Associated Banc-Corp 10K/A 2004 Annual report (amended)

________________________________________________________________________________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K/A

Amendment No. 1

to Form 10-K

(Mark One)


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

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

Commission file number: 0-5519

ASSOCIATED BANC-CORP

(Exact name of registrant as specified in its charter)


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

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

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

None

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

Common stock, par value — $0.01 per share

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes X No

As of June 30, 2004, (the last business day of the registrant’s most recently completed second fiscal quarter) the aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $3,083,051,000. Excludes approximately $177,661,000 of market value representing the outstanding shares of the registrant owned by all directors and officers who individually, in certain cases, or collectively, may be deemed affiliates. Includes approximately $208,750,000 of market value representing 6.40% of the outstanding shares of the registrant held in a fiduciary capacity by the trust company subsidiary of the registrant.

As of July 31, 2005, 127,834,981 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE


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

Explanatory Note

This Amendment No. 1 on Form 10-K/ A, or Amendment No. 1, is being filed by Associated Banc-Corp to amend our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed with the Securities and Exchange Commission, or SEC, on March 16, 2005, or the Initial Report. Amendment No. 1 relates to management’s restated assessment of our disclosure controls and procedures and our internal control over financial reporting as of December 31, 2004. This restatement of our assessment related to a material weakness in our internal control over financial reporting related to our accounting for certain derivative financial instruments under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). Our restatement of our assessment resulted in a restatement of the Report of Independent Registered Public Accounting Firm as it relates to our internal control over financial reporting.

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Item 8 and Item 9A of Part II of the Initial Report are hereby deleted in their entirety and replaced with the Item 8 and Item 9A included herein. Part IV is amended to add the exhibits set forth in such exhibit list included herein. Our financial statements included in Item 8 of this Amendment No. 1 are unchanged from the Initial Report.

PART II


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ASSOCIATED BANC-CORP

CONSOLIDATED BALANCE SHEETS


			December 31,

			2004			2003

			(In Thousands,
			except share data)
ASSETS
Cash and due from banks			$	389,311		$	389,140
Interest-bearing deposits in other financial institutions				13,321			7,434
Federal funds sold and securities purchased under agreements to resell				55,440			3,290
Investment securities available for sale, at fair value				4,815,344			3,773,784
Loans held for sale				64,964			104,336
Loans				13,881,887			10,291,810
Allowance for loan losses				(189,762	)		(177,622	)

		Loans, net		13,692,125			10,114,188
Premises and equipment				184,944			131,315
Goodwill				679,993			224,388
Other intangible assets				119,440			63,509
Other assets				505,254			436,510

		Total assets	$	20,520,136		$	15,247,894

LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing demand deposits			$	2,347,611		$	1,814,446
Interest-bearing deposits, excluding Brokered certificates of deposit				10,077,069			7,813,267
Brokered certificates of deposit				361,559			165,130

		Total deposits		12,786,239			9,792,843
Short-term borrowings				2,926,716			1,928,876
Long-term funding				2,604,540			2,034,160
Accrued expenses and other liabilities				185,222			143,588

		Total liabilities		18,502,717			13,899,467

Stockholders’ equity
	Preferred stock (Par value $1.00 per share, authorized 750,000 shares, no shares issued)			—			—
	Common stock (Par value $0.01 per share, authorized 250,000,000 shares, issued 130,042,415, and 110,163,832 shares at December 31, 2004 and 2003, respectively)			1,300			734
	Surplus			1,127,205			575,975
	Retained earnings			858,847			724,356
	Accumulated other comprehensive income			41,205			52,089
	Deferred compensation			(2,122	)		(1,981	)
	Treasury stock, at cost (272,355 shares in 2004 and 122,863 shares in 2003)			(9,016	)		(2,746	)

		Total stockholders’ equity		2,017,419			1,348,427

		Total liabilities and stockholders’ equity	$	20,520,136		$	15,247,894

See accompanying notes to consolidated financial statements.

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF INCOME


		For the Years Ended December 31,

		2004		2003		2002

		(In Thousands, except
		per share data)
INTEREST INCOME
Interest and fees on loans		$	594,702	$	578,816	$	626,378
Interest and dividends on investment securities and deposits with other financial institutions:
	Taxable		131,020		108,624		125,568
	Tax-exempt		40,804		39,761		39,771
Interest on federal funds sold and securities purchased under agreements to resell			596		163		389

	Total interest income		767,122		727,364		792,106

INTEREST EXPENSE
Interest on deposits			118,236		123,122		169,021
Interest on short-term borrowings			38,940		29,156		51,372
Interest on long-term funding			57,319		64,324		70,447

	Total interest expense		214,495		216,602		290,840

NET INTEREST INCOME			552,627		510,762		501,266
Provision for loan losses			14,668		46,813		50,699

Net interest income after provision for loan losses			537,959		463,949		450,567

NONINTEREST INCOME
Trust service fees			31,791		29,577		27,875
Service charges on deposit accounts			56,153		50,346		46,059
Mortgage banking, net			20,331		53,484		35,942
Credit card and other nondeposit fees			26,181		23,669		27,492
Retail commissions			47,171		25,571		18,264
Bank owned life insurance income			13,101		13,790		13,841
Asset sale gains, net			1,181		1,569		657
Investment securities gains (losses), net			637		702		(427	)
Other			13,701		18,174		15,644

	Total noninterest income		210,247		216,882		185,347

NONINTEREST EXPENSE
Personnel expense			224,548		208,040		189,066
Occupancy			29,572		28,077		26,049
Equipment			12,754		12,818		14,835
Data processing			23,632		23,273		21,024
Business development and advertising			14,975		15,194		13,812
Stationery and supplies			5,436		6,705		7,044
Intangible amortization expense			4,350		2,961		2,283
Loan expense			6,536		7,550		14,555
Other			56,066		54,497		50,920

	Total noninterest expense		377,869		359,115		339,588

Income before income taxes			370,337		321,716		296,326
Income tax expense			112,051		93,059		85,607

Net income		$	258,286	$	228,657	$	210,719

Earnings per share:
	Basic	$	2.28	$	2.07	$	1.88
	Diluted	$	2.25	$	2.05	$	1.86
Average shares outstanding:
	Basic		113,532		110,617		112,027
	Diluted		115,025		111,761		113,240

See accompanying notes to consolidated financial statements.

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


																Accumulated
				Common Stock												Other
													Retained			Comprehensive			Deferred			Treasury
				Shares			Amount			Surplus			Earnings			Income			Compensation			Stock			Total

				(In Thousands, except per share data)
Balance, December 31, 2001					66,174		$	662		$	289,751		$	760,031		$	47,176		$	—		$	(27,204	)	$	1,070,416
Comprehensive income:
	Net income				—			—			—			210,719			—			—			—			210,719
	Net unrealized loss on derivative instruments arising during the year, net of taxes of $13.3 million				—			—			—			—			(19,834	)		—			—			(19,834	)
	Add: reclassification adjustment to interest expense for interest differential, net of taxes of $5.4 million				—			—			—			—			8,027			—			—			8,027
Change in minimum pension obligation, net of taxes of $4.7 million					—			—			—			—			(7,024	)		—			—			(7,024	)
	Net unrealized holding gains on available for sale securities arising during the year, net of taxes of $18.1 million				—			—			—			—			31,712			—			—			31,712
	Add: reclassification adjustment for net losses on available for sale securities realized in net income, net of taxes of $0.2 million				—			—			—			—			256			—			—			256

			Comprehensive income																							223,856

Cash dividends, $0.8079 per share					—			—			—			(90,166	)		—			—			—			(90,166	)
Common stock issued:
		Business combinations			3,690			37			133,892			—			—			—			—			133,929
		Incentive stock options			—			—			—			(14,000	)		—			—			30,564			16,564
		10% stock dividend			6,975			70			258,570			(258,640	)		—			—			—			—
Purchase and retirement of treasury stock					(1,336	)		(14	)		(44,032	)		—			—			—			—			(44,046	)
Purchase of treasury stock					—			—			—			—			—			—			(44,145	)		(44,145	)
Tax benefits of stock options					—			—			5,775			—			—			—			—			5,775

Balance, December 31, 2002					75,503		$	755		$	643,956		$	607,944		$	60,313		$	—		$	(40,785	)	$	1,272,183

Comprehensive income:
	Net income				—			—			—			228,657			—			—			—			228,657
	Net unrealized loss on derivative instruments arising during the year, net of taxes of $1.7 million				—			—			—			—			(2,612	)		—			—			(2,612	)
	Add: reclassification adjustment to interest expense for interest differential, net of taxes of $3.1 million				—			—			—			—			4,603			—			—			4,603
Change in minimum pension obligation, net of taxes of $6.2 million					—			—			—			—			9,252			—			—			9,252
	Net unrealized holding losses on available for sale securities arising during the year, net of taxes of $11.8 million				—			—			—			—			(19,018	)		—			—			(19,018	)
	Less: reclassification adjustment for net gains on available for sale securities realized in net income, net of taxes of $0.3 million				—			—			—			—			(449	)		—			—			(449	)

			Comprehensive income																							220,433

Cash dividends, $0.8867 per share					—			—			—			(98,169	)		—			—			—			(98,169	)
Common stock issued:
		Incentive stock options			—			—			—			(14,076	)		—			—			38,907			24,831
Purchase and retirement of treasury stock					(2,061	)		(21	)		(74,512	)		—			—			—			—			(74,533	)
Purchase of treasury stock					—			—			—			—			—			—			(868	)		(868	)
Restricted stock awards granted, net of amortization					—			—			313			—			—			(1,981	)		—			(1,668	)
Tax benefits of stock options					—			—			6,218			—			—			—			—			6,218

Balance, December 31, 2003					73,442		$	734		$	575,975		$	724,356		$	52,089		$	(1,981	)	$	(2,746	)	$	1,348,427

(continued on next page)

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)


														Accumulated
				Common Stock										Other
											Retained			Comprehensive			Deferred			Treasury
				Shares		Amount		Surplus			Earnings			Income			Compensation			Stock			Total

				(In Thousands, except per share data)
Balance, December 31, 2003					73,442	$	734	$	575,975		$	724,356		$	52,089		$	(1,981	)	$	(2,746	)	$	1,348,427
Comprehensive income:
	Net income				—		—		—			258,286			—			—			—			258,286
	Net unrealized loss on derivative instruments arising during the year, net of taxes of $0.8 million				—		—		—			—			(1,201	)		—			—			(1,201	)
	Add: reclassification adjustment to interest expense for interest differential, net of taxes of $2.9 million				—		—		—			—			4,359			—			—			4,359
	Net unrealized holding losses on available for sale securities arising during the year, net of taxes of $6.5 million				—		—		—			—			(13,660	)		—			—			(13,660	)
	Less: reclassification adjustment for net gains on available for sale securities realized in net income, net of taxes of $0.3 million				—		—		—			—			(382	)		—			—			(382	)

			Comprehensive income																					247,402

Cash dividends, $0.9767 per share					—		—		—			(112,565	)		—			—			—			(112,565	)
Common stock issued:
		Business combinations			19,447		194		537,803			—			—			—			—			537,997
		3-for-2 stock split effected in the form of a stock dividend			36,819		369		(369	)		—			—			—			—			—
		Incentive stock options			334		3		7,699			(11,230	)		—			—			27,385			23,857
Purchase of treasury stock					—		—		—			—			—			—			(33,655	)		(33,655	)
Deferred compensation expense					—		—		141			—			—			(141	)		—			—
Tax benefits of stock options					—		—		5,956			—			—			—			—			5,956

Balance, December 31, 2004					130,042	$	1,300	$	1,127,205		$	858,847		$	41,205		$	(2,122	)	$	(9,016	)	$	2,017,419

See accompanying notes to consolidated financial statements.

ASSOCIATED BANC-CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS


			For the Years Ended December 31,

			2004			2003			2002

			($ in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income		$	258,286		$	228,657		$	210,719
Adjustments to reconcile net income to net cash provided by operating activities:
	Provision for loan losses			14,668			46,813			50,699
	Depreciation and amortization			16,387			16,364			18,696
	Provision for (reversal of) valuation allowance on mortgage servicing rights			(1,193	)		12,341			17,642
	Amortization (accretion) of:
		Mortgage servicing rights		17,932			17,212			12,831
		Intangible assets		4,350			2,961			2,283
		Premiums and discounts on investments, loans and funding		26,114			18,860			14,861
	Deferred income taxes			(23,100	)		(13,202	)		(14,878	)
	(Gain) loss on sales of investment securities, net			(637	)		(702	)		427
	Gain on sales of assets, net			(1,181	)		(1,569	)		(657	)
	Gain on sales of loans held for sale, net			(15,054	)		(55,500	)		(35,172	)
	Mortgage loans originated and acquired for sale			(1,620,680	)		(4,273,406	)		(3,185,531	)
	Proceeds from sales of mortgage loans held for sale			1,700,142			4,530,406			3,233,679
	(Increase) decrease in interest receivable and other assets			15,361			(12,237	)		(13,351	)
	Decrease in interest payable and other liabilities			(7,894	)		(20,197	)		(13,664	)

Net cash provided by operating activities				383,501			496,801			298,584

CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans				(882,063	)		(36,062	)		(547,159	)
Additions to mortgage servicing rights				(18,732	)		(39,707	)		(30,730	)
Purchases of:
	Securities available for sale			(1,327,686	)		(1,761,282	)		(1,621,096	)
	Premises and equipment, net of disposals			(14,965	)		(13,290	)		(12,864	)
Proceeds from:
	Sales of securities available for sale			132,639			1,263			27,793
	Maturities of securities available for sale			776,582			1,298,426			1,626,013
	Sales of other assets			11,480			17,650			5,214
Net cash received (paid) in acquisition of subsidiaries				29,274			(18,025	)		17,982

Net cash used in investing activities				(1,293,471	)		(551,027	)		(534,847	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits				313,011			685,143			(271,203	)
Net cash paid in sales of branch deposits				(19,540	)		(15,845	)		—
Net increase (decrease) in short-term borrowings				526,460			(460,731	)		(357,007	)
Repayment of long-term debt				(1,229,469	)		(558,114	)		(235,675	)
Proceeds from issuance of long-term funding				1,500,079			507,363			1,101,518
Cash dividends				(112,565	)		(98,169	)		(90,166	)
Proceeds from exercise of incentive stock options				23,857			24,831			16,564
Purchase and retirement of treasury stock				—			(74,533	)		(44,046	)
Purchase of treasury stock				(33,655	)		(868	)		(44,145	)

Net cash provided by financing activities				968,178			9,077			75,840

Net increase (decrease) in cash and cash equivalents				58,208			(45,149	)		(160,423	)
Cash and cash equivalents at beginning of year				399,864			445,013			605,436

Cash and cash equivalents at end of year			$	458,072		$	399,864		$	445,013

Supplemental disclosures of cash flow information:
Cash paid during the year for:
	Interest		$	208,201		$	223,233		$	298,207
	Income taxes			89,397			110,423			91,098
Supplemental schedule of noncash investing activities:
	Loans transferred to other real estate			10,283			11,654			14,158
	Acquisitions:
		Fair value of assets acquired, including cash and cash equivalents	$	4,168,800		$	31,400		$	1,155,200
		Value ascribed to intangibles		481,300			27,000			125,300
		Liabilities assumed		3,522,900			10,500			962,700

See accompanying Notes to Consolidated Financial Statements.

ASSOCIATED BANC-CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The accounting and reporting policies of the Corporation conform to U.S. generally accepted accounting principles and to general practice within the financial services industry. The following is a description of the more significant of those policies.

Business

The Corporation provides a full range of banking and related financial services to individual and corporate customers through its network of bank and nonbank subsidiaries. The Corporation is subject to competition from other financial and non-financial institutions that offer similar or competing products and services. The Corporation is regulated by federal and state agencies and is subject to periodic examinations by those agencies.

Basis of Financial Statement Presentation

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

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

Investment Securities Available for Sale

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

term prospects of the issuer, and the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. Realized securities gains or losses on securities sales (using specific identification method) and declines in value judged to be other-than-temporary are included in investment securities gains (losses), net, in the consolidated statements of income.

Loans

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

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

Loans Held for Sale

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

Allowance for Loan Losses

The allowance for loan losses is a reserve for estimated credit losses. Actual credit losses, net of recoveries, are deducted from the allowance for loan losses. A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio.

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

Management, considering current information and events regarding the borrowers’ ability to repay their obligations, considers a loan to be impaired when it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the note agreement, including principal and interest.

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

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

Other Real Estate Owned

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

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the related assets or the lease term. Maintenance and repairs are charged to expense as incurred, while additions or major improvements are capitalized and depreciated over their estimated useful lives. Estimated useful lives of the assets are 3 to 20 years for land improvements, 5 to 40 years for buildings, 3 to 5 years for computers, and 3 to 20 years for furniture, fixtures, and other equipment. Leasehold improvements are amortized on a straight-line basis over the lesser of the lease terms or the estimated useful lives of the improvements.

Goodwill and Intangible Assets

Goodwill and Other Intangible Assets: The excess of the cost of an acquisition over the fair value of the net assets acquired consists primarily of goodwill, core deposit intangibles, and other identifiable intangibles (primarily related to customer relationships acquired). Core deposit intangibles have estimated finite lives and are amortized on an accelerated basis to expense over periods of 7 to 10 years. The other intangibles have estimated finite lives and are amortized on an accelerated basis to expense over a weighted average life of 13 years. The Corporation reviews long-lived assets and certain identifiable intangibles for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in which case an impairment charge would be recorded.

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

Mortgage Servicing Rights: The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. Upon sale, a mortgage servicing rights asset is capitalized,

which represents the then current fair value of future net cash flows expected to be realized for performing servicing activities. Mortgage servicing rights, when purchased, are initially recorded at cost. Mortgage servicing rights are carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value, and are included in intangible assets in the consolidated balance sheets. Mortgage servicing rights are amortized in proportion to and over the period of estimated servicing income.

The Corporation periodically evaluates its mortgage servicing rights asset for impairment. Impairment is assessed using estimated prepayment speeds of the underlying mortgages serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). The value of mortgage servicing rights is adversely affected when mortgage interest rates decline and mortgage loan prepayments increase. A valuation allowance is established, through a charge to earnings, to the extent the amortized cost of the mortgage servicing rights exceeds the estimated fair value by stratification. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation allowance is reduced through a recovery to earnings. An other-than-temporary impairment (i.e., recoverability is considered remote when considering interest rates and loan pay off activity) is recognized as a write-down of the mortgage servicing rights asset and the related valuation allowance (to the extent a valuation reserve is available) and then against earnings. A direct write-down permanently reduces the carrying value of the mortgage servicing rights asset and valuation allowance, precluding subsequent recoveries.

Income Taxes

Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income taxes, which arise principally from temporary differences between the period in which certain income and expenses are recognized for financial accounting purposes and the period in which they affect taxable income, are included in the amounts provided for income taxes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and, if necessary, tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the period that the deferred tax assets are deductible, management believes it is more likely than not the Corporation will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2004.

The Corporation files a consolidated federal income tax return and individual Parent Company and subsidiary state income tax returns. Accordingly, amounts equal to tax benefits of those subsidiaries having taxable federal losses or credits are offset by other subsidiaries that incur federal tax liabilities.

Derivative Financial Instruments and Hedging Activities

Derivative instruments, including derivative instruments embedded in other contracts, are required to be carried at fair value on the balance sheet with changes in the fair value recorded directly in earnings. On the date the derivative contract is entered into, the Corporation designates the derivative, except for mortgage banking derivatives for which changes in fair value of the derivative is recorded in earnings, as either a fair value hedge (i.e., a hedge of the fair value of a recognized asset or liability) or a cash flow hedge (i.e., a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability). The Corporation formally documents all relationships between hedging instruments and hedging items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value hedges or cash flow hedges to specific assets or liabilities on the balance sheet. The Corporation also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. If it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Corporation discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash

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

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

Stock-Based Compensation

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

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

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

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


	For the Years Ended December 31,

	2004			2003			2002

	($ in Thousands, except
	per share amounts)
Net income, as reported	$	258,286		$	228,657		$	210,719
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		458			271			—
Less: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(3,737	)		(2,956	)		(3,156	)

Net income, as adjusted	$	255,007		$	225,972		$	207,563

Basic earnings per share, as reported	$	2.28		$	2.07		$	1.88
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		—			—			—
Less: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(0.03	)		(0.03	)		(0.03	)

Basic earnings per share, as adjusted	$	2.25		$	2.04		$	1.85

Diluted earnings per share, as reported	$	2.25		$	2.05		$	1.86
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		—			—			—
Less: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(0.04	)		(0.03	)		(0.03	)

Diluted earnings per share, as adjusted	$	2.21		$	2.02		$	1.83

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


	2004			2003			2002

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

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

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, cash and cash equivalents are considered to include cash and due from banks, interest-bearing deposits in other financial institutions, and federal funds sold and securities purchased under agreements to resell.

Per Share Computations

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

Recent Accounting Pronouncements

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

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

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

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

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

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

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


NOTE 2	BUSINESS COMBINATIONS:

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

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

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

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


		$ in Millions

Investment securities available for sale		$	665
Loans, net			2,727
Other assets			256
Mortgage servicing rights			32
Intangible assets			21
Goodwill			447

	Total assets acquired	$	4,148

Deposits		$	2,701
Borrowings			768
Other liabilities			51

	Total liabilities assumed	$	3,520

Net assets acquired		$	628

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


	For Year ended
	December 31,

	2004		2003

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

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

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

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

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

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

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

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


		$ in Millions

Investment securities available for sale		$	164
Loans, net			748
Other assets			118
Intangible asset			6
Goodwill			120

	Total assets acquired	$	1,156

Deposits		$	785
Borrowings			166
Other liabilities			12

	Total liabilities assumed	$	963

Net assets acquired		$	193

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


NOTE 3	INVESTMENT SECURITIES:

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


	2004

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value

	($ in Thousands)
U.S. Treasury securities	$	33,177	$	5	$	(159	)	$	33,023
Federal agency securities		175,290		1,006		(232	)		176,064
Obligations of state and political subdivisions		876,208		45,577		(72	)		921,713
Mortgage-related securities		3,238,502		9,697		(10,714	)		3,237,485
Other securities (debt and equity)		413,938		33,124		(3	)		447,059

Total securities available for sale	$	4,737,115	$	89,409	$	(11,180	)	$	4,815,344


	2003

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value

	($ in Thousands)
U.S. Treasury securities	$	36,588	$	171	$	—		$	36,759
Federal agency securities		167,859		4,944		(90	)		172,713
Obligations of state and political subdivisions		868,974		58,579		(68	)		927,485
Mortgage-related securities		2,232,920		12,128		(11,636	)		2,233,412
Other securities (debt and equity)		368,388		36,040		(1,013	)		403,415

Total securities available for sale	$	3,674,729	$	111,862	$	(12,807	)	$	3,773,784

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

The following represents gross unrealized losses and the related fair value of securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2004.


		Less than 12 months					12 months or more					Total

		Unrealized					Unrealized					Unrealized
		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value

							($ in Thousands)
U.S. Treasury securities		$	(153	)	$	31,825	$	(6	)	$	993	$	(159	)	$	32,818
Federal agency securities			(104	)		30,782		(128	)		17,934		(232	)		48,716
Obligations of state and political subdivisions			(60	)		18,495		(12	)		1,004		(72	)		19,499
Mortgage-related securities			(3,345	)		593,209		(7,369	)		1,004,454		(10,714	)		1,597,663
Other securities (equity)			(3	)		297		—			—		(3	)		297

	Total	$	(3,665	)	$	674,608	$	(7,515	)	$	1,024,385	$	(11,180	)	$	1,698,993

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

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

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

The amortized cost and fair values of investment securities available for sale at December 31, 2004, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	2004

	Amortized
	Cost		Fair Value

	($ in Thousands)
Due in one year or less	$	180,512	$	182,134
Due after one year through five years		482,853		501,858
Due after five years through ten years		330,208		346,053
Due after ten years		285,356		300,503

Total debt securities		1,278,929		1,330,548
Mortgage-related securities		3,238,502		3,237,485
Equity securities		219,684		247,311

Total securities available for sale	$	4,737,115	$	4,815,344

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


	2004			2003			2002

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

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

NOTE 4 LOANS:

Loans at December 31 are summarized below.


			2004		2003

			($ in Thousands)
Commercial, financial, and agricultural			$	2,803,333	$	2,116,463
Real estate construction				1,459,629		1,077,731
Commercial real estate				3,933,131		3,246,954
Lease financing				50,718		38,968

	Commercial			8,246,811		6,480,116
	Residential mortgage			2,714,580		1,975,661
Home equity(1)				1,866,485		1,138,311
Installment				1,054,011		697,722

	Retail			2,920,496		1,836,033

		Total loans	$	13,881,887	$	10,291,810


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

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


		2004			2003			2002

		($ in Thousands)
Balance at beginning of year		$	177,622		$	162,541		$	128,204
Balance related to acquisition			14,750			—			11,985
Provision for loan losses			14,668			46,813			50,699
Charge offs			(22,202	)		(37,107	)		(32,179	)
Recoveries			4,924			5,375			3,832

	Net charge offs		(17,278	)		(31,732	)		(28,347	)

Balance at end of year		$	189,762		$	177,622		$	162,541

The following table presents nonperforming loans at December 31:


		December 31,

		2004		2003

		($ in Thousands)
Nonaccrual loans		$	112,761	$	113,944
Accruing loans past due 90 days or more			2,153		7,495
Restructured loans			37		43

	Total nonperforming loans	$	114,951	$	121,482

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


	2004		2003

	($ in Thousands)
Impaired loans for which an allowance has been provided	$	58,237	$	68,571
Impaired loans for which no allowance has been provided		30,065		29,079

Total loans determined to be impaired	$	88,302	$	97,650

Allowance for loan losses related to impaired loans	$	25,609	$	33,497


	2004		2003		2002

	($ in Thousands)
For the years ended December 31:
Average recorded investment in impaired loans	$	70,439	$	83,106	$	60,247

Cash basis interest income recognized from impaired loans	$	2,500	$	2,489	$	3,849

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


	2004

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

Balance at end of year	$	41,349

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


NOTE 5	GOODWILL AND INTANGIBLE ASSETS:

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


Goodwill		2004		2003		2002

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

Balance at end of year		$	679,993	$	224,388	$	212,112

Other Intangible Assets: The Corporation has other intangible assets that are amortized, consisting of core deposit intangibles, other intangibles (primarily related to customer relationships acquired in connection with the CFG and Jabas acquisitions), and mortgage servicing rights. The core deposit intangibles and mortgage servicing rights are assigned to the Corporation’s banking segment, while other intangibles of $17 million are assigned to the wealth management segment and $4 million are assigned to the banking segment.

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


	2004			2003			2002

	($ in Thousands)
Core deposit intangibles:

Gross carrying amount	$	33,468		$	28,165		$	28,165
Accumulated amortization		(11,335	)		(20,682	)		(18,923	)

Net book value	$	22,133		$	7,483		$	9,242

Additions during the year	$	16,685		$	—		$	5,600
Amortization during the year		(2,035	)		(1,759	)		(2,283	)
Other intangibles:

Gross carrying amount	$	24,578		$	14,751		$	—
Accumulated amortization		(3,517	)		(1,202	)		—

Net book value	$	21,061		$	13,549		$	—

Additions during the year	$	9,827		$	14,751		$	—
Amortization during the year		(2,315	)		(1,202	)		—

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


Mortgage servicing rights		2004			2003			2002

		($ in Thousands)
Mortgage servicing rights at beginning of year		$	65,062		$	60,685		$	42,786
Additions			50,508			39,707			30,730
Amortization			(17,932	)		(17,212	)		(12,831	)
Other-than-temporary impairment			(5,855	)		(18,118	)		—

	Mortgage servicing rights at end of year	$	91,783		$	65,062		$	60,685

Valuation allowance at beginning of year			(22,585	)		(28,362	)		(10,720	)
Additions			(5,461	)		(15,832	)		(17,642	)
Reversals			6,654			3,491			—
Other-than-temporary impairment			5,855			18,118			—

	Valuation allowance at end of year		(15,537	)		(22,585	)		(28,362	)

	Mortgage servicing rights, net	$	76,246		$	42,477		$	32,323

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

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

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

The following table shows the estimated future amortization expense for amortizing intangible assets. The projections of amortization expense for the next five years are based on existing asset balances, the current interest rate environment, and prepayment speeds as of December 31, 2004. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon changes in interest rates, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable.


Estimated amortization expense	Core Deposit Intangibles		Other Intangibles		Mortgage Servicing Rights

	($ in Thousands)
Year ending December 31,
2005	$	4,000	$	3,700	$	21,500
2006		3,300		3,000		17,900
2007		2,900		1,300		14,700
2008		2,500		1,200		11,800
2009		2,100		1,100		8,800


NOTE 6	PREMISES AND EQUIPMENT:

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


				2004						2003

		Estimated				Accumulated		Net Book		Net Book
		Useful Lives		Cost		Depreciation		Value		Value

		($ in Thousands)
Land			—	$	42,820	$	—	$	42,820	$	27,595
Land improvements			3 – 20 years		3,616		2,458		1,158		869
Buildings			5 – 40 years		176,696		80,464		96,232		73,589
Computers			3 – 5 years		33,611		24,783		8,828		6,212
Furniture, fixtures and other equipment			3 – 20 years		109,972		82,108		27,864		17,623
Leasehold improvements			5 – 30 years		20,070		12,028		8,042		5,427

	Total premises and equipment			$	386,785	$	201,841	$	184,944	$	131,315

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

The Corporation and certain subsidiaries are obligated under noncancelable operating leases for other facilities and equipment, certain of which provide for increased rentals based upon increases in cost of living adjustments and other operating costs. The approximate minimum annual rentals and commitments under these noncancelable agreements and leases with remaining terms in excess of one year are as follows:


	($ in Thousands)
2005	$	11,143
2006		10,624
2007		9,105
2008		7,364
2009		5,932
Thereafter		22,558

Total	$	66,726

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


NOTE 7	DEPOSITS:

The distribution of deposits at December 31 is as follows.


		2004		2003

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

	Total deposits	$	12,786,239	$	9,792,843

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


Maturities During Year Ending
December 31,	($ in Thousands)

2005	$	2,824,145
2006		766,817
2007		461,880
2008		141,802
2009		67,832
Thereafter		121,397

Total	$	4,383,873

NOTE 8 SHORT-TERM BORROWINGS:

Short-term borrowings at December 31 are as follows:


		2004		2003

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

	Total short-term borrowings	$	2,926,716	$	1,928,876

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

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


NOTE 9	LONG-TERM FUNDING:

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


		2004		2003

		($ in Thousands)
Federal Home Loan Bank advances		$	1,158,294	$	912,138
Bank notes			500,000		300,000
Repurchase agreements			550,000		429,175
Subordinated debt, net			204,168		204,351
Junior subordinated debentures, net			185,517		—
Other borrowed funds			6,561		6,555

	Total long-term debt	$	2,604,540	$	1,852,219
Company-obligated mandatorily redeemable preferred securities, net			—		181,941

	Total long-term funding	$	2,604,540	$	2,034,160

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

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

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

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

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

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

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

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

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

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


Year		($ in Thousands)

2005		$	375,000
2006			970,225
2007			702,850
2008			115,953
2009			—
Thereafter			440,512

	Total long-term debt	$	2,604,540

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


NOTE 10	STOCKHOLDERS’ EQUITY:

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

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

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

The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock each quarter in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. For the Corporation’s employee incentive plans, the Board of

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

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

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

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

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


	2004					2003					2002

	Options			Weighted Average		Options			Weighted Average		Options			Weighted Average
	Outstanding			Exercise Price		Outstanding			Exercise Price		Outstanding			Exercise Price

Outstanding, January 1		6,375,979		$	19.19		7,122,741		$	17.41		6,030,025		$	17.40
Granted		1,258,250			29.06		1,053,263			23.00		1,147,935			21.29
Options from acquisitions		264,247			16.10		—			—		1,614,690			9.43
Exercised		(1,394,279	)		17.25		(1,650,764	)		13.73		(1,469,678	)		11.27
Forfeited		(145,077	)		22.94		(149,261	)		21.74		(200,231	)		20.06

Outstanding, December 31		6,359,120		$	21.35		6,375,979		$	19.19		7,122,741		$	17.41

Options exercisable at year-end		4,209,543					4,434,584					5,059,880

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


	Options		Weighted Average		Remaining		Options		Weighted Average
	Outstanding		Exercise Price		Life (Years)		Exercisable		Exercise Price

Range of Exercise Prices:
$6.29 — $9.95		96,788	$	8.54		2.48		96,788	$	8.54
$10.65 — $12.54		63,510		11.38		2.60		63,510		11.38
$13.20 — $15.82		586,504		14.66		2.90		586,504		14.66
$16.40 — $19.98		1,596,253		17.82		5.14		1,596,253		17.82
$20.01 — $23.29		2,795,542		22.07		6.40		1,866,488		21.88
$27.11 — $33.67		1,220,523		29.06		9.22

TOTAL		6,359,120	$	21.35		6.18		4,209,543	$	18.87

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


NOTE 11	RETIREMENT PLANS:

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

In connection with the First Federal acquisition on October 29, 2004, the Corporation assumed the First Federal pension plan (the “First Federal Plan”). The First Federal Plan was frozen on December 31, 2004 and qualified participants in this plan will become eligible to participate in the Associated Plan as of January 1, 2005. The funded status and net periodic benefit cost of the retirement plans is as follows.


		Associated(1)			First Federal(2)			Total			Associated

		2004			2004			2004			2003

		($ in Thousands)
Change in Fair Value of Plan Assets
Fair value of plan assets at beginning of year		$	69,384		$	16,433		$	85,817		$	45,429
Actual gain on plan assets			6,374			823			7,197			9,795
Employer contributions			—			3,000			3,000			17,542
Gross benefits paid			(6,723	)		(70	)		(6,793	)		(3,382	)

	Fair value of plan assets at end of year	$	69,035		$	20,186		$	89,221		$	69,384

Change in Benefit Obligation
Net benefit obligation at beginning of year		$	62,825		$	27,802		$	90,627		$	54,464
Service cost			6,694			195			6,889			5,857
Interest cost			3,854			259			4,113			3,603
Actuarial loss			3,086			—			3,086			2,283
Gross benefits paid			(6,723	)		(70	)		(6,793	)		(3,382	)

	Net benefit obligation at end of year	$	69,736		$	28,186		$	97,922		$	62,825

Funded Status
Excess (deficit) of plan assets over (under) benefit obligation		$	(701	)	$	(8,001	)	$	(8,702	)	$	6,559
Unrecognized net actuarial loss (gain)			18,389			(599	)		17,790			15,762
Unrecognized prior service cost			515			—			515			589
Unrecognized net transition asset			(412	)		—			(412	)		(736	)

	Net prepaid asset at end of year in the balance sheet	$	17,791		$	(8,600	)	$	9,191		$	22,174


		Associated(1)		First Federal(2)			Total			Associated

		2004		2004			2004			2003

		($ in Thousands)
Amounts Recognized in the Statement of Financial Position Consists of
Prepaid benefit cost		$	17,791	$	—		$	17,791		$	22,174
Accrued benefit cost			—		(8,600	)		(8,600	)		—
		$17,791 $(8,600) $9,191 $22,174
	Net amount recognized


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

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


		Associated			First Federal			Total			Associated

		2004			2004			2004			2003			2002

		($ in Thousands)
Components of Net Periodic Benefit Cost
Service cost		$	6,694		$	195		$	6,889		$	5,857		$	4,582
Interest cost			3,854			260			4,114			3,603			3,257
Expected return on plan assets			(6,286	)		(224	)		(6,510	)		(5,301	)		(3,963	)
Amortization of:
	Transition asset		(324	)		—			(324	)		(324	)		(323	)
	Prior service cost		74			—			74			74			74
	Actuarial loss		370			—			370			73			—

Total net periodic benefit cost		$	4,382		$	231		$	4,613		$	3,982		$	3,627


	Associated			First Federal			Total	Associated

	2004			2004			2004	2003			2002

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

The overall expected long-term rate of return on the Associated Plan assets was 8.75% as of both December 31, 2004 and 2003, while the overall expected long-term rate of return on the First Federal Plan assets was 8.50%. The expected long-term rate of return was estimated using market benchmarks for equities and bonds applied to the plan’s anticipated asset allocations. The expected return on equities was computed utilizing a valuation framework, which projected future returns based on current equity valuations rather than historical returns.

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

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

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


		Associated			First Federal			Associated

Asset Category		2004			2004			2003

Equity securities			65	%		—			66	%
Debt securities			33			—			32
Money market			—			100	%		—
Other			2			—			2

	Total		100	%		100	%		100	%

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

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

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


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


NOTE 12	INCOME TAXES:

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


		Years ended December 31,
		2004			2003			2002

		($ in Thousands)
Current:
	Federal	$	127,799		$	103,321		$	99,730
	State		7,352			2,940			755

Total current			135,151			106,261			100,485
Deferred:
	Federal		(23,206	)		(12,793	)		(16,214	)
	State		106			(409	)		1,336

Total deferred			(23,100	)		(13,202	)		(14,878	)

Total income tax expense		$	112,051		$	93,059		$	85,607

Temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities resulted in deferred taxes. Deferred tax assets and liabilities at December 31 are as follows:


		2004			2003

		($ in Thousands)
Gross deferred tax assets:
	Allowance for loan losses	$	77,643		$	72,319
	Accrued liabilities		9,427			5,970
	Deferred compensation		18,105			9,190
	Securities valuation adjustment		12,805			10,445
	Benefit of tax loss carryforwards		20,589			16,716
	Other		5,689			5,680

Total gross deferred tax assets			144,258			120,320
Valuation adjustment for deferred tax assets			(8,414	)		(7,335	)

			135,844			112,985
Gross deferred tax liabilities:
	Real estate investment trust income		13,817			27,635
	FHLB stock dividends		12,539			3,700
	Prepaids		4,368			6,608
	Purchase acquisition adjustments		9,021			4,795
	Mortgage banking activity		18,835			4,500
	Deferred loan fee income		8,554			7,364
	State income taxes		10,506			9,647
	Leases		5,796			2,670
	Other		5,810			3,321

Total gross deferred tax liabilities			89,246			70,240

Net deferred tax assets			46,598			42,745
Tax effect of unrealized gain related to available for sale securities			(28,267	)		(35,843	)
Tax effect of unrealized loss related to derivative instruments			5,874			7,991

			(22,393	)		(27,852	)

Net deferred tax assets including tax effected items		$	24,205		$	14,893

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

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

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

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


		2004			2003			2002

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

Effective income tax rate			30.3	%		28.9	%		28.9	%

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


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

Commitments and Off-Balance Sheet Arrangements

The Corporation utilizes a variety of financial instruments in the normal course of business to meet the financial needs of its customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include lending-related commitments (see below) and derivative instruments (see Note 14).

Lending-related Commitments

As a financial services provider, the Corporation routinely enters into commitments to extend credit. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Corporation. A significant portion of commitments to extend credit may expire without being drawn upon.

Lending-related commitments include commitments to extend credit, commitments to originate residential mortgage loans held for sale, commercial letters of credit, and standby letters of credit. Commitments to extend credit are agreements to lend to customers at predetermined interest rates as long as there is no violation of any condition established in the contracts. Commercial and standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party, while standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

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


	2004		2003

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


(1)	These off-balance sheet financial instruments are exercisable at the market rate prevailing at the date the underlying transaction will be completed and thus are deemed to have no current fair value, or the fair value is based on fees currently charged to enter into similar agreements and is not material at December 31, 2004 or 2003.

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

The Corporation’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amount of those instruments. The commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Corporation uses the same credit policies in making commitments as it does for extending loans to customers. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the customer. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Contingent Liabilities

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

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

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


NOTE 14	DERIVATIVE AND HEDGING ACTIVITIES:

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

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


						Weighted Average
	Notional		Fair Value
	Amount		Gain / (Loss)			Receive Rate			Pay Rate			Maturity

	($ in Thousands)
December 31, 2004

Interest Rate Risk Management Hedges:
Swaps—receive variable / pay fixed(1),(3)	$	200,000	$	(14,732	)		2.06	%		5.03	%		76 months
Swaps—receive fixed / pay variable(2),(4)		375,000		10,262			7.21	%		3.80	%		199 months
Caps—written(1),(3)		200,000		97			Strike 4.72	%		—			20 months
Swaps—receive variable / pay fixed(2),(5)		320,997		(3,731	)		4.42	%		6.34	%		50 months
Customer Swaps and Caps:
Customer swaps	$	94,457	$	—			2.80	%		2.80	%		89 months
Customer caps		23,550		—			—			—			78 months

December 31, 2003

Interest Rate Risk Management Hedges:
Swaps—receive variable / pay fixed(1),(3)	$	200,000	$	(21,132	)		1.15	%		5.03	%		88 months
Swaps—receive fixed / pay variable(2),(4)		375,000		12,432			7.21	%		2.79	%		211 months
Caps—written(1),(3)		200,000		1,222			Strike 4.72	%		—			32 months
Swaps—receive variable / pay fixed(2),(5)		361,189		(9,876	)		3.31	%		6.27	%		50 months
Customer Swaps:
Customer swaps	$	41,400	$	—			1.96	%		1.96	%		69 months


(1)	Cash flow hedges

(2)	Fair value hedges

(3)	Hedges variable rate long-term debt

(4)	Hedges fixed rate long-term debt

(5)	Hedges specific longer-term fixed rate commercial loans

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

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

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

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

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


NOTE 15	PARENT COMPANY ONLY FINANCIAL INFORMATION:

Presented below are condensed financial statements for the Parent Company:

BALANCE SHEETS


	2004		2003

	($ in Thousands)
ASSETS
Cash and due from banks	$	265	$	924
Notes receivable from subsidiaries		259,827		374,878
Investment in subsidiaries		2,085,144		1,316,773
Other assets		110,638		103,837

Total assets	$	2,455,874	$	1,796,412

LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt	$	389,685	$	391,705
Accrued expenses and other liabilities		48,770		56,280

Total liabilities		438,455		447,985
Stockholders’ equity		2,017,419		1,348,427

Total liabilities and stockholders’ equity	$	2,455,874	$	1,796,412

STATEMENTS OF INCOME


	For the Years Ended December 31,

	2004			2003			2002

	($ in Thousands)
INCOME
Dividends from subsidiaries	$	124,500		$	179,500		$	172,000
Management and service fees from subsidiaries		46,913			43,146			35,346
Interest income on notes receivable		11,979			9,172			5,641
Other income		4,562			2,464			3,510

Total income		187,954			234,282			216,497


EXPENSE
Interest expense on borrowed funds		12,718			11,474			12,627
Provision for loan losses		—			—			500
Personnel expense		28,936			29,219			22,918
Other expense		20,755			20,241			15,191

Total expense		62,409			60,934			51,236

Income before income tax benefit and equity in undistributed income		125,545			173,348			165,261
Income tax benefit		(1,510	)		(1,093	)		(1,759	)

Income before equity in undistributed net income of subsidiaries		127,055			174,441			167,020
Equity in undistributed net income of subsidiaries		131,231			54,216			43,699

Net income	$	258,286		$	228,657		$	210,719

STATEMENTS OF CASH FLOWS


		For the Years Ended December 31,

		2004			2003			2002

		($ in Thousands)
OPERATING ACTIVITIES
Net income		$	258,286		$	228,657		$	210,719
Adjustments to reconcile net income to net cash provided by operating activities:
	Increase in equity in undistributed net income of subsidiaries		(131,231	)		(54,216	)		(43,699	)
	Depreciation and other amortization		495			378			335
	(Gain) loss on sales of assets, net		(8	)		2			2
	(Increase) decrease in interest receivable and other assets		1,935			(269	)		(41,651	)
	Increase in interest payable and other liabilities		(27,200	)		(24,392	)		(14,351	)
Capital received from (contributed to) subsidiaries			(10,000	)		95,470			(12,997	)

Net cash provided by operating activities			92,277			245,630			98,358


INVESTING ACTIVITIES
Proceeds from sales of available for sale securities			1,398			—			—
Purchase of available for sale securities			—			—			(319	)
Net cash paid in acquisition of subsidiary			(72,723	)		—			(78,055	)
Net (increase) decrease in notes receivable			114,847			(95,630	)		(79,551	)
Purchase of premises and equipment, net of disposals			(320	)		(975	)		(614	)

Net cash provided by (used in) investing activities			43,202			(96,605	)		(158,539	)


FINANCING ACTIVITIES
Net decrease in short-term borrowings			(13,775	)		—			—
Net increase in long-term debt			—			—			221,998
Cash dividends paid			(112,565	)		(98,169	)		(90,166	)
Proceeds from exercise of stock options			23,857			24,831			16,564
Purchase and retirement of treasury stock			—			(74,533	)		(44,046	)
Purchase of treasury stock			(33,655	)		(868	)		(44,145	)

Net cash provided by (used in) financing activities			(136,138	)		(148,739	)		60,205

Net increase (decrease) in cash and cash equivalents			(659	)		286			24
Cash and cash equivalents at beginning of year			924			638			614

Cash and cash equivalents at end of year		$	265		$	924		$	638


NOTE 16	FAIR VALUE OF FINANCIAL INSTRUMENTS:

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

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


		2004						2003

		Carrying						Carrying
		Amount			Fair Value			Amount			Fair Value

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


(1)	At both December 31, 2004 and 2003, the notional amount of non-trading interest rate swap and cap agreements was $1.1 billion. See Notes 13 and 14 for information on the fair value of lending-related commitments and derivative financial instruments.

(2)	At December 31, 2004 and 2003, the commitment on standby letters of credit was $0.4 billion and $0.3 billion, respectively. See Note 13 for additional information on the standby letters of credit.

(3)	If carrying amount or fair value is bracketed, represents a loss position of the financial instrument.

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

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

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

Loans— Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, commercial real estate, lease financing, residential mortgage, credit card, and other consumer. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. Future cash flows are also adjusted for estimated reductions or delays due to delinquencies, nonaccruals, or potential charge offs.

Deposits— The fair value of deposits with no stated maturity such as noninterest-bearing demand deposits, savings, interest-bearing demand deposits, and money market accounts, is equal to the amount payable on demand as of December 31. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

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

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

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

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

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

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

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


NOTE 17	REGULATORY MATTERS:

Restrictions on Cash and Due From Banks

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

Regulatory Capital Requirements

The Corporation, as well as the subsidiary banks and thrift, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts

and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2004, that the Corporation meets all capital adequacy requirements to which it is subject.

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

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


									To Be Well Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions: (2)

	Amount		Ratio (1)		Amount		Ratio (1)		Amount		Ratio (1)

	($ In Thousands)
As of December 31, 2004:

Associated Banc-Corp

Total Capital	$	1,817,016		12.33%	$	1,178,460		+8.00%
Tier I Capital		1,420,386		9.64		589,230		³4.00%
Leverage		1,420,386		7.79		729,025		³4.00%
Associated Bank, N.A.

Total Capital		1,093,698		10.79		810,620		³8.00%	$	1,013,275		³10.00%
Tier I Capital		885,340		8.74		405,310		³4.00%		607,965		+ 6.00%
Leverage		885,340		6.46		548,085		³4.00%		685,106		³5.00%
First Federal Capital Bank(3)

Total Capital		202,883		9.86		164,544		³8.00%		205,680		³10.00%
Core Capital		188,217		5.16		145,810		³4.00%		182,263		³5.00%
Tangible Capital		188,217		5.16		54,679		³4.00%
Tier I Capital		188,217		9.15						123,408		³6.00%


									To Be Well Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions: (2)

	Amount		Ratio (1)		Amount		Ratio (1)		Amount		Ratio (1)

	($ In Thousands)
As of December 31, 2003:

Associated Banc-Corp

Total Capital	$	1,572,770		13.99%	$	899,596		³8.00%
Tier I Capital		1,221,647		10.86		449,798		³4.00%
Leverage		1,221,647		8.37		584,108		³4.00%
Associated Bank, N.A.

Total Capital		980,318		10.63		737,810		³8.00%	$	922,262		+10.00%
Tier I Capital		784,263		8.50		368,905		³4.00%		553,357		+ 6.00%
Leverage		784,263		6.34		495,138		³4.00%		618,923		+ 5.00%

Associated Bank Minnesota, N.A.(4)

Total Capital		156,196		11.94		104,688		³8.00%		130,860		+10.00%
Tier I Capital		139,692		10.67		52,344		³4.00%		78,516		+ 6.00%
Leverage		139,692		8.29		67,424		³4.00%		84,279		+ 5.00%


(1)	Total Capital ratio is defined as Tier 1 Capital plus Tier 2 Capital divided by total risk-weighted assets. The Tier 1 Capital ratio is defined as Tier 1 Capital divided by total risk-weighted assets. The leverage ratio is defined as Tier 1 Capital divided by the most recent quarter’s average total assets. The Core Capital ratio is defined as Tier 1 (Core) Capital divided by adjusted total assets. The Tangible Capital ratio is defined as tangible capital divided by tangible assets.

(2)	Prompt corrective action provisions are not applicable at the bank holding company level.

(3)	Prompt corrective action provisions are not applicable for tangible capital, and capital adequacy provisions are not applicable for Tier 1 Capital at thrift institutions. Subsequent to year-end 2004, the Corporation merged First Federal into its Associated Bank, National Association, banking subsidiary during February 2005.

(4)	Not considered a significant subsidiary in 2004.

NOTE 18 EARNINGS PER SHARE:

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


	For the Years Ended December 31,

	2004		2003		2002

	(In Thousands, except per share data)
Net income, as reported	$	258,286	$	228,657	$	210,719

Weighted average shares outstanding		113,532		110,617		112,027
Effect of dilutive stock options outstanding		1,493		1,144		1,213

Diluted weighted average shares outstanding		115,025		111,761		113,240
Basic earnings per share	$	2.28	$	2.07	$	1.88

Diluted earnings per share	$	2.25	$	2.05	$	1.86

NOTE 19 SEGMENT REPORTING

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

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

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

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


						Wealth						Consolidated
			Banking			Management			Other			Total

			($ in Thousands)
2004
Net interest income			$	552,311		$	316		$	—		$	552,627
Provision for loan losses				14,668			—			—			14,668
Noninterest income				150,225			79,609			(1,655	)		228,179
Depreciation and amortization				36,174			2,495			—			38,669
Other noninterest expense				303,720			55,067			(1,655	)		357,132
Income taxes				103,106			8,945			—			112,051

	Net income		$	244,868		$	13,418		$	—		$	258,286

		Total assets	$	20,448,862		$	81,236		$	(9,962	)	$	20,520,136

Total revenues *			$	684,604		$	79,925		$	(1,655	)	$	762,874
Percent of consolidated total revenues				90	%		10	%		—	%		100	%


						Wealth						Consolidated
			Banking			Management			Other			Total

			($ in Thousands)
2003
Net interest income			$	510,213		$	549		$	—		$	510,762
Provision for loan losses				46,813			—			—			46,813
Noninterest income				152,292			55,102			(2,853	)		204,541
Depreciation and amortization				34,966			1,571			—			36,537
Other noninterest expense				267,761			45,329			(2,853	)		310,237
Income taxes				89,559			3,500			—			93,059

	Net income		$	223,406		$	5,251		$	—		$	228,657

		Total assets	$	15,195,428		$	62,383		$	(9,917	)	$	15,247,894

Total revenues *			$	674,846		$	55,651		$	(2,853	)	$	727,644
Percent of consolidated total revenues				93	%		7	%		—	%		100	%

2002
Net interest income			$	501,244		$	22		$	—		$	501,266
Provision for loan losses				50,699			—			—			50,699
Noninterest income				137,886			43,282			(13,463	)		167,705
Depreciation and amortization				33,588			222			—			33,810
Other noninterest expense				267,897			33,702			(13,463	)		288,136
Income taxes				81,855			3,752			—			85,607

	Net income		$	205,091		$	5,628		$	—		$	210,719

		Total assets	$	15,015,136		$	43,737		$	(15,598	)	$	15,043,275

Total revenues*			$	656,772		$	43,304		$	(13,463	)	$	686,613
Percent of consolidated total revenues				96	%		6	%		(2	)%		100	%


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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Associated Banc-Corp:

We have audited the accompanying consolidated balance sheets of Associated Banc-Corp and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Associated Banc-Corp and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004 in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Associated Banc-Corp’s internal control over financial reporting as of December 31, 2004, based on criteria established inInternal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 9, 2005, except as to the fifth paragraph of Management’s Annual Report on Internal Control Over Financial Reporting (restated) which is as of August 11, 2005, expressed an unqualified opinion on management’s assessment of, and an adverse opinion on the effective operation of, internal control over financial reporting.

KPMG LLP

Chicago, Illinois

March 9, 2005

Market Information


						Market Price Range Sales Prices

		Dividends Paid		Book Value		High		Low		Close

2004
	4th Quarter	$	0.2500	$	15.55	$	34.85	$	32.08	$	33.23
	3rd Quarter		0.2500		13.18		32.19		28.81		32.07
	2nd Quarter		0.2500		12.53		30.13		27.09		29.63
	1st Quarter		0.2267		12.67		30.37		28.08		29.86

2003
	4th Quarter	$	0.2267	$	12.26	$	28.75	$	25.87	$	28.53
	3rd Quarter		0.2267		11.84		25.93		24.75		25.26
	2nd Quarter		0.2267		11.92		25.61		21.43		24.41
	1st Quarter		0.2067		11.60		23.48		21.55		21.55

Annual dividend rate: $1.00

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

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Associated Banc-Corp (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 disclosures.

As of the end of the period covered by this report, 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 that evaluation, the Corporation’s management initially concluded that as of December 31, 2004, such disclosure controls and procedures were effective. Subsequent to the Corporation’s July 21, 2005 press release on second quarter 2005 earnings and prior to the filing of the Form 10-Q for the quarter ended June 30, 2005 on August 15, 2005, management concluded that the Corporation had a material weakness in its internal control over financial reporting related to its accounting for certain derivative financial instruments under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). Solely because of this material weakness in its internal control over financial reporting which related to the year ended December 31, 2004, management has, as of the date of the filing this Form 10-K/ A, restated its assessment and concluded that the Corporation’s disclosure controls and procedures were not effective as of December 31, 2004.

(b) Management’s Annual Report on Internal Control Over Financial Reporting (restated)

Management of Associated Banc-Corp (the “Corporation”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Corporation’s financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-5(f) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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

As of December 31, 2004, management assessed the effectiveness of the Corporation’s internal control over financial reporting based on criteria established in “Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, as stated in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005, management initially concluded that the Corporation’s internal control over financial reporting as of December 31, 2004 was effective. Subsequent to the Corporation’s July 21, 2005 press release on second quarter 2005 earnings and prior to the filing of the Form 10-Q for the quarter ended June 30, 2005 on August 15, 2005, management identified a material weakness in its internal control over financial reporting that existed as of December 31, 2004 related to the Corporation’s accounting for certain derivative financial instruments pursuant to the provisions of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). Specifically, the Corporation’s policies and procedures did not provide for proper application of the provisions of SFAS 133 at inception for certain derivative financial instruments, primarily those originated before or during 2001, the year of adoption of SFAS 133. In addition, the Corporation’s policies and procedures did not provide for periodic review of the proper accounting for certain derivative financial instruments for periods subsequent to inception.

The material weakness mentioned above resulted from the absence of personnel possessing sufficient technical expertise related to the application of the provisions of SFAS 133. The material weakness resulted in accounting errors, as the Corporation determined that the hedge accounting treatment applied to interest rate swaps on portions of its variable rate debt, an interest rate cap on variable rate debt, an interest rate swap on fixed rate subordinated debt and certain interest rate swaps related to specific fixed rate commercial loans was not consistent with the provisions of SFAS 133. The Corporation’s historical accounting for these items reflected the exchange of interest payments related to the swap contracts in net interest income, the changes in fair value on the interest rate swaps hedging portions of the variable rate debt and the interest rate cap in stockholders’ equity as part of accumulated other comprehensive income, and the fair value of the swap on fixed rate subordinated debt and the hedged item in the balance sheet, with changes in fair value of both the swap and hedged item recognized in earnings of the current period. Although certain individual errors in accounting would have been material to certain previously issued historical financial statements, management concluded that restatement of previously issued financial statements for annual and quarterly periods was not required because the aggregate effect of the errors in accounting resulting from this material weakness was not material to such historical financial statements.

Solely because of the material weakness in its internal control over financial reporting mentioned above, management has, as of the date of the filing this Form 10-K/ A, restated its earlier assessment and has now concluded that the Corporation’s internal control over financial reporting was not effective as of December 31, 2004.

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Corporation included in the Annual Report on Form 10-K for the year ended December 31, 2004, has issued an auditors’ report on management’s restated assessment of the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2004. The report, which expresses an unqualified opinion on management’s assessment and an adverse opinion on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2004, is included below under the heading “Report of Independent Registered Public Accounting Firm.”

(c) Changes in Internal Control Over Financial Reporting

There were no changes in the Corporation’s internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act during the fiscal quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

In order to remediate the aforementioned material weakness and ensure the ongoing integrity of its financial reporting processes, the Corporation is providing additional and ongoing formal training for treasury and accounting personnel specific to SFAS 133 documentation and effectiveness testing requirements with the assistance of third party consultants with expertise in hedge accounting requirements.

(d) Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Associated Banc-Corp:

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting (restated)(Item 9A(b)), that Associated Banc-Corp did not maintain effective internal control over financial reporting as of December 31, 2004, because of the effect of the material weakness identified in management’s restated assessment, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Associated Banc-Corp’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of Associated Banc-Corp’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified and included in its restated assessment that Associated Banc-Corp had a material weakness in its internal control over financial reporting related to its accounting for certain derivative financial instruments pursuant to the provisions of Statement of Financial Accounting

Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). Specifically, the Corporation’s policies and procedures did not provide for proper application of the provisions of SFAS 133 at inception for certain derivative financial instruments, primarily those originated before or during 2001. In addition, the Corporation’s policies and procedures did not provide for periodic review of the proper accounting for certain derivative financial instruments for periods subsequent to inception.

The material weakness mentioned above resulted from the absence of personnel possessing sufficient technical expertise related to the application of the provisions of SFAS 133. The material weakness resulted in accounting errors, as the Corporation determined that the hedge accounting treatment applied to interest rate swaps on portions of its variable rate debt, an interest rate cap on variable rate debt, an interest rate swap on fixed rate subordinated debt and certain interest rate swaps related to specific fixed rate commercial loans was not consistent with the provisions of SFAS 133. The Corporation’s historical accounting for these items reflected the exchange of interest payments related to the swap contracts in net interest income, the changes in fair value on the interest rate swaps hedging portions of the variable rate debt and the interest rate cap in stockholders’ equity as part of accumulated other comprehensive income, and the fair value of the swap on fixed rate subordinated debt and the hedged item in the balance sheet, with changes in fair value of both the swap and hedged item recognized in earnings of the current period. Certain individual errors in accounting would have been material to certain previously issued historical financial statements. However, management concluded that restatement of previously issued financial statements for annual and quarterly periods was not required because the aggregate effect of the errors in accounting resulting from this material weakness was not material to such historical financial statements.

As stated in the fifth paragraph of Management’s Annual Report on Internal Control Over Financial Reporting (restated), management’s assessment of the effectiveness of Associated Banc-Corp’s internal control over financial reporting has been restated.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Associated Banc-Corp and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 9, 2005 expressed an unqualified opinion on those consolidated financial statements.

In our opinion, management’s restated assessment that Associated Banc-Corp did not maintain effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Associated Banc-Corp did not maintain effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by COSO.

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

KPMG LLP

Chicago, Illinois

March 9, 2005, except as to the fifth paragraph of Management’s Annual Report on Internal Control over Financial Reporting (restated), which is as of August 11, 2005.

PART IV


ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


	The following financial statements and financial statement schedules are included under a separate caption “Financial Statements and Supplementary Data” in Part II, Item 8 hereof and are incorporated herein by reference.

	Consolidated Balance Sheets— December 31, 2004 and 2003

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

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

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

	Notes to Consolidated Financial Statements

	Report of Independent Registered Public Accounting Firm


Exhibit
Number		Description

	(3)(a)	Articles of Incorporation	Exhibit (3)(a) to Report on Form 10-K for fiscal year ended December 31, 1999
	(3)(b)	Articles of Amendment	Exhibit (3) to Current Report on Form 8-K filed on May 3, 2004
	(3)(c)	Bylaws	Exhibit (3)(b) to Report on Form 10-K for fiscal year ended December 31, 1999
	(4)	Instruments Defining the Rights of Security Holders, Including Indentures The Parent Company, by signing this report, agrees to furnish the SEC, upon its request, a copy of any instrument that defines the rights of holders of long-term debt of the Corporation for which consolidated or unconsolidated financial statements are required to be filed and that authorizes a total amount of securities not in excess of 10% of the total assets of the Corporation on a consolidated basis
	*(10)(a)	Associated Banc-Corp Amended and Restated Long-Term Incentive Stock Plan	Exhibit 99.1 to the Corporation’s registration statement (333-121012) on Form S-8 filed under the Securities Act of 1933
	*(10)(b)	Change of Control Plan of the Corporation effective April 25, 1994	Exhibit (10)(d) to Report on Form 10-K for fiscal year ended December 31, 1994
	*(10)(c)	Deferred Compensation Plan and Deferred Compensation Trust effective as of December 16, 1993, and Deferred Compensation Agreement of the Corporation dated December 31, 1994	Exhibit (10)(e) to Report on Form 10-K for fiscal year ended December 31, 1994
	*(10)(d)	Incentive Compensation Agreement (form) and schedules dated as of October 1, 2001	Exhibit (10)(e) to Report on Form 10-K for fiscal year ended December 31, 2001


Exhibit
Number		Description

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


Exhibit
Number		Description

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


*	Management contracts and arrangements.

Schedules and exhibits other than those listed are omitted for the reasons that they are not required, are not applicable or that equivalent information has been included in the financial statements, and notes thereto, or elsewhere within.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		ASSOCIATED BANC-CORP

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

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



/s/Paul S. Beideman Paul S. Beideman President and Chief Executive Officer		/s/ Ronald R. Harder* Ronald R. Harder Director

/s/Joseph B. Selner Joseph B. Selner Chief Financial Officer Principal Financial Officer and Principal Accounting Officer		/s/ William R. Hutchinson* William R. Hutchinson Director

/s/ Karen T. Beckwith* Karen T. Beckwith Director		/s/ Richard T. Lommen* Richard T. Lommen Director

/s/ H.B. Conlon* H. B. Conlon Director		/s/ John C. Meng* John C. Meng Director

/s/ Ruth M. Crowley* Ruth M. Crowley Director		/s/ J. Douglas Quick* J. Douglas Quick Director

/s/ Robert C. Gallagher* Robert C. Gallagher Chairman of the Board		/s/ Jack C. Rusch* Jack C. Rusch Director

* /s/Brian R. Bodager Brian R. Bodager Attorney-in-Fact		/s/ John C. Seramur* John C. Seramur Vice Chairman

Date: August 16, 2005

Associated Banc-Corp (ASB) 10-K/A2004 FY Annual report (amended)