Corporation files a consolidated federal income tax return and individual Parent Company and subsidiary 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.

Derivative Financial Instruments and Hedging Activities

Derivative instruments, including derivative instruments embedded in other contracts, are required to be carried at fair value on the balance sheet with changes in the fair value recorded directly in earnings. On the date the derivative contract is entered into, the Corporation designates the derivative, except for mortgage banking derivatives for which changes in fair value of the derivative is recorded in earnings, as either a fair value hedge (i.e., a hedge of the fair value of a recognized asset or liability) or 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). The Corporation formally documents all relationships between hedging instruments and hedging items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value hedges or cash flow hedges to specific assets or liabilities on the balance sheet. The Corporation also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows 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 it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash

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flows of the hedged item, the derivative expires or is sold, terminated, or exercised, the derivative is dedesignated as a hedging instrument, or management determines that designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value hedge, the Corporation continues to carry the derivative on the balance sheet at its fair value and no longer adjusts the hedged asset or liability for changes in fair value. The adjustment of the carrying amount of the hedged asset or liability is accounted for in the same manner as other components of the carrying amount of that asset or liability.

For a derivative designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and the ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.

Stock-Based Compensation

As allowed under SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and SFAS No. 148, “Accounting for Stock-Based Compensation— Transition and Disclosure— an amendment of SFAS 123,” the Corporation accounts for stock-based compensation cost under the intrinsic value method of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB Opinion 25), and related Interpretations, under which no compensation cost has been recognized for any periods presented, except with respect to restricted stock awards. Compensation expense for employee stock options is not recognized if the exercise price of the option equals or exceeds the fair value of the stock on the date of grant as such options would have no intrinsic value at the date of grant.

The Corporation may issue common stock with restrictions to certain key employees. The shares are restricted as to transfer, but are not restricted as to dividend payment or voting rights. Transfer restrictions lapse over three or five years, depending upon whether the award is fixed or performance-based, are contingent upon continued employment, and for performance awards are based on earnings per share performance goals. The Corporation amortizes the expense over the vesting period. During 2003, 75,000 restricted stock shares were awarded, and expense of approximately $764,000 and $451,000 was recorded for the years ended December 31, 2004 and 2003, respectively.

For purposes of providing the pro forma disclosures required under SFAS 123, the fair value of stock options granted in 2004, 2003, and 2002 was estimated at the date of grant using a Black-Scholes option pricing model, which was originally developed for use in estimating the fair value of traded options that have different characteristics from the Corporation’s employee stock options. The model is also sensitive to changes in the subjective assumptions that can materially affect the fair value estimate. As a result, management believes the Black-Scholes model may not necessarily provide a reliable single measure of the fair value of employee stock

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options. The following table illustrates the effect on net income and earnings per share if the Corporation had applied the fair value recognition provisions of SFAS 123.

	For the Years Ended December 31,
	2004			2003			2002
	($ in Thousands, except
	per share amounts)
Net income, as reported	$	258,286		$	228,657		$	210,719
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		458			271			—
Less: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(3,737	)		(2,956	)		(3,156	)
Net income, as adjusted	$	255,007		$	225,972		$	207,563
Basic earnings per share, as reported	$	2.28		$	2.07		$	1.88
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		—			—			—
Less: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(0.03	)		(0.03	)		(0.03	)
Basic earnings per share, as adjusted	$	2.25		$	2.04		$	1.85
Diluted earnings per share, as reported	$	2.25		$	2.05		$	1.86
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		—			—			—
Less: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(0.04	)		(0.03	)		(0.03	)
Diluted earnings per share, as adjusted	$	2.21		$	2.02		$	1.83

The following assumptions were used in estimating the fair value for options granted in 2004, 2003 and 2002:

	2004			2003			2002
Dividend yield		3.01	%		3.18	%		3.65	%
Risk-free interest rate		3.40	%		3.27	%		4.58	%
Weighted average expected life		6 yrs			7 yrs			7 yrs
Expected volatility		26.12	%		28.29	%		28.35	%

The weighted average per share fair values of options granted in 2004, 2003, and 2002 were $6.26, $5.39, and $5.15, respectively. The annual expense allocation methodology prescribed by SFAS 123 attributes a higher percentage of the reported expense to earlier years than to later years, resulting in an accelerated expense recognition for proforma disclosure purposes.

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

Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing net income by the weighted average number of shares adjusted for the dilutive effect of outstanding stock options. Also see Notes 10 and 18.

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Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised December 2004), “Share-Based Payment,” (“SFAS 123R”), which replaces SFAS 123 and supersedes APB Opinion 25. SFAS 123R is effective for all stock-based awards granted on or after July 1, 2005. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Pro forma disclosure of the income statement effects of share-based payments is no longer an alternative. In addition, companies must recognize compensation expense related to any stock-based awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of SFAS No. 123. The Corporation anticipates adopting SFAS 123R prospectively in the third quarter of 2005, as required. The proforma information provided previously under “Stock-Based Compensation” provides a reasonable estimate of the projected impact of adopting SFAS 123R on the Corporation’s results of operations.

In March 2004, the SEC issued Staff Accounting Bulletin (“SAB”) No. 105, “Application of Accounting Principles to Loan Commitments,” (“SAB 105”). SAB 105 provides guidance regarding loan commitments accounted for as derivative instruments. Specifically, SAB 105 requires servicing assets to be recognized only once the servicing asset has been contractually separated from the underlying loan by sale or securitization of the loan with servicing retained. As such, consideration for the expected future cash flows related to the associated servicing of the loan may not be recognized in valuing the loan commitment. This will result in a lower fair value mark of loan commitments, and recognition of the value of the servicing asset later upon sale or securitization of the underlying loan. The provisions of SAB 105 were effective for loan commitments accounted for as derivatives entered into after March 31, 2004. The adoption of SAB 105 did not have a material impact on the Corporation’s results of operations, financial position, or liquidity. See Note 14 for further discussion of the Corporation’s loan commitments accounted for as derivative instruments.

In March 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force in Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” (“EITF 03-1”). EITF 03-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. Generally, an impairment is considered other-than-temporary unless the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for a forecasted recovery of fair value up to (or beyond) the cost of the investment, and evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. If impairment is determined to be other-than-temporary, then an impairment loss should be recognized through earnings equal to the difference between the investment’s cost and its fair value. In September 2004, the FASB delayed the accounting requirements of EITF 03-1 until additional implementation guidance is issued and goes into effect. The Corporation does not expect the requirements of EITF 03-1 will have a material impact on the Corporation’s results of operations, financial position, or liquidity.

In December 2003, the FASB issued SFAS No. 132 (revised December 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106,” (“SFAS 132”). SFAS 132 revises employers’ disclosures about pension plans and other postretirement benefit plans. This Statement does not change the measurement or recognition of pension plans and other postretirement benefit plans required by FASB Statements No. 87, “Employers’ Accounting for Pensions,” No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” and No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” The revised SFAS 132 retains the disclosure requirements contained in the original SFAS 132 and requires additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. In general, the annual provisions of SFAS 132 are effective for fiscal years ending after December 15, 2003, and the interim-period disclosures are effective for interim periods beginning after December 15, 2003. The adoption did not have a material impact on the Corporation’s results of operations, financial position, or liquidity.

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In December 2003, the FASB reissued FIN 46 (“FIN 46R”) with certain modifications and clarifications. Application of FIN 46R was effective for interests in certain variable interest entities as of December 31, 2003, and for all other types of variable interest entities for periods ending after March 15, 2004, unless FIN 46 was previously applied. The application of FIN 46R resulted in the deconsolidation of a subsidiary relating to the issuance of trust preferred securities. The assets and liabilities of the subsidiary trust were deconsolidated in the first quarter of 2004 and totaled $180 million. See Note 9 for further discussion of this trust and the Corporation’s related obligations. The application of FIN 46R did not have a material impact on the Corporation’s results of operations, financial position, or liquidity.

In December 2003, the AICPA’s Accounting Standards Executive Committee issued Statement of Position (“SOP”) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” (“SOP 03-3”). SOP 03-3 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. The provisions of this SOP are effective for loans acquired in fiscal years beginning after December 15, 2004. The Corporation does not expect the requirements of SOP 03-3 to have a material impact on the Corporation’s results of operations, financial position, or liquidity.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). This interpretation provides guidance on how to identify a variable interest entity and determine when the assets, liabilities, noncontrolling interests, and results of operations of a variable interest entity are to be included in an entity’s consolidated financial statements. A variable interest entity exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics include the direct or indirect ability to make decisions about an entity’s activities through voting rights or similar rights, the obligation to absorb the expected losses of an entity if they occur, or the right to receive the expected residual returns of the entity if they occur. The adoption did not have a material impact on the Corporation’s results of operations, financial position, or liquidity.

NOTE 2  BUSINESS COMBINATIONS:

Completed Business Combinations: First Federal Capital Corp (“First Federal”): On October 29, 2004, the Corporation consummated its acquisition of 100% of the outstanding shares of First Federal, based in La Crosse, Wisconsin. The acquisition was accounted for under the purchase method of accounting; thus, the results of operations of First Federal prior to the consummation date were not included in the accompanying consolidated financial statements. As of the acquisition date, First Federal operated a $4 billion savings bank with over 90 banking locations serving more than 40 communities in Wisconsin, northern Illinois, and southern Minnesota, building upon and complementing the Corporation’s footprint. As a result of the acquisition, the Corporation will enhance its current branch distribution (including supermarket locations which are new to the Corporation’s distribution model), improve its operational and managerial efficiencies, increase revenue streams, and strengthen its community banking model. Subsequent to year-end 2004, the Corporation merged First Federal into its Associated Bank, National Association, banking subsidiary during February 2005.

Per the definitive agreement signed on April 27, 2004 (the “Merger Agreement”), First Federal shareholders received 0.9525 shares (restated for the Corporation’s 3-for-2 stock split in May 2004) of the Corporation’s common stock for each share of First Federal common stock held, an equivalent amount of cash, or a combination thereof. The Merger Agreement provided that the aggregate consideration paid by the Corporation for the First Federal outstanding common stock must be equal to 90% stock and 10% cash, with the cash consideration based upon the Corporation’s closing stock price on the effective date of the merger. The Corporation’s closing stock price on October 29, 2004 was $34.69 per share. The value of the common stock consideration was based upon the Corporation’s average market price surrounding the date of signing and announcing the definitive agreement. Based upon the aforementioned values for the 90% stock/10% cash, the consummation of the transaction included the issuance of approximately 19.4 million shares of common stock (valued at approximately $535 million) and $75 million in cash.

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To record the transaction, the Corporation assigned estimated fair values to the assets acquired and liabilities assumed. The excess cost of the acquisition over the estimated fair value of the net assets acquired was allocated to identifiable intangible assets with the remainder then allocated to goodwill. Goodwill of approximately $447 million, a core deposit intangible of approximately $17 million (with a ten-year estimated life), and other intangibles of $4 million recognized at acquisition were assigned to the banking segment. If additional evidence becomes available subsequent to the recording of the transaction indicating a significant difference from an initial estimated fair value used, goodwill could be adjusted.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed of First Federal at the date of the acquisition.

		$ in Millions
Investment securities available for sale		$	665
Loans, net			2,727
Other assets			256
Mortgage servicing rights			32
Intangible assets			21
Goodwill			447
	Total assets acquired	$	4,148
Deposits		$	2,701
Borrowings			768
Other liabilities			51
	Total liabilities assumed	$	3,520
Net assets acquired		$	628

The following represents required supplemental pro forma disclosure of total revenue, net income, and earnings per share as though the First Federal acquisition had been completed at the beginning of 2004 and 2003, respectively.

	For Year ended
	December 31,
	2004		2003
	(In Thousands, except
	per share data)
Total revenue	$	918,429	$	900,911
Net income		282,190		263,882
Basic earnings per share		2.18		2.03
Diluted earnings per share		2.15		2.01

The pro forma results include amortization of newly created intangibles, interest cost on the cash consideration, and amortization of fair value adjustments on loans, investments, deposits and debt. The pro forma weighted average common shares used in the earnings per share calculations include adjustments for shares issued for the acquisition and the estimated impact of additional dilutive securities but does not assume any incremental share repurchases. The pro forma results presented do not reflect cost savings or revenue enhancements anticipated from the acquisition and are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of each period presented, nor are they necessarily indicative of future results.

Jabas Group, Inc. (“Jabas”): On April 1, 2004, the Corporation (through its subsidiary, Associated Financial Group, LLC) consummated its cash acquisition of 100% of the outstanding shares of Jabas. Jabas is an insurance agency specializing in employee benefit products headquartered in Kimberly, Wisconsin, and was acquired to enhance the Corporation’s existing insurance business. Jabas operates as part of Associated Financial Group, LLC. The acquisition was accounted for under the purchase method of accounting; thus, the results of operations of Jabas prior to the consummation date were not included in the accompanying

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consolidated financial statements. The acquisition was individually immaterial to the consolidated financial results. Goodwill of approximately $8 million and other intangibles of approximately $6 million recognized in the transaction at acquisition were assigned to the wealth management segment. Goodwill may increase by an additional $8 million in the future as contingent payments may be made to the former Jabas shareholders through December 31, 2007, if Jabas exceeds certain performance targets. Goodwill during 2004 was increased by approximately $0.7 million for contingent consideration paid in 2004 per the agreement.

CFG Insurance Services, Inc. (“CFG”): On April 1, 2003, the Corporation consummated its cash acquisition of 100% of the outstanding shares of CFG, a closely-held insurance agency headquartered in Minnetonka, Minnesota. Effective in June 2003, CFG operated as Associated Financial Group, LLC. CFG, an independent, full-line insurance agency, was acquired to enhance the growth of the Corporation’s existing insurance business. The acquisition was accounted for under the purchase method of accounting; thus, the results of operations of CFG prior to the consummation date were not included in the accompanying consolidated financial statements. The acquisition was individually immaterial to the consolidated financial results. Goodwill of approximately $12 million and other intangibles of approximately $15 million recognized in the transaction at acquisition were assigned to the wealth management segment.

Signal Financial Corporation (“Signal”): On February 28, 2002, the Corporation consummated its acquisition of 100% of the outstanding common shares of Signal. Signal operated banking branches in nine locations in the Twin Cities and Eastern Minnesota. As a result of the acquisition, the Corporation expanded its Minnesota banking presence, particularly in the Twin Cities area.

The Signal transaction was accounted for under the purchase method of accounting; thus, the results of operations prior to the consummation date were not included in the accompanying consolidated financial statements. The Signal transaction was consummated through the issuance of approximately 6.1 million shares of common stock and $58 million in cash for a purchase price of $193 million. The value of the shares was determined using the closing stock price of the Corporation’s stock on September 10, 2001, the initiation date of the transaction.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed of Signal at the date of the acquisition.

		$ in Millions
Investment securities available for sale		$	164
Loans, net			748
Other assets			118
Intangible asset			6
Goodwill			120
	Total assets acquired	$	1,156
Deposits		$	785
Borrowings			166
Other liabilities			12
	Total liabilities assumed	$	963
Net assets acquired		$	193

The $6 million other intangible asset represents a core deposit intangible with a ten-year estimated life. The $120 million of goodwill was assigned to the banking segment.

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NOTE 3  INVESTMENT SECURITIES:

The amortized cost and fair values of securities available for sale at December 31, 2004 and 2003, were as follows:

	2004
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
	($ in Thousands)
U.S. Treasury securities	$	33,177	$	5	$	(159	)	$	33,023
Federal agency securities		175,290		1,006		(232	)		176,064
Obligations of state and political subdivisions		876,208		45,577		(72	)		921,713
Mortgage-related securities		3,238,502		9,697		(10,714	)		3,237,485
Other securities (debt and equity)		413,938		33,124		(3	)		447,059
Total securities available for sale	$	4,737,115	$	89,409	$	(11,180	)	$	4,815,344

	2003
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
	($ in Thousands)
U.S. Treasury securities	$	36,588	$	171	$	—		$	36,759
Federal agency securities		167,859		4,944		(90	)		172,713
Obligations of state and political subdivisions		868,974		58,579		(68	)		927,485
Mortgage-related securities		2,232,920		12,128		(11,636	)		2,233,412
Other securities (debt and equity)		368,388		36,040		(1,013	)		403,415
Total securities available for sale	$	3,674,729	$	111,862	$	(12,807	)	$	3,773,784

Equity securities include Federal Reserve and Federal Home Loan Bank stock which had a fair value of $25.5 million and $177.9 million, respectively, at December 31, 2004, and $25.3 million and $112.5 million, respectively, at December 31, 2003.

The following represents gross unrealized losses and the related fair value of 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, 2004.

		Less than 12 months					12 months or more					Total
		Unrealized					Unrealized					Unrealized
		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value
							($ in Thousands)
U.S. Treasury securities		$	(153	)	$	31,825	$	(6	)	$	993	$	(159	)	$	32,818
Federal agency securities			(104	)		30,782		(128	)		17,934		(232	)		48,716
Obligations of state and political subdivisions			(60	)		18,495		(12	)		1,004		(72	)		19,499
Mortgage-related securities			(3,345	)		593,209		(7,369	)		1,004,454		(10,714	)		1,597,663
Other securities (equity)			(3	)		297		—			—		(3	)		297
	Total	$	(3,665	)	$	674,608	$	(7,515	)	$	1,024,385	$	(11,180	)	$	1,698,993

Management does not believe any individual unrealized loss as of December 31, 2004 represents an other-than-temporary impairment. The unrealized losses reported for mortgage-related securities relate primarily to securities issued by government agencies such as the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (“FHLMC”). These unrealized losses are primarily attributable to changes in interest rates and not credit deterioration and individually were 3.5% or less of their respective

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amortized cost basis. The Corporation currently has both the intent and ability to hold the securities contained in the previous table for a time necessary to recover the amortized cost.

The Corporation owns (not included in the above table) a collateralized mortgage obligation (“CMO”) determined to have an other-than-temporary impairment that resulted in a write-down on the security of $0.8 million during 2002, $0.3 million during 2003, and $0.2 million during 2004, based on continued evaluation. As of December 31, 2004, this CMO had a carrying value of $1.0 million. The Corporation also owns (not included in the above table) three FHLMC preferred stock securities determined to have an other-than-temporary impairment that resulted in a write-down on these securities of $2.2 million during 2004. At December 31, 2004, these FHLMC preferred shares had a carrying value of $8.4 million.

The amortized cost and fair values of investment securities available for sale at December 31, 2004, by contractual maturity, 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.

	2004
	Amortized
	Cost		Fair Value
	($ in Thousands)
Due in one year or less	$	180,512	$	182,134
Due after one year through five years		482,853		501,858
Due after five years through ten years		330,208		346,053
Due after ten years		285,356		300,503
Total debt securities		1,278,929		1,330,548
Mortgage-related securities		3,238,502		3,237,485
Equity securities		219,684		247,311
Total securities available for sale	$	4,737,115	$	4,815,344

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

	2004			2003			2002
	($ in Thousands)
Proceeds	$	132,639		$	1,263		$	27,793
Gross gains		3,459			1,029			374
Gross losses		(2,822	)		(327	)		(801	)

Pledged securities with a carrying value of approximately $2.5 billion and $1.6 billion at December 31, 2004, and December 31, 2003, respectively, were pledged to secure certain deposits, Federal Home Loan Bank advances, or for other purposes as required or permitted by law.

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NOTE 4 LOANS:

Loans at December 31 are summarized below.

			2004		2003
			($ in Thousands)
Commercial, financial, and agricultural			$	2,803,333	$	2,116,463
Real estate construction				1,459,629		1,077,731
Commercial real estate				3,933,131		3,246,954
Lease financing				50,718		38,968
	Commercial			8,246,811		6,480,116
	Residential mortgage			2,714,580		1,975,661
Home equity(1)				1,866,485		1,138,311
Installment				1,054,011		697,722
	Retail			2,920,496		1,836,033
		Total loans	$	13,881,887	$	10,291,810

(1)  Home equity includes home equity lines and residential mortgage junior liens.

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

		2004			2003			2002
		($ in Thousands)
Balance at beginning of year		$	177,622		$	162,541		$	128,204
Balance related to acquisition			14,750			—			11,985
Provision for loan losses			14,668			46,813			50,699
Charge offs			(22,202	)		(37,107	)		(32,179	)
Recoveries			4,924			5,375			3,832
	Net charge offs		(17,278	)		(31,732	)		(28,347	)
Balance at end of year		$	189,762		$	177,622		$	162,541

The following table presents nonperforming loans at December 31:

		December 31,
		2004		2003
		($ in Thousands)
Nonaccrual loans		$	112,761	$	113,944
Accruing loans past due 90 days or more			2,153		7,495
Restructured loans			37		43
	Total nonperforming loans	$	114,951	$	121,482

Management has determined that commercial, financial, and agricultural loans, commercial real estate loans, and real estate construction loans that have nonaccrual status or have had their terms restructured are impaired loans. The following table presents data on impaired loans at December 31:

	2004		2003
	($ in Thousands)
Impaired loans for which an allowance has been provided	$	58,237	$	68,571
Impaired loans for which no allowance has been provided		30,065		29,079
Total loans determined to be impaired	$	88,302	$	97,650
Allowance for loan losses related to impaired loans	$	25,609	$	33,497

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	2004		2003		2002
	($ in Thousands)
For the years ended December 31:
Average recorded investment in impaired loans	$	70,439	$	83,106	$	60,247
Cash basis interest income recognized from impaired loans	$	2,500	$	2,489	$	3,849

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

	2004
	($ in Thousands)
Balance at beginning of year	$	29,486
New loans		31,652
Repayments		(17,875	)
Changes due to status of executive officers and directors		(1,914	)
Balance at end of year	$	41,349

The Corporation serves the credit needs of its customers by offering a wide variety of loan programs to customers, primarily in Wisconsin, Illinois, and Minnesota. The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to a multiple number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At December 31, 2004, no significant concentrations existed in the Corporation’s loan portfolio in excess of 10% of total loans.

NOTE 5  GOODWILL AND INTANGIBLE ASSETS:

Goodwill: Goodwill is not amortized but is subject to impairment tests on at least an annual basis. No impairment loss was necessary in 2004, 2003, or 2002. At December 31, 2004, goodwill of $659 million is assigned to the banking segment and goodwill of $21 million is assigned to the wealth management segment. The change in the carrying amount of goodwill was as follows.

Goodwill		2004		2003		2002
		($ in Thousands)
Balance at beginning of year		$	224,388	$	212,112	$	92,397
	Goodwill acquired		455,605		12,276		119,715
Balance at end of year		$	679,993	$	224,388	$	212,112

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 CFG and Jabas acquisitions), and mortgage servicing rights. The core deposit intangibles and mortgage servicing rights are assigned to the Corporation’s banking segment, while other intangibles of $17 million are assigned to the wealth management segment and $4 million are assigned to the banking segment.

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

	2004			2003			2002
	($ in Thousands)
Core deposit intangibles:
Gross carrying amount	$	33,468		$	28,165		$	28,165
Accumulated amortization		(11,335	)		(20,682	)		(18,923	)
Net book value	$	22,133		$	7,483		$	9,242
Additions during the year	$	16,685		$	—		$	5,600
Amortization during the year		(2,035	)		(1,759	)		(2,283	)
Other intangibles:
Gross carrying amount	$	24,578		$	14,751		$	—
Accumulated amortization		(3,517	)		(1,202	)		—
Net book value	$	21,061		$	13,549		$	—
Additions during the year	$	9,827		$	14,751		$	—
Amortization during the year		(2,315	)		(1,202	)		—

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

Mortgage servicing rights		2004			2003			2002
		($ in Thousands)
Mortgage servicing rights at beginning of year		$	65,062		$	60,685		$	42,786
Additions			50,508			39,707			30,730
Amortization			(17,932	)		(17,212	)		(12,831	)
Other-than-temporary impairment			(5,855	)		(18,118	)		—
	Mortgage servicing rights at end of year	$	91,783		$	65,062		$	60,685
Valuation allowance at beginning of year			(22,585	)		(28,362	)		(10,720	)
Additions			(5,461	)		(15,832	)		(17,642	)
Reversals			6,654			3,491			—
Other-than-temporary impairment			5,855			18,118			—
	Valuation allowance at end of year		(15,537	)		(22,585	)		(28,362	)
	Mortgage servicing rights, net	$	76,246		$	42,477		$	32,323

Included in the 2004 additions to mortgage servicing rights was $31.8 million from First Federal at acquisition. The Corporation evaluates its mortgage servicing rights asset for other-than-temporary impairment. During the second and third quarters of 2003 mortgage rates fell to record lows. Given the extended period of historically low interest rates at that time and the impact on mortgage banking volumes, refinances, and secondary markets, the Corporation determined $18.1 million of mortgage servicing rights to be other-than-temporarily impaired during 2003. Impacted by the continued low interest rate environment for 2004, the Corporation determined $5.9 million of mortgage servicing rights to be other-than-temporarily impaired during 2004. This resulted in a similar decrease in mortgage servicing rights and the valuation allowance.

At December 31, 2004, the Corporation was servicing one- to four-family residential mortgage loans owned by other investors with balances totaling $9.5 billion (including $3.5 billion from First Federal at acquisition) compared to $5.9 billion and $5.4 billion at December 31, 2003 and 2002, respectively. The fair value of mortgage servicing rights was approximately $76.2 million (representing 80 bp of total loans serviced) at December 31, 2004, compared to $42.5 million (representing 72 bp of loans serviced) at December 31, 2003, and $32.3 million (representing 59 bp of loans serviced) at December 31, 2002.

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Mortgage servicing rights expense, which includes the amortization of the mortgage servicing rights and increases or decreases to the valuation allowance associated with the mortgage servicing rights, was $16.7 million, $29.6 million, and $30.5 million for the years ended December 31, 2004, 2003, and 2002, respectively.

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, 2004. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon changes in interest rates, 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,
2005	$	4,000	$	3,700	$	21,500
2006		3,300		3,000		17,900
2007		2,900		1,300		14,700
2008		2,500		1,200		11,800
2009		2,100		1,100		8,800

NOTE 6  PREMISES AND EQUIPMENT:

A summary of premises and equipment at December 31 is as follows:

				2004						2003
		Estimated				Accumulated		Net Book		Net Book
		Useful Lives		Cost		Depreciation		Value		Value
		($ in Thousands)
Land			—	$	42,820	$	—	$	42,820	$	27,595
Land improvements			3 – 20  years		3,616		2,458		1,158		869
Buildings			5 – 40  years		176,696		80,464		96,232		73,589
Computers			3 – 5 years		33,611		24,783		8,828		6,212
Furniture, fixtures and other equipment			3 – 20  years		109,972		82,108		27,864		17,623
Leasehold improvements			5 – 30  years		20,070		12,028		8,042		5,427
	Total premises and equipment			$	386,785	$	201,841	$	184,944	$	131,315

Depreciation and amortization of premises and equipment totaled $15.3 million in 2004, $15.1 million in 2003, and $17.1 million in 2002.

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)
2005	$	11,143
2006		10,624
2007		9,105
2008		7,364
2009		5,932
Thereafter		22,558
Total	$	66,726

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Total rental expense under leases, net of sublease income, totaled $10.0 million in 2004, $9.2 million in 2003, and $8.3 million in 2002.

NOTE 7  DEPOSITS:

The distribution of deposits at December 31 is as follows.

		2004		2003
		($ in Thousands)
Noninterest-bearing demand deposits		$	2,347,611	$	1,814,446
Savings deposits			1,116,158		890,092
Interest-bearing demand deposits			2,854,880		2,330,478
Money market deposits			2,083,717		1,573,678
Brokered certificates of deposit			361,559		165,130
Other time deposits			4,022,314		3,019,019
	Total deposits	$	12,786,239	$	9,792,843

Time deposits of $100,000 or more were $1.4 billion and $999 million at December 31, 2004 and 2003, respectively. Aggregate annual maturities of all time deposits at December 31, 2004, are as follows:

Maturities During Year Ending
December 31,	($ in Thousands)
2005	$	2,824,145
2006		766,817
2007		461,880
2008		141,802
2009		67,832
Thereafter		121,397
Total	$	4,383,873

NOTE 8 SHORT-TERM BORROWINGS:

Short-term borrowings at December 31 are as follows:

		2004		2003
		($ in Thousands)
Federal funds purchased and securities sold under agreements to repurchase		$	2,437,088	$	1,340,996
Bank notes			200,000		200,000
Federal Home Loan Bank advances			169,400		—
Treasury, tax, and loan notes			35,825		361,894
Other borrowed funds			84,403		25,986
	Total short-term borrowings	$	2,926,716	$	1,928,876

Included in short-term borrowings are Federal Home Loan Bank advances with original maturities of less than one year. The short-term bank notes are variable rate and have original maturities of less than one year. The treasury, tax, and loan notes are demand notes representing secured borrowings from the U.S. Treasury, collateralized by qualifying securities and loans.

The Parent Company had $100 million of established lines of credit with various nonaffiliated banks, which were not drawn on at December 31, 2004 or 2003. Borrowings under these lines accrue interest at short-term market rates. Under the terms of the credit agreement, a variety of advances and interest periods may be selected by the Parent Company. During 2000, a $200 million commercial paper program was initiated, of which, no amounts were outstanding at December 31, 2004 or 2003.

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NOTE 9  LONG-TERM FUNDING:

Long-term debt (debt with original contractual maturities greater than one year) at December 31 is as follows:

		2004		2003
		($ in Thousands)
Federal Home Loan Bank advances		$	1,158,294	$	912,138
Bank notes			500,000		300,000
Repurchase agreements			550,000		429,175
Subordinated debt, net			204,168		204,351
Junior subordinated debentures, net			185,517		—
Other borrowed funds			6,561		6,555
	Total long-term debt	$	2,604,540	$	1,852,219
Company-obligated mandatorily redeemable preferred securities, net			—		181,941
	Total long-term funding	$	2,604,540	$	2,034,160

Federal Home Loan Bank advances: Long-term advances from the Federal Home Loan Bank had maturities through 2019 and had weighted-average interest rates of 2.91% at December 31, 2004 and 2.96% at December 31, 2003. These advances had a combination of fixed and variable rates, of which 26% and 5% were variable at December 31, 2004 and 2003, respectively.

Bank notes: The long-term bank notes had maturities through 2007 and had weighted-average interest rates of 2.54% at December 31, 2004 and 2.20% at December 31, 2003. These notes had a combination of fixed and variable rates, of which 70% and 50% were variable at December 31, 2004 and 2003, respectively.

Repurchase agreements: The long-term repurchase agreements had maturities through 2007 and had weighted-average interest rates of 1.89% at December 31, 2004 and 1.67% at December 31, 2003. These repurchase agreements had a combination of fixed and variable rates, of which 82% was variable rate at December 31, 2004 and 35% was variable rate at December 31, 2003.

Subordinated debt: In August 2001, the Corporation issued $200 million of 10-year subordinated debt. This debt was issued at a discount and has a fixed coupon interest rate of 6.75%. The Corporation also entered into a fair value hedge to hedge the interest rate risk on the subordinated debt. As of December 31, 2004 and 2003, the fair value of the derivative was a $5.2 million gain and a $5.5 million gain, respectively. Given the fair value hedge, the subordinated debt is carried on the consolidated balance sheet at fair value. The subordinated debt qualifies under the risk-based capital guidelines as Tier 2 supplementary capital for regulatory purposes.

Junior subordinated debentures and Company-obligated Mandatorily Redeemable Preferred Securities: On May 30, 2002, ASBC Capital I (the “ASBC Trust”), a Delaware business trust whose common stock was wholly owned by the Corporation, completed the sale of $175 million of 7.625% preferred securities (the “Preferred Securities”). The Preferred Securities are traded on the New York Stock Exchange under the symbol “ABW PRA.” The ASBC Trust used the proceeds from the offering to purchase a like amount of 7.625% Junior Subordinated Debentures (the “Debentures”) of the Corporation. The Debentures are the sole assets of the ASBC Trust and were eliminated, along with the related income statement effects, in the consolidated financial statements for 2003 and prior years.

Effective in the first quarter of 2004, in accordance with guidance provided on the application of FIN 46R, the Corporation was required to deconsolidate the ASBC Trust from its consolidated financial statements. Accordingly, the Debentures issued by the Corporation to ASBC Trust (as opposed to the trust preferred securities issued by the ASBC Trust) are reflected in the Corporation’s consolidated balance sheet as long-term funding. The deconsolidation of the net assets and results of operations of this trust did not have a material impact on the Corporation’s financial statements since the Corporation continues to be obligated to repay the Debentures held by the ASBC Trust and guarantees repayment of the Preferred Securities issued by the ASBC Trust. The consolidated long-term funding obligation related to the ASBC Trust increased from

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$175 million to $180 million upon deconsolidation, with the difference representing the Corporation’s common ownership interest in the ASBC Trust recorded in investment securities available for sale.

The Preferred Securities accrue and pay dividends quarterly at an annual rate of 7.625% of the stated liquidation amount of $25 per Preferred Security. The Corporation has fully and unconditionally guaranteed all of the obligations of the ASBC Trust. The guarantee covers the quarterly distributions and payments on liquidation or redemption of the Preferred Securities, but only to the extent of funds held by the ASBC Trust. The Preferred Securities are mandatorily redeemable upon the maturity of the Debentures on June 15, 2032, or upon earlier redemption as provided in the Indenture. The Corporation has the right to redeem the Debentures on or after May 30, 2007. The Preferred Securities qualify under the risk-based capital guidelines as Tier 1 capital for regulatory purposes within certain limitations.

During 2002, the Corporation entered into a fair value hedge to hedge the interest rate risk on the Debentures. The fair value of the derivative was a $5.1 million gain at December 31, 2004 and a $6.9 million gain at December 31, 2003. Given the fair value hedge, the Debentures are carried on the consolidated balance sheet at fair value.

The table below summarizes the maturities of the Corporation’s long-term debt at December 31, 2004:

Year		($ in Thousands)
2005		$	375,000
2006			970,225
2007			702,850
2008			115,953
2009			—
Thereafter			440,512
	Total long-term debt	$	2,604,540

Under agreements with the Federal Home Loan Banks of Chicago and Des Moines, Federal Home Loan Bank advances (short-term and long-term) are secured by the subsidiary banks’ qualifying mortgages (such as residential mortgage, residential mortgage loans held for sale, home equity, and commercial real estate) and by specific investment securities for certain Federal Home Loan Bank advances.

NOTE 10  STOCKHOLDERS’ EQUITY:

On April 28, 2004, the Board of Directors declared a 3-for-2 stock split, effected in the form of a stock dividend, payable May 12 to shareholders of record at the close of business on May 7. All share and per share data in the accompanying consolidated financial statements has been adjusted to reflect the effect of this stock split. As a result of the stock split, the Corporation distributed approximately 37 million shares of common stock. Any fractional shares resulting from the dividend were paid in cash. On April 24, 2002, the Board of Directors declared a 10% stock dividend, payable May 15 to shareholders of record at the close of business on April 29. All share and per share data in the accompanying consolidated financial statements has been adjusted to reflect the 10% stock dividend paid. As a result of the stock dividend, the Corporation distributed approximately 7 million shares of common stock. Any fractional shares resulting from the dividend were paid in cash.

The Corporation’s Articles of Incorporation authorize the issuance of 750,000 shares of preferred stock at a par value of $1.00 per share. No shares have been issued.

At December 31, 2004, subsidiary net assets equaled $2.1 billion, of which approximately $210.8 million could be paid to the Corporation in the form of cash dividends without prior regulatory approval, subject to the capital needs of each subsidiary.

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. For the Corporation’s employee incentive plans, the Board of

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Directors authorized the repurchase of up to 3.0 million shares (750,000 shares per quarter) in 2004 and up to 2.4 million shares (600,000 shares per quarter) in 2003. Of these authorizations, approximately 1.1 million shares were repurchased for $33.7 million during 2004 at an average cost of $30.45 per share (with approximately 1.0 million shares reissued in connection with stock options exercised), while none were repurchased during 2003 (with approximately 1.6 million shares reissued in connection with stock options exercised). Additionally, under two separate actions in 2000 and one action in 2003, the Board of Directors authorized the repurchase and cancellation of the Corporation’s outstanding shares, not to exceed approximately 16.5 million shares on a combined basis. Under these authorizations, approximately 3.1 million shares were repurchased for $74.5 million during 2003 at an average cost of $24.11 per share, while none were repurchased during 2004. At December 31, 2004, approximately 5.6 million shares remain authorized to repurchase. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities.

The Board of Directors approved the implementation of a broad-based stock option grant effective July 28, 1999. This stock option grant provided all qualifying employees with an opportunity and an incentive to buy shares of the Corporation and align their financial interest with the growth in value of the Corporation’s shares. These options have 10-year terms, fully vest in two years, and have exercise prices equal to 100% of market value on the date of grant. As of December 31, 2004, approximately 2.8 million shares remain available for granting.

In January 2002, the Board of Directors, with subsequent approval of the Corporation’s shareholders, approved an amendment to the Amended and Restated Long-Term Incentive Stock Plan (“Stock Plan”), increasing the number of shares available to be issued by an additional 5.0 million shares. The Stock Plan was adopted by the Board of Directors and originally approved by shareholders in 1987 and amended in 1994, 1997, and 1998. Options are generally exercisable up to 10 years from the date of grant and vest over two to three years. As of December 31, 2004, approximately 4.1 million shares remain available for grants.

In January 2003, the Board of Directors, with subsequent approval of the Corporation’s shareholders, approved the adoption of the 2003 Long-Term Incentive Plan (“2003 Plan”), which provides for the granting of options to key employees. Options are generally exercisable up to 10 years from the date of grant and vest over three years. As of December 31, 2004, approximately 4.0 million shares remain available for grants.

The stock incentive plans of acquired companies were terminated as to future option grants at each respective merger date. Option holders under such plans received the Corporation’s common stock, or options to buy the Corporation’s common stock, based on the conversion terms of the various merger agreements.

	2004					2003					2002
	Options			Weighted Average		Options			Weighted Average		Options			Weighted Average
	Outstanding			Exercise Price		Outstanding			Exercise Price		Outstanding			Exercise Price
Outstanding, January 1		6,375,979		$	19.19		7,122,741		$	17.41		6,030,025		$	17.40
Granted		1,258,250			29.06		1,053,263			23.00		1,147,935			21.29
Options from acquisitions		264,247			16.10		—			—		1,614,690			9.43
Exercised		(1,394,279	)		17.25		(1,650,764	)		13.73		(1,469,678	)		11.27
Forfeited		(145,077	)		22.94		(149,261	)		21.74		(200,231	)		20.06
Outstanding, December 31		6,359,120		$	21.35		6,375,979		$	19.19		7,122,741		$	17.41
Options exercisable at year-end		4,209,543					4,434,584					5,059,880

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The following table summarizes information about the Corporation’s stock options outstanding at December 31, 2004:

	Options		Weighted Average		Remaining		Options		Weighted Average
	Outstanding		Exercise Price		Life (Years)		Exercisable		Exercise Price
Range of Exercise Prices:
$6.29 — $9.95		96,788	$	8.54		2.48		96,788	$	8.54
$10.65 — $12.54		63,510		11.38		2.60		63,510		11.38
$13.20 — $15.82		586,504		14.66		2.90		586,504		14.66
$16.40 — $19.98		1,596,253		17.82		5.14		1,596,253		17.82
$20.01 — $23.29		2,795,542		22.07		6.40		1,866,488		21.88
$27.11 — $33.67		1,220,523		29.06		9.22
TOTAL		6,359,120	$	21.35		6.18		4,209,543	$	18.87

The pro forma disclosures required under SFAS 123, as amended by SFAS 148, are included in Note 1.

NOTE 11  RETIREMENT PLANS:

The Corporation has a noncontributory defined benefit retirement plan (the “Associated Plan”) covering substantially all full-time employees. The benefits are based primarily on years of service and the employee’s compensation paid. The Corporation’s funding policy is to pay at least the minimum amount required by the funding requirements of federal law and regulations.

In connection with the First Federal acquisition on October 29, 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 this plan will become eligible to participate in the Associated Plan as of January 1, 2005. The funded status and net periodic benefit cost of the retirement plans is as follows.

		Associated(1)			First Federal(2)			Total			Associated
		2004			2004			2004			2003
		($ in Thousands)
Change in Fair Value of Plan Assets
Fair value of plan assets at beginning of year		$	69,384		$	16,433		$	85,817		$	45,429
Actual gain on plan assets			6,374			823			7,197			9,795
Employer contributions			—			3,000			3,000			17,542
Gross benefits paid			(6,723	)		(70	)		(6,793	)		(3,382	)
	Fair value of plan assets at end of year	$	69,035		$	20,186		$	89,221		$	69,384
Change in Benefit Obligation
Net benefit obligation at beginning of year		$	62,825		$	27,802		$	90,627		$	54,464
Service cost			6,694			195			6,889			5,857
Interest cost			3,854			259			4,113			3,603
Actuarial loss			3,086			—			3,086			2,283
Gross benefits paid			(6,723	)		(70	)		(6,793	)		(3,382	)
	Net benefit obligation at end of year	$	69,736		$	28,186		$	97,922		$	62,825
Funded Status
Excess (deficit) of plan assets over (under) benefit obligation		$	(701	)	$	(8,001	)	$	(8,702	)	$	6,559
Unrecognized net actuarial loss (gain)			18,389			(599	)		17,790			15,762
Unrecognized prior service cost			515			—			515			589
Unrecognized net transition asset			(412	)		—			(412	)		(736	)
	Net prepaid asset at end of year in the balance sheet	$	17,791		$	(8,600	)	$	9,191		$	22,174

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		Associated(1)		First Federal(2)			Total			Associated
		2004		2004			2004			2003
		($ in Thousands)
Amounts Recognized in the Statement of Financial Position Consists of
Prepaid benefit cost		$	17,791	$	—		$	17,791		$	22,174
Accrued benefit cost			—		(8,600	)		(8,600	)		—
	Net amount recognized	$	17,791	$	(8,600	)	$	9,191		$	22,174

(1)	Associated does not include the First Federal Plan. The First Federal Plan is shown separately.
(2)	The beginning of the year balance for the First Federal Plan represents the balance at acquisition.

The accumulated benefit obligation for the Associated Plan was $68.0 million and $61.2 million at December 31, 2004 and 2003, respectively. The accumulated benefit obligation for the First Federal Plan was $28.2 million at December 31, 2004.

		Associated			First Federal			Total			Associated
		2004			2004			2004			2003			2002
		($ in Thousands)
Components of Net Periodic Benefit Cost
Service cost		$	6,694		$	195		$	6,889		$	5,857		$	4,582
Interest cost			3,854			260			4,114			3,603			3,257
Expected return on plan assets			(6,286	)		(224	)		(6,510	)		(5,301	)		(3,963	)
Amortization of:
	Transition asset		(324	)		—			(324	)		(324	)		(323	)
	Prior service cost		74			—			74			74			74
	Actuarial loss		370			—			370			73			—
Total net periodic benefit cost		$	4,382		$	231		$	4,613		$	3,982		$	3,627

	Associated			First Federal			Total	Associated
	2004			2004			2004	2003			2002
Weighted average assumptions used to determine benefit obligations:
Discount rate		5.75	%		5.75	%			6.25	%
Rate of increase in compensation levels		5.00			NA				5.00
Weighted average assumptions used to determine net periodic benefit costs:
Discount rate		6.25	%		5.75	%			6.75	%		7.25	%
Rate of increase in compensation levels		5.00			NA				5.00			5.00
Expected long-term rate of return on plan assets		8.75			8.50				8.75			9.00

The overall expected long-term rate of return on the Associated Plan assets was 8.75% as of both December 31, 2004 and 2003, while the overall expected long-term rate of return on the First Federal Plan assets was 8.50%. The expected long-term rate of return was estimated using market benchmarks for equities and bonds applied to the 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.

In anticipation of the First Federal Plan being frozen, as discussed above, all of First Federal Plan assets were temporarily moved into money market accounts at year-end 2004. The Corporation subsequently reinvested the First Federal Plan assets based on the Corporation’s investment strategies for plan assets. The asset classes used to manage plan assets will include common stocks, fixed income or debt securities, and cash equivalents. A diversified portfolio using these assets will provide liquidity, current income, and growth of income and

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growth of principal. The anticipated asset allocation ranges are equity securities of 55-65%, debt securities of 35-45%, and other cash equivalents of 0-5%.

The asset allocation for the Associated Plans as of the measurement date in 2004 and 2003, respectively, and First Federal Plan as of the measurement date in 2004 by asset category were as follows:

		Associated			First Federal			Associated
Asset Category		2004			2004			2003
Equity securities			65	%		—			66	%
Debt securities			33			—			32
Money market			—			100	%		—
Other			2			—			2
	Total		100	%		100	%		100	%

Subsequent to year-end 2004, the Corporation contributed $8 million to its pension plans. The Corporation regularly reviews the funding of its pension plans and generally contributes to its plan assets based on the minimum amounts required by funding requirements with consideration given to the maximum funding amounts allowed.

The Corporation also has a Profit Sharing/ Retirement Savings Plan (the “plan”). First Federal’s retirement plan was merged into the Corporation’s plan on December 31, 2004. The Corporation’s contribution is determined annually by the Administrative Committee of the Board of Directors, based in part on performance-based formulas provided in the plan. Total expense related to contributions to the plan was $13.8 million, $12.3 million, and $11.8 million in 2004, 2003, and 2002, respectively.

The projected benefit payments for the Associated Plan and the First Federal Plan combined at December 31, 2004, were as follows. The projected benefit payments were calculated using the same assumptions as those used to calculate the benefit obligations listed above.

	($ in Thousands)
Estimated future benefit payments:
2005	$	6,705
2006		6,950
2007		7,082
2008		7,742
2009		8,321
Years 2010 - 2014		50,389

NOTE 12  INCOME TAXES:

The current and deferred amounts of income tax expense (benefit) are as follows:

		Years ended December 31,
		2004			2003			2002
		($ in Thousands)
Current:
	Federal	$	127,799		$	103,321		$	99,730
	State		7,352			2,940			755
Total current			135,151			106,261			100,485
Deferred:
	Federal		(23,206	)		(12,793	)		(16,214	)
	State		106			(409	)		1,336
Total deferred			(23,100	)		(13,202	)		(14,878	)
Total income tax expense		$	112,051		$	93,059		$	85,607

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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 are as follows:

		2004			2003
		($ in Thousands)
Gross deferred tax assets:
	Allowance for loan losses	$	77,643		$	72,319
	Accrued liabilities		9,427			5,970
	Deferred compensation		18,105			9,190
	Securities valuation adjustment		12,805			10,445
	Benefit of tax loss carryforwards		20,589			16,716
	Other		5,689			5,680
Total gross deferred tax assets			144,258			120,320
Valuation adjustment for deferred tax assets			(8,414	)		(7,335	)
			135,844			112,985
Gross deferred tax liabilities:
	Real estate investment trust income		13,817			27,635
	FHLB stock dividends		12,539			3,700
	Prepaids		4,368			6,608
	Purchase acquisition adjustments		9,021			4,795
	Mortgage banking activity		18,835			4,500
	Deferred loan fee income		8,554			7,364
	State income taxes		10,506			9,647
	Leases		5,796			2,670
	Other		5,810			3,321
Total gross deferred tax liabilities			89,246			70,240
Net deferred tax assets			46,598			42,745
Tax effect of unrealized gain related to available for sale securities			(28,267	)		(35,843	)
Tax effect of unrealized loss related to derivative instruments			5,874			7,991
			(22,393	)		(27,852	)
Net deferred tax assets including tax effected items		$	24,205		$	14,893

Components of the 2003 net deferred tax assets have been adjusted to reflect the filing of corporate income tax returns.

For financial reporting purposes, a valuation allowance has been recognized to offset deferred tax assets related to state net operating loss carryforwards of certain subsidiaries and other temporary differences due to the uncertainty that the assets will be realized. If it is subsequently determined that all or a portion of these deferred tax assets will be realized, the tax benefit for these items will be used to reduce deferred tax expense for that period.

At December 31, 2004, the Corporation had state net operating losses of $257 million and federal net operating losses of $0.8 million that will expire in the years 2005 through 2018.

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

		2004			2003			2002
Federal income tax rate at statutory rate			35.0	%		35.0	%		35.0	%
Increases (decreases) resulting from:
	Tax-exempt interest and dividends		(3.8	)		(4.2	)		(4.6	)
	State income taxes (net of federal income taxes)		0.7			0.5			0.5
	Other		(1.6	)		(2.4	)		(2.0	)
Effective income tax rate			30.3	%		28.9	%		28.9	%

Savings banks acquired by the Corporation in prior years qualified under provisions of the Internal Revenue Code that permitted them to deduct from taxable income an allowance for bad debts that differed from the provision for such losses charged to income for financial reporting purposes. Accordingly, no provision for income taxes has been made for $100.3 million of retained income at December 31, 2004. If income taxes had been provided, the deferred tax liability would have been approximately $40.3 million. Management does not expect this amount to become taxable in the future, therefore no provision for income taxes has been made.

NOTE 13  COMMITMENTS, OFF-BALANCE SHEET ARRANGEMENTS, AND CONTINGENT LIABILITIES:

Commitments and Off-Balance Sheet Arrangements

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 commitments (see below) and derivative instruments (see Note 14).

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. A significant portion of commitments to extend credit may expire without being drawn upon.

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. 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.

Commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are defined as derivatives and are therefore required to be recorded on the consolidated balance sheet at fair value. The Corporation’s derivative and hedging activity is further summarized in Note 14. The following is a summary of lending-related commitments at December 31:

	2004		2003
	($ in Thousands)
Commitments to extend credit, excluding commitments to originate mortgage loans(1)	$	4,310,944	$	3,732,150
Commercial letters of credit(1)		22,824		19,665
Standby letters of credit(2)		409,156		338,954

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(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, 2004 or 2003.

(2)

As required by FASB Interpretation No. 45, an interpretation of FASB Statements No. 5, 57, and 107, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” the Corporation has established a liability of $4.6 million and $2.3 million at December 31, 2004 and 2003, respectively, as an estimate of the fair value of these financial instruments.

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 commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Corporation uses the same credit policies in making commitments as it does for extending loans to customers. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. 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 many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Contingent Liabilities

In the ordinary course of business, the Corporation may be named as defendant in or be a party to various pending and threatened legal proceedings. Since it is not possible to formulate a meaningful opinion as to the range of possible outcomes and plaintiffs’ ultimate damage claims, management cannot estimate the specific possible loss or range of loss that may result from these proceedings. Management believes, based upon advice of legal counsel and current knowledge, that liabilities arising out of any such current proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Corporation.

Residential mortgage loans sold to others are sold on a nonrecourse basis, though First Federal retained the credit risk on the underlying loans it sold to the Federal Home Loan Bank (“FHLB”), prior to its acquisition by the Corporation, in exchange for a monthly credit enhancement fee. At December 31, 2004, there were $2.4 billion of such loans with credit risk recourse, upon which there have been negligible historical losses.

A contingent liability is required to be established if it is probable that the Corporation will incur a loss on the performance of a letter of credit. During the second quarter of 2003, given the deterioration of the financial condition of a borrower, the Corporation established a $2.5 million liability for commercial letters of credit, of which $1.6 million was drawn on and $0.9 million remained at December 31, 2004.

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 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. Because the contract or notional amount does not represent amounts exchanged by the parties, it is not a measure of loss exposure related to the use of derivatives nor of exposure to liquidity risk. The Corporation is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. As the Corporation generally enters into transactions only with high quality counterparties, no losses with counterparty nonperformance on derivative financial instruments have occurred. Further, the Corporation obtains collateral and uses master netting arrangements when available. To mitigate counterparty risk, interest rate swap agreements generally contain language outlining collateral pledging requirements for each counterparty. Collateral must be posted when the market value exceeds a certain threshold. The threshold limits are determined from the credit ratings of each counterparty. Upgrades or downgrades to the credit ratings of either counterparty would lower or raise the threshold limits. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, currency exchange rates, or commodity prices. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

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Interest rate swap contracts are entered into primarily as an asset/liability management strategy to modify interest rate risk. Interest rate swap contracts are exchanges of interest payments, such as fixed rate payments for floating rate payments, based on a notional principal amount. Payments related to the Corporation’s swap contracts are made monthly, quarterly, or semi-annually by one of the parties depending on the specific terms of the related contract. The primary risk associated with all swaps is the exposure to movements in interest rates and the ability of the counterparties to meet the terms of the contract. At December 31, 2004 and 2003, the Corporation had $896 million and $936 million, respectively, of interest rate swaps outstanding. Included in this amount were $321 million and $361 million, respectively, at December 31, 2004 and 2003, in receive variable/pay fixed interest rate swaps used to convert specific fixed rate loans into floating rate assets. The remaining swap contracts used for interest rate risk management of $575 million both at December 31, 2004 and 2003, were used to hedge interest rate risk of various other specific liabilities. At December 31, 2004, the Corporation pledged $12.1 million of collateral for swap agreements compared to $24.8 million at December 31, 2003. Included in the table below for December 31, 2004 and 2003, were customer swaps and caps for which the Corporation has mirror swaps and caps. The fair value of these customer swaps and caps is recorded in earnings and the net impact for 2004 and 2003 was immaterial.

						Weighted Average
	Notional		Fair Value
	Amount		Gain / (Loss)			Receive Rate			Pay Rate			Maturity
	($ in Thousands)
December 31, 2004
Interest Rate Risk Management Hedges:
Swaps—receive variable / pay fixed(1),(3)	$	200,000	$	(14,732	)		2.06	%		5.03	%		76 months
Swaps—receive fixed / pay variable(2),(4)		375,000		10,262			7.21	%		3.80	%		199  months
Caps—written(1),(3)		200,000		97			Strike 4.72	%		—			20 months
Swaps—receive variable / pay fixed(2),(5)		320,997		(3,731	)		4.42	%		6.34	%		50 months
Customer Swaps and Caps:
Customer swaps	$	94,457	$	—			2.80	%		2.80	%		89 months
Customer caps		23,550		—			—			—			78 months
December 31, 2003
Interest Rate Risk Management Hedges:
Swaps—receive variable / pay fixed(1),(3)	$	200,000	$	(21,132	)		1.15	%		5.03	%		88 months
Swaps—receive fixed / pay variable(2),(4)		375,000		12,432			7.21	%		2.79	%		211  months
Caps—written(1),(3)		200,000		1,222			Strike 4.72	%		—			32 months
Swaps—receive variable / pay fixed(2),(5)		361,189		(9,876	)		3.31	%		6.27	%		50 months
Customer Swaps:
Customer swaps	$	41,400	$	—			1.96	%		1.96	%		69 months

(1)	Cash flow hedges
(2)	Fair value hedges
(3)	Hedges variable rate long-term debt
(4)	Hedges fixed rate long-term debt
(5)	Hedges specific longer-term fixed rate commercial loans

Interest rate floors and caps are interest rate protection instruments that involve the payment from the seller to the buyer of an interest differential. This differential represents the difference between a short-term rate (e.g., six-month LIBOR) and an agreed upon rate (the strike rate) applied to a notional principal amount. By buying a cap, the Corporation will be paid the differential by a counterparty should the short-term rate rise above the strike level of the agreement. The primary risk associated with purchased floors and caps is the ability of the counterparties to meet the terms of the agreement. As of December 31, 2004 and 2003, the Corporation had purchased caps for asset/liability management of $200 million.

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The Corporation measures the effectiveness of its hedges on a periodic basis. Any difference between the fair value change of the hedge versus the fair value change of the hedged item is considered to be the “ineffective” portion of the hedge. The ineffective portion of the hedge is recorded as an increase or decrease in the related income statement classification of the item being hedged.

At December 31, 2004, the estimated net fair value of the interest rate swaps and the cap designated as cash flow hedges was a $14.6 million unrealized loss, or $8.8 million, net of tax benefit of $5.8 million, carried as a component of accumulated other comprehensive income. At December 31, 2003, the estimated fair value of the interest rate swaps and the cap designated as cash flow hedges was a $19.9 million unrealized loss, or $11.9 million, net of tax benefit of $8.0 million, carried as a component of accumulated other comprehensive income. These instruments are used to hedge the exposure to the variability in interest payments of variable rate liabilities. The ineffective portion of the hedges recorded through the statements of income was immaterial. For the years ended December 31, 2004 and 2003, the Corporation recognized interest expense of $7.3 million and $7.7 million, respectively, for interest rate swaps accounted for as cash flow hedges. As of December 31, 2004, approximately $5.9 million of the deferred net losses on derivative instruments that are recorded in accumulated other comprehensive income are expected to be reclassified to interest expense within the next twelve months.

At December 31, 2004 and 2003, the estimated net fair value of the interest rate swaps designated as fair value hedges was an unrealized gain of $6.5 million and $2.6 million, respectively. These swaps hedge against changes in the fair value of certain loans and long-term debt.

For the mortgage derivatives, which are not accounted for as hedges, changes in the fair value are recorded to mortgage banking income. The fair value of the mortgage derivatives at December 31, 2004 was a net loss of $0.7 million, compared to a net loss of $0.2 million at December 31, 2003, with the change of $0.5 million reducing mortgage banking income for 2004. The $0.7 million net fair value loss for mortgage derivatives at December 31, 2004 was composed of the net loss on commitments to sell approximately $148.6 million of loans to various investors and the net loss on commitments to fund approximately $125.9 million of loans to individual borrowers. The $0.2 million net fair value loss for mortgage derivatives at December 31, 2003 was composed of the net loss on commitments to sell approximately $152.0 million of loans to various investors and the net gain on commitments to fund approximately $114.1 million of loans to individual borrowers.

NOTE 15  PARENT COMPANY ONLY FINANCIAL INFORMATION:

Presented below are condensed financial statements for the Parent Company:

BALANCE SHEETS

	2004		2003
	($ in Thousands)
ASSETS
Cash and due from banks	$	265	$	924
Notes receivable from subsidiaries		259,827		374,878
Investment in subsidiaries		2,085,144		1,316,773
Other assets		110,638		103,837
Total assets	$	2,455,874	$	1,796,412
LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt	$	389,685	$	391,705
Accrued expenses and other liabilities		48,770		56,280
Total liabilities		438,455		447,985
Stockholders’ equity		2,017,419		1,348,427
Total liabilities and stockholders’ equity	$	2,455,874	$	1,796,412

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STATEMENTS OF INCOME

	For the Years Ended December 31,
	2004			2003			2002
	($ in Thousands)
INCOME
Dividends from subsidiaries	$	124,500		$	179,500		$	172,000
Management and service fees from subsidiaries		46,913			43,146			35,346
Interest income on notes receivable		11,979			9,172			5,641
Other income		4,562			2,464			3,510
Total income		187,954			234,282			216,497
EXPENSE
Interest expense on borrowed funds		12,718			11,474			12,627
Provision for loan losses		—			—			500
Personnel expense		28,936			29,219			22,918
Other expense		20,755			20,241			15,191
Total expense		62,409			60,934			51,236
Income before income tax benefit and equity in undistributed income		125,545			173,348			165,261
Income tax benefit		(1,510	)		(1,093	)		(1,759	)
Income before equity in undistributed net income of subsidiaries		127,055			174,441			167,020
Equity in undistributed net income of subsidiaries		131,231			54,216			43,699
Net income	$	258,286		$	228,657		$	210,719

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STATEMENTS OF CASH FLOWS

		For the Years Ended December 31,
		2004			2003			2002
		($ in Thousands)
OPERATING ACTIVITIES
Net income		$	258,286		$	228,657		$	210,719
Adjustments to reconcile net income to net cash provided by operating activities:
	Increase in equity in undistributed net income of subsidiaries		(131,231	)		(54,216	)		(43,699	)
	Depreciation and other amortization		495			378			335
	(Gain) loss on sales of assets, net		(8	)		2			2
	(Increase) decrease in interest receivable and other assets		1,935			(269	)		(41,651	)
	Increase in interest payable and other liabilities		(27,200	)		(24,392	)		(14,351	)
Capital received from (contributed to) subsidiaries			(10,000	)		95,470			(12,997	)
Net cash provided by operating activities			92,277			245,630			98,358
INVESTING ACTIVITIES
Proceeds from sales of available for sale securities			1,398			—			—
Purchase of available for sale securities			—			—			(319	)
Net cash paid in acquisition of subsidiary			(72,723	)		—			(78,055	)
Net (increase) decrease in notes receivable			114,847			(95,630	)		(79,551	)
Purchase of premises and equipment, net of disposals			(320	)		(975	)		(614	)
Net cash provided by (used in) investing activities			43,202			(96,605	)		(158,539	)
FINANCING ACTIVITIES
Net decrease in short-term borrowings			(13,775	)		—			—
Net increase in long-term debt			—			—			221,998
Cash dividends paid			(112,565	)		(98,169	)		(90,166	)
Proceeds from exercise of stock options			23,857			24,831			16,564
Purchase and retirement of treasury stock			—			(74,533	)		(44,046	)
Purchase of treasury stock			(33,655	)		(868	)		(44,145	)
Net cash provided by (used in) financing activities			(136,138	)		(148,739	)		60,205
Net increase (decrease) in cash and cash equivalents			(659	)		286			24
Cash and cash equivalents at beginning of year			924			638			614
Cash and cash equivalents at end of year		$	265		$	924		$	638

NOTE 16  FAIR VALUE OF FINANCIAL INSTRUMENTS:

SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” requires that the Corporation disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Corporation’s financial instruments.

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The estimated fair values of the Corporation’s financial instruments on the balance sheet at December 31 are as follows:

		2004						2003
		Carrying						Carrying
		Amount			Fair Value			Amount			Fair Value
		($ in Thousands)
Financial assets:
	Cash and due from banks	$	389,311		$	389,311		$	389,140		$	389,140
	Interest-bearing deposits in other financial institutions		13,321			13,321			7,434			7,434
	Federal funds sold and securities purchased under purchase under agreements to resell		55,440			55,440			3,290			3,290
	Accrued interest receivable		88,953			88,953			67,264			67,264
	Investment securities available for sale		4,815,344			4,815,344			3,773,784			3,773,784
	Loans held for sale		64,964			64,964			104,336			104,504
	Loans		13,881,887			13,980,035			10,291,810			10,503,111
Financial liabilities:
	Deposits		12,786,239			12,814,524			9,792,843			9,855,813
	Accrued interest payable		28,300			28,300			22,006			22,006
	Short-term borrowings		2,926,716			2,926,716			1,928,876			1,928,876
	Long-term funding		2,604,540			2,616,153			2,034,160			2,065,094
	Interest rate swap and cap agreements(1)(3)		(8,104	)		(8,104	)		17,354			17,354
	Standby letters of credit(2)(3)		(4,558	)		(4,558	)		2,275			2,275
	Commitments to originate mortgage loans held for sale(3)		(450	)		(450	)		680			680
	Forward commitments to sell residential mortgage loans(3)		(274	)		(274	)		(905	)		(905	)

(1)	At both December 31, 2004 and 2003, the notional amount of non-trading interest rate swap and cap agreements was $1.1 billion. See Notes 13 and 14 for information on the fair value of lending-related commitments and derivative financial instruments.
(2)	At December 31, 2004 and 2003, the commitment on standby letters of credit was $0.4 billion and $0.3 billion, respectively. See Note 13 for additional information on the standby letters of credit.
(3)	If carrying amount or fair value is bracketed, represents a loss position of the financial instrument.

Cash and due from banks, interest-bearing deposits in other financial institutions, federal funds sold and securities purchased under agreements to resell, and accrued interest receivable— For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Investment securities available for sale— The fair value of investment securities available for sale, except certain state and municipal securities, is estimated based on bid prices published in financial newspapers or bid quotations received from securities dealers. The fair value of certain state and municipal securities is not readily available through market sources other than dealer quotations, so fair value estimates are based on quoted market prices of similar instruments, adjusted for differences between the quoted instruments and the instruments being valued.

Loans held for sale— Fair value is estimated using the prices of the Corporation’s existing commitments to sell such loans and/or the quoted market prices for commitments to sell similar loans.

Loans— Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, commercial real estate, lease financing, residential mortgage, credit card, and other consumer. The fair value of other types 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. Future cash flows are also adjusted for estimated reductions or delays due to delinquencies, nonaccruals, or potential charge offs.

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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 December 31. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Accrued interest payable and short-term borrowings— For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Long-term funding— Rates currently available to the Corporation for debt with similar terms and remaining maturities are used to estimate fair value of existing borrowings.

Interest rate swap and cap agreements— The fair value of interest rate swap and cap agreements is obtained from dealer quotes. These values represent the estimated amount the Corporation would receive or pay to terminate the agreements, taking into account current interest rates and, when appropriate, the current creditworthiness of the counterparties.

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.

Commitments to originate mortgage loans held for sale— The fair value of commitments to originate mortgage loans held for sale is estimated by comparing the Corporation’s cost to acquire mortgages and the current price for similar mortgage loans, taking into account the terms of the commitments and the creditworthiness of the counterparties.

Forward commitments to sell residential mortgage loans— The fair value of forward commitments to sell residential mortgage loans is the estimated amount that the Corporation would receive or pay to terminate the forward delivery contract at the reporting date based on market prices for similar financial instruments.

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 subsidiaries are required to maintain certain vault cash and reserve balances with the Federal Reserve Bank to meet specific reserve requirements. These requirements approximated $31.9 million at December 31, 2004.

Regulatory Capital Requirements

The Corporation, as well as the subsidiary banks and thrift, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly 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

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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 I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2004, that the Corporation meets all capital adequacy requirements to which it is subject.

As of December 31, 2004 and 2003, the most recent notifications from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation categorized the subsidiary banks as well capitalized under the regulatory framework for prompt corrective action and the thrift subsidiary was adequately capitalized at December 31, 2004. To be categorized as well capitalized, the subsidiary banks must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institutions’ category.

The actual capital amounts and ratios of the Corporation and its significant subsidiaries are presented below. No deductions from capital were made for interest rate risk in 2004 or 2003.

									To Be Well Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions: (2)
	Amount		Ratio (1)		Amount		Ratio (1)		Amount		Ratio (1)
	($ In Thousands)
As of December 31, 2004:
Associated Banc-Corp
Total Capital	$	1,817,016		12.33%	$	1,178,460		+8.00%
Tier I Capital		1,420,386		9.64		589,230		³4.00%
Leverage		1,420,386		7.79		729,025		³4.00%
Associated Bank, N.A.
Total Capital		1,093,698		10.79		810,620		³8.00%	$	1,013,275		³10.00%
Tier I Capital		885,340		8.74		405,310		³4.00%		607,965		+ 6.00%
Leverage		885,340		6.46		548,085		³4.00%		685,106		³5.00%
First Federal Capital Bank(3)
Total Capital		202,883		9.86		164,544		³8.00%		205,680		³10.00%
Core Capital		188,217		5.16		145,810		³4.00%		182,263		³5.00%
Tangible Capital		188,217		5.16		54,679		³4.00%
Tier I Capital		188,217		9.15						123,408		³6.00%

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									To Be Well Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions: (2)
	Amount		Ratio (1)		Amount		Ratio (1)		Amount		Ratio (1)
	($ In Thousands)
As of December 31, 2003:
Associated Banc-Corp
Total Capital	$	1,572,770		13.99%	$	899,596		³8.00%
Tier I Capital		1,221,647		10.86		449,798		³4.00%
Leverage		1,221,647		8.37		584,108		³4.00%
Associated Bank, N.A.
Total Capital		980,318		10.63		737,810		³8.00%	$	922,262		+10.00%
Tier I Capital		784,263		8.50		368,905		³4.00%		553,357		+ 6.00%
Leverage		784,263		6.34		495,138		³4.00%		618,923		+ 5.00%
Associated Bank Minnesota, N.A.(4)
Total Capital		156,196		11.94		104,688		³8.00%		130,860		+10.00%
Tier I Capital		139,692		10.67		52,344		³4.00%		78,516		+ 6.00%
Leverage		139,692		8.29		67,424		³4.00%		84,279		+ 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. The Core Capital ratio is defined as Tier 1 (Core) Capital divided by adjusted total assets. The Tangible Capital ratio is defined as tangible capital divided by tangible assets.
(2)	Prompt corrective action provisions are not applicable at the bank holding company level.
(3)	Prompt corrective action provisions are not applicable for tangible capital, and capital adequacy provisions are not applicable for Tier 1 Capital at thrift institutions. Subsequent to year-end 2004, the Corporation merged First Federal into its Associated Bank, National Association, banking subsidiary during February 2005.
(4)	Not considered a significant subsidiary in 2004.

NOTE 18 EARNINGS PER SHARE:

Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing net income by the weighted average number of shares adjusted for the dilutive effect of outstanding stock options.

On April 28, 2004, the Board of Directors declared a 3-for-2 stock split, effected in the form of a stock dividend, payable May 12 to shareholders of record at the close of business on May 7. All share and per share data in the accompanying consolidated financial statements has been adjusted to reflect the effect of this stock split. As a result of the stock split, the Corporation distributed approximately 37 million shares of common stock. Any fractional shares resulting from the dividend were paid in cash. On April 24, 2002, the Board of Directors declared a 10% stock dividend, payable May 15 to shareholders of record at the close of business on April 29. All share and per share data in the accompanying consolidated financial statements has been adjusted to reflect the 10% stock dividend paid. As a result of the stock dividend, the Corporation distributed approximately 7 million shares of common stock. Any fractional shares resulting from the dividend were paid in cash.

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Presented below are the calculations for basic and diluted earnings per share.

	For the Years Ended December 31,
	2004		2003		2002
	(In Thousands, except per share data)
Net income, as reported	$	258,286	$	228,657	$	210,719
Weighted average shares outstanding		113,532		110,617		112,027
Effect of dilutive stock options outstanding		1,493		1,144		1,213
Diluted weighted average shares outstanding		115,025		111,761		113,240
Basic earnings per share	$	2.28	$	2.07	$	1.88
Diluted earnings per share	$	2.25	$	2.05	$	1.86

NOTE 19 SEGMENT REPORTING

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” requires selected financial and descriptive information about reportable operating segments. The statement uses a “management approach” concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the enterprise for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the enterprise’s internal organization, focusing on financial information that an enterprise’s chief operating decision-makers use to make decisions about the enterprise’s operating matters.

The Corporation’s primary segment is banking, conducted through its bank and lending subsidiaries. For purposes of segment disclosure under this statement, these entities have been combined as one segment that have similar economic characteristics and the nature of their products, services, processes, customers, delivery channels, and regulatory environment are similar. Banking consists of lending and deposit gathering (as well as other banking-related products and services) to businesses, governments, and consumers (including mortgages, home equity lending, and card products) and the support to deliver, fund, and manage such banking services.

The wealth management segment provides products and a variety of fiduciary, investment management, advisory, and Corporate agency services to assist customers in building, investing, or protecting their wealth, including insurance, brokerage, and trust/asset management. The other segment includes intersegment eliminations and residual revenues and expenses, representing the difference between actual amounts incurred and the amounts allocated to operating segments.

The accounting policies of the segments are the same as those described in Note 1. Selected segment information is presented below.

						Wealth						Consolidated
			Banking			Management			Other			Total
			($ in Thousands)
2004
Net interest income			$	552,311		$	316		$	—		$	552,627
Provision for loan losses				14,668			—			—			14,668
Noninterest income				150,225			79,609			(1,655	)		228,179
Depreciation and amortization				36,174			2,495			—			38,669
Other noninterest expense				303,720			55,067			(1,655	)		357,132
Income taxes				103,106			8,945			—			112,051
	Net income		$	244,868		$	13,418		$	—		$	258,286
		Total assets	$	20,448,862		$	81,236		$	(9,962	)	$	20,520,136
Total revenues *			$	684,604		$	79,925		$	(1,655	)	$	762,874
Percent of consolidated total revenues				90	%		10	%		—	%		100	%

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						Wealth						Consolidated
			Banking			Management			Other			Total
			($ in Thousands)
2003
Net interest income			$	510,213		$	549		$	—		$	510,762
Provision for loan losses				46,813			—			—			46,813
Noninterest income				152,292			55,102			(2,853	)		204,541
Depreciation and amortization				34,966			1,571			—			36,537
Other noninterest expense				267,761			45,329			(2,853	)		310,237
Income taxes				89,559			3,500			—			93,059
	Net income		$	223,406		$	5,251		$	—		$	228,657
		Total assets	$	15,195,428		$	62,383		$	(9,917	)	$	15,247,894
Total revenues *			$	674,846		$	55,651		$	(2,853	)	$	727,644
Percent of consolidated total revenues				93	%		7	%		—	%		100	%
2002
Net interest income			$	501,244		$	22		$	—		$	501,266
Provision for loan losses				50,699			—			—			50,699
Noninterest income				137,886			43,282			(13,463	)		167,705
Depreciation and amortization				33,588			222			—			33,810
Other noninterest expense				267,897			33,702			(13,463	)		288,136
Income taxes				81,855			3,752			—			85,607
	Net income		$	205,091		$	5,628		$	—		$	210,719
		Total assets	$	15,015,136		$	43,737		$	(15,598	)	$	15,043,275
Total revenues*			$	656,772		$	43,304		$	(13,463	)	$	686,613
Percent of consolidated total revenues				96	%		6	%		(2	)%		100	%

*  Total revenues for this segment disclosure are defined to be the sum of net interest income plus noninterest income, net of mortgage servicing rights expense.

91

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 as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004. 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, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004 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), the effectiveness of Associated Banc-Corp’s internal control over financial reporting as of December 31, 2004, 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 March 9, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

KPMG LLP

Chicago, Illinois

March 9, 2005

92

Market Information

						Market Price Range Sales Prices
		Dividends Paid		Book Value		High		Low		Close
2004
	4th Quarter	$	0.2500	$	15.55	$	34.85	$	32.08	$	33.23
	3rd Quarter		0.2500		13.18		32.19		28.81		32.07
	2nd Quarter		0.2500		12.53		30.13		27.09		29.63
	1st Quarter		0.2267		12.67		30.37		28.08		29.86
2003
	4th Quarter	$	0.2267	$	12.26	$	28.75	$	25.87	$	28.53
	3rd Quarter		0.2267		11.84		25.93		24.75		25.26
	2nd Quarter		0.2267		11.92		25.61		21.43		24.41
	1st Quarter		0.2067		11.60		23.48		21.55		21.55

Annual dividend rate: $1.00

Market information has been restated for the 3-for-2 stock split, effected in the form of a stock dividend, declared on April 28, 2004, and paid on May 12, 2004, to shareholders of record at the close of business on May 7, 2004.

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 promulgated under the Securities Exchange Act of 1934 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, 2004, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including its 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, 2004.

The Corporation acquired First Federal Capital Corp (“First Federal”) on October 29, 2004 by means of a merger. Following consummation of the merger, the Corporation began integrating its internal controls into First Federal’s operations and it is contemplated that this effort will be completed during the quarter ended March 31, 2005. As permitted under the rules of the Securities and Exchange Commission, management excluded from its assessment of the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2004, total assets of approximately $4.1 billion and total revenues of approximately $43 million as of and for the year ended December 31, 2004 associated with First Federal’s business. Management’s assessment of the Corporation’s internal control over financial reporting also excluded an evaluation of the internal control over financial reporting of First Federal. Other than with respect to the acquisition of First Federal, during the quarter ended December 31, 2004, there was no change in our internal control over financial reporting as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

93

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.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, internal control over financial reporting may not prevent or detect misstatements. 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 policies or procedures may deteriorate.

The Corporation acquired First Federal Capital Corp (“First Federal”) on October 29, 2004 by means of a merger. As permitted under the rules of the Securities and Exchange Commission, management excluded from its assessment of the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2004, total assets of approximately $4.1 billion and total revenues of approximately $43 million as of and for the year ended December 31, 2004 associated with First Federal’s business. Management’s assessment of the Corporation’s internal control over financial reporting also excluded an evaluation of the internal control over financial reporting of First Federal.

As of December 31, 2004, 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 Organizations 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, 2004 is 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 management’s assessment of the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2004. The report, which expresses unqualified opinions on management’s assessment and on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2004, is included on page 95 under the heading “Report of Independent Registered Public Accounting Firm.”

94

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Associated Banc-Corp:

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Associated Banc-Corp maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Associated Banc-Corp’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. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of Associated Banc-Corp’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, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and 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, management’s assessment that Associated Banc-Corp maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Associated Banc-Corp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Associated Banc-Corp acquired First Federal Capital Corp (“First Federal”) during 2004; and management excluded from its assessment of the effectiveness of Associated Banc-Corp’s internal control over financial reporting as of December 31, 2004, First Federal’s internal control over financial reporting associated with total assets of approximately $4.1 billion and total revenues of approximately $43 million included in the consolidated financial statements of Associated Banc-Corp and subsidiaries as of and for the year ended December 31, 2004. Our audit of internal control over financial reporting of Associated Banc-Corp also excluded an evaluation of the internal control over financial reporting of First Federal.

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 Decem-

95

ber 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 9, 2005 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

Chicago, Illinois

March 9, 2005

96

ITEM 9B. OTHER INFORMATION

On January 26, 2005, the Administrative Committee of the Board of Directors set the 2005 base salaries effective as of February 21, 2005, for Paul S. Beideman, Gordon J. Weber, Mark J. McMullen, Donald E. Peters, and Joseph B. Selner, the Chief Executive Officer and the other four most highly compensated executive officers of the Corporation in 2004, at $726,000, $369,500, $331,750, $309,100, and $322,900, respectively. Target bonuses for 2005 were established for these named executive officers at 85%, 50%, 50%, 40%, and 50%, respectively. These named executive officers also received option grants for 73,500, 35,000, 40,000, 39,000, and 50,000 options, respectively, to purchase shares of the Corporation’s common stock.

Based upon the 2005 compensation approved by the Administrative Committee, the Corporation expects that Mr. Daniel C. Fischer, Executive Vice President, Community Banking, will be among the four other most highly compensated executive officers in 2005. Mr. Fischer’s 2005 base salary is $341,250, his 2005 target bonus is set at 50%, and he received a grant of 45,000 options to purchase shares of the Corporation’s common stock.

Further, the Board of Directors set the 2005 Board fees at an annual retainer of $20,000 and a meeting fee of $1,500 for each board meeting attended. The directors will also receive $1,000 for each committee meeting attended, with an additional annual retainer of $5,000 to the committee chairman. The Chairman of the Board will continue to receive an additional $100,000 retainer. The common stock contribution to the Associated Banc-Corp Director’s Deferred Compensation Plan will be $35,000 for 2005, an increase of $10,000.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information in the Corporation’s definitive Proxy Statement, prepared for the 2005 Annual Meeting of Shareholders, which contains information concerning directors of the Corporation under the caption “Election of Directors,” and information concerning executive officers of the Corporation under the caption “Information About the Executive Officers,” is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

The information in the Corporation’s definitive Proxy Statement, prepared for the 2005 Annual Meeting of Shareholders, which contains information concerning this item, under the captions “Executive Compensation,” “Report of the Administrative Committee on Executive Compensation,” “Shareholder Return Performance Presentation,” and “Compensation Agreements” is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information in the Corporation’s definitive Proxy Statement, prepared for the 2005 Annual Meeting of Shareholders, which contains information concerning this item, under the captions “Stock Ownership,” and “Equity Compensation Plan Information,” is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information in the Corporation’s definitive Proxy Statement, prepared for the 2005 Annual Meeting of Shareholders, which contains information concerning this item under the caption “Certain Relationships and Related Transactions,” is incorporated herein by reference.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

The information in the Corporation’s definitive Proxy Statement, prepared for the 2005 Annual Meeting of Shareholders, which contains information concerning this item under the caption “Report of the Audit Committee — Audit and Non-Audit Fees,” is incorporated herein by reference.

97

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, 2004 and 2003

Consolidated Statements of Income— For the Years Ended December 31, 2004, 2003, and 2002

Consolidated Statements of Changes in Stockholders’ Equity— For the Years Ended December 31, 2004, 2003, and 2002

Consolidated Statements of Cash Flows— For the Years Ended December 31, 2004, 2003, and 2002

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

(a) 3 Exhibits Required by Item 601 of Regulation S-K

Exhibit
Number		Description
	(3)(a)	Articles of Incorporation	Exhibit (3)(a) to Report on Form 10-K for fiscal year ended December 31, 1999
	(3)(b)	Articles of Amendment	Exhibit (3) to Current Report on Form 8-K filed on May 3, 2004
	(3)(c)	Bylaws	Exhibit (3)(b) to Report on Form 10-K for fiscal year ended December 31, 1999
	(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 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
	*(10)(a)	Associated Banc-Corp Amended and Restated Long-Term Incentive Stock Plan	Exhibit 99.1 to the Corporation’s registration statement (333-121012) on Form S-8 filed under the Securities Act of 1933
	*(10)(b)	Change of Control Plan of the Corporation effective April 25, 1994	Exhibit (10)(d) to Report on Form 10-K for fiscal year ended December 31, 1994
	*(10)(c)	Deferred Compensation Plan and Deferred Compensation Trust effective as of December 16, 1993, and Deferred Compensation Agreement of the Corporation dated December 31, 1994	Exhibit (10)(e) to Report on Form 10-K for fiscal year ended December 31, 1994

98

Exhibit
Number		Description
	*(10)(d)	Incentive Compensation Agreement (form) and schedules dated as of October 1, 2001	Exhibit (10)(e) to Report on Form 10-K for fiscal year ended December 31, 2001
	*(10)(e)	Employment Agreement between the Parent Company and Paul S. Beideman effective April 28, 2003	Exhibit (10)(f) to Report on Form 10-K for fiscal year ended December 31, 2003
	*(10)(f)	Associated Banc-Corp Directors’ Deferred Compensation Plan	Filed herewith
	*(10)(g)	Associated Banc-Corp 1999 Non-Qualified Stock Option Plan	Exhibit 99.1 to the Corporation’s registration statement (333-121010) on Form S-8 filed under the Securities Act of 1933
	*(10)(h)	Associated Banc-Corp 2003 Long-Term Incentive Plan	Exhibit 99.1 to the Corporation’s registration statement (333-121011) on Form S-8 filed under the Securities Act of 1933
	*(10)(i)	Associated Banc-Corp Incentive Compensation Plan	Filed herewith
	*(10)(j)	Separation Agreement and General Release, dated as of October 29, 2004, by and among First Federal Capital Corp, First Federal Capital Bank and Jack C. Rusch	Filed herewith
	*(10)(k)	Noncompete Agreement, dated as of October 29, 2004, by and among Associated Banc-Corp and Jack C. Rusch	Filed herewith
	*(10)(l)	Consulting Agreement, dated as of October 29, 2004, by and between Associated Bank and Jack C. Rusch	Filed herewith
	*(10)(m)	First Federal Director Deferred Compensation Plan	Incorporated by reference as Exhibit 10.2 to First Federal Capital Corp’s 2003 Form 10-K from the 1989 Form 10-K.
	*(10)(n)	2005 Compensation of Named Executive Officers of the Registrant	Filed herewith
	*(10)(o)	2005 Cash Compensation for Non- Management Directors of the Registrant	Filed herewith
	(11)	Statement Re Computation of Per Share Earnings	See Note 18 in Part II Item 8
	(21)	Subsidiaries of the Parent Company	Filed herewith
	(23)	Consent of Independent Registered Public Accounting Firm	Filed herewith
	(24)	Power of Attorney	Filed herewith

99

Exhibit
Number		Description
	(31.1)	Certification Under Section 302 of Sarbanes-Oxley by Paul S. Beideman, Chief Executive Officer	Filed herewith
	(31.2)	Certification Under Section 302 of Sarbanes-Oxley by Joseph B. Selner, Chief Financial Officer	Filed herewith
	(32)	Certification by the CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley.	Filed herewith

*  Management contracts and arrangements.

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.

100

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: March 16, 2005	By: /s/ PAUL S. BEIDEMAN Paul S. Beideman President and Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Paul S. Beideman Paul S. Beideman President and Chief Executive Officer	/s/ Ronald R. Harder* Ronald R. Harder Director
/s/ Joseph B. Selner Joseph B. Selner Chief Financial Officer Principal Financial Officer and Principal Accounting Officer	/s/ William R. Hutchinson* William R. Hutchinson Director
/s/ Karen T. Beckwith* Karen T. Beckwith Director	/s/ Richard T. Lommen* Richard T. Lommen Director
/s/ H.B. Conlon* H. B. Conlon Director	/s/ John C. Meng John C. Meng Director
/s/ Ruth M. Crowley* Ruth M. Crowley Director	/s/ J. Douglas Quick* J. Douglas Quick Director
/s/ Robert C. Gallagher* Robert C. Gallagher Chairman of the Board	/s/ Jack C. Rusch* Jack C. Rusch Director
* /s/ Brian R. Bodager Brian R. Bodager Attorney-in-Fact	/s/ John C. Seramur* John C. Seramur Vice Chairman
Date: March 16, 2005

101 EX-10.F 2 c92829exv10wf.htm DIRECTORS' DEFERRED COMPENSATION PLAN

Exhibit (10)(f)

ASSOCIATED BANC-CORP

DEFERRED COMPENSATION PLAN

Restated Effective January 1, 2001

ASSOCIATED BANC-CORP
DEFERRED COMPENSATION PLAN

TABLE OF CONTENTS

		Page
	ARTICLE 1
	ESTABLISHMENT OF PLAN AND PURPOSE
1.01	Establishment of Plan	1-1
1.02	Purpose of Plan	1-1
	ARTICLE 2
	DEFINITIONS AND CONSTRUCTION
2.01	Definitions	2-1
2.02	Construction	2-2
	ARTICLE 3
	ELIGIBILITY
3.01	Conditions of Eligibility	3-1
3.02	Commencement of Participation	3-1
3.03	Termination of Participation	3-1
	ARTICLE 4
	DEFERRAL OF COMPENSATION
4.01	Amount and Manner of Deferral	4-1
4.02	Cessation of Deferral	4-1

i

		Page
	ARTICLE 5
	MEMORANDUM ACCOUNT
5.01	Nature of Account	5-1
5.02	Credit to Memorandum Account	5-1
5.03	Changes in Memorandum Account	5-1
5.04	Valuation of Memorandum Account	5-2
5.05	Additional Credit	5-2
	ARTICLE 6
	DISTRIBUTIONS
6.01	For Reasons Other Than Death	6-1
6.02	Upon Death	6-1
6.03	Emergencies	6-3
6.04	Form of Payment	6-3
	ARTICLE 7
	ADMINISTRATION OF THE PLAN
7.01	Appointment of Separate Administrator	7-1
7.02	Powers and Duties	7-1
7.03	Records and Notices	7-2
7.04	Compensation and Expenses	7-2
7.05	Limitation of Authority	7-2
	ARTICLE 8
	GENERAL PROVISIONS
8.01	Assignment	8-1
8.02	Employment Not Guaranteed by Plan	8-1
8.03	Termination and Amendment	8-1
8.04	Contingency	8-1
8.05	Notice	8-1
8.06	Limitation on Liability	8-2
8.07	Indemnification	8-2
8.08	Headings	8-2
8.09	Severability	8-2

ii

		Page
	ARTICLE 9
	MERGER OF FIRST FINANCIAL CORPORATION
	DEFERRED COMPENSATION PLAN
9.01	Introduction	9-1
9.02	Merger	9-1
9.03	Investment	9-1
9.04	Beneficiary Designations	9-1
9.05	Distributions	9-1

iii

INTRODUCTION

     Effective December 16, 1993, Associated Banc-Corp (the “Company”) adopted a nonqualified deferred compensation plan (the “Plan”) to benefit certain of its employees by facilitating the accumulation of funds for their retirement. The Company restated the Plan in its entirety effective January 1, 1996. The Company again restated the Plan in its entirety effective January 1, 2001 to merge another nonqualified plan - the First Financial Corporation Deferred Compensation Plan - into the Plan.

     This introduction and the following Articles, as amended from time to time, comprise the Plan.

iv

ASSOCIATED BANC-CORP
DEFERRED COMPENSATION PLAN

ARTICLE 1

Establishment of Plan and Purpose

     1.01 Establishment of Plan. Associated Banc-Corp has established the “Associated Banc-Corp Deferred Compensation Plan,” effective as of December 16, 1993 (the “Plan”). The Plan was restated in its entirety effective as of January 1, 1996. The Company again restated the Plan in its entirety effective January 1, 2001 to merge another nonqualified plan - the First Financial Corporation Deferred Compensation Plan - into the Plan.

     1.02 Purpose of Plan. The Plan shall permit a select group of management and highly compensated employees to enhance the security of themselves and their beneficiaries following the termination of their employment with the Company (as defined herein) by deferring until that time a portion of the compensation which may otherwise be payable to them at an earlier date. By allowing key management employees to participate in the Plan, the Company expects the Plan to benefit it in attracting and retaining the most capable individuals to fill its executive positions.

     The parties intend that the arrangements described herein be unfunded for tax purposes and for purposes of Title I in the Employee Retirement Income Security Act, as amended from time to time.

1 - 1

ARTICLE 2

Definitions and Construction

     As used herein, the following words shall have the following meanings:

     2.01 Definitions.

          (a) Administrator. The person or persons selected pursuant to Article 7 below to control and manage the operation and administration of the Plan.

          (b) Beneficiaries. The spouse or descendants of Participant or any other person receiving benefits hereunder in relation to Participant.

          (c) Company. Associated Banc-Corp, a Wisconsin banking corporation and any subsidiary, successor or affiliate which has adopted this Plan and any successor thereto. The board of directors of Associated Banc-Corp has authorized the Administrative Committee of the board to act on behalf of the Company for purposes of the Plan.

          (d) Effective Date. The effective date of this Plan shall be December 16, 1993.

          (e) Employee. An employee of the Company.

          (f) Employment. Employment with the Company.

          (g) Incentive Compensation. Amounts payable to a Participant in addition to annual compensation. Such amounts shall be determined by the Company, in its sole discretion, as soon as possible but not later than ninety (90) days following the close of a calendar year.

          (h) Memorandum Account. The account maintained for each Participant pursuant to Article 5 below.

          (i) Participants. Such management and highly compensated Employees whom the Company identifies as eligible to defer compensation hereunder and who elect to participate herein. Also, any individual who was a participant in the First Financial Corporation Deferred Compensation

2 - 1

Plan and who had a frozen account balance under the First Financial Corporation Deferred Compensation Plan (“First Financial Frozen Account”) as of December 31, 2000 shall automatically qualify as a Participant in the Plan as of January 1, 2001, for purposes of the maintenance, investment and distribution of the First Financial Frozen Account as described in Article 9.

          (j) Plan. The Associated Banc-Corp Deferred Compensation Plan, as stated herein and as amended from time to time.

          (k) Plan Year. The period beginning on February 1, 1994 and ending on December 31, 1994, and each 12-month period ending on each subsequent December 31.

          (l) Retirement. As to each Participant, the earlier of:

               (i) his attaining age 70-1/2 or

               (ii) the termination of his Employment.

          (m) Trust. The Associated Banc-Corp Deferred Compensation Trust.

          (n) Trustee. The Trustee of the Associated Banc-Corp Deferred Compensation Trust.

          (o) Unforeseeable Emergency. An Unforeseeable Emergency is a severe financial hardship to a Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

     2.02 Construction. The laws of the State of Wisconsin, as amended from time to time, shall govern the construction and application of this Agreement. Words used in the masculine gender shall include the feminine and words used in the singular shall include the plural, as appropriate. The words “hereof,” “herein,” “hereunder” and other similar compounds of the word “here” shall refer to the entire Agreement, not to a particular section. All references to statutory sections shall include the section so identified as amended from time to time or any other statute of similar import. If any provisions of the Internal Revenue Code, Employee Retirement Income Security Act or other statutes or regulations render any provisions of this Plan unenforceable, such provision shall be of no force and effect only to the minimum extent required by such law.

2 - 2

ARTICLE 3

Eligibility

     3.01 Conditions of Eligibility. The Administrator shall prepare and maintain written guidelines for eligibility and selection for participation in the Plan, and shall maintain records of those individuals identified as eligible to participate.

     3.02 Commencement of Participation. By electing a deferral of compensation on the form approved by the Administrator:

          (a) an individual employed by the Company prior to January 1, 1999 and identified as eligible to participate may commence participation as of the first day of any Plan Year beginning on or after his identification as eligible for participation; or

          (b) an individual employed by the Company on or after January 1, 1999 and identified as eligible to participate may commence participation as of the latest of the following: (i) the first day of the month following 60 days of employment; or (ii) the first day of the month following his identification as eligible for participation; or (iii) August 1, 1999.

          A Participant may change a deferral election by submitting a new election form before the beginning of a new Plan Year. Once a Participant makes an identical deferral election for two consecutive Plan Years, that election will automatically renew each Plan Year until the Participant changes the election by submitting a new election form.

     3.03 Termination of Participation. An individual’s right to defer compensation hereto shall cease as of the earlier of the termination of his Employment or action by the Administrator removing him from the Employees eligible to participate herein.

          If an individual’s right to defer compensation terminates during a Plan Year, his deferral for such year shall, consistent with his deferral election for such year, include only salary or Incentive Compensation otherwise earned by him before the cessation of his eligibility to defer.

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ARTICLE 4

Deferral of Compensation

     4.01 Amount and Manner of Deferral. Prior to the commencement of any Plan Year beginning on or after the Effective Date, a Participant may submit to the Company a written election on the form approved by the Administrator indicating the amount of his salary or Incentive Compensation for such Plan Year which he elects deferred hereunder, which election shall become irrevocable immediately upon commencement of such Plan Year. The Company shall, consistent with such election, defer all or such portion of his salary and/or Incentive Compensation earned in such Plan Year provided; however, that the Company shall not allow a Participant to defer his salary and/or Incentive Compensation unless such deferral is at least equal to the amount determined by the Administrator in its current guidelines for participation in the Plan.

          If a Participant elects to defer a portion of his salary, the Company shall reduce the Participant’s regular salary by the amount deferred on a pro rata basis during the Plan Year of deferral. If a Participant elects to defer all or a portion of the Incentive Compensation that may become payable to him, the Company shall reduce each Incentive Compensation payment by the percentage elected by the participant.

     4.02 Cessation of Deferral. In the event of an Unforeseeable Emergency, a Participant may request in writing that deferrals elected by him hereunder cease for the then current Plan Year. Such Unforeseeable Emergency must inflict hardship upon the Participant and must arise from causes beyond the Participant’s control. The Administrator shall, in its reasonable judgment, determine whether such an Unforeseeable Emergency exists. Circumstances that will constitute an Unforeseeable Emergency will depend upon the facts of each case, consistent with the provisions of Treasury Regulation section 1.457-2(h)(4) and (5). If the Administrator determines that such an Unforeseeable Emergency exists, the deferrals for such Plan Year shall cease as to the Participant. If the Administrator determines that no such emergency exists, the deferrals shall continue as originally elected.

          If a Participant, consistent with the immediately preceding paragraph, ceases deferral in a Plan Year, he may not resume deferrals hereunder (if otherwise eligible therefor) until the second Plan Year following the Plan Year in which such cessation occurred.

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ARTICLE 5

Memorandum Account

     5.01 Nature of Account. Only for the purpose of measuring payments due Participants hereunder, the Company shall maintain on behalf of each Participant a Memorandum Account to which the Company shall credit the amounts described in this Article 5.

          The Memorandum Account hereunder and assets, if any and of any nature, acquired by the Company to measure a Participant’s benefits hereunder shall not constitute or be treated for any reason as a trust for, property of or a security interest for the benefit of, Participant, his Beneficiaries or any other person. Participant and the Company acknowledge that the Plan constitutes a promise by the Company to pay benefits to the Participants or their beneficiaries, that Participants’ rights hereunder (by electing to defer compensation hereunder) are limited to those of general unsecured creditors of the Company and that the establishment of the Plan, acquisition of assets to measure Participant’s benefits hereunder or deferral of all or any portion of Participant’s salary or Incentive Compensation hereunder does not prevent any property of the Company from being subject to the rights of all the Company’s creditors.

     5.02 Credit to Memorandum Account. As of the last day of each Plan Year, the Company shall credit to the Memorandum Account of each Participant the amount, if any, of his salary and/or Incentive Compensation deferred for such Plan Year (even if calculated and otherwise payable following the close of such Plan Year). If the Company elects, it may credit to a Participant’s Memorandum Account during a Plan Year amounts representing salary and Incentive Compensation otherwise payable before the end of the Plan Year. In such instances, the Company shall credit such amounts to Participants’ Memorandum Accounts as the amounts would otherwise become payable and shall do so on a uniform and nondiscriminatory basis for all Participants.

     5.03 Changes in Memorandum Account. Effective on and after January 1, 2001, each Participant may specify his investment preferences for his Memorandum Account by completing and submitting an Investment Preference Form provided by the Administrator. Final approval of the Participant’s investment selection is within the discretion of the Administrator, and the Trustee. The Participant’s Memorandum Account shall be adjusted to reflect the income and losses and increase or decrease in value experienced by assets as if the amounts were invested according to the Participant’s preferences, subject to final approval by the Administrator and Trustee. A Participant’s Memorandum Account

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shall also reflect expenses generated by, and related to, the investment choices made in accordance with the Investment Preference Form.

          No individual may commence participation herein as to the deferral of any amount without first submitting an election pursuant to this subsection 5.03. A Participant or, following his death, his Beneficiaries may continue submitting elections hereunder until the distribution of all amounts from his Memorandum Account. All elections must be in writing and must be signed by the Administrator.

     5.04 Valuation of Memorandum Account. Within 90 days after the last day of each Plan Year, the Company shall provide each Participant or his Beneficiaries a statement indicating the balance of his Memorandum Account as of the last day of such Plan Year, reflecting the amount of deferrals, if any, occurring for such year, together with all other changes in value during the Plan Year. Participants who disagree with the information provided in such statements must submit objections, in writing, to the Administrator within 90 days of receipt of such statements.

     5.05 Additional Credit. The Company may, in its sole discretion, credit to a Participant’s Memorandum Account amounts in addition to a Participant’s deferral of salary and/or Incentive Compensation. The name of the Participant and the amount of any such additional credit shall be recorded in the records kept by the Administrator.

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ARTICLE 6

Distributions

          6.01 For Reasons Other Than Death.

     The Company shall pay an amount equaling the entire balance of a Participant’s Memorandum Account to him in accordance with the Participant’s written Distribution Election on forms provided by the Administrator.

          6.02 Upon Death.

               (a) Upon a Participant’s death, either before or after his Retirement, with a balance remaining in his Memorandum Account, the Company shall pay an amount equaling the entire balance of his Memorandum Account to the beneficiary or beneficiaries he specifies or, if none, to his surviving spouse or, if none, to his estate. Each Participant may designate a beneficiary or beneficiaries to receive the unpaid balance of his Memorandum Account upon his death and may revoke or modify such designation at any time and from time to time by submitting to the Administrator a Beneficiary Designation on forms approved by the Administrator.

               (b) If a Participant’s death occurs prior to the payment of any amounts to him hereunder, other than payments for emergencies, and:

                    (i) payments are to be made to his estate, such payments shall occur in six annual installments beginning with a payment on the first day of the sixth month immediately following the Participant’s death of an amount equal to the estate and inheritance taxes attributed to the value of the entire balance of the Memorandum Account with the remainder thereof paid within the first 120 days in each of the five consecutive Plan Years beginning immediately thereafter. The amount of each such subsequent payment shall equal the quotient obtained upon dividing the balance in the Memorandum Account as of the first day of the Plan Year of payment by the number of installments then remaining to be paid (including the installment then being paid) in equal monthly installments, or

                    (ii) if payments are to be made to a beneficiary other than his estate, such payments shall occur in five annual installments occurring within the first 120 days of the Plan Year immediately following the Participant’s death and within the first 120 days of each of the four Plan Years immediately thereafter. The amount of each such payment shall equal the quotient obtained upon dividing the balance in the Memorandum Account as of the first day

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of the Plan Year of payment by the number of installments then remaining to be paid (including the installment then being paid).

               (c) If a Participant’s death occurs after the payment of any amount to him hereunder, other than payments for emergencies, payments to his Beneficiary shall occur in the same form, and be calculated in the same manner, as paid to the Participant prior to his death by merely substituting the new recipient for the Participant.

               (d) If, upon a Participant’s or Beneficiary’s death, the Plan or Trust receives the proceeds of a policy insuring the life of the deceased, the Company shall, as soon as practicable, pay over such proceeds to the appropriate Beneficiary or Beneficiary’s estate.

               (e) If a Beneficiary survives a Participant but dies prior to receipt of the entire amount in the Memorandum Account due him, the Company shall, as soon as practicable, pay to the estate of the Beneficiary in a lump sum the entire remaining balance therein due the Beneficiary.

               (f) The Administrator shall reduce the balance in the deceased Participant’s Memorandum Account by the amount of any payment pursuant to this section 6.02 immediately upon the occurrence of such payment.

          6.03 Emergencies. In the event of an Unforeseeable Emergency either before or after the commencement of payments hereunder, a Participant or Beneficiary may request in writing that all or any portion of the benefits due him hereunder be paid in one or more installments prior to the normal time for payment of such amount. The Administrator shall, in its reasonable judgment, determine whether the applicant could not address the emergency through reimbursement or compensation by insurance or otherwise, by liquidation of other assets (provided such liquidation, in itself, would not create a financial hardship) or by ceasing deferrals hereunder. Only if the Administrator determines that such an Unforeseeable Emergency exists, the Company shall pay to the Participant or Beneficiary, as the case may be, an amount equal to the lesser of (a) the amount requested or (b) the amount reasonably necessary to alleviate the hardship. The Administrator shall use its reasonable discretion to determine when the prepayments shall be made and shall immediately reduce the balance in the recipient’s Memorandum Account by the amount of such payment.

          6.04 Form of Payment. All payments made pursuant to this Plan shall be made in cash. The Plan does not permit distributions in a form other than cash.

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ARTICLE 7

Administration of the Plan

     7.01 Appointment of Separate Administrator. The board of directors of the Company has appointed the Administrative Committee (the “Committee”) of the board to serve as Administrator. The Company shall accept and rely upon any document executed by the Committee until the board revokes such appointment. No person serving on the Committee shall vote or decide upon any matter relating solely to himself or solely to any of his rights or benefits pursuant to the Plan.

     7.02 Powers and Duties. The Administrator shall administer the Plan in accordance with its terms. The Administrator shall have full and complete authority and control with respect to Plan operations and administration unless the Administrator allocates and delegates such authority or control pursuant to the procedures stated in subsection (b) or (c) below. Any decisions of the Administrator or its delegate shall be final and binding upon all persons dealing with the Plan or claiming any benefit under the Plan. The Administrator shall have all powers which are necessary to manage and control Plan operations and administration including, but not limited to, the following:

          (a) To employ such accountants, counsel or other persons as it deems necessary or desirable in connection with Plan administration. The Company shall bear the costs of such services and other administrative expenses.

          (b) To designate in writing persons other than the Administrator to perform any of its powers and duties hereunder.

          (c) To allocate in writing any of its powers and duties hereunder to those persons who have been designated to perform Plan fiduciary responsibilities.

          (d) The discretionary authority to construe and interpret the Plan, including the power to construe disputed provisions.

          (e) To resolve all questions arising in the administration, interpretation and application of the Plan, including, but not limited to, questions as to the eligibility or the right of any person to a benefit.

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          (f) To adopt such rules, regulations, forms and procedures from time to time as it deems advisable and appropriate in the proper administration of the Plan.

          (g) To prescribe procedures to be followed by any person in applying for distributions pursuant to the Plan and to designate the forms or documents, evidence and such other information as the Administrator may reasonably deem necessary, desirable or convenient to support an application for such distribution.

          (h) To apply consistently and uniformly Committee rules, regulations and determinations to all Participants and beneficiaries in similar circumstances.

     7.03 Records and Notices. The Administrator shall keep a record of all its proceedings and acts and shall maintain all such books of accounts, records and other data as may be necessary for proper plan administration. The Administrator shall notify the Company of any action taken by the Administrator which affects the Trustee’s Plan obligations or rights and, when required, shall notify any other interested parties.

     7.04 Compensation and Expenses. The expenses incurred by the Administrator in the proper administration of the Plan shall be paid from the Company. An Administrator who is an Employee shall not receive any additional fee or compensation for services rendered as an Administrator.

     7.05 Limitation of Authority. The Administrator shall not add to, subtract from or modify any of the terms of the Plan, change or add to any benefits prescribed by the Plan, or waive or fail to apply any Plan requirement for benefit eligibility.

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ARTICLE 8

General Provisions

     8.01 Assignment. No Participant or Beneficiary may sell, assign, transfer, encumber or otherwise dispose of the right to receive payments hereunder. A Participant’s rights to benefit payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or the Participant’s beneficiary.

     8.02 Employment Not Guaranteed by Plan. The establishment of this Plan, its amendments and the granting of a benefit pursuant to the Plan shall not give any Participant the right to continued Employment or limit the right of the Company to dismiss or impose penalties upon the Participant or modify the terms of Employment of any Participant.

     8.03 Termination and Amendment. The Company may at any time and from time to time terminate, suspend, alter or amend this Plan and no Participant or any other person shall have any right, title, interest or claim against the Company, its directors, officers or employees for any amounts, except that Participant shall be vested in his Memorandum Account hereunder as of the date on which the Plan is terminated, suspended, altered or amended and (unless the Company and Participant agree to the contrary) such amount shall (a) continue to fluctuate pursuant to the investment election then in effect and (b) be paid to the Participant or his Beneficiaries at the time and in the manner provided by Article 6 above.

     8.04 Contingency. The Company may apply for private rulings from the United States Department of Labor as to the exemption of the arrangement described herein from the reporting and disclosure requirements of ERISA and from the Internal Revenue Service as to the deductibility from taxable income of benefits paid hereunder or the exclusion of amounts deferred hereunder from the taxable income of Participant until paid. If the Company applies for a private letter ruling from the Department of Labor or Internal Revenue Service and does not receive a satisfactory reply thereto, the Company may deem this Plan terminated, in which event, the parties shall treat all amounts deferred hereunder as immediately payable to the Participants and all parties’ rights and obligations hereunder shall thereupon cease.

     8.05 Notice. Any and all notices, designations or reports provided for herein shall be in writing and delivered personally or by registered or certified

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mail, return receipt requested, addressed, in the case of the Company, its Board of Directors or Administrator, to the Company’s principal business office and, in the case of a Participant or Beneficiary, to his home address as shown on the records of the Company.

     8.06 Limitation on Liability. In no event shall the Company, Employer, Administrator or any Employee, officer or director of the Company incur any liability for any act or failure to act unless such act or failure to act constitutes a lack of good faith, willful misconduct or gross negligence with respect to the Plan.

     8.07 Indemnification. The Company shall indemnify the Administrator and any Employee, officer or director of the Company against all liabilities arising by reason of any act or failure to act unless such act or failure to act is due to such person’s own gross negligence, willful misconduct or lack of good faith in the performance of his duties to the Plan or trust. Such indemnification shall include, but not be limited to, expenses reasonably incurred in the defense of any claim, including attorney and legal fees, and amounts paid in any settlement or compromise; provided, however, that indemnification shall not occur to the extent that it is not permitted by applicable law. Indemnification shall not be deemed the exclusive remedy of any person entitled to indemnification pursuant to this section. The indemnification provided hereunder shall continue as to a person who has ceased acting as a director, officer, member, agent or Employee of the Administrator or as an officer, director or Employee of the Company, and such person’s rights shall inure to the benefit of his heirs and representatives.

     8.08 Headings. All articles and section headings in this Plan are intended merely for convenience and shall in no way be deemed to modify or supplement the actual terms and provisions stated thereunder.

     8.09 Severability. Any provision of this Plan prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. The illegal or invalid provisions shall be fully severable and this Plan shall be construed and enforced as if the illegal or invalid provisions had never been inserted in this Plan.

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ARTICLE 9

Merger of First Financial Corporation
Deferred Compensation Plan

     9.01 Introduction. The Company acquired First Financial Corporation effective October 29, 1997. The Company continued to maintain the First Financial Corporation Deferred Compensation Plan and Trust (the “First Financial Plan”) following the acquisition. Deferrals to the First Financial Plan were discontinued after the merger, and participants’ accounts were frozen (the First Financial Frozen Accounts). The former plan document for the First Financial Plan is attached to this Plan as an appendix.

     9.02 Merger. The First Financial Plan was merged into this Plan effective January 1, 2001, and the First Financial Frozen Accounts were transferred to this Plan as of the effective date of the merger. As soon as administratively practicable following the adoption of this restated Plan, the assets subject to Section VII of the document governing the First Financial Corporation Deferred Compensation Plan and Trust will be transferred to the Associated Banc-Corp Deferred Compensation Trust.

     9.03 Investment. Effective January 1, 2001, Participants with First Financial Frozen Accounts may direct investment of those accounts in accordance with Section 5.03 of this Plan.

     9.04 Beneficiary Designations. Participants with First Financial Frozen Accounts may file new Beneficiary Designations for those accounts by completing and filing forms provided by the Administrator for this purpose.

     9.05 Distributions. Distributions from the First Financial Frozen Accounts will be governed by Sections VI, IX, X and XI of the First Financial Plan document and the distribution elections for the First Financial Frozen Accounts previously made by Participants. The functions of the “Compensation Committee” with regard to distributions as described by the First Financial Plan shall be performed by the Administrator of this Plan. The merger of the First Financial Plan into this Plan shall not be construed to give the Participants an opportunity to change their distribution elections for the First Financial Frozen Accounts.

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ASSOCIATED BANC-CORP
DEFERRED COMPENSATION PLAN

     IN WITNESS WHEREOF, the Company, by its duly appointed officer, has caused this restatement of the Plan to be executed on this                      day of                                         , 2001.

ASSOCIATED BANC-CORP

By:

Title:

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EX-10.F

exv10wf

EX-10.I

Exhibit (10(i)

ASSOCIATED BANC-CORP INCENTIVE COMPENSATION PLAN

ARTICLE 1. PURPOSE.

     The purposes of the Plan are (i) to promote the success of the Company; (ii) to associate more closely the interests of certain key employees with those of the Company’s financial, performance, and service goals, (iii) to provide long-term incentives and rewards to those key employees of the Company and its affiliated units who are in a position to contribute to the long-term success and growth of the Company; (iv) to assist the Company in retaining and attracting key employees with requisite experience and ability; and (v) to provide solely Awards that are “qualified performance-based compensation” under Section 162(m) of the Code.

ARTICLE 2. DEFINITIONS.

     Section 2.01 “Award” means the cash incentive compensation paid or payable pursuant to the Plan.

     Section 2.02 “Award Formula” means one or more objective formulas or standards, as defined in Section 162(m) of the Code, established by the Committee for purposes of determining the amount of an Award with respect to a Performance Goal. An Award Formula based upon a percentage of a Participant’s base pay shall use the Participant’s base pay as of the date the Performance Goal is established. The Award Formula may include a modifier of the Award based upon the Company’s performance in relation to its peer group of companies, provided that such modifier satisfies the requirements of an objective formula as defined in Section 162(m) of the Code. Award Formulas may vary from Performance Period to Performance Period and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative.

     Section 2.03 “Award Schedule” means the Award Schedule established pursuant to Section 4.01.

     Section 2.04 “Beneficiary” mean the person(s) designated by the Participant, in writing on a form provided by the Committee, to receive payments under the Plan in the event of his death while a Participant or, in the absence of such designation, the Participant’s estate.

     Section 2.05 “Board” means the Board of Directors of the Company.

     Section 2.06 A “Change of Control” shall be deemed to have occurred on the date of the following transactions:

          (i) An offer is accepted, in writing, for a change in ownership of 25% or more of the outstanding voting securities of the Company;

          (ii) An offer is accepted, in writing, whereby the Company will be merged or consolidated with another corporation, and as a result of such anticipated merger or consolidation, less than 75% of the outstanding voting securities of the surviving or resulting corporation will be owned in the aggregate by the shareholders of the Company who owned such securities immediately prior to such merger or consolidation, other than

affiliates (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of any party to such merger or consolidation;

          (iii) An offer is accepted, in writing, whereby the Company sells at least 85% of its assets to any entity which is not a member of the control group of corporations, within the meaning of Code section 1563, of which the Company is a member; or

          (iv) An offer is accepted, in writing, whereby a person, within the meaning of sections 3(a)(9) or 13(d)(3) of the Exchange Act, acquires 25% or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially, or of record).

For purposes hereof, ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) (relating to options) of the Exchange Act.

     Section 2.07 “Code” means the Internal Revenue Code of 1986, as amended.

     Section 2.08 “Committee” means the Administrative Committee of the Board or such other committee or subcommittee of the Board designated by the Board to administer the Plan. The Committees for purposes of this Plan shall be composed of not less than two directors, each of whom is intended to be an “outside director” within the meaning of Code Section 162(m).

     Section 2.09 “Company” means Associated Banc-Corp and its successors.

     Section 2.10 “Covered Employee” means a covered employee within the meaning of Code Section 162(m)(3).

     Section 2.11 “Eligible Employee” means a key employee of the Company.

     Section 2.12 “Establishment Period” means, with respect to a Performance Period applicable to any Performance Grant under the Plan, the period commencing on or before the first day of such Performance Period and ending on the earlier to occur of (i) 90 days after the commencement of the Performance Period and (ii) the date upon which twenty-five percent (25%) of the Performance Period shall have elapsed.

     Section 2.13 “Participant” means an Eligible Employee selected from time to time by the Committee to participate in the Plan.

     Section 2.14 “Performance Goal” means the target, goal or level of performance established by the Committee with respect to a Performance Measure for a Performance Period. The outcome of a Performance Goal shall be substantially uncertain when established by the Committee. Performance Goals shall be adjusted automatically, without discretion by the Committee, in the event of a dividend or stock split. Performance Goals may vary from Performance Period to Performance Period and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative.

     Section 2.15 “Performance Grant” means the grant to an Eligible Employee of an opportunity to participate in a particular Performance Goal with respect to a particular Performance Period.

     Section 2.16 “Performance Measure” means one or more of the following selected by the Committee to measure Company performance for a Performance Period: basic or diluted earnings per share, revenue growth, return on equity and stock price. Performance Measures are determined in accordance with generally accepted accounting principles as consistently applied by the Company. Prior to the expiration of the Establishment Period, the Committee may provide for a mandatory adjustment of a Performance Measure to omit the effects of extraordinary items (other than a stock dividend or stock split), gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles. Performance Measures may vary from Performance Period to Performance Period and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative.

     Section 2.17 “Performance Period” means one or more periods of time, as the Committee may designate, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to payment of an Award.

     Section 2.18 “Plan” means the Associated Banc-Corp Incentive Compensation Plan. Section 2.10 “Plan Year” means the Company’s fiscal year.

     Section 2.20 “Retirement” means any date on which an employee retires under the terms and conditions of the Company’s Profit Sharing & 401(k) Plan provided, however, that the employee has attained age 55 as of such date.

     Section 2.21 “Total Disability” means a finding by the Committee that a Participant meets the standard for Total Disability as provided in the Associated Banc-Corp Long-Term Disability Plan.

ARTICLE 3. PARTICIPATION.

     Participants shall be selected by the Committee and shall only include Eligible Employees. The selection of a Participant for a Performance Grant shall not entitle such individual to be selected as a Participant with respect to any other Performance Grant.

ARTICLE 4. AWARDS.

     Section 4.01 Award Schedules. For each Performance Period with respect to which an Award may be earned by a Participant under the Plan, prior to the expiration of the Establishment Period, the Committee shall establish the Performance Grants in writing for such Performance Period by preparing an Award Schedule for each Participant. The Award Schedule shall set forth the applicable Performance Period, Performance Measure(s), Performance Goal(s), Award Formula(s), and such other information (including a peer group modifier, if applicable) as the Committee may determine. Once established for a Performance Period, such items shall not be amended or otherwise modified. Award Schedules may vary from Performance Period to Performance Period and from Participant to Participant.

     Section 4.02 Performance Grant Agreement. Performance Grants shall be evidenced by a separate written agreement between the Company and the Participant, in such form and contain such terms and conditions (not inconsistent with the Plan) as the Committee may require. An

agreement executed pursuant to this section shall include a copy of the Award Schedule with respect to the Participant and such other information as the Committee may determine is necessary and appropriate.

     Section 4.03 Certification of Awards. A Participant shall be eligible to receive payment of an Award only when the Performance Goal(s) are achieved and the Committee determines, pursuant to the Award Formula, that all or some portion of such Participant’s Award has been earned for the Performance Period. As soon as administratively feasible after the close of each Performance Period, the Committee shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, to calculate and certify in writing the amount of the Award earned by each Participant for such Performance Period based upon such Participant’s Award Formula. The Committee shall then determine the actual amount of the Award to be paid to each Participant and, in so doing, may use discretion to decrease, but not increase, the amount of the Award otherwise payable to the Participant based upon such performance. The maximum Award payable to any Participant with respect to each Plan Year (or portion thereof) contained within a Performance Period shall be $3,000,000.

     Section 4.04 Payment of Awards. Awards shall be paid in a lump sum cash payment as soon as administratively feasible after the amount thereof has been determined and certified in accordance with Section 4.03.

ARTICLE 5. ADMINISTRATION.

     Section 5.01 In General. The Committee shall have full and complete authority, in its sole and absolute discretion, (i) to exercise all of the powers granted to it under the Plan; (ii) to construe, interpret and implement the Plan and any related document; (iii) to prescribe, amend, and rescind rules relating to the Plan; (iv) to make all determinations necessary or advisable in administering the Plan; and (v) to correct any defect, supply any omission, and reconcile any inconsistency in the Plan.

     Section 5.02 Determinations. The actions and determinations of the Committee or others to whom authority is delegated under the Plan on all matters relating to the Plan and any Performance Grants shall be final and conclusive. Such determinations need not be uniform and may be made selectively among persons who receive, or are eligible to receive, Performance Grants under the Plan, whether or not such persons are similarly situated.

     Section 5.03 Appointment of Experts. The Committee may appoint such accountants, attorneys, and other experts as it deems necessary or desirable in connection with the administration of the Plan.

     Section 5.04 Delegation. The Committee may delegate to others the authority to execute and deliver such instruments and documents, to do all such acts and things, and to take all such other steps deemed necessary, advisable or convenient for the effective administration of the Plan in accordance with its terms and purposes, except that the Committee shall not delegate any authority with respect to duties it is required to perform under Section 162(m) of the Code.

     Section 5.05 Books and Records. The Committee and others to whom the Committee has delegated such duties shall keep a record of all their proceedings and actions and shall

maintain all such books of account, records, and other data as shall be necessary for the proper administration of the Plan.

     Section 5.06 Payment of Expenses. The Company shall pay all reasonable expenses of administering the Plan, including, but not limited to, the payment of professional and expert fees.

     Section 5.07 Code Section 162(m). Except for payments made pursuant to Section 6.02, it is the intent of the Company that this Plan and Awards satisfy the applicable requirements of “performance-based compensation” under Code Section 162(m) so that the Company’s tax deduction for remuneration in respect of this Plan for services performed by Participants who are or may be Covered Employees is not disallowed in whole or in part by the operation of such Code section. If any provision of this Plan or if any Award would otherwise frustrate or conflict with such intent, that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict, and, to the extent of any remaining irreconcilable conflict with such intent, that provision shall be deemed void as applicable to such Covered Employees. With respect to any Award under the Plan that does not qualify as performance-based compensation for purposes of Code section 162(m), the Committee is authorized to defer payment of such Awards, generally until the Participant terminates employment.

ARTICLE 6. TERMINATION OF EMPLOYMENT AND
CHANGE OF CONTROL.

     Section 6.01 Termination of Employment. In the event of the termination of employment of a Participant due to death, Total Disability, or Retirement, the Participant shall receive a prorated portion of the Award, based upon the length of the Participant’s employment during the Performance Period. The Committee will determine the amount of the prorated award by multiplying the amount of the award that would have been earned, determined at the end of the Performance Period, by a fraction. The numerator of the fraction equals the number of whole months such Participant was employed during the Performance Period. The denominator of the fraction equals the total number of months of the Performance Period. This Section 6.01 shall apply only if the Company meets the Performance Goal (or the minimum of the performance range, if any) specified in the Performance Grant. The Participant will receive no Award if the Company does not meet the Performance Goal specified in the Performance Grant. Except as otherwise provided in the Plan, no Award with respect to a Performance Period will be payable to any Participant who is not an employee of the Company on the last day of such Performance Period.

     Section 6.02 Change of Control. Awards shall become immediately payable upon a Change of Control. If the Change of Control occurs during a Performance Period, the Committee shall meet to determine if the Performance Goal is partially satisfied or is likely to be fully satisfied based upon the Company’s performance to that date. If the Committee determines that the Performance Goal is partially satisfied or is likely to be fully satisfied, the Committee shall certify this determination in writing, and a prorated portion of the Award shall become immediately payable. The prorated portion of the Award shall be determined pursuant to the fraction described in Section 6.01, except that the numerator shall include the whole number of months that have elapsed during a Performance Period and prior to the Change of Control. Notwithstanding any other provision of the Plan, the Committee shall not have discretion to reduce the amount of Awards if a Change of Control occurs during a Performance Period and/or before the Performance Goal is certified in accordance with Section 4.03.

ARTICLE 7. MISCELLANEOUS.

     Section 7.01 Nonassignability. Except as otherwise provided in the Plan, no Performance Grant or Award shall be assignable or transferable (including pursuant to a pledge or security interest) other than by will or by laws of descent and distribution.

     Section 7.02 Withholding Taxes. The Company shall be entitled, if necessary or desirable, to withhold from any Participant, from any amounts due and payable by the Company to such Participant (or secure payment from such Participant in lieu of withholding), the amount of any withholding or other tax due from the Company with respect to any Award under the Plan.

     Section 7.03 Amendment or Termination of the Plan. The Plan may be amended or terminated by the Board in any respect except that (i) no amendment may be made after the date on which an Eligible Employee is selected as a Participant for a Performance Period that would adversely affect the rights of such Participant with respect to such Performance Period without the consent of the affected Participant, (ii) no amendment to increase the maximum Award payable under the Plan shall be effective without the approval of the shareholders of the Company or if, in the opinion of counsel to the Company, such approval is necessary to satisfy the intent set forth in Section 5.07, and (iii) the Plan may not be amended or terminated for two years after the date a Change of Control occurs.

     Section 7.04 Other Payments or Awards. Nothing contained in the Plan will be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.

     Section 7.05 Payments to Other Persons. If payments are legally required to be made to any person other than the person to whom any amount is payable under the Plan, such payments will be made accordingly. Any such payment will be a complete discharge of the liability of the Company under the Plan.

     Section 7.06 Unfunded Plan. Nothing in this Plan will require the Company to purchase assets or place assets in a trust or other entity to which contributions are made or otherwise to segregate any assets for the purpose of satisfying any obligations under the Plan. Participants will have no rights under the Plan other than as unsecured general creditors of the Company.

     Section 7.07 No Fiduciary Relationship or Responsibility. The Plan is not subject to ERISA. Under ERISA and related federal laws, the Company is not a fiduciary with respect to the Plan, and has no fiduciary obligation with respect to any Participant, beneficiary, or other person claiming a right hereunder. Further, nothing herein contained, and no action or inaction arising pursuant hereto, shall give rise under state or federal law to a trust of any kind or create any fiduciary relationship of any kind or degree for the benefit of Participants, any beneficiary, or any other person.

     Section 7.08 Limits of Liability and Indemnity. Neither the Board nor the Committee, nor any members of either, nor any employees of the Company or its affiliated units, shall be liable for any act, omission, interpretation, construction, or determination made in good faith in connection with their responsibilities with respect to the Plan, and the Company hereby agrees to indemnify the members of the Board, the members of the Committee, and the employees of the Company and its affiliated units with respect to any claim, loss, damage, or expense (including counsel fees) arising from any such act, omission, interpretation, construction or determination

with respect to the Plan or any action taken pursuant to it to the full extent permitted by law and the Articles of Incorporation of the Company.

     Section 7.09 Right to Awards. No employee of the Company or its affiliated units or other person shall have any claim or right to be a Participant in this Plan or to be granted a Performance Grant or Award hereunder. Neither the adoption of this Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ of the Company or any affiliated unit nor shall the grant of any Performance Grant or Award hereunder constitute a request or consent to postpone the retirement date of a Participant. Nothing contained hereunder shall be construed as giving any Participant or any other person any equity or interest of any kind in any assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person. As to any claim for any unpaid amounts under the Plan, any Participant or any other person having a claim for payments shall be an unsecured creditor.

     Section 7.10 Section Headings. Section headings used herein are for convenience and reference only, and in the event of any conflict, the text of the Plan, rather than the section headings, will control.

     Section 7.11 Severability. Whenever possible, each provision of this Plan shall be interpreted in such manner as to be effective and valid under applicable law; provided, however, that if any provision of this Plan shall be held to be prohibited or invalid under such applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Plan.

     Section 7.12 Applicable Law. This Plan shall be governed, administered, construed and enforced according to the laws of the United States and the State of Wisconsin to the extent not preempted by the laws of the United States.

     Section 7.13 Transfers and Leaves. A change in employment or service from the Company to an affiliated unit of the Company, or vice versa, shall not constitute termination of employment or service for purposes of the Plan. Furthermore, the Committee (or Board in case of a member of the Committee) may determine that for purposes of the Plan, a Participant who is on leave of absence will still be considered as in the continuous employment or service of the Company.

     Section 7.14 Effective Date/Term. The Plan shall become effective upon its adoption by the Committee and the Company, subject to shareholder approval of the Plan as described below.

Adopted by the Administrative Committee of the Board of Directors: March 4, 2003.

Adopted by the Board of Directors: March 4, 2003.

Approved by Shareholders at the April 23, 2003 Annual Meeting.

EX-10.J

EXHIBIT (10)(j)

SEPARATION AGREEMENT AND GENERAL RELEASE

     THIS SEPARATION AGREEMENT AND GENERAL RELEASE (“Release”) is entered into by and among FIRST FEDERAL CAPITAL CORP, its successor and assigns (“Capital Corp”), FIRST FEDERAL CAPITAL BANK (f/k/a First Federal Capital Bank), its successor and assigns (“Capital Bank”) and JACK C. RUSCH (“Mr. Rusch”) as of this 29th day of October, 2004.

RECITALS

     The parties acknowledge the following:

          A. Capital Corp and Mr. Rusch are parties to an Employment Agreement dated July 1, 2001 attached hereto as Schedule 1 and Capital Bank and Mr. Rusch are parties to an Employment Agreement dated July 1, 2001 attached hereto as Schedule 2 (collectively, the “Employment Agreements”).

          B. Capital Corp and Associated Banc-Corp (“Associated”) have entered into an Agreement and Plan of Merger (the “Merger Agreement”) as of April 27, 2004, which Merger Agreement contemplates the merger of the Capital Corp into Associated (the “Merger”).

          C. Associated desires that Capital Corp, Capital Bank and Mr. Rusch affect a final resolution and settlement of all matters and issues relating directly or indirectly to the Employment Agreements and Mr. Rusch’s employment with Capital Corp and Capital Bank and his separation from that employment prior to the effective time of said Merger.

AGREEMENTS

     In consideration of the Recitals and mutual agreements which follow, the parties agree as follows:

     1. Effective Time. This Release shall become effective only upon consummation of the Merger and upon such consummation shall have the same effective time (“Effective Time”) as said Merger.

     2. Termination of Employment Agreements. As of the Effective Time, the Employment Agreements and all of the respective rights and obligations of Capital Corp, Capital Bank, and Mr. Rusch thereunder shall cease and terminate.

Mr. Rusch acknowledges and agrees that he is not entitled to any further compensation or payment pursuant to the terms of the Employment Agreements.

     3. Acknowledgment of Full Compensation. Mr. Rusch acknowledges and agrees that he received from Capital Corp. and Capital Bank all wages, fringe benefits (including without limitation by enumeration vacation pay, insurance benefits, retirement and pension benefits, stock options, severance pay, bonus payments, and expense reimbursement) and all other compensation owed by Capital Corp. and Capital Bank to Mr. Rusch through and including the date of this Release. Mr. Rusch further confirms that he is not entitled to any further compensation arising out of his employment.

     4. Consideration. Conditioned upon Mr. Rusch’s signing of this Release and his return of the Release to Capital Corp. and/or Capital Bank, expiration of the seven-day revocation period without revocation, and Mr. Rusch’s properly executing and returning the attached acknowledgment form to Capital Corp. and/or Capital Bank (Schedule 3) indicating his decision not to revoke this Release, Mr. Rusch shall receive the following lump sum cash payments and benefits:

(A)	a lump sum cash payment of $449,074.81, less ordinary tax withholding and all required deductions;
(B)	a lump sum cash payment of $339,000 for “Rule of 90” benefit, less ordinary tax withholding and all required deductions;
(C)	a cash payment for retirement and other fringe benefits of $1,042,000, reduced by the fair market value of any split-dollar life insurance transferred to the Executive and less ordinary tax withholding and all required deductions;
(D)	a lump sum cash payment calculated based on the Exchange Ratio as defined in Section 1.10 of the Merger Agreement, representing the value of the cancellation of Executive’s stock options in Capital Corp which were granted on April 20, 2004 (which options become fully vested upon consummation of the Merger), less ordinary tax withholding and all required deductions;
(E)	a lump sum cash payment representing the value of or the cancellation of Executive’s restricted stock in Capital Corp which was awarded on April 20, 2004, less ordinary tax withholding and all required deductions; and

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(F)   Executive, Executive’s Spouse and Executive’s Dependents shall be eligible to participate in Associated’s group health and dental plans for Executive’s lifetime, subject to the terms, provisions and limitations of such plans, to the extent such terms, provisions and limitations applicable to current employees of Associated. Associated shall pay the entire premium associated with such coverage for Executive and Executive’s Spouse and Dependents under the plans for the Executive’s and Spouse’s lifetime.

All cash payment shall be made within 10 days of the date hereof. These payments shall not be deemed “compensation” for purposes of any of either Capital Corp or Capital Bank’s qualified retirement plans or other benefit programs, and payment of this severance pay does not entitle Executive to any retirement plan contributions by Capital Corp and Capital Bank for Executive’s benefit or account.

     5. Confidentiality and Non-Disclosure. Mr. Rusch agrees that this Release, and its terms and provisions, are strictly confidential and shall not be divulged or disclosed in any way to any person other than his spouse, legal counsel, or tax advisor, except as required by law. Should Mr. Rusch choose to divulge the terms and conditions of this Release to his spouse, legal counsel, or tax advisor, he shall insure that they will be similarly bound to keep the same confidential. A breach of this paragraph by Mr. Rusch’s spouse, legal counsel, or tax advisor shall be considered a breach of this paragraph by Mr. Rusch.

     6. Non-Admission of Liability. Neither this Release nor any action taken by Capital Corp. or Capital Bank pursuant to it shall in any way be construed as an admission by Capital Corp. or Capital Bank of any liability, wrongdoing, or violation of law, regulation, contract or policy regarding any of Capital Corp. or Capital Bank’s decisions and actions regarding the employment or separation from employment of Mr. Rusch or termination of the Employment Agreements.

     7. Release. Excepted as specifically provided in paragraphs 16 and 18 of the Release, for valuable consideration from Capital Corp. and Capital Bank as stated above, Mr. Rusch, for himself and his heirs, personal representatives, successors and assigns, hereby releases all claims of whatever nature that he may have against Capital Corp. or Capital Bank, their affiliates, subsidiaries, predecessors, successors and assigns and their present, former or later insurers, agents, representatives, officers, administrators, directors, principals and employees (collectively “Releasees”), which arise out of or are in any manner based upon or related to the employment relationship between Mr. Rusch, Capital Corp. or Capital Bank, and his separation from Capital Corp. and Capital Bank,

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and from all other claims or liabilities of any nature whatsoever which have arisen from any occurrence, transaction, omission or communication which transpired or occurred at any time before or on the date of this Release; provided, however, that this Release will not prevent any party from asserting a claim against the other party in the event the other party breaches this Release.

           Excepted as specifically provided in paragraphs 16 and 18 of the Release, without limitation, Mr. Rusch specifically releases, waives and forever discharges the above-listed entities and persons from and against all liabilities, claims, actions, demands, damages and costs of every nature, whether known or unknown, asserted or unasserted, which arise under the Wisconsin Fair Employment Act; Wisconsin wage and hour laws; Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act (29 U.S.C. § 621, et seq.); the Americans With Disabilities Act; the Fair Labor Standards Act; the Equal Pay Act; state or federal parental, family and medical leave acts; or arising under any other local, state or federal statute, ordinance, regulation or order, or which involve a claim or action for wrongful discharge, breach of contract (express or implied) and/or any other tort or common law cause of action. This waiver and release does not affect those rights or claims that arise after the execution of this Release.

     8. No Pending Matters. Mr. Rusch warrants and represents that he has not filed any pending complaint, charge, claim or grievance concerning his compensation, separation from employment or terms and conditions of employment against Capital Corp. or Capital Bank with any local, state or federal agency, court or commission, and that if any agency, commission or court assumes jurisdiction of any such complaint or charge on behalf of Mr. Rusch relating to the claims released in Section 5, he will request that agency, commission, or court to dismiss such proceeding.

     9. Binding Agreement. This Release shall be binding upon Mr. Rusch and upon his heirs, administrators, representatives, executors, successors and assigns and shall inure to the benefit of the Releasees and to their heirs, administrators, representatives, executors, successors and assigns.

     10. Severability. It is understood and agreed that the provisions of this Release shall be deemed severable, and the invalidity or unenforceability of any one or more of the provisions herein shall not affect the validity and enforceability of the other provisions herein.

     11. Complete and Exclusive Agreement. The parties understand and agree that this Release is final and binding and constitutes the complete and exclusive statement of the terms and conditions of separation, that no

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representations or commitments were made by the parties to induce this Release other than as expressly set forth herein. This Release may not be modified or supplemented except by a subsequent written agreement signed by the party against whom enforcement is sought.

     12. Consideration Period. Mr. Rusch represents that he has had the opportunity and time to consult with legal counsel concerning the provisions of this Release and that he has been given up to twenty-one (21) days to consider this Release.

     13. Further Assurances. The parties hereto shall take such additional actions and execute and deliver such additional documents as may be reasonably necessary or desirable to consummate the transactions contemplated by this Release.

     14. Governing Law. This Release shall be governed by, and construed in accordance with, the laws of the State of Wisconsin, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

     15. Acknowledgment. The undersigned parties acknowledge and agree that they have carefully read the foregoing document, that a copy of the document was available to them prior to execution, that they understand its contents including its release of claims, that they have been given the opportunity to ask any questions concerning the Release and its contents, and that they have signed this Release as their free and voluntary act.

     16. Reimbursement Payment. If the payments or value of all or any part of the Total Payments becomes subject to any tax imposed pursuant to Section 4999 of the Internal Revenue Code (the “Excise Tax”), Executive shall be entitled to an additional amount (the “Reimbursement Payment”) such that the net amount retained by Executive after deduction of (i) any Excise Tax; (ii) any federal, state, or local income tax, interest charges or penalties arising in respect to imposition of such Excise Tax; (iii) any federal, state or local income tax or Excise Tax imposed upon the payment provided for in this Section 16, necessary to place Mr. Rusch in the same after-tax financial position he would have been in if he had not incurred any liability for the Excise Tax.

For this purpose, “Total Payments” means together any payments or the value of any benefits provided to Mr. Rusch by Capital Bank, Capital Corp and their successors and assigns under this Release or any other agreement, including but not limited to any amount or value attributable to the vesting of stock options and restricted stock and to which said Excise Tax applies by reason of Section 280G of the Internal Revenue Code.

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For purposes of determining the amount of Reimbursement Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Reimbursement Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s domicile for income tax purposes on the date the Reimbursement Payment is made, net of the maximum reduction of federal income taxes that could be obtained from deduction of such state and local taxes.

The Reimbursement Payment shall be made on the earlier of (i) 30 days following the determination of the Reimbursement Payment, or (ii) the date the Executive is required to pay or deposit any sum with respect to the Excise Tax. In the event the Reimbursement Payment exceeds the amount actually required (“Overpayment”) or that an additional amount should have been paid (“Underpayment”), the amount of the Overpayment or Underpayment shall be treated as a loan from one party to the other, as the case may be, and shall be promptly repaid by the other at such time as finally determined, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Internal Revenue Code.

     17. Cooperation. The Executive shall make all reasonable efforts to cooperate with Capital Corp., Capital Bank and all successors and assigns in preventing and defending against the application of any tax imposed pursuant to Section 4999 of the Internal Revenue Code. Such efforts shall include, but not be limited to, the following:

(A)	In reporting and paying Executive’s federal, state and local income tax on the payments or value of any benefits provided under this Agreement, Executive shall be obligated to report to any applicable taxing authority in accordance with the directions of Associated, which directions shall be consistent with applicable law and these Agreements.
(B)	The Executive shall not agree or consent to any tax assessment by any taxing authority that is inconsistent with a reporting position directed under Section 17(A) above, without the written approval of Associated.
(C)	The Executive shall allow Associated, at its option (and at Associated’s expense), to control and defend against any tax audit that purports to subject any payment described in this Agreement to tax under Section 4999 of the Internal Revenue Code.

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     If the Executive fails to abide by any of the agreements contained in Section 17(A), (B) or (C) above, or if the Executive has misrepresented or fails to abide by his agreement in Section 3 above, and as a result, any payment becomes subject to tax under Section 4999 of the Internal Revenue Code, the Executive shall have no right to receive any Reimbursement Payment under Section 16 above.

     18. Non-Applicability to Certain Benefits. Notwithstanding anything in this Release to the contrary, this Release shall not apply to:

a.

Benefit Plans. Any claims for benefits: (i) pursuant to any retirement benefit plan maintained by Capital Corp or Capital Bank and that is intended to be a tax-qualified plan under Section 401 of the Internal Revenue Code (including the lump-sum payment features); (ii) pursuant to the terms of any medical plan of the Capital Bank with respect to claims; (iii) pursuant to the supplemental executive retirement plan maintained by the Capital Bank; and (iv) for vacation which has accrued as of the Effective Time.

b.

Options. Including the Options described in Section 4(D), Executive currently holds options with respect to a total of 180,580 shares. Such options shall be cashed-out unless converted into options with respect to Associated Common Stock in accordance with Section 1.10 of the Merger Agreement. The following schedule identifies the grant date of each option, the exercise price, the number of shares, the current expiration date to which the option is subject, and the type of option (ISO or NSO).

		Number of
Date of Grant	Option Price	Shares	Expiration Date	Type of Option
April 20, 2004	$20.11	14,916	April 20,2014	ISO
January 27, 1998	$14.75	10,872	January 27, 2008	NSO
August 1, 2000	$11.00	41,820	August 1, 2010	NSO
April 20, 2004	$20.11	52,584	April 20, 2014	NSO
April 24, 2001	$14.06	60,388	April 24, 2011	NSO

     All options shall continue to be subject to the terms of Capital Corp Stock Option Plan under which they were respectively issued, as amended, except as otherwise agreed to and provided in the

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	Merger Agreement and the Conversion Agreement contemplated thereby.
c.	2002 Restricted Stock. Executive currently holds 7,500 shares of restricted stock granted on April 8, 2003, on account of work performed during the 2002 calendar year or earlier (all of which shares shall become fully vested upon consummation of the Merger). The following schedule identifies the grant date of each share, the number of shares, and the vesting status (or date) of each share.

	Number of	Vesting Status (or Future
Date of Grant	Shares	Vesting Date)
April 8, 2003	7,500	January 1, 2005

     IN WITNESS WHEREOF, the parties herein executed this Separation Agreement and General Release as of the date appearing next to their signatures.

	FIRST FEDERAL CAPITAL CORP
Date: 10/29/04	BY	/s/ Bradford R. Price
		Its Exec Vice Pres & Sec
	FIRST FEDERAL CAPITAL BANK
Date: 10/29/04	BY	/s/ Bradford R. Price
		Its Exec Vice Pres & Sec

CAUTION: THIS IS A RELEASE. CAPITAL CORP. AND CAPITAL BANK HEREBY ADVISES MR. RUSCH TO CONSULT
WITH AN ATTORNEY AND READ IT BEFORE SIGNING. THIS RELEASE MAY BE REVOKED IN WRITING BY MR. RUSCH WITHIN SEVEN (7) DAYS OF HIS EXECUTION OF THE DOCUMENT.

Dated: 10/29/04	/s/ Jack C. Rusch
	Jack C. Rusch

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SCHEDULE 1

[Employment Agreement between Capital Corp and Executive]

SCHEDULE 2

[Employment Agreement between Capital Bank and Executive]

SCHEDULE 3

SEVEN DAY RIGHT TO REVOCATION
ACKNOWLEDGMENT FORM

     I, Jack C. Rusch, hereby acknowledge that First Federal Capital Corp. and First Federal Capital Bank each has tendered a Separation Agreement and General Release offer which I voluntarily agreed to accept on _______, 2004, a date at least seven days prior to today’s date.

     I certify that seven calendar days have elapsed since my voluntary acceptance of the above-referenced offer (i.e., seven days have elapsed since the above date), and that I have voluntarily chosen not to revoke my acceptance of the above-referenced Separation Agreement and General Release.

     Signed this                     day of                     , 2004 at                     ,                     .

                                                            
Jack C. Rusch

EX-10.K

EXHIBIT (10)(k)

NONCOMPETE AGREEMENT

     THIS NONCOMPETE AGREEMENT (this “Agreement”) is dated as of October 29, 2004 by and among ASSOCIATED BANC-CORP., a Wisconsin corporation (“Associated”) and JACK C. RUSCH (“Mr. Rusch”).

RECITALS

     A. Mr. Rusch owns shares of the issued and outstanding common stock of First Federal Capital Corp., a Wisconsin corporation, the sole shareholder of First Federal Capital Bank (collectively, “First Federal”).

     B. First Federal engaged in the business of providing financial services (the “Business”).

     C. Associated and First Federal are parties to that certain Agreement and Plan of Merger dated as of the date hereof (the “Merger Agreement”) pursuant to which First Federal will be merged with and into Associated and Associated shall continue as the surviving corporation.

     D. Mr. Rusch acknowledges that he has (1) been an executive level employee of First Federal (2) had access to confidential information of First Federal and (3) extensive experience and knowledge of the Business that he could use to compete with Associated (as successor to First Federal) after the Closing Date (as defined in the Merger Agreement).

     E. Associated and Mr. Rusch acknowledge that their entry into this Agreement is a condition to the consummation of the transactions contemplated by the Merger Agreement. Mr. Rusch further acknowledges that he has entered into a Consulting Agreement (attached hereto as Exhibit A), the term of which runs concurrently with the obligations contained herein, and that entry into this Agreement is a condition of Associated entering into the Consulting Agreement. Mr. Rusch acknowledges that during the term of the Consulting Agreement, he owes Associated a common law duty of loyalty, in addition to the obligations contained herein.

     F. Associated and Mr. Rusch deem it to be in the best interest of all parties to limit the ability of Mr. Rusch to compete with Associated after the date hereof as a result of the consummation of the transactions contemplated by the Merger Agreement.

AGREEMENTS

     In consideration of the Recitals and mutual promises set forth below and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

     1. Consideration. Mr. Rusch shall receive $62,500 per month over the term of this Agreement in exchange for agreeing to the terms of this Agreement (the “Noncompete Payments”). Mr. Rusch acknowledges and agrees that the benefits and consideration he will receive as a result of the consummation of the transactions contemplated by the Merger Agreement constitute adequate and sufficient consideration for their covenants contained in this Agreement. Mr. Rusch acknowledges that Associated would not consummate the transactions contemplated by the Merger Agreement if Mr. Rusch did not agree to be bound by the provisions contained in this Agreement. In the event of the death of Mr. Rusch, Associated shall continue to pay to the estate of Mr. Rusch the Noncompete Payments through the term of this Agreement. Associated may prepay such payments without penalty.

     2. Noncompete Provisions.

          (a) Certain Definitions. For purposes of this Agreement, “Territory” means the counties in which First Federal or its subsidiaries currently has an office. For purposes of this Agreement, “Customer of First Federal” means any individual or entity to which First Federal provided products or services at any time during the two year period prior to the Closing Date or which First Federal actively solicited for the purpose of providing products or services during the two year period prior to the Closing Date.

          (b) Noncompete. During the period commencing on the Closing Date (as defined in the Merger Agreement) and ending on the second anniversary of the Closing Date, Mr. Rusch will not, directly or indirectly, either individually or as an employee, officer, principal, agent, partner, owner, trustee, beneficiary, co-venturer, distributor, consultant or in any other capacity, (i) within the Territory, participate in, become associated with, provide assistance to, engage in, or have a financial or other interest in any business, activity, enterprise or entity, which competes with the Business or any other business of First Federal (or Associated as successor to First Federal) that relates or is complimentary or supplemental to the Business, (ii) within the Territory, advertise, promote or otherwise endorse any second party products and/or services which compete with the Business or any other business of First Federal (or Associated as successor to First Federal)or supplemental to the Business or (iii) canvass, contact, solicit or do

business with any Customer of First Federal for the purpose of providing products or services similar to or competitive with those provided by First Federal (or Associated as successor to First Federal).

          (c) Limitations. The ownership of less than a 5% interest in an entity whose securities are traded in a recognized stock exchange or traded in the over-the-counter market, even though that entity is competitive with the Business, shall not be a breach of paragraph 2(b) of this Agreement.

     3. Confidential Information and Trade Secrets.

          (a) Certain Definitions.

               (i) For purposes of this Agreement, “Confidential Information” means information, to the extent it is not a trade secret, that is possessed by or developed for First Federal (or Associated as successor to First Federal) and that relates to the business or technology, including but not limited to, Inventions (as defined below), business plans and strategies, existing or proposed bids, technical or engineering developments, existing or proposed research projects, financial or business projections, investments, marketing plans and strategies, pricing and cost information, negotiation strategies, training information and materials, employee compensation and other employee information, customer or potential customer lists, customer accounts or customer account history and information generated for customer engagements. Confidential Information also includes information received by First Federal (or Associated as successor to First Federal) from others which either has an obligation to treat as confidential, including all information obtained in connection with customer engagements. Confidential Information shall not include information that is generally known to the public as of the date of this Agreement.

               (ii) For purposes of this Agreement, “Inventions” means all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, processes, techniques, formula, trademarks, data and other intellectual property other than trade secrets (whether or not protectible under intellectual property laws or similar laws), made solely by Mr. Rusch (or jointly with others) while Mr. Rusch owned securities of First Federal that [a] relate to First Federal’s business services or activities, [b] were developed or conceived in connection with Mr. Rusch’s ownership of securities of First Federal or [c] were developed or conceived using First Federal’s assets.

          (b) Nondisclosure. Mr. Rusch agrees that until the first to occur of (i) such time as the Confidential Information becomes generally available to the public through no fault of Mr. Rusch, or any other person under a duty of

confidentiality to First Federal or Associated, (ii) such time as the Confidential Information no longer provides a benefit to Associated, or (iii) the second anniversary of the Closing Date, Mr. Rusch will not, directly or indirectly, use or disclose, or cause to be used or disclosed, in any geographic area in which such use or disclosure could harm Associated’s existing or potential business interests, any Confidential Information.

          (c) Trade Secrets. Notwithstanding the foregoing paragraph, the parties agree that nothing in this Agreement shall be construed to limit or negate any statutory or common law of torts or trade secrets, where such law provides Associated with broader protection than that provided in this Agreement. Following the Closing Date, Mr. Rusch shall take all steps that are reasonably necessary to prevent unauthorized misappropriation or disclosure of First Federal’s (or Associated as successor to First Federal) trade secrets and shall not use or disclose such trade secrets as long as they remain trade secrets.

     4. Acknowledgements Regarding Confidential Information and Trade Secrets. Mr. Rusch agrees and acknowledges that the Confidential Information has been established, maintained and protected by First Federal (and Associated as successor to First Federal) at great expense, is valuable to each party, and will provide such parties with a substantial competitive advantage in conducting the Business. Mr. Rusch acknowledges and agrees that the Confidential Information and all of First Federal’s (and Associated as successor to First Federal) trade secrets are part of the assets of First Federal being transferred to Associated pursuant to the Merger Agreement. To the extent Mr. Rusch has not already done so, Mr. Rusch hereby assigns to First Federal (and Associated as successor to First Federal) all of Mr. Rusch’s right, title and interest in and to any and all Inventions and trade secrets, whether or not patentable or registrable under copyright or similar laws, which Mr. Rusch may solely or jointly have conceived, developed or reduced to practice, or caused to be conceived, developed or reduced to practice, during Mr. Rusch’s ownership of securities of First Federal. Mr. Rusch agrees to take such additional actions and execute such additional documents as may be necessary or appropriate to effectuate the foregoing assignments. Mr. Rusch further acknowledges that all original works of authorship which were made by Mr. Rusch (solely or jointly with others) on behalf of or at the request of First Federal while Mr. Rusch owned securities of First Federal and which are protectible by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.

     5. Relations with Suppliers and Vendors. During the period commencing on the Closing Date and ending on the second anniversary of the Closing Date, Mr. Rusch will not, directly or indirectly, cause, request, or advise

any supplier or vendor of First Federal (or Associated as successor to First Federal) to curtail or cancel its business with Associated.

     6. Relations with Employees. During the period commencing on the Closing Date and ending on the second anniversary of the Closing Date, Mr. Rusch will not, directly or indirectly, induce or attempt to induce any employee, officer, director, sales or other representative, consultant, independent contractor or other agent of First Federal (or Associated as successor to First Federal) who had a relationship with First Federal prior to the Closing Date to terminate his, her or its relationship with Associated or breach his, her or its agreements with Associated. Nothing in this Agreement shall otherwise prohibit Mr. Rusch’s future employer from hiring such individuals without Mr. Rusch’s involvement.

     7. Specific Performance. Mr. Rusch acknowledges and agrees that irreparable injury to Associated may result in the event that Mr. Rusch breaches any covenant in this Agreement, and that the remedy at law for the breach of any such covenant will be inadequate. If Mr. Rusch engages in any act in violation of any provision of paragraph 2(b), 3(b), 3(c), 5 or 6, Mr. Rusch agrees that Associated shall be entitled, in addition to such other remedies and damages that may be available to it by law or under this Agreement, to injunctive relief to enforce such provisions without the necessity of posting a bond.

     8. Miscellaneous.

          (a) All provisions in this Agreement, including subparagraphs, are severable, and the unenforceability of any provision shall not affect the enforceability of any other provision. The parties agree that each covenant contained in paragraphs 2(b), 3(b), 3(c), 5 and 6 is separate and independent.

          (b) Associated may assign this Agreement to a successor entity without notification to, or the consent of Mr. Rusch. This Agreement shall be binding upon Mr. Rusch, and shall inure to the benefit of Associated, its successors and assigns. Mr. Rusch shall not assign the Agreement without prior consent from Associated.

          (c) The failure by Associated to enforce any right or remedy available to it under this Agreement shall not be construed to be a waiver of such right or remedy with respect to any other prior, concurrent or subsequent breach or failure. No waiver of rights under this Agreement shall be effective unless made in writing.

          (d) This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin.

          (e) This Agreement was jointly drafted by the parties hereto and no rules of strict construction shall be applied against any party.

Dated as of the date first written above.

ASSOCIATED BANC-CORP.:
BY	/s/ Brian R. Bodager
	Its
JACK C. RUSCH:
/s/ Jack C. Rusch

EX-10.L

EXHIBIT (10)(L)

CONSULTING AGREEMENT

     THIS AGREEMENT is made and entered into as of this 29th day of October, 2004, by and between ASSOCIATED BANK, a Wisconsin chartered bank (the “Bank”), and JACK C. RUSCH, an individual (“Mr. Rusch”).

RECITALS

     A. The Bank and Mr. Rusch have terminated their employer/employee relationship pursuant to the Termination Agreement between the Bank and Mr. Rusch dated as of the date hereof.

     B. The Bank and Mr. Rusch acknowledges that Mr. Rusch (1) has been an executive level employee of First Federal and (2) has extensive experience and knowledge of the Business.

     C. The Bank desires to retain Mr. Rusch to perform personal services in the capacity of an independent contractor and Mr. Rusch desires to be so retained pursuant to the terms and conditions set forth herein. Mr. Rusch acknowledges that, during the term of this Agreement, he owes the Bank a duty of loyalty. Mr. Rusch further acknowledges that entry into this Agreement is a condition of Associated Banc-Corp. entering into the Selling Shareholders Noncompete Agreement.

     D. The Bank and Mr. Rusch desire to reduce their agreement concerning the terms and conditions of such personal services to written form.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises set forth above, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

          1. Consulting Services. Mr. Rusch agrees to perform for the Bank, during the Consulting Period (as hereinafter defined), the services described in Exhibit A attached hereto (the “Services”). In connection therewith:

               (a) Mr. Rusch will perform the Services as the Bank’s Board of Directors or Chief Executive Officer/President shall assign to him from time to time.

               (b) Mr. Rusch will devote such reasonable time, energy and effort as required to perform the services set forth on Exhibit A in a satisfactory and timely manner. Mr. Rusch has no obligation to perform services exclusively for the Bank, or to work any particular hours or days or any particular number of hours per day performing services for the Bank. Such services may be performed remotely as appropriate.

               (c) All services performed by Mr. Rusch pursuant to this Agreement will be of the highest quality and performed to the Bank’s reasonable satisfaction. Mr. Rusch warrants that he has the expertise, qualifications and capabilities to perform the services described on Schedule A. In the performance of such services, Mr. Rusch shall have the ability to control and direct the details of Mr. Rusch’s work and the Bank shall be interested only in the results obtained by such services, including the quality of the services provided.

               (d) Mr. Rusch will perform his services pursuant to this Agreement to the best of his ability and shall cooperate fully with the Bank in performing such services.

          2. Consulting Fee. In consideration of and contingent on the services to be performed by Mr. Rusch during the Consulting Period pursuant to section 1 hereof and Mr. Rusch’s compliance with the other provisions of this Agreement, the Bank will pay Mr. Rusch a monthly consulting fee of $16,668, commencing on November 30, 2004 and on the last day of each month thereafter (the “Consulting Fee”).

          3. Term.

               (a) The term of this Agreement pursuant to which Mr. Rusch will provide services to the Bank hereunder (the “Consulting Period”) will be for a period of two years commencing on the date hereof, unless earlier terminated as follows:

                    (i) The Consulting Period will terminate upon the written agreement of the parties;

                    (ii) The Consulting Period will terminate upon the death or permanent disability of Mr. Rusch. The term “permanent disability” of Mr. Rusch shall mean mental or physical illness, disability or incapacity which renders Mr. Rusch unable to effectively perform his duties hereunder for 90 consecutive days.

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                    (iii) The Bank may terminate the Consulting Period for “cause” at any time upon written notice to Mr. Rusch stating the facts constituting such “cause.” For purposes of this section 3, the term “cause” means:

•   the diversion or attempted diversion by Mr. Rusch of business from the Bank for Mr. Rusch’s personal gain or benefit;

•   the commission by Mr. Rusch of an act of dishonesty or moral turpitude involving the Bank;

•   gross incompetence by Mr. Rusch in the performance of his duties hereunder;

•   gross negligence by Mr. Rusch involving the Bank;

•   habitual use by Mr. Rusch of alcohol or narcotics;

•   commission by Mr. Rusch of a felony or serious misdemeanor offense or pleading guilty or nolo contendere to same which results in demonstrable material injury to the Bank;

•   willful misconduct by Mr. Rusch as determined in good faith by the Board of Directors of the Bank which results in a demonstrably material injury to the Bank;

•   the willful and persistent failure of Mr. Rusch to follow a specific directive of the Board of Directors or an officer of the Bank;

•   a material breach by Mr. Rusch of any provision of this Agreement, including without limitation any provision of section 4 hereof provided such failure or noncompliance is not remedied by Mr. Rusch within 30 days following written notice to Mr. Rusch from the Bank specifying in reasonable detail the nature of such failure or noncompliance; or

3

•   a breach by Mr. Rusch of any provision of the Selling Shareholders Noncompete Agreement attached hereto as Exhibit B or the Separation Agreement and General Release attached hereto as Exhibit C.

               (c) Upon the termination of the Consulting Period pursuant to section 3(a)(ii), the Bank shall continue to pay the Consulting Fee to Mr. Rusch (or the estate of Mr. Rusch in the event of death) through the term of this Agreement. The Bank may prepay such payments without penalty. The Bank shall not be obligated to make any further payments to Mr. Rusch.

               (d) Upon the termination of the Consulting Period for any reason other than those described in (c) above, the Bank will pay to Mr. Rusch the full amount of any unpaid compensation earned by Mr. Rusch pursuant to section 2 of this Agreement through and including the termination date (and prorated as appropriate), and the Bank shall not be obligated to make any further payments to Mr. Rusch.

               (e) Mr. Rusch’s obligations set forth in sections 4 through 11 hereof shall survive the termination of the Consulting Period.

          4. Unauthorized Disclosure: Inventions and Improvement.

               (a) Mr. Rusch will not disclose to any person or entity, other than employees of the Bank or other persons to whom disclosure is reasonably necessary or appropriate in connection with the performance by Mr. Rusch of his duties hereunder, any confidential or proprietary information of the Bank obtained by Mr. Rusch during the Consulting Period.

               (b) Mr. Rusch will disclose to the Bank and upon the Bank’s request, assign to it, without charge, all of Mr. Rusch’s right, title and interest, if any, in and to any and all ideas, inventions, discoveries and improvements pertaining in any manner to the business which Mr. Rusch may make or conceive, solely or jointly with others, during the Consulting Period (collectively, the “New Developments”). Upon request by the Bank, whether during or subsequent to the Consulting Period, Mr. Rusch will do any and all acts and execute and deliver such documents as may be deemed by the Bank or its counsel to be necessary or advisable to vest in the Bank all of Mr. Rusch’s right, title and interest in and to such New Developments and to apply and obtain domestic or foreign patents, provided that the expenses incurred in connection with the foregoing shall be borne by the Bank. If services in connection therewith are performed at the Bank’s request after the Consulting Period, the Bank will pay

4

Mr. Rusch reasonable compensation for such services. The term “New Developments” shall not include any ideas, inventions and discoveries which Mr. Rusch makes at his expense when not fulfilling his duties to the Bank hereunder and which are not related in any way to the Business.

          5. Common Law or Torts or Trade Secrets. Nothing in this Agreement shall be construed to limit or negate the common law of torts or trade secrets where such common law provides the Bank with broader protection than the protection provided by this Agreement.

          6. Expense Reimbursement. The Bank will reimburse Mr. Rusch for his out-of-pocket expenses reasonably incurred in connection with the performance of Mr. Rusch’s duties hereunder, subject to approval by the Bank.

          7. Independent Contractor. Mr. Rusch shall at all times be an independent contractor, and Mr. Rusch will be responsible for all employment and income taxes on his compensation hereunder. Neither party will assert that an employment relationship exists or take any action inconsistent with the independent contractor status of Mr. Rusch. Mr. Rusch shall have no authority to bind the Bank to any agreement, except to the extent such authority is expressly conferred upon him by the Bank in writing (exclusive of this Agreement) and Mr. Rusch will not take any action inconsistent with the provisions of this Section.

          8. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect or impair the validity or enforceability of any other provision and this Agreement shall be construed as if such invalid or unenforceable provision were not contained herein. Notwithstanding the preceding sentence, if any court of competent jurisdiction shall determine that any geographic or time restraint provided in this Agreement is too broad as to the area or time covered, such restraint may be reduced to whatever extent the court deems reasonable and such restraint may be enforced as reduced.

          9. Notice. All notices under this Agreement shall be in writing and any notice shall be considered to be given and received in all respects on the day it is personally delivered or deposited in the United States mail, first class, postage prepaid, addressed as follows or to such other address as may be designated by one party to the other by notice duly given:

If to the Bank:	Associated Banc-Corp
	Attn: Brian R. Bodager, Chief
	Administrative Officer, General Counsel
	and Corporate Secretary
	1200 Hansen Road

5

	Green Bay, WI 54304
	Telecopier: (920) 491-7010
with a copy to:	Reinhart Boerner Van Deuren s.c.
	Attn: Richard W. Graber, Esq.
	1000 North Water Street, Suite 2100
	Milwaukee, WI 53202
	Telecopier: (414) 298-8097
If to Mr. Rusch:	Mr. Jack Rusch
	W6447 Riverview Drive
	Onalaska, WI 54650

          10. Waiver. A waiver by a party of any breach by the other party of any provision of this Agreement shall not be deemed to be a waiver by such first party of any subsequent breach.

          11. Assignment. This Agreement may not be assigned by the Bank without the written consent of Mr. Rusch, except that if the Bank shall merge or consolidate with or into, or transfer substantially all of the business or the assets thereof to another corporation or other form of business or other entity, this Agreement may be assigned to such a successor and it shall be binding upon and inure to its benefit. Mr. Rusch may not assign, pledge or encumber this Agreement or any interest herein.

          12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, the Bank’s successors and permitted assigns and Mr. Rusch’s heirs and legal representatives.

          13. Amendment. This Agreement may be amended only by a written instrument executed by the parties hereto or their respective successors, assigns, heirs or legal representatives, as applicable.

          14. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Wisconsin.

[Signature Page to follow]

6

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

ASSOCIATED BANK
BY		/s/ Paul S. Beideman
	Its
/s/ Jack C. Rusch
JACK C. RUSCH

7

Schedule A
Description of Services to Be Rendered

Jack Rusch – President and Chief Executive Officer

     §  Assist in the management of all aspects of the merger to ensure maximum profits commensurate with the best interest of customers, shareholders, employees and the public

     §  Assist in the transition of leadership and to provide continued leadership in achieving overall objectives to ensure maximum return on assets and return on equity

     §  Assist and provide leadership in the overall integration of the companies

     §  Assist in Shareholder relations

     §  Assist in Community relations

     §  Assist and provide leadership in customer retention and transition

     §  Assist in communication with industry trade groups

     §  Provide guidance and objectivity in areas of organizational restructuring, change management, and matters affecting the organization

EX-10.N

EXHIBIT (10)(n)

2005 COMPENSATION OF NAMED EXECUTIVE OFFICERS OF THE REGISTRANT

     As of February 21, 2005, the following are the annual base salaries, target bonuses, and options granted to the Named Executive Officers for 2005 and those expected to be among the four most highly compensated executive officers in 2005 (as defined in Item 402(a)(3) of Regulation S-K) of Associated Banc-Corp:

	Base		Target
Executive Officer	Salary		Bonus			Options
Paul S. Beideman President and CEO	$	726,000		85	%		73,500
Gordon J. Weber Executive Vice President, Corporate Banking	$	369,500		50	%		35,000
Mark J. McMullen Executive Vice President; Director, Wealth Management	$	331,750		50	%		40,000
Donald E. Peters Executive Vice President; Director, Systems & Operations	$	309,100		40	%		39,000
Joseph B. Selner Executive Vice President; Chief Financial Officer	$	322,900		50	%		50,000
Daniel C. Fischer Executive Vice President, Regional Banking	$	341,250		50	%		45,000

EX-10.O

EXHIBIT (10)(o)

2005 CASH COMPENSATION FOR NON-MANAGEMENT DIRECTORS OF THE
REGISTRANT

     As of January 1, 2005, the 2005 Board fees include an annual retainer of $20,000 and a meeting fee of $1,500 for each board meeting attended. The directors also receive $1,000 for each committee meeting attended, with an additional annual retainer of $5,000 to the committee chairman. The Chairman of the Board receives an additional $100,000 retainer. The common stock contribution to the Associated Banc-Corp Director’s Deferred Compensation Plan will be $35,000 for 2005.

EX-21

EXHIBIT 21
Subsidiaries of the Parent Company

The following bank subsidiaries are national banks and are organized under the laws of the United States:

     Associated Bank, National Association
     Associated Bank Minnesota, National Association
     Associated Trust Company, National Association

The following bank subsidiary is a state bank organized under the laws of the State of Illinois:

     Associated Bank Chicago

The following thrift subsidiary is a national thrift organized under the laws of the United States:

     First Federal Capital Bank

The following non-bank subsidiaries are organized under the laws of the State of Arizona:

     Banc Life Insurance Corporation
     First Reinsurance, Inc.

The following non-bank subsidiary is organized under the laws of the State of California:

     Mortgage Finance Corporation

The following non-bank subsidiaries are organized under the laws of the State of Minnesota:

     Employer’s Advisory Association, Inc., d/b/a CFG Employer’s Services, Inc.
     Financial Resource Management Group, Inc., d/b/a CFG Financial Services, Inc.
     Riverside Finance, Inc.

The following non-bank subsidiaries are organized under the laws of the State of Nevada:
	ASBC Investment Corp.	ASBC Investment Corp – Illinois
	ASBC Investment Corp-Minnesota	Associated Green Bay Investment Corp.
	Associated Illinois Investment Corp.	Associated Minnesota Investment Corp.
	First Cap Holdings, Inc.

The following non-bank subsidiary is organized under the laws of the State of Vermont:

     FF Mortgage Reinsurance, Inc.

The following non-bank subsidiaries are organized under the laws of the State of Wisconsin:
	Associated Commercial Finance, Inc.	Associated Financial Group, LLC
	Associated Illinois Real Estate Corp.	Associated Investment Management, LLC
	Associated Investment Services, Inc.	Associated Minnesota Real Estate Corp.
	Associated Mortgage, Inc.	Associated Wisconsin Real Estate Corp.
	First Enterprises, Inc.	IQuity Group, LLC

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Associated Banc-Corp.:

Re: Registration Statement on Form S-8

§	#2-77435	§	#333-74307
§	#2-99096	§	#333-121012
§	#33-16952	§	#333-121011
§	#33-24822	§	#333-121010
§	#33-35560	§	#333-120711
§	#33-54658	§	#333-120714
§	#33-63545	§	#333-120713
§	#33-67436	§	#333-120710
§	#33-86790	§	#333-120709
§	#333-46467

Re: Registration Statement on Form S-3

§	#2-98922	§	#33-63557
§	#33-28081	§	#33-67434
§	#333-59482	§	#333-87578

We consent to the incorporation by reference in the Registration Statements on Form S-8 and S-3 of Associated Banc-Corp of our reports dated March 9, 2005 with respect to the consolidated balance sheets of Associated Banc-Corp and Subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 and the effectiveness of internal control over financial reporting as of December 31, 2004, which reports appear in the December 31, 2004 annual report on Form 10-K of Associated Banc-Corp.

/s/ KPMG LLC

Chicago, Illinois
March 14, 2005

EX-24

EXHIBIT 24

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ Karen T. Beckwith  

Karen T. Beckwith 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ Harry B. Conlon  

Harry B. Conlon 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ Ruth M. Crowley  

Ruth M. Crowley 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ Robert C. Gallagher  

Robert C. Gallagher 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ Ronald R. Harder  

Ronald R. Harder 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ William R. Hutchinson  

William R. Hutchinson 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ Richard T. Lommen  

Richard T. Lommen 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ John C. Meng  

John C. Meng 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ J. Douglas Quick  

J. Douglas Quick 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ Jack C. Rusch  

Jack C. Rusch 

Director 

DIRECTOR’S POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Associated Banc-Corp, a Wisconsin corporation (the “Corporation”), which is planning to file with the Securities and Exchange Commission (the “SEC”), Washington, D.C., under the provisions of the Securities Act of 1934 (the “Act”), a Form 10-K, the form which must be used for annual reports pursuant to Section 13 or 15(d) of the Act, and Proxy Statement in accordance with Regulation 14A and Schedule 14A under the Act and Regulation S-K and Rule 14a-3(b) under the Act, for the reporting period ending December 31, 2004, hereby constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact and agent.

     Said attorney-in-fact and agent shall have full power to act for him and in his name, place, and stead in any and all capacities, to sign such Form 10-K and Proxy Statement and any and all amendments thereto (including post-effective amendments), with power where appropriate to affix the corporate seal of the Corporation thereto and to attest such seal, and to file such Form 10-K and Proxy Statement and each amendment (including post-effective amendments) so signed, with all exhibits thereto, and any and all documents in connection therewith, with the SEC, and to appear before the SEC in connection with any matter relating to such Form 10-K and Proxy Statement and to any and all amendments thereto (including post-effective amendments).

     The undersigned hereby grants such attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done as he might or could do in person, and hereby ratifies and confirms all that such attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of the 26^th day of January, 2005.

/s/ John C. Seramur  

John C. Seramur 

Director 

EX-31.1

EXHIBIT 31.1

EXHIBIT 31.1

CERTIFICATION UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Paul S. Beideman, certify that:

     1. I have reviewed this annual report on Form 10-K of Associated Banc-Corp;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officers and I are responsible for establishing and maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

          (b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          (c) Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial data information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: March 15, 2005	/s/ Paul S. Beideman
	Paul S. Beideman
	President & Chief Executive Officer

EX-31.2

Exhibit 31

EXHIBIT 31.2

CERTIFICATION UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Joseph B. Selner, certify that:

     1. I have reviewed this annual report on Form 10-K of Associated Banc-Corp;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officers and I are responsible for establishing and maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

          (b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          (c) Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial data information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: March 15, 2005	/s/ Joseph B. Selner
	Joseph B. Selner
	Chief Financial Officer

2

EX-32

EXHIBIT 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 the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Associated Banc-Corp, a Wisconsin corporation (the “Company”), does hereby certify that:

1. The accompanying Annual Report of the Company on Form 10-K for the year ended December 31, 2004 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.

/s/ Paul S. Beideman

Paul S. Beideman

Chief Executive Officer

March 15, 2005

/s/ Joseph B. Selner

Joseph B. Selner
Chief financial Officer

March 15, 2005