<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-1220
------------------------------
MARSHALL & ILSLEY CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-0968604
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
770 North Water Street
Milwaukee, Wisconsin 53202
---------------------- -----
(Address of principal executive offices) (Zip Code)
(414) 765 - 7801
------------------
(Registrant's telephone number, including area code)
None
----
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class October 31, 1996
----- ----------------
Common Stock, $1.00 Par Value 91,042,638
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
($000's except share data)
September 30, December 31, September 30,
Assets 1996 1995 1995
- ------ -----------------------------------------
Cash and cash equivalents:
Cash and due from banks $ 769,509 $ 745,911 $ 619,395
Federal funds sold and
security resale agreements 80,149 66,618 25,579
Money market funds 38,128 84,960 100,806
-----------------------------------------
Total cash and cash equivalents 887,786 897,489 745,780
Trading securities 32,958 38,601 14,637
Other short-term investments 33,975 95,635 42,987
Investment securities held to
maturity, market value $704,392
($453,240 December 31, and
$535,701 September 30, 1995) 707,603 450,457 529,039
Investment securities available
for sale at market value 2,927,618 2,458,600 1,979,665
-----------------------------------------
Total investment securities 3,635,221 2,909,057 2,508,704
Loans 9,309,436 8,868,902 9,143,651
Less: Allowance for loan losses 152,755 161,430 164,287
------------------------------------------
Net loans 9,156,681 8,707,472 8,979,364
Premises and equipment, net 301,323 306,988 298,366
Accrued interest and other assets 396,393 387,855 368,831
-----------------------------------------
Total Assets $ 14,444,337 $ 13,343,097 $ 12,958,669
=========================================
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,349,445 $ 2,363,194 $ 2,056,547
Interest bearing 8,217,943 7,917,583 7,752,240
-----------------------------------------
Total deposits 10,567,388 10,280,777 9,808,787
Funds purchased and security
repurchase agreements 1,537,551 517,576 711,000
Other short-term borrowings 511,129 497,446 420,860
Long-term borrowings 232,727 422,550 494,908
Accrued expenses and other liabilities 324,802 367,131 303,843
-----------------------------------------
Total liabilities 13,173,597 12,085,480 11,739,398
Shareholders' equity:
Series A convertible preferred
stock, $1.00 par value; 517,129
shares issued (348,944 at December
31, and September 30, 1995) 517 349 349
Common stock, $1.00 par value;
99,494,335 shares issued 99,494 99,494 99,494
Additional paid-in capital 200,320 190,287 187,843
Retained earnings 1,165,163 1,075,789 1,039,536
Less: Treasury common stock, at cost;
8,457,461 shares (5,968,631 December
31, and 5,523,307 September 30, 1995) 197,895 128,459 116,918
Deferred compensation 954 1,090 1,258
Net unrealized gains on securities
available for sale, net of
related taxes 4,095 21,247 10,225
-----------------------------------------
Total shareholders' equity 1,270,740 1,257,617 1,219,271
-----------------------------------------
Total Liabilities and
Shareholders' Equity $ 14,444,337 $ 13,343,097 $ 12,958,669
=========================================
See notes to financial statements.
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($000's except per share data)
Three Months Ended September 30,
--------------------------------
Interest income 1996 1995
- --------------- --------------------------
Loans $ 191,148 $ 199,234
Investment securities:
Taxable 44,815 28,905
Exempt from Federal income taxes 8,366 4,657
Trading securities 308 81
Short-term investments 1,988 2,710
--------------------------
Total interest income 246,625 235,587
Interest expense
- ----------------
Deposits 91,383 87,501
Short-term borrowings 19,421 11,318
Long-term borrowings 9,570 13,884
--------------------------
Total interest expense 120,374 112,703
--------------------------
Net interest income 126,251 122,884
Provision for loan losses 3,983 4,070
--------------------------
Net interest income after
provision for loan losses 122,268 118,814
Other income
- ------------
Data processing services 69,741 55,079
Trust services 17,632 15,973
Other customer services 29,151 27,834
Net securities gains 15 1,291
Other 6,962 8,751
--------------------------
Total other income 123,501 108,928
Other expense
- -------------
Salaries and employee benefits 96,541 88,751
Net occupancy 9,505 9,079
Equipment 19,412 16,941
Payments to regulatory agencies 3,434 105
Processing charges 5,046 5,178
Supplies and printing 3,621 3,963
Professional services 3,842 4,986
Other 37,070 21,876
--------------------------
Total other expense 178,471 150,879
--------------------------
Income before income taxes 67,298 76,863
Provision for income taxes 22,260 28,284
--------------------------
Net income $ 45,038 $ 48,579
==========================
Net income per common share
- ---------------------------
Primary $ 0.46 $ 0.49
Fully Diluted 0.45 0.48
Dividends paid per common share $ 0.185 $ 0.165
Weighted average common shares outstanding:
Primary 98,545 99,318
Fully diluted 100,649 103,246
See notes to financial statements.
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($000's except per share data)
Nine Months Ended September 30,
-------------------------------
Interest income 1996 1995
- --------------- --------------------------
Loans $ 561,887 $ 580,303
Investment securities:
Taxable 124,579 85,241
Exempt from Federal income taxes 21,702 12,858
Trading securities 834 371
Short-term investments 7,079 9,289
--------------------------
Total interest income 716,081 688,062
Interest expense
- ----------------
Deposits 266,498 243,043
Short-term borrowings 42,224 38,842
Long-term borrowings 34,538 40,066
--------------------------
Total interest expense 343,260 321,951
--------------------------
Net interest income 372,821 366,111
Provision for loan losses 11,108 12,058
--------------------------
Net interest income after
provision for loan losses 361,713 354,053
Other income
- ------------
Data processing services 194,099 155,265
Trust services 51,953 47,238
Other customer services 86,797 81,510
Net securities gains 199 1,258
Other 23,776 23,603
--------------------------
Total other income 356,824 308,874
Other expense
- -------------
Salaries and employee benefits 281,386 253,563
Net occupancy 29,143 26,805
Equipment 58,521 47,945
Payments to regulatory agencies 4,558 11,147
Processing charges 14,279 14,032
Supplies and printing 12,056 11,357
Professional services 12,297 13,350
Other 89,616 64,852
--------------------------
Total other expense 501,856 443,051
--------------------------
Income before income taxes 216,681 219,876
Provision for income taxes 75,120 78,925
--------------------------
Net income $ 141,561 $ 140,951
==========================
Net income per common share
- ---------------------------
Primary $ 1.43 $ 1.43
Fully Diluted 1.40 1.38
Dividends paid per common share $ 0.535 $ 0.480
Weighted average common shares outstanding:
Primary 98,714 98,710
Fully diluted 101,483 102,906
See notes to financial statements.
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($000's)
Nine Months Ended September 30,
-------------------------------
1996 1995
--------------------------
Net Cash Provided by Operating Activities $ 167,460 $ 152,326
Cash Flows From Investing Activities:
- -------------------------------------
Net decrease in securities with maturities
of three months or less 64,250 1,270
Proceeds from sales of securities
available for sale 217,245 115,292
Proceeds from maturities of longer
term securities 653,485 464,425
Purchases of longer term securities (1,539,250) (511,227)
Net increase in loans (528,322) (285,541)
Purchases of assets to be leased (115,824) (91,968)
Principal payments on lease receivables 105,178 104,570
Fixed asset purchases, net (24,123) (27,158)
Cash of companies acquired, net (25,741) 15,188
Other 4,649 10,257
--------------------------
Net cash used in
investing activities (1,188,453) (204,892)
--------------------------
Cash Flows From Financing Activities:
- -------------------------------------
Net increase in deposits 286,611 78,270
Proceeds from issuance of commercial paper 478,178 1,062,111
Payments for maturity of commercial paper (498,950) (1,074,965)
Net increase (decrease) in other
short-term borrowings 1,188,414 (271,721)
Proceeds from issuance of long-term debt 36,184 211,766
Payments of long-term debt (350,384) (87,650)
Dividends paid (52,012) (46,896)
Purchases of treasury stock (85,917) (47,698)
Other 9,166 7,238
--------------------------
Net cash provided by (used in)
financing activities 1,011,290 (169,545)
--------------------------
Net decrease in cash and cash equivalents (9,703) (222,111)
Cash and cash equivalents, beginning of year 897,489 967,891
--------------------------
Cash and cash equivalents, end of period $ 887,786 $ 745,780
==========================
Supplemental cash flow information:
- -----------------------------------
Cash paid during the period for:
Interest $ 345,871 $ 299,608
Income taxes 81,231 81,968
See notes to financial statements.
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements
September 30, 1996 & 1995 (Unaudited)
1. The accompanying unaudited consolidated financial statements should be
read in conjunction with Marshall & Ilsley Corporation's ("Corporation")
1995 Annual Report on Form 10-K. The unaudited financial information
included in this report reflects all adjustments (consisting only of
normal recurring accruals) which are necessary for a fair statement of
the financial position and results of operations as of and for the three
months and nine months ended September 30, 1996 and 1995. The results of
operations for the three months and nine months ended September 30, 1996
and 1995 are not necessarily indicative of results to be expected for the
entire year.
2. The Corporation has 5,000,000 shares of preferred stock authorized, of
which, the Board of Directors has designated 2,000,000 shares as Series
A convertible, with a $100 value per share for conversion and liquidation
purposes.
The Corporation has 160,000,000 shares of its $1.00 par value common
stock authorized.
3. The Corporation's loan portfolio consists of the following ($000's):
September 30, December 31, September 30,
1996 1995 1995
-----------------------------------------
Commercial financial &
agricultural $3,026,750 $2,933,278 $2,913,086
Real estate:
Construction 304,908 303,345 322,528
Residential Mortgage 2,180,842 2,002,023 2,299,806
Commercial Mortgage 2,349,363 2,189,449 2,176,295
-------------------------------------
Total real estate 4,835,113 4,494,817 4,798,629
Personal 1,139,402 1,163,127 1,165,958
Lease financing 308,171 277,680 265,978
-------------------------------------
$9,309,436 $8,868,902 $9,143,651
=====================================
4. Investment securities, by type, held by the Corporation are as follows
($000's):
September 30, December 31, September 30,
1996 1995 1995
-----------------------------------------
Investment securities held to maturity:
U.S. treasury and
government agencies $ -- $ -- $ 155,189
State and political
subdivisions 703,547 446,113 365,889
Other 4,056 4,344 7,961
-------------------------------------
Investment securities
held to maturity 707,603 450,457 529,039
Investment securities available for sale:
U.S. treasury and
government agencies 2,771,331 2,346,866 1,874,035
State and political
subdivisions 893 894 --
Other 155,394 110,840 105,630
-------------------------------------
Investment securities
available for sale 2,927,618 2,458,600 1,979,665
-------------------------------------
Total investment securities $3,635,221 $2,909,057 $2,508,704
=====================================
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements - Continued
September 30, 1996 & 1995 (Unaudited)
5. As part of its asset/liability management activities, the Corporation may
enter into interest rate futures, forwards, swaps, floors and option
contracts. These derivative financial instruments are categorized as
risk management instruments and are carried at fair value unless the
instrument qualifies for hedge accounting treatment. Fair value
adjustments on risk management instruments carried at fair value are
reflected in other operating income. Gains and losses realized on
futures and forward contracts qualifying as hedges are deferred and
amortized over the terms of the related assets or liabilities and are
included as adjustments to interest income or expense. Settlement on
interest rate swaps and option contracts are recognized over the lives of
the agreements as adjustments to interest income or interest expense.
Interest rate contracts used in connection with the securities portfolio
that are designated as available for sale are carried at fair value with
gains and losses, net of applicable deferred income taxes, reported in a
separate component of shareholders' equity, consistent with the reporting
of unrealized gains and losses on such securities.
6. On April 1, 1996, $16,819 of the Corporation's 8.5% convertible
subordinated notes were converted by the holder into 1,922,114 shares of
the Corporation's common stock. The common stock acquired by conversion
of the notes was exchanged for 168,185 shares of the Corporation's Series
A convertible preferred stock. These are noncash transactions for
purposes of the Consolidated Statements of Cash Flows.
7. On August 7, 1996, the Corporation consummated the acquisition of
EastPoint Technology, Inc. ("EastPoint") for cash consideration of
approximately $25.5 million.
EastPoint, a software development company specializing in client/server
technology, is located in Bedford, New Hampshire.
The allocation of the purchase price to the various classes of assets was
determined on the basis of an opinion expressed by a nationally
recognized independent appraisal firm. The value determined for in-
process technology, where technology feasibility had not yet been
established or was not believed to have an alternative future use, was
immediately expensed while the values of completed technology and other
assets including the resulting goodwill are being amortized over their
estimated useful lives.
Acquired in-process technology expensed during the third Quarter of 1996
amounted to $12.1 million ($7.9 million after-tax or $0.08 per share).
The results of operations for EastPoint are included from the date of
acquisition and are not material to the Corporation.
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited)
($000's)
Three Months Ended September 30,
---------------------------------
Assets 1996 1995
- ------ --------------------------
Cash and due from banks $ 569,502 $ 578,331
Short-term investments 155,625 199,908
Trading securities 25,583 7,239
Investment securities:
Taxable 2,828,184 1,988,879
Tax-exempt 726,872 395,824
--------------------------
Total investment securities 3,555,056 2,384,703
Loans:
Commercial 2,981,023 2,913,385
Real estate 4,678,969 4,898,780
Personal 1,132,014 1,160,447
Lease financing 295,412 262,268
--------------------------
9,087,418 9,234,880
Less: Allowance for loan losses 164,079 163,593
--------------------------
Total loans 8,923,339 9,071,287
Premises and equipment, net 303,055 297,001
Accrued interest and other assets 388,683 354,603
--------------------------
Total Assets $ 13,920,843 $ 12,893,072
==========================
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,109,407 $ 1,981,112
Interest bearing 8,166,388 7,773,722
--------------------------
Total deposits 10,275,795 9,754,834
Funds purchased and security repurchase
agreements 1,339,433 698,077
Other short-term borrowings 116,644 105,343
Long-term borrowings 584,581 826,987
Accrued expenses and other liabilities 322,501 300,258
--------------------------
Total liabilities 12,638,954 11,685,499
Shareholders' equity 1,281,889 1,207,573
--------------------------
Total Liabilities and Shareholders' Equity $ 13,920,843 $ 12,893,072
==========================
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited)
($000's)
Nine Months Ended September 30,
-------------------------------
Assets 1996 1995
- ------ --------------------------
Cash and due from banks $ 568,703 $ 574,560
Short-term investments 177,497 215,686
Trading securities 23,086 10,584
Investment securities:
Taxable 2,666,444 1,961,170
Tax-exempt 625,677 353,791
--------------------------
Total investment securities 3,292,121 2,314,961
Loans:
Commercial 2,941,086 2,813,544
Real estate 4,516,344 4,814,436
Personal 1,137,170 1,161,491
Lease financing 285,067 260,192
--------------------------
8,879,667 9,049,663
Less: Allowance for loan losses 163,255 159,653
--------------------------
Total loans 8,716,412 8,890,010
Premises and equipment, net 303,571 293,990
Accrued interest and other assets 367,670 346,375
--------------------------
Total Assets $ 13,449,060 $ 12,646,166
==========================
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,044,277 $ 1,941,124
Interest bearing 8,027,446 7,558,132
--------------------------
Total deposits 10,071,723 9,499,256
Funds purchased and security repurchase
agreements 951,724 805,733
Other short-term borrowings 124,951 97,408
Long-term borrowings 712,742 794,741
Accrued expenses and other liabilities 313,055 291,770
--------------------------
Total liabilities 12,174,195 11,488,908
Shareholders' equity 1,274,865 1,157,258
--------------------------
Total Liabilities and Shareholders' Equity $ 13,449,060 $ 12,646,166
==========================
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
- ----------------------------------------------
Net income for the third quarter of 1996 amounted to $45.0 million compared to
$48.6 million for the same period in the prior year. Primary and fully diluted
earnings per share were $.46 and $.45, respectively for the three months ended
September 30, 1996, compared with $.49 and $.48 for the same period last year.
The return on average assets and return on average equity were 1.29% and 13.98%
for the quarter ended September 30, 1996, and 1.49% and 15.96% for the quarter
ended September 30, 1995, respectively.
During the third quarter of 1996, the Corporation completed the acquisition of
EastPoint Technology, Inc. In conjunction with the acquisition, research and
development costs relating to acquired in-process technology were written-off.
Also during the same quarter, the Corporation accrued the one-time 65.7 basis
point assessment associated with the Savings Association Insurance Fund (SAIF)
recapitalization which was enacted into law on September 30, 1996.
The following table shows the impact of the special charges described above
($ in millions):
Earnings Per Share
----------------------
Pre-Tax After-tax Primary Fully Diluted
--------- --------- ----------------------
Net Income $67.3 $45.0 $0.46 $0.45
Special Charges:
Write-off In-process Technology
EastPoint Acquisition 12.1 7.9 0.08 0.08
SAIF Fund Assessment 2.8 1.7 0.01 0.02
--------- --------- --------- ----------
Total Special Charges 14.9 9.6 0.09 0.10
--------- --------- --------- ----------
Income Before Special Charges $82.2 $54.6 $0.55 $0.55
========= ========= ========= ==========
Excluding the special charges, the increase in earnings of $6.0 million is
primarily due to noninterest revenue growth and, to a lesser extent, an increase
in net interest income. The continued growth in expenses associated with the
investment in new products and technology and required software maintenance to
handle the year 2000 by the Data Services Division also impacts earnings. Total
noninterest expense in the third quarter of 1996 continues to include costs
incurred for implementing certain initiatives to make the Corporation's banking
business more effective and efficient.
The following tables present a summary of each of the major elements of the
consolidated income statement, certain financial statistics and a summary of the
major income statement elements stated as a percent of average consolidated
assets -- converted to a fully taxable equivalent basis (FTE) where appropriate
- -- for the current quarter and previous four quarters. Data for the current
quarter is before the special charges previously discussed.
<PAGE>
SUMMARY CONSOLIDATED INCOME STATEMENTS AND FINANCIAL STATISTICS
- ---------------------------------------------------------------
($000's except per share data)
1996 1995
----------------------------- --------------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
--------- --------- ---------- --------- ---------
Interest Income $ 246,625 $ 236,027 $ 233,429 $ 236,598 $ 235,587
Interest Expense (120,374) (112,094) (110,792) (111,232) (112,703)
--------- --------- ---------- --------- ---------
Net Interest Income 126,251 123,933 122,637 125,366 122,884
Provision for Loan Losses (3,983) (3,548) (3,577) (4,100) (4,070)
Net Securities Gains 15 134 50 3,297 1,291
Other Income 123,486 120,476 112,663 112,012 107,637
Other Expense (163,587) (164,195) (159,189) (156,572) (150,879)
--------- --------- ---------- --------- ---------
Income Before Taxes 82,182 76,800 72,584 80,003 76,863
Income Tax Provision (27,533) (26,432) (26,429) (27,655) (28,284)
--------- --------- ---------- --------- ---------
Income Before
Special Charges $ 54,649 $ 50,368 $ 46,155 $ 52,348 $ 48,579
========= ========= ========== ========= =========
Per Share Before Special Charges
Earnings Per Share
Primary $ 0.55 $ 0.51 $ 0.47 $ 0.53 $ 0.49
Fully Diluted 0.55 0.50 0.46 0.51 0.48
Dividends 0.185 0.185 0.165 0.165 0.165
Return on Average Equity
Before Special Charges 16.96% 15.87% 14.66% 16.76% 15.96%
CONSOLIDATED INCOME STATEMENT COMPONENTS AS A PERCENT OF AVERAGE TOTAL ASSETS
- -----------------------------------------------------------------------------
1996 1995
------------------------------ --------------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
--------- --------- ---------- --------- ---------
Interest Income (FTE) 7.15% 7.21% 7.26% 7.32% 7.33%
Interest Expense (3.44) (3.38) (3.40) (3.40) (3.47)
--------- --------- ---------- --------- ---------
Net Interest Income 3.71 3.83 3.86 3.92 3.86
Provision for Loan Losses (0.11) (0.11) (0.11) (0.13) (0.13)
Net Securities Gains 0.00 0.00 0.00 0.10 0.04
Other Income 3.53 3.63 3.46 3.43 3.31
Other Expense (4.68) (4.93) (4.89) (4.79) (4.65)
--------- --------- ---------- --------- ---------
Income Before Taxes 2.45 2.42 2.32 2.53 2.43
Income Tax Provision (0.89) (0.90) (0.90) (0.93) (0.94)
--------- --------- ---------- --------- ---------
Return on Average Assets
Before Special Charges 1.56% 1.52% 1.42% 1.60% 1.49%
========= ========= ========== ========= =========
<PAGE>
NET INTEREST INCOME
- -------------------
Net interest income for the third quarter of 1996 amounted to $126.3 million,
an increase of $3.4 million or 2.7% from the $122.9 million reported in the
third quarter of 1995. The benefit from the increase in the volume of average
earning assets and decrease in the cost of interest bearing liabilities was
offset in part by the decrease in yield on earning assets and increase in volume
of interest bearing liabilities resulting in the increase in net interest
income.
Average earning assets increased $997.0 million or 8.4% in the third quarter
of 1996 compared to the same period a year ago. Excluding the effect of
securitizing adjustable rate mortgage loans (ARMS), average loans grew
approximately $278 million or 3.0% compared to the third quarter of last year.
The remaining average earning asset growth was in investment securities which
reflects the Corporation's intent to increase portfolio size with higher
yielding and longer-term securities to adjust rate sensitivity of the total
balance sheet. Average tax-exempt securities increased $331.0 million or 83.6%
while average taxable securities increased $413.4 million or 21.1% excluding the
effect of the ARM loan securitization.
Average interest bearing liabilities increased $802.9 million or 8.5% in the
third quarter of 1996 compared to the same period in 1995. Average interest
bearing deposits increased $392.7 million or 5.1%, average short-term borrowings
increased $652.7 million or 81.2% and average long-term borrowings decreased
$242.4 million or 29.3%. Average noninterest bearing deposits increased $128.3
million or 6.5% during the third quarter of 1996 compared to the third quarter
of 1995.
During the Second Quarter of 1996, the holder of the Corporation's 8.5%
convertible subordinated notes converted approximately $16.8 million of the
notes as more fully described in Note 6 of Notes to Financial Statements. Also
during the third quarter of 1996, approximately $126.0 million of Bank notes
matured and were refinanced with short-term borrowings and brokered CDs.
<PAGE>
The growth and composition of the Corporation's quarterly average loan portfolio
for the current quarter and previous four quarters are reflected below. The
amortized cost of the securitized ARM loans that are classified as investment
securities available for sale are included to provide a more meaningful
comparison ($ in millions):
1996 1995
-------------------------- ----------------- Annual
Third Second First Fourth Third Growth
Quarter Quarter Quarter Quarter Quarter PCT
-------- ----------------- ----------------- --------
Commercial Loans $ 2,981 $ 2,945 $ 2,897 $ 2,888 $ 2,913 2.3%
Real Estate Loans
Construction 283 267 288 317 329 (14.0)
Commercial Mortgages 2,303 2,226 2,190 2,174 2,169 6.2
Residential Mortgages 2,093 1,953 1,944 2,159 2,401 (12.8)
Securitized ARM loans 452 482 489 282 26 N.M.
-------- -------- -------- -------- -------- --------
Residential Mortgages 2,545 2,435 2,433 2,441 2,427 4.9
-------- -------- -------- -------- -------- --------
Total Real Estate Loans 5,131 4,928 4,911 4,932 4,925 4.2
Personal Loans
Personal Loans 851 841 847 868 876 (2.8)
Student Loans 281 292 300 287 285 (1.3)
-------- -------- -------- -------- -------- --------
Total Personal Loans 1,132 1,133 1,147 1,155 1,161 (2.5)
Lease Financing
Receivables 295 282 277 270 262 12.6
-------- -------- -------- -------- -------- --------
Total Consolidated
Average Loans & ARMs $ 9,539 $ 9,288 $ 9,232 $ 9,245 $ 9,261 3.0%
======== ======== ======== ======== ======== ========
Total Consolidated
Average Loans $ 9,087 $ 8,806 $ 8,743 $ 8,963 $ 9,235 (1.6)%
======== ======== ======== ======== ======== ========
Beginning in the third quarter of 1995, the Corporation began converting ARM
loans into Federal National Mortgage Association ARM pool securities to enhance
liquidity. During the first quarter of 1996 an additional $88 million of such
loans were securitized. There were no ARM loan securitizations during the
second and third quarters of 1996. At September 30, 1996, the cumulative total
amount of ARM loans that have been securitized and transferred to investment
securities available for sale was approximately $542 million. As part of this
process, the Corporation pays a fee of 7.5 basis points to guarantee the
securities which negatively impacts net interest income. The Corporation
estimates that approximately $90 million of ARM loans will be securitized
beginning in the fourth quarter of 1996.
<PAGE>
The growth and composition of the Corporation's quarterly average deposits for
the current and prior year's quarters are as follows ($ in millions):
1996 1995
-------------------------- ----------------- Annual
Third Second First Fourth Third Growth
Quarter Quarter Quarter Quarter Quarter PCT
-------------------------- ----------------- --------
Noninterest Bearing
Commercial $ 1,368 $ 1,302 $ 1,280 $ 1,379 $ 1,282 6.7%
Personal 384 427 418 418 409 (6.1)
Other 358 308 316 298 290 23.3
-------- -------- -------- -------- -------- --------
Total Noninterest
Bearing Deposits 2,110 2,037 2,014 2,095 1,981 6.5
Interest Bearing
Savings & NOW 1,803 1,817 1,842 1,912 1,961 (8.0)
Money Market 2,451 2,407 2,386 2,237 2,049 19.6
Other CDs &
Time Deposits 3,048 3,039 3,034 3,064 3,145 (3.1)
CDs Greater than $100 643 614 621 607 603 6.8
Brokered CDs 221 115 39 21 16 N.M.
-------- -------- -------- -------- -------- --------
Total Interest
Bearing Deposits 8,166 7,992 7,922 7,841 7,774 5.1
-------- -------- -------- -------- -------- --------
Total Consolidated
Average Deposits $ 10,276 $ 10,029 $ 9,936 $ 9,936 $ 9,755 5.3%
======== ======== ======== ======== ======== ========
Money market savings and brokered CDs exhibited the greatest growth when
comparing average deposits in the third quarter of 1996 to the third quarter of
1995. As previously discussed throughout 1995, the money market index account,
which was introduced in the third quarter of 1994, has been a substantial
contributor to deposit growth. The average amount of money market index
accounts was $1.63 billion in the third quarter of 1996 compared to $1.09
billion in the same period one year ago. The increase in this deposit type
represents both new deposits and disintermediation from the Corporation's other
deposit accounts.
The Corporation has a brokered CD program to acquire longer-term CDs with
maturities of one year or more in order to provide a stable funding source that
over time is less costly than Bank notes or Fed Funds. Average brokered CDs
amounted to $220.6 million in the third quarter of 1996 compared to $16.0
million during the third quarter of 1995. As previously discussed, the brokered
CDs were used to partially refinance Bank notes as they matured.
<PAGE>
The Corporation's consolidated average interest earning assets and interest
bearing liabilities, interest earned and interest paid for the current quarter
and comparative prior year quarter is presented below. The impact of market
value adjustments for securities classified as available for sale are not
material to the quarter to quarter comparison.
YIELD & COST ANALYSIS
- ---------------------
($ in millions) THIRD QUARTER
-------------------------------------------------
1996 1995
------------------------ -----------------------
Average Average
Average Yield or Average Yield or
Balance Interest Cost Balance Interest Cost
------------------------ ------------------------
Loans (a) $ 9,087.4 $ 191.6 8.39% $ 9,234.9 $ 199.7 8.58%
Investment Securities:
Taxable 2,828.2 44.8 6.30 1,988.9 28.9 5.77
Tax Exempt (a) 726.9 11.7 6.40 395.8 6.6 6.56
Other Short-term
Investments (a) 181.2 2.3 5.05 207.1 2.8 5.36
------------------------ ------------------------
Total Interest
Earning Assets $12,823.7 $ 250.4 7.77% $11,826.7 $ 238.0 7.98%
======================== ========================
Money Market Savings $ 2,451.2 $ 25.4 4.13% $ 2,049.4 $ 22.0 4.26%
Regular Savings
& NOW 1,803.6 9.6 2.12 1,961.0 10.7 2.15
Other CDs & Time
Deposits 3,047.7 43.9 5.72 3,145.0 45.3 5.72
CDs Greater than
$100 & Brokered CDs 863.9 12.5 5.73 618.3 9.5 6.09
------------------------ ------------------------
Total Interest
Bearing Deposits 8,166.4 91.4 4.45 7,773.7 87.5 4.47
Short-term
Borrowings 1,456.1 19.4 5.31 803.4 11.3 5.59
Long-term
Borrowings 584.5 9.6 6.51 827.0 13.9 6.66
------------------------ ------------------------
Total Interest
Bearing Liabilities $10,207.0 $ 120.4 4.69% $ 9,404.1 $ 112.7 4.75%
======================== ========================
Net Interest Margin
(FTE) as a Percent
of Average Earning
Assets $ 130.0 4.03% $ 125.3 4.20%
============== ==============
(a) Fully taxable equivalent basis (FTE), assuming a Federal income tax rate
of 35%, and excluding disallowed interest expense.
<PAGE>
At the end of the first quarter in 1996, the Corporation began utilizing
interest rate swaps and during the third quarter began utilizing interest rate
floors in the management of its interest rate exposure.
Interest rate swaps are contractual agreements between counterparties to
exchange interest streams based on notional principal amounts over a set period
of time. Such swap agreements normally involve the exchange of fixed and
floating rate payment obligations without the exchange of the underlying
principal amounts.
Interest rate floors are contracts with notional principal amounts that require
the seller, in exchange for a fee, to make payments to the purchaser if a
specified market interest rate falls below the fixed floor rate on specified
future dates.
The notional or principal amount for swaps and floors do not represent an amount
at risk, but is used only as a basis for determining the actual cash flows
related to the interest rate contracts. Market risk, due to potential
fluctuations in interest rates, is inherent in swap and floor agreements. All
interest rate swap and floor counterparties are formally evaluated and
continually monitored for credit-quality.
At September 30, 1996, the Corporation's quarter-end position in interest rate
swaps and interest rate floors amounted to $250 million and $25 million,
respectively, in notional amount. The swaps have terms which range from 2 to
5 years and are designated against variable rate commercial loans and the floor
has a term of five years and is designated against asset-backed available for
sale securities in order to reduce interest rate volatility. The net fair
values of the interest rate swaps at September 30, 1996, was a positive $0.9
million. At September 30, 1996, the fair value of the interest rate floor was
a positive $0.1 million. The impact of the interest rate swaps in the third
quarter was to increase interest income on loans by $0.3 million and increase
the yield on loans, yield on interest earning assets and increase the net
interest margin (FTE) as a percent of average earning assets by one basis
point. The impact of the interest rate floor was not material.
The net interest margin as a percent of average earning assets declined 17 basis
points from 4.20% in the third quarter of 1995 to 4.03% in the current quarter.
The yield on average earning assets decreased 21 basis points while the cost of
interest bearing liabilities decreased 6 basis points. The cost of interest
bearing deposits decreased slightly in the third quarter of 1996 compared to the
same period last year. The average cost of short-term borrowings decreased 28
basis points which reflects in part, the Corporation's banking affiliates
expanded use of the treasury tax and loan note option programs which provide a
lower cost funding source. The cost of long-term borrowings decreased 15 basis
points which reflects the maturity and conversion of higher cost debt.
<PAGE>
PROVISION FOR LOAN LOSSES AND CREDIT QUALITY
- --------------------------------------------
At September 30, 1996, nonperforming assets were $82.0 million compared to $98.1
million at June 30, 1996, and $69.6 million at September 30, 1995. Nonaccrual
loans, the largest component of nonperforming assets, decreased $15.0 million
since the second quarter and increased $14.7 million since September 30, 1995.
Renegotiated loans decreased $1.1 million while loans past due 90 days or more
increased $0.8 million since June 30, 1996. Since September 30, 1995,
renegotiated loans decreased $1.4 million and loans past due 90 days increased
$1.2 million. Other real estate owned decreased $0.9 million since the second
quarter and decreased $2.2 million since September 30, 1995
During the third quarter of 1996 each loan type experienced a decrease in
nonaccrual loans compared to the second quarter except for personal loans which
increased $0.2 million and residential mortgage loans which increased $0.9
million. Nonaccrual commercial real estate loans were relatively unchanged
while nonaccrual commercial loans and leases decreased $15.9 million. One large
commercial credit placed on nonaccrual at the Corporation's lead bank during the
first quarter was partially charged-off during the third quarter which accounts
for approximately $12 million of the decline in nonaccrual commercial loans and
leases since June 30, 1996.
Net charge-offs in the third quarter of 1996 amounted to $15.1 million or 0.66%
of average loans compared to 1.5 million or 0.07% of average loans in the second
quarter of 1996 and $0.8 million or 0.03% of average loans in the third quarter
of 1995. Commercial loan charge-offs, as previously discussed, and commercial
real estate net charge-offs of $0.9 million account for the majority of the
increase in net charge-off activity during the third quarter of 1996.
The allowance for loan losses amounted to $152.8 million or 1.64% of total loans
at September 30, 1996, compared to $163.9 million or 1.82% at June 30, 1996, and
$164.3 million or 1.80% at September 30, 1995. The coverage ratio of the
allowance for loan losses to nonperforming loans was 269% at September 30, 1995,
181% at June 30, 1996 and 202% at September 30, 1996.
The Corporation believes that the current reserve and provision levels continue
to be adequate. The provision for loan losses amounted to $4.0 million in the
third quarter of 1996 compared to $3.5 million in the second quarter of 1996 and
$4.1 million in the third quarter of 1995.
<PAGE>
CONSOLIDATED CREDIT QUALITY INFORMATION ($000's)
1996 1995
-------------------------- -----------------
Third Second First Fourth Third
NONPERFORMING ASSETS Quarter Quarter Quarter Quarter Quarter
- -------------------- -------------------------- -----------------
Nonaccrual $ 65,377 $ 80,344 $ 71,567 $ 50,598 $ 50,643
Renegotiated 1,878 2,936 3,093 3,087 3,298
Past Due 90 Days or More 8,329 7,492 7,422 8,184 7,106
-------- -------- -------- -------- --------
Total Nonperforming Loans 75,584 90,772 82,082 61,869 61,047
Other Real Estate Owned 6,406 7,332 8,744 8,648 8,587
-------- -------- -------- -------- --------
Total Nonperforming Assets $ 81,990 $ 98,104 $ 90,826 $ 70,517 $ 69,634
======== ======== ======== ======== ========
ALLOWANCE FOR LOAN LOSSES $152,755 $163,866 $161,841 $161,430 $164,287
======== ======== ======== ======== ========
CONSOLIDATED STATISTICS
- -----------------------
Net Charge-offs
to Average Loans
Annualized 0.66 % 0.07 % 0.13 % 0.24 % 0.03 %
Total Nonperforming Loans
to Total Loans 0.81 1.01 0.93 0.70 0.67
Total Nonperforming Assets
to Total Loans and Other
Real Estate Owned 0.88 1.09 1.03 0.79 0.76
Allowance for Loan Losses
to Total Loans 1.64 1.82 1.84 1.82 1.80
Allowance for Loan Losses
to Nonperforming Loans 202 181 197 261 269
1996 1995
-------------------------- -----------------
Third Second First Fourth Third
NONACCRUAL LOANS BY TYPE Quarter Quarter Quarter Quarter Quarter
- ------------------------ -------------------------- -----------------
Commercial
Commercial, Financial &
Agricultural $ 21,902 $ 37,495 $ 33,608 $ 13,527 $ 14,449
Lease Financing
Receivables 1,393 1,677 2,069 1,244 2,323
-------- -------- -------- -------- --------
Total Commercial 23,295 39,172 35,677 14,771 16,772
Real Estate
Construction and Land
Development 488 642 630 618 242
Commercial Mortgage 21,218 21,295 17,063 16,653 17,407
Residential Mortgage 17,212 16,293 14,785 15,701 13,010
-------- -------- -------- -------- --------
Total Real Estate 38,918 38,230 32,478 32,972 30,659
Personal 3,164 2,942 3,412 2,855 3,212
-------- -------- -------- -------- --------
Total Nonaccrual Loans $ 65,377 $ 80,344 $ 71,567 $ 50,598 $ 50,643
======== ======== ======== ======== ========
<PAGE>
1996 1995
RECONCILIATION OF -------------------------- -----------------
CONSOLIDATED ALLOWANCE Third Second First Fourth Third
FOR LOAN LOSSES Quarter Quarter Quarter Quarter Quarter
- ------------------------ -------------------------- -----------------
Beginning Balance $163,866 $161,841 $161,430 $164,287 $160,565
Provision for Loan Losses 3,983 3,548 3,577 4,100 4,070
Allowance of Bank Acquire -- -- -- -- 1,096
Allowance Transfer for Loan
Securitizations -- -- (440) (1,615) (660)
Loans Charged-off
Commercial 13,044 1,012 763 3,465 502
Real Estate 1,378 242 455 896 466
Personal 1,430 1,663 1,336 1,779 1,250
Leases 254 61 1,989 380 104
-------- -------- -------- -------- --------
Total Charge-offs 16,106 2,978 4,543 6,520 2,322
Recoveries on Loans
Commercial 255 438 828 457 514
Real Estate 125 385 323 144 483
Personal 589 605 665 573 530
Leases 43 27 1 4 11
-------- -------- -------- -------- --------
Total Recoveries 1,012 1,455 1,817 1,178 1,538
-------- -------- -------- -------- --------
Net Loans Charged-off 15,094 1,523 2,726 5,342 784
-------- -------- -------- -------- --------
Ending Balance $152,755 $163,866 $161,841 $161,430 $164,287
======== ======== ======== ======== ========
OTHER INCOME
- ------------
Total other income in the third quarter of 1996 amounted to $123.5 million, an
increase of $14.6 million or 13.4%, compared to $108.9 million in the same
period last year.
Data processing services revenue increased $14.7 million or 26.6% from $55.1
million in the third quarter of 1995 to $69.7 million in the current quarter.
Processing revenue increased $8.1 million or 19.4% while software revenue
remained relatively unchanged. Buyout fees, which can vary from period to
period, increased $1.5 million. Revenue from unique services such as contract
programming and consulting increased $4.9 million. Compared to the second
quarter of 1996, total data processing services revenue increased $3.8 million
or 5.7%. Significant components of the quarter over quarter increase include
increased processing revenue, $2.8 million and increased revenue from unique
services $1.2 million.
Trust services revenue amounted to $17.6 million in the third quarter of 1996,
an increase of $1.6 million or 10.4% compared to $16.0 million in the third
quarter of 1995.
Other customer services increased $1.4 million or 4.7% and totaled $29.2 million
in the third quarter of 1996 compared to $27.8 million in the same period one
year ago. Service charges on deposits of $13.1 million increased $0.6 million
or 4.5%.
The effects of net securities transactions in the third quarter of 1996 were not
significant. During the third quarter of 1995, the Corporation realized gains
of $1.3 million primarily from the sale of equity securities.
<PAGE>
Other income amounted to $7.0 million in the third quarter of 1996 compared to
$8.8 million in the third quarter of 1995, a decrease of $1.8 million or 20.4%.
Gains from the sale of residential mortgage loans that include servicing rights
decreased $1.5 million.
OTHER EXPENSE
- -------------
Total other expenses in the third quarter of 1996 amounted to $178.5 million,
an increase of $27.6 million or 18.3% compared to $150.9 million in the same
period last year. Special charges, which include the SAIF assessment of $2.8
million and write-off of acquired in-process technology in conjunction with the
EastPoint acquisition of $12.1 million account for $14.9 million of the increase
in total other expenses. Excluding the special charges, total other expenses
increased $12.7 million or 8.4%.
The increase in expenses is primarily attributable to the Corporation's
nonbanking businesses especially its Data Services Division. Data Services
expense growth reflects the impact of the EastPoint acquisition, the cost of
adding processing capacity, certain costs associated with developing new
products and technology and the software maintenance costs to handle the year
2000 in order to meet the ever-changing needs of its new and existing customers
as efficiently and effectively as possible. It is anticipated that new product
development and year 2000 maintenance costs will continue to increase in future
periods.
Expenses of the Corporation's banks in the third quarter of 1996 continue to
include costs of implementing certain initiatives in the areas of retail and
small business lending, loan and deposit operational support and product and
service distribution networks which are intended to improve customer service,
enable more competitive pricing and achieve improved cost efficiencies. Total
operating expenses for the Corporation's combined banks and support services
group excluding the effect of deposit insurance premiums decreased 0.9% in the
third quarter of 1996 compared to the second quarter of 1996 and increased 3.3%
compared to the third quarter of 1995.
Salaries and employee benefits expense which accounts for over one-half of total
other expenses, amounted to $96.5 million in the third quarter of 1996 compared
to $88.8 million in the third quarter of 1995, an increase of $7.8 million or
8.8%. Approximately, $0.3 million of the increase reflects severance and other
related costs associated with the implementation of the banking initiatives
described above. Salaries and employee benefits expense of Data Services
increased $7.9 million or 22.9% in the current quarter compared to the same
period last year. At September 30, 1996, Data Services had approximately 189
more employees when compared to September 30, 1995. Approximately 23% of the
employee increase relates to the EastPoint acquisition.
Net occupancy expense increased $0.4 million or 4.7% and equipment expense
increased $2.5 million or 14.6%, in the third quarter of 1996 compared to the
same period last year. Data Services expense growth accounted for
approximately $2.6 million or 90% of the combined expense growth in these
categories.
The increase in payments to regulatory agencies reflects the SAIF assessment
previously discussed.
<PAGE>
Professional services expense amounted to $3.8 million in the third quarter of
1996 compared to $5.0 million in the third quarter of 1995, a decrease of $1.2
million or 22.9%. Approximately $0.5 million of the decline represents costs
associated with ARM loan securitizations which were incurred in the third
quarter of 1995. The remaining decline is attributable to the decrease in costs
incurred for technological assistance in software development such as Data
Service's data warehouse project.
Other expense, excluding the write-off of acquired in-process technology
attributable to the EastPoint acquisition, increased 14.1% or $3.1 million in
the third quarter of 1996 compared to the third quarter of 1995. Data Services
contributed $2.1 million or 68% of the expense growth. Advertising, promotion
and development and customer related expense increased $0.9 million or 19.6% of
which approximately $0.6 million is related to the banking affiliates.
INCOME TAXES
- ------------
The provision for income taxes for the three months ended September 30, 1996,
amounted to $22.3 million compared to $28.3 million for the three months ended
September 30, 1995. The decline in the effective tax rate is primarily
attributable to the increase in income exempt from Federal income taxes.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
- ---------------------------------------------
Net income for the first three quarters of 1996 amounted to $141.6 million
compared to $141.0 million for the same period in 1995. Primary and fully
diluted earnings per share amounted to $1.43 and $1.40, respectively, for the
nine months ended September 30, 1996, compared with $1.43 and $1.38 per share
respectively, for the nine months ended September 30, 1995. The year to date
return on average equity through September 30, was 14.83% in the current year
and 16.28% last year. The year to date return on average assets was 1.41% in
the current period compared to 1.49% for the comparative period last year.
Excluding the special charges previously discussed, income for the nine months
ended September 30, 1996 would have been $151.2 million or $1.53 and $1.50 per
share on a primary and fully diluted basis, respectively. The return on average
equity before special charges amounted to 16.96%
<PAGE>
The following table presents a summarized view of each of the major elements of
the consolidated income statement for the first nine months of 1996 and 1995
stated as a percent of average consolidated assets and converted to a fully
taxable equivalent where appropriate. Year to date data for the current year
is before the special charges previously discussed.
ROA
1996 1995 Impact
---------------------------
Interest Income 7.21 % 7.35 % (0.14)%
Interest Expense (3.41) (3.41) -
-------- -------- --------
Net Interest Income 3.80 3.94 (0.14)
Provision for Loan Losses (0.11) (0.13) 0.02
Net Securities Gains 0.00 0.01 (0.01)
Other Income 3.54 3.25 0.29
Other Expense (4.83) (4.67) (0.16)
-------- -------- --------
Income Before Income Taxes 2.40 2.40 0.00
Income Taxes (0.90) (0.91) 0.01
-------- -------- --------
Return on Average Assets 1.50 % 1.49 % 0.01 %
======== ======== ========
Excluding special charges, the increase in income is primarily due to
noninterest revenue growth, slower interest margin growth and a somewhat
lower loan loss provision which was offset, in part by the growth in expenses
for new products and technology at Data Services and the costs associated
with implementing certain initiatives at the banking affiliates.
CAPITAL RESOURCES
- -----------------
Shareholders' equity was $1.27 billion or 8.80% of total consolidated assets
at September 30, 1996, compared to $1.26 billion and 9.43% at December 31,
1995, and $1.22 billion and 9.41% at September 30,1995.
Net unrealized gains on securities available for sale decreased $17.2 million
since December 31, 1995, and decreased $6.1 million since September 30, 1995.
The Corporation continued to acquire common shares in accordance with the
Stock Repurchase Program approved by its Board of Directors. During the
third quarter of 1996, 1.1 million shares of common stock were acquired with
an aggregate cost of $30.7 million. Since inception of the program 15.7
million common shares have been acquired with a cumulative cost of $364.3
million.
The Corporation continues to have a strong capital base and its regulatory
capital ratios are significantly above the minimum requirements as shown in the
following tables as of September 30, 1996.
<PAGE>
RISK-BASED CAPITAL RATIOS
As of September 30, 1996
($ in millions)
-------------------------
Amount Ratio
---------- ---------
Tier 1 capital $ 1,193.3 11.31 %
Tier 1 capital
minimum requirement 422.1 4.00
---------- ---------
Excess $ 771.2 7.31 %
========== =========
Total capital $ 1,429.2 13.54 %
Total capital
minimum requirement 844.3 8.00
---------- ---------
Excess $ 584.9 5.54 %
========== =========
Risk-adjusted assets $ 10,553.7
==========
LEVERAGE RATIO
As of September 30, 1996
($ in millions)
------------------------
Amount Ratio
------------ -----------
Tier 1 capital to
adjusted total assets $ 1,193.3 8.62 %
Minimum leverage
requirement 415.4-692.3 3.00-5.00
------------- -----------
Excess $777.9-501.0 5.62-3.62 %
============= ===========
Adjusted average total assets $ 13,845.6
===========
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
A. Exhibits:
Exhibit 11 - Statements - Computation of Earnings Per Share
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARSHALL & ILSLEY CORPORATION
(Registrant)
/s/ P.R. Justiliano
______________________________________
P.R. Justiliano
Senior Vice President and
Corporate Controller
(Chief Accounting Officer)
/s/ J.E. Sandy
______________________________________
J.E. Sandy
Vice President
November 14, 1996
<PAGE>
EXHIBIT 11
MARSHALL & ILSLEY CORPORATION
CALCULATION OF EARNINGS PER SHARE
($000's except per share data)
Three Months Ended September 30,
--------------------------------
PRIMARY 1996 1995
- ------- ---------- ---------
Earnings:
Net income $ 45,038 $ 48,579
========== =========
Shares:
Weighted average number of common shares
outstanding 91,520 94,123
Additional shares relating to:
Convertible preferred stock 5,755 3,833
Stock options outstanding at end
of each period and exercised
during each period (a) 1,270 1,362
---------- ---------
Total average primary shares outstanding 98,545 99,318
========== =========
EARNINGS PER SHARE:
Primary $ 0.46 $ 0.49
========== =========
FULLY DILUTED
- -------------
Earnings:
Net income $ 45,038 $ 48,579
Add: Interest on convertible notes,
net of income tax effect 232 465
---------- ---------
$ 45,270 $ 49,044
========== =========
Shares:
Weighted average number of common shares
outstanding 91,520 94,123
Additional shares relating to:
Convertible preferred stock 5,755 3,833
Stock options outstanding at end
of each period and exercised
during each period (b) 1,452 1,446
Assumed conversion of convertible notes 1,922 3,844
---------- ---------
Total average fully diluted shares outstanding 100,649 103,246
========== =========
EARNINGS PER SHARE:
Fully Diluted $ 0.45 $ 0.48
========== =========
Notes:
- ------
(a) Based on the treasury stock method using average market price.
(b) Based on the treasury stock method using period-end market price, if higher
than average market price for options outstanding at end of each period and
market price at date of exercise for options exercised during each period.
<PAGE>
EXHIBIT 11
MARSHALL & ILSLEY CORPORATION
CALCULATION OF EARNINGS PER SHARE
($000's except per share data)
Nine Months Ended September 30,
-------------------------------
PRIMARY 1996 1995
- ------- ---------- ---------
Earnings:
Net income $ 141,561 $ 140,951
========== =========
Shares:
Weighted average number of common shares
outstanding 92,320 93,686
Additional shares relating to:
Convertible preferred stock 5,117 3,833
Stock options outstanding at end
of each period and exercised
during each period (a) 1,277 1,191
---------- ---------
Total average primary shares outstanding 98,714 98,710
========== =========
EARNINGS PER SHARE:
Primary $ 1.43 $ 1.43
========== =========
FULLY DILUTED
- -------------
Earnings:
Net income $ 141,561 $ 140,951
Add: Interest on convertible notes,
net of income tax effect 929 1,394
---------- ---------
$ 142,490 $ 142,345
========== =========
Shares:
Weighted average number of common shares
outstanding 92,320 93,686
Additional shares relating to:
Convertible preferred stock 5,117 3,833
Stock options outstanding at end
of each period and exercised
during each period (b) 1,485 1,543
Assumed conversion of convertible notes 2,561 3,844
---------- ---------
Total average fully diluted shares outstanding 101,483 102,906
========== =========
EARNINGS PER SHARE:
Fully Diluted $ 1.40 $ 1.38
========== =========
Notes:
- ------
(a) Based on the treasury stock method using average market price.
(b) Based on the treasury stock method using period-end market price, if higher
than average market price for options outstanding at end of each period and
market price at date of exercise for options exercised during each period.
<PAGE>
MARSHALL & ILSLEY CORPORATION EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges
($000's)
<TABLE>
<CAPTION>
Nine
Months
Ended Years Ended December 31,
September 30,------------------------------------------------------
Earnings: 1996 1995 1994 1993 1992 1991
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Earnings before income taxes,
extraordinary items and
cumulative effect of changes
in accounting principles $ 216,681 $ 299,879 $ 167,803 $ 264,584 $ 231,792 $ 186,738
Fixed charges, excluding
interest on deposits 82,189 108,683 77,074 47,905 50,687 66,641
---------- ---------- ---------- ---------- ---------- ----------
Earnings including fixed
charges but excluding interest
on deposits 298,870 408,562 244,877 312,489 282,479 253,379
Interest on deposits 266,498 331,734 255,861 272,100 334,443 448,757
---------- ---------- ---------- ---------- ---------- ----------
Earnings including fixed charges
and interest on deposits $ 565,368 $ 740,296 $ 500,738 $ 584,589 $ 616,922 $ 702,136
========== ========== ========== ========== ========== ==========
Fixed Charges:
Interest Expense:
Short-term borrowings $ 42,224 $ 47,740 $ 39,681 $ 18,010 $ 17,606 $ 32,065
Long-term borrowings 34,538 53,709 30,537 23,088 26,439 27,770
One-third of rental expense for
all operating leases (the amount
deemed representative of the
interest factor) 5,427 7,234 6,856 6,807 6,642 6,806
---------- ---------- ---------- ---------- ---------- ----------
Fixed charges excluding
interest on deposits 82,189 108,683 77,074 47,905 50,687 66,641
Interest on deposits 266,498 331,734 255,861 272,100 334,443 448,757
---------- ---------- ---------- ---------- ---------- ----------
Fixed charges including
interest on deposits $ 348,687 $ 440,417 $ 332,935 $ 320,005 $ 385,130 $ 515,398
========== ========== ========== ========== ========== ==========
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits 3.64 x 3.76 x 3.18 x 6.52 x 5.57 x 3.80 x
Including interest on deposits 1.62 x 1.68 x 1.50 x 1.83 x 1.60 x 1.36 x
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