<PAGE>
FORM 10-Q
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 June 30, 1997
---------------------------------------------
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 July 31, 1997
----- ----------------
Common Stock, $1.00 Par Value 88,785,622
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<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
($000's except share data)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
Assets 1997 1996 1996
- ------ -----------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 795,103 $ 780,562 $ 606,384
Federal funds sold and
security resale agreements 69,631 123,880 59,076
Money market funds 65,861 63,482 76,768
------------- ------------- -------------
Total cash and cash equivalents 930,595 967,924 742,228
Trading securities 41,014 39,671 31,742
Other short-term investments 47,699 45,711 32,670
Investment securities available for sale at
market value 2,985,904 3,065,048 2,731,938
Investment securities held to maturity,
market value $860,213 ($776,750 December 31,
and $613,339 June 30, 1996) 850,339 773,804 620,159
------------- ------------- -------------
Total investment securities 3,836,243 3,838,852 3,352,097
Loans 9,912,723 9,301,884 9,012,023
Less: Allowance for loan losses 155,620 155,895 163,866
------------- ------------- -------------
Net loans 9,757,103 9,145,989 8,848,157
Premises and equipment, net 319,354 313,381 301,723
Accrued interest and other assets 482,656 411,785 374,230
------------- ------------- -------------
Total Assets $ 15,414,664 $ 14,763,313 $ 13,682,847
============= ============= =============
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,443,022 $ 2,470,882 $ 2,164,671
Interest bearing 8,740,638 8,481,476 8,035,514
------------- ------------- -------------
Total deposits 11,183,660 10,952,358 10,200,185
Funds purchased and security
repurchase agreements 1,751,075 1,337,940 909,293
Other short-term borrowings 372,283 496,609 753,513
Accrued expenses and other liabilities 409,749 379,100 298,392
Long-term borrowings 362,752 336,096 253,375
------------- ------------- -------------
Total liabilities 14,079,519 13,502,103 12,414,758
Shareholders' equity:
Series A convertible preferred stock,
$1.00 par value; 685,314 shares issued
(517,129 December 31, and June 30, 1996) 685 517 517
Common stock, $1.00 par value; 99,494,335
shares issued 99,494 99,494 99,494
Additional paid-in capital 207,901 204,135 201,930
Retained earnings 1,283,797 1,209,167 1,138,077
Less: Treasury common stock, at cost;
10,713,325 shares (10,910,798
December 31, and 7,514,437
June 30, 1996) 283,686 279,143 171,382
Deferred compensation 1,054 825 1,024
Net unrealized gains on securities
available for sale, net of related taxes 28,008 27,865 477
------------- ------------- -------------
Total shareholders' equity 1,335,145 1,261,210 1,268,089
------------- ------------- -------------
Total Liabilities and
Shareholders' Equity $ 15,414,664 $ 14,763,313 $ 13,682,847
============= ============= =============
See notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($000's except per share data)
Three Months Ended June 30,
---------------------------
Interest income 1997 1996
- --------------- ------------- -------------
Loans $ 204,269 $ 184,923
Investment securities:
Taxable 49,252 41,191
Exempt from Federal income taxes 10,565 7,180
Trading securities 504 270
Short-term investments 2,690 2,463
------------- -------------
Total interest income 267,280 236,027
Interest expense
- ----------------
Deposits 98,730 87,513
Short-term borrowings 26,736 12,778
Long-term borrowings 8,574 11,803
------------- -------------
Total interest expense 134,040 112,094
------------- -------------
Net interest income 133,240 123,933
Provision for loan losses 4,306 3,548
------------- -------------
Net interest income after
provision for loan losses 128,934 120,385
Other income
- ------------
Data processing services 82,281 65,976
Trust services 18,798 17,518
Other customer services 29,509 28,745
Net securities gains 13 134
Other 7,986 8,237
------------- -------------
Total other income 138,587 120,610
Other expense
- -------------
Salaries and employee benefits 107,882 93,217
Net occupancy 9,892 9,664
Equipment 21,578 19,707
Software expenses 4,685 3,523
Payments to regulatory agencies 627 583
Processing charges 6,135 4,291
Supplies and printing 4,126 3,824
Professional services 4,007 4,497
Other 23,595 24,889
------------- -------------
Total other expense 182,527 164,195
------------- -------------
Income before income taxes 84,994 76,800
Provision for income taxes 28,372 26,432
------------- -------------
Net income $ 56,622 $ 50,368
============= =============
Net income per common share
- ---------------------------
Primary $ 0.58 $ 0.51
Fully Diluted 0.58 0.50
Dividends paid per common share $ 0.200 $ 0.185
Weighted average common shares outstanding:
Primary 98,123 99,420
Fully diluted 98,177 101,391
See notes to financial statements.
<PAGE>
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($000's except per share data)
Six Months Ended June 30,
---------------------------
1997 1996
------------- -------------
Interest income
- ---------------
Loans $ 399,215 $ 370,739
Investment securities:
Taxable 99,343 79,764
Exempt from Federal income taxes 20,573 13,336
Trading securities 987 526
Short-term investments 5,085 5,091
------------- -------------
Total interest income 525,203 469,456
Interest expense
- ----------------
Deposits 193,039 175,115
Short-term borrowings 50,559 22,803
Long-term borrowings 18,723 24,968
------------- -------------
Total interest expense 262,321 222,886
------------- -------------
Net interest income 262,882 246,570
Provision for loan losses 8,617 7,125
------------- -------------
Net interest income after
provision for loan losses 254,265 239,445
Other income
- ------------
Data processing services 162,421 124,358
Trust services 37,729 34,320
Other customer services 59,066 57,645
Net securities gains 816 184
Other 16,150 16,816
------------- -------------
Total other income 276,182 233,323
Other expense
- -------------
Salaries and employee benefits 213,264 184,845
Net occupancy 20,022 19,638
Equipment 42,442 39,109
Software expenses 9,257 7,091
Payments to regulatory agencies 1,228 1,123
Processing charges 11,905 9,233
Supplies and printing 8,241 8,434
Professional services 8,133 8,455
Other 48,802 45,457
------------- -------------
Total other expense 363,294 323,385
------------- -------------
Income before income taxes 167,153 149,383
Provision for income taxes 55,732 52,860
------------- -------------
Net income $ 111,421 $ 96,523
============= =============
Net income per common share
- ---------------------------
Primary $ 1.15 $ 0.98
Fully Diluted 1.14 0.96
Dividends paid per common share $ 0.385 $ 0.350
Weighted average common shares outstanding:
Primary 97,273 98,807
Fully diluted 98,310 101,796
See notes to financial statements.
<PAGE>
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($000's)
Six Months Ended June 30,
---------------------------
1997 1996
------------- -------------
Net Cash Provided by Operating Activities $ 127,398 $ 85,363
Cash Flows From Investing Activities:
- -------------------------------------
Net (increase)decrease in securities with
maturities of three months or less (6,010) 65,250
Proceeds from sales of securities
available for sale 379,947 217,116
Proceeds from maturities of longer
term securities 296,532 438,728
Purchases of longer term securities (676,722) (1,046,552)
Net increase in loans (594,641) (233,232)
Purchases of assets to be leased (117,415) (65,047)
Principal payments on lease receivables 84,400 67,193
Fixed asset purchases, net (30,254) (13,454)
Other 4,575 2,398
------------- -------------
Net cash used in
investing activities (659,588) (567,600)
------------- -------------
Cash Flows From Financing Activities:
- -------------------------------------
Net increase (decrease) in deposits 231,302 (80,592)
Proceeds from issuance of commercial paper 140,667 380,585
Payments for maturity of commercial paper (140,506) (394,947)
Net increase in other short-term
borrowings 477,548 661,973
Proceeds from issuance of long-term debt 16,442 32,403
Payments of long-term debt (174,894) (190,561)
Dividends paid (36,792) (34,060)
Purchases of treasury stock (32,985) (54,442)
Other 14,079 6,617
------------- -------------
Net cash provided by financing
activities 494,861 326,976
------------- -------------
Net decrease in cash and cash equivalents (37,329) (155,261)
Cash and cash equivalents, beginning of year 967,924 897,489
------------- -------------
Cash and cash equivalents, end of period $ 930,595 $ 742,228
============= =============
Supplemental cash flow information:
- -----------------------------------
Cash paid during the period for:
Interest $ 251,159 $ 230,430
Income taxes 44,871 56,715
See notes to financial statements.
<PAGE>
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements
June 30, 1997 & 1996 (Unaudited)
1. The accompanying unaudited consolidated financial statements should be
read in conjunction with Marshall & Ilsley Corporation's ("Corporation")
1996 Annual Report on Form 10-K/A. 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 six months ended June 30, 1997 and 1996. The results of
operations for the three months and six months ended June 30, 1997 and
1996 are not necessarily indicative of results to be expected for the
entire year. Certain amounts in the 1996 consolidated financial
statements and analyses have been reclassified to conform with the 1997
presentation.
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):
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1997 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
Commercial, financial & agricultural $ 3,127,734 $ 2,917,393 $ 3,052,286
Real estate:
Construction 327,164 323,420 274,669
Residential Mortgage 2,421,922 2,176,224 2,010,155
Commercial Mortgage 2,528,127 2,379,156 2,264,483
----------- ----------- -----------
Total real estate 5,277,213 4,878,800 4,549,307
Personal 1,124,529 1,174,186 1,122,210
Lease financing 383,247 331,505 288,220
----------- ----------- -----------
$ 9,912,723 9,301,884 $ 9,012,023
=========== =========== ===========
</TABLE>
4. Investment securities, by type, held by the Corporation are as follows
($000's):
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1997 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
Investment securities held to maturity:
State and political subdivisions $ 845,889 $ 769,748 $ 616,103
Other 4,450 4,056 4,056
----------- ----------- -----------
Investment securities
held to maturity 850,339 773,804 620,159
Investment securities available for sale:
U.S. treasury and
government agencies 2,841,656 2,856,625 2,573,758
State and political subdivisions 717 719 888
Other 143,531 207,704 157,292
----------- ----------- -----------
Investment securities
available for sale 2,985,904 3,065,048 2,731,938
----------- ----------- -----------
Total investment securities $ 3,836,243 $ 3,838,852 $ 3,352,097
=========== =========== ===========
</TABLE>
<PAGE>
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements - Continued
June 30, 1997 & 1996 (Unaudited)
5. On March 31, 1997 and April 1, 1996, $16.8 million 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 each in separate
transactions. The common stock acquired by conversion of the notes were
each 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.
6. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share." This statement establishes new standards for computing and
presenting earnings per share ("EPS"). SFAS No. 128 supersedes
Accounting Principles Board Opinion No. 15, "Earnings Per Share" and
purports to simplify the standards for computing EPS and makes them
comparable to international standards.
SFAS No. 128 replaces the presentation of primary EPS with a presentation
of basic EPS which excludes dilution and requires dual presentation of
basic and diluted EPS for all entities with complex capital structures.
Diluted EPS is computed similarly to fully diluted EPS pursuant to the
previous standard.
The Corporation is required to adopt the new standard in its year-end
1997 financial statements. All prior period EPS information (including
interim EPS) is required to be restated at that time. Early adoption is
not permitted.
The pro forma impact of adopting SFAS No. 128 is as follows:
<TABLE>
<CAPTION>
Pro Forma Earnings Per Share
1997 1996
-------------------- -------------------
Basic Diluted Basic Diluted
-------------------- -------------------
<S> <C> <C> <C> <C>
Three Months Ended June 30, $ 0.62 $ 0.58 $ 0.54 $ 0.50
==================== ===================
Six Months Ended June 30, $ 1.23 $ 1.14 $ 1.03 $ 0.96
==================== ===================
</TABLE>
7. The Corporation's deposit liabilities consists of the following ($000's):
June 30, December 31, June 30,
1997 1996 1996
-----------------------------------------
Noninterest bearing demand $ 2,443,022 $ 2,470,882 $ 2,164,671
Savings and NOW 4,363,367 4,400,594 4,215,774
Other time deposits
$100 and over 1,254,004 1,059,066 783,895
Other time deposits
under $100 3,123,267 3,021,816 3,035,845
-----------------------------------------
$ 11,183,660 $ 10,952,358 $ 10,200,185
=========================================
8. Interest Risk Management Instruments - The Securities and Exchange
Commission recently adopted new rules that require expanded disclosure of
accounting policies for derivative financial instruments. The following
accounting policy disclosures supplement the disclosures included in
Note 1 - Summary of Significant Accounting Policies of the Notes to
Consolidated Financial Statements contained in Item 8 of the
Corporation's 1996 Annual Report on Form 10-K/A.
At the present time, interest rate swaps are the primary derivative
interest rate management instrument used for asset/liability management.
Options (caps and floors) are also used for asset/liability purposes
however, these contracts are not currently material to the Corporation's
financial condition or net income.
<PAGE>
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements - Continued
June 30, 1997 & 1996 (Unaudited)
The hedge accounting method is applied to interest rate swaps that meet
the hedge criteria which is discussed below. Under this method, accrued
income or expense associated with the swap is recognized as a component
of the interest income or expense of the hedged asset or liability.
Unrealized gains and losses are recognized on a basis that is consistent
with the method of accounting for the hedged asset or liability.
Unrealized gains or losses are not recognized for hedged assets or
liabilities carried at amortized cost. Unrealized gains and losses on
hedged assets and liabilities which are carried at fair value are
reported as a component of shareholders' equity, net of applicable income
tax effects.
The criteria to qualify an interest rate swap for the hedge accounting
method is as follows:
1. The swap must be designated as a hedge and reduce the
interest rate risk of the designated asset or liability.
2. The notional amount of the swap must be less than or equal to
the amortized cost of the asset or liability to be hedged.
3. The swap must achieve its intended objective of converting
the yield on the hedged asset or liability to the desired
rate. This criteria is assumed to have been met if the
interest rate on the hedged asset or liability is identical
to the offsetting rate on the swap. If the two rates are not
identical, the correlation between the levels of the two
rates since inception of the swap must be measured to ensure
that the swap is meeting its intended objective.
If an interest risk management instrument is terminated or ceases to
qualify for the hedge accounting method, any realized or unrealized gain
or loss at that time is deferred and amortized over the remaining period
of the original hedge. Any subsequent realized or unrealized gains or
losses on instruments that no longer meet the hedge criteria are included
in the determination of net income. If the item being hedged is sold,
any deferred or unrealized gain or loss on the interest risk management
instrument at the time of sale is considered in the determination of the
gain or loss on the sale. If the interest risk management instrument is
not terminated, it must be carried at fair vale on a prospective basis,
with changes in fair value included in the determination of periodic net
income.
Cash flows from interest risk management instruments are reported in the
consolidated statement of cash flows as operating activities.
<PAGE>
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited)
($000's)
Three Months Ended June 30,
---------------------------
Assets 1997 1996
- ------ ------------- -------------
Cash and due from banks $ 576,533 $ 573,774
Short-term investments 187,972 184,521
Trading securities 40,624 23,327
Investment securities:
Taxable 2,925,572 2,643,004
Tax-exempt 885,513 615,473
------------- -------------
Total investment securities 3,811,085 3,258,477
Loans:
Commercial 3,057,389 2,945,305
Real estate 5,144,644 4,445,908
Personal 1,126,526 1,132,631
Lease financing 368,585 282,448
------------- -------------
9,697,144 8,806,292
Less: Allowance for loan losses 156,273 163,161
------------- -------------
Total loans 9,540,871 8,643,131
Premises and equipment, net 318,727 302,970
Accrued interest and other assets 394,912 363,435
------------- -------------
Total Assets $ 14,870,724 $ 13,349,635
============= =============
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,154,686 $ 2,036,825
Interest bearing 8,637,438 7,992,076
------------- -------------
Total deposits 10,792,124 10,028,901
Funds purchased and security repurchase
agreements 1,744,786 832,692
Other short-term borrowings 196,021 168,188
Long-term borrowings 477,703 735,680
Accrued expenses and other liabilities 352,492 307,425
------------- -------------
Total liabilities 13,563,126 12,072,886
Shareholders' equity 1,307,598 1,276,749
------------- -------------
Total Liabilities and Shareholders' Equity $ 14,870,724 $ 13,349,635
============= =============
<PAGE>
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited)
($000's)
Six Months Ended June 30,
---------------------------
Assets 1997 1996
- ------ ------------- -------------
Cash and due from banks $ 577,543 $ 568,299
Short-term investments 184,062 188,552
Trading securities 40,576 21,824
Investment securities:
Taxable 2,976,151 2,584,684
Tax-exempt 867,215 574,524
------------- -------------
Total investment securities 3,843,366 3,159,208
Loans:
Commercial 3,002,070 2,920,899
Real estate 5,039,656 4,434,139
Personal 1,143,031 1,139,776
Lease financing 355,860 279,837
------------- -------------
9,540,617 8,774,651
Less: Allowance for loan losses 156,790 162,839
------------- -------------
Total loans 9,383,827 8,611,812
Premises and equipment, net 317,663 303,832
Accrued interest and other assets 392,824 357,049
------------- -------------
Total Assets $ 14,739,861 $ 13,210,576
============= =============
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,121,082 $ 2,011,354
Interest bearing 8,575,715 7,957,212
------------- -------------
Total deposits 10,696,797 9,968,566
Funds purchased and security repurchase
agreements 1,695,213 755,739
Other short-term borrowings 180,379 129,151
Long-term borrowings 525,979 777,527
Accrued expenses and other liabilities 348,543 308,279
------------- -------------
Total liabilities 13,446,911 11,939,262
Shareholders' equity 1,292,950 1,271,314
------------- -------------
Total Liabilities and Shareholders' Equity $ 14,739,861 $ 13,210,576
============= =============
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
- -----------------------------------------
Net income for the second quarter of 1997 amounted to $56.6 million compared to
$50.4 million for the same period in the prior year. Primary and fully diluted
earnings per share were both $.58 for the three months ended June 30, 1997,
compared with $.51 and $.50, respectively for the three months ended June 30,
1996. The return on average assets and average equity were 1.53% and 17.37% for
the quarter ended June 30, 1997 and 1.52% and 15.87% for the quarter ended June
30, 1996.
The increase in net income of $6.2 million or 12.4% in the current quarter
compared with the same quarter last year reflects the growth in noninterest
income and the increase in net interest income offset somewhat by an increase
in the provision for loan losses and the increase in noninterest expense.
The following tables present a summary of each of the major elements of the
consolidated operating income statement, certain financial statistics and a
summary of the major operating 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.
Operating income excludes approximately $9.6 million ($.10 per share fully
diluted) of special charges relating to the one-time SAIF assessment and write-
off of in-process technology associated with the acquisition of EastPoint
Technology, Inc. which occurred during the third quarter of 1996.
SUMMARY CONSOLIDATED OPERATING INCOME STATEMENTS AND FINANCIAL STATISTICS
- -------------------------------------------------------------------------
($000's except per share data)
1997 1996
-------------------- ----------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
------------------- ------------------------------
Interest Income $ 267,280 $ 257,923 $ 255,355 $ 246,625 $ 236,027
Interest Expense (134,040) (128,281) (122,457) (120,374) (112,094)
--------- --------- --------- ---------- ---------
Net Interest Income 133,240 129,642 132,898 126,251 123,933
Provision for Loan Losses (4,306) (4,311) (4,086) (3,983) (3,548)
Net Securities Gains 13 803 14,677 15 134
Other Income 138,574 136,792 131,819 123,486 120,476
Other Expense (182,527) (180,767) (178,849) (163,587) (164,195)
--------- --------- --------- ---------- ---------
Income Before Taxes 84,994 82,159 96,459 82,182 76,800
Income Tax Provision (28,372) (27,360) (34,590) (27,533) (26,432)
--------- --------- --------- ---------- ---------
Operating Income $ 56,622 $ 54,799 $ 61,869 $ 54,649 $ 50,368
========= ========= ========= ========== =========
Per Common Share
Operating Income Per Share
Primary $ 0.58 $ 0.57 $ 0.63 $ 0.55 $ 0.51
Fully Diluted 0.58 0.56 0.62 0.55 0.50
Dividends 0.200 0.185 0.185 0.185 0.185
Return on Average Equity
Based on Operating Income 17.37% 17.39% 18.95% 16.96% 15.87%
<PAGE>
<PAGE>
CONSOLIDATED OPERATING INCOME STATEMENT COMPONENTS AS A PERCENT
- ---------------------------------------------------------------
OF AVERAGE TOTAL ASSETS
- -----------------------
1997 1996
------------------- -----------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- ---------- ---------
Interest Income (FTE) 7.35% 7.30% 7.25% 7.17% 7.23%
Interest Expense (3.61) (3.56) (3.41) (3.44) (3.38)
--------- --------- --------- ---------- ---------
Net Interest Income 3.74 3.74 3.84 3.73 3.85
Provision for Loan Losses (0.12) (0.12) (0.11) (0.11) (0.11)
Net Securities Gains 0.00 0.02 0.41 0.00 0.00
Other Income 3.74 3.80 3.67 3.53 3.63
Other Expense (4.92) (5.02) (4.99) (4.68) (4.93)
--------- --------- --------- ---------- ---------
Income Before Taxes 2.44 2.42 2.82 2.47 2.44
Income Tax Provision (0.91) (0.90) (1.10) (0.91) (0.92)
--------- --------- --------- ---------- ---------
Return on Average Assets
Based on Operating Income 1.53% 1.52% 1.72% 1.56% 1.52%
========= ========= ========= ========== =========
The following table reconciles operating income to operating income before
amortization of intangibles ("tangible operating income"). Amortization includes
amortization of goodwill and core deposit premiums and is net of negative
goodwill accretion and the income tax expense or benefit, if any, related to
each component. These calculations were specifically formulated by the
Corporation and may not be comparable to similarly titled measures reported by
other companies.
SUMMARY CONSOLIDATED TANGIBLE OPERATING INCOME AND FINANCIAL STATISTICS
- -----------------------------------------------------------------------
($000's except per share data)
1997 1996
------------------- ------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- ---------- ---------
Operating Income $ 56,622 $ 54,799 $ 61,869 $ 54,649 $ 50,368
Amortization, net of tax 874 874 872 839 790
--------- --------- --------- ---------- ---------
Tangible Operating Income $ 57,496 $ 55,673 $ 62,741 $ 55,488 $ 51,158
========= ========= ========= ========== =========
Tangible Operating Income Per Share
Primary $ 0.59 $ 0.58 $ 0.64 $ 0.56 $ 0.51
Fully Diluted 0.59 0.57 0.63 0.55 0.51
Return on Average
Tangible Assets 1.56% 1.55% 1.76% 1.59% 1.55%
Tangible Equity 18.24 18.30 19.91 17.81 16.60
<PAGE>
<PAGE>
NET INTEREST INCOME
- -------------------
Net interest income for the second quarter of 1997 amounted to $133.2 million,
an increase of $9.3 million or 7.5% from the $123.9 million reported for the
second quarter of 1996. The increase in the volume of average earning assets
contributed approximately $28.0 million while the increase in yield on earning
assets contributed approximately $3.3 million of the increase in interest
income. The increase in the volume of average interest bearing liabilities
contributed approximately $15.0 million and the increase in the cost on interest
bearing liabilities contributed approximately $7.0 million to the increase in
interest expense.
Average earning assets increased $1.5 billion or 11.9% in the second quarter of
1997 compared to the same period a year ago. Including securitized adjustable
rate mortgage loans (ARMS), average loans grew approximately $912.4 million or
9.8% compared to the second quarter of last year. Average securities, excluding
securitized ARMs, increased $531.1 million which reflects the Corporation's
intent, initiated in the prior year, to increase the portfolio size with higher
yielding and longer-term securities to adjust the rate sensitivity and leverage
the consolidated balance sheet. During the second quarter of 1997, the
Corporation's banking affiliates repositioned investment securities through the
sale and purchase of approximately $337 million of securities available for
sale.
Average interest bearing liabilities increased $1.3 billion or 13.6% in the
second quarter of 1997 compared to the same period in 1996. Average interest
bearing deposits increased $645.4 million or 8.1% ,average short-term borrowings
increased $939.9 million while average long-term borrowings decreased $258.0
million or 35.1%. Average noninterest bearing deposits increased $117.9
million or 5.8% during the second quarter of 1997 compared to the second
quarter of 1996.
During the second quarter of 1997, the remaining $25 million of the
Corporation's banking subsidiaries' Bank Notes matured and were refinanced
primarily with short-term borrowings and brokered certificates of deposit. Also
during the second quarter, the Corporation began issuing Series C and Series D
Medium Term Notes in order to refinance approximately $ 87 million of Series B
and Series C Medium Term Notes which will mature during the remainder of 1997
and 1998.
<PAGE>
<PAGE>
The growth and composition of the Corporation's quarterly average loan portfolio
for the current quarter and previous four quarters are reflected below.
Securitized ARM loans which are classified in the consolidated balance sheets
as investment securities available for sale are included to provide a more
meaningful comparison ($ in millions):
Marshall & Ilsley Corporation's quarterly average loan portfolio
1997 1996
----------------- -------------------------- Annual
Second First Fourth Third Second Growth
Quarter Quarter Quarter Quarter Quarter PCT
----------------- -------------------------- -------
Commercial Loans $ 3,057 $ 2,946 $ 2,919 $ 2,981 $ 2,945 3.8%
Real Estate Loans
Construction 320 323 321 283 267 19.6
Commercial Mortgages 2,496 2,417 2,359 2,303 2,226 12.1
Residential Mortgages 2,329 2,193 2,201 2,093 1,953 19.3
Securitized ARM loans 512 550 487 460 491 4.4
-------- -------- -------- -------- -------- -------
Residential Mortgages 2,841 2,743 2,688 2,553 2,444 16.3
-------- -------- -------- -------- -------- -------
Total Real Estate Loans 5,657 5,483 5,368 5,139 4,937 14.6
Personal Loans
Personal Loans 850 872 871 851 841 1.1
Student Loans 277 288 283 281 292 (5.2)
-------- -------- -------- -------- -------- -------
Total Personal Loans 1,127 1,160 1,154 1,132 1,133 (0.5)
Lease Financing
Receivables
Commercial 280 279 269 258 255 9.7
Personal 88 64 49 37 27 229.5
-------- -------- -------- -------- -------- -------
Lease Financing
Receivables 368 343 318 295 282 30.5
-------- -------- -------- -------- -------- -------
Total Consolidated
Average Loans & ARMs $ 10,209 $ 9,932 $ 9,759 $ 9,547 $ 9,297 9.8%
======== ======== ======== ======== ======== =======
Total Consolidated
Average Loans $ 9,697 $ 9,382 $ 9,272 $ 9,087 $ 8,806 10.1%
======== ======== ======== ======== ======== =======
During 1996 approximately $224 million of ARM loans were converted into
government guaranteed agency pool securities. There were no ARM loan
securitizations during the first half of 1997. Including the securitized ARMs,
average residential mortgages increased by approximately $397.8 million or 16.3%
in the second quarter of 1997 compared with the second quarter of 1996.
Approximately $111 million of the increase is attributable to home equity loans
and lines of credit.
Lease financing receivables increased $86.1 million or 30.5% in the second
quarter of 1997 compared with the same period last year of which, approximately
$61.4 million is due to growth in automobile leasing.<PAGE>
<PAGE>
The growth and composition of the Corporation's quarterly average deposits for
the current and prior year's quarters are as follows ($ in millions):
Marshall & Ilsley Corporation's quarterly average deposits
1997 1996
----------------- -------------------------- Annual
Second First Fourth Third Second Growth
Quarter Quarter Quarter Quarter Quarter PCT
----------------- -------------------------- -------
Noninterest Bearing
Commercial $ 1,388 $ 1,362 $ 1,462 $ 1,368 $ 1,302 6.6%
Personal 343 331 329 384 427 (19.7)
Other 424 394 436 358 308 37.9
-------- -------- -------- -------- -------- -------
Total Noninterest
Bearing Deposits 2,155 2,087 2,227 2,110 2,037 5.8
Interest Bearing
Savings & NOW 1,732 1,753 1,787 1,803 1,817 (4.7)
Money Market 2,642 2,613 2,557 2,451 2,407 9.8
Other CDs &
Time Deposits 3,032 3,027 3,054 3,048 3,039 (0.2)
CDs Greater than $100 672 662 643 643 614 9.5
Brokered CDs 559 458 369 221 115 384.2
-------- -------- -------- -------- -------- -------
Total Interest
Bearing Deposits 8,637 8,513 8,410 8,166 7,992 8.1
-------- -------- -------- -------- -------- -------
Total Consolidated
Average Deposits $ 10,792 $ 10,600 $ 10,637 $ 10,276 $ 10,029 7.6%
======== ======== ======== ======== ======== =======
Money market savings and brokered CDs exhibited the greatest growth when
comparing average deposits in the second quarter of 1997 to the second quarter
of 1996. The money market index account increased $342.6 million or 21.8% and
averaged $1.9 billion in the second quarter of 1997 compared with $1.6 billion
during the same period last year. During the second quarter of 1997, the
Corporation began issuing brokered CDs which are callable at the option of the
Corporation in addition to other brokered CDs. Concurrently with the callable
issue, the Corporation entered into receive fixed interest rate swaps which are
callable at the option of the counterparty. The increase in brokered CDs
represents the Corporation's intent to acquire longer-term CDs with maturities
of one year or more in order to provide a stable source of funds that over time
is less costly than Bank Notes. The brokered callable CDs provide term
liquidity at rates below LIBOR.<PAGE>
<PAGE>
The Corporation's consolidated average interest earning assets and interest
bearing liabilities, interest earned and interest paid for the current quarter
and comparative prior year quarter are presented in the following table.
Securitized ARM loans that are classified as investment securities available for
sale are included with loans to make the comparative information more
meaningful.
YIELD & COST ANALYSIS SECOND QUARTER
($ in millions) ----------------------------------------------
1997 1996
------------------------ -------------------------
Average Average
Average Yield or Average Yield or
Balance Interest Cost Balance Interest Cost
------------------------ ------------------------
Loans (a) $10,209.5 $ 214.1 8.41 % $ 9,297.1 $ 194.1 8.40 %
Investment Securities:
Taxable 2,413.2 39.8 6.62 2,152.2 32.4 6.06
Tax Exempt (a) 885.5 15.4 6.98 615.5 10.6 6.89
Other Short-term
Investments (a) 228.6 3.2 5.61 207.8 2.7 5.31
------------------------ -----------------------
Total Interest
Earning Assets $13,736.8 $ 272.5 7.96 % $12,272.6 $ 239.8 7.86 %
======================= =======================
Money Market Savings $ 2,642.4 $ 28.4 4.32 % $ 2,406.9 $ 24.4 4.07 %
Regular Savings
& NOW 1,732.1 9.1 2.10 1,817.2 9.5 2.10
Other CDs & Time
Deposits 3,032.0 43.1 5.71 3,038.6 43.3 5.74
CDs Greater than
$100 & Brokered CDs 1,230.9 18.1 5.89 729.3 10.3 5.69
------------------------ ----------------------
Total Interest
Bearing Deposits 8,637.4 98.7 4.58 7,992.0 87.5 4.40
Short-term
Borrowings 1,940.8 26.7 5.53 1,000.9 12.8 5.13
Long-term
Borrowings 477.7 8.6 7.20 735.7 11.8 6.45
------------------------ ----------------------
Total Interest
Bearing Liabilities $11,055.9 $ 134.0 4.86 % $ 9,728.6 $ 112.1 4.63 %
======================== ======================
Net Interest Margin
(FTE) as a Percent
of Average Earning
Assets $ 138.5 4.05 % $ 127.7 4.19 %
============= =============
(a) Fully taxable equivalent basis (FTE), assuming a Federal income tax rate
of 35%, and excluding disallowed interest expense.
The net interest margin as a percent of average earning assets declined 14 basis
points from 4.19% in the second quarter of 1996 to 4.05% in the current quarter.
The yield on average earning assets increased 10 basis points while the cost of
interest bearing liabilities increased 23 basis points. The cost of interest
bearing deposits increased 18 basis points while short-term borrowing costs
increased 40 basis points. The cost of long-term borrowings increased 75 basis
points which reflects, in part, the issuance of $200 million of 7.65% cumulative
preferred capital securities in December, 1996.
At June 30, 1997, the Corporation had standard receive fixed/pay floating
interest rate swaps and interest rate floors designated as hedges to manage the
interest rate volatility associated with variable rate loans and the convexity
risk associated with investments in collateralized mortgage obligations. In
addition, the Corporation had a callable receive fixed / pay floating interest
rate swap designated as a hedge to offset the brokered callable CDs previously
discussed.
<PAGE>
<PAGE>
The Corporation's position with respect to interest rate swaps and interest rate
floors at June 30, 1997 consisted of the following ($ in millions):
Interest Rate Swaps
-------------------
Notional Value $450
Weighted average receive rate 6.31%
Weighted average pay rate 5.81%
Weighted average remaining term (in years) 2.44
Estimated fair value $0.02
Callable Interest Rate Swaps
----------------------------
Notional Value $15
Weighted average receive rate 6.85%
Weighted average pay rate 5.56%
Weighted average remaining term (in years) 6.99
Estimated fair value ($0.21)
Interest Rate Floors
--------------------
Notional Value $50
Strike Rate 5.13%
Index 5.80%
Weighted average remaining term (in years) 4.34
Estimated fair value $0.18
Unamortized premium $0.37
For the three months ended June 30, 1997, the effect on net interest income
resulting from the swaps, net of floor premium amortization, was a positive $.6
million compared with a positive $.3 million in the same period in 1996.
PROVISION FOR LOAN LOSSES AND CREDIT QUALITY
- --------------------------------------------
At June 30, 1997, nonperforming assets were $71.4 million compared to $77.6
million at March 31, 1997 and $98.1 million at June 30, 1996. Nonaccrual loans,
the largest component of nonperforming assets, decreased $5.9 million since the
first quarter and decreased $23.6 million since June 30, 1996. Other real
estate owned, loans past due 90 days or more and renegotiated loans all
decreased since March 31, 1997. Compared to June 30, 1996, renegotiated loans
decreased $1.3 million, loans past due 90 days or more were relatively unchanged
and other real estate owned decreased $1.7 million.
Total nonaccrual commercial loans and leases decreased $5.3 million since the
first quarter and decreased $24.3 million since June 30, 1996. Nonaccrual
commercial loans and leases are substantially responsible for the decrease in
nonperforming assets at June 30, 1997 compared to nonperforming assets at March
31, 1997. Since the first quarter, nonaccrual real estate loans and nonaccrual
personal loans have also declined to a lesser extent.
Net charge-offs in the second quarter of 1997 amounted to $3.3 million or .14%
of average loans compared to $5.6 million or .24% of average loans in the first
quarter of 1997 and $1.5 million or .07% of average loans in the second quarter
of 1996. Four larger commercial loans accounted for approximately $1.8 million
of the net charge-off activity during the second quarter of 1997.
The allowance for loan losses amounted to $155.6 million or 1.57% of total loans
at June 30, 1997 compared to $154.6 million or 1.61% at March 31, 1997 and
$163.9 million or 1.82% at June 30, 1996. The coverage ratio of the allowance
for loan losses to nonperforming loans was 236% at June 30, 1997 compared with
215% at March 31, 1997 and 181% at June 30, 1996.
<PAGE>
<PAGE>
The provision for loan losses amounted to $4.3 million in the second quarter of
1997 compared to $3.5 million in the second quarter of 1996. The increase is
primarily due to loan growth.
CONSOLIDATED CREDIT QUALITY INFORMATION ($000's)
1997 1996
----------------- --------------------------
Second First Fourth Third Second
NONPERFORMING ASSETS Quarter Quarter Quarter Quarter Quarter
- -------------------- ----------------- --------------------------
Nonaccrual $ 56,723 $ 62,576 $ 60,176 $ 65,377 $ 80,344
Renegotiated 1,636 1,736 1,819 1,878 2,936
Past Due 90 Days or More 7,461 7,517 7,366 8,329 7,492
-------- -------- -------- -------- --------
Total Nonperforming
Loans 65,820 71,829 69,361 75,584 90,772
Other Real Estate Owned 5,625 5,729 5,629 6,406 7,332
-------- -------- -------- -------- --------
Total Nonperforming
Assets $ 71,445 $ 77,558 $ 74,990 $ 81,990 $ 98,104
======== ======== ======== ======== ========
ALLOWANCE FOR
LOAN LOSSES $155,620 $154,599 $155,895 $152,755 $163,866
======== ======== ======== ======== ========
CONSOLIDATED STATISTICS
- -----------------------
Net Charge-offs
to Average Loans
Annualized 0.14 % 0.24 % 0.04 % 0.66 % 0.07 %
Total Nonperforming Loans
to Total Loans 0.66 0.75 0.75 0.81 1.01
Total Nonperforming Assets
to Total Loans and Other
Real Estate Owned 0.72 0.81 0.81 0.88 1.09
Allowance for Loan Losses
to Total Loans 1.57 1.61 1.68 1.64 1.82
Allowance for Loan Losses
to Nonperforming Loans 236 215 225 202 181
<PAGE>
<PAGE>
1997 1996
----------------- --------------------------
Second First Fourth Third Second
NONACCRUAL LOANS BY TYPE Quarter Quarter Quarter Quarter Quarter
- ------------------------ ----------------- --------------------------
Commercial
Commercial, Financial &
Agricultural $ 13,462 $ 17,945 $ 16,257 $ 21,902 $ 37,495
Lease Financing
Receivables 1,430 2,290 1,624 1,393 1,677
-------- -------- -------- -------- --------
Total Commercial 14,892 20,235 17,881 23,295 39,172
Real Estate
Construction and Land
Development 1,311 1,650 731 488 642
Commercial Mortgage 18,185 19,987 19,760 21,218 21,295
Residential Mortgage 19,203 17,286 18,284 17,212 16,293
-------- -------- -------- -------- --------
Total Real Estate 38,699 38,923 38,775 38,918 38,230
Personal 3,132 3,418 3,520 3,164 2,942
-------- -------- -------- -------- --------
Total Nonaccrual Loans $ 56,723 $ 62,576 $ 60,176 $ 65,377 $ 80,344
======== ======== ======== ======== ========
1997 1996
RECONCILIATION OF ----------------- --------------------------
CONSOLIDATED ALLOWANCE Second First Fourth Third Second
FOR LOAN LOSSES Quarter Quarter Quarter Quarter Quarter
- ------------------------ ----------------- --------------------------
Beginning Balance $154,599 $155,895 $152,755 $163,866 $161,841
Provision for Loan Losses 4,306 4,311 4,086 3,983 3,548
Allowance of Bank Acquire -- -- -- -- --
Allowance Transfer for Loan
Securitizations -- -- -- -- --
Loans Charged-off
Commercial 2,773 3,305 1,471 13,044 1,012
Real Estate 446 1,466 1,258 1,378 242
Personal 1,706 2,003 1,959 1,430 1,663
Leases 462 80 93 254 61
-------- -------- -------- -------- --------
Total Charge-offs 5,387 6,854 4,781 16,106 2,978
Recoveries on Loans
Commercial 1,089 349 1,701 255 438
Real Estate 314 235 1,619 125 385
Personal 617 652 474 589 605
Leases 82 11 41 43 27
-------- -------- -------- -------- --------
Total Recoveries 2,102 1,247 3,835 1,012 1,455
-------- -------- -------- -------- --------
Net Loans Charged-off 3,285 5,607 946 15,094 1,523
-------- -------- -------- -------- --------
Ending Balance $155,620 $154,599 $155,895 $152,755 $163,866
======== ======== ======== ======== ========
<PAGE>
<PAGE>
OTHER INCOME
- ------------
Total other income in the second quarter of 1997 amounted to $138.6 million, an
increase of $18.0 million or 14.9%, compared to $120.6 million in the same
period last year.
Data processing revenue increased $16.3 million or 24.7% from $66.0 million in
the second quarter of 1996 to $82.3 million in the current quarter. Processing
revenue increased $14.8 million or 33.1%. Software revenue increased $1.6
million which reflects, in part, the purchase acquisition of EastPoint
Technology, Inc. which occurred in the third quarter of 1996. Buyout fees,
which can vary from period to period, increased $.5 million while conversion
fees decreased $.5 million. Revenues from unique services such as contract
programming and consulting increased $2.0 million. Compared to the first
quarter of 1997, revenue from data processing services increased $2.1 million
or 2.7% which includes a $2.3 million decrease in buyout fees.
Trust services revenue amounted to $18.8 million in the second quarter of 1997,
an increase of $1.3 million or 7.3% compared to $17.5 million in the second
quarter of 1996. While all components of trust services revenue experienced an
increase, personal trust fees increased $.6 million while corporate trust fees
increased $.4 million.
Other customer services increased $.8 million or 2.7% and totaled $29.5 million
in the second quarter of 1997 compared to $28.7 million in the same period one
year ago. Service charges on deposits of $13.2 million increased $.2 million
and credit card fees increased $.5 million from the prior year.
Net securities gains in the second quarter of 1997 and 1996 were not
significant.
All other income amounted to $8.0 million in the second quarter of 1997 compared
to $8.2 million in the second quarter of 1996. Gains from the sale of
residential mortgage loans which includes the servicing rights declined $.5
million while gains from the sale of student loans increased $.2 million.
OTHER EXPENSE
- -------------
Total other expenses in the second quarter of 1997 amounted to $182.5 million,
an increase of $18.3 million or 11.2% compared to $164.2 million in the same
period last year.
The increase in expenses is primarily attributable to the Corporation's
nonbanking businesses especially its Data Services segment ("Data Services").
Data Services expense growth reflects the impact of the acquisition of EastPoint
Technology, Inc., the cost of adding processing capacity and other related
costs associated with increased revenue growth and maintenance activities
associated with the Year 2000. It is estimated that the net cost to change
existing computer programs for both internal and external software to comply
with the Year 2000 will be approximately $25 million. It is anticipated that
a substantial portion of the total cost will be incurred over the next two years
and will be expensed as incurred. Data Services incurred approximately $2
million of expense in all of 1996 and in 1997 incurred approximately $2.2
million of expense in the first quarter and approximately $3.5 million in the
second quarter related to the Year 2000. Future data processing revenue is
critically dependent upon the successful implementation of the necessary
changes.
Expenses of the Corporation's banks throughout all of 1996 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.
<PAGE>
<PAGE>
Salaries and employee benefits expense amounted to $107.9 million in the second
quarter of 1997 compared to $93.2 million in the second quarter of 1996, an
increase of $14.7 million or 15.7%. Salaries and employee benefits expense of
Data Services increased $14.1 million or 36.7% in the current quarter compared
to the same period last year. At June 30, 1997 Data Services had approximately
624 more employees when compared to June 30, 1996 which reflects, in part, the
addition of EastPoint Technology, Inc. and four datacenters. In addition,
expense associated with contract programmers and other temporary help increased
$2.9 million over the comparative periods.
Data Services expense growth accounted for approximately 78% of the increase in
net occupancy, equipment, software expenses, processing charges and supplies and
printing in the second quarter of 1997 compared to the second quarter of 1996.
The decrease in professional services expense of $.5 million in the current
quarter compared with the same period last year is also primarily attributable
to Data Services.
All other expense decreased 5.2% or $1.3 million from $24.9 million in the
second quarter of 1996 to $23.6 million in the second quarter of 1997. Credit
card franchise and authorization fees increased $.8 million . Travel expenses
also increased $.9 million. The increase in travel was attributable to Data
Services. In addition to the above, this category of expense is affected by the
capitalization of costs, net of amortization, associated with software
development and data processing conversions. The amount of cost capitalized,
net of amortization in the second quarter of 1997, was $3.1 million more than
the amount recorded in the second quarter of the prior year. Approximately $2.7
million of the increase was due to software development.
INCOME TAXES
- ------------
The provision for income taxes for the three months ended June 30, 1997 amounted
to $28.4 million compared to $26.4 million for the three months ended June 30,
1996. The decrease in the effective tax rate is primarily due to the increase
in interest income exempt from Federal income taxes.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
- ---------------------------------------
Net income for the first half of 1997 amounted to $111.4 million compared to
$96.5 million in the first half of 1996, an increase of 15.4%. Primary and
fully diluted earnings per share were $1.15 and $1.14, respectively for the six
months ended June 30, 1997 compared to $.98 and $.96, respectively for the same
period last year. The year to date return on average equity was 17.38% in the
current period and 15.27% for the six months ended June 30, 1996.<PAGE>
<PAGE>
The following table presents a summary of each of the major elements of the
consolidated income statement for the first six months of 1997 and 1996 stated
as a percent of average consolidated assets - converted to a fully taxable
equivalent basis (FTE) where appropriate.
ROA
1997 1996 Impact
------ ------ --------
Interest Income 7.33 % 7.26 % 0.07 %
Interest Expense (3.59) (3.40) (0.19)
------ ------ --------
Net Interest Income 3.74 3.86 (0.12)
Provision for Loan Losses (0.12) (0.11) (0.01)
Net Securities Gains 0.01 -- 0.01
Other Income 3.77 3.55 0.22
Other Expense (4.98) (4.92) (0.06)
------ ------ ------
Income Before Taxes 2.42 2.38 0.04
Income Taxes (0.90) (0.91) 0.01
------ ------ ------
Return on Average Assets 1.52 % 1.47 % 0.05 %
====== ====== ======
<PAGE>
<PAGE>
The Corporation's consolidated average interest earning assets and interest
bearing liabilities, interest earned and interest paid for the six months ended
June 30, 1997 and 1996 are presented in the following table. Securitized ARM
loans that are classified as investment securities available for sale are
included with loans to make the comparative information more meaningful.
YIELD & COST ANALYSIS Six Months Ended June 30,
($ in millions) ----------------------------------------------------------
1997 1996
---------------------------- ----------------------------
Average Average
Average Yield or Average Yield or
Balance Interest Cost Balance Interest Cost
---------------------------- ----------------------------
Loans (a) $10,071.7 $ 419.6 8.40% $ 9,268.1 $ 389.2 8.45%
Investment Securities:
Taxable 2,445.1 79.9 6.59 2,091.2 62.2 5.98
Tax Exempt (a) 867.2 30.0 6.98 574.5 19.6 6.85
Other Short-term
Investments (a) 224.6 6.1 5.45 210.4 5.6 5.38
---------------------------- ----------------------------
Total Interest
Earning Assets $13,608.6 $ 535.6 7.94% $12,144.2 $ 476.6 7.89%
============================ ============================
Money Market
Savings $ 2,627.8 $ 55.4 4.25% $ 2,396.8 $ 48.9 4.10%
Regular Savings
& NOW 1,742.4 18.2 2.11 1,829.5 19.2 2.11
Other CDs & Time
Deposits 3,029.7 85.5 5.69 3,036.6 87.2 5.78
CDs Greater than
$100 & Brokered CDs 1,175.8 33.9 5.82 694.3 19.8 5.74
---------------------------- ---------------------------
Total Interest
Bearing Deposits 8,575.7 193.0 4.54 7,957.2 175.1 4.43
Short-term
Borrowings 1,875.6 50.6 5.44 884.9 22.8 5.18
Long-term
Borrowings 526.0 18.7 7.18 777.5 25.0 6.46
---------------------------- ---------------------------
Total Interest Bearing
Liabilities $10,977.3 $ 262.3 4.82% $ 9,619.6 $ 222.9 4.66%
============================ ===========================
Net Interest Margin
(FTE) as a Percent
of Average Earning
Assets $ 273.3 4.05% $ 253.7 4.20%
================== ==================
(a) Fully taxable equivalent basis (FTE), assuming a Federal income tax rate
of 35%, and excluding disallowed interest expense.
The increase in net income is due to growth in noninterest revenue, primarily
data processing services, and net interest income offset by an increased
provision for loan losses and growth in other expense which is driven primarily
by Data Services.
<PAGE>
<PAGE>
CAPITAL RESOURCES
- -----------------
Shareholders' equity was $1.34 billion at June 30, 1997 compared to $1.26
billion at December 31, 1996 and $1.27 billion at June 30, 1996.
Net unrealized gains on securities available for sale were relatively unchanged
at June 30, 1997 compared to December 31, 1996. As previously reported,
shareholders' equity increased by approximately $16.9 million due to the March
31, 1997 conversion of the Corporation's 8.5% convertible subordinated note.
During the second quarter of 1997 the Corporation increased dividends paid to
shareholders 8% to $.20 per share from $.185 per share.
The Corporation continued to acquire common shares in accordance with the Stock
Repurchase Program approved by its Board of Directors. During the second
quarter of 1997, .1 million shares of common stock were acquired with an
aggregate cost of $3.2 million. Since inception of the program 19.3 million
common shares have been acquired with a cumulative cost of $482.5 million or
$25.00 per share on a weighted average basis.
The Corporation continues to have a strong capital base and its regulatory
capital ratios are significantly above the minimum requirements as shown in the
following tables.
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS ($in millions)
---------------------------------------------------------------------
June 30, 1997 December 31, 1996
---------------------------------- ----------------------------------
Amount Ratio Amount Ratio
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Tier 1 Capital $ 1,441.1 12.71 % $ 1,361.9 12.71 %
Tier 1 Capital
Minimum Requirements 453.4 4.00 428.5 4.00
-------- ------ -------- ------
Excess $ 987.7 8.71 % $ 933.4 8.71 %
======== ====== ======== ======
Total Capital $ 1,683.0 14.85 % $ 1,596.4 14.90 %
Total Capital
Minimum Requirement 906.8 8.00 857.1 8.00
-------- ------ -------- ------
Excess $ 776.2 6.85 % $ 739.3 6.90 %
======== ====== ======== ======
Risk-Adjusted Assets $11,335.2 $10,713.4
========= =========
LEVERAGE RATIOS ($in millions)
---------------------------------------------------------------------
Tier 1 Capital $ 1,441.1 9.74 % $ 1,361.9 9.61 %
Minimum Leverage
Requirement 443.7 -739.5 3.00 - 5.00 425.3 -708.8 3.00 - 5.00
--------------- -------------- --------------- --------------
Excess $ 997.4 -701.6 6.74 - 4.74% $ 936.6 -653.1 6.61 - 4.61%
=============== ============== =============== ==============
Adjusted Average
Total Assets $14,789.3 $14,175.4
========= =========
</TABLE>
RECENT DEVELOPMENTS
- -------------------
On March 15,1997, the Corporation announced it would acquire Security Capital
Corporation ("Security") for approximately 12.3 million shares of its Common
Stock and approximately $376 million in cash in a transaction to be accounted
for as a purchase.
Security is the parent of Security Bank S.S.B. a Wisconsin state-chartered stock
savings bank headquartered in Milwaukee, Wisconsin. As of June 30, 1997,
Security had consolidated assets of approximately $3.7 billion.
Regulatory approvals were obtained in June and Security shareholder approval was
obtained in July. The transaction is anticipated to be completed by October 1,
1997.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
A. The Corporation held its Annual Meeting of Shareholders on April 22,
1997.
B. Votes cast for the election of seven Directors to serve until the 2000
Annual Meeting of Shareholders are as follows:
Director For Against Abstentions Non-Vote
------------------ ----------- ------------- ------------ -----------
Richard A. Abdoo 72,975,414 1,109,257 -- --
Wendell F. Bueche 73,054,489 1,030,181 -- --
G.H. Gunnlaugsson 73,080,500 1,004,170 -- --
Jack F. Kellner 72,612,284 1,472,386 -- --
P.M. Platten III 72,064,183 2,020,488 -- --
J.B. Wigdale 73,056,173 1,028,497 -- --
James O. Wright 72,673,535 1,411,136 -- --
The continuing Directors of the Corporation are as follows:
Jon F. Chait Oscar C. Boldt
D.J. Kuester J.P. Bolduc
Edward L. Meyer, Jr. Glenn A. Francke
Don R. O'Hare Burleigh E. Jacobs
San W. Orr, Jr. James F. Kress
J.A. Puelicher Gus A. Zuehlke
Stuart W. Tisdale
Votes cast to approve the Corporation's 1997 Executive Stock Option and
Restricted Stock Plan are as follows:
For Against Abstentions Non-Vote
----------- ------------- ------------ -----------
54,788,986 1,110,339 2,397,078 5,788,266
Votes cast to approve the Corporation's 1997 Annual Executive Incentive
Compensation Plan are as follows:
For Against Abstentions Non-Vote
----------- ------------- ------------ -----------
63,887,911 7,263,086 2,436,528 497,144
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>
<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
August 14, 1997
<PAGE>
EXHIBIT 11
MARSHALL & ILSLEY CORPORATION
COMPUTATION OF EARNINGS PER SHARE
($000's except per share data)
Three Months Ended June 30,
---------------------------------
PRIMARY 1997 1996
- ------- -------------- --------------
Earnings:
Net income $ 56,622 $ 50,368
============== ==============
Shares:
Weighted average number of common shares
outstanding 88,699 92,373
Additional shares relating to:
Convertible preferred stock 7,677 5,755
Stock options outstanding at end
of each period and exercised
during each period (a) 1,472 1,292
Stock Repurchase Forward Agreement 275 --
-------------- --------------
Total average primary shares outstanding 98,123 99,420
============== ==============
EARNINGS PER SHARE:
Primary $ 0.58 $ 0.51
============== ==============
FULLY DILUTED
- -------------
Earnings:
Net income $ 56,622 $ 50,368
Add: Interest on convertible notes,
net of income tax effect -- 232
-------------- --------------
$ 56,622 $ 50,600
============== ==============
Shares:
Weighted average number of common shares
outstanding 88,699 92,373
Additional shares relating to:
Convertible preferred stock 7,677 5,755
Stock options outstanding at end
of each period and exercised
during each period (b) 1,526 1,341
Assumed conversion of convertible notes -- 1,922
Stock Repurchase Forward Agreement 275 --
-------------- --------------
Total average fully diluted
shares outstanding 98,177 101,391
============== ==============
EARNINGS PER SHARE:
Fully Diluted $ 0.58 $ 0.50
============== ==============
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>
<PAGE>
EXHIBIT 11
MARSHALL & ILSLEY CORPORATION
COMPUTATION OF EARNINGS PER SHARE
($000's except per share data)
Six Months Ended June 30,
----------------------------------
PRIMARY 1997 1996
- ------- -------------- --------------
Earnings:
Net income $ 111,421 $ 96,523
============== ==============
Shares:
Weighted average number of common shares
outstanding 88,768 92,725
Additional shares relating to:
Convertible preferred stock 6,732 4,794
Stock options outstanding at end
of each period and exercised
during each period (a) 1,498 1,288
Stock Repurchase Program 275 --
-------------- --------------
Total average primary shares outstanding 97,273 98,807
============== ==============
EARNINGS PER SHARE:
Primary $ 1.15 $ 0.98
============== ==============
FULLY DILUTED
- -------------
Earnings:
Net income $ 111,421 $ 96,523
Add: Interest on convertible notes,
net of income tax effect 232 697
-------------- --------------
$ 111,653 $ 97,220
============== ==============
Shares:
Weighted average number of common shares
outstanding 88,768 92,725
Additional shares relating to:
Convertible preferred stock 6,732 4,794
Stock options outstanding at end
of each period and exercised
during each period (b) 1,590 1,394
Assumed conversion of convertible notes 945 2,883
Stock Repurchase Program 275 --
-------------- --------------
Total average fully diluted
shares outstanding 98,310 101,796
============== ==============
EARNINGS PER SHARE:
Fully Diluted $ 1.14 $ 0.96
============== ==============
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 12
MARSHALL & ILSLEY CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($000's)
<TABLE>
<CAPTION>
Six
Months
Ended
June Years Ended December 31,
30, -----------------------------------------------------
Earnings: 1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings before income taxes, extraordinary
items and cumulative effect of changes
in accounting principles $ 167,153 $ 313,141 $ 299,879 $ 167,803 $ 264,584 $ 231,792
Fixed charges, excluding interest on deposits 73,600 113,515 108,683 77,074 47,905 50,687
------------------------------------------------------------------
Earnings including fixed charges but
excluding interest on deposits 240,753 426,656 408,562 244,877 312,489 282,479
Interest on deposits 193,039 360,838 331,734 255,861 272,100 334,443
------------------------------------------------------------------
Earnings including fixed charges and
interest on deposits $ 433,792 $ 787,494 $ 740,296 $ 500,738 $ 584,589 $ 616,922
==================================================================
Fixed Charges:
Interest Expense:
Short-term borrowings $ 50,559 $ 62,071 $ 47,740 $ 39,681 $ 18,010 $ 17,606
Long-term borrowings 18,723 42,808 53,709 30,537 23,088 26,439
One-third of rental expense for all operating
leases (the amount deemed representative
of the interest factor) 4,318 8,636 7,234 6,856 6,807 6,642
------------------------------------------------------------------
Fixed charges excluding interest on deposits 73,600 113,515 108,683 77,074 47,905 50,687
Interest on deposits 193,039 360,838 331,734 255,861 272,100 334,443
------------------------------------------------------------------
Fixed charges including interest on deposits $ 266,639 $ 474,353 $ 440,417 $ 332,935 $ 320,005 $ 385,130
==================================================================
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits 3.27 x 3.76 x 3.76 x 3.18 x 6.52 x 5.57 x
Including interest on deposits 1.63 x 1.66 x 1.68 x 1.50 x 1.83 x 1.60 x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 795,103
<INT-BEARING-DEPOSITS> 113,560
<FED-FUNDS-SOLD> 69,631
<TRADING-ASSETS> 41,014
<INVESTMENTS-HELD-FOR-SALE> 2,985,904
<INVESTMENTS-CARRYING> 850,339
<INVESTMENTS-MARKET> 860,213
<LOANS> 9,912,723
<ALLOWANCE> 155,620
<TOTAL-ASSETS> 15,414,664
<DEPOSITS> 11,183,660
<SHORT-TERM> 2,123,358
<LIABILITIES-OTHER> 409,749
<LONG-TERM> 362,752
0
685
<COMMON> 99,494
<OTHER-SE> 1,234,966
<TOTAL-LIABILITIES-AND-EQUITY> 15,414,664
<INTEREST-LOAN> 399,215
<INTEREST-INVEST> 119,916
<INTEREST-OTHER> 6,072
<INTEREST-TOTAL> 525,203
<INTEREST-DEPOSIT> 193,039
<INTEREST-EXPENSE> 262,321
<INTEREST-INCOME-NET> 262,882
<LOAN-LOSSES> 8,617
<SECURITIES-GAINS> 816
<EXPENSE-OTHER> 363,294
<INCOME-PRETAX> 167,153
<INCOME-PRE-EXTRAORDINARY> 111,421
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,421
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.14
<YIELD-ACTUAL> 4.05
<LOANS-NON> 56,723
<LOANS-PAST> 7,461
<LOANS-TROUBLED> 1,636
<LOANS-PROBLEM> 65,820
<ALLOWANCE-OPEN> 155,895
<CHARGE-OFFS> 12,241
<RECOVERIES> 3,349
<ALLOWANCE-CLOSE> 155,620
<ALLOWANCE-DOMESTIC> 155,620
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
