UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2011

OR

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

For the transition period from              to             

Commission file number 001-31343

Associated Banc-Corp

(Exact name of registrant as specified in its charter)

Wisconsin	39-1098068
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1200 Hansen Road, Green Bay, Wisconsin	54304
(Address of principal executive offices)	(Zip Code)

(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  x    No  ¨

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of registrant’s common stock, par value $0.01 per share, at October 31, 2011, was 173,510,408.

ASSOCIATED BANC-CORP

TABLE OF CONTENTS

	Page No.
PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets – September 30, 2011 and December 31, 2010		3
Consolidated Statements of Income (Loss) – Three and Nine Months Ended September  30, 2011 and 2010		4
Consolidated Statements of Changes in Stockholders’ Equity – Nine Months Ended September  30, 2011 and 2010		5
Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2011 and 2010		6
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		47
Item 3. Quantitative and Qualitative Disclosures About Market Risk		80
Item 4. Controls and Procedures		80
PART II. Other Information
Item 1. Legal Proceedings		81
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		82
Item 6. Exhibits		83
Signatures		84

2

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements:

ASSOCIATED BANC-CORP

Consolidated Balance Sheets

	September  30, 2011 (Unaudited)			December  31, 2010 (Audited)
	(In Thousands, except share data)
ASSETS
Cash and due from banks	$	410,644		$	319,487
Interest-bearing deposits in other financial institutions		250,648			546,125
Federal funds sold and securities purchased under agreements to resell		4,180			2,550
Investment securities available for sale, at fair value		5,453,816			6,101,341
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost		191,128			190,968
Loans held for sale		201,142			144,808
Loans		13,503,507			12,616,735
Allowance for loan losses		(399,723	)		(476,813	)
Loans, net		13,103,784			12,139,922
Premises and equipment, net		208,301			190,533
Goodwill		929,168			929,168
Other intangible assets, net		67,970			88,044
Other assets		1,081,868			1,132,650
Total assets	$	21,902,649		$	21,785,596
LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing demand deposits	$	3,711,570		$	3,684,965
Interest-bearing deposits, excluding brokered certificates of deposit		10,867,013			11,097,788
Brokered certificates of deposit		203,827			442,640
Total deposits		14,782,410			15,225,393
Short-term funding		2,531,776			1,747,382
Long-term funding		1,477,408			1,413,605
Accrued expenses and other liabilities		260,436			240,425
Total liabilities		19,052,030			18,626,805
Stockholders’ equity
Preferred equity		63,272			514,388
Common stock		1,746			1,739
Surplus		1,585,208			1,573,372
Retained earnings		1,111,080			1,041,666
Accumulated other comprehensive income		89,313			27,626
Total stockholders’ equity		2,850,619			3,158,791
Total liabilities and stockholders’ equity	$	21,902,649		$	21,785,596
Preferred shares issued		65,000			525,000
Preferred shares authorized (par value $1.00 per share)		750,000			750,000
Common shares issued		174,569,469			173,887,504
Common shares authorized (par value $0.01 per share)		250,000,000			250,000,000

See accompanying notes to consolidated financial statements.

3

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Income (Loss)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In Thousands, except per share data)
INTEREST INCOME
Interest and fees on loans	$	145,778		$	148,937		$	432,907		$	462,043
Interest and dividends on investment securities
Taxable		30,513			36,151			100,516			122,611
Tax exempt		7,376			8,499			22,593			25,765
Other interest and dividends		1,428			2,629			4,324			6,615
Total interest income		185,095			196,216			560,340			617,034
INTEREST EXPENSE
Interest on deposits		15,644			25,879			50,794			82,984
Interest on short-term funding		3,039			1,849			10,255			5,695
Interest on long-term funding		13,252			14,584			38,285			45,436
Total interest expense		31,935			42,312			99,334			134,115
NET INTEREST INCOME		153,160			153,904			461,006			482,919
Provision for loan losses		4,000			64,000			51,000			327,010
Net interest income after provision for loan losses		149,160			89,904			410,006			155,909
NONINTEREST INCOME
Trust service fees		9,791			9,462			29,634			28,335
Service charges on deposit accounts		19,949			23,845			58,125			76,350
Card-based and other nondeposit fees		15,291			14,906			46,636			43,457
Retail commission income		15,047			15,276			47,903			46,815
Mortgage banking, net		4,521			9,007			3,046			19,907
Capital market fees, net		3,273			891			4,761			885
Bank owned life insurance income		3,990			3,756			11,076			11,252
Asset sale losses, net		(1,179	)		(2,354	)		(3,374	)		(2,518	)
Investment securities gains (losses), net:
Realized gains (losses), net		1			5,273			(12	)		28,854
Other-than-temporary impairments		(1,611	)		(4,029	)		(1,656	)		(4,175	)
Less: Non-credit portion recognized in other comprehensive income (before taxes)		866			2,121			866			2,121
Total investment securities gains (losses), net		(744	)		3,365			(802	)		26,800
Other		1,737			3,743			11,608			9,543
Total noninterest income		71,676			81,897			208,613			260,826
NONINTEREST EXPENSE
Personnel expense		90,377			80,640			268,510			239,337
Occupancy		14,205			12,157			42,143			37,038
Equipment		4,851			4,637			14,587			13,472
Data processing		7,887			7,502			23,395			22,667
Business development and advertising		5,539			4,297			16,134			13,515
Other intangible asset amortization		1,179			1,206			3,535			3,713
Legal and professional fees		4,289			6,774			13,554			15,086
Losses other than loans		1,659			2,504			6,031			7,323
Foreclosure / OREO expense		7,662			7,349			23,250			23,984
FDIC expense		6,906			11,426			22,348			35,282
Other		17,606			18,088			51,735			52,060
Total noninterest expense		162,160			156,580			485,222			463,477
Income (loss) before income taxes		58,676			15,221			133,397			(46,742	)
Income tax expense (benefit)		17,337			917			34,823			(31,878	)
Net income (loss)		41,339			14,304			98,574			(14,864	)
Preferred stock dividends and discount accretion		7,305			7,389			23,530			22,131
Net income (loss) available to common equity	$	34,034		$	6,915		$	75,044		$	(36,995	)
Earnings (loss) per common share:
Basic	$	0.20		$	0.04		$	0.43		$	(0.22	)
Diluted	$	0.20		$	0.04		$	0.43		$	(0.22	)
Average common shares outstanding:
Basic		173,418			172,989			173,319			170,610
Diluted		173,418			172,990			173,321			170,610

See accompanying notes to consolidated financial statements.

4

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Preferred Equity			Common Stock		Surplus		Retained Earnings			Accumulated Other Comprehensive Income		Treasury Stock			Total
	($ in Thousands, except per share data)
Balance, December 31, 2009	$	511,107		$	1,284	$	1,082,335	$	1,081,156		$	63,432	$	(706	)	$	2,738,608
Comprehensive income (loss):
Net loss		—			—		—		(14,864	)		—		—			(14,864	)
Other comprehensive income		—			—		—		—			15,366		—			15,366
Comprehensive income																	502
Common stock issued:
Issuance of common stock		—			448		477,910		—			—		—			478,358
Stock-based compensation plans, net		—			6		2,942		(2,151	)		—		1,519			2,316
Purchase of treasury stock		—			—		—		—			—		(813	)		(813	)
Cash dividends:
Common stock, $0.03 per share		—			—		—		(5,210	)		—		—			(5,210	)
Preferred stock		—			—		—		(19,688	)		—		—			(19,688	)
Accretion of preferred stock discount		2,443			—		—		(2,443	)		—		—			—
Stock-based compensation expense, net		—			—		6,769		—			—		—			6,769
Tax benefit of stock options		—			—		7		—			—		—			7
Balance, September 30, 2010	$	513,550		$	1,738	$	1,569,963	$	1,036,800		$	78,798	$	—		$	3,200,849
Balance, December 31, 2010	$	514,388		$	1,739	$	1,573,372	$	1,041,666		$	27,626	$	—		$	3,158,791
Comprehensive income:
Net income		—			—		—		98,574			—		—			98,574
Other comprehensive income		—			—		—		—			61,687		—			61,687
Comprehensive income																	160,261
Common stock issued:
Stock-based compensation plans, net		—			7		3,101		(399	)		—		640			3,349
Purchase of treasury stock		—			—		—		—			—		(640	)		(640	)
Cash dividends:
Common stock, $0.03 per share		—			—		—		(5,231	)		—		—			(5,231	)
Preferred stock		—			—		—		(12,918	)		—		—			(12,918	)
Issuance of preferred stock		63,272			—		—		—			—		—			63,272
Redemption of preferred stock		(525,000	)		—		—		—			—		—			(525,000	)
Accretion of preferred stock discount		10,612			—		—		(10,612	)		—		—			—
Stock-based compensation expense, net		—			—		8,724		—			—		—			8,724
Tax benefit of stock options		—			—		11		—			—		—			11
Balance, September 30, 2011	$	63,272		$	1,746	$	1,585,208	$	1,111,080		$	89,313	$	—		$	2,850,619

See accompanying notes to consolidated financial statements.

5

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended September 30,
	2011			2010
	($ in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	98,574		$	(14,864	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses		51,000			327,010
Depreciation and amortization		24,220			22,405
Addition to valuation allowance on mortgage servicing rights, net		8,966			6,052
Amortization of mortgage servicing rights		17,380			16,850
Amortization of other intangible assets		3,535			3,713
Amortization and accretion on earning assets, funding, and other, net		46,186			45,283
Tax benefit from exercise of stock options		11			7
(Gain) loss on sales of investment securities, net and impairment write-downs		802			(26,800	)
Loss on sales of assets, net		3,374			2,518
Gain on mortgage banking activities, net		(15,141	)		(22,945	)
Mortgage loans originated and acquired for sale		(1,011,423	)		(1,684,579	)
Proceeds from sales of mortgage loans held for sale		960,423			1,642,860
Decrease in interest receivable		2,865			5,372
Decrease in interest payable		(7,191	)		(6,422	)
Net change in other assets and other liabilities		59,081			36,769
Net cash provided by operating activities		242,662			353,229
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans		(1,094,612	)		901,593
Purchases of:
Investment securities		(533,674	)		(1,850,368	)
Premises, equipment, and software, net of disposals		(49,312	)		(15,657	)
Other assets		(2,545	)		(2,156	)
Proceeds from:
Sales of investment securities		17,916			963,201
Calls and maturities of investment securities		1,216,224			1,431,674
Sales of other assets		38,160			49,179
Sales of loans originated for investment		39,184			286,330
Net cash provided by (used in) investing activities		(368,659	)		1,763,796
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		(442,983	)		76,247
Net increase (decrease) in short-term funding		784,394			(687,590	)
Repayment of long-term funding		(370,091	)		(640,304	)
Proceeds from issuance of long-term funding		432,504			400,000
Proceeds from issuance of common stock		—			478,358
Proceeds from issuance of preferred stock		63,272			—
Redemption of preferred stock		(525,000	)		—
Cash dividends on common stock		(5,231	)		(5,210	)
Cash dividends on preferred stock		(12,918	)		(19,688	)
Purchase of treasury stock		(640	)		(813	)
Net cash used in financing activities		(76,693	)		(399,000	)
Net increase (decrease) in cash and cash equivalents		(202,690	)		1,718,025
Cash and cash equivalents at beginning of period		868,162			820,692
Cash and cash equivalents at end of period	$	665,472		$	2,538,717
Supplemental disclosures of cash flow information:
Cash paid for interest	$	106,302		$	140,065
Cash (received) paid for income taxes		17,517			(50,351	)
Loans and bank premises transferred to other real estate owned		37,168			37,347
Capitalized mortgage servicing rights		9,807			18,632

See accompanying notes to consolidated financial statements

6

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 2010 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 significant intercompany transactions and balances have been eliminated in consolidation. Certain amounts in the consolidated financial statements of prior periods have been reclassified to conform with the current period’s presentation. 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, goodwill impairment assessment, mortgage servicing rights valuation, derivative financial instruments and hedging activities, and income taxes. Management has evaluated subsequent events for potential recognition or disclosure.

NOTE 2: New Accounting Pronouncements Adopted

In April 2011, the FASB issued clarifying guidance about which loan modifications constitute troubled debt restructurings. In evaluating whether a restructuring constitutes a troubled debt restructuring, the guidance maintains a creditor must separately conclude that the restructuring constitutes a concession and that the debtor is experiencing financial difficulties. The accounting standard provides further clarification whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties. The measurement guidance is effective for interim and annual periods beginning on or after June 15, 2011, while the disclosure guidance is effective for interim and annual periods beginning on or after June 15, 2011 with retrospective application to restructurings occurring on or after the beginning of the fiscal year. The Corporation adopted the accounting standard as of the beginning of the third quarter of 2011, as required, with no material impact on its results of operations, financial position, and liquidity. See Note 6 for additional disclosures required under this accounting standard.

In December 2010, the FASB issued guidance which modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. In accordance with the guidance, for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not if goodwill impairment exists, the guidance states an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The guidance was effective for reporting periods beginning after December 15, 2010. The Corporation adopted the accounting standard as of January 1, 2011, as required, with no material impact on its results of operations, financial position, and liquidity. See Note 7 for disclosures concerning goodwill.

In July 2010, the FASB issued guidance for improving disclosures about an entity’s allowance for loan losses and the credit quality of its loans. The guidance requires additional disclosure to facilitate financial statement users’ evaluation of the following: (1) the nature of credit risk inherent in the entity’s loan portfolio, (2) how that risk is analyzed and assessed in arriving at the allowance for loan losses, and (3) the changes and reasons for those changes in the allowance for loan losses. The increased disclosures as of the end of a reporting period are effective for periods ending on or after December 15, 2010. Increased disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 31, 2010. The Corporation adopted the accounting standard as of December 31, 2010, with no material impact on its results of operations, financial position, and liquidity. See Note 6 for additional disclosures required under this accounting standard.

7

In January 2010, the FASB issued an accounting standard providing additional guidance relating to fair value measurement disclosures. Specifically, companies will be required to separately disclose significant transfers into and out of Level 1 and Level 2 measurements in the fair value hierarchy and the reasons for those transfers. Significance should generally be based on earnings and total assets or liabilities, or when changes are recognized in other comprehensive income, based on total equity. Companies may take different approaches in determining when to recognize such transfers, including using the actual date of the event or change in circumstances causing the transfer, or using the beginning or ending of a reporting period. For Level 3 fair value measurements, the new guidance requires presentation of separate information about purchases, sales, issuances and settlements. Additionally, the FASB also clarified existing fair value measurement disclosure requirements relating to the level of disaggregation, inputs, and valuation techniques. This accounting standard was effective at the beginning of 2010, except for the detailed Level 3 disclosures which were effective at the beginning of 2011. The Corporation adopted the accounting standard at the beginning of 2010, except for the detailed Level 3 disclosures which were adopted at the beginning of 2011, with no material impact on its results of operations, financial position, and liquidity. See Note 13 for additional disclosures required under this accounting standard.

NOTE 3: Earnings Per Common Share

Earnings per share are calculated utilizing the two-class method. Basic earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards (outstanding stock options, unvested restricted stock, and outstanding stock warrants). Presented below are the calculations for basic and diluted earnings per common share.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2011			2010			2011			2010
	(In Thousands, except per share data)
Net income (loss)	$	41,339		$	14,304		$	98,574		$	(14,864	)
Preferred stock dividends and discount accretion		(7,305	)		(7,389	)		(23,530	)		(22,131	)
Net income (loss) available to common equity	$	34,034		$	6,915		$	75,044		$	(36,995	)
Common shareholder dividends		(1,734	)		(1,730	)		(5,200	)		(5,188	)
Unvested share-based payment awards		(11	)		(8	)		(31	)		(22	)
Undistributed earnings	$	32,289		$	5,177		$	69,813		$	(42,205	)
Basic
Distributed earnings to common shareholders	$	1,734		$	1,730		$	5,200		$	5,188
Undistributed earnings to common shareholders		32,087			5,155			69,382			(42,205	)
Total common shareholders earnings, basic	$	33,821		$	6,885		$	74,582		$	(37,017	)
Diluted
Distributed earnings to common shareholders	$	1,734		$	1,730		$	5,200		$	5,188
Undistributed earnings to common shareholders		32,087			5,155			69,382			(42,205	)
Total common shareholders earnings, diluted	$	33,821		$	6,885		$	74,582		$	(37,017	)
Weighted average common shares outstanding		173,418			172,989			173,319			170,610
Effect of dilutive common stock awards		—			1			2			—
Diluted weighted average common shares outstanding		173,418			172,990			173,321			170,610
Basic earnings (loss) per common share	$	0.20		$	0.04		$	0.43		$	(0.22	)
Diluted earnings (loss) per common share	$	0.20		$	0.04		$	0.43		$	(0.22	)

Options to purchase approximately 7 million and 7 million shares were outstanding for the three and nine months ended September 30, 2011, respectively, but excluded from the calculation of diluted earnings per common share as the effect would have been anti-dilutive. Options to purchase approximately 7 million shares were outstanding for the three months ended September 30, 2010, but excluded from the calculation of diluted earnings per common share as the effect would have been anti-dilutive. As a result of the

8

Corporation’s reported net loss for the nine months ended September 30, 2010, all of the stock options outstanding were excluded from the computation of diluted earnings (loss) per common share.

NOTE 4: 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 and salary shares is their fair market value on the date of grant. The fair values of stock grants are amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in personnel expense in the consolidated statements of income.

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 first nine months of 2011 and full year 2010.

	2011			2010
Dividend yield		2.00	%		3.00	%
Risk-free interest rate		2.29	%		2.70	%
Expected volatility		47.21	%		45.38	%
Weighted average expected life		6 years			6 years
Weighted average per share fair value of options	$	5.58		$	4.60

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

A summary of the Corporation’s stock option activity for the year ended December 31, 2010 and for the nine months ended September 30, 2011, is presented below.

Stock Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate  Intrinsic Value (000s)
Outstanding at December 31, 2009		6,708,618		$	26.16
Granted		1,348,474			13.24
Exercised		(14,868	)		12.71
Forfeited or expired		(740,766	)		20.95
Outstanding at December 31, 2010		7,301,458		$	24.33		5.01		2,460
Options exercisable at December 31, 2010		5,275,738		$	27.60		3.63		63
Outstanding at December 31, 2010		7,301,458		$	24.33
Granted		1,600,661			14.25
Exercised		(23,437	)		12.66
Forfeited or expired		(1,453,209	)		24.13
Outstanding at September 30, 2011		7,425,473		$	22.23		5.80		—
Options exercisable at September 30, 2011		4,920,342		$	26.30		4.24		—

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The following table summarizes information about the Corporation’s nonvested stock option activity for the year ended December 31, 2010, and for the nine months ended September 30, 2011.

Stock Options	Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2009		1,896,992		$	3.60
Granted		1,348,474			4.60
Vested		(920,969	)		3.93
Forfeited		(298,777	)		3.78
Nonvested at December 31, 2010		2,025,720		$	4.09
Granted		1,600,661			5.58
Vested		(926,764	)		3.76
Forfeited		(194,486	)		4.86
Nonvested at September 30, 2011		2,505,131		$	5.10

For the nine months ended September 30, 2011 and for the year ended December 31, 2010, the intrinsic value of stock options exercised was immaterial. (Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option.) The total fair value of stock options that vested was $3.5 million for the first nine months of 2011 and $3.6 million for the year ended December 31, 2010. For the nine months ended September 30, 2011 and 2010, the Corporation recognized compensation expense of $3.9 million and $2.6 million, respectively, for the vesting of stock options. For the full year 2010, the Corporation recognized compensation expense of $3.4 million for the vesting of stock options. At September 30, 2011, the Corporation had $9.2 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2013.

The following table summarizes information about the Corporation’s restricted stock awards activity (excluding salary shares) for the year ended December 31, 2010, and for the nine months ended September 30, 2011.

Restricted Stock	Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2009		527,131		$	19.67
Granted		604,343			12.38
Vested		(205,239	)		21.68
Forfeited		(153,973	)		17.12
Outstanding at December 31, 2010		772,262		$	13.94
Granted		578,620			14.36
Vested		(149,438	)		18.24
Forfeited		(109,319	)		13.74
Outstanding at September 30, 2011		1,092,125		$	13.85

The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant. Restricted stock awards granted during 2011 to the senior executive officers and the next 20 most highly compensated employees will vest ratably over a three year period, subject to the full repayment of the funds received under the Capital Purchase Program (“CPP”), and the restricted stock award recipient must continue to perform substantial services for the Corporation for at least two years after the date of grant. Restricted stock awards granted during 2010 to the senior executive officers and the next 20 most highly compensated employees will vest in 25% increments as the funds received under the CPP are repaid (i.e., 0% vest when less than 25% is repaid, 25% vest when 25-49% is repaid, 50% vest when 50-74% is repaid, 75% vest when 75-99% is repaid, and 100% vest when the full amount is repaid), and the restricted stock award recipients must continue to perform substantial services for the Corporation for at least two years after the date of grant. The Corporation repaid 50% of the funds received under the CPP in April 2011, and the remaining 50% of the CPP funds were repaid in September 2011. Expense for restricted stock awards of approximately $4.8 million and $4.2 million was recognized for the nine months ended September 30, 2011 and 2010, respectively. The Corporation recognized approximately $5.6 million of expense for restricted stock awards for the full year 2010. The Corporation

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had $8.0 million of unrecognized compensation costs related to restricted stock awards at September 30, 2011, that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2013.

The Corporation recognizes expense related to salary shares as compensation expense. Each share is fully vested as of the date of grant and is subject to restrictions on transfer that lapse over a period of 9 to 28 months, based on the month of grant. The Corporation recognized compensation expense of $3.1 million on the granting of 234,969 salary shares (or an average cost per share of $12.99) for the nine months ended September 30, 2011, $2.2 million on the granting of 165,048 shares (or an average cost per share of $13.39) for the nine months ended September 30, 2010, and $3.3 million on the granting of 244,062 salary shares (or an average cost per share of $13.43) for the year ended December 31, 2010.

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

NOTE 5: Investment Securities

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

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	($ in Thousands)
September 30, 2011:
U.S. Treasury securities	$	1,100	$	4	$	—		$	1,104
Federal agency securities		25,190		24		—			25,214
Obligations of state and political subdivisions (municipal securities)		782,806		44,617		(38	)		827,385
Residential mortgage-related securities		4,157,686		139,741		(1,213	)		4,296,214
Commercial mortgage-related securities		15,118		1,829		—			16,947
Asset-backed securities(1)		213,955		2		(723	)		213,234
Other securities (debt and equity)		72,887		2,062		(1,231	)		73,718
Total investment securities available for sale	$	5,268,742	$	188,279	$	(3,205	)	$	5,453,816

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	($ in Thousands)
December 31, 2010:
U.S. Treasury securities	$	1,199	$	9	$	—		$	1,208
Federal agency securities		29,791		1		(25	)		29,767
Obligations of state and political subdivisions (municipal securities)		829,058		14,894		(5,350	)		838,602
Residential mortgage-related securities		4,831,481		117,530		(38,514	)		4,910,497
Commercial mortgage-related securities		7,604		149		—			7,753
Asset-backed securities(1)		299,459		3		(621	)		298,841
Other securities (debt and equity)		13,384		2,603		(1,314	)		14,673
Total investment securities available for sale	$	6,011,976	$	135,189	$	(45,824	)	$	6,101,341

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

The amortized cost and fair values of investment securities available for sale at September 30, 2011, by maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

($ in Thousands)	Amortized Cost		Fair Value
Due in one year or less	$	44,954	$	45,463
Due after one year through five years		177,106		182,224
Due after five years through ten years		548,648		582,542
Due after ten years		104,152		108,247
Total debt securities		874,860		918,476
Residential mortgage-related securities		4,157,686		4,296,214
Commercial mortgage-related securities		15,118		16,947
Asset-backed securities		213,955		213,234
Equity securities		7,123		8,945
Total investment securities available for sale	$	5,268,742	$	5,453,816

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 September 30, 2011.

	Less than 12 months					12 months or more					Total
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
	($ in Thousands)
September 30, 2011:
Obligations of state and political subdivisions (municipal securities)	$	(20	)	$	761	$	(18	)	$	348	$	(38	)	$	1,109
Residential mortgage-related securities		(795	)		111,888		(418	)		98,628		(1,213	)		210,516
Asset-backed securities		(134	)		70,553		(589	)		130,449		(723	)		201,002
Other securities (debt and equity)		(348	)		45,308		(883	)		525		(1,231	)		45,833
Total	$	(1,297	)	$	228,510	$	(1,908	)	$	229,950	$	(3,205	)	$	458,460

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

Based on the Corporation’s evaluation, management does not believe any remaining unrealized loss at September 30, 2011, represents an other-than-temporary impairment as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions, and not credit deterioration. At September 30, 2011, the number of investment securities in an unrealized loss position for less than 12 months for municipal, residential mortgage-related, and asset-backed securities was 3, 40 and 14, respectively. For investment securities in an unrealized loss position for 12 months or more, the number of individual securities in the municipal, residential mortgage-related, and asset-backed categories was 1, 10, and 18 respectively. The unrealized losses reported for residential mortgage-related securities relate to non-agency residential mortgage-related securities as well as residential mortgage-

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related securities issued by government agencies such as the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). At September 30, 2011, the $1.2 million unrealized loss position on other securities was primarily comprised of 3 individual trust preferred debt securities pools and 6 floating rate notes. The Corporation currently does not intend to sell nor does it believe that it is probable it will be required to sell the securities contained in the above unrealized losses table before recovery of their amortized cost basis.

The following is a summary of the credit loss portion of other-than-temporary impairment recognized in earnings on debt securities for 2010 and the nine months ended September 30, 2011, respectively.

	Non-agency Mortgage-Related Securities			Trust Preferred Debt Securities			Total
	($ in Thousands)
Balance of credit-related other-than-temporary impairment at December 31, 2009	$	(17,472	)	$	(7,027	)	$	(24,499	)
Credit losses on newly identified impairment		(84	)		(2,992	)		(3,076	)
Balance of credit-related other-than-temporary impairment at December 31, 2010	$	(17,556	)	$	(10,019	)	$	(27,575	)
Credit losses on newly identified impairment		(2	)		(722	)		(724	)
Balance of credit-related other-than-temporary impairment at September 30, 2011	$	(17,558	)	$	(10,741	)	$	(28,299	)

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, 2010.

	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, 2010:
Federal agency securities	$	(25	)	$	29,716	$	—		$	—	$	(25	)	$	29,716
Obligations of state and political subdivisions (municipal securities)		(4,983	)		237,902		(367	)		2,543		(5,350	)		240,445
Residential mortgage-related securities		(36,280	)		1,613,498		(2,234	)		43,306		(38,514	)		1,656,804
Asset-backed securities		(621	)		293,568		—			—		(621	)		293,568
Other securities (debt and equity)		(1	)		100		(1,313	)		864		(1,314	)		964
Total	$	(41,910	)	$	2,174,784	$	(3,914	)	$	46,713	$	(45,824	)	$	2,221,497

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stocks: At both September 30, 2011 and December 31, 2010, the Corporation had FHLB stock of $121.1 million. The Corporation had Federal Reserve Bank stock of $70.0 million and $69.9 million at September 30, 2011 and December 31, 2010, respectively. The Corporation is required to maintain Federal Reserve stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. The Corporation reviewed these securities for impairment in 2011 and 2010, including but not limited to, consideration of operating performance, as well as its liquidity and funding position. After evaluating all of these considerations, the Corporation believes the cost of these investments will be recovered and no impairment has been recorded on these securities during 2011 or 2010.

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NOTE 6: Loans, Allowance for Loan Losses, and Credit Quality

The period end loan composition was as follows.

	September 30,		December 31,
	2011		2010
	($ in Thousands)
Commercial and industrial	$	3,360,502	$	3,049,752
Commercial real estate		3,550,027		3,389,213
Real estate construction		554,024		553,069
Lease financing		54,849		60,254
Total commercial		7,519,402		7,052,288
Home equity		2,571,404		2,523,057
Installment		572,243		695,383
Total retail		3,143,647		3,218,440
Residential mortgage		2,840,458		2,346,007
Total consumer		5,984,105		5,564,447
Total loans	$	13,503,507	$	12,616,735

The following table presents nonaccrual loans, accruing loans past due 90 days or more, and restructured loans.

	September 30,		December 31,
	2011		2010
	($ in Thousands)
Nonaccrual loans (includes nonaccrual restructured loans)	$	403,392	$	574,356
Accruing loans past due 90 days or more		1,220		3,418
Restructured loans (accruing)		113,083		79,935

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

	September 30,			December 31,
	2011			2010
	($ in Thousands)
Balance at beginning of period	$	476,813		$	573,533
Provision for loan losses		51,000			390,010
Charge offs		(155,676	)		(528,492	)
Recoveries		27,586			41,762
Net charge offs		(128,090	)		(486,730	)
Balance at end of period	$	399,723		$	476,813

The level of the allowance for loan losses represents management’s estimate of an amount appropriate to provide for probable credit losses in the loan portfolio at the balance sheet date. In general, the change in the allowance for loan losses is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge offs, trends in past due and impaired loans, and the level of potential problem loans. Management considers the allowance for loan losses a critical accounting policy, as assessing these numerous factors involves significant judgment.

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A summary of the changes in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2011, was as follows.

$ in Thousands

	Commercial and industrial			Commercial real estate			Real estate construction			Lease financing			Home equity			Installment			Residential mortgage			Total
Balance at Dec 31, 2010	$	137,770		$	165,584		$	56,772		$	7,396		$	55,090		$	17,328		$	36,873		$	476,813
Provision for loan losses		11,174			(12,026	)		759			(7,015	)		49,919			4,146			4,043			51,000
Charge offs		(35,452	)		(31,907	)		(28,155	)		(112	)		(33,573	)		(15,361	)		(11,116	)		(155,676	)
Recoveries		13,371			4,051			4,542			1,913			2,264			1,263			182			27,586
Balance at Sep 30, 2011	$	126,863		$	125,702		$	33,918		$	2,182		$	73,700		$	7,376		$	29,982		$	399,723
Allowance for loan losses:
Ending balance impaired loans individually evaluated for impairment	$	5,729		$	13,096		$	12,688		$	—		$	1,284		$	—		$	669		$	33,466
Ending balance impaired loans collectively evaluated for impairment	$	8,953		$	10,191		$	3,165		$	25		$	28,150		$	2,317		$	13,450		$	66,251
Ending balance all other loans collectively evaluated for impairment	$	112,181		$	102,415		$	18,065		$	2,157		$	44,266		$	5,059		$	15,863		$	300,006
Loans:
Ending balance impaired loans individually evaluated for impairment	$	44,200		$	118,309		$	62,656		$	11,073		$	10,407		$	1		$	13,516		$	260,162
Ending balance impaired loans collectively evaluated for impairment	$	40,076		$	75,476		$	20,351		$	594		$	46,268		$	4,159		$	69,389		$	256,313
Ending balance all other loans collectively evaluated for impairment	$	3,276,226		$	3,356,242		$	471,017		$	43,182		$	2,514,729		$	568,083		$	2,757,553		$	12,987,032

The allocation methodology used by the Corporation includes allocations for specifically identified impaired loans and loss factor allocations, (used for both criticized and non-criticized loan categories) with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. Management allocates the allowance for loan losses by pools of risk within each loan portfolio. While the methodology used at September 30, 2011 and December 31, 2010 was generally comparable, several refinements were incorporated into the historical loss factor allocation process during the first quarter of 2011. The refinements, which impacted individual portfolio allocation amounts, did not materially impact the overall level of the allowance for loan losses.

At September 30, 2011, the allowance for loan loss allocations for the home equity portfolio increased, with all other loan portfolio allocations declining from December 31, 2010. The increase in the home equity allocation was due to higher loss rates and a slight decline in credit quality. The decline in the installment allocation was impacted by the $10 million write-down on installment loans transferred to held for sale during the first quarter of 2011. Other portfolio allocations declined primarily due to improved credit quality metrics. The allocation of the allowance for loan losses by loan portfolio is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular category. The total allowance for loan losses is available to absorb losses from any segment of the loan portfolio.

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For comparison purposes, a summary of the changes in the allowance for loan losses by portfolio segment for the year ended December 31, 2010, was as follows.

$ in Thousands

	Commercial and industrial			Commercial real estate			Real estate construction			Lease financing			Home equity			Installment			Residential mortgage			Total
Balance at Dec 31, 2009	$	196,637		$	162,437		$	118,708		$	8,303		$	43,783		$	11,298		$	32,367		$	573,533
Provision for loan losses		41,703			110,099			136,752			10,149			59,706			14,148			17,453			390,010
Charge offs		(121,179	)		(117,401	)		(204,728	)		(11,081	)		(51,132	)		(9,787	)		(13,184	)		(528,492	)
Recoveries		20,609			10,449			6,040			25			2,733			1,669			237			41,762
Balance at Dec 31, 2010	$	137,770		$	165,584		$	56,772		$	7,396		$	55,090		$	17,328		$	36,873		$	476,813
Allowance for loan losses:
Ending balance impaired loans individually evaluated for impairment	$	25,131		$	29,660		$	27,294		$	6,042		$	6,752		$	—		$	3,574		$	98,453
Ending balance impaired loans collectively evaluated for impairment	$	4,769		$	3,827		$	1,804		$	322		$	22,181		$	7,776		$	5,258		$	45,937
Ending balance all other loans collectively evaluated for impairment	$	107,870		$	132,097		$	27,674		$	1,032		$	26,157		$	9,552		$	28,041		$	332,423
Loans:
Ending balance impaired loans individually evaluated for impairment	$	81,777		$	210,098		$	103,585		$	15,184		$	13,562		$	5		$	19,213		$	443,424
Ending balance impaired loans collectively evaluated for impairment	$	28,048		$	29,441		$	13,876		$	1,896		$	49,891		$	11,231		$	76,484		$	210,867
Ending balance all other loans collectively evaluated for impairment	$	2,939,927		$	3,149,674		$	435,608		$	43,174		$	2,459,604		$	684,147		$	2,250,310		$	11,962,444

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The following table presents commercial loans by credit quality indicator at September 30, 2011.

	Pass		Special Mention		Potential Problem		Impaired		Total
	($ in Thousands)
Commercial and industrial	$	2,898,548	$	170,327	$	207,351	$	84,276	$	3,360,502
Commercial real estate		2,796,049		167,456		392,737		193,785		3,550,027
Real estate construction		412,690		21,172		37,155		83,007		554,024
Lease financing		42,358		317		507		11,667		54,849
Total commercial	$	6,149,645	$	359,272	$	637,750	$	372,735	$	7,519,402

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

	Pass		Special Mention		Potential Problem		Impaired		Total
	($ in Thousands)
Commercial and industrial	$	2,363,554	$	222,089	$	354,284	$	109,825	$	3,049,752
Commercial real estate		2,429,339		227,557		492,778		239,539		3,389,213
Real estate construction		311,810		32,180		91,618		117,461		553,069
Lease financing		40,101		456		2,617		17,080		60,254
Total commercial	$	5,144,804	$	482,282	$	941,297	$	483,905	$	7,052,288

The following table presents consumer loans by credit quality indicator at September 30, 2011.

	Performing		30-89 Days Past Due		Potential Problem		Impaired		Total
	($ in Thousands)
Home equity	$	2,491,589	$	18,165	$	4,975	$	56,675	$	2,571,404
Installment		565,855		1,956		272		4,160		572,243
Total retail		3,057,444		20,121		5,247		60,835		3,143,647
Residential mortgage		2,728,889		12,114		16,550		82,905		2,840,458
Total consumer	$	5,786,333	$	32,235	$	21,797	$	143,740	$	5,984,105

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

	Performing		30-89 Days Past Due		Potential Problem		Impaired		Total
	($ in Thousands)
Home equity	$	2,442,661	$	13,886	$	3,057	$	63,453	$	2,523,057
Installment		673,820		9,624		703		11,236		695,383
Total retail		3,116,481		23,510		3,760		74,689		3,218,440
Residential mortgage		2,222,916		8,722		18,672		95,697		2,346,007
Total consumer	$	5,339,397	$	32,232	$	22,432	$	170,386	$	5,564,447

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

For commercial loans, management has determined pass to include credits that exhibit acceptable financial statements, cash flow, and leverage. If any risk exists, it is mitigated by their structure, collateral, monitoring, or control. For consumer loans, performing loans include credits that are performing in accordance with the original contractual terms. Special mention credits have potential weaknesses that deserve management’s attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit. Potential problem loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These loans generally have a well-defined weakness, or weaknesses, that may jeopardize liquidation of the debt and are characterized by the distinct possibility that the bank will sustain some loss if the

17

deficiencies are not corrected. Lastly, management considers a loan to be impaired when it is probable that the Corporation will be unable to collect all amounts due according to the original contractual terms of the note agreement, including both principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this definition. Commercial loans classified as special mention, potential problem, and impaired are reviewed at a minimum on a quarterly basis, while pass and performing rated credits are reviewed on an annual basis or more frequently if the loan renewal is less than one year or if otherwise warranted.

18

The following table presents loans by past due status at September 30, 2011.

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due *		Total Past Due		Current		Total
	($ in Thousands)
Accruing loans
Commercial and industrial	$	5,747	$	508	$	—	$	6,255	$	3,292,991	$	3,299,246
Commercial real estate		72,701		26,844		598		100,143		3,304,991		3,405,134
Real estate construction		4,333		1,160		—		5,493		476,231		481,724
Lease financing		19		488		—		507		42,675		43,182
Total commercial		82,800		29,000		598		112,398		7,116,888		7,229,286
Home equity		10,185		7,980		22		18,187		2,507,098		2,525,285
Installment		1,452		504		600		2,556		566,492		569,048
Total retail		11,637		8,484		622		20,743		3,073,590		3,094,333
Residential mortgage		11,627		487		—		12,114		2,764,382		2,776,496
Total consumer		23,264		8,971		622		32,857		5,837,972		5,870,829
Total accruing loans	$	106,064	$	37,971	$	1,220	$	145,255	$	12,954,860	$	13,100,115
Nonaccrual loans
Commercial and industrial	$	5,196	$	7,893	$	22,014	$	35,103	$	26,153	$	61,256
Commercial real estate		5,791		7,279		71,886		84,956		59,937		144,893
Real estate construction		4,168		1,016		47,157		52,341		19,959		72,300
Lease financing		—		93		296		389		11,278		11,667
Total commercial		15,155		16,281		141,353		172,789		117,327		290,116
Home equity		1,403		4,335		31,745		37,483		8,636		46,119
Installment		383		123		991		1,497		1,698		3,195
Total retail		1,786		4,458		32,736		38,980		10,334		49,314
Residential mortgage		2,980		227		47,769		50,976		12,986		63,962
Total consumer		4,766		4,685		80,505		89,956		23,320		113,276
Total nonaccrual loans	$	19,921	$	20,966	$	221,858	$	262,745	$	140,647	$	403,392
Total loans
Commercial and industrial	$	10,943	$	8,401	$	22,014	$	41,358	$	3,319,144	$	3,360,502
Commercial real estate		78,492		34,123		72,484		185,099		3,364,928		3,550,027
Real estate construction		8,501		2,176		47,157		57,834		496,190		554,024
Lease financing		19		581		296		896		53,953		54,849
Total commercial		97,955		45,281		141,951		285,187		7,234,215		7,519,402
Home equity		11,588		12,315		31,767		55,670		2,515,734		2,571,404
Installment		1,835		627		1,591		4,053		568,190		572,243
Total retail		13,423		12,942		33,358		59,723		3,083,924		3,143,647
Residential mortgage		14,607		714		47,769		63,090		2,777,368		2,840,458
Total consumer		28,030		13,656		81,127		122,813		5,861,292		5,984,105
Total loans	$	125,985	$	58,937	$	223,078	$	408,000	$	13,095,507	$	13,503,507

* The recorded investment in loans past due 90 days or more and still accruing totaled $1.2 million at September 30, 2011 (the same as the reported balances for the accruing loans noted above).

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

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due *		Total Past Due		Current		Total
	($ in Thousands)
Accruing loans
Commercial and industrial	$	20,371	$	12,642	$	—	$	33,013	$	2,916,894	$	2,949,907
Commercial real estate		34,502		11,984		2,096		48,582		3,116,704		3,165,286
Real estate construction		4,470		3,546		—		8,016		450,124		458,140
Lease financing		132		—		—		132		43,042		43,174
Total commercial		59,475		28,172		2,096		89,743		6,526,764		6,616,507
Home equity		10,183		3,703		796		14,682		2,456,663		2,471,345
Installment		5,637		3,987		526		10,150		674,689		684,839
Total retail		15,820		7,690		1,322		24,832		3,131,352		3,156,184
Residential mortgage		7,967		755		—		8,722		2,260,966		2,269,688
Total consumer		23,787		8,445		1,322		33,554		5,392,318		5,425,872
Total accruing loans	$	83,262	$	36,617	$	3,418	$	123,297	$	11,919,082	$	12,042,379
Nonaccrual loans
Commercial and industrial	$	2,532	$	894	$	57,215	$	60,641	$	39,204	$	99,845
Commercial real estate		3,701		8,728		82,675		95,104		128,823		223,927
Real estate construction		166		131		56,443		56,740		38,189		94,929
Lease financing		151		132		998		1,281		15,799		17,080
Total commercial		6,550		9,885		197,331		213,766		222,015		435,781
Home equity		2,463		3,264		37,169		42,896		8,816		51,712
Installment		252		839		7,141		8,232		2,312		10,544
Total retail		2,715		4,103		44,310		51,128		11,128		62,256
Residential mortgage		3,460		4,789		50,609		58,858		17,461		76,319
Total consumer		6,175		8,892		94,919		109,986		28,589		138,575
Total nonaccrual loans	$	12,725	$	18,777	$	292,250	$	323,752	$	250,604	$	574,356
Total loans
Commercial and industrial	$	22,903	$	13,536	$	57,215	$	93,654	$	2,956,098	$	3,049,752
Commercial real estate		38,203		20,712		84,771		143,686		3,245,527		3,389,213
Real estate construction		4,636		3,677		56,443		64,756		488,313		553,069
Lease financing		283		132		998		1,413		58,841		60,254
Total commercial		66,025		38,057		199,427		303,509		6,748,779		7,052,288
Home equity		12,646		6,967		37,965		57,578		2,465,479		2,523,057
Installment		5,889		4,826		7,667		18,382		677,001		695,383
Total retail		18,535		11,793		45,632		75,960		3,142,480		3,218,440
Residential mortgage		11,427		5,544		50,609		67,580		2,278,427		2,346,007
Total consumer		29,962		17,337		96,241		143,540		5,420,907		5,564,447
Total loans	$	95,987	$	55,394	$	295,668	$	447,049	$	12,169,686	$	12,616,735

* The recorded investment in loans past due 90 days or more and still accruing totaled $3.4 million at December 31, 2010 (the same as the reported balances for the accruing loans noted above).

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The following table presents impaired loans at September 30, 2011.

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized*
	($ in Thousands)
Loans with a related allowance
Commercial and industrial	$	58,193	$	65,674	$	14,682	$	64,652	$	1,570
Commercial real estate		125,441		147,175		23,287		133,341		2,284
Real estate construction		58,691		73,888		15,853		64,038		701
Lease financing		594		721		25		922		—
Total commercial		242,919		287,458		53,847		262,953		4,555
Home equity		50,173		55,960		29,434		51,977		1,241
Installment		4,159		4,570		2,317		4,544		194
Total retail		54,332		60,530		31,751		56,521		1,435
Residential mortgage		73,271		80,532		14,119		76,546		1,477
Total consumer		127,603		141,062		45,870		133,067		2,912
Total loans	$	370,522	$	428,520	$	99,717	$	396,020	$	7,467
Loans with no related allowance
Commercial and industrial	$	26,083	$	35,007	$	—	$	31,410	$	672
Commercial real estate		68,344		94,823		—		81,441		656
Real estate construction		24,316		40,595		—		30,680		359
Lease financing		11,073		11,073		—		12,600		—
Total commercial		129,816		181,498		—		156,131		1,687
Home equity		6,502		8,692		—		6,884		35
Installment		1		2		—		3		—
Total retail		6,503		8,694		—		6,887		35
Residential mortgage		9,634		10,509		—		9,833		71
Total consumer		16,137		19,203		—		16,720		106
Total loans	$	145,953	$	200,701	$	—	$	172,851	$	1,793
Total
Commercial and industrial	$	84,276	$	100,681	$	14,682	$	96,062	$	2,242
Commercial real estate		193,785		241,998		23,287		214,782		2,940
Real estate construction		83,007		114,483		15,853		94,718		1,060
Lease financing		11,667		11,794		25		13,522		—
Total commercial		372,735		468,956		53,847		419,084		6,242
Home equity		56,675		64,652		29,434		58,861		1,276
Installment		4,160		4,572		2,317		4,547		194
Total retail		60,835		69,224		31,751		63,408		1,470
Residential mortgage		82,905		91,041		14,119		86,379		1,548
Total consumer		143,740		160,265		45,870		149,787		3,018
Total loans	$	516,475	$	629,221	$	99,717	$	568,871	$	9,260

* Interest income recognized included $4.2 million of interest income recognized on accruing restructured loans for the nine months ended September 30, 2011.

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The following table presents impaired loans at December 31, 2010.

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized*
	($ in Thousands)
Loans with a related allowance
Commercial and industrial	$	80,507	$	100,297	$	29,900	$	93,966	$	2,399
Commercial real estate		137,808		151,723		33,487		146,880		3,224
Real estate construction		77,312		85,173		29,098		64,049		920
Lease financing		16,680		16,680		6,364		18,832		74
Total commercial		312,307		353,873		98,849		323,727		6,617
Home equity		59,975		61,894		28,933		62,805		1,652
Installment		11,231		11,649		7,776		12,481		294
Total retail		71,206		73,543		36,709		75,286		1,946
Residential mortgage		86,163		91,749		8,832		92,602		2,514
Total consumer		157,369		165,292		45,541		167,888		4,460
Total loans	$	469,676	$	519,165	$	144,390	$	491,615	$	11,077
Loans with no related allowance
Commercial and industrial	$	29,318	$	35,841	$	—	$	28,831	$	806
Commercial real estate		101,731		119,963		—		111,267		2,203
Real estate construction		40,149		58,662		—		55,376		1,483
Lease financing		400		400		—		745		—
Total commercial		171,598		214,866		—		196,219		4,492
Home equity		3,478		3,483		—		3,414		102
Installment		5		5		—		7		—
Total retail		3,483		3,488		—		3,421		102
Residential mortgage		9,534		11,267		—		10,675		246
Total consumer		13,017		14,755		—		14,096		348
Total loans	$	184,615	$	229,621	$	—	$	210,315	$	4,840
Total
Commercial and industrial	$	109,825	$	136,138	$	29,900	$	122,797	$	3,205
Commercial real estate		239,539		271,686		33,487		258,147		5,427
Real estate construction		117,461		143,835		29,098		119,425		2,403
Lease financing		17,080		17,080		6,364		19,577		74
Total commercial		483,905		568,739		98,849		519,946		11,109
Home equity		63,453		65,377		28,933		66,219		1,754
Installment		11,236		11,654		7,776		12,488		294
Total retail		74,689		77,031		36,709		78,707		2,048
Residential mortgage		95,697		103,016		8,832		103,277		2,760
Total consumer		170,386		180,047		45,541		181,984		4,808
Total loans	$	654,291	$	748,786	$	144,390	$	701,930	$	15,917

* Interest income recognized included $4.0 million of interest income recognized on accruing restructured loans for the year ended December 31, 2010.

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

22

or costs is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan principal.

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

Troubled Debt Restructurings:

Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty. The concessions granted generally involve the modification of terms of the loan, such as changes in payment schedule or interest rate, which generally would not otherwise be considered. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Nonaccrual restructured loans are included and treated with all other nonaccrual loans. In addition, all accruing restructured loans are being reported as troubled debt restructurings. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains on nonaccrual. Based on the above, the Corporation had $41 million and $8 million of accruing loans that were restructured and remained on accrual status at September 30, 2011, and December 31, 2010, respectively. In addition, the Corporation had $72 million of restructured loans which were restored to accrual status based on a sustained period of repayment performance at both September 30, 2011, and December 31, 2010, respectively.

As of September 30, 2011 and December 31, 2010, there were $80 million and $36 million, respectively, of nonaccrual restructured loans, and $113 million and $80 million, respectively, of performing restructured loans, included within impaired loans. All restructured loans are considered impaired in the calendar year of restructuring. In subsequent years, a restructured loan may cease being classified as impaired if the loan was modified at a market rate and has performed according to the modified terms for at least six months. A loan that has been modified at a below market rate will return to performing status if it satisfies the six month performance requirement; however, it will remain classified as a restructured loan. The following table presents nonaccrual and performing restructured loans by loan portfolio.

	September 30, 2011				December 31, 2010
	Performing Restructured Loans		Nonaccrual Restructured Loans*		Performing Restructured Loans		Nonaccrual Restructured Loans*
	($ in Thousands)
Commercial and industrial	$	23,020	$	10,099	$	9,980	$	5,758
Commercial real estate		48,892		35,977		15,612		14,173
Real estate construction		10,707		15,849		22,532		186
Home equity		10,556		5,061		11,741		2,843
Installment		965		1,260		692		1,849
Residential mortgage		18,943		11,817		19,378		11,130
	$	113,083	$	80,063	$	79,935	$	35,939

* Nonaccrual restructured loans have been included with nonaccrual loans.

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The following table provides the number of loans modified in a troubled debt restructuring by loan portfolio during the three and nine months ended September 30, 2011, and the recorded investment and unpaid principal balance as of September 30, 2011.

	Three Months Ended September 30, 2011						Nine Months Ended September 30, 2011
	Number of Loans		Recorded Investment		Unpaid Principal Balance		Number of Loans		Recorded Investment		Unpaid Principal Balance
	($ in Thousands)
Commercial and industrial		40	$	5,794	$	7,356		89	$	29,811	$	33,443
Commercial real estate		18		17,417		19,912		62		48,017		57,144
Real estate construction		7		3,072		4,715		25		19,431		28,489
Home equity		18		2,817		3,114		48		4,843		5,318
Installment		4		357		381		15		915		954
Residential mortgage		18		3,165		3,736		30		4,696		5,508
		105	$	32,622	$	39,214		269	$	107,713	$	130,856

Restructured loan modifications may include payment schedule modifications, interest rate concessions, maturity date extensions, modification of note structure (A/B Note), principal reduction, or some combination of these concessions. During the three and nine months ended September 30, 2011, restructured loan modifications of commercial and industrial, commercial real estate and real estate construction loans primarily included maturity date extensions and payment schedule modifications. Restructured loan modifications of home equity and residential mortgage loans primarily included maturity date extensions, interest rate concessions, payment schedule modifications, or a combination of these concessions for the three and nine months ended September 30, 2011.

The following table provides the number of loans modified in a troubled debt restructuring during the previous 12 months which subsequently defaulted during the three and nine months ended September 30, 2011, as well as the recorded investment in these restructured loans as of September 30, 2011.

	Three Months Ended September 30, 2011				Nine Months Ended September 30, 2011
	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
	($ in Thousands)
Commercial and industrial		5	$	146		9	$	1,352
Commercial real estate		6		4,156		18		14,935
Real estate construction		1		7,085		5		7,362
Home equity		2		106		18		1,210
Installment		1		21		2		50
Residential mortgage		2		151		10		3,162
		17	$	11,665		62	$	28,071

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

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NOTE 7: Goodwill and Other Intangible Assets

Goodwill: Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis. Consistent with prior years, the Corporation has elected to conduct its annual impairment testing in May. The annual analysis indicated that the estimated fair value exceeded carrying value (including goodwill) for both the banking and wealth segments. Therefore, a step two analysis was not required for these reporting units and no impairment charge was recorded. There were no impairment charges recorded in 2010 or through September 30, 2011. It is possible that a future conclusion could be reached that all or a portion of the Corporation’s goodwill may be impaired, in which case a non-cash charge for the amount of such impairment would be recorded in earnings. Such a charge, if any, would have no impact on tangible capital and would not affect the Corporation’s “well-capitalized” designation.

At September 30, 2011 and December 31, 2010, the Corporation had goodwill of $929 million, including goodwill of $907 million assigned to the banking segment and goodwill of $22 million assigned to the wealth management segment. There was no change in the carrying amount of goodwill for the nine months ended September 30, 2011, and the year ended December 31, 2010.

Other Intangible Assets: The Corporation has other intangible assets that are amortized, consisting of core deposit intangibles, other intangibles (primarily related to customer relationships acquired in connection with the Corporation’s insurance agency acquisitions), and mortgage servicing rights. The core deposit intangibles and mortgage servicing rights are assigned to the banking segment, while the other intangibles are assigned to the wealth management segment as of September 30, 2011. For core deposit intangibles and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows.

	At or for the Nine Months Ended September 30, 2011			At or for the Year Ended December 31, 2010
	($ in Thousands)
Core deposit intangibles:
Gross carrying amount	$	41,831		$	41,831
Accumulated amortization		(29,892	)		(27,121	)
Net book value	$	11,939		$	14,710
Amortization during the period	$	2,771		$	3,750
Other intangibles:
Gross carrying amount(1)	$	19,283		$	20,433
Accumulated amortization		(10,622	)		(11,008	)
Net book value	$	8,661		$	9,425
Amortization during the period	$	764		$	1,169

(1) Other intangibles of $1.2 million were fully amortized during 2010 and have been removed from both the gross carrying amount and the accumulated amortization for 2011.

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

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

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fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. A valuation allowance is established through a charge to earnings to the extent the amortized cost of the mortgage servicing rights exceeds the estimated fair value by stratification. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation reserve 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. See Note 12, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” for a discussion of the recourse provisions on serviced residential mortgage loans. See Note 13, “Fair Value Measurements,” which further discusses fair value measurement relative to the mortgage servicing rights asset.

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 Nine Months Ended September 30, 2011			At or for the Year Ended December 31, 2010
	($ in Thousands)
Mortgage servicing rights:
Mortgage servicing rights at beginning of period	$	84,209		$	80,986
Additions		9,807			26,165
Amortization		(17,380	)		(22,942	)
Mortgage servicing rights at end of period	$	76,636		$	84,209
Valuation allowance at beginning of period		(20,300	)		(17,233	)
Additions, net		(8,966	)		(3,067	)
Valuation allowance at end of period		(29,266	)		(20,300	)
Mortgage servicing rights, net	$	47,370		$	63,909
Fair value of mortgage servicing rights	$	47,370		$	64,378
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)	$	7,281,000		$	7,453,000
Mortgage servicing rights, net to servicing portfolio		0.65	%		0.86	%
Mortgage servicing rights expense(1)	$	26,346		$	26,009

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

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The following table shows the estimated future amortization expense for amortizing intangible assets. The projections of amortization expense for the next five years are based on existing asset balances, the current interest rate environment, and prepayment speeds as of September 30, 2011. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable.

Estimated amortization expense:

	Core Deposit Intangibles		Other Intangibles		Mortgage Servicing Rights
	($ in Thousands)
Three months ending December 31, 2011	$	900	$	300	$	5,400
Year ending December 31, 2012		3,200		1,000		18,200
Year ending December 31, 2013		3,100		900		13,000
Year ending December 31, 2014		2,900		900		9,500
Year ending December 31, 2015		1,400		800		7,100
Year ending December 31, 2016		300		800		5,500

NOTE 8: Long-term Funding

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

	September 30, 2011		December 31, 2010
	($ in Thousands)
Federal Home Loan Bank (“FHLB”) advances	$	800,490	$	1,000,528
Senior notes, net		433,942		—
Subordinated debt, net		25,553		195,436
Junior subordinated debentures, net		215,683		215,848
Other borrowed funds		1,740		1,793
Total long-term funding	$	1,477,408	$	1,413,605

FHLB advances: At September 30, 2011, long-term advances from the FHLB had maturities through 2020 and had weighted-average interest rates of 1.58%, compared to 1.66% at December 31, 2010. These advances all had fixed contractual rates at both September 30, 2011, and December 31, 2010.

Senior notes: In March 2011, the Corporation issued $300 million of senior notes at a discount. In September 2011, the Corporation issued an additional $130 million of senior notes at a premium. The senior notes mature on March 28, 2016 and have a fixed coupon interest rate of 5.125%.

Subordinated debt: In September 2008, the Corporation issued $26 million of 10-year subordinated debt with a 5-year no-call provision, and in August 2001, the Corporation issued $200 million of 10-year subordinated debt. The subordinated notes were each issued at a discount, and the September 2008 debt has a fixed coupon interest rate of 9.25%, while the August 2001 debt has a fixed coupon interest rate of 6.75%. The Corporation retired $30 million of the August 2001 debt in the third quarter of 2010 and paid an early termination penalty of $0.7 million (included in other noninterest expense on the consolidated statements of income). During the first quarter of 2011, the Corporation retired another $28 million of the August 2001 debt and paid an early termination penalty of $0.6 million (included in the other noninterest expense on the consolidated statements of income). The remaining outstanding balance of $142 million on the August 2001 notes was paid on August 15, 2011. Subordinated debt qualifies under the risk-based capital guidelines as Tier 2 supplementary capital for regulatory purposes, and is discounted in accordance with regulations when the debt has five years or less remaining to maturity.

Junior subordinated debentures: The Corporation has $180.4 million of junior subordinated debentures (“ASBC Debentures”), which carry a fixed rate of 7.625% and mature on June 15, 2032. Beginning May 30, 2007, the Corporation has had the right to redeem the ASBC Debentures, at par, and none were redeemed in 2010 or during the first nine months of 2011. The carrying value of the ASBC

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Debentures was $179.7 million at both September 30, 2011 and December 31, 2010. With its October 2005 business combination, the Corporation acquired variable rate junior subordinated debentures at a premium (the “SFSC Debentures”), from two equal issuances (contractually $30.9 million on a combined basis), of which one pays a variable rate adjusted quarterly based on the 90-day LIBOR plus 2.80% (or 3.05% at September 30, 2011) and matures April 23, 2034, and the other which pays a variable rate adjusted quarterly based on the 90-day LIBOR plus 3.45% (or 3.74% at September 30, 2011) and matures November 7, 2032. The Corporation has the right to redeem the SFSC Debentures, at par, on a quarterly basis and none were redeemed in 2010 or during the first nine months of 2011. The carrying value of the SFSC Debentures was $36.0 million at September 30, 2011 and $36.2 million at December 31, 2010.

NOTE 9: Other Comprehensive Income

A summary of activity in accumulated other comprehensive income follows.

	Nine Months Ended						Year Ended
	September 30, 2011			September 30, 2010			December 31, 2010
	($ in Thousands)
Net income (loss)	$	98,574		$	(14,864	)	$	(856	)
Other comprehensive income (loss), net of tax:
Investment securities available for sale:
Net unrealized gains (losses)		94,907			49,929			(38,278	)
Reclassification adjustment for net (gains) losses realized in net income		802			(26,800	)		(24,917	)
Income tax (expense) benefit		(37,119	)		(8,558	)		24,785
Other comprehensive income (loss) on investment securities available for sale		58,590			14,571			(38,410	)
Defined benefit pension and postretirement obligations:
Prior service cost, net of amortization		349			349			467
Net loss, net of amortization		1,354			1,215			2,271
Income tax expense		(661	)		(604	)		(1,106	)
Other comprehensive income on pension and postretirement obligations		1,042			960			1,632
Derivatives used in cash flow hedging relationships:
Net unrealized losses		(528	)		(4,780	)		(4,542	)
Reclassification adjustment for net losses and interest expense for interest differential on derivatives realized in net income		3,969			4,512			6,013
Income tax (expense) benefit		(1,386	)		103			(499	)
Other comprehensive income (loss) on cash flow hedging relationships		2,055			(165	)		972
Total other comprehensive income (loss)		61,687			15,366			(35,806	)
Comprehensive income (loss)	$	160,261		$	502		$	(36,662	)

NOTE 10: Income Taxes

For the first nine months of 2011, the Corporation recognized income tax expense of $34.8 million, compared to an income tax benefit of $31.9 million for the first nine months of 2010. The change in income tax was primarily due to the level of pretax income (loss) between the comparable nine-month periods. The effective tax rate was 26.10% for the first nine months of 2011, compared to an effective tax benefit of (68.20%) for the first nine months of 2010. Income tax expense is also impacted by ongoing federal and state income tax audits and changes in tax law.

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NOTE 11: Derivative and Hedging Activities

The Corporation uses derivative instruments primarily to hedge the variability in interest payments or protect the value of certain assets and liabilities recorded on its consolidated balance sheet from changes in interest rates. The predominant derivative and hedging activities include interest rate-related instruments (swaps, caps, collars, and corridors), foreign currency exchange forwards, and certain mortgage banking activities. The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. The Corporation is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. To mitigate the counterparty risk, interest rate-related instruments generally contain language outlining collateral pledging requirements for each counterparty. Collateral must be posted when the market value exceeds certain threshold limits which are determined from the credit ratings of each counterparty. The Corporation was required to pledge $92 million of investment securities as collateral at September 30, 2011, and pledged $94 million of investment securities as collateral at December 31, 2010.

The Corporation’s derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. See Note 13, “Fair Value Measurements,” for additional fair value information and disclosures.

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

								Weighted Average
	Notional Amount		Fair Value			Balance Sheet Category		Receive Rate			Pay Rate			Maturity
	($ in Thousands)
September 30, 2011
Interest rate swap – short-term funding	$	100,000	$	(2,734	)		Other liabilities		0.08	%		3.04	%		11 months
December 31, 2010
Interest rate swap – short-term funding	$	200,000	$	(6,295	)		Other liabilities		0.19	%		3.15	%		14 months

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

($ in Thousands)										Amount of
	Amount of Gain  / (Loss) Recognized in OCI on Derivatives (Effective Portion)			Category of (Gain) /  Loss Reclassified from AOCI into Income (Effective Portion)		Amount of (Gain) / Loss Reclassified  from AOCI into Income (Effective Portion)		Category of Gain /  (Loss) Recognized in Income on Derivatives (Ineffective Portion)		Gain / (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded  from Effectiveness Testing)
Nine Months Ended September 30, 2011					Interest Expense				Interest Expense
Interest rate swap – short-term funding	$	(528	)		Short-term funding	$	3,969		Short-term funding	$	18
Nine Months Ended September 30, 2010					Interest Expense				Interest Expense
Interest rate swaps – short-term funding	$	(4,780	)		Short-term funding	$	4,512		Short-term funding	$	(1	)

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Cash flow hedges

The Corporation has variable-rate short-term funding which exposes the Corporation to variability in interest payments due to changes in interest rates. To manage the interest rate risk related to the variability of these interest payments, the Corporation has entered into various interest rate swap agreements.

During the third quarter of 2008, the Corporation entered into two interest rate swap agreements which hedge the interest rate risk in the cash flows of certain short-term, variable-rate funding. In the third quarter of 2011, one interest rate swap agreement for $100 million matured. Hedge effectiveness is determined using regression analysis. The Corporation recognized ineffectiveness of $0.1 million for the first nine months of 2011 (which increased interest expense), compared to ineffectiveness of less than $0.1 million for the first nine months of 2010 (which increased interest expense) and $0.2 million for full year 2010 (which increased interest expense) relating to these cash flow hedge relationships. No components of the derivatives change in fair value were excluded from the assessment of hedge effectiveness. Derivative gains and losses reclassified from accumulated other comprehensive income to current period earnings are included in interest expense on short-term funding (i.e., the line item in which the hedged cash flows are recorded). At September 30, 2011, accumulated other comprehensive income included a deferred after-tax net loss of $1.4 million related to these derivatives, compared to a deferred after-tax net loss of $3.5 million at December 31, 2010. The net after-tax derivative loss included in accumulated other comprehensive income at September 30, 2011, is projected to be reclassified into net interest income in conjunction with the recognition of interest payments on the variable-rate, short-term funding through September 2012.

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

($ in Thousands)							Weighted Average
	Notional		Fair			Balance Sheet	Receive			Pay
	Amount		Value			Category	Rate(1)			Rate(1)			Maturity
September 30, 2011
Interest rate-related instruments – customer and mirror	$	1,446,190	$	73,945		Other assets		1.74	%		1.74	%		44 months
Interest rate-related instruments – customer and mirror		1,446,190		(81,802	)	Other liabilities		1.74			1.74			44 months
Interest rate lock commitments (mortgage)		515,702		10,857		Other assets		—			—			—
Forward commitments (mortgage)		630,571		(5,769	)	Other liabilities		—			—			—
Foreign currency exchange forwards		59,909		2,702		Other assets		—			—			—
Foreign currency exchange forwards		41,591		(2,116	)	Other liabilities		—			—			—
Purchased options (time deposit)		32,199		1,307		Other assets		—			—			—
Written options (time deposit)		32,199		(1,307	)	Other liabilities		—			—			—
December 31, 2010
Interest rate-related instruments – customer and mirror	$	1,268,502	$	54,154		Other assets		1.78	%		1.78	%		41 months
Interest rate-related instruments – customer and mirror		1,268,502		(58,632	)	Other liabilities		1.78			1.78			41 months
Interest rate lock commitments (mortgage)		129,377		(78	)	Other liabilities		—			—			—
Forward commitments (mortgage)		281,000		5,617		Other assets		—			—			—
Foreign currency exchange forwards		56,584		1,530		Other assets		—			—			—
Foreign currency exchange forwards		48,652		(1,289	)	Other liabilities		—			—			—

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

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The table below identifies the income statement category of the gains and losses recognized in income on the Corporation’s derivative instruments not designated as hedging instruments.

	Income Statement Category of	Gain / (Loss)
	Gain / (Loss) Recognized in Income	Recognized in Income
		($ in Thousands)
Nine Months Ended September 30, 2011
Interest rate-related instruments – customer and mirror, net	Capital market fees, net	$	(3,379	)
Interest rate lock commitments (mortgage)	Mortgage banking, net		10,935
Forward commitments (mortgage)	Mortgage banking, net		(11,386	)
Foreign exchange forwards	Capital market fees, net		345
Nine Months Ended September 30, 2010
Interest rate-related instruments – customer and mirror, net	Capital market fees, net	$	(4,420	)
Interest rate lock commitments (mortgage)	Mortgage banking, net		8,516
Forward commitments (mortgage)	Mortgage banking, net		(4,782	)
Foreign exchange forwards	Capital market fees, net		531

Free Standing Derivatives

The Corporation enters into various derivative contracts which are designated as free standing derivative contracts. These derivative contracts are not designated against specific assets and liabilities on the balance sheet or forecasted transactions and, therefore, do not qualify for hedge accounting treatment. Such derivative contracts are carried at fair value on the consolidated balance sheet with changes in the fair value recorded as a component of Capital market fees, net, and typically include interest rate-related instruments (swaps, caps, collars, and corridors). The net impact for the first nine months of 2011 was a $3.4 million loss, while the net impact for the full year 2010 was a $1.9 million net loss and the net impact for the first nine months of 2010 was a $4.4 million loss.

Free standing derivatives are entered into primarily for the benefit of commercial customers through providing derivative products which enable the customer to manage their exposures to interest rate risk. The Corporation’s market risk from unfavorable movements in interest rates related to these derivative contracts is generally economically hedged by concurrently entering into offsetting derivative contracts. The offsetting derivative contracts have identical notional values, terms and indices.

Mortgage derivatives

Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded on the consolidated balance sheets with the changes in fair value recorded as a component of mortgage banking, net. The fair value of the mortgage derivatives at September 30, 2011, was a net asset of $5.1 million compared to a net asset of $5.5 million at December 31, 2010.

Foreign currency derivatives

The Corporation provides foreign exchange services to customers. The Corporation may enter into a foreign currency forward to mitigate the exchange rate risk attached to the cash flows of a loan or as an offsetting contract to a forward entered into as a service to our customer. At September 30, 2011, the Corporation had $12 million in notional balances of foreign currency forwards related to loans, and $45 million in notional balances of foreign currency forwards related to customer transactions (with mirror foreign currency forwards of $45 million). At December 31, 2010, the Corporation had $5 million in notional balances of foreign currency forwards related to loans, and $50 million in notional balances of foreign currency forwards related to customer transactions (with mirror foreign currency forwards of $50 million).

Written and purchased option derivatives (time deposit)

The Corporation periodically enters into written and purchased option derivative instruments to facilitate an equity linked time deposit product (the “Power CD”) initiated during the third quarter of 2011. The Power CD is a time deposit that provides the purchaser a guaranteed return of principal at maturity plus a potential equity return (a written option), while the Corporation receives a known stream of funds based on the equity return (a purchased option). The written and purchased options are mirror derivative instruments which are carried at fair value on the consolidated balance sheet.

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NOTE 12: Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities

The Corporation utilizes a variety of financial instruments in the normal course of business to meet the financial needs of its customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include lending-related and other commitments (see below) and derivative instruments (see Note 11). The following is a summary of lending-related commitments.

	September 30, 2011		December 31, 2010
	($ in Thousands)
Commitments to extend credit, excluding commitments to originate residential mortgage loans held for sale(1)(2)	$	4,183,616	$	3,862,208
Commercial letters of credit(1)		47,725		37,872
Standby letters of credit(3)		330,156		362,275

(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 September 30, 2011 or December 31, 2010.

(2) Interest rate lock commitments to originate residential mortgage loans held for sale are considered derivative instruments and are disclosed in Note 11.

(3) The Corporation has established a liability of $3.7 million and $3.9 million at September 30, 2011 and December 31, 2010, respectively, as an estimate of the fair value of these financial instruments.

Lending-related Commitments

As a financial services provider, the Corporation routinely enters into commitments to extend credit. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Corporation, with each customer’s creditworthiness evaluated on a case-by-case basis. The commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amount of those instruments. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the customer. Since a significant portion of commitments to extend credit are subject to specific restrictive loan covenants or may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements. As of September 30, 2011 and December 31, 2010, the Corporation had a reserve for losses on unfunded commitments totaling $14.9 million and $17.4 million, respectively, included in other liabilities on the consolidated balance sheets.

Lending-related commitments include commitments to extend credit, commitments to originate residential mortgage loans held for sale, commercial letters of credit, and standby letters of credit. Commitments to extend credit are agreements to lend to customers at predetermined interest rates, as long as there is no violation of any condition established in the contracts. Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded on the consolidated balance sheets. The Corporation’s derivative and hedging activity is further described in Note 11. Commercial and standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party, while standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

Other Commitments

The Corporation has principal investment commitments to provide capital-based financing to private and public companies through either direct investments in specific companies or through investment funds and partnerships. The timing of future cash requirements to fund such commitments is generally dependent on the investment cycle, whereby privately held companies are funded by private equity investors and ultimately sold, merged, or taken public through an initial offering, which can vary based on overall market conditions, as well as the nature and type of industry in which the companies operate. The Corporation also invests in low-income housing, small-business commercial real estate, new market tax credit projects, and historic tax credit projects to promote the revitalization of low-to-moderate-income neighborhoods throughout the local communities of its bank subsidiary. As a limited partner in these unconsolidated projects, the Corporation is allocated tax credits and deductions associated with the underlying projects. The aggregate carrying value of these investments at September 30, 2011, was $39 million, included in other assets on the consolidated balance sheets, compared to $45 million at December 31, 2010. Related to these investments, the Corporation had remaining commitments to fund of $15 million at September 30, 2011 and $11 million at December 31, 2010.

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Contingent Liabilities

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

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

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

A lawsuit, Harris v. Associated Bank, N.A. (the “Bank”), was filed in the United States District Court for the Western District of Wisconsin in April 2010. The suit alleges that the Bank unfairly assesses and collects overdraft fees and seeks restitution of the overdraft fees, compensatory, consequential and punitive damages, and costs. The lawsuit asserts claims for a multi-year period (as limited by the applicable state’s statute of limitations, generally 6 years) and is styled as a putative class action lawsuit on behalf of consumer banking customers of the Bank with the certification of the class pending. In April 2010, a Multi District Judicial Panel issued a conditional transfer order to consolidate this case into the Multi District Litigation (“MDL”), In re: Checking Account Overdraft Litigation MDL No. 2036 pending in the United States District Court for the Southern District of Florida, Miami Division for coordinated pre-trial proceedings. The Bank is a member, along with many other banking institutions, of the Fourth Tranche of defendants in this case. The Corporation denies all alleged claims and intends to vigorously defend itself. The amount claimed by the plaintiffs has not been determined, but could be material. Several banks which are also party to the Multi District Litigation have announced settlements of similar claims for what we believe to be a small fraction of their aggregate total service charge income on deposit accounts over the applicable claim period. Based upon currently available information including recent settlement announcements, management believes a loss is probable and has established an accrual within a range of possible settlement outcomes. The amount accrued is not considered to be material to the Corporation’s consolidated financial statements. Further, based on the range of announced settlements, management anticipates that these claims may be settled without any additional material loss to the Corporation’s consolidated financial statements. Management will continue to monitor the progress of these claims and in the event of unexpected future developments or as defendants in earlier tranches in the Multi District Litigation reach settlements or proceed to trial, the Corporation will assess its estimate of possible losses and make appropriate adjustments to the accrual accordingly as and when new information becomes available.

The Corporation, as a member bank of Visa, Inc. (“Visa”) prior to Visa’s completion of their initial public offering (“IPO”) in March 2008, had certain indemnification obligations pursuant to Visa’s certificate of incorporation and bylaws and in accordance with their membership agreements. In accordance with Visa’s bylaws prior to the IPO, the Corporation could have been required to indemnify Visa for the Corporation’s proportional share of losses based on the pre-IPO membership interests. In contemplation of the IPO, Visa announced that it had completed restructuring transactions during the fourth quarter of 2007. As part of this restructuring, the Corporation’s indemnification obligation was modified to include only certain known litigation as of the date of the restructuring. This modification triggered a requirement to recognize a $2.3 million liability (included in other liabilities in the consolidated balance sheets) in 2007 equal to the fair value of the indemnification obligation. Based upon Visa’s revised liability estimate for litigation, including the current funding of litigation settlements, the Corporation recorded a $0.3 million reduction in the reserve for litigation losses and a corresponding reduction in the Visa escrow receivable during 2010. The remaining reserve for unfavorable litigation losses related to Visa was $1.4 million at September 30, 2011 and $1.5 million at December 31, 2010.

In connection with the IPO in 2008, Visa retained a portion of the proceeds to fund an escrow account in order to resolve existing litigation settlements as well as to fund potential future litigation settlements. The Corporation’s initial interest in this escrow account was $2 million (included in other assets in the consolidated balance sheets). During 2010, Visa announced it had deposited additional

33

amounts into the litigation escrow account, of which, the Corporation’s pro-rata share was $0.6 million. The remaining receivable related to the Visa escrow account was $1.4 million at September 30, 2011 and $1.3 million at December 31, 2010.

Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages originated under our usual underwriting procedures, and are most often sold on a nonrecourse basis. The Corporation’s agreements to sell residential mortgage loans in the normal course of business usually require general representations and warranties on the underlying loans sold, related to credit information, loan documentation, collateral, 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 general representations and warranties. To a much lesser degree, the Corporation may sell residential mortgage loans with limited recourse (limited in that the recourse period ends prior to the loan’s maturity, usually after certain time and/or loan paydown criteria have been met), whereby repurchase could be required if the loan had defined delinquency issues during the limited recourse periods. At September 30, 2011, and December 31, 2010, there were approximately $59 million and $58 million, respectively, of residential mortgage loans sold with such recourse risk, upon which there have been insignificant instances of repurchase. Given that the underlying loans delivered to buyers are predominantly conventional residential first lien mortgages originated or purchased under our usual underwriting procedures, and that historical experience shows negligible losses and insignificant repurchase activity, management believes that losses and repurchases under the limited recourse provisions will continue to be insignificant.

In October 2004, the Corporation acquired a thrift. Prior to the acquisition, this thrift retained a subordinate position to the FHLB in the credit risk on the underlying residential mortgage loans it sold to the FHLB in exchange for a monthly credit enhancement fee. The Corporation has not sold loans to the FHLB with such credit risk retention since February 2005. At September 30, 2011 and December 31, 2010, there were $525 million and $667 million, respectively, of such residential mortgage loans with credit risk recourse, upon which there have been negligible historical losses to the Corporation.

At September 30, 2011 and December 31, 2010, the Corporation provided a credit guarantee on contracts to unrelated third parties in exchange for a fee. In the event of a customer default, pursuant to the credit recourse provided, the Corporation is required to reimburse the third party. The maximum amount of credit risk, in the event of nonperformance by the underlying borrowers, is limited to a defined contract liability. In the event of nonperformance, the Corporation has rights to the underlying collateral value securing the loan. The Corporation has an estimated fair value of approximately $0.3 million and $0.1 million related to these credit guarantee contracts at September 30, 2011 and December 31, 2010, respectively, recorded in other liabilities on the consolidated balance sheets.

For certain mortgage loans originated by the Corporation, borrowers may be required to obtain Private Mortgage Insurance (PMI) provided by third-party insurers. The Corporation entered into reinsurance treaties with certain PMI carriers which provided, among other things, for a sharing of losses within a specified range of the total PMI coverage in exchange for a portion of the PMI premiums. The Corporation’s reinsurance treaties typically provide that the Corporation will assume liability for losses once they exceed 5% of the aggregate risk exposure up to a maximum of 10% of the aggregate risk exposure. At September 30, 2011, the Corporation’s potential risk exposure was approximately $20 million. As of January 1, 2009, the Corporation discontinued providing reinsurance coverage for new loans in exchange for a portion of the PMI premium. The Corporation’s estimated liability for reinsurance losses, including estimated losses incurred but not yet reported, was $6.3 million and $4.5 million at September 30, 2011 and December 31, 2010, respectively.

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NOTE 13: Fair Value Measurements

The FASB issued an accounting standard (subsequently codified into ASC Topic 820, “Fair Value Measurements and Disclosures”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This accounting standard applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard amends numerous accounting pronouncements but does not require any new fair value measurements of reported balances. The standard also emphasizes that fair value (i.e., the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. When considering the assumptions that market participants would use in pricing the asset or liability, this accounting standard establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.

Level 1 inputs	Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Corporation has the ability to access.
Level 2 inputs	Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.
Level 3 inputs	Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Following is a description of the valuation methodologies used for the Corporation’s more significant instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy. While the Corporation considered the unfavorable impact of recent economic challenges (including but not limited to weakened economic conditions, disruptions in capital markets, troubled or failed financial institutions, government intervention and actions) on quoted market prices for identical and similar financial instruments, and on inputs or assumptions used, the Corporation accepted the fair values determined under its valuation methodologies.

Investment securities available for sale: Where quoted prices are available in an active market, investment securities are classified in Level 1 of the fair value hierarchy. Level 1 investment securities primarily include U.S. Treasury, certain Federal agency, and exchange-traded debt and equity securities. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate, and are classified in Level 2 of the fair value hierarchy. Examples of these investment securities include certain Federal agency securities, obligations of state and political subdivisions, mortgage-related securities, asset-backed securities, and other debt securities. Lastly, in certain cases where there is limited activity or less transparency around inputs to the estimated fair value, securities are classified within Level 3 of the fair value hierarchy. Level 3 securities primarily include trust preferred securities. To validate the fair value estimates, assumptions, and controls, the Corporation looks to transactions for similar instruments and utilizes independent pricing provided by third-party vendors or brokers and relevant market indices. While none of these sources are solely indicative of fair value, they serve as directional indicators for the appropriateness of the Corporation’s fair value estimates. The Corporation has determined that the fair value measures of its investment securities are classified predominantly within Level 1 or 2 of the fair value hierarchy. See Note 5, “Investment Securities,” for additional disclosure regarding the Corporation’s investment securities.

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Derivative financial instruments (interest rate-related instruments): The Corporation uses interest rate swaps to manage its interest rate risk. In addition, the Corporation offers customer interest rate swaps, caps, collars, and corridors to service our customers’ needs, for which the Corporation simultaneously enters into offsetting derivative financial instruments (i.e., mirror interest rate swaps, caps, collars, and corridors) with third parties to manage its interest rate risk associated with these financial instruments. The valuation of the Corporation’s derivative financial instruments is determined using discounted cash flow analysis on the expected cash flows of each derivative and, also includes a nonperformance / credit risk component (credit valuation adjustment). See Note 11, “Derivative and Hedging Activities,” for additional disclosure regarding the Corporation’s derivative financial instruments.

The discounted cash flow analysis component in the fair value measurements reflects the contractual terms of the derivative financial instruments, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. More specifically, the fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments), with the variable cash payments (or receipts) based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. Likewise, the fair values of interest rate options (i.e., interest rate caps, collars, and corridors) are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (or rise above) the strike rate of the floors (or caps), with the variable interest rates used in the calculation of projected receipts on the floor (or cap) based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative financial instruments for the effect of nonperformance risk, the Corporation has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

While the Corporation has determined that the majority of the inputs used to value its derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Corporation has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions as of September 30, 2011, and December 31, 2010, and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. Therefore, the Corporation has determined that the fair value measures of its derivative financial instruments in their entirety are classified within Level 2 of the fair value hierarchy.

Derivative financial instruments (foreign exchange): The Corporation provides foreign exchange services to customers. In addition, the Corporation may enter into a foreign currency forward to mitigate the exchange rate risk attached to the cash flows of a loan or as an offsetting contract to a forward entered into as a service to our customer. The valuation of the Corporation’s foreign exchange forwards is determined using quoted prices of foreign exchange forwards with similar characteristics, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate, and are classified in Level 2 of the fair value hierarchy.

Derivative financial instruments (mortgage derivatives): Mortgage derivatives include interest rate lock commitments to originate residential mortgage loans held for sale to individual customers and forward commitments to sell residential mortgage loans to various investors. The Corporation relies on an internal valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups.

The Corporation also relies on an internal valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e., an estimate of what the Corporation would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available. While there are Level 2 and 3 inputs used in the valuation models, the Corporation has determined that the majority of the inputs significant in the valuation of both of the mortgage derivatives fall within Level 3 of the fair value hierarchy. See Note 11, “Derivative and Hedging Activities,” for additional disclosure regarding the Corporation’s mortgage derivatives.

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Following is a description of the valuation methodologies used for the Corporation’s more significant instruments measured on a nonrecurring basis at the lower of amortized cost or estimated fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

Loans Held for Sale: Loans held for sale, which consist generally of current production of certain fixed-rate, first-lien residential mortgage loans, are carried at the lower of cost or estimated fair value. The estimated fair value of the residential mortgage loans held for sale was based on what secondary markets are currently offering for portfolios with similar characteristics, which the Corporation classifies as a Level 2 nonrecurring fair value measurement.

Impaired Loans: The Corporation considers a loan impaired when it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the note agreement, including principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this impaired loan definition, with the amount of impairment based upon the loan’s observable market price, the estimated fair value of the collateral for collateral-dependent loans, or alternatively, the present value of the expected future cash flows discounted at the loan’s effective interest rate. The use of observable market price or estimated fair value of collateral on collateral-dependent loans is considered a fair value measurement subject to the fair value hierarchy. Appraised values are generally used on real estate collateral-dependent impaired loans, which the Corporation classifies as a Level 2 nonrecurring fair value measurement.

Mortgage servicing rights: Mortgage servicing rights do not trade in an active, open market with readily observable prices. While sales of mortgage servicing rights do occur, the precise terms and conditions typically are not readily available to allow for a “quoted price for similar assets” comparison. Accordingly, the Corporation relies on a discounted cash flow model to estimate the fair value of its mortgage servicing rights. The Corporation uses a valuation model in conjunction with third party prepayment assumptions to project mortgage servicing rights cash flows based on the current interest rate scenario, which is then discounted to estimate an expected fair value of the mortgage servicing rights. The valuation model considers portfolio characteristics of the underlying mortgages, contractually specified servicing fees, prepayment assumptions, discount rate assumptions, delinquency rates, late charges, other ancillary revenue, costs to service, and other economic factors. The Corporation reassesses and periodically adjusts the underlying inputs and assumptions used in the model to reflect market conditions and assumptions that a market participant would consider in valuing the mortgage servicing rights asset. In addition, the Corporation compares its fair value estimates and assumptions to observable market data for mortgage servicing rights, where available, and to recent market activity and actual portfolio experience. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the fair value hierarchy. The Corporation uses the amortization method (i.e., lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, for its mortgage servicing rights assets. See Note 7, “Goodwill and Other Intangible Assets,” for additional disclosure regarding the Corporation’s mortgage servicing rights.

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The table below presents the Corporation’s investment securities available for sale, derivative financial instruments, and mortgage derivatives measured at fair value on a recurring basis as of September 30, 2011 and December 31, 2010, aggregated by the level in the fair value hierarchy within which those measurements fall.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

		00,000,0000		00,000,0000		00,000,0000		00,000,0000
			Fair Value Measurements Using
	September 30, 2011		Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	1,104	$	1,104	$	—	$	—
Federal agency securities		25,214		44		25,170		—
Obligations of state and political subdivisions		827,385		—		827,385		—
Residential mortgage-related securities		4,296,214		—		4,296,214		—
Commercial mortgage-related securities		16,947		—		16,947		—
Asset-backed securities		213,234		—		213,234		—
Other securities (debt and equity)		73,718		11,734		61,123		861
Total investment securities available for sale	$	5,453,816	$	12,882	$	5,440,073	$	861
Derivative financial instruments (other assets)	$	88,811	$	—	$	77,954	$	10,857
Liabilities:
Derivative financial instruments (other liabilities)	$	93,728	$	—	$	87,959	$	5,769

		00,000,0000		00,000,0000		00,000,0000		00,000,0000
			Fair Value Measurements Using
	December 31, 2010		Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	1,208	$	1,208	$	—	$	—
Federal agency securities		29,767		51		29,716		—
Obligations of state and political subdivisions		838,602		—		838,602		—
Residential mortgage-related securities		4,910,497		—		4,910,497		—
Commercial mortgage-related securities		7,753		—		7,753		—
Asset-backed securities		298,841		—		298,841		—
Other securities (debt and equity)		14,673		12,002		999		1,672
Total investment securities available for sale	$	6,101,341	$	13,261	$	6,086,408	$	1,672
Derivative financial instruments (other assets)	$	61,301	$	—	$	55,684	$	5,617
Liabilities:
Derivative financial instruments (other liabilities)	$	66,294	$	—	$	66,216	$	78

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The table below presents a rollforward of the balance sheet amounts for the year ended December 31, 2010 and the nine months ended September 30, 2011, for financial instruments measured on a recurring basis and classified within Level 3 of the fair value hierarchy.

Assets and Liabilities Measured at Fair Value

Using Significant Unobservable Inputs (Level 3)

($ in Thousands)	Investment Securities
	Available for Sale			Derivatives
Balance December 31, 2009	$	—		$	3,141
Transfers in		4,663			—
Total net gains (losses) included in income:
Net impairment losses on investment securities		(2,991	)		—
Mortgage derivative gain, net		—			2,398
Balance December 31, 2010	$	1,672		$	5,539
Total net losses included in income:
Investment securities losses		(722	)
Mortgage derivative loss, net		—			(451	)
Total net losses included in other comprehensive income:
Investment securities losses		(89	)		—
Balance September 30, 2011	$	861		$	5,088

In valuing the investment securities available for sale classified within Level 3, the Corporation incorporated its own assumptions about future cash flows and discount rates adjusting for credit and liquidity factors. The Corporation also reviewed the underlying collateral and other relevant data in developing the assumptions for these investment securities.

The table below presents the Corporation’s loans held for sale, impaired loans, and mortgage servicing rights measured at fair value on a nonrecurring basis as of September 30, 2011 and December 31, 2010, aggregated by the level in the fair value hierarchy within which those measurements fall.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

			Fair Value Measurements Using
	September 30, 2011		Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Loans held for sale	$	201,142	$	—	$	201,142	$	—
Impaired loans(1)		177,151		—		177,151		—
Mortgage servicing rights		47,370		—		—		47,370

			Fair Value Measurements Using
	December 31, 2010		Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Loans held for sale	$	144,808	$	—	$	144,808	$	—
Impaired loans(1)		279,179		—		279,179		—
Mortgage servicing rights		63,909		—		—		63,909

(1) Represents collateral-dependent impaired loans, net, which are included in loans.

Certain nonfinancial assets measured at fair value on a nonrecurring basis include other real estate owned (upon initial recognition or subsequent impairment), nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill

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impairment test, and intangible assets and other nonfinancial long-lived assets measured at fair value for impairment assessment.

During the first nine months of 2011 and the full year 2010, certain other real estate owned, upon initial recognition, was re-measured and reported at fair value through a charge off to the allowance for loan losses based upon the estimated fair value of the other real estate owned. The fair value of other real estate owned, upon initial recognition or subsequent impairment, was estimated using appraised values, which the Corporation classifies as a Level 2 nonrecurring fair value measurement. Other real estate owned measured at fair value upon initial recognition totaled approximately $41 million for the nine months ended September 30, 2011 and $55 million for the year ended December 31, 2010, respectively. In addition to other real estate owned measured at fair value upon initial recognition, the Corporation also recorded write-downs to the balance of other real estate owned for subsequent impairment of $7 million, $6 million, and $10 million to noninterest expense for the nine months ended September 30, 2011 and 2010, and the year ended December 31, 2010, respectively.

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Fair Value of Financial Instruments:

The Corporation is required to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Corporation’s financial instruments.

The estimated fair values of the Corporation’s financial instruments at September 30, 2011 and December 31, 2010, were as follows.

	September 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount			Fair Value
	($ in Thousands)
Financial assets:
Cash and due from banks	$	410,644	$	410,644	$	319,487		$	319,487
Interest-bearing deposits in other financial institutions		250,648		250,648		546,125			546,125
Federal funds sold and securities purchased under agreements to resell		4,180		4,180		2,550			2,550
Investment securities available for sale		5,453,816		5,453,816		6,101,341			6,101,341
Federal Home Loan Bank and Federal Reserve Bank stocks		191,128		191,128		190,968			190,968
Loans held for sale		201,142		205,999		144,808			144,808
Loans, net		13,103,784		11,809,201		12,139,922			10,568,980
Bank owned life insurance		540,943		540,943		533,069			533,069
Accrued interest receivable		71,117		71,117		73,982			73,982
Interest rate-related agreements(1)		73,945		73,945		54,154			54,154
Foreign currency exchange forwards		2,702		2,702		1,530			1,530
Interest rate lock commitments to originate residential mortgage loans held for sale		10,857		10,857		(78	)		(78	)
Purchased options (time deposit)		1,307		1,307		—			—
Financial liabilities:
Deposits	$	14,782,410	$	14,782,410	$	15,225,393		$	15,225,393
Short-term funding		2,531,776		2,531,776		1,747,382			1,747,382
Long-term funding		1,477,408		1,620,893		1,413,605			1,491,786
Accrued interest payable		9,972		9,972		17,163			17,163
Interest rate-related agreements(1)		84,536		84,536		64,927			64,927
Foreign currency exchange forwards		2,116		2,116		1,289			1,289
Standby letters of credit(2)		3,742		3,742		3,943			3,943
Forward commitments to sell residential mortgage loans		5,769		5,769		(5,617	)		(5,617	)
Written options (time deposit)		1,307		1,307		—			—

(1) At September 30, 2011 and December 31, 2010, the notional amount of cash flow hedge interest rate swap agreements was $100 million and $200 million, respectively. See Note 11 for information on the fair value of derivative financial instruments.

(2) At September 30, 2011 and December 31, 2010, the commitment on standby letters of credit was $0.3 billion and $0.4 billion, respectively. See Note 12 for additional information on the standby letters of credit and for information on the fair value of lending-related commitments.

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

Investment securities available for sale - The fair value of investment securities available for sale is based on quoted prices in active markets, or if quoted prices are not available for a specific security, then fair values are estimated by using pricing models, quoted

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prices of securities with similar characteristics, or discounted cash flows.

Federal Home Loan Bank and Federal Reserve Bank stocks - The carrying amount is a reasonable fair value estimate for the Federal Reserve Bank and Federal Home Loan Bank stocks given their “restricted” nature (i.e., the stock can only be sold back to the respective institutions (Federal Home Loan Bank or Federal Reserve Bank) or another member institution at par).

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

Loans, net - The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Corporation believes are consistent with liquidity discounts in the market place. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial and industrial, real estate construction, commercial real estate, lease financing, residential mortgage, home equity, and other installment. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. The fair value analysis also included other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate.

Bank owned life insurance - The fair value of bank owned life insurance approximates the carrying amount, because upon liquidation of these investments, the Corporation would receive the cash surrender value which equals the carrying amount.

Deposits - The fair value of deposits with no stated maturity such as noninterest-bearing demand deposits, savings, interest-bearing demand deposits, and money market accounts, is equal to the amount payable on demand as of the balance sheet date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. However, if the estimated fair value of certificates of deposit is less than the carrying value, the carrying value is reported as the fair value of the certificates of deposit.

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

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

Interest rate-related agreements - The fair value of interest rate swap, cap, collar, and corridor agreements is determined using discounted cash flow analysis on the expected cash flows of each derivative. The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

Foreign currency exchange forwards - The fair value of the Corporation’s foreign exchange forwards is determined using quoted prices of foreign exchange forwards with similar characteristics, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate.

Standby letters of credit - The fair value of standby letters of credit represent deferred fees arising from the related off-balance sheet financial instruments. These deferred fees approximate the fair value of these instruments and are based on several factors, including the remaining terms of the agreement and the credit standing of the customer.

Interest rate lock commitments to originate residential mortgage loans held for sale - The Corporation relies on an internal valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups.

Forward commitments to sell residential mortgage loans - The Corporation relies on an internal valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e., an estimate of what the Corporation would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific

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terms and maturities of the forward commitments against applicable investor pricing available.

Limitations - Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Corporation’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

NOTE 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. The RAP and a smaller acquired plan that was frozen in December 31, 2004, are collectively referred to below as the “Pension Plan.”

The Corporation also provides healthcare access for eligible retired employees in its Postretirement Plan (the “Postretirement Plan”). Retirees who are at least 55 years of age with 5 years of service are eligible to participate in the plan. The Corporation has no plan assets attributable to the plan. The Corporation reserves the right to terminate or make changes to the plan at any time.

The components of net periodic benefit cost for the Pension and Postretirement Plans for the three and nine months ended September 30, 2011 and 2010, and for the full year 2010 were as follows.

	Three Months Ended						Nine Months Ended						Year Ended
	September 30,						September 30,						December 31,
	2011			2010			2011			2010			2010
	($ in Thousands)
Components of Net Periodic Benefit Cost
Pension Plan:
Service cost	$	2,613		$	2,475		$	7,838		$	7,425		$	9,622
Interest cost		1,589			1,590			4,769			4,770			6,377
Expected return on plan assets		(3,220	)		(3,019	)		(9,660	)		(9,057	)		(12,152	)
Amortization of prior service cost		18			18			53			53			72
Amortization of actuarial loss		451			405			1,354			1,215			1,601
Total net periodic benefit cost	$	1,451		$	1,469		$	4,354		$	4,406		$	5,520
Postretirement Plan:
Interest cost	$	50		$	58		$	150		$	173		$	227
Amortization of prior service cost		99			98			296			296			395
Amortization of actuarial gain		—			—			—			—			(3	)
Total net periodic benefit cost	$	149		$	156		$	446		$	469		$	619

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 regularly reviews the funding of its Pension Plan. The Corporation made a contribution of $6 million to its Pension Plan in the first quarter of 2011.

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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 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, governmental units, and consumers (including mortgages, home equity lending, and card products) and the support to deliver, fund, and manage such banking services.

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

Selected segment information is presented below.

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				Wealth
	Banking			Management			Other			Consolidated Total
	($ in Thousands)
As of and for the Nine Months Ended September 30, 2011
Net interest income	$	460,581		$	425		$	—		$	461,006
Provision for loan losses		51,000			—			—			51,000
Noninterest income		155,417			78,857			(8,281	)		225,993
Depreciation and amortization		44,259			876			—			45,135
Other noninterest expense		396,624			69,124			(8,281	)		457,467
Income taxes		31,110			3,713			—			34,823
Net income	$	93,005		$	5,569		$	—		$	98,574
% of consolidated net income		94	%		6	%		—	%		100	%
Total assets	$	21,845,835		$	148,041		$	(91,227	)	$	21,902,649
% of consolidated total assets		100	%		—	%		—	%		100	%
Total revenues*	$	615,998		$	79,282		$	(8,281	)	$	686,999
% of consolidated total revenues		90	%		11	%		(1	)%		100	%
As of and for the Nine Months Ended September 30, 2010
Net interest income	$	482,359		$	560		$	—		$	482,919
Provision for loan losses		327,010			—			—			327,010
Noninterest income		205,915			74,999			(3,238	)		277,676
Depreciation and amortization		42,038			930			—			42,968
Other noninterest expense		379,987			60,610			(3,238	)		437,359
Income taxes		(37,486	)		5,608			—			(31,878	)
Net income (loss)	$	(23,275	)	$	8,411		$	—		$	(14,864	)
% of consolidated net income (loss)		N/M			N/M			N/M			N/M
Total assets	$	22,466,642		$	140,271		$	(81,627	)	$	22,525,286
% of consolidated total assets		100	%		—	%		—	%		100	%
Total revenues*	$	688,274		$	75,559		$	(3,238	)	$	760,595
% of consolidated total revenues		90	%		10	%		—	%		100	%

N/M — Not Meaningful

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

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				Wealth
	Banking			Management			Other			Consolidated Total
	($ in Thousands)
As of and for the Three Months Ended September 30, 2011
Net interest income	$	152,982		$	178		$	—		$	153,160
Provision for loan losses		4,000			—			—			4,000
Noninterest income		55,206			25,773			(3,560	)		77,419
Depreciation and amortization		14,933			291			—			15,224
Other noninterest expense		133,566			22,673			(3,560	)		152,679
Income taxes		16,142			1,195			—			17,337
Net income	$	39,547		$	1,792		$	—		$	41,339
% of consolidated net income		96	%		4	%		—	%		100	%
Total assets	$	21,845,835		$	148,041		$	(91,227	)	$	21,902,649
% of consolidated total assets		100	%		—	%		—	%		100	%
Total revenues*	$	208,188		$	25,951		$	(3,560	)	$	230,579
% of consolidated total revenues		90	%		11	%		(1	)%		100	%
As of and for the Three Months Ended September 30, 2010
Net interest income	$	153,728		$	176		$	—		$	153,904
Provision for loan losses		64,000			—			—			64,000
Noninterest income		63,823			24,899			(1,080	)		87,642
Depreciation and amortization		14,066			306			—			14,372
Other noninterest expense		129,336			19,697			(1,080	)		147,953
Income taxes		(1,112	)		2,029			—			917
Net income	$	11,261		$	3,043		$	—		$	14,304
% of consolidated net income		79	%		21	%		—	%		100	%
Total assets	$	22,466,642		$	140,271		$	(81,627	)	$	22,525,286
% of consolidated total assets		100	%		—	%		—	%		100	%
Total revenues*	$	217,551		$	25,075		$	(1,080	)	$	241,546
% 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.

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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, including risks relating to our allowance for loan losses and impairment of goodwill;

• 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 from 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

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

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

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Allowance for Loan Losses: Management’s evaluation process used to determine the appropriateness of the allowance for loan losses is subject to the use of estimates, assumptions, and judgments. The evaluation process combines many factors: management’s ongoing review and grading of the loan portfolio, consideration of historical loan loss and delinquency experience, trends in past due and nonaccrual loans, risk characteristics of the various classifications of loans, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect probable credit losses. Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the appropriateness of the allowance for loan losses, could change significantly. As an integral part of their examination process, various regulatory agencies also review the allowance for loan losses. Such agencies may require additions to the allowance for loan losses or may require that certain loan balances be charged off or downgraded into criticized loan categories when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination. The Corporation believes the level of the allowance for loan losses is appropriate as recorded in the consolidated financial statements. See Note 6, “Loans, Allowance for Loan Losses, and Credit Quality,” of the notes to consolidated financial statements and section “Allowance for Loan Losses.”

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

The Corporation conducted its annual impairment testing in May 2011. The step one analysis conducted for the banking segment and wealth management segment indicated that the estimated fair value exceeded carrying value (including goodwill) for both segments. Therefore, a step two analysis was not required for these reporting units. The Corporation engaged an independent valuation firm to assist in the computation of the fair value estimates of each reporting unit as part of its impairment assessment. The valuation utilized market and income approach methodologies and applied a weighted average to each in order to determine the fair value of each reporting unit. Goodwill impairment testing is considered a “critical accounting estimate” as estimates and assumptions are made about future performance and cash flows, as well as other prevailing market factors. In the event that we conclude that all or a portion of our goodwill may be impaired, a noncash charge for the amount of such impairment would be recorded in earnings. Such a charge would have no impact on tangible capital. A decline in our stock price or occurrence of a triggering event following any of our quarterly earnings releases and prior to the filing of the periodic report for that period could, under certain circumstances, cause us to re-perform a goodwill impairment test and result in an impairment charge being recorded for that period which was not reflected in such earnings release.

In connection with obtaining an independent third party valuation, management provides certain information and assumptions that is utilized in the implied fair value calculation. Assumptions critical to the process include discount rates, asset and liability growth rates, and other income and expense estimates. The Corporation provided the best information currently available to estimate future performance for each reporting unit; however, future adjustments to these projections may be necessary if conditions differ substantially from the assumptions utilized in making these assumptions. See also, Note 7 “Goodwill and Other Intangible Assets,” of the notes to the consolidated financial statements.

Mortgage Servicing Rights Valuation: The fair value of the Corporation’s mortgage servicing rights asset is important to the presentation of the consolidated financial statements since the mortgage servicing rights are carried on the consolidated balance sheet at the lower of amortized cost or estimated fair value. Mortgage servicing rights do not trade in an active open market with readily observable prices. As such, like other participants in the mortgage banking business, the Corporation relies on a discounted cash flow model to estimate the fair value of its mortgage servicing rights. The use of a discounted cash flow model involves judgment, particularly of estimated prepayment speeds of underlying mortgages serviced and the overall level of interest rates. Loan type and note interest rate are the predominant risk characteristics of the underlying loans used to stratify capitalized mortgage servicing rights for purposes of measuring impairment. The Corporation periodically reviews the assumptions underlying the valuation of mortgage servicing rights. In addition, the Corporation consults periodically with an independent party 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 the discounted cash flow model are indicative of the fair value of its mortgage servicing rights portfolio, these values can

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change significantly depending upon key factors, such as the then current interest rate environment, estimated prepayment speeds of the underlying mortgages serviced, and other economic conditions. The proceeds that might be received should the Corporation actually consider a sale of some or all of the mortgage servicing rights portfolio could differ from the amounts reported at any point in time.

Mortgage servicing rights are carried at the lower of amortized cost or estimated fair value and are assessed for impairment at each reporting date. Impairment is assessed based on the fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. However, the extent to which interest rates impact the value of the mortgage servicing rights asset depends, in part, on the magnitude of the changes in market interest rates and the differential between the then current market interest rates for mortgage loans and the mortgage interest rates included in the mortgage servicing portfolio. Management recognizes that the volatility in the valuation of the mortgage servicing rights asset will continue. To better understand the sensitivity of the impact of prepayment speeds on the value of the mortgage servicing rights asset at September 30, 2011 (holding all other factors unchanged), if prepayment speeds were to increase 25%, the estimated value of the mortgage servicing rights asset would have been approximately $7.6 million (or 16%) lower, while if prepayment speeds were to decrease 25%, the estimated value of the mortgage servicing rights asset would have been approximately $10.3 million (or 22%) higher. The Corporation believes the mortgage servicing rights asset is properly recorded in the consolidated financial statements. See Note 7, “Goodwill and Other Intangible Assets,” and Note 13, “Fair Value Measurements,” of the notes to consolidated financial statements and section “Noninterest Income.”

Derivative Financial Instruments and Hedging Activities: In various aspects of its business, the Corporation uses derivative financial instruments to modify exposures to changes in interest rates and market prices for other financial instruments. Derivative instruments are required to be carried at fair value on the balance sheet with changes in the fair value recorded directly in earnings. To qualify for and maintain hedge accounting, the Corporation must meet formal documentation and effectiveness evaluation requirements both at the hedge’s inception and on an ongoing basis. The application of the hedge accounting policy requires strict adherence to documentation and effectiveness testing requirements, judgment in the assessment of hedge effectiveness, identification of similar hedged item groupings, and measurement of changes in the fair value of hedged items. If in the future derivative financial instruments used by the Corporation no longer qualify for hedge accounting, the impact on the consolidated results of operations and reported earnings could be significant. When hedge accounting is discontinued, the Corporation would continue to carry the derivative on the balance sheet at its fair value; however, for a cash flow derivative, changes in its fair value would be recorded in earnings instead of through other comprehensive income, and for a fair value derivative, the changes in fair value of the hedged asset or liability would no longer be recorded through earnings. See also Note 11, “Derivative and Hedging Activities,” and Note 13 “Fair Value Measurements,” of the notes to consolidated financial statements and section “Interest Rate Risk.”

Income Taxes: The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the consolidated results of operations and reported earnings. Quarterly assessments are performed to determine if valuation allowances are necessary. Assessing the need for, or sufficiency of, a valuation allowance requires management to evaluate all available evidence, both positive and negative, including the recent trend of quarterly earnings. Positive evidence necessary to overcome the negative evidence includes whether future taxable income in sufficient amounts and character within the carryback and carryforward periods is available under the tax law, including the use of tax planning strategies. When negative evidence (e.g., cumulative losses in recent years, history of operating loss or tax credit carryforwards expiring unused) exists, more positive evidence than negative evidence will be necessary. As a result of the pre-tax losses incurred during 2009 and 2010, the Corporation is in a cumulative pre-tax loss position for financial statement purposes. This represents significant negative evidence in the assessment of whether the deferred tax assets will be realized. However, the Corporation has concluded that based on the level of positive evidence, it is more likely than not that the deferred tax asset will be realized. In making this determination, the Corporation has considered the positive evidence associated with future taxable income, tax planning strategies, and reversing taxable temporary differences in future periods. Most significantly, the Corporation relied upon its ability to generate future taxable income, exclusive of reversing temporary differences, over a relatively short time period. However, there is no guarantee that the tax benefits associated with the remaining deferred tax assets will be fully realized. The Corporation believes the tax assets and liabilities are properly recorded in the consolidated financial statements. See Note 10, “Income Taxes,” of the notes to consolidated financial statements and section “Income Taxes.”

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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 and deposit gathering (as well as other banking-related products and services) to businesses, governmental units, and consumers (including mortgages, home equity lending, and card products), and the support to deliver, fund, and manage such banking services. The 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 approximately 90% of total revenues (as defined in the Note) for the first nine months of 2011. 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 and goodwill impairment assessment, which affects both the banking and wealth management segments (see section “Critical Accounting Policies”).

The contribution from the wealth management segment to consolidated total revenues (as defined and disclosed in Note 15, “Segment Reporting,” of the notes to consolidated financial statements) was approximately 11% for the first nine months of 2011, compared to 10% for the comparable period in 2010. Wealth management segment revenues were up $3.7 million (5%) and expenses were up $8.5 million (14%) between the comparable nine month periods of 2011 and 2010. Wealth segment assets (which consist predominantly of cash equivalents, investments, customer receivables, goodwill and intangibles) were up $7.8 million (6%) between September 30, 2010 and September 30, 2011, predominantly due to higher cash and 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 (63% of total segment noninterest expense for the first nine months of 2011 and the comparable period in 2010), as well as occupancy, processing, and other costs, which are covered generally in the consolidated discussion in section “Noninterest Expense.”

Results of Operations – Summary

The Corporation recorded net income of $98.6 million for the nine months ended September 30, 2011, compared to a net loss of $14.9 million for the nine months ended September 30, 2010. Net income available to common equity was $75.0 million for the nine months ended September 30, 2011, or net income of $0.43 for both basic and diluted earnings per common share. Comparatively, net loss available to common equity for the nine months ended September 30, 2010, was $37.0 million, or a net loss of $0.22 for both basic and diluted earnings per common share. The net interest margin for the first nine months of 2011 was 3.28% compared to 3.22% for the first nine months of 2010.

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TABLE 1

Summary Results of Operations: Trends

($ in Thousands, except per share data)

	3rd Qtr			2nd Qtr			1st Qtr			4th Qtr.			3rd Qtr.
	2011			2011			2011			2010			2010
Net income (loss) (Quarter)	$	41,339		$	34,382		$	22,853		$	14,008		$	14,304
Net income (loss) (Year-to-date)		98,574			57,235			22,853			(856	)		(14,864	)
Net income (loss) available to common equity (Quarter)	$	34,034		$	25,570		$	15,440		$	6,608		$	6,915
Net income (loss) available to common equity (Year-to-date)		75,044			41,010			15,440			(30,387	)		(36,995	)
Earnings (loss) per common share – basic (Quarter)	$	0.20		$	0.15		$	0.09		$	0.04		$	0.04
Earnings (loss) per common share – basic (Year-to-date)		0.43			0.24			0.09			(0.18	)		(0.22	)
Earnings (loss) per common share – diluted (Quarter)	$	0.20		$	0.15		$	0.09		$	0.04		$	0.04
Earnings (loss) per common share – diluted (Year-to-date)		0.43			0.24			0.09			(0.18	)		(0.22	)
Return on average assets (Quarter)		0.75	%		0.64	%		0.43	%		0.25	%		0.25	%
Return on average assets (Year-to-date)		0.61			0.54			0.43			(0.00	)		(0.09	)
Return on average equity (Quarter)		5.49	%		4.63	%		2.92	%		1.74	%		1.77	%
Return on average equity (Year-to-date)		4.33			3.75			2.92			(0.03	)		(0.63	)
Return on average common equity (Quarter)		4.88	%		3.79	%		2.36	%		0.98	%		1.02	%
Return on average common equity (Year-to-date)		3.70			3.08			2.36			(1.14	)		(1.85	)
Return on average tangible common equity (Quarter)(1)		7.44	%		5.85	%		3.67	%		1.52	%		1.58	%
Return on average tangible common equity (Year-to-date)(1)		5.71			4.78			3.67			(1.77	)		(2.89	)
Efficiency ratio (Quarter)(2)		71.89	%		72.58	%		72.67	%		70.27	%		67.36	%
Efficiency ratio (Year-to-date)(2)		72.38			72.62			72.67			66.04			64.65
Efficiency ratio, fully taxable equivalent (Quarter)(2)		69.88	%		70.79	%		70.36	%		68.76	%		65.05	%
Efficiency ratio, fully taxable equivalent (Year-to-date)(2)		70.34			70.57			70.36			64.32			62.85
Net interest margin (Quarter)		3.23	%		3.29	%		3.32	%		3.13	%		3.08	%
Net interest margin (Year-to-date)		3.28			3.30			3.32			3.20			3.22

(1) Return on average tangible common equity = Net income available to common equity divided by average common equity excluding average goodwill and other intangible assets (net of mortgage servicing rights). This is a non-GAAP financial measure.

(2) See Table 1A for a reconciliation of this non-GAAP measure.

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TABLE 1A

Reconciliation of Non-GAAP Measure

	3rd Qtr.			2nd Qtr.			1st Qtr.			4th Qtr.			3rd Qtr.
	2011			2011			2011			2010			2010
Efficiency ratio (Quarter)(a)		71.89	%		72.58	%		72.67	%		70.27	%		67.36	%
Taxable equivalent adjustment (Quarter)		(1.65	)		(1.73	)		(1.71	)		(1.66	)		(1.68	)
Asset sale gains / losses, net (Quarter)		(0.36	)		(0.06	)		(0.60	)		0.15			(0.63	)
Efficiency ratio, fully taxable equivalent (Quarter)(b)		69.88	%		70.79	%		70.36	%		68.76	%		65.05	%
Efficiency ratio (Year-to-date)(a)		72.38	%		72.62	%		72.67	%		66.04	%		64.65	%
Taxable equivalent adjustment (Year-to-date)		(1.70	)		(1.71	)		(1.71	)		(1.59	)		(1.58	)
Asset sale gains / losses, net (Year-to-date)		(0.34	)		(0.34	)		(0.60	)		(0.13	)		(0.22	)
Efficiency ratio, fully taxable equivalent (Year-to-date)(b)		70.34	%		70.57	%		70.36	%		64.32	%		62.85	%

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

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

Net Interest Income and Net Interest Margin

Net interest income on a taxable equivalent basis for the nine months ended September 30, 2011, was $477.1 million, a decrease of $23.8 million or 4.7% versus the comparable period last year. As indicated in Tables 2 and 3, the decrease in taxable equivalent net interest income was primarily attributable to unfavorable volume variances (as changes in the balances and mix of earning assets and interest-bearing liabilities lowered taxable equivalent net interest income by $19.0 million) and to a lesser extent to unfavorable rate variances (as the impact of changes in the interest rate environment and product pricing reduced taxable equivalent net interest income by $4.8 million).

The net interest margin for the first nine months of 2011 was 3.28%, 6 bp higher than 3.22% for the same period in 2010. This comparable period increase was a function of an 8 bp increase in interest rate spread and a 2 bp lower contribution from net free funds (due principally to lower rates on interest-bearing liabilities reducing the value of noninterest-bearing deposits and other net free funds). The 8 bp improvement in interest rate spread was the net result of a 20 bp decrease in the cost of interest-bearing liabilities and a 12 bp decrease in the yield on earning assets.

The Federal Reserve left interest rates unchanged during 2010 and the first nine months of 2011. For the remainder of 2011, the Corporation anticipates modest pressure on the net interest margin from the continued low rate environment, modest loan growth and the net effect of the funding for the repurchase of the remaining preferred shares issued under the CPP.

The yield on earning assets was 3.96% for the first nine months of 2011, 12 bp lower than the comparable period last year. The yield on securities and short-term investments decreased 14 bp (to 2.94%), impacted by the lower interest rate environment and prepayment speeds of mortgage-related securities purchased at a premium. Loan yields were down 17 bp, (to 4.47%), due to the repricing of adjustable rate loans and competitive pricing pressures in a low interest rate environment.

The rate on interest-bearing liabilities of 0.88% for the first nine months of 2011 was 20 bp lower than the same period in 2010. Rates on interest-bearing deposits were down 17 bp (to 0.62%, reflecting the low rate environment and a targeted reduction of higher cost deposit products). The cost of short and long-term funding decreased 118 bp (to 1.55%), with the cost of short-term funding down 62 bp while the cost of long-term funding increased 24 bp.

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Average earning assets were $19.4 billion for the first nine months of 2011, a decrease of $1.4 billion or 6.5% from the comparable period last year. Average securities and short-term investments decreased $1.0 billion, while loans declined $0.4 billion. The decrease in average loans was comprised of decreases in commercial loans (down $0.9 billion) and retail loans (down $0.2 billion), while residential mortgage loans increased (up $0.7 billion).

Average interest-bearing liabilities of $15.1 billion for the first nine months of 2011 were $1.5 billion or 8.8% lower than the first nine months of 2010. In keeping with the Corporation’s funding strategy, the Corporation continued to reduce noncustomer network and brokered deposits during the quarter. On average, interest-bearing deposits declined $3.1 billion (primarily attributable to a $1.5 billion reduction in network transaction deposits, a $0.9 billion reduction in interest-bearing demand deposits, and a $0.6 billion decrease in other time deposits), while noninterest-bearing demand deposits (a principal component of net free funds) were up $0.3 billion. Average short and long-term funding balances increased $1.7 billion between the comparable nine-month periods, primarily attributable to a $1.4 million increase in customer funding.

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TABLE 2

Net Interest Income Analysis

($ in Thousands)

	Nine Months Ended September 30, 2011							Nine Months Ended September 30, 2010
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
Earning assets:
Loans:(1)(2)(3)
Commercial	$	7,121,706	$	232,727		4.37	%	$	8,002,403	$	258,475		4.32	%
Residential mortgage		2,685,994		84,564		4.20			2,006,806		74,277		4.94
Retail		3,213,434		118,127		4.91			3,379,368		131,747		5.21
Total loans		13,021,134		435,418		4.47			13,388,577		464,499		4.64
Investment securities		5,658,000		136,665		3.22			5,386,201		163,834		4.06
Other short-term investments		741,438		4,324		0.78			2,001,883		6,615		0.44
Investments and other(1)		6,399,438		140,989		2.94			7,388,084		170,449		3.08
Total earning assets		19,420,572		576,407		3.96			20,776,661		634,948		4.08
Other assets, net		2,111,598							2,047,577
Total assets	$	21,532,170						$	22,824,238
Interest-bearing liabilities:
Interest-bearing deposits:
Savings deposits	$	977,064	$	861		0.12	%	$	894,445	$	857		0.13	%
Interest-bearing demand deposits		1,878,417		2,314		0.16			2,796,295		4,968		0.24
Money market deposits		5,093,270		12,736		0.33			6,490,856		26,215		0.54
Time deposits, excluding Brokered CDs		2,678,134		32,001		1.60			3,317,251		47,294		1.91
Total interest-bearing deposits, excluding Brokered CDs		10,626,885		47,912		0.60			13,498,847		79,334		0.79
Brokered CDs		319,501		2,882		1.21			584,153		3,650		0.84
Total interest-bearing deposits		10,946,386		50,794		0.62			14,083,000		82,984		0.79
Short and long-term funding		4,182,908		48,540		1.55			2,500,326		51,131		2.73
Total interest-bearing liabilities		15,129,294		99,334		0.88			16,583,326		134,115		1.08
Noninterest-bearing demand deposits		3,288,737							3,029,719
Other liabilities		69,267							31,693
Stockholders’ equity		3,044,872							3,179,500
Total liabilities and equity	$	21,532,170						$	22,824,238
Interest rate spread						3.08	%						3.00	%
Net free funds						0.20							0.22
Net interest income, taxable equivalent, and net interest margin			$	477,073		3.28	%			$	500,833		3.22	%
Taxable equivalent adjustment				16,067							17,914
Net interest income			$	461,006						$	482,919

(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.

54

TABLE 2

Net Interest Income Analysis

($ in Thousands)

	Three Months Ended September 30, 2011							Three Months Ended September 30, 2010
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
Earning assets:
Loans:(1)(2)(3)
Commercial	$	7,337,527	$	79,161		4.28	%	$	7,502,980	$	82,606		4.37	%
Residential mortgage		2,869,445		29,385		4.09			2,004,284		24,025		4.78
Retail		3,169,956		38,102		4.78			3,348,527		43,121		5.12
Total loans		13,376,928		146,648		4.36			12,855,791		149,752		4.63
Investment securities		5,430,677		42,314		3.12			5,261,585		49,749		3.78
Other short-term investments		722,402		1,428		0.79			2,543,122		2,629		0.42
Investments and other(1)		6,153,079		43,742		2.84			7,804,707		52,378		2.69
Total earning assets		19,530,007		190,390		3.88			20,660,498		202,130		3.90
Other assets, net		2,199,180							2,066,710
Total assets	$	21,729,187						$	22,727,208
Interest-bearing liabilities:
Interest-bearing deposits:
Savings deposits	$	1,013,333	$	289		0.11	%	$	910,970		316		0.14	%
Interest-bearing demand deposits		2,056,082		945		0.18			2,637,952		1,292		0.19
Money market deposits		5,092,120		3,841		0.30			6,824,352		9,216		0.54
Time deposits, excluding Brokered CDs		2,565,898		9,718		1.50			3,197,087		13,805		1.71
Total interest-bearing deposits, excluding Brokered CDs		10,727,433		14,793		0.55			13,570,361		24,629		0.72
Brokered CDs		260,765		851		1.29			480,074		1,250		1.03
Total interest-bearing deposits		10,988,198		15,644		0.56			14,050,435		25,879		0.73
Short and long-term funding		4,227,319		16,291		1.54			2,326,469		16,433		2.81
Total interest-bearing liabilities		15,215,517		31,935		0.83			16,376,904		42,312		1.03
Noninterest-bearing demand deposits		3,417,113							3,087,670
Other liabilities		109,379							55,892
Stockholders’ equity		2,987,178							3,206,742
Total liabilities and equity	$	21,729,187						$	22,727,208
Interest rate spread						3.05	%						2.87	%
Net free funds						0.18							0.21
Net interest income, taxable equivalent, and net interest margin			$	158,455		3.23	%			$	159,818		3.08	%
Taxable equivalent adjustment				5,295							5,914
Net interest income			$	153,160						$	153,904

(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.

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TABLE 3

Volume / Rate Variance – Taxable Equivalent Basis

($ in Thousands)

	Comparison of									Comparison of
	Nine Months Ended Sept. 30, 2011 vs. 2010									Three Months Ended Sept. 30, 2011 vs. 2010
				Variance Attributable to									Variance Attributable to
	Income/Expense			Volume			Rate			Income/Expense			Volume			Rate
	Variance (1)									Variance (1)
INTEREST INCOME:(2)
Loans:
Commercial	$	(25,748	)	$	(28,750	)	$	3,002		$	(3,445	)	$	(1,799	)	$	(1,646	)
Residential mortgage		10,287			22,558			(12,271	)		5,360			9,214			(3,854	)
Retail		(13,620	)		(6,299	)		(7,321	)		(5,019	)		(2,233	)		(2,786	)
Total loans		(29,081	)		(12,491	)		(16,590	)		(3,104	)		5,182			(8,286	)
Investment securities		(27,169	)		7,933			(35,102	)		(7,435	)		1,555			(8,990	)
Other short-term investments		(2,291	)		(5,610	)		3,319			(1,201	)		(2,664	)		1,463
Investments and other		(29,460	)		2,323			(31,783	)		(8,636	)		(1,109	)		(7,527	)
Total interest income	$	(58,541	)	$	(10,168	)	$	(48,373	)	$	(11,740	)	$	4,073		$	(15,813	)
INTEREST EXPENSE:
Interest-bearing deposits:
Savings deposits	$	4		$	76			(72	)	$	(27	)	$	33		$	(60	)
Interest-bearing demand deposits		(2,654	)		(1,372	)		(1,282	)		(347	)		(271	)		(76	)
Money market deposits		(13,479	)		(4,868	)		(8,611	)		(5,375	)		(1,962	)		(3,413	)
Time deposits, excluding Brokered CDs		(15,293	)		(8,311	)		(6,982	)		(4,087	)		(2,519	)		(1,568	)
Interest-bearing deposits, excluding Brokered CDs		(31,422	)		(14,475	)		(16,947	)		(9,836	)		(4,719	)		(5,117	)
Brokered CDs		(768	)		(2,024	)		1,256			(399	)		(664	)		265
Total interest-bearing deposits		(32,190	)		(16,499	)		(15,691	)		(10,235	)		(5,383	)		(4,852	)
Short and long-term funding		(2,591	)		25,323			(27,914	)		(142	)		9,533			(9,675	)
Total interest expense	$	(34,781	)	$	8,824		$	(43,605	)	$	(10,377	)	$	4,150		$	(14,527	)
Net interest income, taxable equivalent	$	(23,760	)	$	(18,992	)	$	(4,768	)	$	(1,363	)	$	(77	)	$	(1,286	)

(1) The change in interest due to both rate and volume has been allocated proportionately to volume variance and rate variance based on the relationship of the absolute dollar change in each.

(2) 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.

Provision for Loan Losses

The provision for loan losses for the first nine months of 2011 was $51 million, compared to $327 million for the first nine months of 2010 and $390 million for the full year of 2010. Net charge offs were $128 million for first nine months 2011, compared to $379 million for the first nine months 2010 and $487 million for the full year of 2010. Annualized net charge offs as a percent of average loans for first nine months 2011 were 1.32%, compared to 3.78% for the first nine months of 2010 and 3.69% for the full year of 2010. At September 30, 2011, the allowance for loan losses was $400 million, down from $522 million at September 30, 2010 and $477 million at December 31, 2010. The ratio of the allowance for loan losses to total loans was 2.96%, compared to 4.22% at September 30, 2010 and 3.78% at December 31, 2010. Nonaccrual loans at September 30, 2011, were $403 million, compared to $728 million at September 30, 2010, and $574 million at December 31, 2010. See Tables 8 and 9.

The provision for loan losses is predominantly a function of the Corporation’s reserving methodology and judgments as to other qualitative and quantitative factors used to determine the appropriate level of the allowance for loan losses which focuses on changes

56

in the size and character of the loan portfolio, changes in levels of impaired and other nonaccrual loans, historical losses and delinquencies on each portfolio category, the level of loans sold or transferred to held for sale, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other factors which could affect potential credit losses. See additional discussion under sections “Allowance for Loan Losses,” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned.”

Noninterest Income

Noninterest income for the first nine months of 2011 was $208.6 million, down $52.2 million (20.0%) from the first nine months of 2010. Core fee-based revenue (as defined in Table 4 below) was $182.3 million, down $12.7 million from the comparable period last year. Net mortgage banking income was down $16.9 million from the first nine months of 2010. Net losses on investment securities and asset sales combined were $4.2 million, compared to a net gain of $24.3 million for the first nine months of 2010. All other noninterest income categories combined were $27.4 million, up $5.8 million versus the comparable period last year. For the remainder of 2011, the Corporation expects continued pressure on core-fee based revenues due to the challenging economic and regulatory environments.

TABLE 4

Noninterest Income

($ in Thousands)

	3rd Qtr.			3rd Qtr.			Dollar			Percent			YTD			YTD			Dollar			Percent
	2011			2010			Change			Change			2011			2010			Change			Change
Trust service fees	$	9,791		$	9,462		$	329			3.5	%	$	29,634		$	28,335		$	1,299			4.6	%
Service charges on deposit accounts		19,949			23,845			(3,896	)		(16.3	)		58,125			76,350			(18,225	)		(23.9	)
Card-based and other nondeposit fees		15,291			14,906			385			2.6			46,636			43,457			3,179			7.3
Retail commission income		15,047			15,276			(229	)		(1.5	)		47,903			46,815			1,088			2.3
Core fee-based revenue		60,078			63,489			(3,411	)		(5.4	)		182,298			194,957			(12,659	)		(6.5	)
Mortgage banking income		13,467			23,502			(10,035	)		(42.7	)		29,392			42,809			(13,417	)		(31.3	)
Mortgage servicing rights expense		8,946			14,495			(5,549	)		(38.3	)		26,346			22,902			3,444			15.0
Mortgage banking, net		4,521			9,007			(4,486	)		(49.8	)		3,046			19,907			(16,861	)		(84.7	)
Capital market fees, net		3,273			891			2,382			267.3			4,761			885			3,876			438.0
Bank owned life insurance (“BOLI”) income		3,990			3,756			234			6.2			11,076			11,252			(176	)		(1.6	)
Other		1,737			3,743			(2,006	)		(53.6	)		11,608			9,543			2,065			21.6
Subtotal (“fee income”)		73,599			80,886			(7,287	)		(9.0	)		212,789			236,544			(23,755	)		(10.0	)
Asset sale losses, net		(1,179	)		(2,354	)		1,175			(49.9	)		(3,374	)		(2,518	)		(856	)		34.0
Investment securities gains (losses), net		(744	)		3,365			(4,109	)		N/M			(802	)		26,800			(27,602	)		N/M
Total noninterest income	$	71,676		$	81,897		$	(10,221	)		(12.5	)%	$	208,613		$	260,826		$	(52,213	)		(20.0	)%

N/M – Not meaningful.

Trust service fees were $29.6 million, up $1.3 million (4.6%) between the comparable nine month periods, primarily due to asset management fees on higher account balances as stock market performance improved. The market value of average assets under management for the nine months ended September 30, 2011 and 2010 was $5.7 billion and $5.3 billion, respectively.

Service charges on deposit accounts were $58.1 million, down $18.2 million (23.9%) from the comparable period last year. The decrease was primarily attributable to lower nonsufficient funds / overdraft fees (down $18.2 million to $29.4 million) due to changes in customer behavior, recent regulatory changes, and changes in deposit account products.

Card-based and other nondeposit fees were $46.6 million, up $3.2 million (7.3%) from the first nine months of 2010, primarily due to higher interchange, letter of credit and other commercial loan servicing fees. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included a provision, the “Durbin Amendment,” which governs the amount banks can charge as interchange fees. The Corporation expects the Durbin Amendment will negatively impact card-based fees by approximately $4 million for the

57

fourth quarter of 2011 and the annualized impact going forward will be approximately $17 million to $19 million. Retail commissions (which include commissions from insurance and brokerage product sales) were $47.9 million for the first nine months of 2011, up $1.1 million (2.3%) compared to the first nine months of 2010, primarily attributable to higher variable annuity fees (up $1.2 million to $4.1 million).

Net mortgage banking income was $3.0 million for the first nine months of 2011, compared to $19.9 million for the comparable period last year. Net mortgage banking consists of gross mortgage banking income less mortgage servicing rights expense. Gross mortgage banking income (which includes servicing fees and the gain or loss on sales of mortgage loans to the secondary market, related fees and fair value marks on derivatives (collectively “gains on sales and related income”)) was $29.4 million for the first nine months of 2011, a decrease of $13.4 million compared to the first nine months of 2010. This $13.4 million decrease was primarily attributable to a lower volume of loans sold to the secondary market, resulting in lower gains on sales and related income (down $12.0 million). Secondary mortgage production was $1.0 billion for the first nine months of 2011, compared to $1.7 billion for the first nine months of 2010.

Mortgage servicing rights expense includes both the amortization of the mortgage servicing rights asset and changes to the valuation allowance associated with the mortgage servicing rights asset. Mortgage servicing rights expense is affected by the size of the servicing portfolio, as well as the changes in the estimated fair value of the mortgage servicing rights asset. Mortgage servicing rights expense was $3.4 million higher than the first nine months of 2010, with a $2.9 million increase to the valuation reserve (comprised of a $9.0 million addition to the valuation reserve for the first nine months of 2011 compared to a $6.1 million addition to the valuation reserve for the first nine months of 2010) and $0.5 million higher base amortization. As mortgage interest rates fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. At September 30, 2011, the mortgage servicing rights asset, net of its valuation allowance, was $47.4 million, representing 65 bp of the $7.3 billion servicing portfolio, compared to a net mortgage servicing rights asset of $59.5 million, representing 76 bp of the $7.9 billion servicing portfolio at September 30, 2010. Mortgage servicing rights are considered a critical accounting policy given that estimating their fair value involves a discounted cash flow model and assumptions that involve judgment, particularly of estimated prepayment speeds of the underlying mortgages serviced and the overall level of interest rates. See section “Critical Accounting Policies,” as well as Note 7, “Goodwill and Other Intangible Assets,” and Note 13, “Fair Value Measurements,” of the notes to consolidated financial statements for additional disclosure.

Capital market fees, net (which include fee income from foreign currency and interest rate risk management related products and services provided to our customers) were $4.8 million for the first nine months of 2011, compared to $0.9 million for the comparable period in 2010. The increase in capital market fees, net was due to an increase in interest rate risk related fees of $2.1 million, an increase in foreign currency related fees of $0.7 million and by a $1.1 million higher (favorable) credit valuation adjustment on interest rate risk related services.

Other income of $11.6 million was $2.1 million higher than the first nine months of 2010, primarily due to an increase in limited partnership income.

Net asset sale losses were $3.4 million for the first nine months of 2011, compared to net asset sale losses of $2.5 million for the comparable period last year, with the unfavorable change primarily due to higher losses on sales of other assets and other real estate owned. Net investment securities losses of $0.8 million for the first nine months of 2011 were primarily attributable to credit-related other-than-temporary write-downs on various equity securities and a trust preferred debt security, while net investment securities gains of $26.8 million for the first nine months of 2010 were attributable to net gains of $28.9 million on the sale of mortgage-related and municipal securities, partially offset by $2.1 million of credit-related other-than-temporary write-downs on various trust preferred debt securities, a non-agency mortgage-related security and an equity security. See Note 5, “Investment Securities,” of the notes to consolidated financial statements for additional disclosure.

Noninterest Expense

Noninterest expense was $485.2 million for the first nine months of 2011, up $21.7 million (4.7%) over the comparable period last year. Personnel expense was up $29.2 million (12.2%) between the comparable nine month periods, while all remaining expense categories on a combined basis were down $7.4 million (3.3%). For the remainder of 2011, the Corporation expects a moderate increase in noninterest expenses as it continues to execute on its strategic priorities, including investments in our personnel, information systems, and branch network.

58

TABLE 5

Noninterest Expense

($ in Thousands)

	3rd Qtr. 2011		3rd Qtr. 2010		Dollar Change			Percent Change			YTD 2011		YTD 2010		Dollar Change			Percent Change
Personnel expense	$	90,377	$	80,640	$	9,737			12.1	%	$	268,510	$	239,337	$	29,173			12.2	%
Occupancy		14,205		12,157		2,048			16.8			42,143		37,038		5,105			13.8
Equipment		4,851		4,637		214			4.6			14,587		13,472		1,115			8.3
Data processing		7,887		7,502		385			5.1			23,395		22,667		728			3.2
Business development and advertising		5,539		4,297		1,242			28.9			16,134		13,515		2,619			19.4
Other intangible asset amortization		1,179		1,206		(27	)		(2.2	)		3,535		3,713		(178	)		(4.8	)
Legal and professional fees		4,289		6,774		(2,485	)		(36.7	)		13,554		15,086		(1,532	)		(10.2	)
Losses other than loans		1,659		2,504		(845	)		(33.7	)		6,031		7,323		(1,292	)		(17.6	)
Foreclosure / OREO expense		7,662		7,349		313			4.3			23,250		23,984		(734	)		(3.1	)
FDIC expense		6,906		11,426		(4,520	)		(39.6	)		22,348		35,282		(12,934	)		(36.7	)
Stationery and supplies		1,465		1,344		121			9.0			4,539		4,139		400			9.7
Courier		1,136		1,063		73			6.9			3,429		3,205		224			7.0
Postage		1,114		1,266		(152	)		(12.0	)		4,007		4,568		(561	)		(12.3	)
Other		13,891		14,415		(524	)		(3.6	)		39,760		40,148		(388	)		(1.0	)
Total noninterest expense	$	162,160	$	156,580	$	5,580			3.6	%	$	485,222	$	463,477	$	21,745			4.7	%

Personnel expense (which includes salary-related expenses and fringe benefit expenses) was $268.5 million for the first nine months of 2011, up $29.2 million (12.2%) versus the first nine months of 2010. Average full-time equivalent employees were 4,961 for the first nine months of 2011, up 3.6% from 4,790 for the first nine months of 2010. Salary-related expenses increased $23.6 million (12.2%). This increase was primarily the result of higher compensation and commissions (up $20.3 million or 11.4%, including merit increases between the years and higher compensation related to the vesting of stock options and restricted stock grants), combined with higher performance based incentives (up $2.1 million or 19.4%). Fringe benefit expenses were up $5.6 million (12.0%) versus the first nine months of 2010, including higher benefit plan and other fringe benefit expenses (up $3.0 million or 10.2%) and higher costs of premium-based benefits (up $2.6 million or 15.1%).

Nonpersonnel noninterest expenses on a combined basis were $216.7 million, down $7.4 million (3.3%) compared to the comparable period in 2010. FDIC expense decreased $12.9 million due to the decline in the assessable deposit base as well as a change in the FDIC expense calculation (from a deposit based calculation to a net asset / risk-based assessment effective April 1, 2011). Legal and professional fees decreased $1.5 million primarily due to lower legal and other professional consultant costs related to corporate projects completed in 2010. Losses other than loans were down $1.3 million due to lower expenses associated with the reserve for losses on unfunded commitments. Occupancy expense increased $5.1 million (13.8%) and equipment expense increased $1.1 million (8.3%), primarily attributable to strategic investments in our systems and infrastructure. Business development and advertising was up $2.6 million (19.4%) due to targeted marketing campaigns.

Income Taxes

For the first nine months of 2011, the Corporation recognized income tax expense of $34.8 million, compared to income tax benefit of $31.9 million for the first nine months of 2010. The change in income tax was primarily due to the level of pretax income (loss) between the comparable nine-month periods. The effective tax rate was 26.10% for the first nine months of 2011, compared to an effective tax benefit of (68.20%) for the first nine months of 2010. Income tax expense is also impacted by ongoing federal and state income tax audits and changes in tax law.

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

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judgments about information available to them at the time of their examinations. See Note 10, “Income Taxes,” of the notes to consolidated financial statements and section “Critical Accounting Policies.”

Balance Sheet

At September 30, 2011, total assets were $21.9 billion, an increase of $117 million since December 31, 2010. The increase in assets was primarily due to an $887 million increase in loans, partially offset by a $648 million decrease in investment securities available for sale and a $203 million decrease in cash and cash equivalents. The change in assets was primarily funded by short and long-term funding, as deposits declined since year end 2010.

Loans of $13.5 billion at September 30, 2011, were up $887 million from December 31, 2010, with increases in residential mortgage loans (up $494 million), commercial and industrial loans (up $311 million), and commercial real estate loans (up $161 million), partially offset by a $123 million decrease in installment loans. The Corporation expects a moderate pace of loan growth, in the range of 2-3%, for the fourth quarter of 2011. Investment securities available for sale were $5.5 billion, down $648 million from year end 2010 (primarily due to calls and maturities of mortgage-related and municipal securities during the first nine months of 2011).

At September 30, 2011, total deposits of $14.8 billion were down $443 million from December 31, 2010. Since December 31, 2010, money market deposits decreased $229 million, brokered CDs fell $239 million and other time declined $328 million, while all other interest bearing transaction deposits increased $327 million, reflecting the Corporation’s continued strategy for reducing its utilization of network transaction deposits and brokered deposits. Noninterest-bearing demand deposits were level at $3.7 billion and represented 25% of total deposits, compared to 24% of total deposits at December 31, 2010. Short and long-term funding of $4.0 billion was up $848 million since year-end 2010, with customer funding up $1.4 billion and long-term funding increasing $64 million (reflecting the issuance of $430 million of senior notes, net of the repayment of $200 million of long-term FHLB advances and $170 of subordinated debt), while other short-term funding was down $665 million. The change in mix within deposits and short and long-term funding represents the Corporation’s strategy to optimize its funding base.

Since September 30, 2010, loans increased $1.1 billion, with commercial loans up $225 million and residential mortgage loans up $942 million, reflecting the impact of the 2010 loan sales and discounted payoffs to improve credit metrics, as well as the Corporation’s comprehensive risk appetite and loan portfolio shaping analysis performed during 2010. Since September 30, 2010, deposits declined $2.0 billion, primarily attributable to a $1.1 billion decrease in money market deposits (which includes a $1.1 billion decrease in network transaction deposits), a $0.9 billion decrease in interest-bearing demand deposits, and a $0.6 billion decrease in other time deposits. Long-term funding was down $236 million, reflecting the issuance of $430 million of senior notes, net of the repayment of $300 million of long-term FHLB advances, $200 million of long-term repurchase agreements, and $170 million of subordinated debt. Given the decrease in deposit balances and long-term funding, short funding was increased by $2.0 billion since September 30, 2010, including a $1.8 billion increase in customer funding and a $0.2 billion increase in other short-term funding.

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TABLE 6

Period End Loan Composition

($ in Thousands)

	September 30, 2011					June 30, 2011					March 31, 2011					December 31, 2010					September 30, 2010
	Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total
Commercial and industrial	$	3,360,502		25	%	$	3,202,301		24	%	$	2,972,651		24	%	$	3,049,752		24	%	$	2,989,238		24	%
Commercial real estate		3,550,027		26			3,423,686		26			3,382,481		27			3,389,213		27			3,494,342		28
Real estate construction		554,024		4			533,804		4			525,236		4			553,069		4			736,387		6
Lease financing		54,849		1			54,001		1			56,458		—			60,254		—			74,690		1
Total commercial		7,519,402		56			7,213,792		55			6,936,826		55			7,052,288		55			7,294,657		59
Home equity(1)		2,571,404		19			2,594,029		20			2,576,736		20			2,523,057		20			2,457,461		20
Installment		572,243		4			589,714		4			605,767		5			695,383		6			721,480		6
Total retail		3,143,647		23			3,183,743		24			3,182,503		25			3,218,440		26			3,178,941		26
Residential mortgage		2,840,458		21			2,692,054		21			2,535,993		20			2,346,007		19			1,898,795		15
Total loans	$	13,503,507		100	%	$	13,089,589		100	%	$	12,655,322		100	%	$	12,616,735		100	%	$	12,372,393		100	%
(1)    Home equity includes home equity lines and residential mortgage junior liens.
Farmland	$	27,871		1	%	$	30,946		1	%	$	35,032		1	%	$	36,741		1	%	$	39,986		1	%
Multi-family		663,284		19			566,641		17			538,607		16			485,977		14			528,846		15
Owner occupied		1,068,616		30			1,030,060		30			1,027,826		30			1,049,798		31			1,086,258		31
Non-owner occupied		1,790,256		50			1,796,039		52			1,781,016		53			1,816,697		54			1,839,252		53
Commercial real estate	$	3,550,027		100	%	$	3,423,686		100	%	$	3,382,481		100	%	$	3,389,213		100	%	$	3,494,342		100	%
1-4 family construction	$	94,442		17	%	$	92,000		17	%	$	91,349		17	%	$	96,296		17	%	$	137,109		19	%
All other construction		459,582		83			441,804		83			433,887		83			456,773		83			599,278		81
Real estate construction	$	554,024		100	%	$	533,804		100	%	$	525,236		100	%	$	553,069		100	%	$	736,387		100	%

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TABLE 7

Period End Deposit and Customer Funding Composition

($ in Thousands)

	September 30, 2011					June 30, 2011					March 31, 2011					December 31, 2010					September 30, 2010
	Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total
Noninterest-bearing demand	$	3,711,570		25	%	$	3,218,722		23	%	$	3,285,604		23	%	$	3,684,965		24	%	$	3,054,121		18	%
Savings		1,013,195		7			1,007,337		7			973,122		7			887,236		6			902,077		5
Interest-bearing demand		2,071,627		14			1,931,519		14			1,755,367		13			1,870,664		12			2,921,700		17
Money market		5,205,401		35			4,982,492		35			4,968,510		35			5,434,867		36			6,312,912		38
Brokered CDs		203,827		1			316,670		2			324,045		2			442,640		3			442,209		3
Other time		2,576,790		18			2,609,310		19			2,716,995		20			2,905,021		19			3,171,841		19
Total deposits	$	14,782,410		100	%	$	14,066,050		100	%	$	14,023,643		100	%	$	15,225,393		100	%	$	16,804,860		100	%
Customer repo sweeps		871,619					930,101					1,048,516					563,884					209,866
Customer repo term		1,141,450					1,147,938					887,434					—					—
Total customer funding		2,013,069					2,078,039					1,935,950					563,884					209,866
Total deposits and customer funding	$	16,795,479				$	16,144,089				$	15,959,593				$	15,789,277				$	17,014,726
Network transaction deposits included above in interest-bearing demand and money market	$	875,630				$	824,003				$	936,688				$	1,144,134				$	1,970,050
Total network transaction deposits and Brokered CDs		1,079,457					1,140,673					1,260,733					1,586,774					2,412,259
Total deposits and customer funding, excluding Brokered CDs and network transaction deposits	$	15,716,022				$	15,003,416				$	14,698,860				$	14,202,503				$	14,602,467

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 ongoing 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.

The level of the allowance for loan losses represents management’s estimate of an amount appropriate to provide for probable credit losses in the loan portfolio at the balance sheet date. In general, the change in the allowance for loan losses is a function of a number of factors, including but not limited to changes in the loan portfolio (see Table 6), net charge offs (see Table 8) and nonperforming assets (see Table 9). The Corporation’s process, designed to assess the appropriateness of the allowance for loan losses, includes an allocation methodology, as well as management’s ongoing review and grading of the loan portfolio into criticized and non-criticized categories. The allocation methodology focuses on evaluation of facts and issues related to specific loans, management’s ongoing review and grading of the loan portfolio, consideration of historical loan loss and delinquency experience on each portfolio category, trends in past due and nonaccrual loans, the level of potential problem loans, the risk characteristics of the various classifications of loans, changes in the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect potential credit losses. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is not necessarily indicative of the trend of future loan losses in any particular category. The total allowance for loan losses is available to absorb losses from any segment of the loan portfolio. Management considers the allowance for loan losses a critical accounting policy (see section “Critical Accounting Policies”), as assessing these numerous factors involves significant judgment.

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The allocation methodology used by the Corporation includes allocations for specifically identified impaired loans and loss factor allocations, (used for both criticized and non-criticized loan categories) with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. Management allocates the allowance for loan losses by pools of risk within each loan portfolio. While the methodology used at September 30, 2011 and December 31, 2010, was generally comparable, several refinements (described below) were incorporated into the historical loss factor allocation process during the first quarter of 2011. The refinements, which impacted individual portfolio allocation amounts, did not materially impact the overall level of the allowance for loan losses.

The allocation methodology consists of the following components: First, as reflected in Note 6, “Loans, Allowance for Loan Losses, and Credit Quality,” of the notes to consolidated financial statements, a valuation allowance estimate is established for specifically identified commercial and consumer loans determined to be impaired by the Corporation, using discounted cash flows, estimated fair value of underlying collateral, and / or other data available. Second, management allocates allowance for loan losses with loss factors, for criticized loan pools by loan type as well as for non-criticized loan pools by loan type, primarily based on historical loss rates after considering loan type, historical loss and delinquency experience, credit score, and industry statistics. During the first quarter of 2011, management refined its process for determining historical loss rates by incorporating default and loss severity rates at a more granular level within each loan portfolio. Loans that have been criticized are considered to have a higher risk of default than non-criticized loans, as circumstances were present to support the lower loan grade, warranting higher loss factors. The loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in historical loss levels or other risks. Lastly, management allocates allowance for loan losses to absorb unrecognized losses that may not be provided for by the other components due to other factors evaluated by management, such as limitations within the credit risk grading process, known current economic or business conditions that may not yet show in trends, industry or other concentrations, estimation, collateral valuation, and model risk, and other relevant considerations.

At September 30, 2011, the allowance for loan losses was $400 million compared to $522 million at September 30, 2010, and $477 million at December 31, 2010. At September 30, 2011, the allowance for loan losses to total loans was 2.96% and covered 99% of nonaccrual loans, compared to 4.22% and 72%, respectively, at September 30, 2010, and 3.78% and 83%, respectively, at December 31, 2010. The provision for loan losses for the first nine months of 2011 was $51 million, compared to $327 million for the first nine months of 2010, and $390 million for the full year 2010. Net charge offs were $128 million for the nine months ended September 30, 2011, $379 million for the comparable period ended September 30, 2010, and $487 million for the full year 2010. The ratio of net charge offs to average loans on an annualized basis was 1.32%, 3.78%, and 3.69% for the nine months ended September 30, 2011, and 2010, and the full year 2010, respectively. Net charge offs for the first nine months of 2011 include $10 million of write-downs related to installment loans transferred to held for sale in the first quarter of 2011. Tables 8 and 9 provide additional information regarding activity in the allowance for loan losses, impaired loans, and nonperforming assets. See Note 6, “Loans, Allowance for Loan Losses, and Credit Quality,” of the notes to consolidated financial statements for additional allowance for loan losses disclosures.

During 2010, the Corporation took action to significantly improve its credit metrics; in addition, the economy began to stabilize later in the year. Through a combination of loan sales and discounted payoffs (resolutions), the Corporation reduced nonaccrual loans with a net book value of $597 million during 2010. Nonaccrual loans were $728 million (representing 5.88% of total loans) at September 30, 2010, and declined to $574 million (representing 4.55% of total loans) at December 31, 2010. Sales of nonaccrual loans and discounted payoffs resulted in the elevated levels of net charge offs and provision for loan losses during 2010 (as noted above). Loans past due 30-89 days were $124 million at September 30, 2010, declining to $120 million at December 31, 2010. Potential problem loans totaled $1.1 billion at September 30, 2010, compared to $964 million at December 31, 2010.

Credit quality continued to improve during the first nine months of 2011. Nonaccrual loans declined to $403 million (representing 2.99% of total loans), down 30% from December 31, 2010, due to organic portfolio improvements, including a lower level of loans moving into the nonaccrual and potential problem loan categories. Loans past due 30-89 days totaled $144 million at September 30, 2011, an increase of 20% from December 31, 2010 (primarily attributable to two non-owner occupied commercial real estate relationships totaling approximately $37 million which have since paid current), while potential problem loans declined to $660 million, a reduction of 32% from year-end 2010. As a result of the actions taken during the past several quarters and the current economic outlook in the markets we serve, the Corporation expects the provision for loan losses to decline during the fourth quarter of 2011 and net charge offs to remain flat.

Management believes the level of allowance for loan losses to be appropriate at September 30, 2011 and December 31, 2010.

Consolidated net income and stockholders’ equity could be affected if management’s estimate of the allowance for loan losses is subsequently materially different, requiring additional or less provision for loan losses to be recorded. Management carefully considers numerous detailed and general factors, its assumptions, and the likelihood of materially different conditions that could alter its assumptions. While management uses currently available information to recognize losses on loans, future adjustments to the allowance for loan losses may be necessary based on newly received appraisals, updated commercial customer financial statements,

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rapidly deteriorating customer cash flow, and changes in economic conditions that affect our customers. Additionally, larger credit relationships (defined by management as over $25 million) do not inherently create more risk, but can create wider fluctuations in net charge offs and asset quality measures compared to the Corporation’s longer historical trends. As an integral part of their examination process, various federal and state regulatory agencies also review the allowance for loan losses. These agencies may require additions to the allowance for loan losses or may require that certain loan balances be charged off or downgraded into criticized loan categories when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination.

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TABLE 8

Allowance for Loan Losses

($ in Thousands)

	At and for the Nine Months Ended September 30,									At and for the Year Ended December 31,
	2011					2010				2010
Allowance for Loan Losses:
Balance at beginning of period	$			476,813		$		573,533		$		573,533
Provision for loan losses		51,000					327,010				390,010
Charge offs(1)(2)(3)				(155,676	)			(410,124	)			(528,492	)
Recoveries		27,586					31,599				41,762
Net charge offs(1)(2)(3)				(128,090	)			(378,525	)			(486,730	)
Balance at end of period	$			399,723		$		522,018		$		476,813
Net loan charge offs(1)(2)(3):				(A	)			(A	)			(A	)
Commercial and industrial	$	22,081		95		$	73,530	318		$	100,570	330
Commercial real estate (CRE)		27,856		109			86,849	316			106,952	295
Real estate construction		23,613		582			166,809	N/M			198,688	N/M
Lease financing		(1,801	)	N/M			1,897	298			11,056	N/M
Total commercial		71,749		135			329,085	550			417,266	536
Home equity		31,309		162			33,857	183			48,399	195
Installment		14,098		299			5,749	85			8,118	95
Total retail		45,407		189			39,606	157			56,517	169
Residential mortgage		10,934		54			9,834	66			12,947	63
Total net charge offs	$	128,090		132		$	378,525	378		$	486,730	369
CRE & Construction Net Charge Off Detail:				(A	)			(A	)			(A	)
Farmland	$	714		291		$	289	88		$	377	89
Multi-family		2,966		71			12,515	315			13,516	256
Owner occupied		6,437		83			8,786	103			20,563	183
Non-owner occupied		17,739		132			65,259	446			72,496	377
Commercial real estate	$	27,856		109		$	86,849	316		$	106,952	295
1-4 family construction	$	9,220		N/M		$	29,490	N/M		$	41,748	N/M
All other construction		14,393		430			137,319	N/M			156,940	N/M
Real estate construction	$	23,613		582		$	166,809	N/M		$	198,688	N/M
(A) – Annualized ratio of net charge offs to average loans by loan type in basis points.
N/M – Not meaningful.
Ratios:
Allowance for loan losses to total loans				2.96	%			4.22	%			3.78	%
Allowance for loan losses to net charge offs (annualized)				2.3x				1.0x				1.0x

(1) Charge offs for the nine months ended September 30, 2011, include $10 million of write-downs related to installment loans transferred to held for sale.

(2) Charge offs for the year ended December 31, 2010, include $8 million related to write-downs on loans transferred to held for sale and $189 million related to write-downs of commercial loans sold and charge offs of commercial loans resolved through discounted payoff, comprised of $20 million in commercial and industrial, $66 million in commercial real estate, and $111 million in real estate construction.

(3) Charge offs for the nine months ended September 30, 2010 include $155 million of write-downs related to commercial loans sold or transferred to held for sale, comprised of write-downs of $20 million on 1-4 family construction, $72 million on all other construction, $9 million on multi-family commercial real estate, $3 million owner occupied commercial real estate, $45 million on non-owner occupied commercial real estate, and $6 million of commercial and industrial.

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TABLE 8 (continued)

Allowance for Loan Losses

($ in Thousands)

Quarterly Trends:	September 30, 2011					June 30, 2011					March 31, 2011				December 31, 2010				September 30, 2010
Allowance for Loan Losses:
Balance at beginning of period	$			425,961		$			454,461		$		476,813		$		522,018		$		567,912
Provision for loan losses		4,000					16,000					31,000				63,000				64,000
Charge offs				(38,155	)				(52,365	)			(65,156	)			(118,368	)			(122,327	)
Recoveries		7,917					7,865					11,804				10,163				12,433
Net charge offs				(30,238	)				(44,500	)			(53,352	)			(108,205	)			(109,894	)
Balance at end of period	$			399,723		$			425,961		$		454,461		$		476,813		$		522,018
Net loan charge offs:				(A	)				(A	)			(A	)			(A	)			(A	)
Commercial and industrial	$	3,741		46		$	14,026		180		$	4,314	60		$	27,041	364		$	4,274	57
Commercial real estate (CRE)		10,606		120			9,377		111			7,873	94			20,103	231			28,517	319
Real estate construction		5,646		407			6,031		454			11,936	N/M			31,879	N/M			60,488	N/M
Lease financing		(1,889	)	N/M			60		44			28	20			9,159	N/M			826	416
Total commercial		18,104		98			29,494		166			24,151	142			88,182	488			94,105	498
Home equity		8,736		134			8,251		127			14,322	227			14,541	231			10,875	175
Installment		764		52			664		42			12,670	759			2,369	131			1,640	74
Total retail		9,500		119			8,915		111			26,992	338			16,910	209			12,515	148
Residential mortgage		2,634		36			6,091		92			2,209	35			3,113	56			3,274	65
Total net charge offs	$	30,238		90		$	44,500		137		$	53,352	171		$	108,205	341		$	109,894	339
CRE & Construction Net Charge Off Detail:				(A	)				(A	)			(A	)			(A	)			(A	)
Farmland	$	758		N/M		$	(56	)	(67	)	$	12	14		$	88	91		$	2	2
Multi-family		490		31			1,359		98			1,117	90			1,001	77			4,119	320
Owner occupied		134		5			4,436		174			1,867	72			11,777	438			3,381	121
Non-owner occupied		9,224		202			3,638		82			4,877	110			7,237	157			21,015	443
Commercial real estate	$	10,606		120		$	9,377		111		$	7,873	94		$	20,103	231		$	28,517	319
1-4 family construction	$	2,627		N/M		$	2,110		919		$	4,483	N/M		$	12,258	N/M		$	16,409	N/M
All other construction		3,019		264			3,921		357			7,453	N/M			19,621	N/M			44,079	N/M
Real estate construction	$	5,646		407		$	6,031		454		$	11,936	N/M		$	31,879	N/M		$	60,488	N/M

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

N/M – Not meaningful.

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TABLE 9

Nonperforming Assets

($ in Thousands)

	September 30, 2011					June 30, 2011					March 31, 2011					December 31, 2010					September 30, 2010
Nonperforming assets:
Nonaccrual loans:
Commercial	$	290,116				$	350,358				$	363,500				$	435,781				$	591,630
Residential mortgage		63,962					66,752					70,254					76,319					76,589
Retail		49,314					50,501					54,567					62,256					59,658
Total nonaccrual loans (NALs)		403,392					467,611					488,321					574,356					727,877
Other real estate owned (OREO)		42,076					45,712					49,019					44,330					53,101
Total nonperforming assets (NPAs)	$	445,468				$	513,323				$	537,340				$	618,686				$	780,978
Accruing loans past due 90 days or more:
Commercial		598					11,513					8,774					2,096					25,396
Retail		622					610					606					1,322					1,197
Total accruing loans past due 90 days or more		1,220					12,123					9,380					3,418					26,593
Restructured loans (accruing):
Commercial		82,619					69,657					58,072					48,124					31,083
Residential mortgage		18,943					18,216					17,342					19,378					20,633
Retail		11,521					12,470					12,779					12,433					11,062
Total restructured loans (accruing)		113,083					100,343					88,193					79,935					62,778
Ratios:
Nonaccrual loans to total loans		2.99	%				3.57	%				3.86	%				4.55	%				5.88	%
NPAs to total loans plus OREO		3.29	%				3.91	%				4.23	%				4.89	%				6.29	%
NPAs to total assets		2.03	%				2.33	%				2.50	%				2.84	%				3.47	%
Allowance for loan losses to NALs		99.09	%				91.09	%				93.07	%				83.02	%				71.72	%
Allowance for loan losses to total loans		2.96	%				3.25	%				3.59	%				3.78	%				4.22	%
Nonperforming assets by type:				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial and industrial	$	61,256		2	%	$	71,183		2	%	$	76,780		3	%	$	99,845		3	%	$	156,697		5	%
Commercial real estate		144,893		4	%		193,495		6	%		186,547		6	%		223,927		7	%		275,586		8	%
Real estate construction		72,300		13	%		72,782		14	%		84,903		16	%		94,929		17	%		132,425		18	%
Lease financing		11,667		21	%		12,898		24	%		15,270		27	%		17,080		28	%		26,922		36	%
Total commercial		290,116		4	%		350,358		5	%		363,500		5	%		435,781		6	%		591,630		8	%
Home equity		46,119		2	%		46,777		2	%		49,618		2	%		51,712		2	%		50,901		2	%
Installment		3,195		1	%		3,724		1	%		4,949		1	%		10,544		2	%		8,757		1	%
Total retail		49,314		2	%		50,501		2	%		54,567		2	%		62,256		2	%		59,658		2	%
Residential mortgage		63,962		2	%		66,752		2	%		70,254		3	%		76,319		3	%		76,589		4	%
Total nonaccrual loans		403,392		3	%		467,611		4	%		488,321		4	%		574,356		5	%		727,877		6	%
Commercial real estate owned		27,886					30,629					31,227					31,830					39,002
Residential real estate owned		10,659					11,531					13,423					9,090					10,783
Bank properties real estate owned		3,531					3,552					4,369					3,410					3,316
Other real estate owned		42,076					45,712					49,019					44,330					53,101
Total nonperforming assets	$	445,468				$	513,323				$	537,340				$	618,686				$	780,978
Commercial real estate & Real estate construction NALs Detail:
Farmland	$	1,971		7	%	$	2,870		9	%	$	4,296		12	%	$	4,734		13	%	$	4,024		10	%
Multi-family		9,905		1	%		11,092		2	%		12,262		2	%		23,864		5	%		35,696		7	%
Owner occupied		47,202		4	%		59,725		6	%		57,168		6	%		59,317		6	%		80,883		7	%
Non-owner occupied		85,815		5	%		119,808		7	%		112,821		6	%		136,012		7	%		154,983		8	%
Commercial real estate	$	144,893		4	%	$	193,495		6	%	$	186,547		6	%	$	223,927		7	%	$	275,586		8	%
1-4 family construction	$	25,439		27	%	$	24,287		26	%	$	29,878		33	%	$	23,963		25	%	$	28,924		21	%
All other construction		46,861		10	%		48,495		11	%		55,025		13	%		70,966		16	%		103,501		17	%
Real estate construction	$	72,300		13	%	$	72,782		14	%	$	84,903		16	%	$	94,929		17	%	$	132,425		18	%

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

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TABLE 9 (continued)

Nonperforming Assets

($ in Thousands)

	September 30, 2011		June 30, 2011		March 31, 2011		December 31, 2010		September 30, 2010
Loans 30-89 days past due by type:
Commercial and industrial	$	6,255	$	7,581	$	36,205	$	33,013	$	14,505
Commercial real estate		99,545		61,240		40,537		46,486		56,710
Real estate construction		5,493		13,217		3,410		8,016		12,225
Leasing		507		79		135		132		168
Total commercial		111,800		82,117		80,287		87,647		83,608
Home equity		18,165		14,818		14,808		13,886		20,044
Installment		1,956		3,851		2,714		9,624		10,536
Total retail		20,121		18,669		17,522		23,510		30,580
Residential mortgage		12,114		12,573		7,940		8,722		10,065
Total loans past due 30-89 days	$	144,035	$	113,359	$	105,749	$	119,879	$	124,253
Commercial real estate & Real estate construction loans 30-89 days past due detail:
Farmland	$	164	$	55	$	96	$	47	$	237
Multi-family		978		3,932		3,377		2,758		20,240
Owner occupied		29,409		33,753		21,820		9,295		4,887
Non-owner occupied		68,994		23,500		15,244		34,386		31,346
Commercial real estate	$	99,545	$	61,240	$	40,537	$	46,486	$	56,710
1-4 family construction		658	$	4,839	$	681	$	930	$	10,412
All other construction		4,835		8,378		2,729		7,086		1,813
Real estate construction	$	5,493	$	13,217	$	3,410	$	8,016	$	12,225
Potential problem loans by type:
Commercial and industrial	$	207,351	$	229,407	$	348,949	$	354,284	$	373,955
Commercial real estate		392,737		382,056		465,376		492,778		553,126
Real estate construction		37,155		63,186		70,824		91,618		175,817
Leasing		507		1,399		1,705		2,617		2,302
Total commercial		637,750		676,048		886,854		941,297		1,105,200
Home equity		4,975		4,515		4,737		3,057		6,495
Installment		272		216		230		703		692
Total retail		5,247		4,731		4,967		3,760		7,187
Residential mortgage		16,550		18,575		19,710		18,672		19,416
Total potential problem loans	$	659,547	$	699,354	$	911,531	$	963,729	$	1,131,803

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

Management is committed to a proactive nonaccrual and problem loan identification philosophy. This philosophy is implemented through the ongoing monitoring and review of all pools of risk in the loan portfolio to ensure that problem loans are identified quickly and the risk of loss is minimized. Table 9 provides detailed information regarding nonperforming assets, which include nonaccrual loans and other real estate owned.

Nonaccrual loans are considered one indicator of potential future loan losses. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of

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facts or circumstances that may adversely impact the collectability of principal or interest on loans, management may place such loans on nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due. Previously accrued and uncollected interest on such loans is reversed, amortization of related loan fees is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan principal.

Nonaccrual loans were $403 million at September 30, 2011, compared to $728 million at September 30, 2010 and $574 million at December 31, 2010. As shown in Table 9, total nonaccrual loans were down $171 million since December 31, 2010, with commercial nonaccrual loans down $146 million while consumer-related nonaccrual loans were down $25 million. Since September 30, 2010, total nonaccrual loans decreased $325 million, with commercial nonaccrual loans down $302 million, while consumer-related nonaccrual loans decreased $23 million. The ratio of nonaccrual loans to total loans was 2.99% at September 30, 2011, compared to 5.88% at September 30, 2010 and 4.55% at year-end 2010. The Corporation’s allowance for loan losses to nonaccrual loans was 99% at September 30, 2011, up from 72% at September 30, 2010 and 83% at December 31, 2010.

Accruing Loans Past Due 90 Days or More: Loans past due 90 days or more but still accruing interest are classified as such where the underlying loans are both well secured (the collateral value is sufficient to cover principal and accrued interest) and are in the process of collection. At September 30, 2011 accruing loans 90 days or more past due totaled $1.2 million compared to $27 million at September 30, 2010 and $3 million at December 31, 2010.

Restructured Loans: Restructured loans involve the granting of some concession to the borrower involving the modification of terms of the loan, such as changes in payment schedule or interest rate, which generally would not otherwise be considered. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance under the modified loan terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains on nonaccrual. Beginning in 2009, as a result of the Corporation’s continued efforts to support foreclosure prevention in the markets it serves, the Corporation introduced a modification program (similar to the government modification programs available), in which the Corporation works with its mortgage customers to provide them with an affordable monthly payment through extension of the maturity date, reduction in interest rate, and / or partial principal forbearance. Beginning in 2010, the Corporation began utilizing a multiple note structure as a workout alternative for certain commercial loans, whereby a troubled loan is restructured into two notes. The first note is reasonably assured of repayment and performance according to the prudently modified terms and is returned to accrual status based on a sustained period of repayment performance under the modified terms (generally a minimum of six months). The portion of the troubled loan that is not reasonably assured of repayment is fully charged off; however, the borrower has not been released from any repayment obligation related to these notes. In accordance with generally accepted accounting principles, the first note need not be disclosed as a troubled debt restructuring in years after the restructuring if the restructuring agreement specifies an interest rate equal to or greater than the rate that the Corporation was willing to accept at the time of the restructuring for a new loan with comparable risk and the loan is not impaired based on the terms specified by the restructuring agreement. To date, the Corporation’s use of the multiple note structure has not been significant, but use of this structure could increase in future periods. At September 30, 2011, the Corporation had total restructured loans of $193 million (including $80 million classified as nonaccrual and $113 million performing in accordance with the modified terms), compared to $116 million at December 31, 2010 (including $36 million classified as nonaccrual and $80 million performing in accordance with the modified terms).

Potential Problem Loans: The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the appropriate level of the allowance for loan losses. Potential problem loans are generally defined by management to include loans rated as substandard by management but that are not considered impaired (i.e., nonaccrual loans and accruing troubled debt restructurings); however, there are circumstances present to create doubt as to the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that the Corporation expects losses to occur, but that management recognizes a higher degree of risk associated with these loans. The loans that have been reported as potential problem loans are predominantly commercial loans covering a diverse range of businesses and real estate property types. At September 30, 2011, potential problem loans totaled $660 million, compared to $1.1 billion at September 30, 2010 and $964 million at December 31, 2010. The $304 million decrease in potential problem loans since December 31, 2010, was primarily due to a $147 million decrease in commercial and industrial, a $100 million decrease in commercial real estate and a $54 million decrease in real estate construction.

Other Real Estate Owned: Other real estate owned decreased to $42 million at September 30, 2011, compared to $53 million at September 30, 2010 and $44 million at December 31, 2010. The $11 million decrease in other real estate owned between the

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September periods was primarily attributable to a decline in commercial real estate owned (down $11 million). Since December 31, 2010, other real estate owned decreased $2 million, including a $4 million decrease in commercial real estate owned, and a $2 million increase to residential other real estate owned. Net losses on sales of other real estate owned were $3 million for the nine months ended September 30, 2011 and $3 million for the comparable period ended September 30, 2010. For the year-ended December 31, 2010 net losses were $4 million. Write-downs on other real estate owned were $7 million and $6 million for the nine months ended September 30, 2011 and 2010, respectively. For the year-ended December 31, 2010 write-downs were $10 million. Management actively seeks to ensure properties held are monitored to minimize the Corporation’s risk of loss.

Liquidity

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

Funds are available from a number of basic banking activity sources, primarily from the core deposit base and from loans and investment securities repayments and maturities. Additionally, liquidity is provided from the sale of investment securities, securities repurchase agreements and lines of credit with counterparty banks, the ability to acquire large, network, and brokered deposits, and the ability to securitize or package loans for sale. The Corporation regularly evaluates the creation of additional funding capacity based on market opportunities and conditions, as well as corporate funding needs. The Corporation’s capital can be a source of funding and liquidity as well (see section “Capital”).

The Corporation’s internal liquidity management framework includes measurement of several key elements, such as deposit funding as a percent of total assets and liquid asset levels. Strong capital ratios, credit quality, and core earnings are essential to maintaining cost-effective access to wholesale funding markets. A downgrade or loss in credit ratings could have an impact on the Corporation’s ability to access wholesale funding at favorable interest rates. At September 30, 2011, the Corporation was in compliance with its internal liquidity objectives.

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

	September 30, 2011			December 31, 2010
	Moody’s	S&P	Fitch	Moody’s	S&P	Fitch
Bank short-term	P2	—	F2	P2	—	F2
Bank long-term	A3	BBB	BBB-	A3	BB+	BBB-
Corporation short-term	P2	—	F3	P2	—	F3
Corporation long-term	Baa1	BBB-	BBB-	Baa1	BB-	BBB-
Subordinated debt long-term	Baa2	BB+	BB+	Baa2	B	BB+
Outlook	Stable	Stable	Stable	Stable	Positive	Stable

The Corporation also has multiple funding sources that could be used to increase liquidity and provide additional financial flexibility. In December 2008, the Parent Company filed a “shelf” registration under which the Parent Company may offer any combination of the following securities, either separately or in units: trust preferred securities, debt securities, preferred stock, depositary shares,

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common stock, and warrants. The Corporation issued $300 million of senior notes in March 2011 and an additional $130 million of senior notes in September 2011 under the December 2008 “shelf” registration. These senior notes are due in 2016 and bear a 5.125% fixed coupon. In addition, the Corporation issued $65 million of depositary shares of 8% perpetual preferred stock. The Parent Company also has a $200 million commercial paper program, of which, no commercial paper was outstanding at September 30, 2011.

In November 2008, under the CPP, the Corporation issued 525,000 shares of Senior Preferred Stock (with a par value of $1.00 per share and a liquidation preference of $1,000 per share) and a 10-year warrant to purchase approximately 4.0 million shares of common stock (“Common Stock Warrants”), for aggregate proceeds of $525 million. Cumulative dividends on the Senior Preferred Stock are payable at 5% per annum for the first five years and at a rate of 9% per annum thereafter on the liquidation preference of $1,000 per share. The Common Stock Warrants have a term of 10 years and are exercisable at any time, in whole or in part, at an exercise price of $19.77 per share (subject to certain anti-dilution adjustments). While any Senior Preferred Stock is outstanding, the Corporation may pay dividends on common stock, provided that all accrued and unpaid dividends for all past dividend periods on the Senior Preferred Stock are fully paid. On April 6, 2011, the Corporation repurchased half (262,500 shares) of the Senior Preferred Stock issued to the U.S. Department of the Treasury under the CPP for $262.5 million. On September 14, 2011, the Corporation repurchased the remaining shares (262,500) of the Senior Preferred Stock issued to the U.S. Department of the Treasury under the CPP for $262.5 million. As of September 30, 2011, the Common Stock Warrants remain outstanding.

While dividends and service fees from subsidiaries and proceeds from issuance of capital are primary funding sources for the Parent Company, these sources could be limited or costly (such as by regulation or subject to the capital needs of its subsidiaries or by market appetite for bank holding company stock). The subsidiary bank is subject to regulation and may be limited in its ability to pay dividends or transfer funds to the Parent Company. On November 5, 2009, Associated Bank, National Association (the “Bank”) entered into a Memorandum of Understanding (“MOU”) with the Comptroller of the Currency (“OCC”), its primary banking regulator. The MOU required the Bank to develop, implement, and maintain various processes to improve the Bank’s risk management of its loan portfolio and a three year capital plan providing for maintenance of specified capital levels, notification to the OCC of dividends proposed to be paid to the Corporation and the commitment of the Corporation to act as a primary or contingent source of the Bank’s capital. During the third quarter of 2011, the Corporation announced that it had been advised by the OCC that the MOU the Bank had entered into in November 2009 had been terminated. On April 6, 2010, the Corporation entered into a Memorandum of Understanding (“Memorandum”) with the Federal Reserve Bank of Chicago (“Reserve Bank”). The Memorandum requires the Corporation to obtain approval prior to the payment of dividends and interest or principal payments on subordinated debt, increases in funding or guarantees of debt, or the repurchase of common stock. See section “Capital” for additional discussion.

A bank note program associated with the Bank was established during 2000. Under this program, short-term and long-term funding may be issued. As of September 30, 2011, no bank notes were outstanding and $225 million was available under the 2000 bank note program. A new bank note program was instituted during 2005, of which $2 billion was available at September 30, 2011. The Bank has also established federal funds lines with counterparty banks and the ability to borrow from the Federal Home Loan Bank ($1.1 billion was outstanding at September 30, 2011). Associated Bank also issues institutional certificates of deposit, network transaction deposits, brokered certificates of deposit, and accepts Eurodollar deposits.

Investment securities are an important tool to the Corporation’s liquidity objective. As of September 30, 2011, all investment securities are classified as available for sale and are reported at fair value on the consolidated balance sheet. Of the $5.5 billion investment securities portfolio at September 30, 2011, a portion of these securities were pledged to secure $1.1 billion of collateralized deposits and $2.0 billion of repurchase agreements and for other purposes as required or permitted by law. The majority of the remaining securities could be pledged or sold to enhance liquidity, if necessary.

For the nine months ended September 30, 2011, net cash provided by operating activities was $243 million, while net cash used in investing and financing activities was $369 million and $77 million, respectively, for a net decrease in cash and cash equivalents of $203 million since year-end 2010. During the first nine months of 2011, assets increased $117 million, with loans up $887 million and investment securities down $648 million. On the funding side, deposits decreased $443 million (reflecting the Corporation’s strategy for reducing its utilization of network transaction deposits and brokered deposits), while short and long-term funding increased $784 million and $64 million, respectively.

For the nine months ended September 30, 2010, net cash provided by operating and investing activities was $353.2 million and $1.8 billion, respectively, while net cash used by financing activities was $399.0 million, for a net increase in cash and cash equivalents of $1.7 billion since year-end 2009. During the first nine months of 2010, assets decreased $349 million, with loans down $1.8 billion and investment securities declining $544 million, while loans held for sale increased $193 million. On the funding side, deposits increased $76 million while short and long-term funding declined $928 million.

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Quantitative and Qualitative Disclosures about Market Risk

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

Interest Rate Risk

In order to measure earnings sensitivity to changing rates, the Corporation uses three different measurement tools: simulation of earnings, economic value of equity, and static gap analysis. These three measurement tools present different views which take into account changes in management strategies and market conditions, among other factors, to varying degrees.

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

The resulting simulations for September 30, 2011, projected that net interest income would increase by approximately 2.6% if rates rose by a 100 bp shock. Accordingly, this suggests the Corporation was in an asset sensitive position at September 30, 2011. (Asset sensitive in this context means projected net interest income is positively impacted by projected rising rates, while liability sensitive would mean projected net interest income would be negatively impacted by projected rising interest rates.) At December 31, 2010, the 100 bp shock up was projected to increase net interest income by approximately 1.7%. As of September 30, 2011, the simulation of earnings results were within the Corporation’s interest rate risk policy.

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

These results are based solely on immediate and sustained parallel changes in market rates and do not reflect the earnings sensitivity that may arise from other factors. These factors may include changes in the shape of the yield curve, the change in spread between key market rates, or accounting recognition of the impairment of certain intangibles. The results are also considered to be conservative estimates due to the fact that no management action to mitigate potential income variances is included within the simulation process. This action could include, but would not be limited to, delaying an increase in deposit rates, extending liabilities, using financial derivative products to hedge interest rate risk, changing the pricing characteristics of loans, or changing the growth rate of certain assets and liabilities. As of September 30, 2011, the projected changes for the economic value of equity were within the Corporation’s interest rate risk policy.

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

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The following table represents the Corporation’s consolidated static gap position as of September 30, 2011.

	Table 10: Interest Rate Sensitivity Analysis
	Interest Sensitivity Period
	0-90 Days			91-180 Days			181-365 Days			Total Within 1 Year			Over 1 Year			Total
	($ in Thousands)
Earning assets:
Loans held for sale	$	201,142		$	—			—			201,142		$	—			201,142
Investment securities available for sale, at fair value		972,081			275,591			534,072			1,781,744			3,672,072			5,453,816
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost		191,128			—			—			191,128			—			191,128
Loans		7,009,575			655,320			1,223,195			8,888,090			4,615,417			13,503,507
Other earning assets		254,828			—			—			254,828			—			254,828
Total earning assets	$	8,628,754		$	930,911		$	1,757,267		$	11,316,932		$	8,287,489		$	19,604,421
Interest-bearing liabilities:
Deposits(1)(2)	$	2,532,066		$	1,763,333		$	3,221,792		$	7,517,191		$	7,061,392		$	14,578,583
Other interest-bearing liabilities(2)		2,279,276			626,370			165,709			3,071,355			1,141,656			4,213,011
Interest rate swap		(100,000	)		—			—			(100,000	)		100,000			—
Total interest-bearing liabilities	$	4,711,342		$	2,389,703		$	3,387,501		$	10,488,546		$	8,303,048		$	18,791,594
Interest sensitivity gap	$	3,917,412		$	(1,458,792	)	$	(1,630,234	)	$	828,386		$	(15,559	)	$	812,827
Cumulative interest sensitivity gap	$	3,917,412		$	2,458,620		$	828,386
Cumulative gap as a percentage of earning assets at September 30, 2011		20.0	%	$	12.5	%	$	4.2	%

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

(2) For analysis purposes, Brokered CDs of $204 million have been included with other interest-bearing liabilities and excluded from deposits.

The static gap analysis in Table 10 provides a representation of the Corporation’s earnings sensitivity to changes in interest rates. It is a static indicator that may not necessarily indicate the sensitivity of net interest income in a changing interest rate environment. As of September 30, 2011, the 12-month cumulative gap results were within the limits under the Corporation’s interest rate risk policy.

At September 30, 2011, the Corporation’s 12-month static gap analysis was slightly positive due to the increases of LIBOR-based loans and other short-term revolving credit arrangements, and a reduction in short-term liabilities as both FHLB advances were not renewed and the Corporation’s subordinated debt was retired. For the remainder of 2011, the Corporation’s objective is to remain relatively neutral. However, the interest rate position is at risk to changes in other factors, such as the slope of the yield curve, competitive pricing pressures, changes in balance sheet mix from management action and/or from customer behavior relative to loan or deposit products. See also section “Net Interest Income and Net Interest Margin.”

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

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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 lending-related commitments and derivative instruments. A discussion of the Corporation’s derivative instruments at September 30, 2011, is included in Note 11, “Derivative and Hedging Activities,” of the notes to consolidated financial statements. A discussion of the Corporation’s lending-related commitments is included in Note 12, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” of the notes to consolidated financial statements. See also Note 8, “Long-term Funding,” of the notes to consolidated financial statements for additional information on the Corporation’s long-term funding.

Table 11 summarizes significant contractual obligations and other commitments at September 30, 2011, at those amounts contractually due to the recipient, including any premiums or discounts, hedge basis adjustments, or other similar carrying value adjustments.

TABLE 11: Contractual Obligations and Other Commitments

	One Year or Less		One to Three Years		Three to Five Years		Over Five Years		Total
	($ in Thousands)
Time deposits	$	2,284,561	$	376,335	$	110,320	$	9,401	$	2,780,617
Short-term funding		2,531,776		—		—		—		2,531,776
Long-term funding		300,060		500,070		435,682		241,596		1,477,408
Operating leases		11,775		21,918		15,857		29,313		78,863
Commitments to extend credit		3,258,694		800,835		502,314		137,475		4,699,318
Total	$	8,386,866	$	1,699,158	$	1,064,173	$	417,785	$	11,567,982

Capital

Stockholders’ equity at September 30, 2011 was $2.9 billion, down $308 million from December 31, 2010. The $308 million decrease in stockholders’ equity was primarily attributable to the repurchase of the Senior Preferred Stock issued to the U.S. Department of the Treasury under the CPP. At September 30, 2011, stockholders’ equity included $89.3 million of accumulated other comprehensive income compared to $27.6 million of accumulated other comprehensive income at December 31, 2010. The change in accumulated other comprehensive income resulted primarily from the change in the unrealized gain/loss position, net of the tax effect, on investment securities available for sale (from unrealized gains of $55.6 million at December 31, 2010, to unrealized gains of $114.2 million at September 30, 2011). Cash dividends of $0.03 per share were paid in both the first nine months of 2011 and the first nine months of 2010. Stockholders’ equity to assets was 13.01% and 14.50% at September 30, 2011 and December 31, 2010, respectively.

On November 5, 2009, Associated Bank, National Association (the “Bank”) entered into a Memorandum of Understanding (“MOU”) with the Comptroller of the Currency (“OCC”), its primary banking regulator. The MOU, which is an informal agreement between the Bank and the OCC, requires the Bank to develop, implement, and maintain various processes to improve the Bank’s risk management of its loan portfolio and a three year capital plan providing for maintenance of specified capital levels, notification to the OCC of dividends proposed to be paid to the Corporation and the commitment of the Corporation to act as a primary or contingent source of the Bank’s capital. On September 6, 2011, the Corporation announced that it had been advised by the OCC that the MOU the Bank had entered into in November 2009 had been terminated. On April 6, 2010, the Corporation entered into a Memorandum of Understanding (“Memorandum”) with the Federal Reserve Bank of Chicago (“Reserve Bank”). The Memorandum, which was entered into following the 2008-2009 supervisory cycle, is an informal agreement between the Corporation and the Reserve Bank. As required, management has submitted plans to strengthen board and management oversight and risk management and for maintaining sufficient capital incorporating stress scenarios. As also required, the Corporation has submitted quarterly progress reports, and has obtained, and will in the future continue to obtain, approval prior to the payment of dividends and interest or principal payments on subordinated debt, increases in funding or guarantees of debt, or the repurchase of common stock.

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

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Corporation repurchased all of the Senior Preferred Stock issued to the U.S. Department of the Treasury. On April 6, 2011, the Corporation repurchased half (262,500 shares) of the Senior Preferred Stock issued to the U.S. Department of the Treasury under the CPP for $262.5 million and on September 14, 2011, the remaining balance (262,500 shares) was repurchased for $262.5 million. The Senior Preferred Stock repurchases were funded by the issuance of $430 million of senior notes and $65 million of depositary shares of 8% perpetual preferred stock. As of September 30, 2011, the Common Stock Warrants remain outstanding.

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/or for other corporate purposes. During 2010 and the first nine months of 2011, no shares were repurchased under these authorizations. The Corporation repurchased shares for minimum tax withholding settlements on equity compensation during 2010 and the first nine months of 2011. See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,” for additional information on the shares repurchased for equity compensation for the three months ended September 30, 2011. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities, and is subject to the restrictions under the Memorandum of Understanding with the Federal Reserve Bank of Chicago.

Management actively reviews capital strategies for the Corporation and each of its subsidiaries in light of perceived business risks, future growth opportunities, industry standards, and compliance with regulatory requirements. The assessment of overall capital adequacy depends on a variety of factors, including asset quality, liquidity, stability of earnings, changing competitive forces, economic condition in markets served, and strength of management. The capital ratios of the Corporation and its banking affiliate were in excess of regulatory minimum requirements. The Corporation’s capital ratios are summarized in Table 12.

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TABLE 12

Capital Ratios

(In Thousands, except per share data)

	At or For the Quarter Ended
	September 30, 2011			June 30, 2011			March 31, 2011			December 31, 2010			September 30, 2010
Total stockholders’ equity	$	2,850,619		$	2,999,148		$	3,194,714		$	3,158,791		$	3,200,849
Tier 1 capital		2,011,800			2,168,557			2,395,960			2,376,893			2,367,021
Total capital		2,216,594			2,368,081			2,592,118			2,576,297			2,565,227
Market capitalization		1,613,308			2,409,899			2,573,119			2,622,647			2,282,121
Book value per common share	$	16.07		$	15.81		$	15.46		$	15.28		$	15.53
Tangible book value per common share		10.59			10.33			9.97			9.77			10.02
Cash dividend per common share		0.01			0.01			0.01			0.01			0.01
Stock price at end of period		9.30			13.90			14.85			15.15			13.19
Low closing price for the period		8.95			13.06			13.83			12.57			11.96
High closing price for the period		14.17			15.02			15.36			15.49			13.90
Total stockholders’ equity / assets		13.01	%		13.60	%		14.88	%		14.50	%		14.21	%
Tangible common equity / tangible assets(1)		8.77			8.49			8.42			8.12			8.03
Tangible stockholders’ equity / tangible assets(2)		9.07			9.71			10.93			10.59			10.41
Tier 1 common equity / risk-weighted assets(3)		12.44			12.61			12.65			12.26			12.31
Tier 1 leverage ratio		9.62			10.46			11.65			11.19			10.78
Tier 1 risk-based capital ratio		14.35			16.03			18.08			17.58			17.68
Total risk-based capital ratio		15.81			17.50			19.56			19.05			19.16
Shares outstanding (period end)		173,474			173,374			173,274			173,112			173,019
Basic shares outstanding (average)		173,418			173,323			173,213			173,068			172,989
Diluted shares outstanding (average)		173,418			173,327			173,217			173,072			172,990

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

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

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

Comparable Third Quarter Results

The Corporation recorded net income of $41.3 million for the three months ended September 30, 2011, compared to net income of $14.3 million for the three months ended September 30, 2010. Net income available to common equity was $34.0 million for the three months ended September 30, 2011, or net income of $0.20 for both basic and diluted earnings per common share. Comparatively, net income available to common equity for the three months ended September 30, 2010, was $6.9 million, or net income of $0.04 for both basic and diluted earnings per common share (see Table 1).

Taxable equivalent net interest income for the third quarter of 2011 was $158.5 million, $1.4 million lower than the third quarter of 2010 (see Tables 2 and 3). Changes in the rate environment and product pricing lowered net interest income by $1.3 million while changes in the balance sheet volume and mix decreased taxable equivalent net interest income by $0.1 million. The Federal funds target rate was unchanged for both the third quarter of 2011 and the third quarter of 2010. The net interest margin between the comparable quarters was up 15 bp, to 3.23% in the third quarter of 2011, comprised of a 18 bp higher interest rate spread (to 3.05%, as the yield on earning assets declined 2 bp and the rate on interest-bearing liabilities fell 20 bp) and a 3 bp lower contribution from net free funds (to 0.18%, as lower rates on interest-bearing liabilities decreased the value of noninterest-bearing funds). Average earning assets declined $1.1 billion to $19.5 billion in the third quarter of 2011, with average loans up $0.5 billion (predominantly in residential mortgage loans) and investments down $1.6 billion. On the funding side, average interest-bearing deposits were down $3.1

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billion, while average demand deposits increased $0.3 billion. On average, short and long-term funding balances were up $1.9 billion, comprised of a $1.7 billion increase in customer funding, a $0.5 billion increase in other short-term funding, and a $0.3 billion decrease in long-term funding.

Credit metrics continued to improve with nonaccrual loans declining to $403 million (2.99% of total loans) at September 30, 2011, compared to $728 million (5.88% of total loans) at September 30, 2010 (see Table 9). Compared to the third quarter of 2010, potential problem loans were down 42% to $660 million. As a result of these improving credit metrics, the provision for loan losses for the third quarter of 2011 declined to $4 million (or $26 million less than net charge offs), compared to $64 million (or $46 million less than net charge offs) in the third quarter of 2010 (see Table 8). Annualized net charge offs represented 0.90% of average loans for the third quarter of 2011 compared to 3.39% for the third quarter of 2010. The allowance for loan losses to loans at September 30, 2011 was 2.96%, compared to 4.22% at September 30, 2010. See discussion under sections, “Provision for Loan Losses,” “Allowance for Loan Losses,” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned.”

Noninterest income for the third quarter of 2011 decreased $10.2 million (12.5%) to $71.7 million versus the third quarter of 2010. Core fee-based revenues of $60.1 million were down $3.4 million (5.4%) versus the comparable quarter in 2010. Net mortgage banking decreased $4.5 million from the third quarter of 2010, predominantly due to lower gains on sales and related income as mortgage loan production returned to more normal levels (secondary mortgage production was $471 million for the third quarter of 2011 compared to secondary mortgage production of $728 million for the third quarter of 2010). Net asset sale losses were $1.2 million for the third quarter of 2011, compared to losses of $2.4 million for the third quarter of 2010, primarily due to lower losses on sales of other real estate owned. Investment securities losses of $0.7 million for the third quarter 2011 were down $4.1 million from investment securities gains of $3.4 million in the third quarter 2010, primarily due to gains on the sale of mortgage-related and municipal securities during the third quarter of 2010.

On a comparable quarter basis, noninterest expense increased $5.6 million (3.6%) to $162.2 million in the third quarter of 2011. Personnel expense increased $9.7 million (12.1%) from the third quarter of 2010, with salary-related expenses up $8.0 million (average full-time equivalent employees increased 3.2% between the comparable third quarter periods) and fringe benefit expenses were up $1.7 million. Occupancy expense of $14.2 million was up $2.0 million (16.8%) from the third quarter of 2010, primarily attributable to strategic investments in our systems and infrastructure. FDIC expense decreased $4.5 million (39.6%) due to the decline in the assessable deposit base as well as a change in the FDIC expense calculation (from a deposit based calculation to a net asset / risk-based assessment effective April 1, 2011).

For the third quarter of 2011, the Corporation recognized income tax expense of $17.3 million, compared to income tax expense of $0.9 million for the third quarter of 2010. The change in income tax was primarily due to the level of pretax income between the comparable quarters. The effective tax rate was 29.55% and 6.03% for the third quarter of 2011 and the third quarter of 2010, respectively. Income tax expense was also impacted by ongoing federal and state income tax audits and changes in tax law.

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TABLE 13

Selected Quarterly Information

($ in Thousands)

	For the Quarter Ended
	September 30, 2011			June 30, 2011			March 31, 2011			December 31, 2010			September 30, 2010
Summary of Operations:
Net interest income	$	153,160		$	154,123		$	153,723		$	150,860		$	153,904
Provision for loan losses		4,000			16,000			31,000			63,000			64,000
Noninterest income
Trust service fees		9,791			10,012			9,831			9,518			9,462
Service charges on deposit accounts		19,949			19,112			19,064			20,390			23,845
Card-based and other nondeposit fees		15,291			15,747			15,598			15,842			14,906
Retail commission income		15,047			16,475			16,381			14,441			15,276
Core fee-based revenue		60,078			61,346			60,874			60,191			63,489
Mortgage banking, net		4,521			(3,320	)		1,845			13,229			9,007
Capital market fees, net		3,273			(890	)		2,378			5,187			891
BOLI income		3,990			3,500			3,586			4,509			3,756
Asset sale gains (losses), net		(1,179	)		(209	)		(1,986	)		514			(2,354	)
Investment securities gains (losses), net		(744	)		(36	)		(22	)		(1,883	)		3,365
Other		1,737			4,364			5,507			2,950			3,743
Total noninterest income		71,676			64,755			72,182			84,697			81,897
Noninterest expense
Personnel expense		90,377			89,203			88,930			83,912			80,640
Occupancy		14,205			12,663			15,275			12,899			12,157
Equipment		4,851			4,969			4,767			4,899			4,637
Data processing		7,887			7,974			7,534			7,047			7,502
Business development and advertising		5,539			5,652			4,943			4,870			4,297
Other intangible asset amortization		1,179			1,178			1,178			1,206			1,206
Legal and professional fees		4,289			4,783			4,482			5,353			6,774
Losses other than loans		1,659			(1,925	)		6,297			7,470			2,504
Foreclosure / OREO expense		7,662			9,527			6,061			9,860			7,349
FDIC expense		6,906			7,198			8,244			11,095			11,426
Other		17,606			17,664			16,465			18,232			18,088
Total noninterest expense		162,160			158,886			164,176			166,843			156,580
Income tax expense (benefit)		17,337			9,610			7,876			(8,294	)		917
Net income		41,339			34,382			22,853			14,008			14,304
Preferred stock dividends and discount accretion		7,305			8,812			7,413			7,400			7,389
Net income available to common equity	$	34,034		$	25,570			15,440			6,608			6,915
Taxable equivalent net interest income	$	158,455		$	159,455		$	159,163		$	156,581		$	159,818
Net interest margin		3.23	%		3.29	%		3.32	%		3.13	%		3.08	%
Effective tax rate (benefit)		29.55	%		21.84	%		25.63	%		(145.13	)%		6.03	%
Average Balances:
Assets	$	21,729,187		$	21,526,155		$	21,336,858		$	22,034,041		$	22,727,208
Earning assets		19,530,007			19,431,292			19,297,866			19,950,784			20,660,498
Interest-bearing liabilities		15,215,517			15,261,514			14,907,465			15,476,002			16,376,904
Loans		13,376,928			13,004,904			12,673,844			12,587,702			12,855,791
Deposits		14,405,311			14,052,689			14,245,614			16,452,473			17,138,105
Short and long-term funding		4,227,319			4,434,500			3,883,122			2,311,016			2,326,469
Stockholders’ equity		2,987,178			2,976,840			3,172,636			3,195,657			3,206,742

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Sequential Quarter Results

The Corporation recorded net income of $41.3 million for the three months ended September 30, 2011, compared to net income of $34.4 million for the three months ended June 30, 2011. Net income available to common equity was $34.0 million for the three months ended September 30, 2011, or net income of $0.20 for both basic and diluted earnings per common share. Comparatively, net income available to common equity for the three months ended June 30, 2011, was $25.6 million, or net income of $0.15 for both basic and diluted earnings per common share (see Table 1).

Taxable equivalent net interest income for the third quarter of 2011 was $158.5 million, $1.0 million lower than the second quarter of 2011. Consistent with the Corporation’s strategy of funding loan growth primarily through investment securities run-off, net interest income from loans grew quarter-over-quarter, while investment securities income continued to contract. Changes in the rate environment and product pricing decreased net interest income by $4.6 million, while changes in balance sheet volume and mix increased taxable equivalent net interest income by $3.0 million and one extra day in the third quarter increased net interest income by $0.7 million. The Federal funds target rate was unchanged for both the third quarter of 2011 and the second quarter of 2011. The net interest margin between the sequential quarters was down 6 bp, to 3.23% in the third quarter of 2011, comprised of a 4 bp lower interest rate spread (to 3.05%, as the yield on earning assets declined 12 bp and the rate on interest-bearing liabilities declined 8 bp) and a decline of 2 bp in net free funds (to 0.18%). Average earning assets increased $0.1 billion to $19.5 billion in the third quarter of 2011, with average investments and other short-term investments down $0.3 billion, while average loans increased $0.4 billion (predominantly in commercial and residential mortgage loans). On the funding side, average interest-bearing deposits were up $0.2 billion, while average demand deposits were also up $0.2 billion. On average, short and long-term funding balances were down $0.2 billion, primarily due to a decline in customer funding.

The Corporation reported another quarter of improving credit metrics with nonaccrual loans of $403 million (2.99% of total loans) at September 30, 2011, down from $468 million (3.57% of total loans) at June 30, 2011 (see Table 9). Potential problem loans declined to $660 million, down $39 million (5.7%) from $699 million for the second quarter of 2011. As a result of these improving credit metrics, the provision for loan losses for the third quarter of 2011 decreased to $4 million, compared to $16 million in the second quarter of 2011, with third quarter 2011 provision less than net charge offs by $26 million and second quarter 2011 provision less than net charge offs by $29 million. Annualized net charge offs represented 0.90% of average loans for the third quarter of 2011 compared to 1.37% for the second quarter of 2011. The allowance for loan losses to loans at September 30, 2011 was 2.96%, compared to 3.25% at June 30, 2011 (see Table 8). See discussion under sections, “Provision for Loan Losses,” “Allowance for Loan Losses,” and “Nonaccrual Loans, Potential Problem Loans, and Other Real Estate Owned.”

Noninterest income for the third quarter of 2011 increased $6.9 million (10.7%) to $71.7 million versus second quarter 2011. Core fee-based revenues of $60.1 million were down $1.3 million (2.1%) versus second quarter 2011, primarily due to a decline in retail commission income. Net mortgage banking income was $4.5 million, up from a net mortgage banking loss of $3.3 million in the second quarter 2011, predominantly due to increased gains on sales and related income as mortgage loan production nearly doubled from the prior quarter. Net capital market fees were $3.3 million, up from net capital market losses of $0.9 million in the second quarter 2011 due to a favourable change in the credit valuation adjustment related to one credit relationship. Other income of $1.7 million was $2.6 million lower than second quarter 2011, primarily due to a decline in limited partnership income. Net asset sale losses were $1.2 million, compared to net asset sale losses of $0.2 million in second quarter 2011, primarily attributable to an increase in losses on other real estate owned.

On a sequential quarter basis, noninterest expense increased $3.3 million (2.1%) to $162.2 million in the third quarter of 2011. Losses other than loans increased $3.6 million from the second quarter of 2011, with the second quarter of 2011 including a reduction in the expense related to the reserve for losses on unfunded commitments due to improving credit relationships. Occupancy expense increased $1.5 million, primarily attributable to strategic investments in our systems and infrastructure. Foreclosure/OREO expense of $7.7 million decreased $1.9 million from the second quarter 2011 due to a decrease in OREO write-downs and foreclosure costs.

For the third quarter of 2011, the Corporation recognized income tax expense of $17.3 million, compared to income tax expense of $9.6 million for the second quarter of 2011. The change in income tax was primarily due to the level of pretax income between the sequential quarters. The effective tax rate was 29.55% and 21.84% for the third quarter of 2011 and the second quarter of 2011, respectively. Income tax expense was also impacted by ongoing federal and state income tax audits and changes in tax law.

Future Accounting Pronouncements

New accounting policies adopted by the Corporation are discussed in Note 2, “New Accounting Pronouncements Adopted,” of the notes to consolidated financial statements. The expected impact of accounting policies recently issued or proposed but not yet required

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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 September 2011, the FASB issued amendments intended to simplify how entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Under the guidance, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying value. The amendments are effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The Corporation is currently evaluating the impact on its results of operations, financial position, and liquidity.

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

In May 2011, the FASB issued guidance on measuring fair value to create common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments change the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements. The amendments also clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements. The amendments are effective for interim and annual periods beginning after December 15, 2011. The Corporation will adopt the accounting standard during 2012, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In April 2011, the FASB issued guidance which clarifies the definition of effective control for determining whether a repurchase agreement is accounted for as a sale or secured borrowing. The amendments in the guidance remove from the assessment of effective control both the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed upon terms and the collateral maintenance implementation guidance related to that criterion. Other criteria applicable to the assessment of effective control are not changed by the amendments in the update. The guidance is effective for interim and annual periods beginning on or after December 15, 2011. The Corporation will adopt the accounting standard during 2012, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

Recent Developments

On October 26, 2011, the Board of Directors declared a $0.01 per common share dividend payable on November 16, 2011, to shareholders of record as of November 7, 2011. This cash dividend has not been reflected in the accompanying consolidated financial statements.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Information required by this item is set forth in Item 2 under the captions “Quantitative and Qualitative Disclosures about Market Risk” and “Interest Rate Risk.”

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.

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As of September 30, 2011, 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 September 30, 2011. 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 1. Legal Proceedings

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

A lawsuit, Harris v. Associated Bank, N.A. (the “Bank”), was filed in the United States District Court for the Western District of Wisconsin in April 2010. The suit alleges that the Bank unfairly assesses and collects overdraft fees and seeks restitution of the overdraft fees, compensatory, consequential and punitive damages, and costs. The lawsuit asserts claims for a multi-year period (as limited by the applicable state’s statute of limitations, generally 6 years) and is styled as a putative class action lawsuit on behalf of consumer banking customers of the Bank with the certification of the class pending. In April 2010, a Multi District Judicial Panel issued a conditional transfer order to consolidate this case into the Multi District Litigation (“MDL”), In re: Checking Account Overdraft Litigation MDL No. 2036 pending in the United States District Court for the Southern District of Florida, Miami Division for coordinated pre-trial proceedings. The Bank is a member, along with many other banking institutions, of the Fourth Tranche of defendants in this case.

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

Following are the Corporation’s monthly common stock purchases during the third quarter of 2011. For a discussion of the common stock repurchase authorizations and repurchases during the period, see section “Capital” included under Part I Item 2 of this document.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares that May Yet Be Purchased Under the Plan
July 1 - July 31, 2011		—	$	—		—		—
August 1 - August 31, 2011		1,871		13.01		—		—
September 1 - September 30, 2011		—		—		—		—
Total		1,871	$	13.01		—		—

During the third quarter of 2011, the Corporation repurchased shares for minimum tax withholding settlements on equity compensation. The effect to the Corporation of this transaction was an increase in treasury stock and a decrease in cash of approximately $24,000 in the third quarter of 2011.

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ITEM 6. Exhibits

(a) Exhibits:

Exhibit (11), Statement regarding computation of per-share earnings. See Note 3 of the notes to consolidated financial statements in Part I Item 1.

Exhibit (31.1), Certification Under Section 302 of Sarbanes-Oxley by Philip B. Flynn, 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.

Exhibit (101), Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Changes in Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. *

* As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ASSOCIATED BANC-CORP
	(Registrant)
Date: November 4, 2011	/s/ Philip B. Flynn
	Philip B. Flynn
	President and Chief Executive Officer
Date: November 4, 2011	/s/ Joseph B. Selner
	Joseph B. Selner
	Chief Financial Officer

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