WRAPUP 1-Limited loan growth hurts margins at mid-sized US banks

* Associated Q4 EPS miss by a penny, City National beats

* Associated, City National net interest margins down

* People's United Q4 in-line

* Bad loan provisioning drops at all three (Adds conference call details, City National, People's results)

By Abhinav Sharma

BANGALORE, Jan 20 (Reuters) - Mid-sized regional lenders followed in the footsteps of large U.S. banks, showing signs of improving credit quality but limited loan growth squeezed interest margins.

Associated Banc-Corp (ASBC.O) posted a 84 percent decline in its bad loan provisioning, while City National Corp's (CYN.N) loan loss provisions dropped 96 percent during the latest fourth quarter.

On Wednesday, Wells Fargo & Co (WFC.N) and U.S. Bancorp (USB.N) said on Wednesday low interest rates were squeezing lending profits, but improving credit quality helped both banks post higher fourth-quarter earnings. [ID:nN19242496]

For Oct-Dec period, City National's net interest margin was 3.71 percent, compared with 3.74 percent last year, while that of Associated fell 46 basis points to 3.13 percent.

A rise in the residential mortgage segment was partially offset by declines in the construction and commercial real estate sections of the portfolio primarily related to loan sales during the quarter, Associated said in a statement.

The Green Bay, Wisconsin-based bank said on a post-earnings call that it does not expect any bulk loan sales, and that it will continue to release reserves in 2011. For the latest fourth quarter, Associated earned $6.6 million, or 4 cents a share, falling short of analysts' expectations by a penny on lower net interest income. [ID:nSGE70J0D4]

Associated also said on the call that it has enough cash to repay U.S. Treasury funds in 2011 without significantly diluting its shareholders' value.

Beverly Hills, California-based City National posted net income of $39.7 million, or 74 cents a share, compared with $19.7 million, or 38 cents a share, in the year-ago period.

Excluding items, it earned 88 cents a share, above analysts' view of earnings of 69 cents a share, according to Thomson Reuters I/B/E/S.

The bank holding company, which operates in Southern California, the San Francisco Bay area, Nevada and New York City through its units, said it is likely that limited loan demand, conditions in the commercial real estate market, and continuing decline of covered assets will moderate overall average loan growth in 2011.

S&P 500 component .SPX People's United Financial Inc (PBCT.O) earned $32 million, or 9 cents for the fourth quarter, compared with $24.9 million, or 7 cents a share last year.

Excluding items, it earned 10 cents a share, in-line with analysts' expectations, according to Thomson Reuters I/B/E/S.

Provision for loan losses fell to $10.9 million from $13.6 million.

Shares of People's were down 30 cents in extended trading after the company said it will buy Danvers Bancorp DNBK.O in a cash-and-stock deal valued at about $493 million. [ID:nSGE70J0DH] (Additional reporting by Aditi Sharma in Bangalore; Editing by Jarshad Kakkrakandy)