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 March 31, 2012

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 April 30, 2012, was 173,939,357.

ASSOCIATED BANC-CORP

TABLE OF CONTENTS

	Page No.
PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets — March 31, 2012 and December 31, 2011		3
Consolidated Statements of Income (Loss) — Three Months Ended March 31, 2012 and 2011		4
Consolidated Statements of Other Comprehensive Income — Three Months Ended March  31, 2012 and 2011		5
Consolidated Statements of Changes in Stockholders’ Equity — Three Months Ended March  31, 2012 and 2011		6
Consolidated Statements of Cash Flows — Three Months Ended March 31, 2012 and 2011		7
Notes to Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		47
Item 3. Quantitative and Qualitative Disclosures About Market Risk		74
Item 4. Controls and Procedures		74
PART II. Other Information
Item 1. Legal Proceedings		74
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		75
Item 6. Exhibits		75
Signatures		76

2

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements:

ASSOCIATED BANC-CORP

Consolidated Balance Sheets

	March 31, 2012 (Unaudited)			December  31, 2011 (Audited)
	(In Thousands, except share and per share data)
ASSETS
Cash and due from banks	$	360,728		$	454,958
Interest-bearing deposits in other financial institutions		344,148			154,562
Federal funds sold and securities purchased under agreements to resell		7,100			7,075
Investment securities available for sale, at fair value		4,669,100			4,937,483
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost		177,808			191,188
Loans held for sale		196,570			249,195
Loans		14,253,725			14,031,071
Allowance for loan losses		(356,298	)		(378,151	)
Loans, net		13,897,427			13,652,920
Premises and equipment, net		225,164			223,736
Goodwill		929,168			929,168
Other intangible assets, net		68,374			67,574
Other assets		1,038,083			1,056,358
Total assets	$	21,913,670		$	21,924,217
LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing demand deposits	$	3,989,156		$	3,928,792
Interest-bearing deposits, excluding brokered certificates of deposit		11,617,727			10,958,915
Brokered certificates of deposit		46,493			202,948
Total deposits		15,653,376			15,090,655
Short-term funding		1,936,219			2,514,485
Long-term funding		1,176,736			1,177,071
Accrued expenses and other liabilities		246,466			276,212
Total liabilities		19,012,797			19,058,423
Stockholders’ equity
Preferred equity		63,272			63,272
Common stock		1,750			1,746
Surplus		1,590,336			1,586,401
Retained earnings		1,181,247			1,148,773
Accumulated other comprehensive income		65,278			65,602
Treasury stock, at cost		(1,010	)		—
Total stockholders’ equity		2,900,873			2,865,794
Total liabilities and stockholders’ equity	$	21,913,670		$	21,924,217
Preferred shares issued		65,000			65,000
Preferred shares authorized (par value $1.00 per share)		750,000			750,000
Common shares issued		175,012,686			174,591,841
Common shares authorized (par value $0.01 per share)		250,000,000			250,000,000

See accompanying notes to consolidated financial statements.

3

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Income

(Unaudited)

	Three Months Ended March 31,
	2012			2011
	(In Thousands, except per share data)
INTEREST INCOME
Interest and fees on loans	$	149,023		$	142,771
Interest and dividends on investment securities
Taxable		23,029			34,652
Tax exempt		7,274			7,713
Other interest		1,247			1,458
Total interest income		180,573			186,594
INTEREST EXPENSE
Interest on deposits		12,036			18,249
Interest on short-term funding		1,823			3,579
Interest on long-term funding		12,046			11,043
Total interest expense		25,905			32,871
NET INTEREST INCOME		154,668			153,723
Provision for loan losses		—			31,000
Net interest income after provision for loan losses		154,668			122,723
NONINTEREST INCOME
Trust service fees		9,787			9,831
Service charges on deposit accounts		18,042			19,064
Card-based and other nondeposit fees		10,879			15,598
Retail commission income		15,717			16,381
Mortgage banking, net		17,654			1,845
Capital market fees, net		3,716			2,378
Bank owned life insurance income		4,292			3,586
Asset sale losses, net		(481	)		(1,986	)
Investment securities gains / (losses), net:
Realized gains, net		40			1
Other-than-temporary impairments		—			(23	)
Less: Non-credit portion recognized in other comprehensive income (before taxes)		—			—
Total investment securities gains (losses), net		40			(22	)
Other		1,913			5,507
Total noninterest income		81,559			72,182
NONINTEREST EXPENSE
Personnel expense		94,078			88,930
Occupancy		15,179			15,275
Equipment		5,468			4,767
Data processing		9,516			7,534
Business development and advertising		5,381			4,943
Other intangible amortization		1,049			1,178
Loan expense		2,910			2,956
Legal and professional fees		9,715			4,482
Losses other than loans		3,550			6,297
Foreclosure / OREO expense		6,475			6,061
FDIC expense		4,870			8,244
Other		14,684			13,509
Total noninterest expense		172,875			164,176
Income before income taxes		63,352			30,729
Income tax expense		20,719			7,876
Net income		42,633			22,853
Preferred stock dividends and discount accretion		1,300			7,413
Net income available to common equity	$	41,333		$	15,440
Earnings per common share:
Basic	$	0.24		$	0.09
Diluted	$	0.24		$	0.09
Average common shares outstanding:
Basic		173,846			173,213
Diluted		173,848			173,217

See accompanying notes to consolidated financial statements.

4

ITEM 1: Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Other Comprehensive Income

(Unaudited)

	Three Months Ended March 31,
	2012			2011
	(In Thousands)
Net income	$	42,633		$	22,853
Other comprehensive income (loss), net of tax:
Investment securities available for sale:
Net unrealized gains (losses)		(1,914	)		27,585
Reclassification adjustment for net (gains) losses realized in net income		(40	)		22
Income tax (expense) benefit		762			(10,708	)
Other comprehensive income (loss) on investment securities available for sale		(1,192	)		16,899
Defined benefit pension and postretirement obligations:
Prior service cost, net of amortization		60			117
Net gain, net of amortization		640			451
Income tax expense		(273	)		(221	)
Other comprehensive income on pension and postretirement obligations		427			347
Derivatives used in cash flow hedging relationships:
Net unrealized gains		10			450
Reclassification adjustment for net losses and interest expense for interest differential on derivatives realized in net income		731			982
Income tax expense		(300	)		(573	)
Other comprehensive income on cash flow hedging relationships		441			859
Total other comprehensive income (loss)		(324	)		18,105
Comprehensive income	$	42,309		$	40,958

See accompanying notes to consolidated financial statements.

5

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, 2010	$	514,388	$	1,739	$	1,573,372	$	1,041,666		$	27,626		$	—		$	3,158,791
Comprehensive income:
Net income		—		—		—		22,853			—			—			22,853
Other comprehensive income		—		—		—		—			18,105			—			18,105
Comprehensive income																	40,958
Common stock issued:
Stock-based compensation plans, net		—		5		582		(20	)		—			361			928
Purchase of treasury stock		—		—		—		—			—			(607	)		(607	)
Cash dividends:
Common stock, $0.01 per share		—		—		—		(1,742	)		—			—			(1,742	)
Preferred stock		—		—		—		(6,563	)		—			—			(6,563	)
Accretion of preferred stock discount		850		—		—		(850	)		—			—			—
Stock-based compensation expense, net		—		—		2,947		—			—			—			2,947
Tax benefit of stock options		—		—		2		—			—			—			2
Balance, March 31, 2011	$	515,238	$	1,744	$	1,576,903	$	1,055,344		$	45,731		$	(246	)	$	3,194,714
Balance, December 31, 2011	$	63,272	$	1,746	$	1,586,401	$	1,148,773		$	65,602		$	—		$	2,865,794
Comprehensive income (loss):
Net income		—		—		—		42,633			—			—			42,633
Other comprehensive loss		—		—		—		—			(324	)		—			(324	)
Comprehensive income																	42,309
Common stock issued:
Stock-based compensation plans, net		—		4		136		(124	)		—			103			119
Purchase of treasury stock		—		—		—		—			—			(1,113	)		(1,113	)
Cash dividends:
Common stock, $0.05 per share		—		—		—		(8,735	)		—			—			(8,735	)
Preferred stock		—		—		—		(1,300	)		—			—			(1,300	)
Stock-based compensation expense, net		—		—		3,794		—			—			—			3,794
Tax benefit of stock options		—		—		5		—			—			—			5
Balance, March 31, 2012	$	63,272	$	1,750	$	1,590,336	$	1,181,247		$	65,278		$	(1,010	)	$	2,900,873

See accompanying notes to consolidated financial statements.

6

ITEM 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2012			2011
	($ in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	42,633		$	22,853
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		—			31,000
Depreciation and amortization		10,144			8,027
Addition to (recovery of) valuation allowance on mortgage servicing rights, net		(2,371	)		180
Amortization of mortgage servicing rights		6,417			5,869
Amortization of other intangible assets		1,049			1,178
Amortization and accretion on earning assets, funding, and other, net		16,149			16,266
Tax benefit from exercise of stock options		5			2
(Gain) loss on sales of investment securities, net and impairment write-downs		(40	)		22
Loss on sales of assets, net		481			1,986
Gain on mortgage banking activities, net		(10,477	)		(7,858	)
Mortgage loans originated and acquired for sale		(563,688	)		(290,013	)
Proceeds from sales of mortgage loans held for sale		620,895			403,707
Decrease in interest receivable		2,744			295
Decrease in interest payable		(9,574	)		(5,368	)
Net change in other assets and other liabilities		(2,602	)		10,065
Net cash provided by operating activities		111,765			198,211
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans		(251,508	)		(158,263	)
Purchases of:
Investment securities		(266,436	)		(255,023	)
Premises, equipment, and software, net of disposals		(12,149	)		(7,156	)
Other assets		(407	)		(755	)
Proceeds from:
Sales of investment securities		92,716			2,114
Calls and maturities of investment securities		439,014			483,436
Sales of other assets		9,204			9,435
Net cash provided by investing activities		10,434			73,788
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		562,721			(1,201,750	)
Net increase (decrease) in short-term funding		(578,266	)		800,423
Repayment of long-term funding		(125	)		(228,013	)
Proceeds from issuance of long-term funding		—			297,240
Cash dividends on common stock		(8,735	)		(1,742	)
Cash dividends on preferred stock		(1,300	)		(6,563	)
Purchase of common stock		(1,113	)		(607	)
Net cash used in financing activities		(26,818	)		(341,012	)
Net increase (decrease) in cash and cash equivalents		95,381			(69,013	)
Cash and cash equivalents at beginning of period		616,595			868,162
Cash and cash equivalents at end of period	$	711,976		$	799,149
Supplemental disclosures of cash flow information:
Cash paid for interest	$	35,461		$	38,090
Cash (received) paid for income taxes		(10,025	)		7
Loans and bank premises transferred to other real estate owned		5,137			14,996
Transfers of loans to held for sale		—			50,904
Capitalized mortgage servicing rights		5,895			4,383

See accompanying notes to consolidated financial statements.

7

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 2011 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 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 adopted the accounting standard as of January 1, 2012, as required, with no material impact on its results of operations, financial position, and liquidity. See Note 7 for additional disclosures required under this accounting standard.

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

In May 2011, the FASB issued guidance on measuring fair value to create common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments change the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements. The amendments also clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements. The amendments are effective for interim and annual periods beginning after December 15, 2011. The Corporation adopted the accounting standard as of January 1, 2012, with no material impact on its results of operations, financial position, and liquidity. See Note 12 for additional disclosures required under this accounting standard.

8

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 adopted the accounting standard as of January 1, 2012, as required, with no material impact on its results of operations, financial position, and liquidity.

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.

	Three Months Ended March 31,
	2012			2011
	(In Thousands, except per share data)
Net income	$	42,633		$	22,853
Preferred stock dividends and discount accretion		(1,300	)		(7,413	)
Net income available to common equity	$	41,333		$	15,440
Common shareholder dividends		(8,683	)		(1,732	)
Unvested share-based payment awards		(40	)		(9	)
Undistributed earnings	$	32,610		$	13,699
Undistributed earnings allocated to common shareholders	$	32,455		$	13,622
Undistributed earnings allocated to unvested share-based payment awards		155			77
Undistributed earnings	$	32,610		$	13,699
Basic
Distributed earnings to common shareholders	$	8,683		$	1,732
Undistributed earnings allocated to common shareholders		32,455			13,622
Total common shareholders earnings, basic	$	41,138		$	15,354
Diluted
Distributed earnings to common shareholders	$	8,683		$	1,732
Undistributed earnings allocated to common shareholders		32,455			13,622
Total common shareholders earnings, diluted	$	41,138		$	15,354
Weighted average common shares outstanding		173,846			173,213
Effect of dilutive common stock awards		2			4
Diluted weighted average common shares outstanding		173,848			173,217
Basic earnings per common share	$	0.24		$	0.09
Diluted earnings per common share	$	0.24		$	0.09

Options to purchase approximately 6 million and 5 million shares were outstanding at March 31, 2012 and March 31, 2011 respectively, but excluded from the calculation of diluted earnings per common share as the effect would have been anti-dilutive.

9

NOTE 4: Stock-Based Compensation

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

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

Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock options 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 quarter of 2012 and full year 2011.

	2012			2011
Dividend yield		2.00	%		2.00	%
Risk-free interest rate		1.20	%		2.27	%
Expected volatility		49.62	%		47.24	%
Weighted average expected life		6 years			6 years
Weighted average per share fair value of options	$	5.10		$	5.56

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, 2011 and for the three months ended March 31, 2012, is presented below.

Stock Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate  Intrinsic Value (000s)
Outstanding at December 31, 2010		7,301,458		$	24.33
Granted		1,624,369			14.20
Exercised		(23,437	)		12.66
Forfeited or expired		(1,847,116	)		24.51
Outstanding at December 31, 2011		7,055,274		$	21.99		5.61		27
Options exercisable at December 31, 2011		4,623,935		$	26.10		4.01		7
Outstanding at December 31, 2011		7,055,274		$	21.99
Granted		2,923,611			12.97
Exercised		(9,110	)		13.16
Forfeited or expired		(718,716	)		22.33
Outstanding at March 31, 2012		9,251,059		$	19.12		7.05		3,782
Options exercisable at March 31, 2012		4,954,631		$	24.19		4.99		536

10

The following table summarizes information about the Corporation’s nonvested stock option activity for the year ended December 31, 2011, and for the three months ended March 31, 2012.

Stock Options	Shares			Weighted Average Grant  Date Fair Value
Nonvested at December 31, 2010		2,025,720		$	4.09
Granted		1,624,369			5.56
Vested		(955,454	)		3.77
Forfeited		(263,296	)		4.85
Nonvested at December 31, 2011		2,431,339		$	5.11
Granted		2,923,611			5.10
Vested		(990,296	)		4.86
Forfeited		(68,226	)		5.13
Nonvested at March 31, 2012		4,296,428		$	5.16

For the three months ended March 31, 2012 and for the year ended December 31, 2011, the intrinsic value of stock options exercised was immaterial. (Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option.) The total fair value of stock options that vested was $5 million for the first three months of 2012 and $4 million for the year ended December 31, 2011. For the three months ended March 31, 2012 and 2011, the Corporation recognized compensation expense of $2 million and $1 million, respectively, for the vesting of stock options. For the full year 2011, the Corporation recognized compensation expense of $5 million for the vesting of stock options. At March 31, 2012, the Corporation had $20 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 2014.

The following table summarizes information about the Corporation’s restricted stock awards activity (excluding salary shares) for the year ended December 31, 2011, and for the three months ended March 31, 2012.

Restricted Stock	Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010		772,262		$	13.94
Granted		593,437			14.27
Vested		(169,499	)		17.74
Forfeited		(182,435	)		13.86
Outstanding at December 31, 2011		1,013,765		$	13.79
Granted		430,163			12.97
Vested		(426,433	)		13.34
Forfeited		(10,095	)		13.90
Outstanding at March 31, 2012		1,007,400		$	13.63

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 and the restricted stock award recipient must continue to perform substantial services for the Corporation for at least two years after the date of grant. Expense for restricted stock awards of approximately $2 million and $1 million was recognized for the three months ended March 31, 2012 and 2011, respectively. The Corporation recognized approximately $6 million of expense for restricted stock awards for the full year 2011. The Corporation had $10 million of unrecognized compensation costs related to restricted stock awards at March 31, 2012, that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2014.

The Corporation recognizes expense related to salary shares as compensation expense. Each share is fully vested as of the date of grant and is subject to restrictions on transfer that lapse over a period of 9 to 28 months, based on the month of grant. No salary shares were issued during the first quarter of 2012. The Corporation recognized compensation expense of $1 million on the granting of 60,992 salary shares (or an average cost per share of $14.49) for the three months ended March 31, 2011, and $4 million on the granting of 317,450 salary shares (or an average cost per share of $12.41) for the year ended December 31, 2011.

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

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)
March 31, 2012:
U.S. Treasury securities	$	1,005	$	—	$	(4	)	$	1,001
Federal agency securities		7		1		—			8
Obligations of state and political subdivisions		792,854		43,068		(258	)		835,664
(municipal securities)
Residential mortgage-related securities		3,440,370		114,939		(879	)		3,554,430
Commercial mortgage-related securities		17,779		1,524		—			19,303
Asset-backed securities(1)		163,466		1		(453	)		163,014
Other securities (debt and equity)		93,490		2,427		(237	)		95,680
Total investment securities available for sale	$	4,508,971	$	161,960	$	(1,831	)	$	4,669,100

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

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

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The amortized cost and fair values of investment securities available for sale at March 31, 2012, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

($ in Thousands)	Amortized Cost		Fair Value
Due in one year or less	$	44,685	$	45,223
Due after one year through five years		202,823		209,057
Due after five years through ten years		556,206		588,599
Due after ten years		76,516		80,355
Total debt securities		880,230		923,234
Residential mortgage-related securities		3,440,370		3,554,430
Commercial mortgage-related securities		17,779		19,303
Asset-backed securities		163,466		163,014
Equity securities		7,126		9,119
Total investment securities available for sale	$	4,508,971	$	4,669,100

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 March 31, 2012.

	Less than 12 months					12 months or more					Total
	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
	($ in Thousands)
March 31, 2012:
U.S. Treasury securities	$	(4	)	$	1,001	$	—		$	—	$	(4	)	$	1,001
Obligations of state and political subdivisions (municipal securities)		(241	)		15,070		(17	)		348		(258	)		15,418
Residential mortgage-related securities		(673	)		179,764		(206	)		3,153		(879	)		182,917
Asset-backed securities		(8	)		3,769		(445	)		137,982		(453	)		141,751
Other securities (debt and equity)		(46	)		15,824		(191	)		322		(237	)		16,146
Total	$	(972	)	$	215,428	$	(859	)	$	141,805	$	(1,831	)	$	357,233

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 and extent to which the security has been in an unrealized loss position, changes in security ratings, financial condition and near-term prospects of the issuer, as well as security and industry specific economic conditions. In addition, with regards to its debt securities, the Corporation may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds, and the value of any underlying collateral. For certain debt securities in unrealized loss positions, the Corporation prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

Based on the Corporation’s evaluation, management does not believe any unrealized loss at March 31, 2012, represents an other-than-temporary impairment as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions, and not credit deterioration. At March 31, 2012, the number of investment securities in an unrealized loss position for less than 12 months for U.S. Treasury, municipal, residential mortgage-related, and asset-backed securities was 1, 35, 18 and 1, 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 securities categories was 1, 16 and 28, respectively. The unrealized losses reported for residential mortgage-related securities relate to non-agency residential mortgage-related securities as well as residential mortgage-related securities issued by government agencies such as the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). At March 31, 2012, the unrealized loss position on other securities was

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primarily comprised of 2 individual trust preferred debt securities pools and 1 floating rate note. The Corporation currently does not intend to sell nor does it believe that it will be required to sell the securities contained in the above unrealized losses table before recovery of their amortized cost basis.

The following is a summary of the credit loss portion of other-than-temporary impairment recognized in earnings on debt securities for 2011 and the three months ended March 31, 2012, respectively.

	Non-agency Mortgage-Related Securities			Trust Preferred Debt Securities			Total
	($ in Thousands)
Balance of credit-related other-than-temporary impairment at December 31, 2010	$	(17,556	)	$	(10,019	)	$	(27,575	)
Credit losses on newly identified impairment		(2	)		(816	)		(818	)
Balance of credit-related other-than-temporary impairment at December 31, 2011	$	(17,558	)	$	(10,835	)	$	(28,393	)
Reduction due to credit impaired securities sold		17,026			4,157			21,183
Balance of credit-related other-than-temporary impairment at March 31, 2012	$	(532	)	$	(6,678	)	$	(7,210	)

For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011.

	Less than 12 months					12 months or more					Total
	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
	($ in Thousands)
December 31, 2011:
Obligations of state and political subdivisions (municipal securities)	$	(10	)	$	971	$	(18	)	$	348	$	(28	)	$	1,319
Residential mortgage-related securities		(1,443	)		186,954		(20	)		1,469		(1,463	)		188,423
Asset-backed securities		(9	)		4,091		(698	)		174,640		(707	)		178,731
Other securities (debt and equity)		(671	)		45,395		(794	)		522		(1,465	)		45,917
Total	$	(2,133	)	$	237,411	$	(1,530	)	$	176,979	$	(3,663	)	$	414,390

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stocks: The Corporation is required to maintain Federal Reserve stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. At March 31, 2012 and December 31, 2011, the Corporation had FHLB stock of $108 million and $121 million, respectively. The Corporation had Federal Reserve Bank stock of $70 million at both March 31, 2012 and December 31, 2011.

The Corporation reviewed these securities for impairment, including but not limited to, consideration of operating performance, the severity and duration of market value declines, as well as its liquidity and funding position. After evaluating all of these considerations, the Corporation believes the cost of these investments will be recovered and no impairment has been recorded on these securities during 2011 or the first quarter of 2012. In February 2012, the FHLB of Chicago initiated a tender offer for certain of its shares, whereby the FHLB would repurchase its shares at par. The Corporation participated in the tender and reduced its equity holdings in the FHLB of Chicago by $13 million. The Corporation plans to further reduce its FHLB stock position during 2012.

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

The period end loan composition was as follows.

	March 31, 2012		December 31, 2011
	($ in Thousands)
Commercial and industrial	$	3,719,016	$	3,724,736
Commercial real estate—owner occupied		1,074,755		1,086,829
Lease financing		61,208		58,194
Commercial and business lending		4,854,979		4,869,759
Commercial real estate—investor		2,664,251		2,563,767
Real estate construction		565,953		584,046
Commercial real estate lending		3,230,204		3,147,813
Total commercial		8,085,183		8,017,572
Home equity		2,501,770		2,504,704
Installment		537,628		557,782
Total retail		3,039,398		3,062,486
Residential mortgage		3,129,144		2,951,013
Total consumer		6,168,542		6,013,499
Total loans	$	14,253,725	$	14,031,071

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

	March 31, 2012		December 31, 2011
	($ in Thousands)
Nonaccrual loans (includes nonaccrual restructured loans)	$	327,085	$	356,772
Accruing loans past due 90 days or more		2,497		4,925
Restructured loans (accruing)		120,719		113,164

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

	March 31, 2012			December 31, 2011
	($ in Thousands)
Balance at beginning of period	$	378,151		$	476,813
Provision for loan losses		—			52,000
Charge offs		(31,259	)		(189,732	)
Recoveries		9,406			39,070
Net charge offs		(21,853	)		(150,662	)
Balance at end of period	$	356,298		$	378,151

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 three months ended March 31, 2012, was as follows.

$ in Thousands	Commercial and industrial			Commercial  real estate—owner occupied			Lease financing			Commercial  real estate—investor			Real estate construction			Home equity			Installment			Residential mortgage			Total
Balance at Dec 31, 2011	$	124,374		$	36,200		$	2,567		$	86,689		$	21,327		$	70,144		$	6,623		$	30,227		$	378,151
Provision for loan losses		(1,658	)		(2,594	)		(1,647	)		(762	)		(2,320	)		4,230			162			4,589			—
Charge offs		(8,035	)		(732	)		—			(8,393	)		(924	)		(9,761	)		(604	)		(2,810	)		(31,259	)
Recoveries		4,163			317			1,836			1,039			694			811			503			43			9,406
Balance at Mar 31, 2012	$	118,844		$	33,191		$	2,756		$	78,573		$	18,777		$	65,424		$	6,684		$	32,049		$	356,298
Allowance for loan losses:
Ending balance impaired loans individually evaluated for impairment	$	9,039		$	2,701		$	133		$	11,599		$	2,904		$	1,763		$	—		$	1,175		$	29,314
Ending balance impaired loans collectively evaluated for impairment	$	8,104		$	4,765		$	24		$	9,712		$	4,696		$	27,196		$	2,004		$	15,428		$	71,929
Ending balance all other loans collectively evaluated for impairment	$	101,701		$	25,725		$	2,599		$	57,262		$	11,177		$	36,465		$	4,680		$	15,446		$	255,055
Total	$	118,844		$	33,191		$	2,756		$	78,573		$	18,777		$	65,424		$	6,684		$	32,049		$	356,298
Loans:
Ending balance impaired loans individually evaluated for impairment	$	35,910		$	21,489		$	8,428		$	75,874		$	27,474		$	7,817		$	—		$	9,592		$	186,584
Ending balance impaired loans collectively evaluated for impairment	$	40,353		$	17,325		$	612		$	59,001		$	20,767		$	45,903		$	3,626		$	73,633		$	261,220
Ending balance all other loans collectively evaluated for impairment	$	3,642,753		$	1,035,941		$	52,168		$	2,529,376		$	517,712		$	2,448,050		$	534,002		$	3,045,919		$	13,805,921
Total	$	3,719,016		$	1,074,755		$	61,208		$	2,664,251		$	565,953		$	2,501,770		$	537,628		$	3,129,144		$	14,253,725

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. The methodology used at March 31, 2012 and December 31, 2011 was generally comparable.

At March 31, 2012, the allowance for loan loss allocations for the residential mortgage portfolio increased, with all other loan portfolio allocations declining or remaining relatively level from December 31, 2011. The increase in the residential mortgage allocation was due to growth in the residential mortgage portfolio and a slight decline in credit quality. Other portfolio allocations declined or remained level 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, 2011, was as follows.

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

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

	Pass		Special Mention		Potential Problem		Impaired		Total
	($ in Thousands)
Commercial and industrial	$	3,316,048	$	168,927	$	157,778	$	76,263	$	3,719,016
Commercial real estate—owner occupied		877,924		45,344		112,673		38,814		1,074,755
Lease financing		50,837		844		487		9,040		61,208
Commercial and business lending		4,244,809		215,115		270,938		124,117		4,854,979
Commercial real estate—investor		2,247,172		114,865		167,339		134,875		2,664,251
Real estate construction		479,848		10,210		27,654		48,241		565,953
Commercial real estate lending		2,727,020		125,075		194,993		183,116		3,230,204
Total commercial	$	6,971,829	$	340,190	$	465,931	$	307,233	$	8,085,183

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

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

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

	Performing		30-89 Days Past Due		Potential Problem		Impaired		Total
	($ in Thousands)
Home equity	$	2,425,602	$	18,007	$	4,441	$	53,720	$	2,501,770
Installment		531,047		2,813		142		3,626		537,628
Total retail		2,956,649		20,820		4,583		57,346		3,039,398
Residential mortgage		3,026,225		10,114		9,580		83,225		3,129,144
Total consumer	$	5,982,874	$	30,934	$	14,163	$	140,571	$	6,168,542

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

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

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

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

19

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

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due *		Total Past Due		Current		Total
	($ in Thousands)
Accruing loans
Commercial and industrial	$	11,615	$	1,028	$	1,051	$	13,694	$	3,654,681	$	3,668,375
Commercial real estate—owner occupied		3,816		3,716		823		8,355		1,034,512		1,042,867
Lease financing		11		29		—		40		52,128		52,168
Commercial and business lending		15,442		4,773		1,874		22,089		4,741,321		4,763,410
Commercial real estate—investor		4,523		3,790		—		8,313		2,566,908		2,575,221
Real estate construction		1,736		—		—		1,736		527,746		529,482
Commercial real estate lending		6,259		3,790		—		10,049		3,094,654		3,104,703
Total commercial		21,701		8,563		1,874		32,138		7,835,975		7,868,113
Home equity		11,412		6,595		—		18,007		2,439,135		2,457,142
Installment		2,322		491		623		3,436		531,565		535,001
Total retail		13,734		7,086		623		21,443		2,970,700		2,992,143
Residential mortgage		9,864		250		—		10,114		3,056,270		3,066,384
Total consumer		23,598		7,336		623		31,557		6,026,970		6,058,527
Total accruing loans	$	45,299	$	15,899	$	2,497	$	63,695	$	13,862,945	$	13,926,640
Nonaccrual loans
Commercial and industrial	$	5,098	$	2,024	$	23,311	$	30,433	$	20,208	$	50,641
Commercial real estate—owner occupied		1,271		477		16,711		18,459		13,429		31,888
Lease financing		—		15		843		858		8,182		9,040
Commercial and business lending		6,369		2,516		40,865		49,750		41,819		91,569
Commercial real estate—investor		2,362		1,814		29,748		33,924		55,106		89,030
Real estate construction		—		238		17,661		17,899		18,572		36,471
Commercial real estate lending		2,362		2,052		47,409		51,823		73,678		125,501
Total commercial		8,731		4,568		88,274		101,573		115,497		217,070
Home equity		4,338		2,268		30,482		37,088		7,540		44,628
Installment		367		188		848		1,403		1,224		2,627
Total retail		4,705		2,456		31,330		38,491		8,764		47,255
Residential mortgage		2,237		4,315		42,727		49,279		13,481		62,760
Total consumer		6,942		6,771		74,057		87,770		22,245		110,015
Total nonaccrual loans	$	15,673	$	11,339	$	162,331	$	189,343	$	137,742	$	327,085
Total loans
Commercial and industrial	$	16,713	$	3,052	$	24,362	$	44,127	$	3,674,889	$	3,719,016
Commercial real estate—owner occupied		5,087		4,193		17,534		26,814		1,047,941		1,074,755
Lease financing		11		44		843		898		60,310		61,208
Commercial and business lending		21,811		7,289		42,739		71,839		4,783,140		4,854,979
Commercial real estate—investor		6,885		5,604		29,748		42,237		2,622,014		2,664,251
Real estate construction		1,736		238		17,661		19,635		546,318		565,953
Commercial real estate lending		8,621		5,842		47,409		61,872		3,168,332		3,230,204
Total commercial		30,432		13,131		90,148		133,711		7,951,472		8,085,183
Home equity		15,750		8,863		30,482		55,095		2,446,675		2,501,770
Installment		2,689		679		1,471		4,839		532,789		537,628
Total retail		18,439		9,542		31,953		59,934		2,979,464		3,039,398
Residential mortgage		12,101		4,565		42,727		59,393		3,069,751		3,129,144
Total consumer		30,540		14,107		74,680		119,327		6,049,215		6,168,542
Total loans	$	60,972	$	27,238	$	164,828	$	253,038	$	14,000,687	$	14,253,725

* The recorded investment in loans past due 90 days or more and still accruing totaled $2.5 million at March 31, 2012 (the same as the reported balances for the accruing loans noted above).

20

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

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

* The recorded investment in loans past due 90 days or more and still accruing totaled $4.9 million at December 31, 2011 (the same as the reported balances for the accruing loans noted above).

21

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

	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized*
	($ in Thousands)
Loans with a related allowance
Commercial and industrial	$	64,018	$	76,134	$	17,143	$	64,487	$	600
Commercial real estate—owner occupied		27,399		32,742		7,466		27,899		167
Lease financing		1,032		1,032		157		1,060		—
Commercial and business lending		92,449		109,908		24,766		93,446		767
Commercial real estate—investor		88,316		109,312		21,311		88,766		643
Real estate construction		28,332		39,911		7,600		28,673		187
Commercial real estate lending		116,648		149,223		28,911		117,439		830
Total commercial		209,097		259,131		53,677		210,885		1,597
Home equity		50,315		56,525		28,959		51,171		388
Installment		3,626		4,012		2,004		3,710		45
Total retail		53,941		60,537		30,963		54,881		433
Residential mortgage		77,732		85,554		16,603		78,314		421
Total consumer		131,673		146,091		47,566		133,195		854
Total loans	$	340,770	$	405,222	$	101,243	$	344,080	$	2,451
Loans with no related allowance
Commercial and industrial	$	12,245	$	18,962	$	—	$	15,496	$	46
Commercial real estate—owner occupied		11,415		12,466		—		11,482		44
Lease financing		8,008		8,008		—		8,615		—
Commercial and business lending		31,668		39,436		—		35,593		90
Commercial real estate—investor		46,559		70,719		—		51,632		20
Real estate construction		19,909		36,162		—		20,175		5
Commercial real estate lending		66,468		106,881		—		71,807		25
Total commercial		98,136		146,317		—		107,400		115
Home equity		3,405		5,384		—		3,394		—
Installment		—		—		—		—		—
Total retail		3,405		5,384		—		3,394		—
Residential mortgage		5,493		6,049		—		5,729		8
Total consumer		8,898		11,433		—		9,123		8
Total loans	$	107,034	$	157,750	$	—	$	116,523	$	123
Total
Commercial and industrial	$	76,263	$	95,096	$	17,143	$	79,983	$	646
Commercial real estate—owner occupied		38,814		45,208		7,466		39,381		211
Lease financing		9,040		9,040		157		9,675		—
Commercial and business lending		124,117		149,344		24,766		129,039		857
Commercial real estate—investor		134,875		180,031		21,311		140,398		663
Real estate construction		48,241		76,073		7,600		48,848		192
Commercial real estate lending		183,116		256,104		28,911		189,246		855
Total commercial		307,233		405,448		53,677		318,285		1,712
Home equity		53,720		61,909		28,959		54,565		388
Installment		3,626		4,012		2,004		3,710		45
Total retail		57,346		65,921		30,963		58,275		433
Residential mortgage		83,225		91,603		16,603		84,043		429
Total consumer		140,571		157,524		47,566		142,318		862
Total loans	$	447,804	$	562,972	$	101,243	$	460,603	$	2,574

* Interest income recognized included $2 million of interest income recognized on accruing restructured loans for the three months ended March 31, 2012.

22

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

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

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

23

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

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

Troubled Debt Restructurings (“Restructured Loans”):

Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty. The concessions granted generally involve the modification of terms of the loan, such as changes in payment schedule or interest rate, which generally would not otherwise be considered. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Nonaccrual restructured loans are included and treated with all other nonaccrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings which are considered and accounted for as impaired loans. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains on nonaccrual status. Based on the above, the Corporation had $44 million and $36 million of accruing loans that were restructured and remained on accrual status at March 31, 2012, and December 31, 2011, respectively. In addition, the Corporation had $77 million of restructured loans which were restored to accrual status based on a sustained period of repayment performance at both March 31, 2012, and December 31, 2011.

As of March 31, 2012 and December 31, 2011, there were $80 million and $87 million, respectively, of nonaccrual restructured loans, and $121 million and $113 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.

24

	March 31, 2012				December 31, 2011
	Performing Restructured Loans		Nonaccrual Restructured Loans *		Performing Restructured Loans		Nonaccrual Restructured Loans *
	($ in Thousands)
Commercial and industrial	$	25,622	$	14,402	$	22,552	$	12,211
Commercial real estate—owner occupied		6,926		10,055		8,138		9,706
Commercial real estate—investor		45,845		25,996		43,417		30,303
Real estate construction		11,770		10,073		10,977		14,253
Home equity		9,092		6,116		8,950		6,268
Installment		999		1,054		1,015		1,163
Residential mortgage		20,465		12,250		18,115		13,589
Total	$	120,719	$	79,946	$	113,164	$	87,493

* Nonaccrual restructured loans have been included with nonaccrual loans.

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

	Three Months Ended March 31, 2012
	Number of Loans		Recorded Investment (1)		Unpaid Principal Balance (2)
	($ in Thousands)
Commercial and industrial		45	$	7,838	$	8,666
Commercial real estate—owner occupied		9		3,496		3,911
Commercial real estate—investor		9		2,885		2,898
Real estate construction		4		1,485		1,815
Home equity		13		599		604
Installment		4		42		42
Residential mortgage		9		2,219		2,291
Total		93	$	18,564	$	20,227

(1) Represents post-modification outstanding recorded investment.

(2) Represents pre-modification outstanding recorded investment.

Restructured loan modifications may include payment schedule modifications, interest rate concessions, maturity date extensions, modification of note structure (A/B Note), principal reduction, or some combination of these concessions. During the three months ended March 31, 2012, 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 months ended March 31, 2012.

25

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 months ended March 31, 2012, as well as the recorded investment in these restructured loans as of March 31, 2012.

	Three Months Ended March 31, 2012
	Number of Loans		Recorded Investment
	($ in Thousands)
Commercial and industrial		7	$	865
Commercial real estate—investor		4		1,302
Real estate construction		1		18
Home equity		2		60
Total		14	$	2,245

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

NOTE 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 elected to conduct its annual impairment testing in May. Accounting guidance states that goodwill of a reporting unit shall be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Management assessed and determined during the fourth quarter of 2011 that an extended decline in the Corporation’s stock price qualified as a triggering event and as such, performed an interim impairment test. Both the annual impairment test and the interim impairment test indicated that the estimated fair value exceeded the carrying value (including goodwill) for all of the reported 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 2011, or through March 31, 2012. 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.

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

	Three Months Ended March 31, 2012			Year Ended December 31, 2011
	($ in Thousands)
Core deposit intangibles:
Gross carrying amount	$	41,831		$	41,831
Accumulated amortization		(31,622	)		(30,815	)
Net book value	$	10,209		$	11,016
Amortization during the period	$	807		$	3,695
Other intangibles:
Gross carrying amount	$	19,283		$	19,283
Accumulated amortization		(11,119	)		(10,877	)
Net book value	$	8,164		$	8,406
Amortization during the period	$	242		$	1,019

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

The Corporation periodically evaluates its mortgage servicing rights asset for impairment. Impairment is assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. A valuation allowance is established, through a charge to earnings, to the extent the amortized cost of the mortgage servicing rights exceeds the estimated fair value by stratification. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation is reduced through a recovery to earnings. An other-than-temporary impairment (i.e., recoverability is considered remote when considering interest rates and loan pay off activity) is recognized as a write-down of the mortgage servicing rights asset and the related valuation allowance (to the extent a valuation allowance is available) and then against earnings. A direct write-down permanently reduces the carrying value of the mortgage servicing rights asset and valuation allowance, precluding subsequent recoveries. The Corporation recorded an other-than-temporary impairment on mortgage servicing rights by reducing the capitalized cost and the valuation allowance on mortgage servicing rights of $12 million during the first quarter of 2012 due to the uncertainty of the recoverability of the valuation allowance on mortgage servicing rights associated with the long-term, consistently low rate environment. See Note 11, “Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities,” for a discussion of the recourse provisions on serviced residential mortgage loans. See Note 12, “Fair Value Measurements,” which further discusses fair value measurement relative to the mortgage servicing rights asset.

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

	Three Months Ended March 31, 2012			Year Ended December 31, 2011
	($ in Thousands)
Mortgage servicing rights:
Mortgage servicing rights at beginning of period	$	75,855		$	84,209
Additions		5,895			17,476
Amortization		(6,417	)		(25,830	)
Other-than-temporary impairment		(12,122	)		—
Mortgage servicing rights at end of period	$	63,211		$	75,855
Valuation allowance at beginning of period		(27,703	)		(20,300	)
(Additions) / Recoveries, net		2,371			(7,403	)
Other-than-temporary impairment		12,122			—
Valuation allowance at end of period		(13,210	)		(27,703	)
Mortgage servicing rights, net	$	50,001		$	48,152
Fair value of mortgage servicing rights	$	50,001		$	48,152
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)		7,284,000			7,321,000
Mortgage servicing rights, net to servicing portfolio		0.69	%		0.66	%
Mortgage servicing rights expense(1)	$	4,046		$	33,233

(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.

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 March 31, 2012. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable.

Estimated amortization expense:

	Core Deposit Intangibles		Other Intangibles		Mortgage Servicing Rights
	($ in Thousands)
Nine months ending December 31, 2012	$	2,400	$	700	$	11,100
Year ending December 31, 2013		3,100		900		11,700
Year ending December 31, 2014		2,900		900		8,700
Year ending December 31, 2015		1,400		800		6,700
Year ending December 31, 2016		300		800		5,200
Year ending December 31, 2017		100		800		4,100

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NOTE 8: Long-term Funding

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

	March 31, 2012		December 31, 2011
	($ in Thousands)
Federal Home Loan Bank (“FHLB”) advances	$	500,409	$	500,476
Senior notes, at par		430,000		430,000
Subordinated debt, at par		25,821		25,821
Junior subordinated debentures, at par		211,340		211,340
Other borrowed funds and capitalized costs		9,166		9,434
Total long-term funding	$	1,176,736	$	1,177,071

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

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. The subordinated debt was issued at a discount, and has a fixed coupon interest rate of 9.25%. Subordinated debt qualifies under the risk-based capital guidelines as Tier 2 supplementary capital for regulatory purposes, and is discounted in accordance with regulations when the debt has five years or less remaining to maturity.

Junior subordinated debentures: The Corporation has $180 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 2011 or during the first three months of 2012. The carrying value of the ASBC Debentures was $180 million at both March 31, 2012 and December 31, 2011. 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 $31 million on a combined basis), of which one pays a variable rate adjusted quarterly based on the 90-day LIBOR plus 2.80% (or 3.35% at March 31, 2012) 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 3.96% at March 31, 2012) 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 2011 or during the first three months of 2012. The carrying value of the SFSC Debentures was $36 million at both March 31, 2012 and December 31, 2011.

NOTE 9: Income Taxes

For the first quarter of 2012, the Corporation recognized income tax expense of $21 million, compared to income tax expense of $8 million for the first quarter of 2011. The effective tax rate was 32.70% for the first quarter of 2012, compared to an effective tax rate of 25.63% for the first quarter of 2011. The change in income tax expense and the effective tax rate was primarily due to the level of pretax income between the comparable first quarter periods. Income tax expense is also impacted by ongoing federal and state income tax audits and changes in tax law.

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NOTE 10: 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 $80 million of investment securities as collateral at March 31, 2012, and pledged $85 million of investment securities as collateral at December 31, 2011.

The Corporation’s derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. See Note 12, “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)
March 31, 2012
Interest rate swap – short-term funding	$	100,000	$	(1,240	)		Other liabilities		0.13	%		3.04	%		5 months
December 31, 2011
Interest rate swap – short-term funding	$	100,000	$	(2,011	)		Other liabilities		0.07	%		3.04	%		8 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 Gain / (Loss) Recognized in OCI on Derivatives (Effective Portion)		Category of Gain / (Loss) Reclassified from AOCI into Income (Effective Portion)		Amount of Gain / (Loss) Reclassified from AOCI into Income (Effective Portion)		Category of Gain  /(Loss) Recognized in Income on Derivatives (Ineffective Portion)		Gross Amount of Gain /(Loss) Recognized in Income on Derivatives (Ineffective Portion)
Three Months Ended March 31, 2012				Interest Expense				Interest Expense
Interest rate swap—short-term funding	$	10		Short-term funding	$	731		Short-term funding	$	18
Three Months Ended March 31, 2011				Interest Expense				Interest Expense
Interest rate swaps—short-term funding	$	450		Short-term funding	$	982		Short-term funding	$	(24	)

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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. 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 March 31, 2012, accumulated other comprehensive income included a deferred after-tax net loss of $0.5 million related to these derivatives, compared to a deferred after-tax net loss of $1 million at December 31, 2011. The net after-tax derivative loss included in accumulated other comprehensive income at March 31, 2012, 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.

							Weighted Average
($ in Thousands)	Notional Amount		Fair Value			Balance Sheet Category	Receive Rate(1)			Pay Rate(1)			Maturity
March 31, 2012
Interest rate-related instruments — customer and mirror	$	1,655,325	$	67,891		Other assets		1.54	%		1.54	%		43 months
Interest rate-related instruments — customer and mirror		1,655,325		(74,057	)	Other liabilities		1.54			1.54			43 months
Interest rate lock commitments (mortgage)		366,507		6,755		Other assets		—			—			—
Forward commitments (mortgage)		461,250		(887	)	Other liabilities		—			—			—
Foreign currency exchange forwards		44,363		1,133		Other assets		—			—			—
Foreign currency exchange forwards		44,722		(1,066	)	Other liabilities		—			—			—
Purchased options (time deposit)		82,116		4,078		Other assets		—			—			—
Written options (time deposit)		82,116		(4,078	)	Other liabilities		—			—			—
December 31, 2011
Interest rate-related instruments — customer and mirror	$	1,563,831	$	71,143		Other assets		1.66	%		1.66	%		45 months
Interest rate-related instruments — customer and mirror		1,563,831		(78,064	)	Other liabilities		1.66			1.66			45 months
Interest rate lock commitments (mortgage)		235,375		4,571		Other assets		—			—			—
Forward commitments (mortgage)		437,500		(4,771	)	Other liabilities		—			—			—
Foreign currency exchange forwards		52,973		2,079		Other assets		—			—			—
Foreign currency exchange forwards		44,107		(1,891	)	Other liabilities		—			—			—
Purchased options (time deposit)		54,780		2,854		Other assets		—			—			—
Written options (time deposit)		54,780		(2,854	)	Other liabilities		—			—			—

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

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

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	Income Statement Category of Gain / (Loss) Recognized in Income	Gain / (Loss) Recognized in Income
		($ in Thousands)
Three Months Ended March 31, 2012
Interest rate-related instruments — customer and mirror, net	Capital market fees, net	$	755
Interest rate lock commitments (mortgage)	Mortgage banking, net		2,184
Forward commitments (mortgage)	Mortgage banking, net		3,884
Foreign currency exchange forwards	Capital market fees, net		(121	)
Three Months Ended March 31, 2011
Interest rate-related instruments — customer and mirror, net	Capital market fees, net	$	(63	)
Interest rate lock commitments (mortgage)	Mortgage banking, net		1,272
Forward commitments (mortgage)	Mortgage banking, net		(6,162	)
Foreign currency exchange forwards	Capital market fees, net		(90	)

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 quarter of 2012 was a $1 million gain, while the net impact for the full year 2011 was a $2 million net loss and the net impact for the first quarter of 2011 was less than a $0.1 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 March 31, 2012, was a net asset of $6 million compared to a net liability of $0.2 million at December 31, 2011.

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 March 31, 2012, the Corporation had $89 million in notional balances of foreign currency forwards related to loans and foreign currency forwards related to customer transactions (including mirror foreign currency forwards on the customer transactions). At December 31, 2011, the Corporation had $97 million in notional balances of foreign currency forwards related to loans and foreign currency forwards related to customer transactions (including mirror foreign currency forwards on the customer transactions).

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. At March 31, 2012, the Corporation had $82 million in notional balances of written and purchased options, compared with $55 million in notional balances at December 31, 2011.

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NOTE 11: 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 10). The following is a summary of lending-related commitments.

	March 31, 2012		December 31, 2011
	($ in Thousands)
Commitments to extend credit, excluding commitments to originate residential mortgage loans held for sale(1)(2)	$	4,551,151	$	4,561,210
Commercial letters of credit (1)		48,479		47,699
Standby letters of credit (3)		313,165		320,375

(1) These off-balance sheet financial instruments are exercisable at the market rate prevailing at the date the underlying transaction will be completed and, thus, are deemed to have no current fair value, or the fair value is based on fees currently charged to enter into similar agreements and is not material at March 31, 2012 or December 31, 2011.

(2) Interest rate lock commitments to originate residential mortgage loans held for sale are considered derivative instruments and are disclosed in Note 10.

(3) The Corporation has established a liability of $4 million at both March 31, 2012 and December 31, 2011, as an estimate of the fair value of these financial instruments.

Lending-related Commitments

As a financial services provider, the Corporation routinely enters into commitments to extend credit. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Corporation, with each customer’s creditworthiness evaluated on a case-by-case basis. The commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amount of those instruments. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the customer. Since a significant portion of commitments to extend credit are subject to specific restrictive loan covenants or may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements. As of March 31, 2012 and December 31, 2011, the Corporation had a reserve for losses on unfunded commitments totaling $16 million and $15 million, respectively, included in other liabilities on the consolidated balance sheets.

Lending-related commitments include commitments to extend credit, commitments to originate residential mortgage loans held for sale, commercial letters of credit, and standby letters of credit. Commitments to extend credit are agreements to lend to customers at predetermined interest rates, as long as there is no violation of any condition established in the contracts. Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded on the consolidated balance sheets. The Corporation’s derivative and hedging activity is further described in Note 10. 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 both March 31, 2012 and December 31, 2011, was $36 million, included in other assets on the consolidated balance sheets. Related to these investments, the Corporation had remaining commitments to fund of $17 million at March 31, 2012 and $15 million at December 31, 2011.

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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. An agreement in principle has been reached with plaintiffs’ counsel which requires payment by the Bank of $13 million for a full and complete release of all claims brought against the Bank. A settlement agreement will be filed with the court for preliminary approval upon negotiating a final agreement. Although we cannot guarantee that the court will approve the settlement, it is reasonably likely that the settlement will be approved. By entering into such an agreement, we have not admitted any liability with respect to the lawsuit. The settlement is a result of our evaluation of the cost of fully litigating the matter and the time and expense of resources needed to administer the litigation. The settlement amount has been accrued for in the financial statements.

The Corporation, as a member bank of Visa, Inc. (“Visa”) prior to Visa’s completion of their initial public offering (“IPO”) in March 2008, had certain indemnification obligations pursuant to Visa’s certificate of incorporation and bylaws and in accordance with their membership agreements. In accordance with Visa’s bylaws prior to the IPO, the Corporation could have been required to indemnify Visa for the Corporation’s proportional share of losses based on the pre-IPO membership interests. In contemplation of the IPO, Visa announced that it had completed restructuring transactions during the fourth quarter of 2007. As part of this restructuring, the Corporation’s indemnification obligation was modified to include only certain known litigation as of the date of the restructuring. Based upon Visa’s revised liability estimate for litigation, including the current funding of litigation settlements, the Corporation has a Visa indemnification liability (included in other liabilities on the consolidated balance sheets) totaling $2 million at both March 31, 2012 and December 31, 2011. In connection with the IPO in 2008, Visa retained a portion of the proceeds to fund an escrow account in order to resolve existing litigation settlements as well as to fund potential future litigation settlements. The Corporation’s interest in this escrow account (included in other assets on the consolidation balance sheets) was $2 million at both March 31, 2012 and December 31, 2011.

Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages originated under our usual underwriting procedures, and are most often sold on a nonrecourse basis. 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 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 March 31, 2012, and

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December 31, 2011, there were approximately $65 million and $56 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 March 31, 2012 and December 31, 2011, there were $431 million and $475 million, respectively, of such residential mortgage loans with credit risk recourse, upon which there have been negligible historical losses to the Corporation.

For certain mortgage loans originated by the Corporation, borrowers may be required to obtain Private Mortgage Insurance (“PMI”) provided by third-party insurers. The Corporation entered into reinsurance treaties with certain 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. As of January 1, 2009, the Corporation discontinued providing reinsurance coverage for new loans in exchange for a portion of the PMI premium. At March 31, 2012, the Corporation’s potential risk exposure was approximately $19 million. The Corporation’s estimated liability for reinsurance losses, including estimated losses incurred but not yet reported, was $9 million and $8 million at March 31, 2012 and December 31, 2011, respectively.

Regulatory Matters:

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

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NOTE 12: Fair Value Measurements

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

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

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. As a result, certain prior period reclassifications and disclosures have been made to conform to the new requirements. The Corporation now classifies impaired loans as a Level 3 fair value measurement, compared to a Level 2 fair value measurement in prior periods, and the prior periods have been reclassified to reflect this change. These reclassifications had no impact on the Corporation’s consolidated results of operations, financial position, or liquidity.

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

Investment securities available for sale: Where quoted prices are available in an active market, investment securities are classified in Level 1 of the fair value hierarchy. Level 1 investment securities primarily include U.S. Treasury, certain Federal agency, and exchange-traded debt and equity securities. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate, and are classified in Level 2 of the fair value hierarchy. Examples of these investment securities include certain Federal agency securities, obligations of state and political subdivisions, mortgage-related securities, asset-backed securities, and other debt securities. Lastly, in certain cases where there is limited activity or less transparency around inputs to the estimated fair value, securities are classified within Level 3 of the fair value hierarchy. Level 3 securities primarily include 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.

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,

36

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

While the Corporation has determined that the majority of the inputs used to value its derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Corporation has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions as of March 31, 2012, and December 31, 2011, and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. Therefore, the Corporation has determined that the fair value measures of its derivative financial instruments in their entirety are classified within Level 2 of the fair value hierarchy.

Derivative financial instruments (foreign 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 10, “Derivative and Hedging Activities,” for additional disclosure regarding the Corporation’s mortgage derivatives.

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.

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

Impaired Loans: The Corporation considers a loan impaired when it is probable that the Corporation will be unable to collect all amounts due according to the original contractual terms of the note agreement, including both principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this impaired loan definition. For individually evaluated impaired loans, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, and the estimated liquidity of the note.

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

The table below presents the Corporation’s investment securities available for sale and derivative financial instruments measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

			Fair Value Measurements Using
	March 31, 2012		Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Investment securities available for sale:
U.S. Treasury securities	$	1,001	$	1,001	$	—	$	—
Federal agency securities		8		8		—		—
Obligations of state and political subdivisions (municipal securities)		835,664		—		835,664		—
Residential mortgage-related securities		3,554,430		—		3,554,430		—
Commercial mortgage-related securities		19,303		—		19,303		—
Asset-backed securities		163,014		—		163,014		—
Other securities (debt and equity)		95,680		12,136		82,943		601
Total investment securities available for sale	$	4,669,100	$	13,145	$	4,655,354	$	601
Derivatives (other assets)	$	79,857	$	—	$	73,102	$	6,755
Liabilities:
Derivatives (other liabilities)	$	81,328	$	—	$	80,441	$	887

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

The table below presents a rollforward of the balance sheet amounts for the year ended December 31, 2011 and the three months ended March 31, 2012, 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			Derivative Financial Instruments
	Available for Sale
Balance December 31, 2010	$	1,672		$	5,539
Total net losses included in income:
Impairment losses on investment securities		(816	)		—
Mortgage derivative loss		—			(5,739	)
Balance December 31, 2011	$	856		$	(200	)
Total net gains (losses) included in income:
Mortgage derivative gain		—			6,068
Total net losses included in other comprehensive income:
Investment securities losses		(255	)		—
Balance March 31, 2012	$	601		$	5,868

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

Investment securities available for sale – other securities (debt and equity): In valuing the investment securities available for sale classified within Level 3, the Corporation utilized a discounted cash flow model and incorporated its own assumptions about future cash flows and discount rates adjusting for credit and liquidity factors. The Corporation also reviewed the underlying collateral and other relevant data in developing the assumptions for these investment securities. The significant unobservable input used within the discounted cash flow analysis was the discount rate, which was based on the 3 month LIBOR forward curve (the 3 month LIBOR forward ranged from 0.46% to 3.53%) plus the investment security spread at March 31, 2012.

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

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

Mortgage servicing rights: The discounted cash flow analyses that generate expected market prices utilize the observable characteristics of the mortgage servicing rights portfolio, as well as certain unobservable valuation parameters. The significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are the weighted average constant prepayment rate and weighted average discount rate, which were 21.55% and 9.7% at March 31, 2012, respectively. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. Although the prepayment rate and discount rate are not directly interrelated, they will generally move in opposite directions.

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

The table below presents the Corporation’s loans held for sale, impaired loans, and mortgage servicing rights measured at fair value on a nonrecurring basis as of March 31, 2012 and December 31, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
			Fair Value Measurements Using
	March 31, 2012		Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Loans held for sale	$	196,570	$	—	$	196,570	$	—
Impaired loans (1)		157,270		—		—		157,270
Mortgage servicing rights		50,001		—		—		50,001
			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
	($ in Thousands)
Assets:
Loans held for sale	$	249,195	$	—	$	249,195	$	—
Impaired loans (1)		178,669		—		—		178,669
Mortgage servicing rights		48,152		—		—		48,152

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

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

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During the first quarter of 2012 and the full year 2011, certain other real estate owned, upon initial recognition, was re-measured and reported at fair value through a charge off to the allowance for loan losses based upon the estimated fair value of the other real estate owned, less estimated selling costs. The fair value of other real estate owned, upon initial recognition or subsequent impairment, was estimated using appraised values, which the Corporation classifies as a Level 2 nonrecurring fair value measurement. Other real estate owned measured at fair value upon initial recognition totaled approximately $7 million for the first quarter of 2012 and $54 million for the year ended December 31, 2011, respectively. In addition to other real estate owned measured at fair value upon initial recognition, the Corporation also recorded write-downs to the balance of other real estate owned for subsequent impairment of $3 million, $1 million, and $9 million to noninterest expense for the three months ended March 31, 2012 and 2011, and the year ended December 31, 2011, respectively.

Fair Value of Financial Instruments:

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

The estimated fair values of the Corporation’s financial instruments at March 31, 2012 and December 31, 2011, were as follows.

	March 31, 2012
	Carrying Amount		Fair Value		Fair Value Measurements Using
					Level 1		Level 2		Level 3
	($ in Thousands)
Financial assets:
Cash and due from banks	$	360,728	$	360,728	$	360,728	$	—	$	—
Interest-bearing deposits in other financial institutions		344,148		344,148		344,148		—		—
Federal funds sold and securities purchased under agreements to resell		7,100		7,100		—		7,100		—
Investment securities available for sale		4,669,100		4,669,100		13,145		4,655,354		601
FHLB and Federal Reserve Bank stocks		177,808		177,808		—		177,808		—
Loans held for sale		196,570		199,087		—		199,087		—
Loans, net		13,897,427		13,432,367		—		—		13,432,367
Bank owned life insurance		546,894		546,894		—		546,894		—
Accrued interest receivable		66,176		66,176		66,176		—		—
Interest rate-related agreements (1)		67,891		67,891		—		67,891		—
Foreign currency exchange forwards		1,133		1,133		—		1,133		—
Interest rate lock commitments to originate residential mortgage loans held for sale		6,755		6,755		—		—		6,755
Purchased options (time deposit)		4,078		4,078		—		4,078		—
Financial liabilities:
Noninterest-bearing demand, savings, interest-bearing demand, and money market deposits	$	13,306,012	$	13,306,012	$	13,306,012	$	—	$	—
Brokered CDs and other time deposits		2,347,364		2,347,364		—		2,347,364		—
Short-term funding		1,936,219		1,936,219		—		1,936,219		—
Long-term funding		1,176,736		1,225,172		—		1,225,172		—
Accrued interest payable		6,357		6,357		6,357		—		—
Interest rate-related agreements (1)		75,297		75,297		—		75,297		—
Foreign currency exchange forwards		1,066		1,066		—		1,066		—
Standby letters of credit (2)		3,583		3,583		—		3,583		—
Forward commitments to sell residential mortgage loans		887		887		—		—		887
Written options (time deposit)		4,078		4,078		—		4,078		—

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

(1) At both March 31, 2012 and December 31, 2011, the notional amount of cash flow hedge interest rate swap agreements was $100 million. See Note 10 for information on the fair value of derivative financial instruments.

(2) At both March 31, 2012 and December 31, 2011, the commitment on standby letters of credit was $0.3 billion. See Note 11 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 prices of securities with similar characteristics, or discounted cash flows.

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

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

Loans, net—The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Corporation believes are consistent with liquidity discounts in the market place. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial and industrial, real estate construction, commercial real estate (owner occupied and investor), lease financing, residential mortgage, home equity, and other installment. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. The fair value analysis also included other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate. In addition, as part of the annual goodwill impairment assessment, the Corporation may consult with an independent party as to the assumptions used and to determine that the Corporation’s valuation is consistent with the third party valuation.

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

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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 13: 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 months ended March 31, 2012 and 2011, and for the full year 2011 were as follows.

	Three Months Ended March 31,						Year Ended December 31,
	2012			2011			2011
	($ in Thousands)
Components of Net Periodic Benefit Cost
Pension Plan:
Service cost	$	2,613		$	2,613		$	9,898
Interest cost		1,613			1,589			6,414
Expected return on plan assets		(3,558	)		(3,220	)		(12,896	)
Amortization of prior service cost		17			18			72
Amortization of actuarial loss		640			451			2,024
Total net periodic benefit cost	$	1,325		$	1,451		$	5,512
Postretirement Plan:
Interest cost	$	47		$	50		$	198
Amortization of prior service cost		43			99			395
Total net periodic benefit cost	$	90		$	149		$	593

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 $10 million to its Pension Plan in the first quarter of 2012.

NOTE 14: Segment Reporting

During the first quarter of 2012, the Corporation implemented a new risk-based internal profitability measurement system which provides strategic business unit reporting. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the units. As a result of these changes, we have re-organized our business segments to provide enhanced transparency given our new system capabilities. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The reorganization will result in three reportable segments, in contrast to the two previously reported, with no segment representing more than half of the assets, liabilities or Tier 1 Common Equity of the Corporation as a whole. The three reportable segments will be Commercial Banking, Consumer Banking, and Risk Management and Shared Services.

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The financial information of the Corporation’s segments has been compiled utilizing the accounting policies described in the Corporation’s 2011 annual report on Form 10-K with certain exceptions. The more significant of these exceptions are described herein. The Corporation allocates interest income or interest expense using a funds transfer pricing methodology that charges users of funds (assets) interest expense and credits providers of funds (liabilities, primarily deposits) with income based on the maturity, prepayment and/or repricing characteristics of the assets and liabilities. The net effect of this allocation is recorded in the Risk Management and Shared Services segment. A credit provision is allocated to segments based on long-term annual net charge off rates attributable to the credit risk of loans managed by the segment during the period. In contrast, the level of the consolidated provision for loan losses is determined using the methodologies described in the Corporation’s 2011 annual report on Form 10-K to assess the overall appropriateness of the allowance for loan losses. The net effect of the credit provision is recorded in Risk Management and Shared Services. Indirect expenses incurred by certain centralized support areas are allocated to segments based on actual usage (for example, volume measurements) and other criteria. Certain types of administrative expense and bank-wide expense accruals (including amortization of core deposit and other intangible assets associated with acquisitions) are generally not allocated to segments. Income taxes are allocated to segments based on the Corporation’s estimated effective tax rate adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the segments based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated with the business of the segment (including interest, credit and operating risk).

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

A description of each business segment is presented below.

Commercial Banking– The Commercial Banking segment offers loans, deposits, and related banking services offered to businesses (including regional middle market and larger commercial businesses, governments/municipalities, metro or niche markets, and companies with specialized borrowing needs such as financial institutions, or asset-based borrowers), which primarily include, but are not limited to: business checking and other business deposit products, business loans, lines of credit, commercial real estate financing, construction loans, letters of credit, revolving credit arrangements, and to a lesser degree, insurance related products and services, business credit cards, equipment and machinery leases, and the support to deliver, fund and manage such banking services. To further support business customers and correspondent financial institutions, the Corporation provides safe deposit and night depository services, cash management, risk management, international banking, as well as check clearing, safekeeping, and other banking-based services. The segment competes on the basis of relationship manager performance, commitment to local markets and market competitive pricing. This segment focuses on optimizing the go to market approach with emphasis on market alignment, relationship banking and sales excellence.

Consumer Banking – The Consumer Banking segment consists of lending and deposit gathering to individuals and small businesses and also provides a variety of fiduciary, investment management, advisory and corporate agency services to assist customers in building, investing or protecting their wealth, including securities brokerage, and trust/asset management. The segment offers a variety of loan and deposit products to retail customers, including but not limited to: home equity loans and lines of credit, residential mortgage loans and mortgage refinancing, personal and installment loans, checking, savings, money market deposit accounts, IRA accounts, certificates of deposit, and safe deposit boxes; small business checking and deposit products, loans, lines of credit; fixed and variable annuities, full-service, discount and on-line investment brokerage; and trust/asset management, investment management, administration of pension, profit-sharing and other employee benefit plans, personal trusts, and estate planning. The segment competes by offering an extensive breadth and depth of products, an extensive branch network and competitive pricing. The Consumer Banking segment strives toward optimization of value propositions and relationship banking.

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

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Information about the Corporation’s segments is presented below.

Segment Income Statement Data
($ in Thousands)	Commercial Banking			Consumer Banking			Risk Management and Shared Services			Consolidated Total
Three Months Ended March 31, 2012
Net interest income	$	70,086		$	80,239		$	4,343		$	154,668
Noninterest income		27,816			54,457			(714	)		81,559
Total revenue		97,902			134,696			3,629			236,227
Credit provision *		10,882			4,931			(15,813	)		—
Noninterest expense		58,504			106,346			8,025			172,875
Income before income taxes		28,516			23,419			11,417			63,352
Income tax expense		9,981			8,197			2,541			20,719
Net income	$	18,535		$	15,222		$	8,876		$	42,633
Return on average allocated capital (ROT1CE) **		9.9	%		10.3	%		7.6	%		9.2	%
Three Months Ended March 31, 2011
Net interest income	$	64,016		$	83,642		$	6,065		$	153,723
Noninterest income		29,483			44,152			(1,453	)		72,182
Total revenue		93,499			127,794			4,612			225,905
Credit provision *		9,738			4,353			16,909			31,000
Noninterest expense		50,372			109,206			4,598			164,176
Income (loss) before income taxes		33,389			14,235			(16,895	)		30,729
Income tax expense (benefit)		11,686			4,982			(8,792	)		7,876
Net income (loss)	$	21,703		$	9,253		$	(8,103	)	$	22,853
Return on average allocated capital (ROT1CE) **		11.7	%		6.9	%		(8.3	)%		3.7	%
Segment Balance Sheet Data
($ in Thousands)	Commercial Banking			Consumer Banking			Risk Management and Shared Services			Consolidated Total
Average Balances for 1Q 2012
Average earning assets	$	7,081,463		$	7,212,426		$	5,077,840		$	19,371,729
Average loans		7,078,409			7,212,426			19,606			14,310,441
Average deposits		4,352,399			9,432,244			1,215,924			15,000,567
Average allocated capital (T1CE) **	$	746,008		$	591,280		$	464,361		$	1,801,649
Average Balances for 1Q 2011
Average earning assets	$	6,051,968		$	6,611,525		$	6,634,373		$	19,297,866
Average loans		6,049,021			6,611,525			13,298			12,673,844
Average deposits		3,386,977			9,445,062			1,413,575			14,245,614
Average allocated capital (T1CE) **	$	738,870		$	537,805		$	389,939		$	1,666,614

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

** ROT1CE reflects return on average allocated Tier 1 common equity (“T1CE”).

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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:

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

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

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

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

• legal, compliance, and reputational risks, including regulatory and litigation risks; and

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

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.

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

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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. In addition, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The impairment testing process is conducted by assigning net assets and goodwill to each reporting unit. The fair value of each reporting unit is compared to the recorded book value, “step one”. If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired and “step two” is not considered necessary. If the carrying value of a reporting unit exceeds its fair value, the impairment test continues (“step two”) by comparing the carrying value of the reporting unit’s goodwill to the implied fair value of goodwill. The implied fair value is computed by adjusting all assets and liabilities of the reporting unit to current fair value with the offset adjustment to goodwill. The adjusted goodwill balance is the implied fair value of the goodwill. An impairment charge is recognized if the carrying fair value of goodwill exceeds the implied fair value of goodwill.

The Corporation conducted its annual impairment testing in May 2011. In addition, management assessed and determined during the fourth quarter of 2011 that an extended decline in the Corporation’s stock price qualified as a triggering event and as such, performed an interim impairment test. Both the annual impairment test and the interim impairment test during 2011 indicated that the estimated fair value exceeded the carrying value (including goodwill) for each reporting unit. Therefore, a step two analysis was not required.

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 an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of its mortgage servicing rights. The use of a discounted cash flow model involves judgment, particularly of estimated prepayment speeds of underlying mortgages serviced and the overall level of interest rates. Loan type and note interest rate are the predominant risk characteristics of the underlying loans used to stratify capitalized mortgage servicing rights for purposes of measuring impairment. The Corporation periodically reviews the assumptions underlying the valuation of mortgage servicing rights. While the Corporation believes that the values produced by the discounted cash flow model are indicative of the fair value of its mortgage servicing rights portfolio, these values can change significantly depending upon key factors, such as the then current interest rate environment, estimated prepayment speeds of the underlying mortgages serviced, and other economic conditions. The proceeds that might be received should the Corporation actually consider a sale of some or all of the mortgage servicing rights portfolio could differ from the amounts reported at any point in time.

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Mortgage servicing rights are carried at the lower of amortized cost or estimated fair value and are assessed for impairment at each reporting date. Impairment is assessed based on the fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. However, the extent to which interest rates impact the value of the mortgage servicing rights asset depends, in part, on the magnitude of the changes in market interest rates and the differential between the then current market interest rates for mortgage loans and the mortgage interest rates included in the mortgage servicing portfolio. Management recognizes that the volatility in the valuation of the mortgage servicing rights asset will continue. To better understand the sensitivity of the impact of prepayment speeds and refinance rates on the value of the mortgage servicing rights asset at March 31, 2012 (holding all other factors unchanged), if refinance rates were to decrease 50 bp, the estimated value of the mortgage servicing rights asset would have been approximately $7 million (or 13%) lower. Conversely, if refinance rates were to increase 50 bp, the estimated value of the mortgage servicing rights asset would have been approximately $8 million (or 16%) 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 12, “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 10, “Derivative and Hedging Activities,” and Note 12 “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 also Note 9, “Income Taxes,” of the notes to consolidated financial statements and section “Income Taxes.”

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Segment Review

As discussed in Note 14 of the notes to consolidated financial statements, the Corporation implemented a new risk-based internal profitability measurement system during the first quarter of 2012. As a result, we have reorganized our business segments to provide enhanced transparency given our new system capabilities. The Corporation’s reportable segments have been determined based upon its internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer, and the distribution of those products and services are similar. The reportable segments are Commercial Banking, Consumer Banking and Risk Management and Shared Services.

The financial information of the Corporation’s segments was compiled utilizing the accounting policies described in Note 14 of the notes to consolidated financial statements. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to U.S. generally accepted accounting principles. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

The Commercial Banking segment consists of lending and deposit gathering to businesses and governmental units and the support to deliver, fund and manage such banking services. The Commercial Banking segment had net income of $19 million in the first quarter of 2012, down $3 million compared to $22 million for the comparable period in 2011. Earnings were down as expense growth outpaced revenue growth, due to the Corporation committing resources during the past year to grow this segment, including investments to expand into new markets (Houston, Cincinnati, Indianapolis, and Detroit) and new industry lending segments (power, oil and gas). As a result of these investments, segment revenue, grew $5 million to $98 million for the first quarter of 2012 compared to $93 million for the first quarter of 2011. The credit provision for loans increased $1 million to $11 million for the quarter due to the growth in the segment’s loan balances, offset by an improvement in credit quality as compared to the first quarter of 2011. Total segment expenses for the first quarter of 2012 were $58 million, up $8 million from $50 million in the comparable quarter in 2011 as the segment hired additional commercial bankers to support these new markets and to enhance its presence in existing markets. Average loan balances were $7.1 billion for the first quarter of 2012, up $1.0 billion from an average balance of $6.1 billion during the first quarter of 2011, and average deposit balances were $4.4 billion for the first quarter of 2012, up $1.0 billion from average deposits of $3.4 billion during the first quarter of 2011, reflecting our investments and strategy to expand and grow the Commercial Banking segment. Average allocated capital increased modestly to $746 million for the first quarter of 2012 reflecting the increase in the segment’s loan balances offset by an improvement in credit quality as compared to the first quarter of 2011.

The Consumer Banking segment consists of lending and deposit gathering to individuals and small businesses and also provides a variety of other wealth management products and services. The Consumer Banking segment had net income of $15 million in the first quarter of 2012, up $6 million compared to $9 million in the first quarter of 2011. Earnings increased as segment revenue, grew $7 million to $135 million for the first quarter of 2012 compared to $128 million for the first quarter of 2011, primarily due to higher mortgage banking income, which was partially offset by decreases in net interest income, and lower deposit service charge and card-based fee income. The credit provision for loans increased $1 million to $5 million for the quarter due to the growth in the segment’s loan balances. Total segment expenses for the first quarter of 2012 were $106 million, down $3 million from $109 million in the comparable quarter in 2011 primarily due to the reduction in FDIC insurance costs. Average deposits were $9.4 billion for the first quarter of 2012, consistent with the average balance during the first quarter of 2011. Average loan balances were $7.2 billion during the first quarter of 2012, up $600 million from an average balance of $6.6 billion during the first quarter of 2011. The segment’s loan growth was primarily in the residential mortgage portfolio as the Corporation continued to retain much of its mortgage production throughout 2011 and into the first quarter of 2012. Average allocated capital increased $53 million to $591 million for the first quarter of 2012 reflecting the increase in the segment’s loan balances.

The Risk Management and Shared Services segment includes Corporate Risk Management, Finance, Treasury, Operations and Technology functions. Risk Management and Shared Services had net income of $9 million in the first quarter of 2012, up $17 million compared to a net loss of $8 million for the comparable period in 2011. The main components of the segment’s quarterly earnings improvement were a $33 million improvement in credit provision, which is consistent with the $31 million improvement in the Corporation’s overall loan loss provision, and a $3 million increase in expenses largely due to higher (unallocated) costs related to addressing certain regulatory issues. Average earning asset balances were $5.1 billion for the first quarter of 2012, down $1.5 billion from an average balance of $6.6 billion during the first quarter of 2011, reflecting the reduction in the Corporation’s investment portfolio. Average allocated capital increased $74 million to $464 million for the first quarter of 2012 reflecting the unallocated portion of the Corporation’s $135 million overall increase in average Tier 1 common equity.

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Results of Operations – Summary

The Corporation recorded net income of $43 million for the three months ended March 31, 2012, compared to net income of $23 million for the three months ended March 31, 2011. Net income available to common equity was $41 million for the three months ended March 31, 2012, or net income of $0.24 for both basic and diluted earnings per common share. Comparatively, net income available to common equity for the three months ended March 31, 2011, was $15 million, or a net income of $0.09 for both basic and diluted earnings per common share. The net interest margin for the first three months of 2012 was 3.31% compared to 3.32% for the first three months of 2011.

TABLE 1
Summary Results of Operations: Trends
($ in Thousands, except per share data)
	1st Qtr			4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
	2012			2011			2011			2011			2011
Net income (Quarter)	$	42,633		$	41,125		$	41,339		$	34,382		$	22,853
Net income (Year-to-date)		42,633			139,699			98,574			57,235			22,853
Net income available to common equity (Quarter)	$	41,333		$	39,825		$	34,034		$	25,570		$	15,440
Net income available to common equity (Year-to-date)		41,333			114,869			75,044			41,010			15,440
Earnings per common share – basic (Quarter)	$	0.24		$	0.23		$	0.20		$	0.15		$	0.09
Earnings per common share – basic (Year-to-date)		0.24			0.66			0.43			0.24			0.09
Earnings per common share – diluted (Quarter)	$	0.24		$	0.23		$	0.20		$	0.15		$	0.09
Earnings per common share – diluted (Year-to-date)		0.24			0.66			0.43			0.24			0.09
Return on average assets (Quarter)		0.79	%		0.75	%		0.75	%		0.64	%		0.43	%
Return on average assets (Year-to-date)		0.79			0.65			0.61			0.54			0.43
Return on average equity (Quarter)		5.93	%		5.71	%		5.49	%		4.63	%		2.92	%
Return on average equity (Year-to-date)		5.93			4.66			4.33			3.75			2.92
Return on average common equity (Quarter)		5.88	%		5.66	%		4.88	%		3.79	%		2.36	%
Return on average common equity (Year-to-date)		5.88			4.21			3.70			3.08			2.36
Return on average Tier 1 common equity (Quarter) (1)		9.23	%		8.96	%		7.83	%		6.07	%		3.76	%
Return on average Tier 1 common equity (Year-to-date) (1)		9.23			6.71			5.92			4.92			3.76
Efficiency ratio (Quarter) (2)		73.19	%		77.28	%		71.89	%		72.58	%		72.67	%
Efficiency ratio (Year-to-date)(2)		73.19			73.61			72.38			72.62			72.67
Efficiency ratio, fully taxable equivalent (Quarter)(2)		71.44	%		75.68	%		69.88	%		70.79	%		70.36	%
Efficiency ratio, fully taxable equivalent (Year-to-date) (2)		71.44			71.68			70.34			70.57			70.36
Net interest margin (Quarter)		3.31	%		3.21	%		3.23	%		3.29	%		3.32	%
Net interest margin (Year-to-date)		3.31			3.26			3.28			3.30			3.32

(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.

51

TABLE 1A
Reconciliation of Non-GAAP Measure
	1st Qtr			4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
	2012			2011			2011			2011			2011
Efficiency ratio (Quarter) (a)		73.19	%		77.28	%		71.89	%		72.58	%		72.67	%
Taxable equivalent adjustment (Quarter)		(1.60	)		(1.77	)		(1.65	)		(1.73	)		(1.71	)
Asset sale gains / losses, net (Quarter)		(0.15	)		0.17			(0.36	)		(0.06	)		(0.60	)
Efficiency ratio, fully taxable equivalent (Quarter) (b)		71.44	%		75.68	%		69.88	%		70.79	%		70.36	%
Efficiency ratio (Year-to-date)(a)		73.19	%		73.61	%		72.38	%		72.62	%		72.67	%
Taxable equivalent adjustment (Year-to-date)		(1.60	)		(1.71	)		(1.70	)		(1.71	)		(1.71	)
Asset sale gains / losses, net (Year-to-date)		(0.15	)		(0.22	)		(0.34	)		(0.34	)		(0.60	)
Efficiency ratio, fully taxable equivalent (Year-to-date) (b)		71.44	%		71.68	%		70.34	%		70.57	%		70.36	%

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 quarter ended March 31, 2012, was $160 million, an increase of $1 million (1%) versus the comparable quarter last year. The increase in taxable equivalent net interest income was primarily attributable to favorable volume variances (as changes in the balances and mix of earning assets and interest-bearing liabilities increased taxable equivalent net interest income by $10 million), partially offset by unfavorable rate variances (as the impact of changes in the interest rate environment and product pricing reduced taxable equivalent net interest income by $9 million).

The net interest margin for the first quarter of 2012 was 3.31%, 1 bp lower than 3.32% for the same quarter in 2011. This comparable quarter decrease was a function of a 4 bp lower contribution from net free funds and a 3 bp increase in interest rate spread. The 3 bp improvement in interest rate spread was the net result of a 19 bp decrease in the cost of interest-bearing liabilities and a 16 bp decrease in the yield on earning assets.

The Federal Reserve left interest rates unchanged during 2011 and the first quarter of 2012. For the remainder of 2012, the Corporation anticipates modest pressure on the net interest margin from the continued low rate environment.

The yield on earning assets was 3.85% for the first quarter of 2012, 16 bp lower than the comparable quarter last year. Loan yields were down 37 bp, (to 4.21%), due to the repricing of adjustable rate loans and competitive pricing pressures in a low interest rate environment. The yield on investment securities and other short-term investments decreased 9 bp (to 2.84%), also impacted by the low interest rate environment and prepayment speeds of mortgage-related securities purchased at a premium.

The rate on interest-bearing liabilities of 0.70% for the first quarter of 2012 was 19 bp lower than the same period in 2011. Rates on interest-bearing deposits were down 24 bp (to 0.43%, reflecting the low rate environment and a targeted reduction of higher cost deposit products). The cost of short and long-term funding increased 2 bp (to 1.54%), with the cost of short-term funding down 28 bp while the cost of long-term funding increased 85 bp.

Average earning assets were $19.4 billion for the first quarter of 2012, an increase of $74 million (less than 1%) from the comparable period last year. On average, loan balances increased $1.6 billion, including increases in commercial loans (up $1.1 billion) and residential mortgage loans (up $712 million), while retail loans decreased (down $184 million). Average investment securities and other short-term investments decreased $1.6 billion, reflecting the Corporation’s strategy of funding loan growth primarily through investment securities run-off.

52

Average interest-bearing liabilities of $14.9 billion for the first quarter of 2012 were minimally changed from the first quarter of 2011 (up less than 1%). On average, interest-bearing deposits grew $292 million (primarily attributable to a $539 million increase in money market accounts and a $350 million increase in interest-bearing demand deposits, partially offset by a $444 million decrease in other time deposits and a $265 million decrease in brokered CDs), while noninterest-bearing demand deposits (a principal component of net free funds) were up $463 million. Average short and long-term funding balances decreased $279 million between the comparable first quarter periods, primarily attributable to a decrease in customer funding (driven by pricing strategies to shift funds away from customer funding and into more traditional deposit products).

53

TABLE 2
Net Interest Income Analysis
($ in Thousands)
	Three Months Ended March 31, 2012							Three Months Ended March 31, 2011
			Interest		Average					Interest		Average
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate
Earning assets:
Loans: (1)(2)(3)
Commercial and business lending	$	4,828,953	$	48,985		4.08	%	$	4,022,566	$	44,421		4.47	%
Commercial real estate lending		3,187,150		34,502		4.35			2,885,375		32,023		4.49
Total commercial		8,016,103		83,487		4.19			6,907,941		76,444		4.48
Residential mortgage		3,239,087		30,964		3.83			2,527,035		27,147		4.31
Retail		3,055,251		35,511		4.67			3,238,868		39,992		4.98
Total loans		14,310,441		149,962		4.21			12,673,844		143,583		4.58
Investment securities		4,611,600		34,667		3.01			5,858,293		46,993		3.21
Other short-term investments		449,688		1,247		1.11			765,729		1,458		0.76
Investments and other (1)		5,061,288		35,914		2.84			6,624,022		48,451		2.93
Total earning assets		19,371,729		185,876		3.85			19,297,866		192,034		4.01
Other assets, net		2,287,410							2,038,992
Total assets	$	21,659,139						$	21,336,858
Interest-bearing liabilities:
Interest-bearing deposits:
Savings deposits	$	1,029,390	$	185		0.07	%	$	917,053	$	264		0.12	%
Interest-bearing demand deposits		2,114,454		944		0.18			1,764,439		631		0.15
Money market deposits		5,688,567		3,558		0.25			5,149,261		4,688		0.37
Time deposits, excluding Brokered CDs		2,371,049		7,043		1.19			2,815,301		11,616		1.67
Total interest-bearing deposits, excluding Brokered CDs		11,203,460		11,730		0.42			10,646,054		17,199		0.66
Brokered CDs		113,253		306		1.09			378,289		1,050		1.13
Total interest-bearing deposits		11,316,713		12,036		0.43			11,024,343		18,249		0.67
Short and long-term funding		3,603,700		13,869		1.54			3,883,122		14,622		1.52
Total interest-bearing liabilities		14,920,413		25,905		0.70			14,907,465		32,871		0.89
Noninterest-bearing demand deposits		3,683,854							3,221,271
Other liabilities		164,687							35,486
Stockholders’ equity		2,890,185							3,172,636
Total liabilities and equity	$	21,659,139						$	21,336,858
Interest rate spread						3.15	%						3.12	%
Net free funds						0.16							0.20
Net interest income, taxable equivalent, and net interest margin			$	159,971		3.31	%			$	159,163		3.32	%
Taxable equivalent adjustment				5,303							5,440
Net interest income			$	154,668						$	153,723

(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

Provision for Loan Losses

The provision for loan losses for the first quarter of 2012 was $0, compared to $31 million for the first quarter of 2011 and $1 million for the fourth quarter of 2011. Net charge offs were $22 million for first quarter of 2012, compared to $53 million for the first quarter of 2011 and $23 million for the fourth quarter of 2011. Annualized net charge offs as a percent of average loans for the first quarter of 2012 were 0.61%, compared to 1.71% for the first quarter of 2011 and 0.64% for the fourth quarter of 2011. At March 31, 2012, the allowance for loan losses was $356 million, down from $454 million at March 31, 2011 and $378 million at December 31, 2011. The ratio of the allowance for loan losses to total loans was 2.50%, compared to 3.59% at March 31, 2011 and 2.70% at December 31, 2011. Nonaccrual loans at March 31, 2012, were $327 million, compared to $488 million at March 31, 2011, and $357 million at December 31, 2011. See Tables 7 and 8.

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

Noninterest Income

Noninterest income for the first quarter of 2012 was $82 million, up $9 million (13%) from the first quarter of 2011. Core fee-based revenue (as defined in Table 3 below) was down $6 million, while mortgage banking, net, was up $16 million. For the remainder of 2012, the Corporation expects modest year-over-year periodic improvement in fee income, partially offset by reduced mortgage banking income.

TABLE 3 Noninterest Income ($ in Thousands)
	1st Qtr.			1st Qtr.			Dollar			Percent
	2012			2011			Change			Change
Trust service fees	$	9,787		$	9,831		$	(44	)		(0.4	)%
Service charges on deposit accounts		18,042			19,064			(1,022	)		(5.4	)
Card-based and other nondeposit fees		10,879			15,598			(4,719	)		(30.3	)
Retail commissions		15,717			16,381			(664	)		(4.1	)
Core fee-based revenue		54,425			60,874			(6,449	)		(10.6	)
Mortgage banking income		21,700			7,894			13,806			174.9
Mortgage servicing rights expense		4,046			6,049			(2,003	)		(33.1	)
Mortgage banking, net		17,654			1,845			15,809			N/M
Capital market fees, net		3,716			2,378			1,338			56.3
Bank owned life insurance (“BOLI”) income		4,292			3,586			706			19.7
Other		1,913			5,507			(3,594	)		(65.3	)
Subtotal (“fee income”)		82,000			74,190			7,810			10.5
Asset sale losses, net		(481	)		(1,986	)		1,505			(75.8	)
Investment securities gains / (losses), net		40			(22	)		62			(281.8	)
Total noninterest income	$	81,559		$	72,182		$	9,377			13.0	%
N/M – Not meaningful.

Service charges on deposit accounts were $18 million, down $1 million (5%) from the comparable period in 2011. The decrease was primarily attributable to lower nonsufficient funds / overdraft fees (down $2 million to $7 million) due to changes in customer behavior, recent regulatory changes, and changes in deposit account products.

55

Card-based and other nondeposit fees were $11 million, down $5 million (30%) from the first quarter of 2011, primarily due to lower interchange fees 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 Durbin Amendment negatively impacted the amount the bank charged in interchange fees during the first quarter of 2012 by approximately $3 million. Retail commissions (which include commissions from insurance and brokerage product sales) were $16 million for the first quarter of 2012, down $1 million (4%) compared to the first quarter of 2011, attributable to lower fixed annuity commissions.

Net mortgage banking income was $18 million for the first quarter of 2012, compared to $2 million for the comparable quarter in 2011. 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 $22 million for the first quarter of 2012, an increase of $14 million compared to the first quarter of 2011. This increase was primarily attributable to higher volume of loans sold to the secondary market, resulting in higher gains on sales and related income (up $14 million). Secondary mortgage production was $564 million for the first quarter of 2012, compared to $290 million for the first quarter of 2011.

Mortgage servicing rights expense includes both the amortization of the mortgage servicing rights asset and changes to the valuation allowance associated with the mortgage servicing rights asset. Mortgage servicing rights expense is affected by the size of the servicing portfolio, as well as the changes in the estimated fair value of the mortgage servicing rights asset. Mortgage servicing rights expense was $4 million for the first quarter of 2012, compared to $6 million for the first quarter of 2011, with a $3 million decrease to the valuation reserve (comprised of a $2 million recovery to the valuation reserve for the first quarter of 2012 compared to a $1 million addition to the valuation reserve for the first quarter of 2011) and $1 million higher base amortization. As mortgage interest rates fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. Mortgage servicing rights, net of any valuation allowance, are carried in other intangible assets, net, on the consolidated balance sheets at the lower of amortized cost or estimated fair value. At March 31, 2012, the mortgage servicing rights asset, net of its valuation allowance, was $50 million, representing 69 bp of the $7.3 billion servicing portfolio, compared to a net mortgage servicing rights asset of $62 million, representing 83 bp of the $7.5 billion servicing portfolio at March 31, 2011. Mortgage servicing rights are considered a critical accounting policy given that estimating their fair value involves a discounted cash flow model and assumptions that involve judgment, particularly of estimated prepayment speeds of the underlying mortgages serviced and the overall level of interest rates. See section “Critical Accounting Policies,” as well as Note 7, “Goodwill and Other Intangible Assets,” and Note 12, “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 related services provided to our customers) were $4 million for the first quarter of 2012, compared to $2 million for the comparable quarter in 2011, primarily due to an increase in interest rate risk related fees. Other income of $2 million was $4 million lower than the first quarter of 2011, primarily due to a decrease in limited partnership income. Net losses on investment securities and asset sales combined were favorable by $2 million, primarily due to lower losses on the sales of other real estate owned.

Noninterest Expense

Noninterest expense was $173 million for the first quarter of 2012, up $9 million (5%) over the comparable quarter in 2011. Personnel expense was up $5 million (6%), while legal and professional fees were up $5 million. For the remainder of 2012, the Corporation expects noninterest expense growth in the low-single-digit range, including the costs of BSA compliance and realized savings from branch consolidations.

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TABLE 4 Noninterest Expense ($ in Thousands)
	1st Qtr. 2012		1st Qtr. 2011		Dollar Change			Percent Change
Personnel expense	$	94,078	$	88,930	$	5,148			5.8	%
Occupancy		15,179		15,275		(96	)		(0.6	)
Equipment		5,468		4,767		701			14.7
Data processing		9,516		7,534		1,982			26.3
Business development and advertising		5,381		4,943		438			8.9
Other intangible amortization		1,049		1,178		(129	)		(11.0	)
Loan expense		2,910		2,956		(46	)		(1.6	)
Legal and professional fees		9,715		4,482		5,233			116.8
Losses other than loans		3,550		6,297		(2,747	)		(43.6	)
Foreclosure / OREO expense		6,475		6,061		414			6.8
FDIC expense		4,870		8,244		(3,374	)		(40.9	)
Stationery and supplies		1,610		1,487		123			8.3
Courier		1,135		1,080		55			5.1
Postage		1,501		1,680		(179	)		(10.7	)
Other		10,438		9,262		1,176			12.7
Total noninterest expense	$	172,875	$	164,176	$	8,699			5.3	%

Personnel expense (which includes salary-related expenses and fringe benefit expenses) was $94 million for the first quarter of 2012, up $5 million (6%) versus the first quarter of 2011. Average full-time equivalent employees were 5,045 for the first quarter of 2012, up 2% from 4,929 for the first quarter of 2011. Salary-related expenses increased $3 million (5%). This increase was primarily the result of higher compensation and commissions (up $2 million or 4%, including increases in full-time equivalent employees, merit increases between the years, and higher compensation related to the vesting of stock options and restricted stock grants), and higher performance based incentives (up $1 million or 27%). Fringe benefit expenses were up $2 million (10%) versus the first quarter of 2011, primarily due to higher employment taxes and benefit plan expenses related to the increased compensation.

Nonpersonnel noninterest expenses on a combined basis were $79 million, up $4 million (5%) compared to the comparable quarter in 2011. Legal and professional fees were up $5 million, primarily due to the cost of addressing regulatory items. Data processing was up $2 million (26%), due to strategic investments in our systems. Losses other than loans decreased $3 million (44%), primarily due to the change in litigation reserves on the settlement of a legal matter. FDIC expense decreased $3 million (41%) due to a change in the FDIC expense calculation (from a deposit based calculation to a net asset / risk-based assessment effective April 1, 2011) as well as the Corporation’s improved regulatory ratings. All remaining noninterest expense categories on a combined basis were up $3 million (5%).

Income Taxes

For the first quarter of 2012, the Corporation recognized income tax expense of $21 million, compared to income tax expense of $8 million for the first quarter of 2011. The effective tax rate was 32.70% for the first quarter of 2012, compared to an effective tax rate of 25.63% for the first quarter of 2011. The change in income tax and the effective tax rate was primarily due to the level of pretax income between the comparable first quarter periods. 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 judgments about information available to them at the time of their examinations. See Note 9, “Income Taxes,” of the notes to consolidated financial statements and section “Critical Accounting Policies.”

57

Balance Sheet

At March 31, 2012, total assets were $21.9 billion, unchanged from December 31, 2011. Loans of $14.3 billion at March 31, 2012, were up $223 million from December 31, 2011, with increases in residential mortgage loans (up $178 million) and commercial real estate lending (up $82 million), partially offset by a $15 million decrease in commercial and business lending. The Corporation expects a moderate pace of approximately 3% quarterly loan growth for the remainder of 2012. Investment securities available for sale were $4.7 billion, down $268 million from year end 2011 (primarily due to calls and maturities of mortgage-related and Federal agency securities during the first quarter of 2012), as the Corporation continued the strategy of funding long growth with run-off from the investment securities portfolio.

At March 31, 2012, total deposits of $15.7 billion were up $563 million from December 31, 2011. Since December 31, 2011, money market deposits increased $1.0 billion, while other time deposits declined $224 million and brokered CDs decreased $156 million, reflecting the Corporation’s continued strategy for reducing its utilization of network transaction deposits and brokered deposits. Noninterest-bearing demand deposits increased to $4.0 billion and represented 26% of total deposits, unchanged from December 31, 2011. Short and long-term funding of $3.1 billion was down $579 million since year-end 2011, primarily in short-term funding, driven by pricing strategies to shift customer funding into more traditional deposit products.

Since March 31, 2011, loans increased $1.6 billion, with commercial loans up $1.1 billion and residential mortgage loans up $593 million, partially offset by a $143 million decline in retail loans. Since March 31, 2011, deposits increased $1.6 billion, primarily attributable to a $1.2 billion increase in money market deposits and a $704 million increase in noninterest-bearing demand deposits, partially offset by a $416 million decrease in other time deposits and a $278 million decrease in brokered CDs. Given the increase in deposit balances, short and long-term funding declined $919 million, including a $791 million decrease in customer funding, the repayment of $300 million of long-term FHLB advances, and the repayment of $142 million of subordinated debt, net of a $179 million increase in other short-term funding and the issuance of $130 million of senior notes.

58

		$xxx,xxxx		$xxx,xxxx			$xxx,xxxx		$xxx,xxxx			$xxx,xxxx		$xxx,xxxx			$xxx,xxxx		$xxx,xxxx			$xxx,xxxx		$xxx,xxxx
TABLE 5 Period End Loan Composition ($ in Thousands)
	March 31, 2012					December 31, 2011					September 30, 2011					June 30, 2011					March 31, 2011
	Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total
Commercial and industrial	$	3,719,016		26	%	$	3,724,736		27	%	$	3,360,502		25	%	$	3,202,301		24	%	$	2,972,651		24	%
Commercial real estate—owner occupied		1,074,755		8			1,086,829		8			1,068,616		8			1,030,060		8			1,027,826		8
Lease financing		61,208		—			58,194		—			54,849		1			54,001		1			56,458		—
Commercial and business lending		4,854,979		34			4,869,759		35			4,483,967		34			4,286,362		33			4,056,935		32
Commercial real estate—investor		2,664,251		19			2,563,767		18			2,481,411		18			2,393,626		18			2,354,655		19
Real estate construction		565,953		4			584,046		4			554,024		4			533,804		4			525,236		4
Commercial real estate lending		3,230,204		23			3,147,813		22			3,035,435		22			2,927,430		22			2,879,891		23
Total commercial		8,085,183		57			8,017,572		57			7,519,402		56			7,213,792		55			6,936,826		55
Home equity		2,501,770		17			2,504,704		18			2,571,404		19			2,594,029		20			2,576,736		20
Installment		537,628		4			557,782		4			572,243		4			589,714		4			605,767		5
Total retail		3,039,398		21			3,062,486		22			3,143,647		23			3,183,743		24			3,182,503		25
Residential mortgage		3,129,144		22			2,951,013		21			2,840,458		21			2,692,054		21			2,535,993		20
Total consumer		6,168,542		43			6,013,499		43			5,984,105		44			5,875,797		45			5,718,496		45
Total loans	$	14,253,725		100	%	$	14,031,071		100	%	$	13,503,507		100	%	$	13,089,589		100	%	$	12,655,322		100	%
Farmland	$	25,031		1	%	$	26,221		1	%	$	27,871		1	%	$	30,946		1	%	$	35,032		1	%
Multi-family		756,737		28			694,056		27			663,284		27			566,641		24			538,607		23
Non-owner occupied		1,882,483		71			1,843,490		72			1,790,256		72			1,796,039		75			1,781,016		76
Commercial real estate—investor	$	2,664,251		100	%	$	2,563,767		100	%	$	2,481,411		100	%	$	2,393,626		100	%	$	2,354,655		100	%
1-4 family construction	$	114,724		20	%	$	120,170		21	%	$	94,442		17	%	$	92,000		17	%	$	91,349		17	%
All other construction		451,229		80			463,876		79			459,582		83			441,804		83			433,887		83
Real estate construction	$	565,953		100	%	$	584,046		100	%	$	554,024		100	%	$	533,804		100	%	$	525,236		100	%

59

		$xxx,xxx		$xxx,xxx			$xxx,xxx		$xxx,xxx			$xxx,xxx		$xxx,xxx			$xxx,xxx		$xxx,xxx			$xxx,xxx		$xxx,xxx
TABLE 6 Period End Deposit and Customer Funding Composition ($ in Thousands)
	March 31, 2012					December 31, 2011					September 30, 2011					June 30, 2011					March 31, 2011
			% of					% of					% of					% of					% of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total			Amount		Total
Noninterest-bearing demand	$	3,989,156		26	%	$	3,928,792		26	%	$	3,711,570		25	%	$	3,218,722		23	%	$	3,285,604		23	%
Savings		1,098,975		7			986,766		7			1,013,195		7			1,007,337		7			973,122		7
Interest-bearing demand		2,040,900		13			2,297,454		15			2,071,627		14			1,931,519		14			1,755,367		13
Money market		6,176,981		39			5,150,275		34			5,205,401		35			4,982,492		35			4,968,510		35
Brokered CDs		46,493		—			202,948		1			203,827		1			316,670		2			324,045		2
Other time		2,300,871		15			2,524,420		17			2,576,790		18			2,609,310		19			2,716,995		20
Total deposits	$	15,653,376		100	%	$	15,090,655		100	%	$	14,782,410		100	%	$	14,066,050		100	%	$	14,023,643		100	%
Customer repo sweeps		635,697					664,624					871,619					930,101					1,048,516
Customer repo term		509,332					695,131					1,141,450					1,147,938					887,434
Total customer funding		1,145,029					1,359,755					2,013,069					2,078,039					1,935,950
Total deposits and customer funding	$	16,798,405				$	16,450,410				$	16,795,479				$	16,144,089				$	15,959,593
Network transaction deposits included above in interest-bearing demand and money market	$	1,171,679				$	875,052				$	875,630				$	824,003				$	936,688
Total network transaction deposits and Brokered CDs		1,218,172					1,078,000					1,079,457					1,140,673					1,260,733
Total deposits and customer funding, excluding Brokered CDs and network transaction deposits	$	15,580,233				$	15,372,410				$	15,716,022				$	15,003,416				$	14,698,860

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 5), net charge offs (see Table 7) and nonperforming assets (see Table 8). 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.

60

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. The allocation methodology used at March 31, 2012 and December 31, 2011 was generally comparable.

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 the allowance for loan losses with loss factors, for criticized loan pools by loan type as well as for non-criticized loan pools by loan type, primarily based on historical loss rates after considering loan type, historical loss and delinquency experience, and industry statistics. Loans that have been criticized are considered to have a higher risk of default than non-criticized loans, as circumstances were present to support the lower loan grade, warranting higher loss factors. The loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in historical loss levels or other risks. Lastly, management allocates the allowance for loan losses to absorb unrecognized losses that may not be provided for by the other components due to other factors evaluated by management, such as limitations within the credit risk grading process, known current economic or business conditions that may not yet show in trends, industry or other concentrations with current issues that impose higher inherent risks than are reflected in the loss factors, and other relevant considerations.

At March 31, 2012, the allowance for loan losses was $356 million compared to $454 million at March 31, 2011, and $378 million at December 31, 2011. At March 31, 2012, the allowance for loan losses to total loans was 2.50% and covered 109% of nonaccrual loans, compared to 3.59% and 93%, respectively, at March 31, 2011, and 2.70% and 106%, respectively, at December 31, 2011. The provision for loan losses for the first quarter of 2012 was $0, compared to $31 million for the first quarter of 2011, and $52 million for the full year 2011. Net charge offs were $22 million for the first quarter of 2012, $53 million for the comparable quarter ended March 31, 2011, and $151 million for the full year 2011. The ratio of net charge offs to average loans on an annualized basis was 0.61%, 1.71%, and 1.13% for the three months ended March 31, 2012, and 2011, and the full year 2011, respectively. Net charge offs for the first quarter of 2011 included $10 million of write-downs related to installment loans transferred to held for sale. Tables 7 and 8 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.

Credit quality continued to improve during the first quarter of 2012. Nonaccrual loans declined to $327 million (representing 2.29% of total loans), down 33% from March 31, 2011 and down 8% from December 31, 2011, due to organic portfolio improvements, including a lower level of loans moving into the nonaccrual and potential problem loan categories. Loans past due 30-89 days totaled $61 million at March 31, 2012, a decrease from March 31, 2011 and an increase from December 31, 2011, while potential problem loans declined to $480 million, a reduction from both the first quarter of 2011 and year-end 2011. As a result of the actions taken during the past several quarters and the current economic outlook in the markets we serve, the Corporation anticipates a modest provision for loan losses for the remainder of 2012.

Management believes the level of allowance for loan losses to be appropriate at March 31, 2012 and December 31, 2011.

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

61

TABLE 7 Allowance for Loan Losses ($ in Thousands)
	At and for the Three Months Ended March 31,										At and for the Year Ended December 31,
	2012					2011					2011
Allowance for Loan Losses:
Balance at beginning of period	$	378,151				$	476,813				$	476,813
Provision for loan losses		—					31,000					52,000
Charge offs (1)		(31,259	)				(65,156	)				(189,732	)
Recoveries		9,406					11,804					39,070
Net charge offs (1)		(21,853	)				(53,352	)				(150,662	)
Balance at end of period	$	356,298				$	454,461				$	378,151
Net loan charge offs(1):				(A	)				(A	)				(A	)
Commercial and industrial	$	3,872		42		$	4,314		60		$	22,312		70
Commercial real estate—owner occupied		415		16			1,867		72			6,976		67
Lease financing		(1,836	)	N/M			28		20			(1,782	)	N/M
Commercial and business lending		2,451		20			6,209		63			27,506		64
Commercial real estate—investor		7,354		113			6,006		104			23,813		98
Real estate construction		230		16			11,936		N/M			30,701		N/M
Commercial real estate lending		7,584		96			17,942		252			54,514		183
Total commercial		10,035		50			24,151		142			82,020		113
Home equity		8,950		144			14,322		227			39,422		153
Installment		101		7			12,670		759			14,550		237
Total retail		9,051		119			26,992		338			53,972		169
Residential mortgage		2,767		34			2,209		35			14,670		52
Total net charge offs	$	21,853		61		$	53,352		171		$	150,662		113
CRE & Construction Net Charge Off Detail:				(A	)				(A	)				(A	)
Farmland	$	53		83		$	12		14		$	704		225
Multi-family		(66	)	(4	)		1,117		90			4,531		77
Non-owner occupied		7,367		160			4,877		110			18,578		103
Commercial real estate—investor	$	7,354		113		$	6,006		104		$	23,813		98
1-4 family construction	$	(605	)	(225	)	$	4,483		N/M		$	11,888		N/M
All other construction		835		73			7,453		N/M			18,813		N/M
Real estate construction	$	230		16		$	11,936		N/M		$	30,701		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		2.50%					3.59%					2.70%
Allowance for loan losses to net charge offs (annualized)		4.1x					2.1x					2.5x

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

62

		$xxx,xxx		$xxx,xxx			$xxx,xxx		$xxx,xxx			$xxx,xxx		$xxx,xxx			$xxx,xxx		$xxx,xxx			$xxx,xxx		$xxx,xxx
TABLE 7 (continued) Allowance for Loan Losses ($ in Thousands)
Quarterly Trends:	March 31, 2012					December 31, 2011					September 30, 2011					June 30, 2011					March 31, 2011
Allowance for Loan Losses:
Balance at beginning of period	$	378,151				$	399,723				$	425,961				$	454,461				$	476,813
Provision for loan losses		—					1,000					4,000					16,000					31,000
Charge offs		(31,259	)				(34,056	)				(38,155	)				(52,365	)				(65,156	)
Recoveries		9,406					11,484					7,917					7,865					11,804
Net charge offs		(21,853	)				(22,572	)				(30,238	)				(44,500	)				(53,352	)
Balance at end of period	$	356,298				$	378,151				$	399,723				$	425,961				$	454,461
Net loan charge offs:				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial and industrial	$	3,872		42		$	231		3		$	3,741		46		$	14,026		180		$	4,314		60
Commercial real estate—owner occupied		415		16			539		20			134		5			4,436		174			1,867		72
Lease financing		(1,836	)	N/M			19		14			(1,889	)	N/M			60		44			28		20
Commercial and business lending		2,451		20			789		7			1,986		18			18,522		177			6,209		63
Commercial real estate—investor		7,354		113			2,394		38			10,472		169			4,941		83			6,006		104
Real estate construction		230		16			7,088		502			5,646		407			6,031		454			11,936		N/M
Commercial real estate lending		7,584		96			9,482		122			16,118		213			10,972		151			17,942		252
Total commercial		10,035		50			10,271		53			18,104		98			29,494		166			24,151		142
Home equity		8,950		144			8,113		127			8,736		134			8,251		127			14,322		227
Installment		101		7			452		32			764		52			664		42			12,670		759
Total retail		9,051		119			8,565		110			9,500		119			8,915		111			26,992		338
Residential mortgage		2,767		34			3,736		46			2,634		36			6,091		92			2,209		35
Total net charge offs	$	21,853		61		$	22,572		64		$	30,238		90		$	44,500		137		$	53,352		171
CRE & Construction Net Charge Off Detail:				(A	)				(A	)				(A	)				(A	)				(A	)
Farmland	$	53		83		$	(10	)	(15	)	$	758		N/M		$	(56	)	(67	)	$	12		14
Multi-family		(66	)	(4	)		1,565		91			490		31			1,359		98			1,117		90
Non-owner occupied		7,367		160			839		18			9,224		202			3,638		82			4,877		110
Commercial real estate—investor	$	7,354		113		$	2,394		38		$	10,472		169		$	4,941		83		$	6,006		104
1-4 family construction	$	(605	)	(225	)	$	2,668		1,001		$	2,627		N/M		$	2,110		919		$	4,483		N/M
All other construction		835		73			4,420		386			3,019		264			3,921		357			7,453		N/M
Real estate construction	$	230		16		$	7,088		502		$	5,646		407		$	6,031		454		$	11,936		N/M

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

N/M – Not meaningful.

63

TABLE 8 Nonperforming Assets ($ in Thousands)
	March 31, 2012					December 31, 2011					September 30, 2011					June 30, 2011					March 31, 2011
Nonperforming assets:
Nonaccrual loans:
Commercial	$	217,070				$	243,595				$	290,116				$	350,358				$	363,500
Residential mortgage		62,760					63,555					63,962					66,752					70,254
Retail		47,255					49,622					49,314					50,501					54,567
Total nonaccrual loans (NALs)		327,085					356,772					403,392					467,611					488,321
Other real estate owned (OREO)		34,425					41,571					42,076					45,712					49,019
Total nonperforming assets (NPAs)	$	361,510				$	398,343				$	445,468				$	513,323				$	537,340
Accruing loans past due 90 days or more:
Commercial	$	1,874				$	4,236				$	598				$	11,513				$	8,774
Retail		623					689					622					610					606
Total accruing loans past due 90 days or more	$	2,497				$	4,925				$	1,220				$	12,123				$	9,380
Restructured loans (accruing):
Commercial	$	90,163				$	85,084				$	82,619				$	69,657				$	58,072
Residential mortgage		20,465					18,115					18,943					18,216					17,342
Retail		10,091					9,965					11,521					12,470					12,779
Total restructured loans (accruing)	$	120,719				$	113,164				$	113,083				$	100,343				$	88,193
Restructured loans in nonaccrual loans (not included above)	$	79,946				$	87,493				$	80,063				$	71,084				$	49,352
Ratios:
Nonaccrual loans to total loans		2.29	%				2.54	%				2.99	%				3.57	%				3.86	%
NPAs to total loans plus OREO		2.53	%				2.83	%				3.29	%				3.91	%				4.23	%
NPAs to total assets		1.65	%				1.82	%				2.03	%				2.33	%				2.50	%
Allowance for loan losses to NALs		108.93	%				105.99	%				99.09	%				91.09	%				93.07	%
Allowance for loan losses to total loans		2.50	%				2.70	%				2.96	%				3.25	%				3.59	%
Nonperforming assets by type:				(A	)				(A	)				(A	)				(A	)				(A	)
Commercial and industrial	$	50,641		1	%	$	56,075		2	%	$	61,256		2	%	$	71,183		2	%	$	76,780		3	%
Commercial real estate - owner occupied		31,888		3	%		35,718		3	%		47,202		4	%		59,725		6	%		57,168		6	%
Lease financing		9,040		15	%		10,644		18	%		11,667		21	%		12,898		24	%		15,270		27	%
Commercial and business lending		91,569		2	%		102,437		2	%		120,125		3	%		143,806		3	%		149,218		4	%
Commercial real estate - investor		89,030		3	%		99,352		4	%		97,691		4	%		133,770		6	%		129,379		5	%
Real estate construction		36,471		6	%		41,806		7	%		72,300		13	%		72,782		14	%		84,903		16	%
Commercial real estate lending		125,501		4	%		141,158		4	%		169,991		6	%		206,552		7	%		214,282		7	%
Total commercial		217,070		3	%		243,595		3	%		290,116		4	%		350,358		5	%		363,500		5	%
Home equity		44,628		2	%		46,907		2	%		46,119		2	%		46,777		2	%		49,618		2	%
Installment		2,627		—	%		2,715		—	%		3,195		1	%		3,724		1	%		4,949		1	%
Total retail		47,255		2	%		49,622		2	%		49,314		2	%		50,501		2	%		54,567		2	%
Residential mortgage		62,760		2	%		63,555		2	%		63,962		2	%		66,752		2	%		70,254		3	%
Total consumer		110,015		2	%		113,177		2	%		113,276		2	%		117,253		2	%		124,821		2	%
Total nonaccrual loans		327,085		2	%		356,772		3	%		403,392		3	%		467,611		4	%		488,321		4	%
Commercial real estate owned		20,119					24,795					27,886					30,629					31,227
Residential real estate owned		10,971					13,285					10,659					11,531					13,423
Bank properties real estate owned		3,335					3,491					3,531					3,552					4,369
Other real estate owned		34,425					41,571					42,076					45,712					49,019
Total nonperforming assets	$	361,510				$	398,343				$	445,468				$	513,323				$	537,340
Commercial real estate & Real estate construction NALs Detail:
Farmland	$	1,337		5	%	$	1,907		7	%	$	1,971		7	%	$	2,870		9	%	$	4,296		12	%
Multi-family		6,920		1	%		7,909		1	%		9,905		1	%		11,092		2	%		12,262		2	%
Non-owner occupied		80,773		4	%		89,536		5	%		85,815		5	%		119,808		7	%		112,821		6	%
Commercial real estate - investor	$	89,030		3	%	$	99,352		4	%	$	97,691		4	%	$	133,770		6	%	$	129,379		5	%
1-4 family construction	$	20,487		18	%	$	21,717		18	%	$	25,439		27	%	$	24,287		26	%	$	29,878		33	%
All other construction		15,984		4	%		20,089		4	%		46,861		10	%		48,495		11	%		55,025		13	%
Real estate construction	$	36,471		6	%	$	41,806		7	%	$	72,300		13	%	$	72,782		14	%	$	84,903		16	%

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

64

TABLE 8 (continued) Nonperforming Assets ($ in Thousands)
	March 31,		December 31,		September 30,		June 30,		March 31,
	2012		2011		2011		2011		2011
Loans 30-89 days past due by type:
Commercial and industrial	$	12,643	$	8,743	$	6,255	$	7,581	$	36,205
Commercial real estate - owner occupied		7,532		7,092		29,409		33,753		21,820
Leasing		40		104		507		79		135
Commercial and business lending		20,215		15,939		36,171		41,413		58,160
Commercial real estate - investor		8,313		4,970		70,136		27,487		18,717
Real estate construction		1,736		996		5,493		13,217		3,410
Commercial real estate lending		10,049		5,966		75,629		40,704		22,127
Total commercial		30,264		21,905		111,800		82,117		80,287
Home equity		18,007		12,189		18,165		14,818		14,808
Installment		2,813		2,592		1,956		3,851		2,714
Total retail		20,820		14,781		20,121		18,669		17,522
Residential mortgage		10,114		7,224		12,114		12,573		7,940
Total consumer		30,934		22,005		32,235		31,242		25,462
Total loans past due 30-89 days	$	61,198	$	43,910	$	144,035	$	113,359	$	105,749
Commercial real estate & Real estate construction loans 30-89 days past due detail:
Farmland	$	—	$	—	$	164	$	55	$	96
Multi-family		4,130		407		978		3,932		3,377
Non-owner occupied		4,183		4,563		68,994		23,500		15,244
Commercial real estate - investor	$	8,313	$	4,970	$	70,136	$	27,487	$	18,717
1-4 family construction	$	676	$	475	$	658	$	4,839	$	681
All other construction		1,060		521		4,835		8,378		2,729
Real estate construction	$	1,736	$	996	$	5,493	$	13,217	$	3,410
Potential problem loans by type:
Commercial and industrial	$	157,778	$	153,306	$	207,351	$	229,407	$	348,949
Commercial real estate - owner occupied		112,673		136,366		140,406		145,622		172,662
Leasing		487		158		507		1,399		1,705
Commercial and business lending		270,938		289,830		348,264		376,428		523,316
Commercial real estate - investor		167,339		230,206		252,331		236,434		292,714
Real estate construction		27,654		27,649		37,155		63,186		70,824
Commercial real estate lending		194,993		257,855		289,486		299,620		363,538
Total commercial		465,931		547,685		637,750		676,048		886,854
Home equity		4,441		5,451		4,975		4,515		4,737
Installment		142		233		272		216		230
Total retail		4,583		5,684		5,247		4,731		4,967
Residential mortgage		9,580		13,037		16,550		18,575		19,710
Total consumer		14,163		18,721		21,797		23,306		24,677
Total potential problem loans	$	480,094	$	566,406	$	659,547	$	699,354	$	911,531

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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 8 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, unless the loan is well secured and in the process of collection. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is reversed, amortization of related deferred loan fees or costs is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectability of the principal and interest is in doubt, payments received are applied to loan principal.

Nonaccrual loans were $327 million at March 31, 2012, compared to $488 million at March 31, 2011 and $357 million at December 31, 2011. As shown in Table 8, total nonaccrual loans were down $161 million since March 31, 2011, with commercial nonaccrual loans down $146 million while consumer-related nonaccrual loans were down $15 million. Since December 31, 2011, total nonaccrual loans decreased $30 million, with commercial nonaccrual loans down $27 million and consumer nonaccrual loans down $3 million. The ratio of nonaccrual loans to total loans was 2.29% at March 31, 2012, compared to 3.86% at March 31, 2011 and 2.54% at December 31, 2011. The Corporation’s allowance for loan losses to nonaccrual loans was 109% at March 31, 2012, up from 93% at March 31, 2011 and 106% at December 31, 2011, respectively.

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 March 31, 2012, accruing loans 90 days or more past due totaled $2 million compared to $9 million at March 31, 2011 and $5 million at December 31, 2011, respectively.

Troubled Debt Restructurings (“Restructured Loans”): Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty. The concessions granted generally involve the modification of terms of the loan, such as changes in payment structure or interest rate, which generally would not otherwise be considered. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Nonaccrual restructured loans are included and treated with all other nonaccrual loans. In addition, all accruing restructured loans are being reported as troubled debt restructurings. 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.

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 March 31, 2012, the Corporation had total restructured loans of $201 million (including $80 million classified as nonaccrual and $121 million performing in accordance with the modified terms), compared to $137 million at March 31, 2011 (including $49 million classified as nonaccrual and $88 million performing in accordance with the modified terms) and $200 million at December 31, 2011 (including $87 million classified as nonaccrual and $113 million performing in accordance with the modified terms).

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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 March 31, 2012, potential problem loans totaled $480 million, compared to $912 million at March 31, 2011 and $566 million at December 31, 2011, respectively.

Other Real Estate Owned: Other real estate owned decreased to $34 million at March 31, 2012, compared to $49 million at March 31, 2011 and $41 million at December 31, 2011, respectively. Write-downs on other real estate owned were $3 million and $1 million for the first quarter of 2012 and 2011, respectively, and $9 million for the full year 2011. 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. In addition to satisfying cash flow requirements in the ordinary course of business, the Corporation actively monitors and manages its liquidity position to insure sufficient resources are available to meet cash flow requirements in adverse situations.

The Corporation’s internal liquidity management framework includes measurement of several key elements, such as deposit funding as a percent of total assets and liquid asset levels. Strong capital ratios, credit quality, and core earnings are essential to maintaining cost-effective access to wholesale funding markets. A downgrade or loss in credit ratings could have an impact on the Corporation’s ability to access wholesale funding at favorable interest rates. In addition to static liquidity measures, the Corporation performs dynamic scenario analysis in accordance with industry best practices. Measures have been established to ensure the Corporation has sufficient high quality short-term liquidity to meet cash flow requirements under stressed scenarios. At March 31, 2012, the Corporation was in compliance with its internal liquidity objectives.

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

	March 31, 2012
	Moody’s	S&P	Fitch	DBRS
Bank short-term	P2	—	F2	R2
Bank long-term	A3	BBB+	BBB-	BBB
Corporation short-term	P2	—	F3	R2
Corporation long-term	Baa1	BBB	BBB-	BBB
Outlook	Stable	Stable	Stable	Stable

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The Corporation also has multiple funding sources that could be used to increase liquidity and provide additional financial flexibility. The Parent Company filed a “shelf” registration in December 2008, which was subsequently renewed in January 2012, under which the Parent Company may offer any combination of the following securities, either separately or in units: debt securities, preferred stock, depositary shares, common stock, and warrants. The Corporation issued $300 million of senior notes in March 2011 and an additional $130 million of senior notes in September 2011. 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% Series B perpetual preferred stock. The Parent Company also has a $200 million commercial paper program, of which, no commercial paper was outstanding at March 31, 2012. While dividends and service fees from subsidiaries and proceeds from issuance of capital are primary funding sources for the Parent Company, these sources could be limited or costly (such as by regulation or subject to the capital needs of its subsidiaries or by market appetite for bank holding company stock).

The Bank established a note program during 2000. Under this program, short-term and long-term debt may be issued. As of March 31, 2012, 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 March 31, 2012. The Bank has also established federal funds lines with counterparty banks and the ability to borrow from the Federal Home Loan Bank ($1.2 billion of Federal Home Loan Bank advances were outstanding at March 31, 2012). The Bank also has significant excess loan and investment securities collateral which could be pledged to secure additional deposits or to counterparty banks, the Federal Home Loan Bank or other parties as necessary. Associated Bank also issues institutional certificates of deposit, network transaction deposits, and brokered certificates of deposit.

Investment securities are an important tool to the Corporation’s liquidity objective. As of March 31, 2012, all investment securities are classified as available for sale and are reported at fair value on the consolidated balance sheet. Of the $4.7 billion investment securities portfolio at March 31, 2012, a portion of these securities were pledged to secure $1.6 billion of collateralized deposits and $1.1 billion of repurchase agreements and for other purposes as required or permitted by law. The majority of the remaining investment securities of $1.3 billion could be pledged or sold to enhance liquidity, if necessary.

For the three months ended March 31, 2012, net cash provided by operating and investing activities was $112 million and $10 million, respectively, while net cash used in financing activities was $27 million, respectively, for a net increase in cash and cash equivalents of $95 million since year-end 2011. During the first three months of 2012, loans increased $223 million and investment securities decreased $268 million, as run-off from the investment securities portfolio was utilized to fund loan growth. On the funding side, deposits increased $563 million, while short-term funding decreased $578 million (reflecting the Corporation’s strategy to shift customer funds away from repurchase agreements and into more traditional deposit products).

For the three months ended March 31, 2011, net cash provided by operating and investing activities was $198 million and $74 million, respectively, while financing activities used net cash of $341 million, for a net decrease in cash and cash equivalents of $69 million since year-end 2010. During first quarter 2011, assets decreased $312 million, primarily in loans held for sale and investment securities. On the funding side, deposits decreased $1.2 billion (reflecting the Corporation’s strategy for reducing its utilization of network transaction deposits and brokered deposits) and other short-term borrowings decreased $572 million, while customer funding and long-term funding increased $1.4 billion and $71 million, respectively.

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.

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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 projected balance sheet growth assumptions, 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 March 31, 2012, projected that net interest income would increase by approximately 3.0% if rates rose by a 100 bp shock. Accordingly, this suggests the Corporation was in an asset sensitive position at March 31, 2012. At December 31, 2011, the 100 bp shock up was projected to increase net interest income by approximately 2.2%. As of March 31, 2012, 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 or balance 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 March 31, 2012, 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. As of March 31, 2012, the 12-month cumulative gap results indicated that the Corporation was in an asset sensitive position and were within the limits under the Corporation’s interest rate risk policy. For 2012, the Corporation’s objective is to remain relatively neutral.

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 March 31, 2012, is included in Note 10, “Derivative and Hedging Activities,” of the notes to consolidated financial statements. A discussion of the Corporation’s lending-related commitments is included in Note 11, “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.

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Table 9 summarizes significant contractual obligations and other commitments at March 31, 2012, at those amounts contractually due to the recipient, including any premiums or discounts, hedge basis adjustments, or other similar carrying value adjustments.

TABLE 9: 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	$	1,788,902	$	364,110	$	137,916	$	56,436	$	2,347,364
Short-term funding		1,936,219		—		—		—		1,936,219
Long-term funding		100,000		400,063		435,280		241,393		1,176,736
Operating leases		13,400		23,583		20,578		45,748		103,309
Commitments to extend credit		3,150,345		805,511		863,615		98,187		4,917,658
Total	$	6,988,866	$	1,593,267	$	1,457,389	$	441,764	$	10,481,286

Capital

Stockholders’ equity at March 31, 2012 was $2.9 billion, up $35 million from December 31, 2011. At March 31, 2012, stockholders’ equity included $65 million of accumulated other comprehensive income compared to $66 million of accumulated other comprehensive income at December 31, 2011. 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 $100 million at December 31, 2011, to unrealized gains of $99 million at March 31, 2012). Cash dividends of $0.05 per share were paid in the first quarter of 2012 and $0.01 per share were paid in the first quarter of 2011. Stockholders’ equity to assets was 13.24% and 13.07% at March 31, 2012 and December 31, 2011, respectively.

On April 6, 2010, the Corporation entered into a Memorandum of Understanding (“Memorandum”) with the Federal Reserve Bank of Chicago (“Reserve Bank”). The Memorandum, which was entered into following the 2008-2009 supervisory cycle, is an informal agreement between the Corporation and the Reserve Bank. On February 27, 2012, the Corporation announced that it had been advised by the Reserve Bank that it had complied fully with the terms of the Memorandum. As a result, the Memorandum was terminated in March 2012.

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 2011 and the first three months of 2012, no shares were repurchased under these authorizations. The Corporation repurchased shares for minimum tax withholding settlements on equity compensation during 2011 and the first three months of 2012. 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 March 31, 2012. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities.

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 10.

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TABLE 10

Capital Ratios

(In Thousands, except per share data)

	Quarter Ended
	March 31, 2012			December 31, 2011			September 30, 2011			June 30, 2011			March 31, 2011
Total stockholders’ equity	$	2,900,873		$	2,865,794		$	2,850,619		$	2,999,148		$	3,194,714
Tier 1 capital		2,088,054			2,051,787			2,011,800			2,168,557			2,395,960
Tier 1 common equity		1,819,782			1,783,515			1,743,528			1,705,506			1,675,722
Tangible common equity		1,890,060			1,853,932			1,837,579			1,790,150			1,727,350
Total capital		2,299,239			2,263,065			2,216,594			2,368,081			2,592,118
Market capitalization		2,427,965			1,938,833			1,613,308			2,409,899			2,573,119
Book value per common share	$	16.32		$	16.15		$	16.07		$	15.81		$	15.46
Tangible book value per common share		10.87			10.68			10.59			10.33			9.97
Cash dividend per common share		0.05			0.01			0.01			0.01			0.01
Stock price at end of period		13.96			11.17			9.30			13.90			14.85
Low closing price for the period		11.43			9.15			8.95			13.06			13.83
High closing price for the period		14.63			11.78			14.17			15.02			15.36
Total stockholders’ equity / assets		13.24	%		13.07	%		13.01	%		13.60	%		14.88	%
Tangible common equity / tangible assets (1)		9.01			8.84			8.77			8.49			8.42
Tangible stockholders’ equity / tangible assets (2)		9.32			9.14			9.07			9.71			10.93
Tier 1 common equity / risk-weighted assets (3)		12.49			12.24			12.44			12.61			12.65
Tier 1 leverage ratio		10.03			9.81			9.62			10.46			11.65
Tier 1 risk-based capital ratio		14.33			14.08			14.35			16.03			18.08
Total risk-based capital ratio		15.78			15.53			15.81			17.50			19.56
Common shares outstanding (period end)		173,923			173,575			173,474			173,374			173,274
Basic common shares outstanding (average)		173,846			173,523			173,418			173,323			173,213
Diluted common shares outstanding (average)		173,848			173,523			173,418			173,327			173,217

(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.

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TABLE 11

Selected Quarterly Information

($ in Thousands)

	Quarter Ended
	March 31, 2012			December 31, 2011			September 30, 2011			June 30, 2011			March 31, 2011
Summary of Operations:
Net interest income	$	154,668		$	151,825		$	153,160		$	154,123		$	153,723
Provision for loan losses		—			1,000			4,000			16,000			31,000
Noninterest income
Trust service fees		9,787			9,511			9,791			10,012			9,831
Service charges on deposit accounts		18,042			17,783			19,949			19,112			19,064
Card-based and other nondeposit fees		10,879			11,269			15,291			15,747			15,598
Retail commission income		15,717			14,881			15,047			16,475			16,381
Core fee-based revenue		54,425			53,444			60,078			61,346			60,874
Mortgage banking, net		17,654			9,677			4,521			(3,320	)		1,845
Capital market fees, net		3,716			3,950			3,273			(890	)		2,378
BOLI income		4,292			3,820			3,990			3,500			3,586
Asset sale gains (losses), net		(481	)		525			(1,179	)		(209	)		(1,986	)
Investment securities gains (losses), net		40			(310	)		(744	)		(36	)		(22	)
Other		1,913			2,750			1,737			4,364			5,507
Total noninterest income		81,559			73,856			71,676			64,755			72,182
Noninterest expense
Personnel expense		94,078			89,785			90,377			89,203			88,930
Occupancy		15,179			13,796			14,205			12,663			15,275
Equipment		5,468			5,286			4,851			4,969			4,767
Data processing		9,516			9,080			7,887			7,974			7,534
Business development and advertising		5,381			6,904			5,539			5,652			4,943
Other intangible amortization		1,049			1,179			1,179			1,178			1,178
Loan expense		2,910			3,469			2,600			2,983			2,956
Legal and professional fees		9,715			4,651			4,289			4,783			4,482
Losses other than loans		3,550			11,890			1,659			(1,925	)		6,297
Foreclosure / OREO expense		6,475			7,493			7,662			9,527			6,061
FDIC expense		4,870			6,136			6,906			7,198			8,244
Other		14,684			14,982			15,006			14,681			13,509
Total noninterest expense		172,875			174,651			162,160			158,886			164,176
Income tax expense		20,719			8,905			17,337			9,610			7,876
Net income		42,633			41,125			41,339			34,382			22,853
Preferred stock dividends and discount accretion		1,300			1,300			7,305			8,812			7,413
Net income available to common equity	$	41,333		$	39,825			34,034			25,570			15,440
Taxable equivalent net interest income	$	159,971		$	157,132		$	158,455		$	159,455		$	159,163
Net interest margin		3.31	%		3.21	%		3.23	%		3.29	%		3.32	%
Effective tax rate		32.70	%		17.80	%		29.55	%		21.84	%		25.63	%
Average Balances:
Assets	$	21,659,139		$	21,755,870		$	21,729,187		$	21,526,155		$	21,336,858
Earning assets		19,371,729			19,506,627			19,530,007			19,431,292			19,297,866
Interest-bearing liabilities		14,920,413			15,095,689			15,215,517			15,261,514			14,907,465
Loans		14,310,441			14,043,585			13,376,928			13,004,904			12,673,844
Deposits		15,000,567			14,893,469			14,405,311			14,052,689			14,245,614
Short and long-term funding		3,603,700			3,857,252			4,227,319			4,434,500			3,883,122
Stockholders’ equity		2,890,185			2,856,095			2,987,178			2,976,840			3,172,636

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Sequential Quarter Results

The Corporation recorded net income of $43 million for the first quarter of 2012, compared to net income of $41 million for the fourth quarter of 2011. Net income available to common equity was $41 million for the first quarter of 2012, or net income of $0.24 for both basic and diluted earnings per common share. Comparatively, net income available to common equity for the fourth quarter of 2011, was $40 million, or net income of $0.23 for both basic and diluted earnings per common share (see Table 1).

Taxable equivalent net interest income for the first quarter of 2012 was $160 million, $3 million higher than the fourth quarter of 2011. Changes in the rate environment and product pricing increased net interest income by $3 million and changes in balance sheet volume and mix increased taxable equivalent net interest income by $1 million, while one less day in the first quarter decreased net interest income by $1 million. The Federal funds target rate was unchanged for both quarters. The net interest margin between the sequential quarters was up 10 bp, to 3.31% in the first quarter of 2012, attributable to a 12 bp higher interest rate spread (to 3.15%, as the yield on earning assets improved 4 bp and the rate on interest-bearing liabilities declined 8 bp, as higher paying long-term time deposits began to mature), partially offset by a decline of 2 bp in net free funds (to 0.16%). Average earning assets decreased $135 million to $19.4 billion in the first quarter of 2012, with average investments and other short-term investments down $402 million, while average loans increased $267 million (predominantly in commercial loans). On the funding side, average short and long-term funding balances were down $253 million (primarily due to a decline in customer funding), while average interest-bearing deposits were up $78 million. On average, demand deposit balances were up $29 million.

The Corporation reported another quarter of improving credit metrics with nonaccrual loans of $327 million (2.29% of total loans) at March 31, 2012, down from $357 million (2.54% of total loans) at December 31, 2011 (see Table 8). Potential problem loans declined to $480 million, down $86 million (15%) from the fourth quarter of 2011. As a result of these improving credit metrics, the provision for loan losses for the first quarter of 2012 decreased to $0, compared to $1 million in the fourth quarter of 2011. Annualized net charge offs represented 0.61% of average loans for the first quarter of 2012, compared to 0.64% for the fourth quarter of 2011. The allowance for loan losses to loans at March 31, 2012 was 2.50%, compared to 2.70% at December 31, 2011 (see Table 7). 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 first quarter of 2012 increased $8 million (10%) to $82 million versus the fourth quarter of 2011. Core fee-based revenues of $54 million were up $1 million (2%) versus the fourth quarter of 2011. Net mortgage banking income was $18 million, up from net mortgage banking income of $10 million in the fourth quarter 2011, predominantly due to higher gains on sales and related income from secondary mortgage production of $5 million and a $3 million reduction in mortgage servicing rights expense. Other income of $2 million was $1 million lower than the fourth quarter of 2011, primarily due to additional interest in VISA escrow during the fourth quarter of 2011 (versus none in the first quarter of 2012) and a reduction in limited partnership income. Compared to the fourth quarter of 2011, net asset sale gains were unfavorable by $1 million, primarily attributable to a $2 million gain on the sale of a commercial real estate owned property during the fourth quarter of 2011.

On a sequential quarter basis, noninterest expense decreased $2 million (1%) to $173 million in the first quarter of 2012. Personnel expense increased $4 million primarily due to the resetting of payroll taxes. Legal and professional fees increased $5 million, primarily due to the cost of addressing regulatory items. Losses other than loans decreased $8 million, primarily due to the fourth quarter 2011 litigation reserves on the settlement of a legal matter. Business development and advertising was down $2 million due to targeted marketing campaigns during the fourth quarter of 2011. All remaining noninterest expense categories on a combined basis were down $3 million (6%).

For the first quarter of 2012, the Corporation recognized income tax expense of $21 million, compared to income tax expense of $9 million for the fourth quarter of 2011. The change in income tax was primarily due to the level of pretax income between the sequential quarters, as well as the $6 million reversal of certain prior years’ tax reserves during the fourth quarter of 2011. The effective tax rate was 32.70% and 17.80% for the first quarter of 2012 and the fourth quarter of 2011, respectively.

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 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.

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

Recent Developments

At the Corporation’s 2012 Annual Meeting of Shareholders held on April 24 in Green Bay, Wisconsin, the Corporation’s shareholders re-elected all twelve incumbent directors. In addition, the shareholders also approved the following:

• A proposal to amend the Corporation’s Amended and Restated Articles of Incorporation regarding the rights and preferences of preferred stock

• The shareholders, by advisory vote, approved the Corporation’s executive compensation practices

• The shareholders, by advisory vote, approved having an advisory vote each year on Executive Compensation

• A proposal to approve the appointment of KPMG LLP as the Corporation’s independent registered accounting firm for 2012

On April 24, 2012, the Board of Directors affirmed the Corporation’s capital priorities and approved the repurchase of up to an aggregate amount of $30 million of common stock. The share repurchases may occur from time to time in open market or privately negotiated transactions, and there are no regulatory impediments to such repurchases. Any future share repurchases are subject to notice to, and may in some cases require non-objection from, the Corporation’s primary regulators. In addition, on May 7, 2012 the Corporation gave notice to Bank of New York, as trustee, to execute a partial call of $25 million (par) of its outstanding 7.625% Trust Originated Preferred Securities, effective June 15, 2012.

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.

As of March 31, 2012, the Corporation’s management carried out an evaluation, under the supervision and with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on the foregoing, its Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of March 31, 2012. 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. An agreement in principle has been reached with plaintiffs’ counsel which requires payment by the Bank of $13 million for a full and complete release of all claims brought against the Bank. A settlement agreement will be filed with the court for preliminary approval upon negotiating a final agreement. Although we cannot guarantee that the court will approve the settlement, it is reasonably likely that the settlement will be approved. By entering into such an agreement, we have not admitted any liability with respect to the lawsuit. The settlement is a result of our evaluation of the cost of fully litigating the matter and the time and expense of resources needed to administer the litigation.

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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 first quarter of 2012. 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
January 1—January 31, 2012		—	$	—		—		—
February 1—February 29, 2012		87,374		12.74		—		—
March 1—March 31, 2012		—		—		—		—
Total		87,374	$	12.74		—		—

During the first quarter of 2012, 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 $1 million in the first quarter of 2012.

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 Christopher Del Moral-Niles, 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) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Other Comprehensive Income, (iv) Unaudited Consolidated Statements of Changes in Stockholders’ Equity, (v) Unaudited Consolidated Statements of Cash Flows, and (vi) 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: May 7, 2012	/s/ Philip B. Flynn
	Philip B. Flynn
	President and Chief Executive Officer
Date: May 7, 2012	/s/ Christopher Del Moral-Niles
	Christopher Del Moral-Niles
	Chief Financial Officer
Date: May 7, 2012	/s/ Bryan R. McKeag
	Bryan R. McKeag
	Principal Accounting Officer

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