-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J6gYJ4U4SvaS6Yj3aeT9AGYjlx7Lgag7DVPAC64L6+GpnT2DXd/lzKgyramZyWQO aJBNRLhiYXyBlCTf0wVJzg== 0000062741-96-000021.txt : 19961118 0000062741-96-000021.hdr.sgml : 19961118 ACCESSION NUMBER: 0000062741-96-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARSHALL & ILSLEY CORP/WI/ CENTRAL INDEX KEY: 0000062741 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 390968604 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01220 FILM NUMBER: 96663792 BUSINESS ADDRESS: STREET 1: 770 N WATER ST CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4147657801 MAIL ADDRESS: STREET 1: 770 NORTH WATER ST CITY: MILWAUKEE STATE: WI ZIP: 53202 10-Q 1 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1996 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-1220 ------------------------------ MARSHALL & ILSLEY CORPORATION ----------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0968604 --------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 770 North Water Street Milwaukee, Wisconsin 53202 ---------------------- ----- (Address of principal executive offices) (Zip Code) (414) 765 - 7801 ------------------ (Registrant's telephone number, including area code) None ---- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class October 31, 1996 ----- ---------------- Common Stock, $1.00 Par Value 91,042,638 MARSHALL & ILSLEY CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) ($000's except share data) September 30, December 31, September 30, Assets 1996 1995 1995 - ------ ----------------------------------------- Cash and cash equivalents: Cash and due from banks $ 769,509 $ 745,911 $ 619,395 Federal funds sold and security resale agreements 80,149 66,618 25,579 Money market funds 38,128 84,960 100,806 ----------------------------------------- Total cash and cash equivalents 887,786 897,489 745,780 Trading securities 32,958 38,601 14,637 Other short-term investments 33,975 95,635 42,987 Investment securities held to maturity, market value $704,392 ($453,240 December 31, and $535,701 September 30, 1995) 707,603 450,457 529,039 Investment securities available for sale at market value 2,927,618 2,458,600 1,979,665 ----------------------------------------- Total investment securities 3,635,221 2,909,057 2,508,704 Loans 9,309,436 8,868,902 9,143,651 Less: Allowance for loan losses 152,755 161,430 164,287 ------------------------------------------ Net loans 9,156,681 8,707,472 8,979,364 Premises and equipment, net 301,323 306,988 298,366 Accrued interest and other assets 396,393 387,855 368,831 ----------------------------------------- Total Assets $ 14,444,337 $ 13,343,097 $ 12,958,669 ========================================= Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $ 2,349,445 $ 2,363,194 $ 2,056,547 Interest bearing 8,217,943 7,917,583 7,752,240 ----------------------------------------- Total deposits 10,567,388 10,280,777 9,808,787 Funds purchased and security repurchase agreements 1,537,551 517,576 711,000 Other short-term borrowings 511,129 497,446 420,860 Long-term borrowings 232,727 422,550 494,908 Accrued expenses and other liabilities 324,802 367,131 303,843 ----------------------------------------- Total liabilities 13,173,597 12,085,480 11,739,398 Shareholders' equity: Series A convertible preferred stock, $1.00 par value; 517,129 shares issued (348,944 at December 31, and September 30, 1995) 517 349 349 Common stock, $1.00 par value; 99,494,335 shares issued 99,494 99,494 99,494 Additional paid-in capital 200,320 190,287 187,843 Retained earnings 1,165,163 1,075,789 1,039,536 Less: Treasury common stock, at cost; 8,457,461 shares (5,968,631 December 31, and 5,523,307 September 30, 1995) 197,895 128,459 116,918 Deferred compensation 954 1,090 1,258 Net unrealized gains on securities available for sale, net of related taxes 4,095 21,247 10,225 ----------------------------------------- Total shareholders' equity 1,270,740 1,257,617 1,219,271 ----------------------------------------- Total Liabilities and Shareholders' Equity $ 14,444,337 $ 13,343,097 $ 12,958,669 ========================================= See notes to financial statements. MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ($000's except per share data) Three Months Ended September 30, -------------------------------- Interest income 1996 1995 - --------------- -------------------------- Loans $ 191,148 $ 199,234 Investment securities: Taxable 44,815 28,905 Exempt from Federal income taxes 8,366 4,657 Trading securities 308 81 Short-term investments 1,988 2,710 -------------------------- Total interest income 246,625 235,587 Interest expense - ---------------- Deposits 91,383 87,501 Short-term borrowings 19,421 11,318 Long-term borrowings 9,570 13,884 -------------------------- Total interest expense 120,374 112,703 -------------------------- Net interest income 126,251 122,884 Provision for loan losses 3,983 4,070 -------------------------- Net interest income after provision for loan losses 122,268 118,814 Other income - ------------ Data processing services 69,741 55,079 Trust services 17,632 15,973 Other customer services 29,151 27,834 Net securities gains 15 1,291 Other 6,962 8,751 -------------------------- Total other income 123,501 108,928 Other expense - ------------- Salaries and employee benefits 96,541 88,751 Net occupancy 9,505 9,079 Equipment 19,412 16,941 Payments to regulatory agencies 3,434 105 Processing charges 5,046 5,178 Supplies and printing 3,621 3,963 Professional services 3,842 4,986 Other 37,070 21,876 -------------------------- Total other expense 178,471 150,879 -------------------------- Income before income taxes 67,298 76,863 Provision for income taxes 22,260 28,284 -------------------------- Net income $ 45,038 $ 48,579 ========================== Net income per common share - --------------------------- Primary $ 0.46 $ 0.49 Fully Diluted 0.45 0.48 Dividends paid per common share $ 0.185 $ 0.165 Weighted average common shares outstanding: Primary 98,545 99,318 Fully diluted 100,649 103,246 See notes to financial statements. MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ($000's except per share data) Nine Months Ended September 30, ------------------------------- Interest income 1996 1995 - --------------- -------------------------- Loans $ 561,887 $ 580,303 Investment securities: Taxable 124,579 85,241 Exempt from Federal income taxes 21,702 12,858 Trading securities 834 371 Short-term investments 7,079 9,289 -------------------------- Total interest income 716,081 688,062 Interest expense - ---------------- Deposits 266,498 243,043 Short-term borrowings 42,224 38,842 Long-term borrowings 34,538 40,066 -------------------------- Total interest expense 343,260 321,951 -------------------------- Net interest income 372,821 366,111 Provision for loan losses 11,108 12,058 -------------------------- Net interest income after provision for loan losses 361,713 354,053 Other income - ------------ Data processing services 194,099 155,265 Trust services 51,953 47,238 Other customer services 86,797 81,510 Net securities gains 199 1,258 Other 23,776 23,603 -------------------------- Total other income 356,824 308,874 Other expense - ------------- Salaries and employee benefits 281,386 253,563 Net occupancy 29,143 26,805 Equipment 58,521 47,945 Payments to regulatory agencies 4,558 11,147 Processing charges 14,279 14,032 Supplies and printing 12,056 11,357 Professional services 12,297 13,350 Other 89,616 64,852 -------------------------- Total other expense 501,856 443,051 -------------------------- Income before income taxes 216,681 219,876 Provision for income taxes 75,120 78,925 -------------------------- Net income $ 141,561 $ 140,951 ========================== Net income per common share - --------------------------- Primary $ 1.43 $ 1.43 Fully Diluted 1.40 1.38 Dividends paid per common share $ 0.535 $ 0.480 Weighted average common shares outstanding: Primary 98,714 98,710 Fully diluted 101,483 102,906 See notes to financial statements. MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ($000's) Nine Months Ended September 30, ------------------------------- 1996 1995 -------------------------- Net Cash Provided by Operating Activities $ 167,460 $ 152,326 Cash Flows From Investing Activities: - ------------------------------------- Net decrease in securities with maturities of three months or less 64,250 1,270 Proceeds from sales of securities available for sale 217,245 115,292 Proceeds from maturities of longer term securities 653,485 464,425 Purchases of longer term securities (1,539,250) (511,227) Net increase in loans (528,322) (285,541) Purchases of assets to be leased (115,824) (91,968) Principal payments on lease receivables 105,178 104,570 Fixed asset purchases, net (24,123) (27,158) Cash of companies acquired, net (25,741) 15,188 Other 4,649 10,257 -------------------------- Net cash used in investing activities (1,188,453) (204,892) -------------------------- Cash Flows From Financing Activities: - ------------------------------------- Net increase in deposits 286,611 78,270 Proceeds from issuance of commercial paper 478,178 1,062,111 Payments for maturity of commercial paper (498,950) (1,074,965) Net increase (decrease) in other short-term borrowings 1,188,414 (271,721) Proceeds from issuance of long-term debt 36,184 211,766 Payments of long-term debt (350,384) (87,650) Dividends paid (52,012) (46,896) Purchases of treasury stock (85,917) (47,698) Other 9,166 7,238 -------------------------- Net cash provided by (used in) financing activities 1,011,290 (169,545) -------------------------- Net decrease in cash and cash equivalents (9,703) (222,111) Cash and cash equivalents, beginning of year 897,489 967,891 -------------------------- Cash and cash equivalents, end of period $ 887,786 $ 745,780 ========================== Supplemental cash flow information: - ----------------------------------- Cash paid during the period for: Interest $ 345,871 $ 299,608 Income taxes 81,231 81,968 See notes to financial statements. MARSHALL & ILSLEY CORPORATION Notes to Financial Statements September 30, 1996 & 1995 (Unaudited) 1. The accompanying unaudited consolidated financial statements should be read in conjunction with Marshall & Ilsley Corporation's ("Corporation") 1995 Annual Report on Form 10-K. The unaudited financial information included in this report reflects all adjustments (consisting only of normal recurring accruals) which are necessary for a fair statement of the financial position and results of operations as of and for the three months and nine months ended September 30, 1996 and 1995. The results of operations for the three months and nine months ended September 30, 1996 and 1995 are not necessarily indicative of results to be expected for the entire year. 2. The Corporation has 5,000,000 shares of preferred stock authorized, of which, the Board of Directors has designated 2,000,000 shares as Series A convertible, with a $100 value per share for conversion and liquidation purposes. The Corporation has 160,000,000 shares of its $1.00 par value common stock authorized. 3. The Corporation's loan portfolio consists of the following ($000's): September 30, December 31, September 30, 1996 1995 1995 ----------------------------------------- Commercial financial & agricultural $3,026,750 $2,933,278 $2,913,086 Real estate: Construction 304,908 303,345 322,528 Residential Mortgage 2,180,842 2,002,023 2,299,806 Commercial Mortgage 2,349,363 2,189,449 2,176,295 ------------------------------------- Total real estate 4,835,113 4,494,817 4,798,629 Personal 1,139,402 1,163,127 1,165,958 Lease financing 308,171 277,680 265,978 ------------------------------------- $9,309,436 $8,868,902 $9,143,651 ===================================== 4. Investment securities, by type, held by the Corporation are as follows ($000's): September 30, December 31, September 30, 1996 1995 1995 ----------------------------------------- Investment securities held to maturity: U.S. treasury and government agencies $ -- $ -- $ 155,189 State and political subdivisions 703,547 446,113 365,889 Other 4,056 4,344 7,961 ------------------------------------- Investment securities held to maturity 707,603 450,457 529,039 Investment securities available for sale: U.S. treasury and government agencies 2,771,331 2,346,866 1,874,035 State and political subdivisions 893 894 -- Other 155,394 110,840 105,630 ------------------------------------- Investment securities available for sale 2,927,618 2,458,600 1,979,665 ------------------------------------- Total investment securities $3,635,221 $2,909,057 $2,508,704 ===================================== MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued September 30, 1996 & 1995 (Unaudited) 5. As part of its asset/liability management activities, the Corporation may enter into interest rate futures, forwards, swaps, floors and option contracts. These derivative financial instruments are categorized as risk management instruments and are carried at fair value unless the instrument qualifies for hedge accounting treatment. Fair value adjustments on risk management instruments carried at fair value are reflected in other operating income. Gains and losses realized on futures and forward contracts qualifying as hedges are deferred and amortized over the terms of the related assets or liabilities and are included as adjustments to interest income or expense. Settlement on interest rate swaps and option contracts are recognized over the lives of the agreements as adjustments to interest income or interest expense. Interest rate contracts used in connection with the securities portfolio that are designated as available for sale are carried at fair value with gains and losses, net of applicable deferred income taxes, reported in a separate component of shareholders' equity, consistent with the reporting of unrealized gains and losses on such securities. 6. On April 1, 1996, $16,819 of the Corporation's 8.5% convertible subordinated notes were converted by the holder into 1,922,114 shares of the Corporation's common stock. The common stock acquired by conversion of the notes was exchanged for 168,185 shares of the Corporation's Series A convertible preferred stock. These are noncash transactions for purposes of the Consolidated Statements of Cash Flows. 7. On August 7, 1996, the Corporation consummated the acquisition of EastPoint Technology, Inc. ("EastPoint") for cash consideration of approximately $25.5 million. EastPoint, a software development company specializing in client/server technology, is located in Bedford, New Hampshire. The allocation of the purchase price to the various classes of assets was determined on the basis of an opinion expressed by a nationally recognized independent appraisal firm. The value determined for in- process technology, where technology feasibility had not yet been established or was not believed to have an alternative future use, was immediately expensed while the values of completed technology and other assets including the resulting goodwill are being amortized over their estimated useful lives. Acquired in-process technology expensed during the third Quarter of 1996 amounted to $12.1 million ($7.9 million after-tax or $0.08 per share). The results of operations for EastPoint are included from the date of acquisition and are not material to the Corporation. MARSHALL & ILSLEY CORPORATION CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited) ($000's) Three Months Ended September 30, --------------------------------- Assets 1996 1995 - ------ -------------------------- Cash and due from banks $ 569,502 $ 578,331 Short-term investments 155,625 199,908 Trading securities 25,583 7,239 Investment securities: Taxable 2,828,184 1,988,879 Tax-exempt 726,872 395,824 -------------------------- Total investment securities 3,555,056 2,384,703 Loans: Commercial 2,981,023 2,913,385 Real estate 4,678,969 4,898,780 Personal 1,132,014 1,160,447 Lease financing 295,412 262,268 -------------------------- 9,087,418 9,234,880 Less: Allowance for loan losses 164,079 163,593 -------------------------- Total loans 8,923,339 9,071,287 Premises and equipment, net 303,055 297,001 Accrued interest and other assets 388,683 354,603 -------------------------- Total Assets $ 13,920,843 $ 12,893,072 ========================== Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $ 2,109,407 $ 1,981,112 Interest bearing 8,166,388 7,773,722 -------------------------- Total deposits 10,275,795 9,754,834 Funds purchased and security repurchase agreements 1,339,433 698,077 Other short-term borrowings 116,644 105,343 Long-term borrowings 584,581 826,987 Accrued expenses and other liabilities 322,501 300,258 -------------------------- Total liabilities 12,638,954 11,685,499 Shareholders' equity 1,281,889 1,207,573 -------------------------- Total Liabilities and Shareholders' Equity $ 13,920,843 $ 12,893,072 ========================== MARSHALL & ILSLEY CORPORATION CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited) ($000's) Nine Months Ended September 30, ------------------------------- Assets 1996 1995 - ------ -------------------------- Cash and due from banks $ 568,703 $ 574,560 Short-term investments 177,497 215,686 Trading securities 23,086 10,584 Investment securities: Taxable 2,666,444 1,961,170 Tax-exempt 625,677 353,791 -------------------------- Total investment securities 3,292,121 2,314,961 Loans: Commercial 2,941,086 2,813,544 Real estate 4,516,344 4,814,436 Personal 1,137,170 1,161,491 Lease financing 285,067 260,192 -------------------------- 8,879,667 9,049,663 Less: Allowance for loan losses 163,255 159,653 -------------------------- Total loans 8,716,412 8,890,010 Premises and equipment, net 303,571 293,990 Accrued interest and other assets 367,670 346,375 -------------------------- Total Assets $ 13,449,060 $ 12,646,166 ========================== Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $ 2,044,277 $ 1,941,124 Interest bearing 8,027,446 7,558,132 -------------------------- Total deposits 10,071,723 9,499,256 Funds purchased and security repurchase agreements 951,724 805,733 Other short-term borrowings 124,951 97,408 Long-term borrowings 712,742 794,741 Accrued expenses and other liabilities 313,055 291,770 -------------------------- Total liabilities 12,174,195 11,488,908 Shareholders' equity 1,274,865 1,157,258 -------------------------- Total Liabilities and Shareholders' Equity $ 13,449,060 $ 12,646,166 ========================== MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 - ---------------------------------------------- Net income for the third quarter of 1996 amounted to $45.0 million compared to $48.6 million for the same period in the prior year. Primary and fully diluted earnings per share were $.46 and $.45, respectively for the three months ended September 30, 1996, compared with $.49 and $.48 for the same period last year. The return on average assets and return on average equity were 1.29% and 13.98% for the quarter ended September 30, 1996, and 1.49% and 15.96% for the quarter ended September 30, 1995, respectively. During the third quarter of 1996, the Corporation completed the acquisition of EastPoint Technology, Inc. In conjunction with the acquisition, research and development costs relating to acquired in-process technology were written-off. Also during the same quarter, the Corporation accrued the one-time 65.7 basis point assessment associated with the Savings Association Insurance Fund (SAIF) recapitalization which was enacted into law on September 30, 1996. The following table shows the impact of the special charges described above ($ in millions): Earnings Per Share ---------------------- Pre-Tax After-tax Primary Fully Diluted --------- --------- ---------------------- Net Income $67.3 $45.0 $0.46 $0.45 Special Charges: Write-off In-process Technology EastPoint Acquisition 12.1 7.9 0.08 0.08 SAIF Fund Assessment 2.8 1.7 0.01 0.02 --------- --------- --------- ---------- Total Special Charges 14.9 9.6 0.09 0.10 --------- --------- --------- ---------- Income Before Special Charges $82.2 $54.6 $0.55 $0.55 ========= ========= ========= ========== Excluding the special charges, the increase in earnings of $6.0 million is primarily due to noninterest revenue growth and, to a lesser extent, an increase in net interest income. The continued growth in expenses associated with the investment in new products and technology and required software maintenance to handle the year 2000 by the Data Services Division also impacts earnings. Total noninterest expense in the third quarter of 1996 continues to include costs incurred for implementing certain initiatives to make the Corporation's banking business more effective and efficient. The following tables present a summary of each of the major elements of the consolidated income statement, certain financial statistics and a summary of the major income statement elements stated as a percent of average consolidated assets -- converted to a fully taxable equivalent basis (FTE) where appropriate - -- for the current quarter and previous four quarters. Data for the current quarter is before the special charges previously discussed. SUMMARY CONSOLIDATED INCOME STATEMENTS AND FINANCIAL STATISTICS - --------------------------------------------------------------- ($000's except per share data) 1996 1995 ----------------------------- -------------------- Third Second First Fourth Third Quarter Quarter Quarter Quarter Quarter --------- --------- ---------- --------- --------- Interest Income $ 246,625 $ 236,027 $ 233,429 $ 236,598 $ 235,587 Interest Expense (120,374) (112,094) (110,792) (111,232) (112,703) --------- --------- ---------- --------- --------- Net Interest Income 126,251 123,933 122,637 125,366 122,884 Provision for Loan Losses (3,983) (3,548) (3,577) (4,100) (4,070) Net Securities Gains 15 134 50 3,297 1,291 Other Income 123,486 120,476 112,663 112,012 107,637 Other Expense (163,587) (164,195) (159,189) (156,572) (150,879) --------- --------- ---------- --------- --------- Income Before Taxes 82,182 76,800 72,584 80,003 76,863 Income Tax Provision (27,533) (26,432) (26,429) (27,655) (28,284) --------- --------- ---------- --------- --------- Income Before Special Charges $ 54,649 $ 50,368 $ 46,155 $ 52,348 $ 48,579 ========= ========= ========== ========= ========= Per Share Before Special Charges Earnings Per Share Primary $ 0.55 $ 0.51 $ 0.47 $ 0.53 $ 0.49 Fully Diluted 0.55 0.50 0.46 0.51 0.48 Dividends 0.185 0.185 0.165 0.165 0.165 Return on Average Equity Before Special Charges 16.96% 15.87% 14.66% 16.76% 15.96% CONSOLIDATED INCOME STATEMENT COMPONENTS AS A PERCENT OF AVERAGE TOTAL ASSETS - ----------------------------------------------------------------------------- 1996 1995 ------------------------------ -------------------- Third Second First Fourth Third Quarter Quarter Quarter Quarter Quarter --------- --------- ---------- --------- --------- Interest Income (FTE) 7.15% 7.21% 7.26% 7.32% 7.33% Interest Expense (3.44) (3.38) (3.40) (3.40) (3.47) --------- --------- ---------- --------- --------- Net Interest Income 3.71 3.83 3.86 3.92 3.86 Provision for Loan Losses (0.11) (0.11) (0.11) (0.13) (0.13) Net Securities Gains 0.00 0.00 0.00 0.10 0.04 Other Income 3.53 3.63 3.46 3.43 3.31 Other Expense (4.68) (4.93) (4.89) (4.79) (4.65) --------- --------- ---------- --------- --------- Income Before Taxes 2.45 2.42 2.32 2.53 2.43 Income Tax Provision (0.89) (0.90) (0.90) (0.93) (0.94) --------- --------- ---------- --------- --------- Return on Average Assets Before Special Charges 1.56% 1.52% 1.42% 1.60% 1.49% ========= ========= ========== ========= ========= NET INTEREST INCOME - ------------------- Net interest income for the third quarter of 1996 amounted to $126.3 million, an increase of $3.4 million or 2.7% from the $122.9 million reported in the third quarter of 1995. The benefit from the increase in the volume of average earning assets and decrease in the cost of interest bearing liabilities was offset in part by the decrease in yield on earning assets and increase in volume of interest bearing liabilities resulting in the increase in net interest income. Average earning assets increased $997.0 million or 8.4% in the third quarter of 1996 compared to the same period a year ago. Excluding the effect of securitizing adjustable rate mortgage loans (ARMS), average loans grew approximately $278 million or 3.0% compared to the third quarter of last year. The remaining average earning asset growth was in investment securities which reflects the Corporation's intent to increase portfolio size with higher yielding and longer-term securities to adjust rate sensitivity of the total balance sheet. Average tax-exempt securities increased $331.0 million or 83.6% while average taxable securities increased $413.4 million or 21.1% excluding the effect of the ARM loan securitization. Average interest bearing liabilities increased $802.9 million or 8.5% in the third quarter of 1996 compared to the same period in 1995. Average interest bearing deposits increased $392.7 million or 5.1%, average short-term borrowings increased $652.7 million or 81.2% and average long-term borrowings decreased $242.4 million or 29.3%. Average noninterest bearing deposits increased $128.3 million or 6.5% during the third quarter of 1996 compared to the third quarter of 1995. During the Second Quarter of 1996, the holder of the Corporation's 8.5% convertible subordinated notes converted approximately $16.8 million of the notes as more fully described in Note 6 of Notes to Financial Statements. Also during the third quarter of 1996, approximately $126.0 million of Bank notes matured and were refinanced with short-term borrowings and brokered CDs. The growth and composition of the Corporation's quarterly average loan portfolio for the current quarter and previous four quarters are reflected below. The amortized cost of the securitized ARM loans that are classified as investment securities available for sale are included to provide a more meaningful comparison ($ in millions): 1996 1995 -------------------------- ----------------- Annual Third Second First Fourth Third Growth Quarter Quarter Quarter Quarter Quarter PCT -------- ----------------- ----------------- -------- Commercial Loans $ 2,981 $ 2,945 $ 2,897 $ 2,888 $ 2,913 2.3% Real Estate Loans Construction 283 267 288 317 329 (14.0) Commercial Mortgages 2,303 2,226 2,190 2,174 2,169 6.2 Residential Mortgages 2,093 1,953 1,944 2,159 2,401 (12.8) Securitized ARM loans 452 482 489 282 26 N.M. -------- -------- -------- -------- -------- -------- Residential Mortgages 2,545 2,435 2,433 2,441 2,427 4.9 -------- -------- -------- -------- -------- -------- Total Real Estate Loans 5,131 4,928 4,911 4,932 4,925 4.2 Personal Loans Personal Loans 851 841 847 868 876 (2.8) Student Loans 281 292 300 287 285 (1.3) -------- -------- -------- -------- -------- -------- Total Personal Loans 1,132 1,133 1,147 1,155 1,161 (2.5) Lease Financing Receivables 295 282 277 270 262 12.6 -------- -------- -------- -------- -------- -------- Total Consolidated Average Loans & ARMs $ 9,539 $ 9,288 $ 9,232 $ 9,245 $ 9,261 3.0% ======== ======== ======== ======== ======== ======== Total Consolidated Average Loans $ 9,087 $ 8,806 $ 8,743 $ 8,963 $ 9,235 (1.6)% ======== ======== ======== ======== ======== ======== Beginning in the third quarter of 1995, the Corporation began converting ARM loans into Federal National Mortgage Association ARM pool securities to enhance liquidity. During the first quarter of 1996 an additional $88 million of such loans were securitized. There were no ARM loan securitizations during the second and third quarters of 1996. At September 30, 1996, the cumulative total amount of ARM loans that have been securitized and transferred to investment securities available for sale was approximately $542 million. As part of this process, the Corporation pays a fee of 7.5 basis points to guarantee the securities which negatively impacts net interest income. The Corporation estimates that approximately $90 million of ARM loans will be securitized beginning in the fourth quarter of 1996. The growth and composition of the Corporation's quarterly average deposits for the current and prior year's quarters are as follows ($ in millions): 1996 1995 -------------------------- ----------------- Annual Third Second First Fourth Third Growth Quarter Quarter Quarter Quarter Quarter PCT -------------------------- ----------------- -------- Noninterest Bearing Commercial $ 1,368 $ 1,302 $ 1,280 $ 1,379 $ 1,282 6.7% Personal 384 427 418 418 409 (6.1) Other 358 308 316 298 290 23.3 -------- -------- -------- -------- -------- -------- Total Noninterest Bearing Deposits 2,110 2,037 2,014 2,095 1,981 6.5 Interest Bearing Savings & NOW 1,803 1,817 1,842 1,912 1,961 (8.0) Money Market 2,451 2,407 2,386 2,237 2,049 19.6 Other CDs & Time Deposits 3,048 3,039 3,034 3,064 3,145 (3.1) CDs Greater than $100 643 614 621 607 603 6.8 Brokered CDs 221 115 39 21 16 N.M. -------- -------- -------- -------- -------- -------- Total Interest Bearing Deposits 8,166 7,992 7,922 7,841 7,774 5.1 -------- -------- -------- -------- -------- -------- Total Consolidated Average Deposits $ 10,276 $ 10,029 $ 9,936 $ 9,936 $ 9,755 5.3% ======== ======== ======== ======== ======== ======== Money market savings and brokered CDs exhibited the greatest growth when comparing average deposits in the third quarter of 1996 to the third quarter of 1995. As previously discussed throughout 1995, the money market index account, which was introduced in the third quarter of 1994, has been a substantial contributor to deposit growth. The average amount of money market index accounts was $1.63 billion in the third quarter of 1996 compared to $1.09 billion in the same period one year ago. The increase in this deposit type represents both new deposits and disintermediation from the Corporation's other deposit accounts. The Corporation has a brokered CD program to acquire longer-term CDs with maturities of one year or more in order to provide a stable funding source that over time is less costly than Bank notes or Fed Funds. Average brokered CDs amounted to $220.6 million in the third quarter of 1996 compared to $16.0 million during the third quarter of 1995. As previously discussed, the brokered CDs were used to partially refinance Bank notes as they matured. The Corporation's consolidated average interest earning assets and interest bearing liabilities, interest earned and interest paid for the current quarter and comparative prior year quarter is presented below. The impact of market value adjustments for securities classified as available for sale are not material to the quarter to quarter comparison. YIELD & COST ANALYSIS - --------------------- ($ in millions) THIRD QUARTER ------------------------------------------------- 1996 1995 ------------------------ ----------------------- Average Average Average Yield or Average Yield or Balance Interest Cost Balance Interest Cost ------------------------ ------------------------ Loans (a) $ 9,087.4 $ 191.6 8.39% $ 9,234.9 $ 199.7 8.58% Investment Securities: Taxable 2,828.2 44.8 6.30 1,988.9 28.9 5.77 Tax Exempt (a) 726.9 11.7 6.40 395.8 6.6 6.56 Other Short-term Investments (a) 181.2 2.3 5.05 207.1 2.8 5.36 ------------------------ ------------------------ Total Interest Earning Assets $12,823.7 $ 250.4 7.77% $11,826.7 $ 238.0 7.98% ======================== ======================== Money Market Savings $ 2,451.2 $ 25.4 4.13% $ 2,049.4 $ 22.0 4.26% Regular Savings & NOW 1,803.6 9.6 2.12 1,961.0 10.7 2.15 Other CDs & Time Deposits 3,047.7 43.9 5.72 3,145.0 45.3 5.72 CDs Greater than $100 & Brokered CDs 863.9 12.5 5.73 618.3 9.5 6.09 ------------------------ ------------------------ Total Interest Bearing Deposits 8,166.4 91.4 4.45 7,773.7 87.5 4.47 Short-term Borrowings 1,456.1 19.4 5.31 803.4 11.3 5.59 Long-term Borrowings 584.5 9.6 6.51 827.0 13.9 6.66 ------------------------ ------------------------ Total Interest Bearing Liabilities $10,207.0 $ 120.4 4.69% $ 9,404.1 $ 112.7 4.75% ======================== ======================== Net Interest Margin (FTE) as a Percent of Average Earning Assets $ 130.0 4.03% $ 125.3 4.20% ============== ============== (a) Fully taxable equivalent basis (FTE), assuming a Federal income tax rate of 35%, and excluding disallowed interest expense. At the end of the first quarter in 1996, the Corporation began utilizing interest rate swaps and during the third quarter began utilizing interest rate floors in the management of its interest rate exposure. Interest rate swaps are contractual agreements between counterparties to exchange interest streams based on notional principal amounts over a set period of time. Such swap agreements normally involve the exchange of fixed and floating rate payment obligations without the exchange of the underlying principal amounts. Interest rate floors are contracts with notional principal amounts that require the seller, in exchange for a fee, to make payments to the purchaser if a specified market interest rate falls below the fixed floor rate on specified future dates. The notional or principal amount for swaps and floors do not represent an amount at risk, but is used only as a basis for determining the actual cash flows related to the interest rate contracts. Market risk, due to potential fluctuations in interest rates, is inherent in swap and floor agreements. All interest rate swap and floor counterparties are formally evaluated and continually monitored for credit-quality. At September 30, 1996, the Corporation's quarter-end position in interest rate swaps and interest rate floors amounted to $250 million and $25 million, respectively, in notional amount. The swaps have terms which range from 2 to 5 years and are designated against variable rate commercial loans and the floor has a term of five years and is designated against asset-backed available for sale securities in order to reduce interest rate volatility. The net fair values of the interest rate swaps at September 30, 1996, was a positive $0.9 million. At September 30, 1996, the fair value of the interest rate floor was a positive $0.1 million. The impact of the interest rate swaps in the third quarter was to increase interest income on loans by $0.3 million and increase the yield on loans, yield on interest earning assets and increase the net interest margin (FTE) as a percent of average earning assets by one basis point. The impact of the interest rate floor was not material. The net interest margin as a percent of average earning assets declined 17 basis points from 4.20% in the third quarter of 1995 to 4.03% in the current quarter. The yield on average earning assets decreased 21 basis points while the cost of interest bearing liabilities decreased 6 basis points. The cost of interest bearing deposits decreased slightly in the third quarter of 1996 compared to the same period last year. The average cost of short-term borrowings decreased 28 basis points which reflects in part, the Corporation's banking affiliates expanded use of the treasury tax and loan note option programs which provide a lower cost funding source. The cost of long-term borrowings decreased 15 basis points which reflects the maturity and conversion of higher cost debt. PROVISION FOR LOAN LOSSES AND CREDIT QUALITY - -------------------------------------------- At September 30, 1996, nonperforming assets were $82.0 million compared to $98.1 million at June 30, 1996, and $69.6 million at September 30, 1995. Nonaccrual loans, the largest component of nonperforming assets, decreased $15.0 million since the second quarter and increased $14.7 million since September 30, 1995. Renegotiated loans decreased $1.1 million while loans past due 90 days or more increased $0.8 million since June 30, 1996. Since September 30, 1995, renegotiated loans decreased $1.4 million and loans past due 90 days increased $1.2 million. Other real estate owned decreased $0.9 million since the second quarter and decreased $2.2 million since September 30, 1995 During the third quarter of 1996 each loan type experienced a decrease in nonaccrual loans compared to the second quarter except for personal loans which increased $0.2 million and residential mortgage loans which increased $0.9 million. Nonaccrual commercial real estate loans were relatively unchanged while nonaccrual commercial loans and leases decreased $15.9 million. One large commercial credit placed on nonaccrual at the Corporation's lead bank during the first quarter was partially charged-off during the third quarter which accounts for approximately $12 million of the decline in nonaccrual commercial loans and leases since June 30, 1996. Net charge-offs in the third quarter of 1996 amounted to $15.1 million or 0.66% of average loans compared to 1.5 million or 0.07% of average loans in the second quarter of 1996 and $0.8 million or 0.03% of average loans in the third quarter of 1995. Commercial loan charge-offs, as previously discussed, and commercial real estate net charge-offs of $0.9 million account for the majority of the increase in net charge-off activity during the third quarter of 1996. The allowance for loan losses amounted to $152.8 million or 1.64% of total loans at September 30, 1996, compared to $163.9 million or 1.82% at June 30, 1996, and $164.3 million or 1.80% at September 30, 1995. The coverage ratio of the allowance for loan losses to nonperforming loans was 269% at September 30, 1995, 181% at June 30, 1996 and 202% at September 30, 1996. The Corporation believes that the current reserve and provision levels continue to be adequate. The provision for loan losses amounted to $4.0 million in the third quarter of 1996 compared to $3.5 million in the second quarter of 1996 and $4.1 million in the third quarter of 1995. CONSOLIDATED CREDIT QUALITY INFORMATION ($000's) 1996 1995 -------------------------- ----------------- Third Second First Fourth Third NONPERFORMING ASSETS Quarter Quarter Quarter Quarter Quarter - -------------------- -------------------------- ----------------- Nonaccrual $ 65,377 $ 80,344 $ 71,567 $ 50,598 $ 50,643 Renegotiated 1,878 2,936 3,093 3,087 3,298 Past Due 90 Days or More 8,329 7,492 7,422 8,184 7,106 -------- -------- -------- -------- -------- Total Nonperforming Loans 75,584 90,772 82,082 61,869 61,047 Other Real Estate Owned 6,406 7,332 8,744 8,648 8,587 -------- -------- -------- -------- -------- Total Nonperforming Assets $ 81,990 $ 98,104 $ 90,826 $ 70,517 $ 69,634 ======== ======== ======== ======== ======== ALLOWANCE FOR LOAN LOSSES $152,755 $163,866 $161,841 $161,430 $164,287 ======== ======== ======== ======== ======== CONSOLIDATED STATISTICS - ----------------------- Net Charge-offs to Average Loans Annualized 0.66 % 0.07 % 0.13 % 0.24 % 0.03 % Total Nonperforming Loans to Total Loans 0.81 1.01 0.93 0.70 0.67 Total Nonperforming Assets to Total Loans and Other Real Estate Owned 0.88 1.09 1.03 0.79 0.76 Allowance for Loan Losses to Total Loans 1.64 1.82 1.84 1.82 1.80 Allowance for Loan Losses to Nonperforming Loans 202 181 197 261 269 1996 1995 -------------------------- ----------------- Third Second First Fourth Third NONACCRUAL LOANS BY TYPE Quarter Quarter Quarter Quarter Quarter - ------------------------ -------------------------- ----------------- Commercial Commercial, Financial & Agricultural $ 21,902 $ 37,495 $ 33,608 $ 13,527 $ 14,449 Lease Financing Receivables 1,393 1,677 2,069 1,244 2,323 -------- -------- -------- -------- -------- Total Commercial 23,295 39,172 35,677 14,771 16,772 Real Estate Construction and Land Development 488 642 630 618 242 Commercial Mortgage 21,218 21,295 17,063 16,653 17,407 Residential Mortgage 17,212 16,293 14,785 15,701 13,010 -------- -------- -------- -------- -------- Total Real Estate 38,918 38,230 32,478 32,972 30,659 Personal 3,164 2,942 3,412 2,855 3,212 -------- -------- -------- -------- -------- Total Nonaccrual Loans $ 65,377 $ 80,344 $ 71,567 $ 50,598 $ 50,643 ======== ======== ======== ======== ======== 1996 1995 RECONCILIATION OF -------------------------- ----------------- CONSOLIDATED ALLOWANCE Third Second First Fourth Third FOR LOAN LOSSES Quarter Quarter Quarter Quarter Quarter - ------------------------ -------------------------- ----------------- Beginning Balance $163,866 $161,841 $161,430 $164,287 $160,565 Provision for Loan Losses 3,983 3,548 3,577 4,100 4,070 Allowance of Bank Acquire -- -- -- -- 1,096 Allowance Transfer for Loan Securitizations -- -- (440) (1,615) (660) Loans Charged-off Commercial 13,044 1,012 763 3,465 502 Real Estate 1,378 242 455 896 466 Personal 1,430 1,663 1,336 1,779 1,250 Leases 254 61 1,989 380 104 -------- -------- -------- -------- -------- Total Charge-offs 16,106 2,978 4,543 6,520 2,322 Recoveries on Loans Commercial 255 438 828 457 514 Real Estate 125 385 323 144 483 Personal 589 605 665 573 530 Leases 43 27 1 4 11 -------- -------- -------- -------- -------- Total Recoveries 1,012 1,455 1,817 1,178 1,538 -------- -------- -------- -------- -------- Net Loans Charged-off 15,094 1,523 2,726 5,342 784 -------- -------- -------- -------- -------- Ending Balance $152,755 $163,866 $161,841 $161,430 $164,287 ======== ======== ======== ======== ======== OTHER INCOME - ------------ Total other income in the third quarter of 1996 amounted to $123.5 million, an increase of $14.6 million or 13.4%, compared to $108.9 million in the same period last year. Data processing services revenue increased $14.7 million or 26.6% from $55.1 million in the third quarter of 1995 to $69.7 million in the current quarter. Processing revenue increased $8.1 million or 19.4% while software revenue remained relatively unchanged. Buyout fees, which can vary from period to period, increased $1.5 million. Revenue from unique services such as contract programming and consulting increased $4.9 million. Compared to the second quarter of 1996, total data processing services revenue increased $3.8 million or 5.7%. Significant components of the quarter over quarter increase include increased processing revenue, $2.8 million and increased revenue from unique services $1.2 million. Trust services revenue amounted to $17.6 million in the third quarter of 1996, an increase of $1.6 million or 10.4% compared to $16.0 million in the third quarter of 1995. Other customer services increased $1.4 million or 4.7% and totaled $29.2 million in the third quarter of 1996 compared to $27.8 million in the same period one year ago. Service charges on deposits of $13.1 million increased $0.6 million or 4.5%. The effects of net securities transactions in the third quarter of 1996 were not significant. During the third quarter of 1995, the Corporation realized gains of $1.3 million primarily from the sale of equity securities. Other income amounted to $7.0 million in the third quarter of 1996 compared to $8.8 million in the third quarter of 1995, a decrease of $1.8 million or 20.4%. Gains from the sale of residential mortgage loans that include servicing rights decreased $1.5 million. OTHER EXPENSE - ------------- Total other expenses in the third quarter of 1996 amounted to $178.5 million, an increase of $27.6 million or 18.3% compared to $150.9 million in the same period last year. Special charges, which include the SAIF assessment of $2.8 million and write-off of acquired in-process technology in conjunction with the EastPoint acquisition of $12.1 million account for $14.9 million of the increase in total other expenses. Excluding the special charges, total other expenses increased $12.7 million or 8.4%. The increase in expenses is primarily attributable to the Corporation's nonbanking businesses especially its Data Services Division. Data Services expense growth reflects the impact of the EastPoint acquisition, the cost of adding processing capacity, certain costs associated with developing new products and technology and the software maintenance costs to handle the year 2000 in order to meet the ever-changing needs of its new and existing customers as efficiently and effectively as possible. It is anticipated that new product development and year 2000 maintenance costs will continue to increase in future periods. Expenses of the Corporation's banks in the third quarter of 1996 continue to include costs of implementing certain initiatives in the areas of retail and small business lending, loan and deposit operational support and product and service distribution networks which are intended to improve customer service, enable more competitive pricing and achieve improved cost efficiencies. Total operating expenses for the Corporation's combined banks and support services group excluding the effect of deposit insurance premiums decreased 0.9% in the third quarter of 1996 compared to the second quarter of 1996 and increased 3.3% compared to the third quarter of 1995. Salaries and employee benefits expense which accounts for over one-half of total other expenses, amounted to $96.5 million in the third quarter of 1996 compared to $88.8 million in the third quarter of 1995, an increase of $7.8 million or 8.8%. Approximately, $0.3 million of the increase reflects severance and other related costs associated with the implementation of the banking initiatives described above. Salaries and employee benefits expense of Data Services increased $7.9 million or 22.9% in the current quarter compared to the same period last year. At September 30, 1996, Data Services had approximately 189 more employees when compared to September 30, 1995. Approximately 23% of the employee increase relates to the EastPoint acquisition. Net occupancy expense increased $0.4 million or 4.7% and equipment expense increased $2.5 million or 14.6%, in the third quarter of 1996 compared to the same period last year. Data Services expense growth accounted for approximately $2.6 million or 90% of the combined expense growth in these categories. The increase in payments to regulatory agencies reflects the SAIF assessment previously discussed. Professional services expense amounted to $3.8 million in the third quarter of 1996 compared to $5.0 million in the third quarter of 1995, a decrease of $1.2 million or 22.9%. Approximately $0.5 million of the decline represents costs associated with ARM loan securitizations which were incurred in the third quarter of 1995. The remaining decline is attributable to the decrease in costs incurred for technological assistance in software development such as Data Service's data warehouse project. Other expense, excluding the write-off of acquired in-process technology attributable to the EastPoint acquisition, increased 14.1% or $3.1 million in the third quarter of 1996 compared to the third quarter of 1995. Data Services contributed $2.1 million or 68% of the expense growth. Advertising, promotion and development and customer related expense increased $0.9 million or 19.6% of which approximately $0.6 million is related to the banking affiliates. INCOME TAXES - ------------ The provision for income taxes for the three months ended September 30, 1996, amounted to $22.3 million compared to $28.3 million for the three months ended September 30, 1995. The decline in the effective tax rate is primarily attributable to the increase in income exempt from Federal income taxes. NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 - --------------------------------------------- Net income for the first three quarters of 1996 amounted to $141.6 million compared to $141.0 million for the same period in 1995. Primary and fully diluted earnings per share amounted to $1.43 and $1.40, respectively, for the nine months ended September 30, 1996, compared with $1.43 and $1.38 per share respectively, for the nine months ended September 30, 1995. The year to date return on average equity through September 30, was 14.83% in the current year and 16.28% last year. The year to date return on average assets was 1.41% in the current period compared to 1.49% for the comparative period last year. Excluding the special charges previously discussed, income for the nine months ended September 30, 1996 would have been $151.2 million or $1.53 and $1.50 per share on a primary and fully diluted basis, respectively. The return on average equity before special charges amounted to 16.96% The following table presents a summarized view of each of the major elements of the consolidated income statement for the first nine months of 1996 and 1995 stated as a percent of average consolidated assets and converted to a fully taxable equivalent where appropriate. Year to date data for the current year is before the special charges previously discussed. ROA 1996 1995 Impact --------------------------- Interest Income 7.21 % 7.35 % (0.14)% Interest Expense (3.41) (3.41) - -------- -------- -------- Net Interest Income 3.80 3.94 (0.14) Provision for Loan Losses (0.11) (0.13) 0.02 Net Securities Gains 0.00 0.01 (0.01) Other Income 3.54 3.25 0.29 Other Expense (4.83) (4.67) (0.16) -------- -------- -------- Income Before Income Taxes 2.40 2.40 0.00 Income Taxes (0.90) (0.91) 0.01 -------- -------- -------- Return on Average Assets 1.50 % 1.49 % 0.01 % ======== ======== ======== Excluding special charges, the increase in income is primarily due to noninterest revenue growth, slower interest margin growth and a somewhat lower loan loss provision which was offset, in part by the growth in expenses for new products and technology at Data Services and the costs associated with implementing certain initiatives at the banking affiliates. CAPITAL RESOURCES - ----------------- Shareholders' equity was $1.27 billion or 8.80% of total consolidated assets at September 30, 1996, compared to $1.26 billion and 9.43% at December 31, 1995, and $1.22 billion and 9.41% at September 30,1995. Net unrealized gains on securities available for sale decreased $17.2 million since December 31, 1995, and decreased $6.1 million since September 30, 1995. The Corporation continued to acquire common shares in accordance with the Stock Repurchase Program approved by its Board of Directors. During the third quarter of 1996, 1.1 million shares of common stock were acquired with an aggregate cost of $30.7 million. Since inception of the program 15.7 million common shares have been acquired with a cumulative cost of $364.3 million. The Corporation continues to have a strong capital base and its regulatory capital ratios are significantly above the minimum requirements as shown in the following tables as of September 30, 1996. RISK-BASED CAPITAL RATIOS As of September 30, 1996 ($ in millions) ------------------------- Amount Ratio ---------- --------- Tier 1 capital $ 1,193.3 11.31 % Tier 1 capital minimum requirement 422.1 4.00 ---------- --------- Excess $ 771.2 7.31 % ========== ========= Total capital $ 1,429.2 13.54 % Total capital minimum requirement 844.3 8.00 ---------- --------- Excess $ 584.9 5.54 % ========== ========= Risk-adjusted assets $ 10,553.7 ========== LEVERAGE RATIO As of September 30, 1996 ($ in millions) ------------------------ Amount Ratio ------------ ----------- Tier 1 capital to adjusted total assets $ 1,193.3 8.62 % Minimum leverage requirement 415.4-692.3 3.00-5.00 ------------- ----------- Excess $777.9-501.0 5.62-3.62 % ============= =========== Adjusted average total assets $ 13,845.6 =========== PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- A. Exhibits: Exhibit 11 - Statements - Computation of Earnings Per Share Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges Exhibit 27 - Financial Data Schedule B. Reports on Form 8-K: None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MARSHALL & ILSLEY CORPORATION (Registrant) /s/ P.R. Justiliano ______________________________________ P.R. Justiliano Senior Vice President and Corporate Controller (Chief Accounting Officer) /s/ J.E. Sandy ______________________________________ J.E. Sandy Vice President November 14, 1996 EX-11 2 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1996/EXHIBIT 11 EXHIBIT 11 MARSHALL & ILSLEY CORPORATION CALCULATION OF EARNINGS PER SHARE ($000's except per share data) Three Months Ended September 30, -------------------------------- PRIMARY 1996 1995 - ------- ---------- --------- Earnings: Net income $ 45,038 $ 48,579 ========== ========= Shares: Weighted average number of common shares outstanding 91,520 94,123 Additional shares relating to: Convertible preferred stock 5,755 3,833 Stock options outstanding at end of each period and exercised during each period (a) 1,270 1,362 ---------- --------- Total average primary shares outstanding 98,545 99,318 ========== ========= EARNINGS PER SHARE: Primary $ 0.46 $ 0.49 ========== ========= FULLY DILUTED - ------------- Earnings: Net income $ 45,038 $ 48,579 Add: Interest on convertible notes, net of income tax effect 232 465 ---------- --------- $ 45,270 $ 49,044 ========== ========= Shares: Weighted average number of common shares outstanding 91,520 94,123 Additional shares relating to: Convertible preferred stock 5,755 3,833 Stock options outstanding at end of each period and exercised during each period (b) 1,452 1,446 Assumed conversion of convertible notes 1,922 3,844 ---------- --------- Total average fully diluted shares outstanding 100,649 103,246 ========== ========= EARNINGS PER SHARE: Fully Diluted $ 0.45 $ 0.48 ========== ========= Notes: - ------ (a) Based on the treasury stock method using average market price. (b) Based on the treasury stock method using period-end market price, if higher than average market price for options outstanding at end of each period and market price at date of exercise for options exercised during each period. EXHIBIT 11 MARSHALL & ILSLEY CORPORATION CALCULATION OF EARNINGS PER SHARE ($000's except per share data) Nine Months Ended September 30, ------------------------------- PRIMARY 1996 1995 - ------- ---------- --------- Earnings: Net income $ 141,561 $ 140,951 ========== ========= Shares: Weighted average number of common shares outstanding 92,320 93,686 Additional shares relating to: Convertible preferred stock 5,117 3,833 Stock options outstanding at end of each period and exercised during each period (a) 1,277 1,191 ---------- --------- Total average primary shares outstanding 98,714 98,710 ========== ========= EARNINGS PER SHARE: Primary $ 1.43 $ 1.43 ========== ========= FULLY DILUTED - ------------- Earnings: Net income $ 141,561 $ 140,951 Add: Interest on convertible notes, net of income tax effect 929 1,394 ---------- --------- $ 142,490 $ 142,345 ========== ========= Shares: Weighted average number of common shares outstanding 92,320 93,686 Additional shares relating to: Convertible preferred stock 5,117 3,833 Stock options outstanding at end of each period and exercised during each period (b) 1,485 1,543 Assumed conversion of convertible notes 2,561 3,844 ---------- --------- Total average fully diluted shares outstanding 101,483 102,906 ========== ========= EARNINGS PER SHARE: Fully Diluted $ 1.40 $ 1.38 ========== ========= Notes: - ------ (a) Based on the treasury stock method using average market price. (b) Based on the treasury stock method using period-end market price, if higher than average market price for options outstanding at end of each period and market price at date of exercise for options exercised during each period. EX-12 3 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1996/EXHIBIT 12 MARSHALL & ILSLEY CORPORATION EXHIBIT 12 Computation of Ratio of Earnings to Fixed Charges ($000's)
Nine Months Ended Years Ended December 31, September 30,------------------------------------------------------ Earnings: 1996 1995 1994 1993 1992 1991 ------------ ---------- ---------- ---------- ---------- ---------- Earnings before income taxes, extraordinary items and cumulative effect of changes in accounting principles $ 216,681 $ 299,879 $ 167,803 $ 264,584 $ 231,792 $ 186,738 Fixed charges, excluding interest on deposits 82,189 108,683 77,074 47,905 50,687 66,641 ---------- ---------- ---------- ---------- ---------- ---------- Earnings including fixed charges but excluding interest on deposits 298,870 408,562 244,877 312,489 282,479 253,379 Interest on deposits 266,498 331,734 255,861 272,100 334,443 448,757 ---------- ---------- ---------- ---------- ---------- ---------- Earnings including fixed charges and interest on deposits $ 565,368 $ 740,296 $ 500,738 $ 584,589 $ 616,922 $ 702,136 ========== ========== ========== ========== ========== ========== Fixed Charges: Interest Expense: Short-term borrowings $ 42,224 $ 47,740 $ 39,681 $ 18,010 $ 17,606 $ 32,065 Long-term borrowings 34,538 53,709 30,537 23,088 26,439 27,770 One-third of rental expense for all operating leases (the amount deemed representative of the interest factor) 5,427 7,234 6,856 6,807 6,642 6,806 ---------- ---------- ---------- ---------- ---------- ---------- Fixed charges excluding interest on deposits 82,189 108,683 77,074 47,905 50,687 66,641 Interest on deposits 266,498 331,734 255,861 272,100 334,443 448,757 ---------- ---------- ---------- ---------- ---------- ---------- Fixed charges including interest on deposits $ 348,687 $ 440,417 $ 332,935 $ 320,005 $ 385,130 $ 515,398 ========== ========== ========== ========== ========== ========== Ratio of Earnings to Fixed Charges: Excluding interest on deposits 3.64 x 3.76 x 3.18 x 6.52 x 5.57 x 3.80 x Including interest on deposits 1.62 x 1.68 x 1.50 x 1.83 x 1.60 x 1.36 x
EX-27 4 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1996/EXHIBIT 27
9 1,000 9-MOS DEC-31-1996 SEP-30-1996 769,509 72,103 80,149 32,958 2,927,618 707,603 704,392 9,309,436 152,755 14,444,337 10,567,388 2,048,680 324,802 232,727 0 517 99,494 1,170,729 14,444,337 561,887 146,281 7,913 716,081 266,498 343,260 372,821 11,108 199 501,856 216,681 141,561 0 0 141,561 1.43 1.40 4.13 65,377 8,329 1,878 75,584 161,430 23,627 4,284 152,755 152,755 0 0
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