<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, 1998
--------------------------------------------
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, 1998
----- -----------------
Common Stock, $1.00 Par Value 106,134,699
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
($000's except share data)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
Assets 1998 1997 1997
- ------ ---------------------------------------------
<C> <S> <S> <S>
Cash and cash equivalents:
Cash and due from banks $ 726,772 $ 817,491 $ 813,165
Federal funds sold and
security resale agreements 76,812 34,586 76,160
Money market funds 54,459 65,986 67,698
---------------------------------------------
Total cash and cash equivalents 858,043 918,063 957,023
Investment Securities:
Trading securities 46,389 43,644 41,014
Short-term investments, available for sale 53,259 37,018 48,207
Other available for sale at market value 4,573,344 4,208,616 3,160,859
Held to maturity, market value $1,055,306
($1,203,872 December 31, and $1,079,883
June 30, 1997) 1,031,812 1,176,688 1,067,594
---------------------------------------------
Total investment securities 5,704,804 5,465,966 4,317,674
Loans and leases 13,402,285 13,101,912 10,489,517
Less: Allowance for loan and lease losses 216,014 208,651 161,426
---------------------------------------------
Net loans and leases 13,186,271 12,893,261 10,328,091
Premises and equipment, net 356,579 351,423 332,318
Accrued interest and other assets 877,510 873,445 502,411
---------------------------------------------
Total Assets $ 20,983,207 $ 20,502,158 $ 16,437,517
=============================================
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,774,190 $ 2,753,320 $ 2,483,924
Interest bearing 11,833,028 12,267,008 9,364,946
---------------------------------------------
Total deposits 14,607,218 15,020,328 11,848,870
Funds purchased and security
repurchase agreements 1,257,335 1,486,663 1,828,415
Other short-term borrowings 1,656,626 658,597 409,283
Accrued expenses and other liabilities 455,786 516,779 423,745
Long-term borrowings 890,826 797,362 498,112
---------------------------------------------
Total liabilities 18,867,791 18,479,729 15,008,425
Shareholders' equity:
Series A convertible preferred stock,
$1.00 par value; 685,314 shares issued 685 685 685
Common stock, $1.00 par value; 112,757,546
shares issued (113,185,374 December 31,
and 103,374,831 June 30, 1997) 112,757 113,185 103,375
Additional paid-in capital 611,931 620,899 220,454
Retained earnings 1,550,516 1,460,646 1,362,515
Less: Treasury common stock, at cost;
6,816,459 shares (7,765,169 December 31,
and 10,713,325 June 30, 1997) 196,707 215,787 283,686
Deferred compensation 7,496 9,297 3,498
Net unrealized gains on securities
available for sale, net of related taxes 43,730 52,098 29,247
---------------------------------------------
Total shareholders' equity 2,115,416 2,022,429 1,429,092
---------------------------------------------
Total Liabilities and
Shareholders' Equity $ 20,983,207 $ 20,502,158 $ 16,437,517
=============================================
</TABLE>
See notes to financial statements.
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($000's except per share data)
Three Months Ended June 30,
------------------------------
Interest income 1998 1997
- --------------- ------------------------------
Loans $ 272,551 $ 216,347
Investment securities:
Taxable 70,193 55,819
Exempt from Federal income taxes 12,865 10,601
Trading securities 539 504
Short-term investments 2,599 3,131
------------------------------
Total interest income 358,747 286,402
Interest expense
- ----------------
Deposits 142,343 106,285
Short-term borrowings 31,911 27,912
Long-term borrowings 16,480 11,321
------------------------------
Total interest expense 190,734 145,518
------------------------------
Net interest income 168,013 140,884
Provision for loan and lease losses 4,868 4,396
------------------------------
Net interest income after
provision for loan and lease losses 163,145 136,488
Other income
- ------------
Data processing services 99,088 82,281
Trust services 22,043 18,798
Other customer services 37,902 31,131
Net securities gains 8,031 268
Other 17,438 8,317
------------------------------
Total other income 184,502 140,795
Other expense
- -------------
Salaries and employee benefits 129,555 110,435
Net occupancy 10,715 10,214
Equipment 25,195 21,996
Software expenses 4,869 4,685
Payments to regulatory agencies 1,286 792
Processing charges 5,872 6,526
Supplies and printing 4,820 4,325
Professional services 5,718 4,142
Merger /Restructuring 23,373 --
Other 39,599 24,902
------------------------------
Total other expense 251,002 188,017
------------------------------
Income before income taxes 96,645 89,266
Provision for income taxes 34,453 29,862
------------------------------
Net income $ 62,192 $ 59,404
==============================
Net income per common share
- ---------------------------
Basic $ 0.57 $ 0.63
Diluted 0.54 0.58
Dividends paid per common share $ 0.220 $ 0.200
Weighted average common shares outstanding:
Basic 105,790 92,358
Diluted 115,278 102,157
See notes to financial statements.
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($000's except per share data)
Six Months Ended June 30,
------------------------------
Interest income 1998 1997
- --------------- ------------------------------
Loans $ 537,375 $ 423,124
Investment securities:
Taxable 144,270 112,376
Exempt from Federal income taxes 25,171 20,648
Trading securities 1,027 987
Short-term investments 4,991 5,921
------------------------------
Total interest income 712,834 563,056
Interest expense
- ----------------
Deposits 284,038 208,325
Short-term borrowings 62,721 52,899
Long-term borrowings 33,461 23,967
------------------------------
Total interest expense 380,220 285,191
------------------------------
Net interest income 332,614 277,865
Provision for loan and lease losses 9,733 8,807
------------------------------
Net interest income after
provision for loan and lease losses 322,881 269,058
Other income
- ------------
Data processing services 195,926 162,421
Trust services 43,507 37,729
Other customer services 76,098 62,259
Net securities gains 14,694 1,166
Other 33,569 16,811
------------------------------
Total other income 363,794 280,386
Other expense
- -------------
Salaries and employee benefits 255,987 218,345
Net occupancy 21,989 20,712
Equipment 49,936 43,234
Software expenses 10,068 9,257
Payments to regulatory agencies 2,511 1,559
Processing charges 12,253 12,761
Supplies and printing 9,292 8,561
Professional services 10,259 8,335
Merger /Restructuring 23,373 --
Other 76,488 51,335
------------------------------
Total other expense 472,156 374,099
------------------------------
Income before income taxes 214,519 175,345
Provision for income taxes 76,821 58,605
------------------------------
Net income $ 137,698 $ 116,740
==============================
Net income per common share
- ---------------------------
Basic $ 1.27 $ 1.23
Diluted 1.19 1.14
Dividends paid per common share $ 0.420 $ 0.385
Weighted average common shares outstanding:
Basic 105,612 92,422
Diluted 115,238 102,237
See notes to financial statements.
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($000's)
Six Months Ended June 30,
------------------------------
1998 1997
------------------------------
Net Cash Provided by Operating Activities $ 162,593 $ 137,137
Cash Flows From Investing Activities:
- -------------------------------------
Net increase in securities with
maturities of three months or less (16,250) (6,010)
Proceeds from sales of securities
available for sale 80,194 386,844
Proceeds from maturities of longer
term securities 796,949 324,047
Purchases of longer term securities (840,117) (725,993)
Net increase in loans (596,115) (592,383)
Purchases of assets to be leased (136,771) (117,415)
Principal payments on lease receivables 114,415 84,400
Fixed asset purchases, net (33,970) (31,649)
Other 9,882 5,297
------------------------------
Net cash used in
investing activities (621,783) (672,862)
------------------------------
Cash Flows From Financing Activities:
- -------------------------------------
Net increase (decrease) in deposits (413,110) 199,293
Proceeds from issuance of commercial paper 448,497 140,667
Payments for maturity of commercial paper (518,994) (140,506)
Net increase in other short-term
borrowings 997,320 473,970
Proceeds from issuance of long-term debt 30,654 58,442
Payments of long-term debt (97,655) (198,044)
Dividends paid (47,225) (37,442)
Purchases of treasury stock (12,703) (34,869)
Other 12,386 14,221
------------------------------
Net cash provided by financing
activities 399,170 475,732
------------------------------
Net decrease in cash and cash equivalents (60,020) (59,993)
Cash and cash equivalents, beginning of year 918,063 1,017,016
------------------------------
Cash and cash equivalents, end of period $ 858,043 $ 957,023
==============================
Supplemental cash flow information:
- -----------------------------------
Cash paid during the period for:
Interest $ 389,166 $ 272,382
Income taxes 70,572 45,445
See notes to financial statements.
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements
June 30, 1998 & 1997 (Unaudited)
1. The accompanying unaudited consolidated financial statements should be
read in conjunction with Marshall & Ilsley Corporation's ("Corporation")
1997 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
and six months ended June 30, 1998 and 1997. The results of operations
for the three and six months ended June 30, 1998 and 1997 are not
necessarily indicative of results to be expected for the entire year.
Certain amounts in the 1997 consolidated financial statements and
analyses have been reclassified to conform with the 1998 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. A reconciliation of the numerators and denominators of the basic and
diluted per share computations are as follows (dollars and shares in
thousands, except per share data):
Three Months Ended June 30, 1998
-----------------------------------
Per
Income Average Shares Share
(Numerator) (Denominator) Amount
-----------------------------------
Net Income $ 62,192
Convertible Preferred Dividends (1,689)
-----------
Basic Earnings Per Share
Income Available to
Common Shareholders $ 60,503 105,790 $ 0.57
Effect of Dilutive Securities
Convertible Preferred Stock 1,689 7,677
Stock Option and Restricted
Stock Plans -- 1,811
----------- -------------
Diluted Earnings Per Share
Income Available to
Common Shareholders
Plus Assumed Conversions $ 62,192 115,278 $ 0.54
Three Months Ended June 30, 1997
-----------------------------------
Per
Income Average Shares Share
(Numerator) (Denominator) Amount
-----------------------------------
Net Income $ 59,404
Convertible Preferred Dividends (1,535)
-----------
Basic Earnings Per Share
Income Available to
Common Shareholders $ 57,869 92,358 $ 0.63
Effect of Dilutive Securities
Convertible Preferred Stock 1,535 7,677
Stock Options, Restricted Stock
and Performance Plans -- 1,853
Forward Repurchase Contract -- 269
----------- -------------
Diluted Earnings Per Share
Income Available to
Common Shareholders
Plus Assumed Conversions $ 59,404 102,157 $ 0.58
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements - Continued
June 30, 1998 & 1997 (Unaudited)
Six Months Ended June 30, 1998
-----------------------------------
Per
Income Average Shares Share
(Numerator) (Denominator) Amount
-----------------------------------
Net Income $ 137,698
Convertible Preferred Dividends (3,224)
-----------
Basic Earnings Per Share
Income Available to
Common Shareholders $ 134,474 105,612 $ 1.27
Effect of Dilutive Securities
Convertible Preferred Stock 3,224 7,677
Stock Option and Restricted
Stock Plans -- 1,949
----------- -------------
Diluted Earnings Per Share
Income Available to
Common Shareholders
Plus Assumed Conversions $ 137,698 115,238 $ 1.19
Six Months Ended June 30, 1997
-----------------------------------
Per
Income Average Shares Share
(Numerator) (Denominator) Amount
-----------------------------------
Net Income $ 116,740
Convertible Preferred Dividends (2,600)
-----------
Basic Earnings Per Share
Income Available to
Common Shareholders $ 114,140 92,422 $ 1.23
Effect of Dilutive Securities
Convertible Preferred Stock 2,600 6,732
8.5% Convertible Debt 232 945
Stock Options, Restricted Stock
and Performance Plans -- 1,897
Forward Repurchase Contract -- 241
----------- -------------
Diluted Earnings Per Share
Income Available to
Common Shareholders
Plus Assumed Conversions $ 116,972 102,237 $ 1.14
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements - Continued
June 30, 1998 & 1997 (Unaudited)
4. Selected investment securities, by type, held by the Corporation are as
follows ($000's):
June 30, December 31, June 30,
1998 1997 1997
-----------------------------------------
Other investment securities available for sale:
U.S. treasury and
government agencies $ 4,171,767 $ 3,880,813 $ 2,936,743
State and political
subdivisions 223 487 717
Other 401,354 327,316 223,399
-----------------------------------------
Other available for sale $ 4,573,344 $ 4,208,616 $ 3,160,859
=========================================
Investment securities held to maturity:
U.S. treasury and
government agencies $ -- $ 168,665 $ 135,977
State and political
subdivisions 1,027,337 925,644 845,889
Other 4,475 82,379 85,728
-----------------------------------------
Held to maturity $ 1,031,812 $ 1,176,688 $ 1,067,594
=========================================
5. The Corporation's loan and lease portfolio consists of the following
($000's):
June 30, December 31, June 30,
1998 1997 1997
-----------------------------------------
Commercial, financial
& agricultural $ 3,894,203 $ 3,395,227 $ 3,146,754
Real estate:
Construction 398,140 458,671 391,333
Residential Mortgage 3,891,697 4,146,416 2,807,684
Commercial Mortgage 3,518,845 3,450,896 2,628,480
-----------------------------------------
Total real estate 7,808,682 8,055,983 5,827,497
Personal 1,166,381 1,161,608 1,132,019
Lease financing 533,019 489,094 383,247
-----------------------------------------
$ 13,402,285 $ 13,101,912 $ 10,489,517
=========================================
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements - Continued
June 30, 1998 & 1997 (Unaudited)
6. The Corporation's deposit liabilities consists of the following ($000's):
June 30, December 31, June 30,
1998 1997 1997
-----------------------------------------
Noninterest bearing demand $ 2,774,190 $ 2,753,320 $ 2,483,924
Savings and NOW 6,210,006 5,858,845 4,605,916
Other time deposits $100 and over 1,590,680 1,463,643 1,332,910
Other time deposits under $100 4,032,342 4,944,520 3,426,120
-----------------------------------------
$ 14,607,218 $ 15,020,328 $ 11,848,870
=========================================
7. On March 31, 1997, $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. The common stock acquired by conversion
of the notes was exchanged for 168,185 shares of the Corporation's
Series A convertible preferred stock. This is a noncash transaction for
purposes of the Consolidated Statements of Cash Flows.
8. The accompanying unaudited consolidated financial statements have been
restated to give effect to the merger of Advantage Bancorp, Inc.
("Advantage") with and into the Corporation. Certain adjustments have
been made to conform the presentation of Advantage's financial
information with that of the Corporation. In accordance with the terms
of the merger, which was consummated April 1, 1998, each share of
Advantage Common Stock was converted into a right to receive 1.2 shares
of the Corporation's Common Stock (approximately 4.0 million shares) in
a tax-free reorganization which was accounted for as a pooling of
interests.
Net interest income and net income of the previously separate enterprises
for the three months ended March 31, 1998 prior to the consummation of
the merger and a reconciliation of the net interest income and net income
of the Corporation as previously reported for the three months and six
months ended June 30, 1997 to the amounts for those periods in the
accompanying consolidated financial statements as restated for the
pooling of interest are as follows ($000's):
Three Three Six
Months Months Months
Ended Ended Ended
March 31, June 30, June 30,
1998 1997 1997
----------------------------------------
Net interest income:
Corporation $ 156,637 $ 133,240 $ 262,882
Advantage Bancorp 7,964 7,644 14,983
------------ ------------ ------------
Combined $ 164,601 $ 140,884 $ 277,865
============ ============ ============
Net income:
Corporation $ 72,931 $ 56,622 $ 111,421
Advantage Bancorp 2,575 2,782 5,319
------------ ------------ ------------
Combined $ 75,506 $ 59,404 $ 116,740
============ ============ ============
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements - Continued
June 30, 1998 & 1997 (Unaudited)
9. Comprehensive Income
On January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of
comprehensive income and its components in a complete set of financial
statements. Comprehensive income is the total of reported net income and
all other revenues, expenses, gains and losses that under generally
accepted accounting principles are not includable in reported net income
but are reflected in shareholders' equity. The standard permits the
statement of changes in shareholders' equity to be used and requires
companies to report comparative totals for comprehensive income in
interim reports. The following table presents the Corporation's
comprehensive income ($000's):
Three Months Ended
-----------------------------------
June 30, June 30,
1998 1997
-------------- --------------
Net income $ 62,192 $ 59,404
Other comprehensive income
Unrealized gains (losses) on
securities, net of tax:
Arising during the period (2,617) 15,459
Reclassification adjustment for gains
(losses) included in net income (1,896) 2,651
-------------- --------------
(4,513) 18,110
-------------- --------------
Total comprehensive income $ 57,679 $ 77,514
============== ==============
Six Months Ended
-----------------------------------
June 30, June 30,
1998 1997
-------------- --------------
Net income $ 137,698 $ 116,740
Other comprehensive income
Unrealized gains (losses) on
securities, net of tax:
Arising during the period (6,422) 218
Reclassification adjustment for gains
(losses) included in net income (1,946) 681
-------------- --------------
(8,368) 899
-------------- --------------
Total comprehensive income $ 129,330 $ 117,639
============== ==============
Other comprehensive income as shown is net of deferred income tax
benefits (expenses) of $2,760 and $(10,555) for the three months and
$4,834 and $(492) for the six months ended June 30, 1998 and 1997,
respectively.
<PAGE>
MARSHALL & ILSLEY CORPORATION
Notes to Financial Statements - Continued
June 30, 1998 & 1997 (Unaudited)
10. New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivatives fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that
receive hedge accounting treatment.
Statement 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement the Statement as of the beginning of
any quarter after issuance. Statement 133 cannot be applied
retroactively. Statement 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after
December 31, 1997 (and, at the company's election, before January 1,
1998).
To the extent derivative instruments do not qualify for hedge accounting
treatment, the statement could increase volatility in earnings and other
comprehensive income. The Corporation believes their existing derivative
instruments will qualify for hedge accounting and therefore the impacts
of adopting Statement 133 on its financial statements will not be
material. The Corporation has not determined the timing or method of
adoption.
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited)
($000's)
Three Months Ended June 30,
------------------------------
Assets 1998 1997
- ------ ------------------------------
Cash and due from banks $ 648,189 $ 591,598
Trading securities 42,084 40,624
Short-term investments 187,650 217,518
Other investment securities:
Taxable 4,290,355 3,290,603
Tax-exempt 1,082,598 890,783
------------------------------
Total investment securities 5,602,687 4,439,528
Loans and leases:
Commercial 3,711,387 3,076,783
Real estate 7,930,213 5,693,634
Personal 1,151,053 1,134,080
Lease financing 519,311 368,585
------------------------------
13,311,964 10,273,082
Less: Allowance for loan and lease losses 216,846 162,062
------------------------------
Total loans and leases 13,095,118 10,111,020
Premises and equipment, net 356,436 331,765
Accrued interest and other assets 901,984 414,108
------------------------------
Total Assets $ 20,604,414 $ 15,888,019
==============================
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,493,817 $ 2,189,589
Interest bearing 12,141,835 9,268,330
------------------------------
Total deposits 14,635,652 11,457,919
Funds purchased and security repurchase
agreements 1,682,896 1,825,099
Other short-term borrowings 677,764 196,020
Long-term borrowings 1,020,505 643,250
Accrued expenses and other liabilities 484,573 366,458
------------------------------
Total liabilities 18,501,390 14,488,746
Shareholders' equity 2,103,024 1,399,273
------------------------------
Total Liabilities and Shareholders' Equity $ 20,604,414 $ 15,888,019
==============================
<PAGE>
MARSHALL & ILSLEY CORPORATION
CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited)
($000's)
Six Months Ended June 30,
------------------------------
Assets 1998 1997
- ------ ------------------------------
Cash and due from banks $ 653,163 $ 592,938
Trading securities 39,918 40,576
Short-term investments 181,195 211,429
Other investment securities:
Taxable 4,333,687 3,341,197
Tax-exempt 1,057,683 872,076
------------------------------
Total investment securities 5,612,483 4,465,278
Loans and leases:
Commercial 3,556,746 3,021,300
Real estate 7,967,656 5,589,017
Personal 1,148,403 1,150,649
Lease financing 502,104 355,861
------------------------------
13,174,909 10,116,827
Less: Allowance for loan and lease losses 213,896 162,563
------------------------------
Total loans and leases 12,961,013 9,954,264
Premises and equipment, net 354,533 330,430
Accrued interest and other assets 885,910 412,082
------------------------------
Total Assets $ 20,467,102 $ 15,754,992
==============================
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits:
Noninterest bearing $ 2,443,215 $ 2,154,124
Interest bearing 12,103,631 9,215,370
------------------------------
Total deposits 14,546,846 11,369,494
Funds purchased and security repurchase
agreements 1,852,338 1,775,529
Other short-term borrowings 442,534 180,379
Long-term borrowings 1,052,555 684,437
Accrued expenses and other liabilities 491,365 361,073
------------------------------
Total liabilities 18,385,638 14,370,912
Shareholders' equity 2,081,464 1,384,080
------------------------------
Total Liabilities and Shareholders' Equity $ 20,467,102 $ 15,754,992
==============================
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
- -----------------------------------------
Net income for the second quarter of 1998 amounted to $62.2 million compared to
$59.4 million for the same period in the prior year. Basic and diluted earnings
per share were $.57 and $.54 respectively for the three months ended June 30,
1998, compared with $.63 and $.58, respectively for the three months ended June
30, 1997. The return on average assets and average equity were 1.21% and 11.86%
for the quarter ended June 30, 1998 and 1.50% and 17.03% for the quarter ended
June 30, 1997.
The Corporation's results of operations and financial position for 1998 include
the effects of the merger with Security Capital Corporation ("Security") which
was completed on October 1, 1997 and accounted for as a purchase. Security had
approximately $2.2 billion of loans and $2.3 billion of deposits at the time of
merger.
On April 1, 1998, the Corporation completed the merger with Advantage Bancorp,
Inc. ("Advantage") a Kenosha, Wisconsin based savings and loan holding company
by issuing 1.2 shares of the Corporation's Common Stock for each share of
Advantage Common Stock. The transaction was accounted for as a pooling of
interests. In conjunction with this transaction, the Corporation recorded a
merger / restructuring charge of approximately $16.3 million ($23.4 million
before-tax).
Operating income for the second quarter of 1998 was $78.5 million and diluted
earnings per share amounted to $.68 per share excluding the above charge. The
quarterly returns on average equity and assets based on operating income were
14.96% and 1.53%, respectively, for the second quarter.
The table below summarizes the merger / restructuring charge recorded on
April 1, 1998 (amounts in millions):
MERGER / RESTRUCTURING CHARGE
Severance & Benefits $15.4
Investment Advisor & Other Professional Fees 3.1
System Conversion & Contract Cancellation Fees 2.4
Facilities & Equipment 1.9
Other 0.6
------
$23.4
======
Severance and benefits include non-cash accelerated benefit vesting of $10.4
million for stock options, $1.2 million for an employee stock ownership plan
(ESOP) and $0.4 million for a bank incentive stock plan. Executive employment
contract payouts were $1.9 million. Severance and retention payments amounted
to $1.5 million. Accrued employment contract and severance expenses included
costs for 116 employees that were not given permanent employment with the
Corporation subsequent to the merger.
Investment advisor fees were $2.0 million and other legal, accounting and
consulting fees were $1.1 million. All professional fees represent amounts
incurred to consummate the merger.
System conversion costs of $1.5 million represent costs associated with the one
time conversion and standardization of Advantage's records to M&I's data
processing systems. Contract cancellation fees mainly represent fees paid to
service bureaus for early termination of Advantage's long term data processing
contracts.
As part of the merger, duplicative branch, loan production and administrative
facilities will be sold or leases terminated. In addition, certain excess
furniture, computer and other equipment will be disposed of.
<PAGE>
<PAGE>
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.
SUMMARY CONSOLIDATED OPERATING INCOME STATEMENTS AND FINANCIAL STATISTICS
- -------------------------------------------------------------------------
($000's except per share data)
1998 1997
------------------- ------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- ---------- ---------
Interest Income $ 358,747 $ 354,087 $ 363,257 $ 294,020 $ 286,402
Interest Expense (190,734) (189,486) (189,859) (150,736) (145,518)
--------- --------- --------- ---------- ---------
Net Interest Income 168,013 164,601 173,398 143,284 140,884
Provision for Loan Losses (4,868) (4,865) (4,478) (4,348) (4,396)
Net Securities Gains 8,031 6,663 2,765 196 268
Other Income 176,471 172,629 170,641 154,481 140,527
Other Expense (227,629) (221,154) (227,376) (195,736) (188,017)
--------- --------- --------- ---------- ---------
Income Before Taxes 120,018 117,874 114,950 97,877 89,266
Income Tax Provision (41,558) (42,368) (39,785) (33,097) (29,862)
--------- --------- --------- ---------- ---------
Operating Income $ 78,460 $ 75,506 $ 75,165 $ 64,780 $ 59,404
========= ========= ========= ========== =========
Per Common Share
Operating Income Per Share
Basic $ 0.73 $ 0.70 $ 0.70 $ 0.68 $ 0.63
Diluted 0.68 0.66 0.65 0.63 0.58
Dividends 0.220 0.200 0.200 0.200 0.200
Return on Average Equity
Based on Operating Income 14.96% 14.87% 14.96% 17.62% 17.03%
CONSOLIDATED OPERATING INCOME STATEMENT COMPONENTS
- --------------------------------------------------
AS A PERCENT OF AVERAGE TOTAL ASSETS
- ------------------------------------
1998 1997
------------------- ------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- ---------- ---------
Interest Income (FTE) 7.10% 7.19% 7.28% 7.30% 7.36%
Interest Expense (3.71) (3.78) (3.73) (3.67) (3.67)
--------- --------- --------- ---------- ---------
Net Interest Income 3.39 3.41 3.55 3.63 3.69
Provision for Loan Losses (0.09) (0.10) (0.09) (0.11) (0.11)
Net Securities Gains 0.16 0.13 0.05 0.00 0.01
Other Income 3.44 3.44 3.36 3.76 3.55
Other Expense (4.44) (4.40) (4.47) (4.76) (4.75)
--------- --------- --------- ---------- ---------
Income Before Taxes 2.46 2.48 2.40 2.52 2.39
Income Tax Provision (0.93) (0.97) (0.92) (0.94) (0.89)
--------- --------- --------- ---------- ---------
Return on Average Assets
Based on Operating Income 1.53% 1.51% 1.48% 1.58% 1.50%
========= ========= ========= ========== =========
<PAGE>
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)
1998 1997
------------------- ------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- ---------- ---------
Operating Income $ 78,460 $ 75,506 $ 75,165 $ 64,780 $ 59,404
Amortization, net of tax 5,206 5,379 5,292 1,064 1,064
--------- --------- --------- ---------- ---------
Tangible Operating Income $ 83,666 $ 80,885 $ 80,457 $ 65,844 $ 60,468
========= ========= ========= ========== =========
Tangible Operating Income Per Share
Basic $ 0.76 $ 0.75 $ 0.75 $ 0.70 $ 0.64
Diluted 0.73 0.70 0.70 0.64 0.59
Return on Average
Tangible Assets 1.65% 1.64% 1.61% 1.61% 1.53%
Tangible Equity 18.66 18.66 18.96 18.46 17.90
NET INTEREST INCOME
- -------------------
Net interest income for the second quarter of 1998 amounted to $168.0 million,
an increase of $27.1 million or 19.3% from the $140.9 million reported for the
second quarter of 1997. The increase in the volume of average earning assets
contributed approximately $84.4 million while the decrease in yield on earning
assets, primarily loans, decreased interest income by approximately $12.1
million. The increase in the volume of average interest bearing liabilities
contributed approximately $43.5 million and the increase in the cost of interest
bearing liabilities contributed approximately $1.7 million to the increase in
interest expense. The large changes attributable to volume reflect the effect
of the acquisition of Security in the fourth quarter of 1997.
Average earning assets increased $4.2 billion or 28.6% in the second quarter of
1998 compared to the same period a year ago and increased $.3 billion since the
first quarter of 1998. Including securitized adjustable rate mortgage loans
(ARMS), average loans grew approximately $3.5 billion or 32.0% compared to the
second quarter of last year and increased 1.3% since the first quarter of 1998.
Average securities, excluding securitized ARMs, increased $774.5 million for the
three months ended June 30, 1998 compared with the same period in the prior year
and increased $58.4 million since the first quarter of 1998.
<PAGE>
Average interest bearing liabilities increased $3.6 billion or 30.1% in the
second quarter of 1998 compared to the same period in 1997 and increased $144.7
million since the first quarter of 1998. Since the first quarter of 1998,
average interest bearing deposits increased $76.8 million or 0.6% while average
total borrowings increased $67.9 million. Average noninterest bearing deposits
increased $304.2 million or 13.9% from the quarter ended June 30, 1997 to the
quarter ended June 30, 1998 and $101.8 million from the prior quarter in 1998.
The growth and composition of the Corporation's quarterly average loan portfolio
for the current quarter and previous four quarters are reflected in the
following table. Securitized ARM loans which are classified in the consolidated
balance sheets as investment securities available for sale are included to
provide a more meaningful comparison ($ in millions):
Marshall & Ilsley Corporation's quarterly average loan and lease portfolio
<TABLE>
<CAPTION>
Growth Pct.
------------------
1998 1997 Second Qtr.
------------------- ----------------------------- 1998 Vs.
Second First Fourth Third Second First Qtr.
Quarter Quarter Quarter Quarter Quarter Annual 1998
--------- --------- --------- --------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial Loans $ 3,711 $ 3,400 $ 3,305 $ 3,163 $ 3,077 20.6 % 9.1 %
Real Estate Loans
Residential Mortgages 3,979 4,081 4,293 2,863 2,715 46.6 (2.5)
Securitized ARM loans 929 1,025 972 437 513 81.4 (9.4)
--------- --------- --------- --------- ---------------- --------
Residential Mortgages 4,908 5,106 5,265 3,300 3,228 52.1 (3.9)
Construction 409 448 453 397 384 6.5 (8.7)
Commercial Mortgages 3,543 3,476 3,403 2,629 2,595 36.5 1.9
--------- --------- --------- --------- ---------------- --------
Total Real Estate Loans 8,860 9,030 9,121 6,326 6,207 42.8 (1.9)
Personal Loans
Personal Loans 877 862 881 857 853 2.8 1.7
Student Loans 274 284 278 272 281 (2.5) (3.5)
--------- --------- --------- --------- ---------------- --------
Total Personal Loans 1,151 1,146 1,159 1,129 1,134 1.5 0.4
Lease Financing Receivables
Commercial 335 322 321 287 280 19.4 4.0
Personal 184 163 141 114 88 109.2 12.9
--------- --------- --------- --------- ---------------- --------
Lease Financing Receivables 519 485 462 401 368 40.9 7.0
--------- --------- --------- --------- ---------------- --------
Total Consolidated
Average Loans, Leases and ARMs $ 14,241 $ 14,061 $ 14,047 $ 11,019 $ 10,786 32.0 % 1.3 %
========= ========= ========= ========= ================ ========
Total Consolidated
Average Loans and Leases $ 13,312 $ 13,036 $ 13,075 $ 10,582 $ 10,273 29.6 % 2.1 %
========= ========= ========= ========= ================ ========
</TABLE>
As previously discussed, the annual growth is largely attributable to the
Security merger.
At the end of the second quarter of 1998, approximately $142 million of ARM
loans were converted into government guaranteed agency pool securities. Through
the first six months of 1998, approximately $259 million of ARM loans were
securitized compared with approximately $218 million in all of 1997. In
addition, approximately $580 million of securitized ARMs were acquired in the
Security merger.
<PAGE>
Compared with the first quarter of 1998, total consolidated average loans,
leases and securitized ARMs increased $180 million. The growth in commercial and
commercial real estate loans and lease financing receivables of approximately
$412 million was offset by declines in total residential real estate loans and
securitized ARMs and construction loans of $237 million. The increase in
average commercial loans reflects, in part, the purchase of $102 million of such
loans in the last half of April, 1998. The decrease in residential real estate
loans and securitized ARMs reflects the effect of increased prepayments
associated with customer refinancings to fixed rate loans in response to the
recent interest rate environment. Generally, the Corporation sells fixed rate
residential real estate loans in the secondary market. One to four family
residential real estate loans sold to investors amounted to $484 million in the
second quarter of 1998 compared to $106 million in the second quarter of 1997.
For the six months ended June 30, 1998 sales to investors amounted to $1.0
billion compared to $215 million in the first half of 1997.
The growth and composition of the Corporation's quarterly average deposits for
the current and prior year's quarters are as follows ($ in millions):
Marshall & Ilsley Corporation's quarterly average deposits
<TABLE>
<CAPTION>
Growth Pct.
------------------
1998 1997 Second Qtr.
------------------- ----------------------------- 1998 Vs.
Second First Fourth Third Second First Qtr.
Quarter Quarter Quarter Quarter Quarter Annual 1998
--------- --------- --------- --------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Noninterest Bearing
Commercial $ 1,599 $ 1,562 $ 1,696 $ 1,502 $ 1,410 13.4 % 2.4 %
Personal 512 487 475 449 449 14.1 5.1
Other 383 343 412 358 331 15.7 11.7
--------- --------- --------- --------- ---------------- --------
Total Noninterest
Bearing Deposits 2,494 2,392 2,583 2,309 2,190 13.9 4.3
Interest Bearing
Savings & NOW 2,160 2,131 2,149 1,843 1,824 18.4 1.4
Money Market 4,021 3,805 3,676 2,849 2,796 43.8 5.7
Other CDs & Time Deposits 4,397 4,626 4,547 3,430 3,335 31.8 (5.0)
CDs Greater than $100,000 844 834 780 682 680 24.1 1.2
Brokered CDs 720 669 668 676 633 13.7 7.6
--------- --------- --------- --------- ---------------- --------
Total Interest
Bearing Deposits 12,142 12,065 11,820 9,480 9,268 31.0 0.6
--------- --------- --------- --------- ---------------- --------
Total Consolidated
Average Deposits $ 14,636 $ 14,457 $ 14,403 $ 11,789 $ 11,458 27.7 % 1.2 %
========= ========= ========= ========= ================ ========
</TABLE>
Compared with the first quarter of 1998, average deposit growth amounted to $179
million or 1.2%. Money market, noninterest bearing and brokered CDs exhibited
the largest growth and accounted for approximately $369 million of the growth
in average deposits. Offsetting this growth were declines in other CDs and time
deposits of $229 million. This shift in deposit mix reflects, in part, the
maturity of special CD products which were offered at the time of the Security
merger, and had a positive impact on the net interest margin.
The Corporation's consolidated average interest earning assets and interest
bearing liabilities, interest earned and interest paid for the current quarter,
prior quarter and prior year second quarter are presented in the following
table. Securitized ARM loans that are classified in the balance sheet as
investment securities available for sale are included with loans to make the
comparative information more meaningful.
<PAGE>
YIELD & COST ANALYSIS
- ---------------------
($ in millions)
<TABLE>
<CAPTION>
Three Months Ended June 30, Three Months Ended Mar. 31, Three Months Ended June 30,
--------------------------- --------------------------- ---------------------------
1998 1998 1997
--------------------------- --------------------------- ---------------------------
Average Average Average
Average Yield or Average Yield or Average Yield or
Balance Interest Cost (b) Balance Interest Cost (b) Balance Interest Cost (b)
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans and Leases (a) $ 14,241.4 $ 290.6 8.19% $ 14,061.2 $ 284.7 8.23% $ 10,785.5 $ 226.2 8.42%
Investment Securities:
Taxable 3,376.1 52.7 6.32 3,352.6 54.7 6.70 2,778.2 46.4 6.69
Tax Exempt (a) 1,067.5 18.7 7.17 1,032.5 17.9 7.19 890.8 15.5 7.07
Other Short-term
Investments (a) 229.7 3.1 5.48 212.4 2.9 5.50 258.1 3.6 5.65
--------------------------- --------------------------- ---------------------------
Total Interest
Earning Assets $ 18,914.7 $ 365.1 7.77% $ 18,658.7 $ 360.2 7.86% $ 14,712.6 $ 291.7 7.96%
=========================== =========================== ===========================
Money Market Savings $ 4,021.0 $ 45.6 4.55% $ 3,804.8 $ 42.4 4.52% $ 2,795.5 $ 29.9 4.29%
Regular Savings
& NOW 2,160.2 11.6 2.16 2,131.1 11.4 2.18 1,824.3 9.6 2.11
Other CDs & Time
Deposits 4,397.2 62.3 5.68 4,626.2 65.8 5.77 3,335.8 47.4 5.70
CDs Greater than
$100 & Brokered CDs 1,563.4 22.8 5.85 1,502.9 22.1 5.96 1,312.7 19.4 5.93
--------------------------- --------------------------- ---------------------------
Total Interest
Bearing Deposits 12,141.8 142.3 4.70 12,065.0 141.7 4.76 9,268.3 106.3 4.60
Short-term
Borrowings 2,360.7 31.9 5.42 2,262.9 30.8 5.52 2,021.1 27.9 5.54
Long-term
Borrowings 1,020.5 16.5 6.48 1,050.4 17.0 6.56 643.3 11.3 7.06
--------------------------- --------------------------- ---------------------------
Total Interest
Bearing Liabilities $ 15,523.0 $ 190.7 4.93% $ 15,378.3 $ 189.5 5.00% $ 11,932.7 $ 145.5 4.89%
=========================== =========================== ===========================
Net Interest Margin
(FTE) as a Percent
of Average Earning
Assets $ 174.4 3.71% $ 170.7 3.73% $ 146.2 3.99%
================ ================ ================
</TABLE>
(a) Fully taxable equivalent basis (FTE), assuming a Federal income tax rate
of 35%, and excluding disallowed interest expense.
(b) Based on average balances excluding fair value adjustments for available
for sale securities.
<PAGE>
The net interest margin as a percent of average earning assets declined 28 basis
points since the second quarter of 1997 and decreased 2 basis points from 3.73%
in the first quarter of 1998 to 3.71% in the current quarter. The yield on
average earning assets decreased 9 basis points since the first quarter of 1998.
The yield on loans and securitized ARMs, the largest earning asset, declined 4
basis points which had a negative impact on net interest income of approximately
$1.4 million compared with the first quarter of 1998. This decline in yield
reflects, in part, continued accelerated run-off of higher yielding loans and
securitized ARMs due to prepayments and refinancings in response to the interest
rate environment. As a result, the Corporation increased the amortization
associated with the purchase accounting premium assigned to loans and investment
securities acquired in the Security merger. Net interest income may continue
to be adversely affected if the current prepayment experience continues. The
cost of interest bearing deposits decreased 6 basis points which reflects the
shift in deposit mix previously discussed along with the reduction of interest
paid on selected deposit account types. Short-term and long-term borrowing
costs decreased 10 and 8 basis points, respectively, compared with the first
quarter of 1998.
At June 30, 1998, the Corporation had standard receive fixed/pay floating
interest rate swaps and interest rate caps and floors designated as hedges to
manage the interest rate volatility associated with variable rate loans and
variable rate debt. In addition, the Corporation had callable receive fixed /
pay floating interest rate swaps designated as hedges to offset callable CDs.
The Corporation's position with respect to interest rate swaps and interest rate
caps and floors at June 30, 1998 consisted of the following ($ in millions):
Interest Rate Swaps
-------------------
Notional Value $600
Weighted average receive rate 6.21%
Weighted average pay rate 5.69%
Weighted average remaining term (in years) 2.20
Estimated fair value $4.77
Callable Interest Rate Swaps
----------------------------
Notional Value $295
Weighted average receive rate 6.40%
Weighted average pay rate 5.51%
Weighted average remaining term (in years) 7.46
Estimated fair value $0.46
Interest Rate Floors
--------------------
Notional Value $50
Strike Rate 5.63%
Index 5.70%
Weighted average remaining term (in years) 2.38
Estimated fair value $0.15
Unamortized premium $0.28
For the three months ended June 30, 1998, the effect on net interest income
resulting from the swaps, net of cap and floor premium amortization, was a
positive $1.2 million compared with a positive $.6 million in the same period
in 1997.
<PAGE>
PROVISION FOR LOAN AND LEASE LOSSES AND CREDIT QUALITY
- ------------------------------------------------------
At June 30, 1998, nonperforming assets were $98.4 million compared to $91.3
million at March 31, 1998 and $76.0 million at June 30, 1997. Nonaccrual loans
and leases, the largest component of nonperforming assets, increased $8.2
million since the first quarter and increased $20.9 million since June 30, 1997.
Other real estate owned decreased $0.7 million and loans and leases past due 90
days or more decreased $0.3 million since the first quarter of 1998. Compared
to June 30, 1997, renegotiated loans and loans and leases past due 90 days or
more decreased $0.4 million and $0.7 million, respectively. Other real estate
owned increased $2.6 million since June 30, 1997, which is primarily due to
branch closures associated with the Security merger which occurred in the fourth
quarter of 1997.
Net charge-offs in the second quarter of 1998 amounted to $4.3 million or .04%
of average loans and leases compared to net recoveries of $2.0 million or (.06)%
of average loans and leases in the first quarter of 1998 and net charge-offs of
$3.4 million or .13% of average loans and leases in the second quarter of 1997.
The Corporation's lead bank had one large commercial loan that accounted for
$2.1 million of the charge-offs in the second quarter of 1998.
The allowance for loan and lease losses amounted to $216.0 million or 1.61% of
total loans at June 30, 1998 compared to $215.5 million or 1.63% at March 31,
1998 and $161.4 million or 1.54% at June 30, 1997. The coverage ratio of the
allowance for loan and lease losses to nonperforming loans and leases was 247%
at June 30, 1998 compared with 270% at March 31, 1998 and 238% at June 30, 1997.
The provision for loan and lease losses amounted to $4.9 million in the second
quarter of 1998 compared to $4.4 million in the second quarter of 1997. The
increase is primarily due to loan growth.
CONSOLIDATED CREDIT QUALITY INFORMATION
- ---------------------------------------
($000's)
NONPERFORMING ASSETS
- --------------------
<TABLE>
<CAPTION>
1998 1997
------------------- -----------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Nonaccrual $ 79,594 $ 71,399 $ 66,945 $ 64,846 $ 58,703
Renegotiated 1,192 1,241 1,338 1,242 1,636
Past Due 90 Days or More 6,809 7,117 8,238 7,721 7,461
--------- --------- --------- --------- ---------
Total Nonperforming Loans and Leases 87,595 79,757 76,521 73,809 67,800
Other Real Estate Owned 10,807 11,504 15,573 5,430 8,180
--------- --------- --------- --------- ---------
Total Nonperforming Assets $ 98,402 $ 91,261 $ 92,094 $ 79,239 $ 75,980
========= ========= ========= ========= =========
ALLOWANCE FOR LOAN
AND LEASE LOSSES $ 216,014 $ 215,481 $ 208,651 $ 163,690 $ 161,426
========= ========= ========= ========= =========
CONSOLIDATED STATISTICS
- -----------------------
Net Charge-offs (Recoveries)
to Average Loans and Leases
Annualized 0.04 % (0.06)% 0.07 % 0.08 % 0.13 %
Total Nonperforming Loans and Leases
to Total Loans and Leases 0.65 0.61 0.58 0.68 0.65
Total Nonperforming Assets
to Total Loans and Other
Real Estate Owned 0.73 0.69 0.70 0.73 0.72
Allowance for Loan and Lease Losses
to Total Loans and Leases 1.61 1.63 1.59 1.51 1.54
Allowance for Loan and Lease Losses
to Nonperforming Loans and Leases 247 270 273 222 238
</TABLE>
<PAGE>
NONACCRUAL LOANS AND LEASES BY TYPE
- -----------------------------------
<TABLE>
<CAPTION>
1998 1997
------------------- -----------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Commercial
Commercial, Financial &
Agricultural $ 19,322 $ 16,659 $ 12,431 $ 17,280 $ 13,486
Lease Financing
Receivables 2,171 2,648 3,855 2,073 1,430
--------- --------- --------- --------- ---------
Total Commercial 21,493 19,307 16,286 19,353 14,916
Real Estate
Construction and Land
Development 2,032 2,152 1,329 856 1,311
Commercial Mortgage 21,967 17,472 14,696 20,277 18,671
Residential Mortgage 31,424 29,327 31,117 20,644 20,579
--------- --------- --------- --------- ---------
Total Real Estate 55,423 48,951 47,142 41,777 40,561
Personal 2,678 3,141 3,517 3,716 3,226
--------- --------- --------- --------- ---------
Total Nonaccrual Loans and Leases $ 79,594 $ 71,399 $ 66,945 $ 64,846 $ 58,703
========= ========= ========= ========= =========
</TABLE>
RECONCILIATION OF CONSOLIDATED ALLOWANCE FOR LOAN AND LEASE LOSSES ($000's)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------------- -----------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Beginning Balance $ 215,481 $ 208,651 $ 163,690 $ 161,426 $ 160,410
Provision for Loan and Lease Losses 4,868 4,865 4,478 4,348 4,396
Allowance of Bank Acquired -- -- 42,773 -- --
Loans and Leases Charged-off
Commercial 3,065 1,153 1,273 1,123 2,773
Real Estate 1,022 906 925 1,109 468
Personal 1,733 2,426 2,058 1,962 1,779
Leases 194 165 416 208 462
--------- --------- --------- --------- ---------
Total Charge-offs 6,014 4,650 4,672 4,402 5,482
Recoveries on Loans and Leases
Commercial 322 5,704 1,387 1,338 1,089
Real Estate 384 146 326 249 314
Personal 696 760 635 597 617
Leases 277 5 34 134 82
--------- --------- --------- --------- ---------
Total Recoveries 1,679 6,615 2,382 2,318 2,102
--------- --------- --------- --------- ---------
Net Loans and Leases
Charge-offs (Recoveries) 4,335 (1,965) 2,290 2,084 3,380
--------- --------- --------- --------- ---------
Ending Balance $ 216,014 $ 215,481 $ 208,651 $ 163,690 $ 161,426
========= ========= ========= ========= =========
</TABLE>
<PAGE>
OTHER INCOME
- ------------
Total other income in the second quarter of 1998 amounted to $184.5 million, an
increase of $43.7 million or 31.0%, compared to $140.8 million in the same
period last year.
Data processing revenue increased $16.8 million or 20.4% from $82.3 million in
the second quarter of 1997 to $99.1 million in the current quarter. Processing
revenue increased $7.4 million or 12.4%. Software revenue increased $5.9
million or 48.9%. Conversion fees increased $3.7 million. All other revenue
including buyout fees, which can vary from period to period, were relatively
unchanged. Compared to the first quarter of 1998, revenue from data processing
services increased $2.3 million or 2.3%.
Trust services revenue amounted to $22.0 million in the second quarter of 1998,
an increase of $3.2 million or 17.3% compared to $18.8 million in the second
quarter of 1997. All components of trust services revenue experienced an
increase led by personal trust fees and corporate trust fees which each
increased $1.2 million over the prior year.
Other customer services revenue amounted to $37.9 million in the second quarter
of 1998 compared with $38.2 million in the first quarter of 1998 and $31.1
million in the second quarter of 1997. Other customer services revenue in the
first and second quarters of 1998 include the effects of the Security merger.
The decrease in revenue in the current quarter compared to the prior quarter is
primarily due to a decrease in corporate finance fees attributable to the
Corporation's Capital Markets Group.
Net securities gains in the second quarter of 1998 amounted to $8.0 million
compared with $.3 million in the second quarter of 1997. Venture capital gains
realized by the Corporation's Capital Markets Group amounted to $6.1 million of
the net gains in the current quarter.
All other income amounted to $17.4 million in the second quarter of 1998
compared to $8.3 million in the second quarter of 1997. Gains from the sale of
residential mortgage loans, which includes the servicing rights, increased $5.7
million. Gain on fixed asset dispositions increased $1.7 million over 1997
primarily due to the sale of two branch facilities, unrelated to recent mergers.
Revenue from bank-owned life insurance acquired in the Security merger amounted
to $.8 million for the three months ended June 30, 1998.
OTHER EXPENSE
- -------------
Total other expenses, excluding merger/restructuring expense, in the second
quarter of 1998 amounted to $227.6 million compared with $221.2 million in the
first quarter of 1998 and $188.0 million in the second quarter of 1997.
Expenses of the Corporation's banking business in the second quarter of 1998
include the effects of the Security merger. The Corporation added approximately
400 full-time equivalent employees as a direct result of the merger.
The Corporation's nonbanking businesses, especially its Data Services segment
("Data Services"), continue to be the primary contributors to operating expense
growth. Data Services expense growth represents over half of the consolidated
operating expense growth and reflects the cost of adding processing capacity
and other related costs associated with increased revenue growth and maintenance
activities for Year 2000.
<PAGE>
Expense Control is sometimes measured in the financial services industry by the
efficiency ratio statistic. The efficiency ratio is calculated by taking total
other expense (excluding nonrecurring charges) divided by the sum of total other
income (excluding securities gains or losses) and net interest income on a fully
taxable equivalent basis. The Corporation's efficiency ratios for the three
months ended June 30, 1998 and March 31, 1998 and the year ended December 31,
1997 are:
<TABLE>
<CAPTION>
Three Months Three Months Year
Ended Ended Ended
Efficiency Ratios June 30, 1998 March 31, 1998 December 31, 1997
- ------------------------------------------ ------------- -------------- -----------------
<S> <C> <C> <C>
Consolidated Corporation 64.9 % 64.5 % 65.7 %
Consolidated Corporation
Excluding Data Services 54.4 % 55.1 % 57.1 %
</TABLE>
Salaries and employee benefits expense amounted to $129.6 million in the second
quarter of 1998 compared to $110.4 million in the second quarter of 1997, an
increase of $19.2 million or 17.3%. Salaries and employee benefits expense of
Data Services increased $10.9 million or 20.6% in the current quarter compared
to the same period last year. At June 30, 1998 Data Services had on average
approximately 628 more full time equivalent employees when compared to June 30,
1997 which reflects, in part, additional processing and service centers. In
addition, expense associated with contract programmers and other temporary help
primarily used in the Year 2000 project increased $1.4 million over the
comparative period.
Data Services expense growth accounted for approximately $2.9 million or 73.4%
of the increase in net occupancy, equipment and software expenses in the second
quarter of 1998 compared to the second quarter of 1997.
The increase in payments to regulatory agencies in the second quarter of 1998
compared to the like period in the prior year reflects the additional deposits
acquired in the Security merger.
The increase in professional services expense in the second quarter of 1998
compared to 1997 of $1.6 million or 38.0% is attributable to fees associated
with job placement, securitizations and other consultants. Data Services
accounted for approximately $.9 million of the increase in professional services
expense.
Other expense amounted to $39.6 million in the second quarter of 1998, an
increase of $14.7 million or 59.0% compared to the second quarter of 1997.
Other expenses associated with Data Services accounted for approximately $5.1
million of the increase including the effect of the capitalization of costs, net
of amortization, associated with software development and data processing
conversions. Amortization expense for goodwill, core deposit premiums and
mortgage servicing rights, primarily attributable to the Security merger,
increased $7.5 million. Advertising, promotion and development and customer
related expense of the Corporation and its affiliates excluding Data Services
increased $2.5 million.
INCOME TAXES
- ------------
The provision for income taxes for the three months ended June 30, 1998 amounted
to $34.5 million or 35.6% of pre-tax income compared to $29.9 million or 33.5%
of pre-tax income for the three months ended June 30, 1997. The change in the
effective tax is primarily due to the increase in nondeductible
merger/restructuring expense and goodwill amortization expense in the current
quarter compared to the prior year quarter.
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
- ---------------------------------------
Net income for the first half of 1998 amounted to $137.7 million compared to
$116.7 million in the first half of 1997. Basic and diluted earnings per share
were $1.27 and $1.19, respectively for the six months ended June 30, 1998
compared to $1.23 and $1.14, respectively for the same period last year. The
year to date return on average equity was 13.34% in the current period and
17.01% for the six months ended June 30, 1997.
The Corporation's results of operations for the six months ended June 30, 1998
also include the impact of the Security and Advantage mergers as previously
discussed.
Operating income for the first half of 1998 was $154.0 million and basic and
diluted earnings per share amounted to $1.43 and $1.34 per share, respectively,
excluding the merger / restructuring charge for the Advantage merger. The
return on average equity based on operating income was 14.92% for the six months
ended June 30, 1998.
The following table presents a summary of each of the major elements of the
consolidated income statement for the first six months of 1998 and 1997,
excluding the merger / restructuring charges, stated as a percent of average
consolidated assets - converted to a fully taxable equivalent basis (FTE) where
appropriate.
Six Months
Ended
June 30,
----------------------- ROA
1998 1997 Impact
--------- --------- -----------
Interest Income 7.15 % 7.34 % (0.19)%
Interest Expense (3.75) (3.65) (0.10)
--------- --------- ---------
Net Interest Income 3.40 3.69 (0.29)
Provision for Loan Losses (0.10) (0.11) 0.01
Net Securities Gains 0.14 0.01 0.13
Other Income 3.44 3.57 (0.13)
Other Expense (4.41) (4.79) 0.38
--------- --------- ---------
Income Before Taxes 2.47 2.37 0.10
Income Taxes (0.95) (0.88) (0.07)
--------- --------- ---------
Return on Average Assets 1.52 % 1.49 % 0.03 %
========= ========= =========
The increase in operating income is largely due to growth in noninterest revenue
of $83.4 million, including $33.5 million in data processing services, $13.8
million in other customer services and $13.5 million in net securities gains.
The net securities gains were primarily attributable to the Capital Markets
Group. Net interest income increased $54.7 million. Growth in other expense,
which is driven primarily by Data Services, was $74.7 million excluding the
merger / restructuring charge.
<PAGE>
CAPITAL RESOURCES
- -----------------
Shareholders' equity was $2.12 billion at June 30, 1998 compared to $2.0 billion
at December 31, 1997 and $1.43 billion at June 30, 1997.
The Company has net unrealized gains on securities available for sale at June
30, 1998 of $43.7 million, a decrease of $8.4 million compared to December 31,
1997.
The decrease in deferred compensation of $1.8 million from $9.3 million at
December 31, 1997 to $7.5 million at June 30, 1998 reflects in part, the
accelerated vesting of the Advantage bank incentive plan ($.4 million) and
termination of Advantage's ESOP ($1.2 million) which were charged to merger/
restructuring as previously discussed.
During the second quarter of 1998, 147,500 shares of common stock were acquired
with an aggregate cost of $7.9 million to provide the initial funding for the
new Directors Deferred Compensation Plan approved at the April 28, 1998 annual
meeting of shareholders.
The Corporation continues to have a strong capital base and its regulatory
capital ratios are significantly above the minimum requirements as shown in the
following tables.
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS ($in millions)
- --------------------------------------------------------------------------------------------------------------
June 30, 1998 December 31, 1997
-------------------------------------- --------------------------------------
Amount Ratio Amount Ratio
-------------------- -------------- -------------------- --------------
<S> <C> <C> <C> <C>
Tier 1 Capital $ 1,936.9 12.76% $ 1,821.7 12.34%
Tier 1 Capital
Minimum Requirement 607.2 4.00 590.5 4.00
---------- --------- ---------- ---------
Excess $ 1,329.7 8.76% $ 1,231.2 8.34%
========== ========= ========== =========
Total Capital $ 2,227.0 14.67% $ 2,106.5 14.27%
Total Capital
Minimum Requirement 1,214.4 8.00 1,180.9 8.00
---------- --------- ---------- ---------
Excess $ 1,012.6 6.67% $ 925.6 6.27%
========== ========= ========== =========
Risk-Adjusted Assets $ 15,179.6 $ 14,761.7
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LEVERAGE RATIOS ($in millions)
- --------------------------------------------------------------------------------------------------------------
June 30, 1998 December 31, 1997
-------------------------------------- --------------------------------------
Amount Ratio Amount Ratio
-------------------- -------------- -------------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 Capital $ 1,936.9 9.59% $ 1,821.7 9.21%
Minimum Leverage Requirement 605.8 - 1,009.7 3.00 - 5.00 593.5 - 989.2 3.00 - 5.00
-------------------- -------------- -------------------- --------------
Excess $ 1,331.1 - 927.2 6.59 - 4.59% $ 1,228.2 - 832.5 6.21 - 4.21%
==================== ============== ==================== =============
Adjusted Average
Total Assets $ 20,194.9 $ 19,784.3
========== ==========
</TABLE>
<PAGE>
Year 2000
- ---------
Year 2000 is the term used to describe the fact that many existing computer
programs use only two digits to identify a year in a date field. These programs
were designed and developed without considering the impact of the upcoming
change in the century. If not corrected, many computer applications could fail
or create erroneous results by or at the year 2000. The Year 2000 issue affects
virtually all companies and organizations.
Data Services began developing its plan to address Year 2000 in 1996. Data
Services employs approximately 150 full-time equivalent employees who are
dedicated to the Year 2000 project and maintains a dedicated code renovation
center and testing facility. Code modifications and testing have been completed
for licensed software and upgrades have been distributed to customers. Service
bureau code modifications were completed in December 1997 with testing and
system verification scheduled to take place throughout 1998. It is estimated
that the net cost to change existing computer programs for both internal and
external software will be approximately $34 million, an increase of $4 million
from the estimate in 1997. During 1997, Data Services incurred approximately $10
million in expense related to this issue compared to $3 million in 1996. It is
estimated that 1998 net expense will be approximately $15 million. Year 2000
related net expense for the six months ended June 30, 1998 amounted to
approximately $7.1 million. The majority of Data Services' contracts do not
provide for additional reimbursement over and above the previously contracted
maintenance amounts. Future data processing revenue is critically dependent
upon the successful implementation of the necessary changes.
The Corporation and its other affiliates began addressing Year 2000 in 1997.
The overall process is being coordinated through M&I Support Services which has
a dedicated function addressing the issue that includes providing an overall
plan, communicating and documenting the process and reporting of progress
including periodic reporting to the banking affiliates primary regulator(s).
In addition, a coordinator has been appointed from each affiliate bank and
division of the Corporation. The inventory of hardware, software, electronic
equipment and building systems has been completed. The risk assessment phase
of analyzing vendor readiness, compiling critical software lists, and testing
hardware is substantially complete. The plan for renovation of systems is in
process. This phase includes developing an action plan for each inventory item,
developing hardware and software upgrades and/or replacement schedules and
implementation. The remaining phases include testing of implementation,
certification of hardware, software, office machines and building systems and
contingency planning. The Corporation anticipates the process to be completed
late in 1998 in order to allow for adequate testing and contingency planning.
Replacement equipment and software will be capitalized or expensed in accordance
with the Corporation's normal accounting policies. The effect of writing off the
net book value of equipment or software that is not Year 2000 compliant is not
considered material.
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
For a detailed discussion of market risk, see Item 7A. Quantitative and
Qualitative Disclosures about Market Risk in the Corporation's Annual Report on
Form 10K for the year ended December 31, 1997. For additional information on
the Corporation's derivative financial instruments, see Management's Discussion
and Analysis of Financial Position and Results of Operations.
Interest Rate Risk
- ------------------
The Corporation's consolidated static gap position as of June 30, 1998 has
not materially changed since December 31, 1997.
Along with the static gap analysis, determining the sensitivity of future
earnings to a hypothetical +/- 100 basis point parallel rate shock is
accomplished through the use of simulation modeling. The following table
illustrates these amounts as of June 30 and March 31, 1998, and December 31,
1997, which are within the limits established by the Corporation:
<TABLE>
<CAPTION>
Impact to Pretax Net Income
Hypothetical Change -------------------------------------------------
in Interest Rates June 30, 1998 March 31, 1998 December 31, 1997
- ------------------- ------------- -------------- -----------------
<S> <C> <C> <C>
100 basis point Shock Up (7.4%) (7.2%) (7.1%)
100 basis point Shock Down 5.9% 6.0% 6.1%
</TABLE>
These results are based solely on the repricing characteristics of the
balance sheet, adjusted for expected prepayments, due to immediate and sustained
parallel changes in market rates and do not reflect the earnings sensitivity
that may arise from other factors such as changes in the shape of the yield
curve, the change in spread between key market rates, or accounting recognition
for impairment of certain intangibles. The above results are also considered
to be conservative estimates due to the fact that no management action to
mitigate potential income variances are included within the simulation process.
This action would include, but would not be limited to, adjustments to the
repricing characteristics of any on or off balance sheet item with regard to
short-term rate projections and current market value assessments.
Another component of interest rate risk, fair value at risk, is
determined by the Corporation through the technique of simulating the fair value
of equity in changing rate environments. This technique involves determining
the present value of all contractual asset and liability cash flows (adjusted
for prepayments) based on a predetermined discount rate. The net result of all
these balance sheet items determine the fair value of equity. The fair value
of equity resulting from the current flat rate scenario is compared to the fair
value of equity calculated using discount rates +/- 100 basis points from flat
rates to determine the fair value of equity at risk. The fair value of equity
at risk is less than 1.0% of the market value of the Corporation as of June 30,
1998.
<PAGE>
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds
- --------------------------------------------------
C. During the period covered by this report, 63,500 shares of the
Registrant's Common Stock were issued pursuant to employee stock options
which had been gifted to family members of the original option holder.
The option exercise prices were $57.00 and $57.625 per share. The
issuance of the securities was exempt from the registration provisions of
the Securities Act of 1933, as amended, as a transaction not involving a
public offering.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
A. The Corporation held its Annual Meeting of Shareholders on April 28,
1998.
Votes cast for the election of seven directors to serve until the 2001
Annual Meeting of Shareholders are as follows:
Director For Against Abstentions Non-Vote
-------------------- ---------- --------- ----------- --------
Jon F. Chait 83,135,465 1,335,279 -- --
D.J. Kuester 83,096,934 1,373,810 -- --
Edward L. Meyer, Jr. 83,165,678 1,305,066 -- --
Don R. O'Hare 82,811,374 1,659,370 -- --
San W. Orr, Jr. 83,131,800 1,338,944 -- --
J.A. Puelicher 82,737,717 1,733,027 -- --
Stuart W. Tisdale 83,049,522 1,421,222 -- --
Votes cast to approve the amendments to the 1994 Long-Term Incentive Plan
for Executives are as follows:
For Against Abstentions Non-Vote
---------- ---------- ----------- --------
68,537,460 12,998,578 2,933,502 1,204
Votes cast to approve the Directors Deferred Compensation Plan are as
follows:
For Against Abstentions Non-Vote
---------- ---------- ----------- --------
75,269,084 6,129,507 3,070,949 1,204
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
August 14, 1998
<PAGE>
EXHIBIT 11
<PAGE>
EXHIBIT 11
MARSHALL & ILSLEY CORPORATION
COMPUTATION OF EARNINGS PER SHARE
($000's except per share data)
Three Months Ended June 30,
-------------------------------
BASIC 1998 1997
- ------- ------------- -------------
Earnings:
Net income $ 62,192 $ 59,404
Less: Convertible preferred dividends (1,689) (1,535)
------------- -------------
Income available to common shareholders $ 60,503 $ 57,869
============= =============
Shares:
Weighted average number of common shares
outstanding 105,900 92,535
Less: Unvested restricted stock (110) (177)
------------- -------------
Total average basic shares outstanding 105,790 92,358
============= =============
Basic earnings per share $ 0.57 $ 0.63
============= =============
DILUTED
- -------------
Earnings:
Net income $ 62,192 $ 59,404
Add: Interest on convertible notes,
net of income tax effect -- --
------------- -------------
Income available to common shareholders
plus conversions $ 62,192 $ 59,404
============= =============
Shares:
Weighted average number of common shares
outstanding 105,900 92,535
Additional shares relating to:
Convertible preferred stock 7,677 7,677
8.5% convertible debt -- --
Stock options, restricted stock and
performance plans 1,701 1,676
Forward repurchase contract -- 269
------------- -------------
Total average diluted shares outstanding 115,278 102,157
============= =============
Diluted earnings per share $ 0.54 $ 0.58
============= =============
<PAGE>
EXHIBIT 11
MARSHALL & ILSLEY CORPORATION
COMPUTATION OF EARNINGS PER SHARE
($000's except per share data)
Six Months Ended June 30,
-------------------------------
BASIC 1998 1997
- ------- ------------- -------------
Earnings:
Net income $ 137,698 $ 116,740
Less: Convertible preferred dividends (3,224) (2,600)
------------- -------------
Income available to common shareholders $ 134,474 $ 114,140
============= =============
Shares:
Weighted average number of common shares
outstanding 105,733 92,616
Less: Unvested restricted stock (121) (194)
------------- -------------
Total average basic shares outstanding 105,612 92,422
============= =============
Basic earnings per share $ 1.27 $ 1.23
============= =============
DILUTED
- -------------
Earnings:
Net income $ 137,698 $ 116,740
Add: Interest on convertible notes,
net of income tax effect -- 232
------------- -------------
Income available to common shareholders
plus conversions $ 137,698 $ 116,972
============= =============
Shares:
Weighted average number of common shares
outstanding 105,733 92,616
Additional shares relating to:
Convertible preferred stock 7,677 6,732
8.5% convertible debt -- 945
Stock options, restricted stock and
performance plans 1,828 1,703
Forward repurchase contract -- 241
------------- -------------
Total average diluted shares outstanding 115,238 102,237
============= =============
Diluted earnings per share $ 1.19 $ 1.14
============= =============
<PAGE>
EXHIBIT 12
<PAGE>
EXHIBIT 12
MARSHALL & ILSLEY CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($000's)
<TABLE>
<CAPTION>
Six
Months
Ended Years Ended December 31,
June 30, ----------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings before income taxes, extraordinary
items and cumulative effect of changes
in accounting principles $ 214,519 $ 388,172 $ 317,949 $ 312,938 $ 179,762 $ 276,163
Fixed charges, excluding interest on deposits 101,303 175,609 126,188 119,424 85,768 55,740
---------- ---------- ---------- ---------- ---------- ----------
Earnings including fixed charges but
excluding interest on deposits 315,822 563,781 444,137 432,362 265,530 331,903
Interest on deposits 284,038 460,418 392,504 363,488 274,211 288,397
---------- ---------- ---------- ---------- ---------- ----------
Earnings including fixed charges and
interest on deposits $ 599,860 $ 1,024,199 $ 836,641 $ 795,850 $ 539,741 $ 620,300
========== ========== ========== ========== ========== ==========
Fixed Charges:
Interest Expense:
Short-term borrowings $ 62,721 $ 112,794 $ 62,071 $ 47,740 $ 39,681 $ 18,010
Long-term borrowings 33,461 52,574 55,363 64,363 39,168 30,860
One-third of rental expense for all operating
leases (the amount deemed representative
of the interest factor) 5,121 10,241 8,754 7,321 6,919 6,870
---------- ---------- ---------- ---------- ---------- ----------
Fixed charges excluding interest on deposits 101,303 175,609 126,188 119,424 85,768 55,740
Interest on deposits 284,038 460,418 392,504 363,488 274,211 288,397
---------- ---------- ---------- ---------- ---------- ----------
Fixed charges including interest on deposits $ 385,341 $ 636,027 $ 518,692 $ 482,912 $ 359,979 $ 344,137
========== ========== ========== ========== ========== ==========
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits 3.12 x 3.21 x 3.52 x 3.62 x 3.10 x 5.95 x
Including interest on deposits 1.56 x 1.61 x 1.61 x 1.65 x 1.50 x 1.80 x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 726,772
<INT-BEARING-DEPOSITS> 107,718
<FED-FUNDS-SOLD> 76,812
<TRADING-ASSETS> 46,389
<INVESTMENTS-HELD-FOR-SALE> 4,573,344
<INVESTMENTS-CARRYING> 1,031,812
<INVESTMENTS-MARKET> 1,055,306
<LOANS> 13,402,285
<ALLOWANCE> 216,014
<TOTAL-ASSETS> 20,983,207
<DEPOSITS> 14,607,218
<SHORT-TERM> 2,913,961
<LIABILITIES-OTHER> 455,786
<LONG-TERM> 890,826
0
685
<COMMON> 112,757
<OTHER-SE> 2,001,974
<TOTAL-LIABILITIES-AND-EQUITY> 20,983,207
<INTEREST-LOAN> 537,375
<INTEREST-INVEST> 169,441
<INTEREST-OTHER> 6,018
<INTEREST-TOTAL> 712,834
<INTEREST-DEPOSIT> 284,038
<INTEREST-EXPENSE> 380,220
<INTEREST-INCOME-NET> 332,614
<LOAN-LOSSES> 9,733
<SECURITIES-GAINS> 14,694
<EXPENSE-OTHER> 472,156
<INCOME-PRETAX> 214,519
<INCOME-PRE-EXTRAORDINARY> 137,698
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,698
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.19
<YIELD-ACTUAL> 3.71
<LOANS-NON> 79,594
<LOANS-PAST> 6,809
<LOANS-TROUBLED> 1,192
<LOANS-PROBLEM> 87,595
<ALLOWANCE-OPEN> 208,651
<CHARGE-OFFS> 10,664
<RECOVERIES> 8,294
<ALLOWANCE-CLOSE> 216,014
<ALLOWANCE-DOMESTIC> 216,014
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
