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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

Amendment No. 1 to Form 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007


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 incorporation or organization)		(IRS employer identification no.)


1200 Hansen Road, Green Bay, Wisconsin		54304

(Address of principal executive offices)		(Zip code)

(920) 491-7000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

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

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of registrant’s common stock, par value $0.01 per share, at April 30, 2007, was 127,530,354.

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements:

ASSOCIATED BANC-CORP

Consolidated Balance Sheets


	March 31,			December 31,
	2007			2006
	(Unaudited)			(Audited)
	(In Thousands, except share data)
ASSETS
Cash and due from banks	$	315,157		$	458,344
Interest-bearing deposits in other financial institutions		33,280			10,505
Federal funds sold and securities purchased under agreements to resell		4,698			13,187
Investment securities available for sale, at fair value		3,467,732			3,436,621
Loans held for sale		92,303			370,758
Loans		14,856,003			14,881,526
Allowance for loan losses		(203,495	)		(203,481	)

Loans, net		14,652,508			14,678,045
Premises and equipment, net		190,309			196,007
Goodwill		871,629			871,629
Other intangible assets, net		89,295			109,234
Other assets		790,502			717,054

Total assets	$	20,507,413		$	20,861,384


LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing demand deposits	$	2,425,248		$	2,756,222
Interest-bearing deposits, excluding brokered certificates of deposit		10,905,635			10,922,274
Brokered certificates of deposit		650,084			637,575

Total deposits		13,980,967			14,316,071
Short-term borrowings		2,332,816			2,042,685
Long-term funding		1,743,103			2,071,142
Accrued expenses and other liabilities		214,393			185,993

Total liabilities		18,271,279			18,615,891

Stockholders’ equity
Preferred stock		—			—
Common stock (Par value $0.01 per share, authorized 250,000,000 shares, issued 128,426,588 and 130,426,588 shares, respectively)		1,284			1,304
Surplus		1,055,914			1,120,934
Retained earnings		1,215,551			1,189,658
Accumulated other comprehensive loss		(11,564	)		(16,453	)
Treasury stock, at cost (716,399, and 1,552,086 shares, respectively)		(25,051	)		(49,950	)

Total stockholders’ equity		2,236,134			2,245,493

Total liabilities and stockholders’ equity	$	20,507,413		$	20,861,384

See accompanying notes to consolidated financial statements.

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Income

(Unaudited)


	Three Months Ended March 31,
	2007		2006
	(In Thousands, except per share data)
INTEREST INCOME
Interest and fees on loans	$	273,961	$	261,015
Interest and dividends on investment securities and deposits in other financial institutions:
Taxable		30,526		39,116
Tax exempt		9,794		10,163
Interest on federal funds sold and securities purchased under agreements to resell		183		249

Total interest income		314,464		310,543
INTEREST EXPENSE
Interest on deposits		98,299		77,878
Interest on short-term borrowings		35,183		33,244
Interest on long-term funding		21,936		32,552

Total interest expense		155,418		143,674

NET INTEREST INCOME		159,046		166,869
Provision for loan losses		5,082		4,465

Net interest income after provision for loan losses		153,964		162,404
NONINTEREST INCOME
Trust service fees		10,309		8,897
Service charges on deposit accounts		23,022		20,959
Card-based and other nondeposit fees		11,323		9,886
Retail commission income		15,479		15,478
Mortgage banking, net		9,550		4,404
Bank owned life insurance income		4,164		3,071
Asset sale gains (losses), net		1,883		(230	)
Investment securities gains, net		1,035		2,456
Other		5,935		5,852

Total noninterest income		82,700		70,773
NONINTEREST EXPENSE
Personnel expense		74,047		69,303
Occupancy		11,587		11,758
Equipment		4,394		4,588
Data processing		7,678		8,039
Business development and advertising		4,405		4,249
Other intangible amortization expense		1,661		2,343
Other		24,364		23,191

Total noninterest expense		128,136		123,471

Income before income taxes		108,528		109,706
Income tax expense		35,133		27,999

NET INCOME	$	73,395	$	81,707

Earnings per share:
Basic	$	0.57	$	0.60
Diluted	$	0.57	$	0.60
Average shares outstanding:
Basic		127,988		135,114
Diluted		129,299		136,404

See accompanying notes to consolidated financial statements.

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


										Accumulated
										Other
	Common						Retained			Comprehensive			Deferred			Treasury
	Stock			Surplus			Earnings			Income (Loss)			Compensation			Stock			Total
										(In Thousands, except per share data)
Balance, December 31, 2005	$	1,357		$	1,301,004		$	1,029,247		$	(3,938	)	$	(2,081	)	$	(611	)	$	2,324,978
Comprehensive income:
Net income		—			—			316,645			—			—			—			316,645
Other comprehensive income		—			—			—			2,549			—			—			2,549

Comprehensive income																				319,194

Adjustment for adoption of SFAS 158, net of tax											(15,064	)								(15,064	)
Cash dividends, $1.14 per share		—			—			(151,235	)		—			—			—			(151,235	)
Common stock issued:
Stock-based compensation plans		8			15,268			(4,945	)		—			—			19,538			29,869
Purchase of common stock		(61	)		(201,913	)		—			—			—			(68,316	)		(270,290	)
Stock-based compensation, net		—			2,345			(54	)		—			2,081			(561	)		3,811
Tax benefit of stock options		—			4,230			—			—			—			—			4,230

Balance, December 31, 2006	$	1,304		$	1,120,934		$	1,189,658		$	(16,453	)	$	—		$	(49,950	)	$	2,245,493

Comprehensive income:
Net income		—			—			73,395			—			—			—			73,395
Other comprehensive income		—			—			—			4,889			—			—			4,889

Comprehensive income																				78,284

Cash dividends, $0.29 per share		—			—			(37,450	)		—			—			—			(37,450	)
Common stock issued:
Stock-based compensation plans		—			—			(10,052	)		—			—			24,899			14,847
Purchase of common stock		(20	)		(68,220	)		—			—			—			—			(68,240	)
Stock-based compensation, net		—			1,076			—			—			—			—			1,076
Tax benefit of stock options		—			2,124			—			—			—			—			2,124

Balance, March 31, 2007	$	1,284		$	1,055,914		$	1,215,551		$	(11,564	)	$	—		$	(25,051	)	$	2,236,134

See accompanying notes to consolidated financial statements.

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Cash Flows

(Unaudited)


	For the Three Months Ended
	March 31,
	2007			2006
	($ in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	73,395		$	81,707
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		5,082			4,465
Depreciation and amortization		6,070			6,331
Provision for (recovery of) valuation allowance on mortgage servicing rights, net		1,174			(1,426	)
Amortization of mortgage servicing rights		5,037			5,080
Amortization of other intangible assets		1,661			2,343
Amortization and accretion on earning assets, funding, and other, net		1,515			4,723
Tax benefit from exercise of stock options		2,124			2,051
Excess tax benefit from stock-based compensation		(1,677	)		(1,524	)
Gain on sales of investment securities, net		(1,035	)		(2,456	)
(Gain) loss on sales of assets, net		(1,883	)		230
Gain on sales of loans held for sale and mortgage servicing rights, net		(9,681	)		(2,122	)
Mortgage loans originated and acquired for sale		(338,802	)		(246,724	)
Proceeds from sales of mortgage loans held for sale		615,544			255,809
(Increase) decrease in interest receivable		1,017			(1,538	)
Decrease in interest payable		(5,939	)		(6,281	)
Net change in other assets and other liabilities		14,405			3,851

Net cash provided by operating activities		368,007			104,519

CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans		(14,630	)		(344,093	)
Purchases of:
Investment securities		(210,157	)		(59,287	)
Premises and equipment, net of disposals		(24	)		(1,177	)
Bank owned life insurance		—			(50,000	)
Proceeds from:
Sales of investment securities		5,624			673,361
Calls and maturities of investment securities		181,619			245,826
Sales of other assets		2,959			4,325

Net cash provided by (used in) investing activities		(34,609	)		468,955

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		(335,104	)		43,781
Net increase (decrease) in short-term borrowings		290,131			(68,357	)
Repayment of long-term funding		(628,160	)		(748,291	)
Proceeds from issuance of long-term funding		300,000			300,000
Cash dividends		(37,450	)		(36,716	)
Proceeds from exercise of stock options		14,847			13,239
Excess tax benefit from stock-based compensation		1,677			1,524
Purchase of common stock		(68,240	)		(137,472	)

Net cash used in financing activities		(462,299	)		(632,292	)

Net decrease in cash and cash equivalents		(128,901	)		(58,818	)
Cash and cash equivalents at beginning of period		482,036			492,295

Cash and cash equivalents at end of period	$	353,135		$	433,477

Supplemental disclosures of cash flow information:
Cash paid for interest	$	161,356		$	149,955
Cash paid for income taxes		1,043			3,030
Loans and bank premises transferred to other real estate		3,735			4,488
Capitalized mortgage servicing rights		3,801			2,929

See accompanying notes to consolidated financial statements .

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Notes to Consolidated Financial Statements

These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally presented in accordance with U.S. generally accepted accounting principles have been omitted or abbreviated. The information contained in the consolidated financial statements and footnotes in Associated Banc-Corp’s 2006 annual report on Form 10-K, should be referred to in connection with the reading of these unaudited interim financial statements.

NOTE 1: Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations, changes in stockholders’ equity, and cash flows of 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”) for the periods presented, and all such adjustments are of a normal recurring nature. The consolidated financial statements include the accounts of all subsidiaries. All material intercompany transactions and balances are eliminated. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

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.

NOTE 2: Reclassifications

Certain amounts in the consolidated financial statements of prior periods have been reclassified to conform with the current period’s presentation. Additionally, the statement of changes in stockholders’ equity for 2006 was modified from the presentation in the annual report on Form 10-K to show the transition adjustment related to the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” (“SFAS 158”) as a direct component of accumulated other comprehensive income, separate from comprehensive income. Management determined the effect on the statement of changes in stockholders’ equity of this change in presentation was not material to the prior period presented.

NOTE 3: New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) ratified the consensus reached by the Emerging Issues Task Force (“EITF”) in Issue No. 06-5, “Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance,” (“EITF 06-5”). EITF 06-5 concluded that companies purchasing a life insurance policy should record the amount that could be realized, considering any additional amounts beyond cash surrender value included in the contractual terms of the policy. The amount that could be realized should be based on assumed surrender at the individual policy or certificate level, unless all policies or certificates are required to be surrendered as a group. When it is probable that contractual restrictions would limit the amount that could be realized, such contractual limitations should be considered and any amounts recoverable at the insurance company’s discretion should be excluded from the amount that could be realized. Companies are permitted to recognize the effects of applying the consensus through either (1) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets as of the beginning of the year of adoption or (2) a change in accounting principle through retrospective application to all prior periods. EITF 06-5 was effective for fiscal years beginning after December 15, 2006. The Corporation adopted EITF 06-5 at the beginning of 2007 and the adoption did not have a material impact on its results of operations, financial position, and liquidity.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,” (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation requires the impact of a tax position to be recognized in the financial statements if that position is more-likely-than-not of being sustained upon examination, based on the technical merits of the position. A tax position meeting the more-likely-than-not threshold is then to be measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 was effective for fiscal years beginning after December 15, 2006. The Corporation adopted the provisions of FIN 48 effective January 1, 2007, resulting in no cumulative effect adjustment to retained earnings as of the date of adoption and determined that the adoption did not have a material impact on its results of operations, financial position, and liquidity. See Note 11 for additional disclosures.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140,” (“SFAS 156”). SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract. All separately recognized servicing assets and servicing liabilities are to be initially measured at fair value, if practicable. SFAS 156 permits an entity to choose either the amortization method or the fair value measurement method for subsequently measuring each class of separately recognized servicing assets or servicing liabilities. Under the amortization method, servicing assets or servicing liabilities are amortized in proportion to and over the period of estimated net servicing income or loss and servicing assets or servicing liabilities are assessed for impairment based on fair value at each reporting date. The fair value measurement method measures servicing assets and servicing liabilities at fair value at each reporting date with the changes in fair value recognized in earnings in the period in which the changes occur. SFAS 156 was effective for fiscal years beginning after September 15, 2006. The Corporation adopted SFAS 156 at the beginning of 2007 and the adoption did not have a material impact on its results of operations, financial position, and liquidity. See Note 8 for additional disclosures.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140,” (“SFAS 155”), effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. SFAS 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation and clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133. Additionally, SFAS 155 establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation and clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS 155 also amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The Corporation adopted SFAS 155 at the beginning of 2007 and the adoption did not have a material impact on its results of operations, financial position, and liquidity.

NOTE 4: 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 and, having a lesser impact, unvested restricted stock and unsettled share repurchases. Presented below are the calculations for basic and diluted earnings per share.


	For the three months ended March 31,
	2007		2006
	(In Thousands, except per share data)
Net income	$	73,395	$	81,707


Weighted average shares outstanding		127,988		135,114
Effect of dilutive stock awards and unsettled share repurchases		1,311		1,290

Diluted weighted average shares outstanding		129,299		136,404


Basic earnings per share	$	0.57	$	0.60


Diluted earnings per share	$	0.57	$	0.60

NOTE 5: Stock-Based Compensation

The fair value of stock options granted is estimated on the date of grant using a Black-Scholes option pricing model, while the fair value of restricted stock shares is their fair market value on the date of grant. The fair values of stock awards are amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in personnel expense in the consolidated statements of income.

Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock option represents the period of time that stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the historical volatility of the Corporation’s stock. The following assumptions were used in estimating the fair value for options granted in the comparable first quarter periods of 2007 and 2006:


	2007			2006
Dividend yield		3.42	%		3.23	%
Risk-free interest rate		4.81	%		4.44	%
Expected volatility		19.31	%		23.98	%
Weighted average expected life	6 yrs			6 yrs
Weighted average per share fair value of options	$	6.07		$	6.97

The Corporation is required to estimate potential forfeitures of stock grants and adjust compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

A summary of the Corporation’s stock-based compensation activity for the year ended December 31, 2006 and for the three months ended March 31, 2007, is presented below.


						Weighted Average		Aggregate Intrinsic
				Weighted Average		Remaining		Value
Stock Options	Shares			Exercise Price		Contractual Term		(000s)

Outstanding at December 31, 2005		7,859,686		$	25.40
Granted		77,000			32.28
Exercised		(1,316,932	)		22.58
Forfeited		(153,272	)		31.43

Outstanding at December 31, 2006		6,466,482		$	25.91		5.95	$	57,985

Options exercisable at December 31, 2006		6,081,776		$	25.67		5.85	$	56,005

Outstanding at December 31, 2006		6,466,482		$	25.91
Granted		1,037,145			33.89
Exercised		(641,242	)		23.70
Forfeited		(36,400	)		28.61

Outstanding at March 31, 2007		6,825,985		$	27.32		6.41	$	42,878

Options exercisable at March 31, 2007		5,718,630		$	26.07		5.76	$	43,065

The following table summarizes information about the Corporation’s nonvested stock compensation activity for the year ended December 31, 2006, and for the three months ended March 31, 2007.


				Weighted Average
Stock Options	Shares			Grant Date Fair Value

Nonvested at December 31, 2005		1,003,891		$	6.00
Granted		77,000			6.97
Vested		(668,362	)		5.87
Forfeited		(27,823	)		6.26

Nonvested at December 31, 2006		384,706		$	6.40

Granted		1,037,145			6.07
Vested		(311,371	)		6.28
Forfeited		(3,125	)		6.07

Nonvested at March 31, 2007		1,107,355		$	6.12

For the quarter ended March 31, 2007 and the year ended December 31, 2006, the intrinsic value of stock options exercised was $6.9 million and $14.6 million, respectively. (Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option.) For the quarters ended March 31, 2007 and 2006, the Corporation recognized compensation expense of $0.6 million and $0.2 million, respectively, for the vesting of stock options. For the full year 2006, the Corporation recognized compensation expense of $0.9 million for the vesting of stock options. At March 31, 2007, the Corporation had $6.1 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 32 months.

The following table summarizes information about the Corporation’s restricted stock shares activity for the year ended December 31, 2006, and for the three months ended March 31, 2007.


				Weighted Average
Restricted Stock	Shares			Grant Date Fair Value

Outstanding at December 31, 2005		72,500		$	28.70
Granted		92,300			33.50
Vested		(15,000	)		23.25
Forfeited		(21,900	)		32.78

Outstanding at December 31, 2006		127,900		$	32.11

Granted		114,000			33.88
Vested		(28,220	)		33.60
Forfeited		—			—

Outstanding at March 31, 2007		213,680		$	32.86

The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period. For performance-based restricted stock shares, the Corporation estimates the degree to which performance conditions will be met to determine the number of shares which will vest and the related compensation expense prior to the vesting date. Compensation expense is adjusted in the period such estimates change. At March 31, 2007, there were 25,500 shares of performance-based restricted stock shares that will vest only if certain earnings per share goals and service conditions are achieved. Failure to achieve the goals and service conditions will result in all or a portion of these shares being forfeited.

Expense for restricted stock awards of approximately $0.4 million was recorded for both the three months ended March 31, 2007 and 2006, while expense for restricted stock awards of approximately $1.0 million was recognized for the full year 2006. The Corporation had $5.4 million of unrecognized compensation costs related to restricted stock shares at March 31, 2007, that is expected to be recognized over a weighted-average period of 25 months.

The Corporation issues shares from treasury, when available, or new shares upon the exercise of stock options and vesting of restricted stock shares. The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock each quarter in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities.

NOTE 6: Business Combinations

As required, the Corporation’s acquisitions are accounted for under the purchase method of accounting; thus, the results of operations of each acquired entity prior to its respective consummation date are not included in the accompanying consolidated financial statements. When valuing acquisitions, the Corporation considers a range of valuation methodologies, including comparable publicly-traded companies, comparable precedent transactions, and discounted cash flow. For the pending acquisition noted below, the resulting purchase price is anticipated to exceed the value of the net assets acquired. To record the transaction, the Corporation assigns estimated fair values to the assets acquired, including identifying and measuring acquired intangible assets, and to liabilities assumed (using sources of information such as observable market prices or discounted cash flows). To identify intangible assets that should be measured, the Corporation determines if the asset arose from contractual or other legal rights or if the asset is capable of being separated from the acquired entity. When valuing identified intangible assets, the Corporation generally relies on valuation reports by independent third parties. In each acquisition, the excess cost of the acquisition over the fair value of the net assets acquired is allocated to goodwill.

Pending Business Combination:

First National Bank of Hudson (“First National Bank”): On January 17, 2007, the Corporation announced the signing of a definitive agreement to acquire First National Bank. First National Bank is a $0.4 billion community bank headquartered in Woodbury, Minnesota, with eight banking locations in the Greater Twin Cities area.

Completed Business Combination:

There were no completed business combinations during 2006 or in 2007 through March 31, 2007.

NOTE 7: Investment Securities

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


	March 31, 2007			December 31, 2006
	($ in Thousands)
Amortized cost	$	3,462,354		$	3,438,437
Gross unrealized gains		30,075			31,697
Gross unrealized losses		(24,697	)		(33,513	)

Fair value	$	3,467,732		$	3,436,621

In March 2006, $0.7 billion of investment securities were sold as part of the Corporation’s initiative to reduce wholesale borrowings. Investment securities sales included losses of $15.8 million, offset by gains of $18.3 million on equity security sales, resulting in a net $2.5 million gain for first quarter 2006. While during the remainder of 2006 there were gains realized on equity securities sold and a $2.0 million other-than-temporary impairment write-down (discussed below), there were no other losses on sales of investment securities during 2006. The Corporation does not have a historical pattern of restructuring its balance sheet through large investment reductions. Balance sheet and net interest margin challenges in the first quarter of 2006 led to the targeted sale decision in support of its wholesale funding reduction initiative, and did not change the Corporation’s intent on the remaining investment portfolio. For the first quarter of 2007, the Corporation recognized gains of $1.0 million on sales of equity securities.

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 March 31, 2007.


	Less than 12 months					12 months or more					Total
	Unrealized					Unrealized					Unrealized
	Losses			Fair Value		Losses			Fair Value		Losses			Fair Value
	($ in Thousands)
March 31, 2007:
U. S. Treasury securities	$	(9	)	$	25,915	$	(4	)	$	996	$	(13	)	$	26,911
Federal agency securities		(4	)		9,969		(340	)		48,520		(344	)		58,489
Obligations of state and political subdivisions		(79	)		13,121		(1,701	)		163,566		(1,780	)		176,687
Mortgage-related securities		(61	)		50,277		(22,376	)		1,685,765		(22,437	)		1,736,042
Other securities (debt and equity)		(27	)		2,091		(96	)		6,231		(123	)		8,322

Total	$	(180	)	$	101,373	$	(24,517	)	$	1,905,078	$	(24,697	)	$	2,006,451

Management does not believe any individual unrealized loss at March 31, 2007 represents an other-than-temporary impairment. The unrealized losses reported for mortgage-related securities relate primarily to mortgage-backed securities issued by government agencies such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (“FHLMC”). These unrealized losses are primarily attributable to changes in interest rates and not credit deterioration. 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.

At March 31, 2007, the Corporation owned certain preferred stock securities that were determined to have an other-than-temporary impairment that resulted in write-downs to earnings of prior years (with no write-downs in 2007) on the related securities. One preferred stock security holding was determined to have an other-than-temporary impairment that resulted in a write-down on the security of $2.0 million during 2006 (effectively reducing the carrying value of this preferred stock holding to zero). Three FHLMC preferred stock securities were determined to have an other-than-temporary impairment that resulted in a write-down on these securities of $2.2 million during 2004 (with no additional other-than-temporary write-downs on these securities subsequent to 2004). At March 31, 2007, these FHLMC preferred stock securities were in an unrealized gain position with an amortized cost of $8.4 million and a fair value of $9.7 million.

For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2006.


	Less than 12 months					12 months or more					Total
	Unrealized					Unrealized					Unrealized
	Losses			Fair Value		Losses			Fair Value		Losses			Fair Value
						($ in Thousands)
December 31, 2006:
U. S. Treasury securities	$	(3	)	$	2,458	$	(6	)	$	993	$	(9	)	$	3,451
Federal agency securities		(20	)		24,906		(452	)		33,428		(472	)		58,334
Obligations of state and political subdivisions		(103	)		18,444		(1,684	)		165,306		(1,787	)		183,750
Mortgage-related securities		(275	)		94,806		(30,812	)		1,804,884		(31,087	)		1,899,690
Other securities (debt and equity)		(13	)		355		(145	)		7,682		(158	)		8,037

Total	$	(414	)	$	140,969	$	(33,099	)	$	2,012,293	$	(33,513	)	$	2,153,262

NOTE 8: Mortgage Servicing Rights

The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. Upon sale, a mortgage servicing rights asset is capitalized, which represents the then current fair value of future net cash flows expected to be realized for performing servicing activities. Mortgage servicing rights, when purchased, are initially recorded at fair value (i.e. the purchase price paid). As the Corporation has not elected to subsequently measure any class of servicing assets under the fair value measurement method, the Corporation follows the amortization method. Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income, and assessed for impairment at each reporting date. Mortgage servicing rights are carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value, and are included in other intangible assets, net in the consolidated balance sheets. At March 31, 2007 and December 31, 2006, the fair value of the mortgage servicing rights was $54.9 million and $76.7 million, respectively.

The Corporation periodically evaluates its mortgage servicing rights asset for impairment. Impairment is assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). 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 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.

Mortgage servicing rights expense is a component of mortgage banking, net, in the consolidated statements of income. The $6.2 million mortgage servicing rights expense for first quarter 2007 was comprised of $5.0 million of base amortization and a $1.2 million addition to the valuation allowance, while the $3.7 million mortgage servicing rights expense for first quarter 2006 was comprised of base amortization of $5.1 million and a $1.4 million reversal to the valuation allowance. For the full year 2006, the $18.1 million mortgage servicing rights expense included $20.4 million base amortization, net of a $2.3 million reversal to the valuation allowance.

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


	At or for the			At or for the
	Three months ended			Year ended
	March 31, 2007			December 31, 2006
	($ in Thousands)
Mortgage servicing rights:
Mortgage servicing rights at beginning of period	$	71,694		$	76,236
Additions		3,801			15,866
Sale of servicing (1)		(15,868	)		—
Amortization		(5,037	)		(20,400	)
Other-than-temporary impairment		(27	)		(8	)

Mortgage servicing rights at end of period	$	54,563		$	71,694

Valuation allowance at beginning of period		(5,074	)		(7,395	)
(Additions) / Reversals, net		(1,174	)		2,313
Other-than-temporary impairment		27			8

Valuation allowance at end of period		(6,221	)		(5,074	)

Mortgage servicing rights, net	$	48,342		$	66,620


Portfolio of residential mortgage loans serviced for others (1)	$	6,087,000		$	8,330,000
Mortgage servicing rights, net to Portfolio of residential mortgage loans serviced for others		0.79	%		0.80	%
Mortgage servicing rights expense (2)	$	6,211		$	18,087


(1)		The Corporation sold approximately $2.3 billion of its mortgage portfolio serviced for others with a carrying value of $15.9 million in the first quarter of 2007 at a $7.8 million gain, included in mortgage banking, net in the consolidated statements of income.

(2)		Includes the amortization of mortgage servicing rights and additions/reversals to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net in the consolidated statements of income.

The estimated future amortization expense for mortgage servicing rights over the remainder of 2007 and the next five years (based on existing asset balances, the current interest rate environment, and prepayment speeds as of March 31, 2007) are projected to be: $10.3 million for the remaining nine months of 2007, and $11.4 million, $8.6 million, $6.8 million, $5.2 million, and $3.4 million for the years ended 2008, 2009, 2010, 2011, and 2012, respectively. The actual amortization expense recognized in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable.

NOTE 9: Long-term Funding

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


	March 31,		December 31,
	2007		2006
	($ in Thousands)
Federal Home Loan Bank advances	$	819,957	$	923,264
Bank notes		400,000		625,000
Repurchase agreements		105,000		105,000
Subordinated debt, net		199,349		199,311
Junior subordinated debentures, net		216,629		216,399
Other borrowed funds		2,168		2,168

Total long-term funding	$	1,743,103	$	2,071,142

Federal Home Loan Bank advances: Long-term advances from the Federal Home Loan Bank (“FHLB”) had maturities through 2020 and had weighted-average interest rates of 4.53% at March 31, 2007, compared to 4.04% at December 31, 2006. These advances had a combination of fixed and variable contractual rates, of which, 24% were variable at March 31, 2007, while 22% were variable at December 31, 2006.

Bank notes: The long-term bank notes had maturities through 2008 and had weighted-average interest rates of 5.03% at March 31, 2007, and 5.18% at December 31, 2006. These notes had a combination of fixed and variable rates, of which 75% was variable rate at March 31, 2007, compared to 84% variable rate at December 31, 2006.

Repurchase agreements: The long-term repurchase agreements had maturities through 2009 and had weighted-average interest rates of 4.79% at March 31, 2007, and 4.81% at December 31, 2006. These repurchase agreements were 100% variable rate for all periods presented.

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 subordinated debt qualifies under the risk-based capital guidelines as Tier 2 supplementary capital for regulatory purposes.

Junior subordinated debentures: The Corporation has $180.4 million of junior subordinated debentures (“ASBC Debentures”), which carry a fixed rate of 7.625% and mature on June 15, 2032. The Corporation has the right to redeem the ASBC Debentures, at par, on or after May 30, 2007. During 2002, the Corporation entered into interest rate swaps to hedge the interest rate risk on the ASBC Debentures. The fair value of the derivative was a $0.6 million loss at March 31, 2007, compared to a $1.0 million loss at December 31, 2006. The carrying value of the ASBC Debentures was $179.5 million and $179.3 million at March 31, 2007 and December 31, 2006, respectively. With its October 2005 acquisition, the Corporation acquired $30.9 million of variable rate junior subordinated debentures (the “SFSC Debentures”), from two equal issuances, of which one pays a variable rate adjusted quarterly based on the 90-day LIBOR plus 2.80% (or 8.16% at March 31, 2007) and matures April 23, 2034, and the other which pays a variable rate adjusted quarterly based on the 90-day LIBOR plus 3.45% (or 8.81% at March 31, 2007) and matures November 7, 2032. The Corporation has the right to redeem the SFSC Debentures, at par, on January 23, 2009, and November 7, 2007, respectively, and quarterly thereafter. The carrying value of the SFSC Debentures was $37.1 million at both March 31, 2007 and December 31, 2006.

NOTE 10: Other Comprehensive Income

A summary of activity in accumulated other comprehensive income follows.


	Three Months Ended						Year Ended
	March 31, 2007			March 31, 2006			December 31, 2006
				($ in Thousands)
Net income	$	73,395		$	81,707		$	316,645
Other comprehensive income (loss):
Net gains (losses) on investment securities available for sale:
Net unrealized gains (losses)		8,229			(6,103	)		8,790
Reclassification adjustment for net gains realized in net income		(1,035	)		(2,456	)		(4,722	)
Income tax expense (benefit)		(2,501	)		2,993			(1,519	)
Amortization of adjustment for adoption of SFAS 158:
Prior service cost		111			—			—
Net loss		215
Income tax benefit		(130	)		—			—

Total other comprehensive income (loss)		4,889			(5,566	)		2,549

Comprehensive income	$	78,284		$	76,141		$	319,194

NOTE 11: Income Taxes

The Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states jurisdictions. Generally, the Corporation is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 1999.

The Corporation adopted the provisions of FIN 48 effective January 1, 2007, resulting in no cumulative effect adjustment to retained earnings as of the date of adoption. As of January 1, 2007, the gross amount of unrecognized tax benefits was $29 million. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $21 million.

The Corporation recognizes interest and penalties accrued related to unrecognized tax benefits in the income tax expense line of the consolidated statements of income. As of January 1, 2007, the Corporation had expensed $4 million of interest and penalties on unrecognized tax benefits. Management does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.

NOTE 12: Derivative and Hedging Activities

The table below identifies the Corporation’s derivative instruments, excluding mortgage derivatives, at March 31, 2007 and December 31, 2006, as well as which instruments receive hedge accounting treatment. Included in the table below for both March 31, 2007 and December 31, 2006, were customer interest rate swaps and interest rate caps for which the Corporation has mirror swaps and caps. The fair value of these customer swaps and caps and of the mirror swaps and caps is recorded in earnings and the net impact for the first quarter periods of 2007 and 2006, and full year 2006 was immaterial.


	Notional		Estimated Fair			Weighted Average
	Amount		Market Value			Receive Rate			Pay Rate			Maturity
	($ in Thousands)
March 31, 2007
Swaps–receive fixed / pay variable (1)	$	175,000	$	(645	)		7.63	%		6.37	%	307 months
Customer and mirror swaps (2)		466,704		—			4.98	%		4.98	%	60 months
Customer and mirror caps (2)		22,197		—			—			—		29 months


(1)		Fair value hedge accounting is applied on $175 million notional, which hedges a long-term, fixed-rate subordinated debenture.

(2)		Hedge accounting is not applied on $489 million notional of interest rate swaps and caps entered into with our customers whose value changes are offset by mirror swaps and caps entered into with third parties.


	Notional		Estimated Fair			Weighted Average
	Amount		Market Value			Receive Rate			Pay Rate			Maturity
	($ in Thousands)
December 31, 2006
Swaps–receive fixed / pay variable (3)	$	175,000	$	(979	)		7.63	%		6.38	%	310 months
Customer and mirror swaps (4)		434,178		—			4.91	%		4.91	%	63 months
Customer and mirror caps (4)		22,197		—			—			—		32 months


(3)		Fair value hedge accounting is applied on $175 million notional, which hedges a long-term, fixed-rate subordinated debenture.

(4)		Hedge accounting is not applied on $456 million notional of interest rate swaps and caps entered into with our customers whose value changes are offset by mirror swaps and caps entered into with third parties.

For the first quarter of 2007, the Corporation recognized combined ineffectiveness of $45,000 (which increased net interest income), relating to the Corporation’s fair value hedge of a long-term, fixed rate subordinated debenture. The Corporation recognized combined ineffectiveness of $45,000 for first quarter 2006 and $1.1 million for full year 2006 relating to the Corporation’s fair value hedges of long-term, fixed-rate commercial loans and a long-term, fixed-rate subordinated debenture. No components of the derivatives change in fair value were excluded from the assessment of hedge effectiveness. Prior to March 31, 2006, the Corporation had been using the short cut method of assessing hedge effectiveness for a fair value hedge with $175 million notional balance hedging a long-term, fixed-rate subordinated debenture. Effective March 31, 2006, the Corporation de-designated the hedging relationship under the short cut method and re-designated the hedging relationship under a long-haul method utilizing the same instruments. This hedging relationship accounts for the majority of ineffectiveness recorded in 2006. In December 2006, the Corporation terminated all swaps hedging long-term, fixed-rate commercial loans for a net gain of approximately $0.8 million.

For the mortgage derivatives, which are not included in the table above and are not accounted for as hedges, changes in the fair value are recorded to mortgage banking, net. The fair value of the mortgage derivatives at March 31, 2007, was a net loss of $0.9 million, comprised of the net loss on commitments to fund approximately $143 million of loans to individual borrowers and the net gain on commitments to sell approximately $199 million of loans to various investors. The fair value of the mortgage derivatives at March 31, 2006, was a net loss of $0.8 million, comprised of the net loss on commitments to fund approximately $129 million of loans to individual borrowers and the net gain on commitments to sell approximately $154 million of loans to various investors. The fair value of the mortgage derivatives at December 31, 2006, was a net loss of $0.7 million, comprised of the net loss on commitments to fund approximately $91 million of loans to individual borrowers and the net gain on commitments to sell approximately $138 million of loans to various investors.

NOTE 13: Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities

Lending-related Commitments

As a financial services provider, the Corporation routinely enters into commitments to extend credit. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Corporation, with each customer’s creditworthiness evaluated on a case-by-case basis. The commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amount of those instruments. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the customer. Since a significant portion of commitments to extend credit expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements.

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. Commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded on the consolidated balance sheets. The Corporation’s derivative and hedging activity is further described in Note 12. 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.


	March 31, 2007		December 31, 2006
	($ in Thousands)
Commitments to extend credit, excluding commitments to originate mortgage loans ⁽¹⁾	$	6,690,257	$	6,067,120
Commercial letters of credit ⁽¹⁾		23,809		22,568
Standby letters of credit ⁽²⁾		608,751		608,352


(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 March 31, 2007 or December 31, 2006.

(2)		The Corporation has established a liability of $4.8 million at both March 31, 2007 and December 31, 2006, respectively, as an estimate of the fair value of these financial instruments.

Other Commitments

The Corporation has principal investment commitments to provide capital-based financing to private and public companies through either direct investments in specific companies or through investment funds and partnerships. The timing of future cash requirements to fund such commitments is generally dependent on the investment cycle, whereby privately held companies are funded by private equity investors and ultimately sold, merged, or taken public through an initial offering, which can vary based on overall market conditions, as well as the nature and type of industry in which the companies operate. The Corporation also invests in low-income housing, small-business commercial real estate, and historic tax credit projects to promote the revitalization of low-to-moderate-income neighborhoods throughout the local communities of its bank subsidiary. As a limited partner in these unconsolidated projects, the Corporation is allocated tax credits and deductions associated with the underlying projects. As of March 31, 2007, the Corporation’s commitment for all these investments was $41 million (of which, $22 million was funded), while at December 31, 2006, the Corporation’s commitment for all these investments was $33 million (of which, $16 million was funded). The aggregate carrying value of these investments at March 31, 2007, was $18 million, included in other assets on the consolidated balance sheets, compared to $13 million at December 31, 2006.

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 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 predominantly sold on a nonrecourse basis. The Corporation’s agreements to sell residential mortgage loans in the normal course of business usually require certain representations and warranties on the underlying loans sold, related to credit information, loan documentation, collateral, and insurability, which if subsequently are untrue or breached, could require the Corporation to repurchase certain loans affected. There have been insignificant instances of repurchase under representations and warranties. To a much lesser degree, the Corporation may sell residential mortgage loans with limited recourse (limited in that the recourse period ends prior to the loan’s maturity, usually after certain time and/or loan paydown criteria have been met), whereby repurchase could be required if the loan had defined delinquency issues. At March 31, 2007 and December 31, 2006, there was approximately $28 million and $27 million, respectively, of loans sold with such recourse risk, upon which there have been insignificant instances of repurchase. Finally, a thrift retained the credit risk on the underlying loans it sold to the FHLB, prior to its acquisition by the Corporation in October 2004, in exchange for a monthly credit enhancement fee. At March 31, 2007 and December 31, 2006, there were $1.7 billion and $1.8 billion, respectively, of such loans with credit risk recourse, upon which there have been negligible historical losses.

NOTE 14: Retirement Plans

The Corporation has a noncontributory defined benefit retirement plan (the Retirement Account Plan (“RAP”)) covering substantially all full-time employees. The benefits are based primarily on years of service and the employee’s compensation paid. Employees of acquired entities generally participate in the RAP after consummation of the business combinations. The plans of acquired entities are typically merged into the RAP after completion of the mergers, and credit is usually given to employees for years of service at the acquired institution for vesting and eligibility purposes. In connection with the First Federal acquisition in October 2004, the Corporation assumed the First Federal pension plan (the “First Federal Plan”). The First Federal Plan was frozen on December 31, 2004, and qualified participants in the First Federal Plan became eligible to participate in the RAP as of January 1, 2005. Additional discussion and information on the RAP and the First Federal Plan are collectively referred to below as the “Pension Plan.”

Associated also provides healthcare benefits for eligible retired employees in its Postretirement Plan (the “Postretirement Plan”). Retirees who are at least 55 years of age with 10 years of service are eligible to participate

in the plan. Additionally, with the rise in healthcare costs for retirees under the age of 65, the Corporation changed its postretirement benefits to include a subsidy for those employees who are at least age 55 but less than age 65 with at least 15 years of service as of January 1, 2007. This subsidy has been accounted for as a plan amendment and increased the projected benefit obligation by $2.7 million in 2006. The Corporation has no plan assets attributable to the plan, and funds the benefits as claims arise. The Corporation reserves the right to terminate or make changes to the plan at any time.

The components of net periodic benefit cost for the Pension and Postretirement Plans for the three months ended March 31, 2007 and 2006, and for the full year 2006 were as follows.


	Three Months Ended						Year Ended
	March 31,						December 31
	2007			2006			2006
				($ in Thousands)
Components of Net Periodic Benefit Cost

Pension Plan:
Service cost	$	2,525		$	2,525		$	9,546
Interest cost		1,443			1,350			5,335
Expected return on plan assets		(2,825	)		(2,264	)		(9,551	)
Amortization of:
Transition asset		—			(23	)		(88	)
Prior service cost		12			13			47
Actuarial loss		215			274			1,035

Subtotal net periodic benefit cost	$	1,370		$	1,875		$	6,324
Settlement charge		—			—			102

Total net periodic benefit cost	$	1,370		$	1,875		$	6,426


Postretirement Plan:
Interest cost	$	79		$	79		$	311
Amortization of prior service cost		99			84			395

Total net periodic benefit cost	$	178		$	163		$	706

The Corporation’s funding policy is to pay at least the minimum amount required by the funding requirements of federal law and regulations, with consideration given to the maximum funding amounts allowed. The Corporation contributed $10 million to its Pension Plan during the first quarter of 2007, and as of March 31, 2007, does not expect to make additional contributions for the remainder of 2007. The Corporation regularly reviews the funding of its Pension Plan.

NOTE 15: Segment Reporting

Selected financial and descriptive information is required to be provided about reportable operating segments, considering a “management approach” concept as the basis for identifying reportable segments. The management approach is to be based on the way that management organizes the segments within the enterprise for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the enterprise’s internal organization, focusing on financial information that an enterprise’s chief operating decision-makers use to make decisions about the enterprise’s operating matters.

The Corporation’s primary segment is banking, conducted through its bank and lending subsidiaries. For purposes of segment disclosure, as allowed by the governing accounting statement, these entities have been combined as one segment that have similar economic characteristics and the nature of their products, services, processes, customers, delivery channels, and regulatory environment are similar. Banking consists of lending and deposit gathering (as well as other 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.

Selected segment information is presented below.


				Wealth
	Banking			Management			Other			Consolidated Total
	($ in Thousands)
As of and for the three months ended March 31, 2007

Net interest income	$	158,916		$	130		$	—		$	159,046
Provision for loan losses		5,082			—			—			5,082
Noninterest income		62,475			26,233			(971	)		87,737
Depreciation and amortization		12,327			441			—			12,768
Other noninterest expense		104,277			17,099			(971	)		120,405
Income taxes		31,604			3,529			—			35,133

Net income	$	68,101		$	5,294		$	—		$	73,395

Percent of consolidated net income		93	%		7	%		—	%		100	%

Total assets	$	20,442,932		$	101,783		$	(37,302	)	$	20,507,413

Percent of consolidated total assets		100	%		—	%		—	%		100	%

Total revenues *	$	221,391		$	26,363		$	(971	)	$	246,783
Percent of consolidated total revenues		90	%		10	%		—			100	%

As of and for the three months ended March 31, 2006

Net interest income	$	166,740		$	129		$	—		$	166,869
Provision for loan losses		4,465			—			—			4,465
Noninterest income		51,936			24,708			(791	)		75,853
Depreciation and amortization		13,223			531			—			13,754
Other noninterest expense		98,961			16,627			(791	)		114,797
Income taxes		24,927			3,072			—			27,999

Net income	$	77,100		$	4,607		$	—		$	81,707

Percent of consolidated net income		94	%		6	%		—	%		100	%

Total assets	$	21,455,894		$	93,327		$	(30,361	)	$	21,518,860

Percent of consolidated total assets		100	%		—	%		—	%		100	%

Total revenues *	$	218,676		$	24,837		$	(791	)	$	242,722
Percent of consolidated total revenues		90	%		10	%		—			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 amortization.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 the Corporation 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 the Corporation’s control, include the following:

	§		operating, legal, and regulatory risks;

	§		economic, political, and competitive forces affecting the Corporation’s banking, securities, asset management, insurance, and credit services businesses;

	§		integration risks related to acquisitions;

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

	§		the risk that the Corporation’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. The Corporation undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

The following discussion and analysis is presented to assist in the understanding and evaluation of the Corporation’s financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Form 10-Q and should be read in conjunction therewith.

Critical Accounting Policies

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 historical loan loss and delinquency experience, trends in past due and nonperforming loans, risk characteristics of the various classifications of loans, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect probable credit losses. Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the 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 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 participants in the mortgage banking business, the Corporation relies on an internal discounted cash flow model to estimate the fair value of its mortgage servicing rights. The use of an internal discounted cash flow model involves judgment, particularly of estimated prepayment speeds of underlying mortgages serviced and the overall level of interest rates. Loan type and note rate are the predominant risk characteristics of the underlying loans used to stratify capitalized mortgage servicing rights for purposes of measuring impairment. The Corporation periodically reviews the assumptions underlying the valuation of mortgage servicing rights. In addition, the Corporation consults periodically with third parties as to the assumptions used and to determine that the Corporation’s valuation is consistent with the third party valuation. While the Corporation believes that the values produced by its internal model are indicative of the fair value of its mortgage servicing rights portfolio, these values can change significantly depending upon key factors, such as the then current interest rate environment, estimated prepayment speeds of the underlying mortgages serviced, and other economic conditions. 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 March 31, 2007 (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 $2 million higher than that determined at March 31, 2007 (leading to more valuation allowance reversal and an increase in net 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 $3 million lower (leading to adding more valuation allowance and a decrease in net mortgage banking income). The proceeds that might be received should the Corporation actually consider a sale of some or all of the mortgage servicing rights portfolio could differ from the amounts reported at any point in time. The Corporation believes the mortgage servicing rights asset is properly recorded in the consolidated financial statements. See Note 8, “Mortgage Servicing Rights,” 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. Derivative instruments are required to be carried at fair value on the balance sheet with changes in the fair value recorded directly in earnings. To qualify for and maintain hedge accounting, the Corporation must meet formal documentation and effectiveness evaluation requirements both at the hedge’s inception and on an ongoing basis. The application of the hedge accounting policy requires strict adherence to documentation and effectiveness testing requirements, judgment in the assessment of hedge effectiveness, identification of similar hedged item

groupings, and measurement of changes in the fair value of hedged items. If in the future derivative financial instruments used by the Corporation no longer qualify for hedge accounting, the impact on the consolidated results of operations and reported earnings could be significant. When hedge accounting is discontinued, the Corporation would continue to carry the derivative on the balance sheet at its fair value; however, for a cash flow derivative changes in its fair value would be recorded in earnings instead of through other comprehensive income, and for a fair value derivative the changes in fair value of the hedged asset or liability would no longer be recorded through earnings. Prior to March 31, 2006, the Corporation had been using the short cut method of assessing hedge effectiveness for a fair value hedge with $175 million notional balance, hedging a long-term, fixed-rate subordinated debenture. Effective March 31, 2006, the Corporation de-designated the hedging relationship under the short cut method and re-designated the hedging relationship under a long-haul method utilizing the same instruments. This hedging relationship accounts for the majority of the ineffectiveness recorded in 2006. In December 2006, the Corporation terminated all swaps hedging long-term, fixed-rate commercial loans for a net gain of approximately $0.8 million. At March 31, 2007 and December 31, 2006, the only remaining hedge accounting is on interest rate swaps hedging a $175 million long-term, fixed-rate subordinated debenture. The Corporation continues to evaluate its future hedging strategies. See Note 12, “Derivative and Hedging Activities,” of the notes to consolidated financial statements.

Income Taxes: The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the consolidated results of operations and reported earnings. The Corporation believes the tax assets and liabilities are adequate and properly recorded in the consolidated financial statements. See Note 3, “New Accounting Pronouncements,” and Note 11, “Income Taxes,” of the notes to consolidated financial statements and section “Income Taxes.”

Segment Review

As described in Note 15, “Segment Reporting,” of the notes to consolidated financial statements, the Corporation’s primary reportable segment is banking. Banking consists of lending, deposit gathering, and other banking-related products and services to businesses, governmental units, and consumers, as well as 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 15, “Segment Reporting,” of the notes to consolidated financial statements, indicates that the banking segment represents 93% of consolidated net income and 90% of total revenues (as defined in the Note) for the first quarter of 2007. The Corporation’s profitability is predominantly dependent on net interest income, noninterest income, the level of the provision for loan losses, noninterest expense, and taxes of its banking segment. The consolidated discussion therefore predominantly describes the banking segment results. The critical accounting policies primarily affect the banking segment, with the exception of income taxes, which affects both the banking and wealth management segments (see section “Critical Accounting Policies”).

The contribution from the wealth management segment to consolidated net income and total revenues (as defined and disclosed in Note 15, “Segment Reporting,” of the notes to consolidated financial statements) was approximately 7% and 6%, respectively, for the comparable first quarter periods in 2007 and 2006. Wealth management segment revenues were up $1.5 million (6%) and expenses were up $0.4 million (2%) between the comparable first quarter periods of 2007 and 2006. Wealth segment assets (which consist predominantly of cash equivalents, investments, customer receivables, goodwill and intangibles) were up $8.5 million (9%) between March 31, 2007 and March 31, 2006, predominantly cash equivalents. The major components of wealth management revenues are trust fees, insurance fees and commissions, and brokerage commissions, which are individually discussed in section “Noninterest Income.” The major expenses for the wealth management segment are personnel expense (74% and 70%, respectively, of total segment noninterest expense for first quarter 2007 and the comparable period in 2006), as well as occupancy, processing, and other costs, which are covered generally in

the consolidated discussion in section “Noninterest Expense.”

Results of Operations – Summary

Net income for the three months ended March 31, 2007, totaled $73.4 million, or $0.57 for both basic and diluted earnings per share. Comparatively, net income for the three months ended March 31, 2006, totaled $81.7 million, or $0.60 for both basic and diluted earnings per share. For the first quarter of 2007 the annualized return on average assets was 1.46% and the annualized return on average equity was 13.35%, compared to 1.52% and 14.16%, respectively, for the comparable period in 2006. The net interest margin for the first three months of 2007 was 3.62% compared to 3.48% for the first three months of 2006.

TABLE 1
Summary Results of Operations: Trends
($ in Thousands, except per share data)


	1^st Qtr.			4^th Qtr.			3^rd Qtr.			2^nd Qtr.			1^st Qtr.
	2007			2006			2006			2006			2006

Net income (Quarter)	$	73,395		$	74,501		$	76,888		$	83,549		$	81,707
Net income (Year-to-date)		73,395			316,645			242,144			165,256			81,707

Earnings per share – basic (Quarter)	$	0.57		$	0.58		$	0.58		$	0.63		$	0.60
Earnings per share – basic (Year-to-date)		0.57			2.40			1.82			1.24			0.60

Earnings per share – diluted (Quarter)	$	0.57		$	0.57		$	0.58		$	0.63		$	0.60
Earnings per share – diluted (Year-to-date)		0.57			2.38			1.81			1.23			0.60

Return on average assets (Quarter)		1.46	%		1.43	%		1.46	%		1.58	%		1.52	%
Return on average assets (Year-to-date)		1.46			1.50			1.52			1.55			1.52

Return on average equity (Quarter)		13.35	%		13.19	%		13.36	%		14.86	%		14.16	%
Return on average equity (Year-to-date)		13.35			13.89			14.12			14.51			14.16

Return on tangible average equity (Quarter) (1)		22.63	%		22.31	%		22.32	%		25.18	%		23.48	%
Return on tangible average equity (Year-to-date) (1)		22.63			23.31			23.64			24.31			23.48

Efficiency ratio (Quarter) (2)		52.22	%		50.26	%		50.19	%		49.82	%		51.00	%
Efficiency ratio (Year-to-date) (2)		52.22			50.31			50.33			50.40			51.00

Net interest margin (Quarter)		3.62	%		3.64	%		3.63	%		3.59	%		3.48	%
Net interest margin (Year-to-date)		3.62			3.62			3.56			3.53			3.48


(1)		Return on tangible average equity = Net income divided by average equity excluding average goodwill and other intangible assets. This is a non-GAAP financial measure.

(2)		Efficiency ratio = Noninterest expense divided by sum of taxable equivalent net interest income plus noninterest income, excluding investment securities gains (losses), net, and asset sales gains (losses), net.

Net Interest Income and Net Interest Margin

Net interest income on a taxable equivalent basis for the three months ended March 31, 2007, was $165.6 million, a decrease of $7.9 million or 4.6% versus the comparable period last year. As indicated in Tables 2 and 3, the decrease in taxable equivalent net interest income was attributable to both unfavorable volume variances (as changes in the balances and mix of earning assets and interest-bearing liabilities reduced taxable equivalent net interest income by $4.8 million) and rate variances (as the impact of changes in the interest rate environment and product pricing reduced taxable equivalent net interest income by $3.1 million).

The net interest margin for the first three months of 2007 was 3.62%, 14 bp higher than 3.48% for the same period in 2006. This comparable period increase was a function of a 14 bp higher contribution from net free funds (reflecting both the higher volume and value of noninterest-bearing deposits and other net free funds). Interest rate spread remained unchanged at 3.01%, the net result of the cost of interest-bearing liabilities and the yield on earning assets each rising by 65 bp.

The Federal Reserve raised interest rates by 25 bp four times during the first half of 2006 and rates have been unchanged since, resulting in a level Federal funds rate of 5.25% for first quarter 2007, 82 bp higher than the 4.43% average during the first quarter 2006. The benefits to the margin from the interest rate increases were substantially offset by the more prominently inverted yield curve (i.e., rising short-term interest rates without commensurate

increases to longer-term interest rates) and competitive pricing pressures, producing lower spreads on loans and higher rates on deposits.

The yield on earning assets was 7.03% for the first quarter of 2007, 65 bp higher than the comparable quarter last year, aided in part by a favorable change in mix, as higher yielding loans represented a larger percentage of earning assets. Loan yields increased 59 bp (to 7.43%). Although interest rates rose during the first half of 2006, the favorable impact on loan yields was moderated by competitive pricing on new and refinanced loans in an inverted yield curve environment and by the portion of the loan portfolio that is fixed rate and, therefore, not subject to repricing. The yield on securities and short-term investments increased 48 bp (to 5.34%), benefiting by the sale of lower-yielding investment securities in conjunction with the corporate initiative whereby cash flows from maturing or sold investments were not reinvested, but used to reduce wholesale funding and repurchase stock.

The rate on interest-bearing liabilities of 4.02% for the first quarter of 2007 was 65 bp higher than the same quarter in 2006, with the cost of funds repricing upward in the rising interest rate environment, yet benefiting from lower-costing interest-bearing deposits representing a greater percentage of average interest-bearing liabilities. Interest-bearing deposits were up 72 bp (to 3.56%), impacted by aggressive pricing especially in business and municipal deposits and a shift in customer preference from lower-priced transaction accounts to higher paying deposit products. Wholesale funding costs increased 86 bp (to 5.18%), with short-term borrowings up 80 bp (closely mirroring the year-over-year increase in average Federal funds rates) and long-term funding up 89 bp (as lower-costing bank notes and FHLB advances matured or repriced at higher rates).

Year-over-year changes in the average quarterly balance sheet were predominantly a function of the Corporation’s wholesale funding reduction strategy. In conjunction with this initiative (which began in fourth quarter 2005 and completed in third quarter 2006), cash from maturing or sold investments was not reinvested, but used to reduce wholesale borrowings and repurchase stock. As a result, average earning assets were $18.4 billion for first quarter 2007, a decrease of $1.5 billion or 7.4% from the comparable quarter last year. On average, securities and short-term investments were down $1.1 billion. Average loans were down $0.4 billion, with the decrease primarily attributable to the January 2007 sale of $0.3 billion of lower-yielding residential mortgage first liens. As a percentage of average earning assets, loans increased from 77.0% for first quarter 2006 to 81.1% in first quarter 2007 and investment securities experienced a corresponding decrease (from 23.0% for first quarter 2006 to 18.9% for first quarter 2007).

Average interest-bearing liabilities of $15.7 billion in first quarter 2007 were down $1.5 billion versus first quarter 2006. On average, interest-bearing deposits grew $99 million and noninterest-bearing demand deposits (a principal component of net free funds) were up $139 million. Given the growth in average total deposits and the decrease in average earning assets, wholesale funding balances decreased $1.6 billion between the first quarter periods, with long-term debt down $1.3 billion and short-term borrowings down $0.3 billion. As a percentage of total average interest-bearing liabilities, wholesale funds decreased from 35.4% for the first quarter 2006 to 28.5% in first quarter 2007.

TABLE 2
Net Interest Income Analysis
($ in Thousands)


	Three months ended March 31, 2007							Three months ended March 31, 2006
			Interest		Average					Interest		Average
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate

Earning assets:
Loans: (1) (2) (3) (4)
Commercial	$	9,581,543	$	178,441		7.55	%	$	9,425,306	$	164,288		6.97	%
Residential mortgage		2,356,944		35,383		6.04	%		2,877,613		40,946		5.71	%
Retail		3,019,661		60,820		8.11	%		3,024,884		56,350		7.50	%

Total loans		14,958,148		274,644		7.43	%		15,327,803		261,584		6.84	%
Investments and other (1)		3,475,838		46,380		5.34	%		4,582,617		55,626		4.86	%

Total earning assets		18,433,986	$	321,024		7.03	%		19,910,420	$	317,210		6.38	%
Other assets, net		1,939,089							1,961,549

Total assets	$	20,373,075						$	21,871,969


Interest-bearing liabilities:
Interest-bearing deposits:
Savings deposits	$	882,783	$	801		0.37	%	$	1,065,212	$	943		0.36	%
Interest-bearing demand deposits		1,799,385		8,587		1.94	%		2,384,072		10,392		1.77	%
Money market deposits		3,819,228		36,093		3.83	%		2,800,403		21,352		3.09	%
Time deposits, excluding Brokered CDs		4,310,365		47,594		4.48	%		4,350,733		39,449		3.68	%

Total interest-bearing deposits, excluding Brokered CDs		10,811,761		93,075		3.49	%		10,600,420		72,136		2.76	%
Brokered CDs		400,171		5,224		5.29	%		512,165		5,742		4.55	%

Total interest-bearing deposits		11,211,932		98,299		3.56	%		11,112,585		77,878		2.84	%
Wholesale funding		4,462,713		57,119		5.18	%		6,092,275		65,796		4.32	%

Total interest-bearing liabilities		15,674,645	$	155,418		4.02	%		17,204,860	$	143,674		3.37	%

Noninterest-bearing demand deposits		2,346,026							2,207,079
Other liabilities		123,495							120,491
Stockholders’ equity		2,228,909							2,339,539

Total liabilities and equity	$	20,373,075						$	21,871,969


Interest rate spread						3.01	%						3.01	%
Net free funds						0.61	%						0.47	%

Net interest income, taxable equivalent, and net interest margin			$	165,606		3.62	%			$	173,536		3.48	%

Taxable equivalent adjustment				6,560							6,667

Net interest income			$	159,046						$	166,869


(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; and retail includes home equity lines, residential mortgage junior liens, and installment loans (such as educational and other consumer loans).

TABLE 3
Volume / Rate Variance (1)
($ in Thousands)


	Comparison of
	Three months ended March 31, 2007 versus 2006
	Income/Expense			Variance Attributable to
	Variance			Volume			Rate

INTEREST INCOME
Loans: (2)
Commercial	$	14,153		$	2,480		$	11,673
Residential mortgage		(5,563	)		(7,721	)		2,158
Retail		4,470			(94	)		4,564

Total loans		13,060			(5,335	)		18,395
Investments and other (2)		(9,246	)		(14,233	)		4,987

Total interest income	$	3,814		$	(19,568	)	$	23,382

INTEREST EXPENSE
Interest-bearing deposits:
Savings deposits	$	(142	)	$	(165	)	$	23
Interest-bearing demand deposits		(1,805	)		(2,723	)		918
Money market deposits		14,741			8,890			5,851
Time deposits, excluding brokered CDs		8,145			(369	)		8,514

Interest-bearing deposits, excluding brokered CDs		20,939			5,633			15,306
Brokered CDs		(518	)		(1,374	)		856

Total interest-bearing deposits		20,421			4,259			16,162
Wholesale funding		(8,677	)		(18,973	)		10,296

Total interest expense	$	11,744		$	(14,714	)	$	26,458

Net interest income, taxable equivalent	$	(7,930	)	$	(4,854	)	$	(3,076	)


(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.

Provision for Loan Losses

The provision for loan losses for the first quarter of 2007 was $5.1 million, compared to $7.1 million and $4.5 million for the fourth and first quarters of 2006, respectively, approximating net charge off levels for each period. At March 31, 2007, the allowance for loan losses was $203.5 million, unchanged from December 31, 2006, and up from $203.4 million at March 31, 2006. Net charge offs were $5.1 million for first quarter 2007, compared to $7.0 million for fourth quarter 2006 and $4.5 million for first quarter 2006. Annualized net charge offs as a percent of average loans for first quarter 2007 were 0.14%, compared to 0.18% for fourth quarter 2006 and 0.12% for first quarter 2006. The ratio of the allowance for loan losses to total loans was 1.37%, unchanged from December 31, 2006 and up from 1.31% at March 31, 2006. Nonperforming loans at March 31, 2007, were $153 million, compared to $142 million at December 31, 2006, and $110 million at March 31, 2006. See Table 8.

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 and Other Real Estate Owned.”

Noninterest Income

Noninterest income for the first quarter of 2007 was $82.7 million, up $11.9 million (16.9%) from the first quarter of 2006. Core fee-based revenue (as defined in Table 4 below) was $60.1 million, an increase of $4.9 million or 8.9% over the comparable quarter last year. Net mortgage banking income was $9.6 million compared to $4.4 million for the first quarter of 2006. All other noninterest income categories combined were $13.0 million, up $1.9 million compared to the comparable quarter last year.

TABLE 4
Noninterest Income
($ in Thousands)


	1^st Qtr.			1^st Qtr.			Dollar			Percent
	2007			2006			Change			Change

Trust service fees	$	10,309		$	8,897		$	1,412			15.9	%
Service charges on deposit accounts		23,022			20,959			2,063			9.8
Card-based and other nondeposit fees		11,323			9,886			1,437			14.5
Retail commissions		15,479			15,478			1			0.0

Core fee-based revenue		60,133			55,220			4,913			8.9	%
Mortgage banking income		15,761			8,058			7,703			95.6
Mortgage servicing rights expense		(6,211	)		(3,654	)		(2,557	)		(70.0	)

Mortgage banking, net		9,550			4,404			5,146			116.8
Bank owned life insurance (“BOLI”) income		4,164			3,071			1,093			35.6
Other		5,935			5,852			83			1.4

Subtotal (“fee income”)		79,782			68,547			11,235			16.4
Asset sale gains / (losses), net		1,883			(230	)		2,113			N/M
Investment securities gains, net		1,035			2,456			(1,421	)		N/M

Total noninterest income	$	82,700		$	70,773		$	11,927			16.9	%


N/M – Not meaningful.

Trust service fees were $10.3 million, up $1.4 million (15.9%) between the comparable first quarter periods. The change was primarily the result of an improved stock market and growth in assets under management, particularly retirement plan assets, as well as to new fee schedules on personal trust accounts implemented in the fourth quarter of 2006. The market value of assets under management was $5.9 billion and $5.2 billion at March 31, 2007 and 2006, respectively.

Service charges on deposit accounts were $23.0 million, up $2.1 million (9.8%) over the comparable first quarter last year. The increase was primarily a function of higher nonsufficient funds / overdraft fees (attributable to the moderate fee increase in fourth quarter 2006) and, to a much lesser degree, an increase in business service charges, partially offset by a decline in personal service charges.

Card-based and other nondeposit fees were $11.3 million, up $1.4 million (14.5%) over first quarter 2006, primarily from increases in card-related inclearing and other fees, as well as higher ancillary loan fees.

Retail commissions (which include commissions from insurance and brokerage product sales) were unchanged at $15.5 million for both first quarter 2007 and 2006. Insurance commissions of $11.3 million were down $0.2 million (principally given lower property-casualty premiums) and fixed annuity commissions of $1.4 million were down $0.5 million, while brokerage commissions of $1.8 million were up $0.4 million and variable annuity commissions of $1.0 million were up $0.3 million.

Net mortgage banking income was $9.6 million for first quarter 2007, up $5.1 million compared to first quarter 2006. Net mortgage banking income consists of gross mortgage banking income less mortgage servicing rights expense. Gross mortgage banking income was $15.8 million for first quarter 2007, an increase of $7.7 million (95.6%) compared to first quarter 2006. The Corporation periodically considers sales of portions of its residential mortgage portfolio serviced for others (the servicing portfolio) to effectively manage earnings volatility risk. In

late March 2007, the Corporation sold approximately $2.3 billion (28%) of its servicing portfolio at a $7.8 million gain. Thus, the $7.7 million increase in gross mortgage banking income includes the $7.8 million gain on the bulk servicing sales, net of $0.1 million lower combined servicing revenue, gains on loan sales, and other fees. Servicing fees were flat between the comparable first quarter periods, as the bulk servicing sales have a subservicing arrangement until the serviced loans are transferred, which is expected in the second quarter of 2007. Net gains on loan sales and other fees were affected by lower margins on sales but higher volume of settled sales. Secondary mortgage production was $339 million for the first quarter of 2007, 37% higher than the $247 million for first quarter 2006.

Mortgage servicing rights expense is affected by the size of the servicing portfolio, as well as the changes in the estimated fair value of the mortgage servicing rights asset. Mortgage servicing rights expense was $2.6 million higher than first quarter 2006, including a $2.6 million increase to the valuation reserve (comprised of a $1.2 million addition to the valuation reserve in first quarter 2007 compared to a $1.4 million recovery of the valuation reserve in first quarter 2006), and negligible change in the base amortization expense on the mortgage servicing rights asset. As mortgage interest rates decline, prepayment speeds generally increase and the value of the mortgage servicing rights asset generally decreases, potentially requiring additional valuation reserve. At March 31, 2007, the mortgage servicing rights asset, net of its valuation allowance, was $48.3 million, representing 79 bp of the $6.1 billion servicing portfolio, compared to a net mortgage servicing rights asset of $68.1 million, representing 85 bp of the $8.0 billion servicing portfolio at March 31, 2006. The valuation of the mortgage servicing rights asset is considered a critical accounting policy. See section “Critical Accounting Policies,” as well as Note 8, “Mortgage Servicing Rights,” of the notes to consolidated financial statements for additional disclosure.

BOLI income was $4.2 million, up $1.1 million (35.6%) from first quarter 2006, primarily due to higher average BOLI balances between the comparable quarters and underlying rate increases on a net basis of the BOLI investments. Other income was unchanged at $5.9 million for both first quarter 2007 and 2006. Asset sale gains were $1.9 million for first quarter 2007, including a $1.3 million gain on the sale of $32 million in student loans. Net investment securities gains of $1.0 million for first quarter 2007 were attributable to equity security sales. In late-March 2006, $0.7 billion of investment securities were sold as part of the Corporation’s 2006 initiative to reduce wholesale borrowings, resulting in a net $2.5 million gain for first quarter 2006, comprised of investment securities sales losses of $15.8 million, offset by gains of $18.3 million on equity security sales.

Noninterest Expense

Noninterest expense was $128.1 million for first quarter 2007, up $4.7 million (3.8%) over first quarter last year, primarily a result of increased personnel costs. Personnel costs were up $4.7 million between the comparable first quarter periods, while all remaining expense categories on a combined basis were minimally changed (down 0.1%).

TABLE 5
Noninterest Expense
($ in Thousands)


	1^st Qtr.		1^st Qtr.		Dollar			Percent
	2007		2006		Change			Change

Personnel expense	$	74,047	$	69,303	$	4,744			6.8	%
Occupancy		11,587		11,758		(171	)		(1.5	)
Equipment		4,394		4,588		(194	)		(4.2	)
Data processing		7,678		8,039		(361	)		(4.5	)
Business development and advertising		4,405		4,249		156			3.7
Other intangible amortization		1,661		2,343		(682	)		(29.1	)
Stationery and supplies		1,548		1,774		(226	)		(12.7	)
Postage		1,826		1,828		(2	)		(0.1	)
Legal and professional		2,686		2,750		(64	)		(2.3	)
Other		18,304		16,839		1,465			8.7

Total noninterest expense	$	128,136	$	123,471	$	4,665			3.8	%

Personnel expense (which includes salary-related expenses and fringe benefit expenses) was $74.0 million for first quarter 2007, up $4.7 million (6.8%) versus the first quarter of 2006. Average full-time equivalent employees were 5,089 for first quarter 2007, down 1.1% from 5,147 for first quarter 2006. Salary-related expenses increased $3.4 million (6.3%). This increase was the result of higher formal/discretionary bonus incentives (up $2.3 million, as first quarter 2006 scaled back discretionary pay to a greater degree in response to the Corporation’s performance pace than in first quarter 2007), higher base salaries and commissions (up $0.9 million or 1.9%, as merit increases between the years were tempered in part by fewer average employees and higher salary deferrals related to loan originations), higher compensation cost related to unvested stock options and restricted stock grants (up $0.5 million or 81.2%), and increased signing bonuses (up $0.2 million), offset partly by lower severance costs (down $0.5 million). Fringe benefit expenses were up $1.3 million (8.7%) versus the first quarter of 2006, primarily from increased costs of premium-based benefits (up $0.9 million or 11.7%) and payroll taxes given the larger salary-related expenses.

Occupancy expense of $11.6 million for first quarter 2007 was down $0.2 million (1.5%), equipment expense of $4.4 million was down $0.2 million (4.2%), data processing expense of $7.7 million was down $0.4 million (4.5%), and stationery and supplies of $1.5 million was down $0.2 million (12.7%) compared to the first quarter last year, while business development and advertising of $4.4 million was up modestly by $0.2 million (3.7%), reflecting efforts to control selected discretionary expenses. Intangible amortization expense decreased $0.7 million (29.1%), attributable to the full amortization of certain intangible assets during 2006 related to the 2004 and 2005 acquisitions. Other expense increased $1.5 million (8.7%) over the comparable quarter last year, largely due to $0.5 million higher foreclosure costs and $2.0 million higher third party deposit network service costs, offset partly by reductions across multiple categories, including $0.4 million lower fraud and robbery losses.

Income Taxes

Income tax expense for the first quarter of 2007 was $35.1 million compared to $28.0 million for first quarter 2006. The effective tax rate (income tax expense divided by income before taxes) was 32.4% and 25.5% for the first three months of 2007 and 2006, respectively. The increase in the effective tax rate was primarily due to the first quarter 2006 resolution of certain multi-jurisdictional tax issues for certain years, which resulted in the reduction of previously recorded tax liabilities and income tax expense of approximately $7.7 million in the first quarter of 2006.

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

Balance Sheet

At March 31, 2007, total assets were $20.5 billion, a decrease of $0.4 billion (7% annualized) since December 31, 2006. The decline in assets was comprised primarily of a $0.3 billion decrease in loans held for sale, given the January 2007 sale of $0.3 billion of residential mortgages, transferred into loans held for sale in December 2006.

Loans were $14.9 billion, relatively unchanged (down less than 1% annualized) from December 31, 2006, with a slight shift in the mix of loans. Commercial loans grew $0.1 billion to represent 65% of total loans, compared to 64% of total loans at December 31, 2006, and residential mortgage loans increased $0.1 billion to represent 15% of total loans (unchanged from 15% of total loans at December 31, 2006). Retail loans decreased $0.2 billion to represent 20% of total loans versus 21% of total loans at December 31, 2006. Investment securities available for sale were also relatively unchanged, up $31,000 to $3.5 billion at March 31, 2007.

At March 31, 2007, total deposits were $14.0 billion, down $0.3 billion from December 31, 2006, reflecting the usual seasonal declines in noninterest-bearing demand deposits. Noninterest-bearing demand deposits decreased $0.3 billion to represent 17% of total deposits, compared to 19% of total deposits at December 31, 2006.

Wholesale funding (including both short-term borrowings and long-term funding) was relatively unchanged, down $38,000 to $4.1 billion at March 31, 2007.

TABLE 6
Period End Loan Composition
($ in Thousands)


	March 31, 2007					December 31, 2006					September 30, 2006					June 30, 2006					March 31, 2006
			% of					% of					% of					% of					% of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total			Amount		Total
Commercial, financial, and agricultural	$	3,788,800		25	%	$	3,677,573		24	%	$	3,549,216		23	%	$	3,505,819		23	%	$	3,571,835		23	%
Real estate construction		2,084,883		14			2,047,124		14			2,186,810		14			2,122,136		14			1,981,473		13
Commercial real estate		3,723,289		25			3,789,480		25			3,755,037		25			3,872,819		25			4,024,260		26
Lease financing		89,524		1			81,814		1			79,234		1			74,919		—			62,600		—

Commercial		9,686,496		65			9,595,991		64			9,570,297		63			9,575,693		62			9,640,168		62
Home equity ⁽¹⁾		2,042,284		14			2,164,758		15			2,166,312		14			2,151,858		14			2,121,601		14
Installment		869,719		6			915,747		6			940,139		6			945,123		6			957,877		6

Retail		2,912,003		20			3,080,505		21			3,106,451		20			3,096,981		20			3,079,478		20
Residential mortgage		2,257,504		15			2,205,030		15			2,607,860		17			2,732,956		18			2,819,541		18


Total loans	$	14,856,003		100	%	$	14,881,526		100	%	$	15,284,608		100	%	$	15,405,630		100	%	$	15,539,187		100	%


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

TABLE 7
Period End Deposit Composition
($ in Thousands)


	March 31, 2007					December 31, 2006					September 30, 2006					June 30, 2006					March 31, 2006
			% of					% of					% of					% of					% of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total			Amount		Total
Noninterest-bearing demand	$	2,425,248		17	%	$	2,756,222		19	%	$	2,534,686		18	%	$	2,276,463		17	%	$	2,319,075		17	%
Savings		903,738		6			890,380		6			959,650		7			1,031,993		8			1,074,938		8
Interest-bearing demand		1,805,658		13			1,875,879		13			1,712,833		12			1,975,364		14			2,347,104		17
Money market		3,880,744		28			3,822,928		27			3,959,719		28			3,434,288		25			2,863,174		21
Brokered CDs		650,084		5			637,575		5			630,637		4			518,354		4			567,660		4
Other time		4,315,495		31			4,333,087		30			4,411,020		31			4,409,946		32			4,444,919		33


Total deposits	$	13,980,967		100	%	$	14,316,071		100	%	$	14,208,545		100	%	$	13,646,408		100	%	$	13,616,870		100	%

Total deposits, excluding Brokered CDs	$	13,330,883		95	%	$	13,678,496		95	%	$	13,577,908		96	%	$	13,128,054		96	%	$	13,049,210		96	%

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.

As of March 31, 2007, the allowance for loan losses was $203.5 million compared to $203.4 million at March 31, 2006, and $203.5 million at December 31, 2006. At March 31, 2007, the allowance for loan losses to total loans was 1.37% and covered 133% of nonperforming loans, compared to 1.31% and 185%, respectively, at March 31, 2006, and 1.37% and 143%, respectively, at December 31, 2006. Table 8 provides additional information regarding activity in the allowance for loan losses and nonperforming assets.

Gross charge offs were $6.9 million for the three months ended March 31, 2007, $6.1 million for the comparable period ended March 31, 2006, and $30.5 million for the full 2006 year, while recoveries for the corresponding periods were $1.8 million, $1.6 million and $11.5 million, respectively. The ratio of net charge offs to average loans on an annualized basis was 0.14%, 0.12%, and 0.12% for the periods ended March 31, 2007 and March 31, 2006, and for the 2006 year, respectively.

TABLE 8
Allowance for Loan Losses and Nonperforming Assets
($ in Thousands)


	At and for the						At and for the
	three months ended						Year ended
	March 31,						December 31,
	2007			2006			2006

Allowance for Loan Losses:
Balance at beginning of period	$	203,481		$	203,404		$	203,404
Provision for loan losses		5,082			4,465			19,056
Charge offs		(6,869	)		(6,062	)		(30,507	)
Recoveries		1,801			1,601			11,528

Net charge offs		(5,068	)		(4,461	)		(18,979	)

Balance at end of period	$	203,495		$	203,408		$	203,481


Nonperforming Assets:
Nonaccrual loans:
Commercial	$	112,240		$	73,263		$	108,129
Residential mortgage		24,940			20,150			19,290
Retail		9,684			9,411			9,315

Total nonaccrual loans	$	146,864		$	102,824		$	136,734
Accruing loans past due 90 days or more:
Commercial	$	495		$	1,426		$	1,631
Residential mortgage		—			631			—
Retail		5,636			5,011			4,094

Total accruing loans past due 90 days or more	$	6,131		$	7,068		$	5,725
Restructured loans (commercial)		25			31			26

Total nonperforming loans		153,020			109,923			142,485
Other real estate owned		16,439			11,676			14,417

Total nonperforming assets	$	169,459		$	121,599		$	156,902


Ratios:
Allowance for loan losses to net charge offs (annualized)		9.9	x		11.2	x		10.7	x
Ratio of net charge offs to average loans (annualized)		0.14	%		0.12	%		0.12	%
Allowance for loan losses to total loans		1.37			1.31			1.37
Nonperforming loans to total loans		1.03			0.71			0.96
Nonperforming assets to total assets		0.83			0.57			0.75
Allowance for loan losses to nonperforming loans		133			185			143

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. In general, the change in the allowance for loan losses is a function of a number of factors, including but not limited to changes in the loan portfolio (see Table 6), net charge offs and nonperforming loans (see Table 8). To assess the adequacy of the allowance for loan losses, an allocation methodology is applied by the Corporation. The allocation methodology focuses on evaluation of facts and issues related to specific loans, 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, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors. Assessing these numerous factors involves significant judgment. Therefore, management considers the allowance for loan losses a critical accounting policy (see section “Critical Accounting Policies”).

The allocation methodology used was comparable for March 31, 2007and December 31, 2006, whereby the Corporation segregated its loss factors allocations (used for both criticized and non-criticized loan categories) into a component primarily based on historical loss rates and a component primarily based on other qualitative factors that may affect loan collectibility. Factors applied are reviewed periodically and adjusted to reflect changes in trends or other risks. Total loans at March 31, 2007, were $14.9 billion, unchanged from December 31, 2006, and

down $0.7 billion from March 31, 2006 (see Table 6). Nonperforming loans were $153 million or 1.03% of total loans at March 31, 2007, up from 0.71% of loans a year ago, and up from 0.96% of loans at year-end 2006. Criticized commercial loans increased 27% since March 31, 2006 (primarily attributable to deterioration of certain commercial loans in various industries), and increased 5% since year-end 2006. The allowance for loan losses to loans was 1.37%, 1.31% and 1.37% for March 31, 2007, and March 31 and December 31, 2006, respectively.

Management believes the allowance for loan losses to be adequate at March 31, 2007.

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 (defined as over $25 million) has been increasing in recent years. 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 federal and state regulatory agencies also review the allowance for loan losses. These 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 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. Table 8 provides detailed information regarding nonperforming assets, which include nonperforming loans and other real estate owned.

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 $14.7 million, $14.3 million and $15.3 million of nonperforming student loans at March 31, 2007, March 31, 2006, and December 31, 2006, respectively.

Total nonperforming loans of $153 million at March 31, 2007 were up $43 million from March 31, 2006 and up $11 million from year-end 2006, reflecting in part the impact of the economy on the Corporation’s customers. The ratio of nonperforming loans to total loans was 1.03% at March 31, 2007, compared to 0.71% at March 31, 2006 and 0.96% at year-end 2006. The Corporation’s allowance for loan losses to nonperforming loans was 133% at March 31, 2007, down from 185% at March 31, 2006 and 143% at December 31, 2006.

Nonaccrual loans account for the majority of the increase in nonperforming loans between both the comparable and sequential quarter periods. Nonaccrual loans increased $44 million (driven by higher commercial and residential mortgage nonaccrual loans) and accruing loans past due 90 or more days decreased $0.9 million since March 31, 2006, while nonaccrual loans increased $10 million and accruing loans past due 90 or more days increase $0.4 million since December 31, 2006. Credit quality between the comparable March periods was impacted primarily by deterioration in certain commercial credits, resulting in an increase in nonperforming loans. The increase in commercial nonaccrual loans from March 31, 2006 to March 31, 2007, came predominantly from several large commercial credits across various industries adding $30 million to commercial nonaccrual loans. The general increase in residential mortgage nonaccrual loans (as well as to residential real estate owned discussed below) for both the comparable and sequential quarter periods was primarily attributable to the impact on consumers of rising interest rates, the weakening housing market, and the overall economy.

Other real estate owned was $16.4 million at March 31, 2007 (including $6.6 million of bank premises no longer used for banking and reclassified into other real estate owned, i.e., bank properties), compared to $11.7 million (including $6.1 million of bank properties) at March 31, 2006, and $14.4 million (including $5.6 million of bank

properties) at year-end 2006. The $2.7 million increase in other real estate owned from March 31, 2006 to December 31, 2006 was predominantly due to a $3.2 million increase in residential real estate owned offset partly by a $0.5 million reduction to bank properties. The $2.0 million increase in other real estate owned from December 31, 2006 to March 31, 2007 was attributable to the addition of three bank properties, a $0.7 million increase in residential real estate owned, and a $0.3 million increase in commercial real estate owned.

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 determining the level of the allowance for loan losses. The loans that have been reported as potential problem loans are all commercial loans covering a diverse range of businesses and are not concentrated in a particular industry. At March 31, 2007, potential problem loans totaled $419 million, compared to $363 million at March 31, 2006, and $405 million at December 31, 2006. The increase in potential problem loans is primarily attributable to deterioration of certain commercial real estate loans in the Corporation’s core markets.

Liquidity

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

Funds are available from a number of basic banking activity sources, primarily from the core deposit base and from loans and securities repayments and maturities. Additionally, liquidity is provided from the sales of the investment 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.”

While core deposits and loan and investment securities repayments are principal sources of liquidity, funding diversification is another key element of liquidity management. Diversity is achieved by strategically varying depositor type, term, funding market, and instrument. The Parent Company and its subsidiary bank are rated by Moody’s and Standard and Poor’s. These ratings, along with the Corporation’s other ratings, provide opportunity for greater funding capacity and funding alternatives.

At March 31, 2007, the Corporation was in compliance with its internal liquidity objectives.

The Corporation also has multiple funding sources that could be used to increase liquidity and provide additional financial flexibility. 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 March 31, 2007. In addition, under the Parent Company’s $200 million commercial paper program, $160 million of commercial paper was outstanding and $40 million of commercial paper was available at March 31, 2007.

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 March 31, 2007, $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 March 31, 2007, $300 million was available under the shelf registration.

A bank note program associated with Associated Bank, National Association, (the “Bank”) was established during 2000. Under this program, short-term and long-term debt may be issued. As of March 31, 2007, $400 million of long-term bank notes were outstanding and $225 million was available under the 2000 bank note program. A new bank note program was instituted during the third quarter of 2005, of which $2 billion was available at March 31, 2007. The 2005 bank note program will be utilized upon completion of the 2000 bank note program. The Bank has also established federal funds lines with major banks and the ability to borrow from the Federal Home Loan Bank ($1.1 billion was outstanding at March 31, 2007). The Bank also issues institutional certificates of deposit, from time to time offers brokered certificates of deposit, and to a lesser degree, accepts Eurodollar deposits.

Investment securities are an important tool to the Corporation’s liquidity objective. As of March 31, 2007, all investment securities are classified as available for sale and are reported at fair value on the consolidated balance sheet. Of the $3.5 billion investment portfolio at March 31, 2007, $2.0 billion was pledged to secure certain deposits or for other purposes as required or permitted by law, and $181 million of FHLB and Federal Reserve stock combined is “restricted” in nature and less liquid than other tradable equity securities. The majority of the remaining securities could be pledged or sold to enhance liquidity, if necessary.

For the three months ended March 31, 2007, net cash provided by operating activities was $368.0 million, while investing and financing activities used net cash of $34.6 million and $462.3 million, respectively, for a net decrease in cash and cash equivalents of $128.9 million since year-end 2006. Generally, during first quarter 2007, net assets declined $0.4 billion since year-end 2006 given the previously mentioned sale of $0.3 billion of residential mortgage loans in January 2007, and deposits declined $0.3 billion. Short-term borrowings were predominantly used to replenish the net decrease in deposits and repay long-term funding as well as to provide for common stock repurchases and the payment of cash dividends to the Corporation’s stockholders.

For the three months ended March 31, 2006, net cash provided by operating and investing activities was $104.5 million and $469.0 million, respectively, while financing activities used net cash of $632.3 million, for a net decrease in cash and cash equivalents of $58.8 million since year-end 2005. Generally, during first quarter 2006, net assets declined $0.6 billion since year-end 2005 given the previously announced initiative to reduce wholesale funding. Proceeds from sales and maturities of investment securities were used to reduce wholesale funding, as well as to provide for common stock repurchases and the payment of cash dividends to the Corporation’s stockholders.

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

The Corporation utilizes a variety of financial instruments in the normal course of business to meet the financial needs of its customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, commitments to originate residential mortgage loans held for sale, commercial letters of credit, standby letters of credit, forward commitments to sell residential mortgage loans, interest rate swaps, and interest rate caps. A discussion of the Corporation’s derivative instruments at March 31, 2007, is included in Note 12, “Derivative and Hedging Activities,” of the notes to consolidated financial statements and a discussion of the Corporation’s commitments is included in Note 13, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to consolidated financial statements.

Items disclosed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006, have not materially changed since that report was filed, relative to qualitative and quantitative disclosures of fixed and determinable contractual obligations.

In addition, the Corporation adopted the provisions of FIN 48 on January 1, 2007. The adoption of FIN 48 did not have a material effect on the contractual obligations table presented in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006.

Capital

Stockholders’ equity at March 31, 2007 was $2.2 billion, down slightly from December 31, 2006. The change in stockholders’ equity between the two periods was primarily composed of the retention of earnings and the exercise of stock options, with more than offsetting decreases to stockholders’ equity from the payment of cash dividends and the repurchase of common stock. At March 31, 2007, stockholders’ equity included $11.6 million of accumulated other comprehensive loss compared to $16.5 million of accumulated other comprehensive loss at December 31, 2006. The $4.9 million improvement in accumulated other comprehensive loss resulted primarily from lower unrealized losses, net of the tax effect, on securities available for sale (from unrealized losses of $1.4 million at December 31, 2006, to unrealized gains of $3.3 million at March 31, 2006) and $0.2 million attributable to the amortization, net of tax, of the prior service cost and net loss from accumulated other comprehensive loss into net benefit cost. Stockholders’ equity to assets was 10.90% and 10.43% at March 31, 2007 and 2006, respectively.

Cash dividends of $0.29 per share were paid in the first quarter of 2007, compared to $0.27 per share in the first quarter of 2006, an increase of 7%.

The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock to be made available for reissuance 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 2.0 million shares per quarter, while under various actions, the Board of Directors authorized the repurchase of shares, not to exceed specified amounts of the Corporation’s outstanding shares per authorization (“block authorizations”).

During the first quarter of 2007, under the block authorizations, the Corporation repurchased (and cancelled) 2.0 million shares of its outstanding common stock for approximately $68 million (or $34.12 per share) under an accelerated share repurchase agreement. In addition, the Corporation settled two previously announced accelerated share repurchase agreements by issuing shares. At March 31, 2007, approximately 5.9 million shares remain authorized to repurchase under the block authorizations. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities.

The Corporation regularly reviews the adequacy of its capital 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 conditions in markets served and strength of management. The capital ratios of the Corporation and its banking affiliate are greater than minimums required by regulatory guidelines. The Corporation’s capital ratios are summarized in Table 9.

TABLE 9
Capital Ratios
(In Thousands, except per share data)


	At or For the Quarter Ended
	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
	2007			2006			2006			2006			2006

Total stockholders’ equity	$	2,236,134		$	2,245,493		$	2,270,380		$	2,274,860		$	2,244,695
Tier 1 capital		1,535,278			1,546,037			1,558,462			1,578,353			1,527,479
Total capital		1,904,518			1,955,035			1,968,221			1,988,587			1,937,961
Market capitalization		4,283,899			4,490,695			4,232,020			4,170,883			4,491,035

Book value per common share	$	17.54		$	17.44		$	17.44		$	17.20		$	16.98
Cash dividend per common share		0.29			0.29			0.29			0.29			0.27
Stock price at end of period		33.60			34.88			32.50			31.53			33.98
Low closing price for the period		33.16			32.13			30.27			30.69			32.75
High closing price for the period		35.43			35.13			32.58			34.45			34.83

Total equity / assets		10.90	%		10.76	%		10.85	%		10.77	%		10.43	%
Tier 1 leverage ratio		7.86			7.82			7.77			7.73			7.29
Tier 1 risk-based capital ratio		9.36			9.42			9.44			9.53			9.18
Total risk-based capital ratio		11.61			11.92			11.92			12.00			11.65

Shares outstanding (period end)		127,497			128,747			130,216			132,283			132,167
Basic shares outstanding (average)		127,988			129,202			131,520			132,259			135,114
Diluted shares outstanding (average)		129,299			130,366			132,591			133,441			136,404

Other:
Shares repurchased under all authorizations during the period, including settlements		1,909			1,957			2,000			31			4,030
Average per share cost of shares repurchased during the period	$	35.74		$	33.11		$	31.43		$	—		$	33.63
Shares remaining to be repurchased under outstanding block authorizations at the end of the period		5,865			1,375			3,332			5,332			5,363

Sequential Quarter Results

Net income for the first quarter of 2007 was $73.4 million, a decrease of $1.1 million or 1.5% from fourth quarter 2006 net income of $74.5 million. For the first quarter of 2007, return on average assets was 1.46% and return on average equity was 13.35%, compared to return on average assets of 1.43% and return on average equity of 13.19% for the fourth quarter of 2006 (see Table 1).

TABLE 10
Selected Quarterly Information
($ in Thousands)


	For the Quarter Ended
	March 31,			Dec. 31,			Sep. 30,			June 30,			March 31,
	2007			2006			2006			2006			2006

*Summary of Operations:*
Net interest income	$	159,046		$	166,064		$	168,217		$	168,399		$	166,869
Provision for loan losses		5,082			7,068			3,837			3,686			4,465
Noninterest income
Trust service fees		10,309			9,941			9,339			9,307			8,897
Service charges on deposit accounts		23,022			24,214			23,438			22,982			20,959
Mortgage banking, net		9,550			1,735			2,833			5,829			4,404
Card-based and other nondeposit fees		11,323			11,267			10,461			11,047			9,886
Retail commissions		15,479			15,053			14,360			16,365			15,478
BOLI income		4,164			5,102			4,390			3,592			3,071
Asset sale gains (losses), net		1,883			91			89			354			(230	)
Investment securities gains (losses), net		1,035			(436	)		1,164			1,538			2,456
Other		5,935			7,568			6,911			6,194			5,852

Total noninterest income		82,700			74,535			72,985			77,208			70,773
Noninterest expense
Personnel expense		74,047			68,315			71,321			74,492			69,303
Occupancy		11,587			10,971			10,442			10,654			11,758
Equipment		4,394			4,300			4,355			4,223			4,588
Data processing		7,678			8,033			7,668			7,711			8,039
Business development and advertising		4,405			4,365			4,142			4,101			4,249
Other intangible amortization		1,661			1,999			2,280			2,281			2,343
Other		24,364			26,415			23,478			21,198			23,191

Total noninterest expense		128,136			124,398			123,686			124,660			123,471
Income tax expense		35,133			34,632			36,791			33,712			27,999

Net income	$	73,395		$	74,501		$	76,888		$	83,549		$	81,707


Taxable equivalent net interest income	$	165,606		$	172,632		$	174,712		$	174,902		$	173,536
Net interest margin		3.62	%		3.64	%		3.63	%		3.59	%		3.48	%
Effective tax rate		32.37	%		31.73	%		32.36	%		28.75	%		25.52	%

*Average Balances:*
Assets	$	20,373,075		$	20,635,203		$	20,891,001		$	21,266,792		$	21,871,969
Earning assets		18,433,986			18,713,784			18,968,584			19,342,628			19,910,420
Interest-bearing liabilities		15,674,645			15,765,774			16,070,975			16,717,761			17,204,860
Loans		14,958,148			15,233,207			15,404,223			15,515,789			15,327,803
Deposits		13,557,958			13,748,444			13,884,404			13,534,725			13,319,664
Wholesale funding		4,462,713			4,547,042			4,636,853			5,391,108			6,092,275
Stockholders’ equity		2,228,909			2,240,143			2,283,933			2,254,933			2,339,539

*Asset Quality Data:*
Allowance for loan losses to total loans		1.37	%		1.37	%		1.33	%		1.32	%		1.31	%
Allowance for loan losses to nonperforming loans		133	%		143	%		158	%		197	%		185	%
Nonperforming loans to total loans		1.03	%		0.96	%		0.84	%		0.67	%		0.71	%
Nonperforming assets to total assets		0.83	%		0.75	%		0.68	%		0.56	%		0.57	%
Net charge offs to average loans (annualized)		0.14	%		0.18	%		0.10	%		0.10	%		0.12	%

Taxable equivalent net interest income for the first quarter of 2007 was $165.6 million, $7.0 million lower than the fourth quarter of 2006. Changes in balance sheet volume and mix reduced taxable equivalent net interest income by $4.5 million, two fewer days in the first quarter decreased net interest income by $1.4 million, and changes in the rate environment and product pricing lowered it by $1.1 million. Federal funds rates were level at 5.25% throughout both quarters. The net interest margin between the sequential quarters was down 2 bp, to 3.62% in the first quarter of 2007, comprised of 1 bp lower contribution from net free funds (to 0.61%) and 1 bp lower interest rate spread (to 3.01%). The decrease in rate spread was the net result of a 9 bp higher rate on interest-bearing liabilities (to 4.02%) and an 8 bp increase in earning asset yield (7.03%). Average earning assets were $18.4 billion in the first quarter of 2007, a decrease of $280 million from the fourth quarter of 2006, due principally to the sale of

$0.3 billion of residential mortgage loans in January 2007. On the funding side, average interest-bearing deposits were essentially level, while average demand deposits (the primary component of net free funds) were down $184 million, reflecting a first quarter seasonal decline in business and custodial balances. This outflow of average demand deposits unfavorably impacted net interest income by $2.4 million in the first quarter of 2007, as the decrease in noninterest-bearing balances was covered by a like increase in short-term wholesale borrowings. On average, wholesale funding balances were down $84 million versus fourth quarter 2006, as long-term debt matured (decreasing by $382 million, on average) and the net funding needs were met with short-term borrowings (increasing $298 million, on average).

Provision for loan losses was $5.1 million in the first quarter of 2007 versus $7.1 million in the previous quarter, with both quarters approximating the level of net charge offs. Annualized net charge offs represented 0.14% of average loans for the first quarter of 2007 compared to 0.18% for the fourth quarter of 2006. Total nonperforming loans of $153 million (1.03% of total loans) at March 31, 2007 were up from $142 million (0.96% of total loans) at December 31, 2006. The allowance for loan losses to loans at March 31, 2007 was 1.37%, unchanged from year-end 2006. See discussion under sections, “Provision for Loan Losses,” “Allowance for Loan Losses,” and “Nonperforming Loans and Other Real Estate Owned.”

Noninterest income increased $8.2 million (11%) to $82.7 million between sequential quarters, due primarily to net mortgage banking income. Net mortgage banking income for first quarter 2007 was up $7.8 million, largely attributable to a $7.8 million gain from the sales of $2.3 billion (28%) of the Corporation’s servicing portfolio. Of the remaining components of net mortgage banking income, servicing fees were relatively flat, net gains on sales of mortgage loans were up $0.7 million (with fourth quarter 2006 including a $2.1 million unfavorable market valuation adjustment on residential mortgage loans transferred to loans held for sale, a $0.5 million unfavorable change in the mark on the mortgage derivatives, and overall lower margins on the sales of loans between the quarters), and mortgage servicing rights expense included a $0.7 million unfavorable change in the valuation reserve (with additions to the valuation reserve of $1.2 million for the first quarter of 2007 compared to $0.5 million for the fourth quarter of 2006. Net gains on asset and investment sales combined were $2.9 million for first quarter 2007 (including a $1.3 million gain on the sale of $32 million in student loans and $1.0 million net gain from the sale of equity securities), compared to net losses on asset and investment sales of $0.3 million combined for fourth quarter 2006. Compared to fourth quarter 2006, service charges on deposit accounts were seasonally down $1.2 million (5%). BOLI income was down $0.9 million (18%), due primarily to death benefit proceeds received in fourth quarter 2006. Other income of $5.9 million decreased $1.6 million (22%), with fourth quarter 2006 including a $0.8 million net gain on the termination of all swaps hedging long-term, fixed-rate commercial loans.

On a sequential quarter basis, noninterest expense increased $3.7 million (3%) to $128.1 million in the first quarter of 2007, as expenses remained relatively controlled. Personnel expense of $74.0 million was up $5.7 million (8%) over the fourth quarter of 2006. Increases in personnel expense included higher premium-based and other benefit plan costs, as well as higher social security and unemployment taxes as these costs re-set annually in the first quarter, offset in part by lower severance and discretionary pay (such as bonuses and other incentives). Occupancy expense of $11.6 million increased $0.6 million (6%), primarily due to the seasonal increases in utilities and snow removal costs. Other expense (as shown in Table 10) was down $2.1 million (8%) compared to the fourth quarter of 2006, across multiple categories (including decreases in legal and professional fees, various office expenses, and lower ATM and other operational losses). All other noninterest expense categories combined were down $0.6 million (3%) versus the fourth quarter of 2006.

Future Accounting Pronouncements

Note 3, “New Accounting Pronouncements,” of the notes to consolidated financial statements discusses new accounting policies adopted by the Corporation. The expected impact of accounting policies recently issued or proposed but not yet required to be adopted are discussed below. To the extent the adoption of new accounting standards materially affects the Corporation’s financial condition, results of operations, or liquidity, the impacts are discussed in the applicable sections of this financial review and the notes to consolidated financial statements.

In March 2007, the FASB ratified the consensus reached by the EITF in Issue No. 06-10, “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements,” (“EITF 06-10”). EITF 06-10 requires companies with collateral assignment split-dollar life insurance policies that provide a benefit to an employee that extends to postretirement periods to recognize a liability for future benefits based on the substantive agreement with the employee. Recognition should be in accordance with FASB Statement No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” or APB Opinion No. 12, “Omnibus Opinion – 1967,” depending on whether a substantive plan is deemed to exist. Companies are permitted to recognize the effects of applying the consensus through either (1) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets as of the beginning of the year of adoption or (2) a change in accounting principle through retrospective application to all prior periods. EITF 06-10 is effective for fiscal years beginning after December 15, 2007, with early adoption permitted. The Corporation will adopt EITF 06-10 when required in 2008 and is in the process of assessing the impact on its results of operations, financial position, and liquidity.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). This statement permits companies to choose, at specified election dates, to measure several financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The decision about whether to elect the fair value option is generally applied on an instrument by instrument basis, is applied only to an entire instrument, and is irrevocable. Once companies elect the fair value option for an item, SFAS 159 requires them to report unrealized gains and losses on it in earnings at each subsequent reporting date. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons (a) between companies that choose different measurement attributes for similar assets and liabilities and (b) between assets and liabilities in the financial statements of a company that selects different measurement attributes for similar assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. The Corporation will adopt SFAS 159 when required in 2008 and is in the process of assessing the impact on its results of operations, financial position, and liquidity.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (“SFAS 157”). According to SFAS 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability by establishing a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value measurements must then be disclosed separately by level within the fair value hierarchy. SFAS 157 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. The Corporation will adopt SFAS 157 when required in 2008 and is in the process of assessing the impact on its results of operations, financial position, and liquidity.

In September 2006, the FASB ratified the consensus reached by the EITF in Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” (“EITF 06-4”). EITF 06-4 requires companies with endorsement type split-dollar life insurance policies that provide a benefit to an employee that extends to postretirement periods to recognize a liability for future benefits based on the substantive agreement with the employee. Recognition should be in accordance with FASB Statement No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” or APB Opinion No. 12, “Omnibus Opinion – 1967,” depending on whether a substantive plan is deemed to exist. Companies are permitted to recognize the effects of applying the consensus through either (1) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets as of the beginning of the year of adoption or (2) a change in accounting principle through retrospective application to all prior periods. EITF 06-4 is effective for fiscal years beginning after December 15, 2007, with early adoption permitted. The Corporation will adopt EITF 06-4 when required in 2008 and is in the process of assessing the impact on its results of operations, financial position, and liquidity.

Subsequent Events

On April 25, 2007, the Board of Directors declared a $0.31 per share dividend payable on May 15, 2007, to shareholders of record as of May 7, 2007. This cash dividend has not been reflected in the accompanying consolidated financial statements.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

The Corporation has not experienced any material changes to its market risk position since December 31, 2006, from that disclosed in the Corporation’s 2006 Form 10-K Annual Report.

ITEM 4. Controls and Procedures

The Corporation maintains disclosure controls and procedures as required under Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of March 31, 2007, the Corporation’s management carried out an evaluation, under the supervision and with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on the foregoing, its Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of March 31, 2007. No changes were made to the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act of 1934) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Following are the Corporation’s monthly common stock purchases during the first quarter of 2007. For a detailed discussion of the common stock repurchase authorizations and repurchases during the period, see section “Capital” included under Part I Item 2 of this document.


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

January 1- January 31, 2007		—	$	—		—		—
February 1 - February 28, 2007		2,000,000		34.12		2,000,000		5,865,463
March 1 - March 31, 2007		—		—		—		—

Total		2,000,000	$	34.12		2,000,000		5,865,463

In January 2007, the Board of Directors authorized the repurchase of the Corporation’s outstanding shares, not to exceed approximately 6.4 million shares. During the first quarter of 2007, the Corporation repurchased 2.0 million shares of its outstanding common stock for approximately $68 million (or $34.12 per share) under an accelerated share repurchase agreement. In addition, the Corporation two previously announced accelerated share repurchase agreements by issuing shares. At March 31, 2007, approximately 5.9 million shares remain authorized to repurchase under the January 2007 authorization.


	Page No.
PART I. Financial Information

Item 1. Financial Statements (Unaudited):

Consolidated Balance Sheets — March 31, 2007 and December 31, 2006		3

Consolidated Statements of Income — Three Months Ended March 31, 2007 and 2006		4

Consolidated Statements of Changes in Stockholders’ Equity — Three Months Ended March 31, 2007 and Year Ended 2006		5

Consolidated Statements of Cash Flows — Three Months Ended March 31, 2007 and 2006		6

Notes to Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3. Quantitative and Qualitative Disclosures about Market Risk		42

Item 4. Controls and Procedures		42

PART II. Other Information

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		42

Item 6. Exhibits		43

Signatures		44
302 Certification of Chief Executive Officer
302 Certification of Chief Financial Officer
Section 906 Certification of CEO and CFO

	(a)		Exhibits:

			Exhibit (11), Statement regarding computation of per-share earnings. See Note 4 of the notes to consolidated financial statements in Part I Item 1.

			Exhibit (31.1), Certification Under Section 302 of Sarbanes-Oxley by Paul S. Beideman, Chief Executive Officer, is attached hereto.

			Exhibit (31.2), Certification Under Section 302 of Sarbanes-Oxley by Joseph B. Selner, Chief Financial Officer, is attached hereto.

			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 Sarbanes-Oxley, is attached hereto.


	ASSOCIATED BANC-CORP
	(Registrant)




Date: November 15, 2007	/s/ Paul S. Beideman
	Paul S. Beideman
	Chairman and Chief Executive Officer


Date: November 15, 2007	/s/ Joseph B. Selner
	Joseph B. Selner
	Chief Financial Officer