Associated Earns 58 Cents Per Diluted Share in 3rd Quarter of 2006.

GREEN BAY, Wis. -- Associated Banc-Corp (Nasdaq:ASBC):

* Net income $76.9 million

* Net interest margin stable at 3.63%, up 7 bp over 3rd quarter of 2005

* Net charge offs at 10 basis points of average loans

* Wholesale funding reduced by $2.4 billion since Sept. 2005; strategy fully executed

* Accelerated stock buyback executed in 3(rd) quarter; another anticipated for 4(th) quarter

Associated Banc-Corp (Nasdaq:ASBC) earned $76.9 million, or $.58 per diluted share, for the third quarter of 2006, compared to net income of $81.0 million, or $.63 per diluted share, for the third quarter of 2005.

For the nine months ended Sept. 30, 2006, net income was $242.1 million, up 4 percent over $232.5 million for the comparable period in 2005. Earnings per diluted share were $1.81 and $1.79 for the first nine months of 2006 and 2005, respectively.

For the third quarter of 2006, return on average assets (ROA) was 1.46 percent, compared to 1.56 percent for the third quarter of last year. Return on average equity (ROE) was 13.36 percent for the third quarter, versus 15.85 percent for the comparable quarter last year. For the first nine months of 2006, ROA was 1.52 percent and ROE was 14.12 percent, compared to ROA of 1.51 percent and ROE of 15.33 percent last year. Book value per share rose to $17.44 as of Sept. 30, 2006, up 8 percent compared to a year earlier.

Return on average tangible equity (which is a non-GAAP measure that excludes average goodwill and other intangible assets from average equity) was 23.64 percent for the first nine months of 2006, versus 23.78 percent for the comparable period of 2005.

"While operating in a challenging banking environment, we are focused on margin improvement, deposit growth, sustained credit quality and prudent expense management. We have undertaken several important initiatives to manage risk and improve the contribution of our commercial banking business," Associated President and CEO Paul S. Beideman said.

Since Sept. 30, 2005, and after adjusting for a fourth quarter 2005 acquisition, wholesale funding has been reduced by $2.4 billion, through the use of investment cash flows and improved deposit flows. This initiative reduced the ratio of wholesale funding to total funding from 34 percent at Sept. 30, 2005, to 23 percent at Sept. 30, 2006.

Associated's net interest margin benefited from both the reduction in higher-costing wholesale funding and the increased percentage of loans to earning assets. The net interest margin for the third quarter of 2006 was 3.63 percent compared to 3.56 percent for the third quarter of 2005.

Between the third quarter periods, average loans grew $1.2 billion to $15.4 billion for third quarter 2006 (with $1.0 billion added from the State Financial acquisition in fourth quarter 2005), and average investments declined $1.2 billion in support of the wholesale funding reduction strategy, leaving average earning assets unchanged at $19.0 billion. Average total deposits increased $1.8 billion (with $1.0 billion added from the State Financial acquisition).

As of Sept. 30, 2006, the allowance for loan losses represented 1.33 percent of total loans and covered 158 percent of nonperforming loans. Nonperforming loans increased to $129 million, representing 0.84 percent of total loans, compared to $111 million (or 0.78 percent) at Sept. 30, 2005. The provision for loan losses, approximating net charge offs for each quarterly period, was $3.8 million and $3.3 million, respectively, for the comparable third quarter periods of 2006 and 2005. On a year-to-date basis, the provision for loan losses was $12.0 million for 2006, versus $9.3 million for 2005, and net charge offs represented 0.10 percent of average loans for 2006, versus 0.09 percent for the comparable nine-month period of 2005.

Core fee-based revenues including trust service fees, service charges on deposits, card-based and other non-deposit fees, and retail commissions totaled $57.6 million for the third quarter of 2006, up 7 percent over $53.9 million for the comparable quarter of 2005. On a year-to-date basis, core-fee based revenues were $172.5 million, up 8 percent over $160.1 million for the nine month periods of 2006 and 2005, respectively.

Net mortgage banking income was $2.8 million (including $0.5 million of valuation expense on the mortgage servicing asset) for the third quarter of 2006, down from $12.0 million (including a $4.5 million valuation recovery) in the third quarter of last year. On a year-to-date basis, net mortgage banking income was down $11.2 million (46 percent), as this industry continues to experience a slowdown.

All other noninterest income sources combined totaled $12.6 million for the third quarter of 2006, an increase of $1.5 million (13 percent) over the comparable third quarter of 2005, particularly due to income on bank owned life insurance. All other noninterest income sources totaled $35.4 million for the first nine months of 2006, versus $25.8 million last year, with other noninterest income for 2005 including a $6.7 million net loss on derivatives no longer accounted for as hedges.

Noninterest expense grew 5 percent between both the three-month and nine-month periods ending Sept. 30, 2006, and 2005, reflecting the larger operating base of the company attributable to the State Financial acquisition during the fourth quarter of 2005. While up in absolute terms, noninterest expenses remain controlled, with the efficiency ratio at 50.19 percent and 50.33 percent respectively, for the three and nine months ending Sept. 30, 2006.

The effective tax rate for the nine month period of 2006 was 28.92 percent, versus 32.10 percent for the comparable period of 2005. The year-to-date decline was primarily due to the first quarter 2006 resolution of certain multi-jurisdictional tax issues, as well as changes in exposure of uncertain tax positions in the second quarter of 2006, both of which resulted in the reduction of tax liabilities and income tax expense.

During the third quarter of 2006, Associated repurchased 2 million shares of its common stock at an average price of $31.43 per share for a total cost of approximately $63 million, leaving approximately 3.3 million shares remaining available for repurchase under its outstanding Board of Directors authorization.

"We anticipate buying back additional common stock in the fourth quarter similar in size to our previous actions, as we weigh market opportunities, capital levels, growth prospects and other investment opportunities," Beideman said.

Associated will host a conference call for investors and analysts at 3 p.m. CDT today. The toll-free dial-in number for the live call is 888-694-4769. The number for international callers is 973-582-2757. Participants should ask the operator for the Associated Banc-Corp third quarter 2006 earnings call, or for call ID number 7980287. A replay of the call will be available from 6 p.m. CDT today through October 26 by calling 877-519-4471 (toll-free) domestically or 973-341-3080 internationally. The call ID number, 7980287, is required to access the replay.

Associated Banc-Corp, headquartered in Green Bay, Wis., is a diversified multibank holding company with total assets of $21 billion. Associated has more than 320 banking offices serving more than 180 communities in Wisconsin, Illinois, and Minnesota. The company offers a full range of traditional banking services and a variety of other financial products and services. More information about Associated Banc-Corp is available at www.associatedbank.com.

Statements made in this document that are not purely historical are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. This includes any statements regarding management's plans, objectives, or goals for future operations, products or services, and forecasts of its revenues, earnings, or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements may be identified by the use of words such as "believe," "expect," "anticipate," "plan," "estimate," "should," "will," "intend," or similar expressions. Outcomes related to such statements are subject to numerous risk factors and uncertainties including those listed in the company's Annual Report filed on Form 10-K.

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