-----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, R1Xj/Ayuu47G0MyBYBIFmWB/ICMwjdB9Bi0JhSsrgTkmsBjF9BG57OXZ8lYz7Y+e eBdqS099+mNYwsvdNG2Hlw== 0000062741-00-000069.txt : 20000515 0000062741-00-000069.hdr.sgml : 20000515 ACCESSION NUMBER: 0000062741-00-000069 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 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: SEC FILE NUMBER: 001-15403 FILM NUMBER: 629695 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 MARCH 31, 2000 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 March 31, 2000 ----------------------------------------------- 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 April 28, 2000 ------- ---------------- Common Stock, $1.00 Par Value 104,008,959 MARSHALL & ILSLEY CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) ($000's except share data)
March 31, December 31, March 31, Assets 2000 1999 1999 - ------ ----------------------------------------- Cash and cash equivalents: Cash and due from banks $ 674,604 $ 705,293 $ 641,648 Federal funds sold and security resale agreements 64,655 101,922 16,954 Money market funds 153,652 72,641 71,408 ------------ ------------ ------------ Total cash and cash equivalents 892,911 879,856 730,010 Investment securities: Trading securities, at market value 43,342 40,334 33,234 Short-term investments, at cost which approximates market value 16,382 6,828 54,571 Available for sale at market value 4,306,051 4,357,196 4,402,071 Held to maturity at amortized cost, market value $1,130,123 ($1,137,126 December 31, and $1,147,979 March 31, 1999) 1,160,104 1,170,734 1,112,843 ------------ ------------ ------------ Total investment securities 5,525,879 5,575,092 5,602,719 Loans and leases 16,965,521 16,335,061 14,260,672 Less: Allowance for loan and lease losses 232,471 225,862 229,669 ------------ ------------ ------------ Net loans and leases 16,733,050 16,109,199 14,031,003 Premises and equipment 370,663 370,534 354,504 Intangible assets 358,842 366,416 321,157 Accrued interest and other assets 1,040,043 1,068,626 950,216 ------------ ------------ ------------ Total Assets $ 24,921,388 $ 24,369,723 $ 21,989,609 ============ ============ ============ Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $ 2,658,348 $ 2,830,960 $ 2,681,922 Interest bearing 14,409,973 13,604,222 12,793,158 ------------ ------------ ------------ Total deposits 17,068,321 16,435,182 15,475,080 Funds purchased and security repurchase agreements 2,125,022 1,402,077 2,609,501 Other short-term borrowings 2,044,667 3,138,178 549,492 Accrued expenses and other liabilities 568,333 612,336 498,068 Long-term borrowings 1,038,184 665,024 680,236 ------------ ------------ ------------ Total liabilities 22,844,527 22,252,797 19,812,377 Shareholders' equity: Series A convertible preferred stock, $1.00 par value; 336,370 shares issued (685,314 March 31,1999) 336 336 685 Common stock, $1.00 par value; 112,757,546 shares issued 112,757 112,757 112,757 Additional paid-in capital 455,217 457,097 618,466 Retained earnings 1,978,813 1,914,128 1,724,779 Net unrealized (losses) gains on securities available for sale, net of related taxes (45,057) (32,749) 40,601 Less: Treasury common stock, at cost; 8,752,702 shares (6,941,684 December 31, and 8,385,347 March 31, 1999) 405,805 314,513 301,529 Deferred compensation 19,400 20,130 18,527 ------------ ------------ ------------ Total shareholders' equity 2,076,861 2,116,926 2,177,232 ------------ ------------ ------------ Total Liabilities and Shareholders' Equity $ 24,921,388 $ 24,369,723 $ 21,989,609 ============ ============ ============ See notes to financial statements.
MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ($000's except per share data)
Three Months Ended March 31, ---------------------------- Interest income 2000 1999 - --------------- --------------------------- Loans and leases $ 326,478 $ 271,977 Investment securities: Taxable 67,890 64,300 Exempt from Federal income taxes 16,447 13,674 Trading securities 527 399 Short-term investments 3,283 2,236 ------------ ------------ Total interest income 414,625 352,586 Interest expense - ---------------- Deposits 172,578 133,651 Short-term borrowings 57,039 30,282 Long-term borrowings 15,887 15,836 ------------ ------------ Total interest expense 245,504 179,769 ------------ ------------ Net interest income 169,121 172,817 Provision for loan and lease losses 5,819 4,873 ------------ ------------ Net interest income after provision for loan and lease losses 163,302 167,944 Other income - ------------ Data processing services Processing 65,871 62,648 Software and consulting 19,925 21,759 E-commerce 39,553 24,392 Other 5,955 3,248 ------------ ------------ Total data processing services 131,304 112,047 Internet banking 505 519 Trust services 27,808 23,872 Service charges on deposits 18,514 16,453 Mortgage banking 2,912 11,186 Capital Markets revenue 15,111 1,582 Net investment securities gains -- -- Life insurance revenue 6,672 6,225 Other 27,477 23,476 ------------ ------------ Total other income 230,303 195,360 Other expense - ------------- Salaries and employee benefits 156,220 134,123 Net occupancy 13,328 12,093 Equipment 27,362 26,474 Software expenses 6,865 6,103 Processing charges 7,540 7,923 Supplies and printing 4,852 4,515 Professional services 7,574 7,213 Amortization of intangibles 7,706 15,025 Other 25,659 20,826 ------------ ------------ Total other expense 257,106 234,295 ------------ ------------ Income before income taxes 136,499 129,009 Provision for income taxes 45,917 43,478 ------------ ------------ Net income $ 90,582 $ 85,531 ============ ============ Net income per common share - --------------------------- Basic $ 0.86 $ 0.79 Diluted 0.83 0.75 Dividends paid per common share $ 0.24 $ 0.22 Weighted average common shares outstanding: Basic 104,657 105,466 Diluted 109,564 114,743 See notes to financial statements.
MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ($000's)
Three Months Ended March 31, ---------------------------- 2000 1999 --------------------------- Net Cash Provided by Operating Activities $ 88,892 $ 249,179 Cash Flows From Investing Activities: - ------------------------------------- Net (increase)/decrease in securities with maturities of three months or less -- (2,480) Proceeds from sales of securities available for sale 11,498 -- Proceeds from maturities of longer term securities 173,386 288,712 Purchases of longer term securities (136,933) (726,903) Net increase in loans (607,295) (344,688) Purchases of assets to be leased (102,100) (93,486) Principal payments on lease receivables 81,334 73,006 Fixed asset purchases, net (14,571) (9,820) Acquisitions and investments in joint ventures (265) -- Other 2,396 2,606 ------------ ------------ Net cash used in investing activities (592,550) (813,053) ------------ ------------ Cash Flows From Financing Activities: - ------------------------------------- Net increase /(decrease) in deposits 633,140 (444,839) Proceeds from issuance of commercial paper 804,280 230,453 Payments for maturity of commercial paper (625,093) (132,960) Net increase /(decrease) in other short-term borrowings (534,826) 893,964 Proceeds from issuance of long-term debt 378,110 4,361 Payments of long-term debt (19,913) (28,385) Dividends paid (25,897) (24,876) Purchases of treasury stock (94,756) (116,512) Other 1,668 5,940 ------------ ------------ Net cash provided by financing activities 516,713 387,146 ------------ ------------ Net increase/(decrease) in cash and cash equivalents 13,055 (176,728) Cash and cash equivalents, beginning of year 879,856 906,738 ------------ ------------ Cash and cash equivalents, end of period $ 892,911 $ 730,010 ============ ============ Supplemental cash flow information: - ----------------------------------- Cash paid during the period for: Interest $ 224,574 $ 181,667 Income taxes 930 3,921 See notes to financial statements.
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2000 & 1999 (Unaudited) 1. The accompanying unaudited consolidated financial statements should be read in conjunction with Marshall & Ilsley Corporation's ("M&I" or "Corporation") 1999 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 ended March 31, 2000 and 1999. The results of operations for the three months ended March 31, 2000 and 1999 are not necessarily indicative of results to be expected for the entire year. Certain amounts in the 1999 consolidated financial statements and analyses have been reclassified to conform with the 2000 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. At the 2000 Annual Meeting of Shareholders held April 25, 2000, the shareholders of the Corporation approved an amendment to the Corporation's Restated Articles of Incorporation to increase the authorized common stock to 320,000,000 shares. 3. Acquisitions / Acquisition Update During the first quarter of 2000, the Corporation paid an additional $0.3 million in settlement of the assets acquired and liabilities assumed in the October 1, 1999 purchase acquisition of Cardpro Services, Inc. Initial goodwill subject to the completion of appraisals and valuations of the assets acquired and liabilities assumed amounted to $10.5 million and is being amortized on a straight-line basis over ten years. Also during the first quarter of 2000, appraisals and valuations associated with the April 1, 1999 purchase acquisition of the Electronic Banking Services business unit of ADP were completed. Goodwill associated with this transaction amounted to $44.0 million and is being amortized on a straight-line basis over twenty five years. In conjunction with the October 1, 1997 purchase acquisition of Security Capital Corporation, $18.6 million of exit costs were recorded as liabilities assumed in the acquisition. As of March 31, 2000, the remaining liability amounted to $0.4 million which consists of unpaid severance. Periodic severance payments will continue through 2002. MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 2000 & 1999 (Unaudited) 4. 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 March 31, 2000 ------------------------------------- Per Income Average Shares Share (Numerator) (Denominator) Amount ------------------------------------- Net Income $ 90,582 Convertible Preferred Dividends (923) ------------ Basic Earnings Per Share Income Available to Common Shareholders $ 89,659 104,657 $ 0.86 ======= Effect of Dilutive Securities Convertible Preferred Stock 923 3,844 Stock Options and Restricted Stock Plans -- 1,063 ------------ --------------- Diluted Earnings Per Share Income Available to Common Shareholders Plus Assumed Conversions $ 90,582 109,564 $ 0.83 =======
Three Months Ended March 31, 1999 ------------------------------------- Per Income Average Shares Share (Numerator) (Denominator) Amount ------------------------------------- Net Income $ 85,531 Convertible Preferred Dividends (1,689) ------------ Basic Earnings Per Share Income Available to Common Shareholders $ 83,842 105,466 $ 0.79 ======= Effect of Dilutive Securities Convertible Preferred Stock 1,689 7,677 Stock Options and Restricted Stock Plans -- 1,600 ------------ --------------- Diluted Earnings Per Share Income Available to Common Shareholders Plus Assumed Conversions $ 85,531 114,743 $ 0.75 =======
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 2000 & 1999 (Unaudited) 5. Selected investment securities, by type, held by the Corporation are as follows ($000's):
March 31, December 31, March 31, 2000 1999 1999 ----------------------------------------- Other investment securities available for sale: U.S. treasury and government agencies $ 3,760,161 $ 3,852,731 $ 4,059,856 State and political subdivisions 145,993 109,971 153 Other 399,897 394,494 342,062 ------------ ------------ ------------ Other available for sale $ 4,306,051 $ 4,357,196 $ 4,402,071 ============ ============ ============ Investment securities held to maturity: U.S. treasury and government agencies $ 5 $ 9 $ 58 State and political subdivisions 1,154,905 1,165,756 1,108,128 Other 5,194 4,969 4,657 ------------ ------------ ------------ Held to maturity $ 1,160,104 $ 1,170,734 $ 1,112,843 ============ ============ ============
6. The Corporation's loan and lease portfolio consists of the following ($000's):
March 31, December 31, March 31, 2000 1999 1999 ----------------------------------------- Commercial, financial & agricultural $ 5,031,736 $ 4,754,857 $ 4,228,402 Real estate: Construction 515,502 494,558 395,718 Residential mortgage 5,154,388 4,941,450 4,081,788 Commercial mortgage 4,095,617 4,034,771 3,750,583 ------------ ------------ ------------ Total real estate 9,765,507 9,470,779 8,228,089 Personal 1,320,014 1,299,416 1,154,191 Lease financing 848,264 810,009 649,990 ------------ ------------ ------------ $ 16,965,521 $ 16,335,061 $ 14,260,672 ============ ============ ============
7. The Corporation's deposit liabilities consists of the following ($000's):
March 31, December 31, March 31, 2000 1999 1999 ----------------------------------------- Noninterest bearing demand $ 2,658,348 $ 2,830,960 $ 2,681,922 Savings and NOW 7,033,134 6,966,423 6,860,544 CD's $100,000 and over 1,993,954 1,885,933 1,596,154 Other time deposits 3,456,666 3,419,333 3,428,472 Foreign Deposits 1,926,219 1,332,533 907,988 ------------ ------------ ------------ $ 17,068,321 $ 16,435,182 $ 15,475,080 ============ ============ ============
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 2000 & 1999 (Unaudited) 8. Comprehensive Income The following table presents the Corporation's comprehensive income ($000's):
Three Months Ended ---------------------------- March 31, March 31, 2000 1999 ------------ ------------ Net income $ 90,582 $ 85,531 Other comprehensive income Unrealized gains (losses) on securities, net of tax: Arising during the period (20,086) (17,501) Reclassification for securities transactions included in net income net of income taxes of $4,188 7,778 -- ------------ ------------ (12,308) (17,501) ------------ ------------ Total comprehensive income $ 78,274 $ 68,030 ============ ============
Other comprehensive income as shown is net of deferred income tax benefits of $10,833 and $10,705 for the three months ended March 31, 2000 and 1999, respectively. 9. Segments Generally, the Corporation organizes its segments based on legal entities and segregates the Data Services Division of the Corporation. Each entity offers a variety of products and services to meet the needs of its customers and the particular market served. Each entity or division has its own president and is separately managed subject to adherence to Corporate policies. Discrete financial information is reviewed by senior management to assess performance on a monthly basis. Certain segments are combined and consolidated for purposes of assessing financial performance. No changes have been made in the organization or reporting of the Corporation's segments since the 1999 Annual Report. The Corporation evaluates the profit or loss performance of its segments based on operating income. Operating income is after-tax income excluding nonrecurring charges and charges for services from the holding company, excluding its Data Services Division. Operating income for the banking entities and certain other entities also excludes certain assets, liabilities, equity, revenues and expenses associated with adjustments, charges or credits arising from acquisitions accounted for as purchases (hereinafter called acquisition costs). The accounting policies of the Corporation's segments are the same as those described in Note 1 to the Corporation's Annual Report on Form 10K, Item 8. Intersegment revenues may be based on cost, current market prices or negotiated prices between the providers and receivers of services. Based on the way the Corporation organizes its segments and the requirements of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information", the Corporation has determined that it has two reportable segments. Information with respect to M&I's segments is as follows: MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 2000 & 1999 (Unaudited) Banking ------- Banking represents the aggregation of twenty-six separately chartered banks located in Wisconsin, one bank in Arizona, one federally chartered thrift headquartered in Nevada and an operational support subsidiary. Banking consists of accepting deposits, making loans and providing other services such as cash management, foreign exchange and correspondent banking to a variety of commercial and retail customers. Products and services are provided through a variety of delivery channels including traditional branches, supermarket branches, telephone centers, ATMs and the internet. In addition, the Corporation's larger affiliate banks provide numerous services such as cash management, regional credit, and centralized accounting to M&I's community banking affiliates. Intrasegment revenues, expenses and assets have been eliminated in the following information. ($ in millions):
Three Months Ended ----------------------------- March 31, March 31, 2000 1999 ------------ ------------ Revenue: Net interest income $ 170.9 $ 171.0 Other revenues: Unaffiliated customers 43.8 45.2 Affiliated customers 4.6 3.6 ------------ ------------ Total revenues 219.3 219.8 Expenses: Intersegment charges 18.9 22.4 Other operating expense 81.5 78.3 ------------ ------------ Total expenses 100.4 100.7 Provision for loan and lease losses 5.8 4.7 Income tax expense 34.9 36.4 ------------ ------------ Operating income $ 78.2 $ 78.0 ============ ============ Identifiable assets $ 23,566.8 $ 20,820.5 ============ ============ Return on tangible equity 19.1 % 19.9 % ============ ============
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 2000 & 1999 (Unaudited) Banking (continued) ------------------- The following tables present revenue and operating income by line of business for Banking. This information is based on the Corporation's product profitability measurement system and is an aggregation of the revenues and expenses associated with the products and services within each line of business. Net interest income is derived from the Corporation's internal funds transfer pricing system, expenses are allocated based on available transaction volumes and the provision for loan and lease losses is allocated based on credit risk. Equity is assigned to products and services on a basis that considers market, operational and reputation risk. ($ in millions):
Three Months Ended ----------------------------- March 31, March 31, 2000 1999 ------------ ------------ Banking revenues: Commercial Banking $ 98.6 $ 89.8 Retail Banking 95.1 94.7 Investments and Other 25.6 35.3 ------------ ------------ Total banking revenues $ 219.3 $ 219.8 ============ ============ Percent of total banking revenue: Commercial Banking 45.0 % 40.8 % Retail Banking 43.4 43.1 Investments and Other 11.6 16.1 ------------ ------------ Total banking revenues 100.0 % 100.0 % ============ ============ Operating banking income Commercial Banking $ 40.3 $ 42.3 Retail Banking 24.4 25.4 Investments and Other 13.5 10.3 ------------ ------------ Total operating banking income $ 78.2 $ 78.0 ============ ============ Percent of total operating banking income: Commercial Banking 51.5 % 54.3 % Retail Banking 31.2 32.5 Investments and Other 17.3 13.2 ------------ ------------ Total operating banking income 100.0 % 100.0 % ============ ============ Banking return on tangible equity Commercial Banking 21.9 % 25.5 % Retail Banking 19.4 22.7 ------------ ------------ Total banking return on tangible equity 19.1 % 19.9 % ============ ============
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 2000 & 1999 (Unaudited) Data Services ------------- Data Services includes the Data Services Division of the Corporation as well as two nonbank subsidiaries. Data Services provides data processing services, develops and sells software and provides consulting services to M&I affiliates as well as banks, thrifts, credit unions, trust companies and other financial services companies throughout the world although its activities are primarily domestic. In addition, Data Services derives revenue from the Corporation's credit card merchant operations. The majority of Data Services revenue is derived from internal and external processing. Intrasegment revenues, expenses and assets have been eliminated in the following information. ($ in millions):
Three Months Ended ----------------------------- March 31, March 31, 2000 1999 ------------ ------------ Revenue: Net interest expense $ (1.3) $ (0.6) Other revenues: Unaffiliated customers 131.9 112.7 Affiliated customers 23.4 21.5 ------------ ------------ Total revenues 154.0 133.6 Expenses: Intersegment charges 0.3 0.1 Other operating expense 131.9 114.4 ------------ ------------ Total expenses 132.2 114.5 Income tax expense 9.1 8.3 ------------ ------------ Operating income $ 12.7 $ 10.8 ============ ============ Identifiable assets $ 505.5 $ 426.8 ============ ============ Return on equity 19.6 % 19.9 % ============ ============
Data Services revenue from unaffiliated customers consist of the following ($ in millions):
Three Months Ended ----------------------------- March 31, March 31, 2000 1999 ------------ ------------ Data Processing Services $ 131.3 $ 112.0 Other 0.6 0.7 ------------ ------------ Total unaffiliated customer revenue $ 131.9 $ 112.7 ============ ============
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 2000 & 1999 (Unaudited) All Others ---------- M&I's primary other operating segments includes Trust Services, Mortgage Banking (residential and commercial), Capital Markets Group, Brokerage and Insurance Services and Commercial Leasing. Trust Services provide investment management and advisory services as well as personal, commercial and corporate trust services in Wisconsin, Florida and Arizona. Capital Markets Group provide venture capital and advisory services. Intrasegment revenues, expenses and assets for the entities that comprise Trust Services and Capital Markets Group have been eliminated in the following information. ($ in millions):
Three Months Ended ----------------------------- March 31, March 31, 2000 1999 ------------ ------------ Revenue: Net interest income $ 5.0 $ 5.8 Other revenues: Unaffiliated customers 52.9 36.2 Affiliated customers 2.8 5.2 ------------ ------------ Total revenues 60.7 47.2 Expenses: Intersegment charges 7.1 6.3 Other operating expense 26.0 25.8 ------------ ------------ Total expenses 33.1 32.1 Provision for loan and lease losses -- 0.2 Income tax expense 11.1 5.9 ------------ ------------ Operating income $ 16.5 $ 9.0 ============ ============ Identifiable assets $ 704.1 $ 678.4 ============ ============ Return on tangible equity 30.7 % 18.0 % ============ ============
Total Revenues by type in All Others consist of the following:
Three Months Ended ----------------------------- March 31, March 31, 2000 1999 ------------ ------------ Trust Services $ 28.5 $ 24.5 Residential Mortgage Banking 5.7 10.3 Internet Mortgage Banking 0.6 0.5 Capital Markets 15.5 2.7 Brokerage and Insurance 6.4 5.0 Commercial Leasing 2.4 2.7 Commercial Mortgage Banking 0.4 0.3 Others 1.2 1.2 ------------ ------------ Total revenues $ 60.7 $ 47.2 ============ ============
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 2000 & 1999 (Unaudited) Segment information reconciled to the Consolidated Financial Statements is as follows ($ in millions):
Three Months Ended ----------------------------- March 31, March 31, 2000 1999 ------------ ------------ Revenues: Banking $ 219.3 $ 219.8 Data Services 154.0 133.6 All Others 60.7 47.2 Corporate overhead (4.2) (1.6) Acquisition costs 0.3 (0.4) Intersegment eliminations (30.7) (30.4) ------------ ------------ Consolidated revenues $ 399.4 $ 368.2 ============ ============ Expenses: Banking $ 100.4 $ 100.7 Data Services 132.2 114.5 All Others 33.1 32.1 Corporate overhead 17.2 11.7 Acquisition costs 4.9 5.7 Intersegment eliminations (30.7) (30.4) ------------ ------------ Consolidated expenses $ 257.1 $ 234.3 ============ ============ Net income (loss): Operating income: Banking $ 78.2 $ 78.0 Data Services 12.7 10.8 All Others 16.5 9.0 Corporate overhead (12.9) (7.5) Acquisition costs (3.9) (4.8) ------------ ------------ Consolidated net income $ 90.6 $ 85.5 ============ ============ Assets: Banking $ 23,566.8 $ 20,820.5 Data Services 505.5 426.8 All Others 704.1 678.4 Corporate overhead 196.4 173.3 Acquisition costs 264.1 283.3 Intersegment eliminations (315.5) (392.7) ------------ ------------ Consolidated assets $ 24,921.4 $ 21,989.6 ============ ============
MARSHALL & ILSLEY CORPORATION CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited) ($000's)
Three Months Ended March 31, ---------------------------- Assets 2000 1999 - ------ ---------------------------- Cash and due from banks $ 630,113 $ 658,996 Trading securities 41,553 32,093 Short-term investments 234,435 190,542 Other investment securities: Taxable 4,132,667 4,092,000 Tax-exempt 1,341,892 1,128,932 ------------ ------------ Total investment securities 5,750,547 5,443,567 Loans and leases: Commercial 4,896,688 4,132,882 Real estate 9,599,400 8,156,151 Personal 1,313,719 1,154,323 Lease financing 825,300 627,461 ------------ ------------ 16,635,107 14,070,817 Less: Allowance for loan and lease losses 228,464 228,619 ------------ ------------ Total loans and leases 16,406,643 13,842,198 Premises and equipment, net 372,300 357,233 Accrued interest and other assets 1,398,920 1,294,022 ------------ ------------ Total Assets $ 24,558,523 $ 21,596,016 ============ ============ Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $ 2,609,079 $ 2,567,832 Interest bearing 14,422,706 12,718,488 ------------ ------------ Total deposits 17,031,785 15,286,320 Funds purchased and security repurchase agreements 2,751,558 2,447,332 Other short-term borrowings 1,143,504 121,809 Long-term borrowings 1,010,484 1,028,593 Accrued expenses and other liabilities 540,613 480,806 ------------ ------------ Total liabilities 22,477,944 19,364,860 Shareholders' equity 2,080,579 2,231,156 ------------ ------------ Total Liabilities and Shareholders' Equity $ 24,558,523 $ 21,596,016 ============ ============
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 AND 1999 ------------------------------------------ Net income for the first quarter of 2000 amounted to $90.6 million compared to $85.5 million for the same period in the prior year. Basic and diluted earnings per share were $.86 and $.83 respectively for the three months ended March 31, 2000, compared with $.79 and $.75, respectively for the three months ended March 31, 1999. The return on average assets and average equity were 1.48% and 17.51% for the quarter ended March 31, 2000 and 1.61% and 15.55% for the quarter ended March 31, 1999. 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. "Cash operating income" and related statistics is operating income before amortization of intangibles. 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 OPERATING INCOME STATEMENTS AND FINANCIAL STATISTICS ------------------------------------------------------------------------- ($000's except per share data)
2000 1999 ---------- ---------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ---------- ---------- ---------- ---------- Interest income $ 414,625 $ 398,819 $ 380,477 $ 364,702 $ 352,586 Interest expense (245,504) (221,900) (202,674) (186,960) (179,769) ---------- ---------- ---------- ---------- ---------- Net interest income 169,121 176,919 177,803 177,742 172,817 Provision for loan and lease losses (5,819) (10,938) (4,797) (4,811) (4,873) Net investment securities gains (losses) -- (4,513) 59 355 -- Other income 230,303 223,633 222,708 208,172 195,360 Other expense (257,106) (255,063) (260,394) (247,945) (234,295) ---------- ---------- ---------- ---------- ---------- Income before taxes 136,499 130,038 135,379 133,513 129,009 Income tax provision (45,917) (39,412) (44,543) (45,995) (43,478) ---------- ---------- ---------- ---------- ---------- Operating income $ 90,582 $ 90,626 $ 90,836 $ 87,518 $ 85,531 ========== ========== ========== ========== ========== Cash operating income $ 95,071 $ 95,664 $ 95,796 $ 92,475 $ 94,372 ========== ========== ========== ========== ========== Per Common Share Operating income Basic $ 0.86 $ 0.84 $ 0.86 $ 0.82 $ 0.79 Diluted 0.83 0.81 0.81 0.77 0.75 Cash Operating income Basic $ 0.90 $ 0.89 $ 0.91 $ 0.87 $ 0.88 Diluted 0.87 0.86 0.85 0.81 0.82 Dividends 0.24 0.24 0.24 0.24 0.22 Return on Average Equity Operating income 17.51 % 16.86 % 16.85 % 16.04 % 15.55 % Cash Operating income 21.86 21.14 21.04 20.04 19.78
SUMMARY CONSOLIDATED OPERATING INCOME STATEMENT COMPONENTS AS A PERCENT OF AVERAGE TOTAL ASSETS
2000 1999 ---------- ---------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ---------- ---------- ---------- ---------- Interest income (FTE) 6.92 % 6.77 % 6.68 % 6.68 % 6.75 % Interest expense (4.02) (3.70) (3.49) (3.36) (3.38) ---------- ---------- ---------- ---------- ---------- Net interest income 2.90 3.07 3.19 3.32 3.37 Provision for loan and lease losses (0.10) (0.18) (0.08) (0.09) (0.09) Net investment securities gains (losses) -- (0.07) -- 0.01 -- Other income 3.77 3.72 3.83 3.74 3.67 Other expense (4.21) (4.25) (4.49) (4.46) (4.40) ---------- ---------- ---------- ---------- ---------- Income before taxes 2.36 2.29 2.45 2.52 2.55 Income tax provision (0.88) (0.78) (0.89) (0.95) (0.94) ---------- ---------- ---------- ---------- ---------- Return on average assets based on operating income 1.48 % 1.51 % 1.56 % 1.57 % 1.61 % ========== ========== ========== ========== ========== Return on tangible average assets based on cash operating income 1.58 % 1.62 % 1.67 % 1.69 % 1.80 % ========== ========== ========== ========== ==========
NET INTEREST INCOME ------------------- Net interest income for the first quarter of 2000 amounted to $169.1 million compared to $172.8 million reported for the first quarter of 1999. The inability of bank issued deposit growth to keep pace with strong loan growth, reduced spreads in loan and deposit products, the continued use of higher-cost borrowings and wholesale deposits, in the recent rising interest rate environment and the costs associated with treasury share buybacks and recent acquisitions all contributed to the $3.7 million decline in net interest income. Average earning assets in the first quarter of 2000 increased $2.9 billion or 14.7% compared to the same period a year ago. Average loans, including securitized adjustable rate mortgage loans (ARMs), accounted for $2.3 billion or 81.5% of the growth in earning assets compared to the first quarter of last year. Average investment securities, excluding securitized ARMs, increased $478.6 million while other earning assets increased $53.3 million for the three months ended March 31, 2000 compared with the same period in the prior year. Average interest bearing liabilities increased $3.0 billion or 18.5% in the first quarter of 2000 compared to the same period in 1999. Since the first quarter of 1999, average interest bearing deposits increased $1.7 billion. Approximately 81% of the growth in interest bearing deposits was attributable to higher-cost wholesale deposits. Average total borrowings which reflects, in part, the effect of the Corporation's repurchase program, increased $1.3 billion. Beginning in September, 1999 certain of the Corporation's banking affiliates began offering Bank Notes to institutional investors. Issuing banks may from time to time issue Short-term Senior Notes and Medium-term Senior Notes as well as Subordinated Notes with maturities ranging from seven days to thirty years and at fixed or floating rates. As of March 31, 2000, Short-term Senior Notes amounted to $649.8 million, Medium-term Senior Notes amounted to $199.4 million and Subordinated Notes amounted to $98.8 million. Average noninterest bearing deposits increased $41.2 million or 1.6% in the current quarter compared to the same period last year. The growth and composition of the Corporation's quarterly average loan portfolio for the current quarter and previous four quarters are reflected in the following table. Securitized ARM loans which are classified in the consolidated balance sheets as investment securities available for sale are included to provide a more meaningful comparison ($ in millions):
2000 1999 Growth Pct. -------- -------------------------------------- ------------------- First Fourth Third Second First Prior Quarter Quarter Quarter Quarter Quarter Annual Quarter -------- -------- -------- -------- -------- -------- -------- Consolidated Average Loans, Leases and Securitized ARMs Commercial $ 4,897 $ 4,566 $ 4,424 $ 4,311 $ 4,133 18.5 % 7.2 % Real Estate Construction Commercial 407 365 344 304 305 33.4 11.3 Residential 106 98 95 101 107 (0.8) 8.6 -------- -------- -------- -------- -------- -------- -------- Total Construction 513 463 439 405 412 24.5 10.7 Commercial Mortgages 4,050 3,985 3,884 3,792 3,717 9.0 1.6 Residential Residential mortgages 2,862 2,701 2,474 2,334 2,333 22.7 5.9 Home equity loans and lines 2,174 2,084 1,982 1,845 1,694 28.3 4.3 Securitized ARM loans 424 450 490 560 649 (34.7) (5.8) -------- -------- -------- -------- -------- -------- -------- Total Residential 5,460 5,235 4,946 4,739 4,676 16.8 4.3 -------- -------- -------- -------- -------- -------- -------- Total Real Estate 10,023 9,683 9,269 8,936 8,805 13.8 3.5 Personal Student 262 258 254 255 264 (1.0) 1.3 Credit card 151 144 139 137 137 9.6 4.8 Other 901 872 828 777 753 19.8 3.4 -------- -------- -------- -------- -------- -------- -------- Total Personal 1,314 1,274 1,221 1,169 1,154 13.8 3.1 Lease financing Commercial 335 335 337 333 335 (0.0) 0.2 Personal 490 444 397 345 293 67.7 10.3 -------- -------- -------- -------- -------- -------- -------- Total Lease Financing 825 779 734 678 628 31.5 6.0 -------- -------- -------- -------- -------- -------- -------- Total Consolidated Average Loans, Leases and ARMs $ 17,059 $ 16,302 $ 15,648 $ 15,094 $ 14,720 15.9 % 4.6 % ======== ======== ======== ======== ======== ======== ======== Total Consolidated Average Loans, Leases and ARMs Commercial Banking $ 9,689 $ 9,251 $ 8,989 $ 8,740 $ 8,490 14.1 % 4.7 % Retail Banking 7,370 7,051 6,659 6,354 6,230 18.3 4.5 -------- -------- -------- -------- -------- -------- -------- Total Consolidated Average Loans, Leases and ARMs $ 17,059 $ 16,302 $ 15,648 $ 15,094 $ 14,720 15.9 % 4.6 % ======== ======== ======== ======== ======== ======== ======== Total Consolidated Average Loans and Leases $ 16,635 $ 15,852 $ 15,158 $ 14,534 $ 14,071 18.2 % 4.9 % ======== ======== ======== ======== ======== ======== ========
Compared with the first quarter of 1999, total consolidated average loans, leases and securitized ARMs increased $2.3 billion or 15.9%. Loan growth was relatively evenly distributed between commercial and retail banking. Total loan growth in commercial banking amounted to $1.2 billion or 14.1% and was driven by commercial loan growth of $764 million and commercial real estate loan growth of $435 million of which, $102 million was attributable to commercial construction loan growth. Retail banking loan growth amounted to $1.1 billion or 18.3%. Residential real estate loans and ARMs increased $304 million, home equity loans and lines increased $480 million and lease financing receivables increased $197 million. During the first quarter of 2000, the Corporation began selling a portion of ARM loan production in the secondary market in addition to fixed rate residential mortgage loans. Total loans sold in the first quarter of 2000 amounted to $71.6 million of which approximately $15 million were ARM loans. By comparison, fixed rate loan sales in the first quarter of 1999 amounted to $530 million which reflected the accelerated refinancing to fixed rate loans experienced throughout 1998 and the first quarter of 1999. The growth and composition of the Corporation's quarterly average deposits for the current and prior year's quarters are as follows ($ in millions):
2000 1999 Growth Pct. -------- -------------------------------------- ------------------- First Fourth Third Second First Prior Quarter Quarter Quarter Quarter Quarter Annual Quarter -------- -------- -------- -------- -------- -------- -------- Noninterest bearing deposits Commercial $ 1,668 $ 1,791 $ 1,732 $ 1,682 $ 1,655 0.8 % (6.8)% Personal 576 564 555 567 549 5.1 2.1 Other 365 420 402 372 364 0.1 (13.1) -------- -------- -------- -------- -------- -------- -------- Total noninterest bearing deposits 2,609 2,775 2,689 2,621 2,568 1.6 (6.0) Interest bearing deposits Savings & NOW 1,919 1,957 2,019 2,054 2,082 (7.9) (2.0) Money market 5,065 5,021 4,837 4,762 4,697 7.8 0.9 Other CDs & time deposits 3,428 3,430 3,444 3,398 3,476 (1.4) (0.1) CDs greater than $100,000 909 887 841 780 762 19.3 2.5 Brokered CDs 1,045 970 932 845 755 38.4 7.7 Foreign time 2,057 1,896 1,887 1,273 946 117.5 8.5 -------- -------- -------- -------- -------- -------- -------- Total interest bearing deposits 14,423 14,161 13,960 13,112 12,718 13.4 1.8 -------- -------- -------- -------- -------- -------- -------- Total consolidated average deposits $ 17,032 $ 16,936 $ 16,649 $ 15,733 $ 15,286 11.4 % 0.6 % ======== ======== ======== ======== ======== ======== ======== Bank issued deposits $ 13,688 $ 13,819 $ 13,582 $ 13,326 $ 13,320 2.8 % (1.0)% Wholesale deposits 3,344 3,117 3,067 2,407 1,966 70.1 7.3 -------- -------- -------- -------- -------- -------- -------- Total consolidated average deposits $ 17,032 $ 16,936 $ 16,649 $ 15,733 $ 15,286 11.4 % 0.6 % ======== ======== ======== ======== ======== ======== ========
Due to continued strong earning asset growth, particularly loan growth, the Corporation continued to rely on wholesale deposits for funding. Compared with the first quarter of 1999, average wholesale deposit growth amounted to $1.4 billion or 70.1%. Eurodollar term and overnight deposits, which are included in Foreign time increased $1.1 billion and Brokered CDs increased $0.3 billion. By comparison, average bank issued deposits increased $0.3 billion or 2.8 % in the first quarter of 2000 compared to the first quarter of 1999. Money market, primarily money market index accounts, accounted for approximately $327 million of the growth while CDs, primarily large CDs, accounted for $164 million of the growth in average bank issued deposits. As previously discussed noninterest bearing deposits increased $41.2 million. Partially, offsetting this growth was a decline in less costly Savings and NOW deposits of $164 million. The Corporation's consolidated average interest earning assets and interest bearing liabilities, interest earned and interest paid for the current quarter and prior year first quarter are presented in the following table. Securitized ARM loans that are classified in the balance sheet as investment securities available for sale are included with loans to provide a more meaningful comparison ($ in millions):
Three Months Ended Three Months Ended March 31, 2000 March 31, 1999 ---------------------------- ---------------------------- Average Average Average Yield or Average Yield or Balance Interest Cost (b) Balance Interest Cost (b) ---------- -------- -------- ---------- -------- -------- Loans and leases (a) $ 17,059.0 $ 335.0 7.90 % $ 14,719.6 $ 284.4 7.84 % Investment securities: Taxable 3,708.8 59.9 6.34 3,443.2 52.4 6.24 Tax Exempt (a) 1,341.9 23.8 7.20 1,128.9 19.9 7.26 Other short-term investments (a) 276.0 3.8 5.56 222.7 2.6 4.81 ---------- -------- -------- ---------- -------- -------- Total interest earning assets $ 22,385.7 $ 422.5 7.57 % $ 19,514.4 $ 359.3 7.50 % ========== ======== ======== ========== ======== ======== Money market savings $ 5,065.3 $ 61.2 4.86 % $ 4,697.3 $ 47.7 4.12 % Regular savings & NOW 1,918.4 8.5 1.78 2,081.9 8.6 1.68 Other CDs & time deposits 5,484.9 74.6 5.47 4,422.1 56.9 5.21 CDs greater than $100 & Brokered CDs 1,954.1 28.3 5.82 1,517.2 20.5 5.48 ---------- -------- -------- ---------- -------- -------- Total interest bearing deposits 14,422.7 172.6 4.81 12,718.5 133.7 4.26 Short-term borrowings 3,895.1 57.0 5.89 2,569.1 30.3 4.78 Long-term borrowings 1,010.5 15.9 6.32 1,028.6 15.8 6.24 ---------- -------- -------- ---------- -------- -------- Total interest bearing liabilities $ 19,328.3 $ 245.5 5.11 % $ 16,316.2 $ 179.8 4.47 % ========== ======== ======== ========== ======== ======== Net interest margin (FTE) as a percent of average earning assets $ 177.0 3.17 % $ 179.5 3.75 % ======== ======== ======== ======== Net interest spread (FTE) 2.46 % 3.03 % ======== ========
(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. The yield on average earning assets increased 7 basis points since the first quarter of 1999 which had a positive impact on interest income (FTE) of approximately $6.5 million. The slowing of accelerated amortization of purchase accounting premiums assigned to acquired loans and investment securities due to prepayments increased interest income by approximately $1.4 million. The benefit of lower amortization was offset by a decline of approximately $2.0 million in interest income from the use of derivatives. The increase in the volume of earning assets, primarily loans and securitized ARMs, increased interest income by approximately $56.7 million compared with the first quarter of 1999. The cost of interest bearing deposits increased 55 basis points from the same quarter of the previous year. Short-term borrowing costs increased 111 basis points and long-term borrowing costs increased 8 basis points, respectively, compared with the first quarter of 1999. The overall increase in the cost of interest bearing liabilities of 64 basis points increased interest expense by approximately $27.5 million while the increase in the volume of interest bearing liabilities increased interest expense by approximately $38.3 million. The decline in benefit from use of derivatives increased interest expense by $0.1 million in the current quarter compared to the same period last year. The Corporation estimates that approximately $5.2 million of the increase in interest expense is attributable to the treasury shares repurchased throughout 1999 and the first quarter of 2000. The Corporation's positions with respect to derivative financial instruments consisted of the following at March 31, 2000, ($ in millions):
Interest Rate Swaps - Loans Notional value $520 Weighted average receive rate 5.92% Weighted average pay rate 6.11% Weighted average remaining term (in years) 2.26 Estimated fair value ($13.68) Interest Rate Swaps - Callable Deposits Notional value $487 Weighted average receive rate 6.45% Weighted average pay rate 5.95% Weighted average remaining term (in years) 6.91 Estimated fair value ($19.47) Interest Rate Swaps - Equity Indexed Deposits Notional value $15 Receive - Index interest upon maturity or call Weighted average pay rate 5.92% Weighted average remaining term (in years) 5.01 Estimated fair value ($0.84) Interest Rate Swaps - Short-term Borrowings Notional value $200 Weighted average receive rate 7.65% Weighted average pay rate 5.58% Weighted average remaining term (in years) 26.69 Estimated fair value $1.80 Interest Rate Swaps - Long-term Borrowings Notional value $200 Weighted average receive rate 5.77% Weighted average pay rate 7.27% Weighted average remaining term (in years) 6.67 Estimated fair value ($0.20) Interest Rate Floors - Loans Notional value $275 Strike rate 7.19% Index 6.39% Weighted average remaining term (in years) 6.13 Estimated fair value $3.69 Unamortized premium $5.19
For the three months ended March 31, 2000, the effect on net interest income resulting from derivative financial instruments was a positive $0.2 million compared with a positive $2.3 million in the same period in 1999. In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In June 1999, the FASB issued SFAS 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF THE EFFECTIVE DATE OF SFAS 133. SFAS 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other 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 instrument'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. Statement 133, as amended, is effective for fiscal years beginning after June 15, 2000. 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. With respect to hybrid instruments, A company may elect to apply SFAS 133, as amended, to (1) all hybrid contracts, (2) only those hybrid instruments that were issued, acquired or substantively modified after December 31, 1997, or (3) only those hybrid instruments that were issued, acquired or substantively modified after December 31, 1998. The Corporation has not determined the timing of adoption. Presented above is the fair value of the freestanding derivatives held by the Corporation as of March 31, 2000. Statement 133 would require that those derivative instruments be recognized in the Corporation's Consolidated Balance Sheets as assets or liabilities at their fair value. The Corporation has not yet completed quantifying the other effects of adopting Statement 133 on its consolidated financial statements nor has it completed its determination which of the freestanding derivatives shown above qualify for hedge accounting prescribed by the statement. However, the Statement could increase volatility in earnings and other comprehensive income. Throughout 1999 and the first quarter of 2000, the Corporation has been experiencing favorable loan growth and has had to rely on wholesale deposits and borrowings to fund growth in excess of core deposit growth. As previously discussed, the use of higher cost funding sources in lieu of core deposit growth contributed to the decline in net interest income. Based on the Corporation's existing balance sheet, net interest margin will also continue to be adversely affected by rising interest rates in the near term. In addition to continuing to seek less costly funding sources, the Corporation may, among other things, consider divesting of lower yielding assets through sale or securitization in the future. PROVISION FOR LOAN AND LEASE LOSSES AND CREDIT QUALITY ------------------------------------------------------ The following tables present comparative consolidated credit quality information as of March 31, 2000 and the prior four quarters. NONPERFORMING ASSETS -------------------- ($000's)
2000 1999 --------- --------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter --------- --------- --------- --------- --------- Nonaccrual $ 111,642 $ 106,387 $ 121,091 $ 122,561 $ 116,632 Renegotiated 688 708 725 746 878 Past due 90 days or more 9,334 9,975 7,630 6,525 7,275 --------- --------- --------- --------- --------- Total nonperforming loans and leases 121,664 117,070 129,446 129,832 124,785 Other real estate owned 6,247 6,230 6,660 6,766 9,245 --------- --------- --------- --------- --------- Total nonperforming assets $ 127,911 $ 123,300 $ 136,106 $ 136,598 $ 134,030 ========= ========= ========= ========= ========= Allowance for loan and lease losses $ 232,471 $ 225,862 $ 226,461 $ 225,277 $ 229,669 ========= ========= ========= ========= =========
CONSOLIDATED STATISTICS -----------------------
2000 1999 --------- --------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter --------- --------- --------- --------- --------- Net Charge-offs (Recoveries) to average loans and leases annualized (0.02)% 0.29 % 0.09 % 0.25 % 0.04 % Total nonperforming loans and leases to total loans and leases 0.72 0.72 0.83 0.87 0.88 Total nonperforming assets to total loans and leases and other real estate owned 0.75 0.75 0.87 0.92 0.94 Allowance for loan and lease losses to total loans and leases 1.37 1.38 1.45 1.51 1.61 Allowance for loan and lease losses to nonperforming loans and leases 191 193 175 174 184
NONACCRUAL LOANS AND LEASES BY TYPE ----------------------------------- ($000's)
2000 1999 --------- --------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter --------- --------- --------- --------- --------- Commercial Commercial, financial & agricultural $ 49,006 $ 52,563 $ 60,627 $ 57,524 $ 51,472 Lease financing receivables 3,929 4,243 4,655 4,041 3,046 --------- --------- --------- --------- --------- Total commercial 52,935 56,806 65,282 61,565 54,518 Real estate Construction & land development 5,284 2,609 2,463 3,004 1,498 Commercial mortgage 28,069 19,668 22,911 25,763 24,865 Residential mortgage 23,715 25,901 28,651 30,154 33,517 --------- --------- --------- --------- --------- Total real estate 57,068 48,178 54,025 58,921 59,880 Personal 1,639 1,403 1,784 2,075 2,234 --------- --------- --------- --------- --------- Total nonaccrual loans and leases $ 111,642 $ 106,387 $ 121,091 $ 122,561 $ 116,632 ========= ========= ========= ========= =========
RECONCILIATION OF ALLOWANCE FOR LOAN AND LEASE LOSSES ----------------------------------------------------- ($000's)
2000 1999 --------- --------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter --------- --------- --------- --------- --------- Beginning balance $ 225,862 $ 226,461 $ 225,277 $ 229,669 $ 226,052 Provision for loan and lease losses 5,819 10,938 4,797 4,811 4,873 Loans and leases charged-off Commercial 449 7,949 1,653 7,117 556 Real estate 653 1,953 1,198 1,475 1,250 Personal 1,544 2,086 1,794 1,544 1,697 Leases 198 1,103 300 686 196 --------- --------- --------- --------- --------- Total charge-offs 2,844 13,091 4,945 10,822 3,699 Recoveries on loans and leases Commercial 2,811 724 610 389 973 Real estate 206 258 195 405 561 Personal 525 457 472 611 704 Leases 92 115 55 214 205 --------- --------- --------- --------- --------- Total Recoveries 3,634 1,554 1,332 1,619 2,443 --------- --------- --------- --------- --------- Net loans and leases charge-offs (recoveries) (790) 11,537 3,613 9,203 1,256 --------- --------- --------- --------- --------- Ending balance $ 232,471 $ 225,862 $ 226,461 $ 225,277 $ 229,669 ========= ========= ========= ========= =========
Nonperforming assets consist of nonperforming loans and other real estate owned (OREO). OREO is comprised of commercial and residential properties acquired in partial or total satisfaction of problem loans and branch premises held for sale. At March 31, 2000, OREO acquired in satisfaction of debts amounted to $5.0 million and branch premises held for sale amounted to $1.2 million. Nonperforming loans and leases consist of nonaccrual, renegotiated or restructured loans, and loans and leases that are delinquent 90 days or more and still accruing interest. The balance of nonperforming loans and leases can fluctuate widely based on the timing of cash collections, renegotiations and renewals. Maintaining nonperforming assets at an acceptable level is important to the ongoing success of a financial services institution. The Corporation's comprehensive credit review and approval process is critical to ensuring that the amount of nonperforming assets on a long-term basis is minimized within the overall framework of acceptable levels of credit risk. In addition to the negative impact on net interest income and credit losses, nonperforming assets also increase operating costs due to the expense associated with collection efforts. At March 31, 2000, nonperforming loans and leases amounted to $121.7 million or 0.72% of consolidated loans and leases of $17.0 billion, an increase of $4.6 million or 3.9% since December 31, 1999. Nonaccrual loans and leases, primarily real estate loans, have shown the largest increases since year end 1999. Nonaccrual loans secured by real estate, primarily commercial mortgages increased $8.9 million since December 31, 1999. Commercial loans and leases decreased $3.9 million during the same period. Net recoveries amounted to $0.8 million or (0.02)% of average loans in the first quarter of 2000 compared with net charge-offs of $11.5 million or 0.29% of average loans in the fourth quarter of 1999 and $1.3 million or 0.04% of average loans in the first quarter of 1999. One large commercial loan accounted for $2.0 million of the net recoveries in the current quarter. The allowance for loan and lease losses represents management's estimate of probable inherent losses which have occurred as of the date of the financial statements. In determining the adequacy of the reserve the Corporation evaluates the reserves necessary for specific nonperforming loans and also estimates losses inherent in other loans and leases. As a result, the allowance for loans and leases contains the following components: Specific Reserve. The amount of specific reserves is determined through a loan-by-loan analysis of nonperforming loans that considers expected future cash flows, the value of collateral and other factors that may impact the borrower's ability to make payments when due. Included in this group are those nonaccrual or renegotiated loans which meet the criteria as being "impaired" under the definition in SFAS 114. A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Allocated inherent reserve. The amount of the allocated portion of the inherent loss reserve is determined by reserving factors assigned to loans and leases based on the Corporation's internal loan grading system. Line officers and loan committees are responsible for continually assigning grades to commercial loan types based on standards established in the Corporation's loan policies and adherence to the standards is closely monitored by the Corporation's Loan Review Group. Loan grades are similar to, but generally more conservative than, regulatory classifications. In addition, reserving factors are applied to retail and smaller balance ungraded credits as well as specialty loan products such as credit card, student loans and mortgages. Reserving factors are derived and are determined based on such factors as historical charge-off experience, remaining life, and industry practice for reserve levels. The use of industry practice is intended to prevent an understatement of reserves based upon an over-reliance on historical charge-offs during favorable economic conditions. Unallocated inherent reserve. Management determines the unallocated portion of the inherent loss reserve based on factors that cannot be associated with a specific credit or loan categories. These factors include management's subjective evaluation of local, national and international economic and business conditions, changes to underwriting standards and marketing channels such as use of centralized retail and small business credit centers, trends towards higher advance rates and longer amortization periods and the impact of acquisitions on the Corporation's credit risk profile. The unallocated portion of the inherent loss reserve also reflects management's attempt to ensure that the overall reserve appropriately reflects a margin for the imprecision necessarily inherent in estimates of expected credit losses. Management's evaluation of the factors described above resulted in an allowance for loan and lease losses of $232.5 million at March 31, 2000 compared to $225.9 million at December 31,1999. The level of reserve reflects management's belief that losses inherent in the loan and lease portfolio were larger than would otherwise be suggested by the Corporation's favorable charge-off experience in recent years; the Corporation's experience, as most recently evidenced in the second quarter and fourth quarter of 1999, of larger losses in commercial and commercial real estate loans in brief periods at particular points in economic cycles; and the view that the absolute level of the allowance should not decline appreciably given continuing loan growth and the potential for the unprecedented period of economic prosperity to come to an end. The resulting provision for loan and lease losses amounted to $5.8 million for the three months ended March 31, 2000. OTHER INCOME ------------ Total other income in the first quarter of 2000 amounted to $230.3 million, an increase of $34.9 million or 17.9%, compared to $195.4 million in the same period last year. Total data processing services revenue increased $19.3 million or 17.2% from $112.0 million in the first quarter of 1999 to $131.3 million in the current quarter. Processing revenue which includes processing, conversions, and contract buyouts increased $3.2 million or 5.1% and amounted to $65.9 million. Conversion revenue and buyout fees, which vary from period to period, decreased $2.9 million compared with the first quarter of the prior year. Software and consulting revenue decreased $1.8 million in the current quarter compared to the same period last year. E-commerce revenue which includes electronic funds transfer, electronic banking, cash management, home banking, Internet banking, electronic payment services and a mortgage solution joint venture, increased $15.2 million or 62.2% from $24.4 million in the first quarter of 1999 to $39.6 million in the current quarter. Revenue associated with recent acquisitions and the joint venture accounted for $13.1 million of the increase. Other data processing services revenue which consists of merchant credit card fees, credit card plastics sales and equipment sales increased $2.7 million of which $1.8 million related to card plastics sales, and $0.8 million related to equipment sales. Trust services revenue amounted to $27.8 million in the first quarter of 2000, an increase of $3.9 million or 16.5% compared to $23.9 million in the first quarter of 1999. Net new business growth in personal trust and commercial trust and increased balances in proprietary mutual fund balances resulted in favorable revenue growth in major product lines. Total assets in trust accounts were approximately $8 billion or 16% greater in the current year compared to the prior year. For the three months ended March 31, 2000, service charges on deposits amounted to $18.5 million, an increase of $2.0 million or 12.5% compared to $16.5 million in the three months ended March 31, 1999. Service charges associated with commercial demand accounts increased $1.2 million and service charges associated with personal demand accounts increased $0.6 million. Mortgage banking revenue amounted to $2.9 million in the first quarter of 2000 compared with $11.2 million in the first quarter of 1999. While all sources of mortgage banking revenue decreased compared to the prior year, gains on the sale of mortgages accounted for $7.9 million of the decline which reflects the slowing of refinancing activity experienced in the first quarter of the 1999. The increase in Capital Markets revenue is due to gains from the sale of investments and other net unrealized gains. Net securities gains from Capital Markets investments, which can vary from period to period, amounted to $14.8 million in the current quarter compared to gains of $1.5 million in the comparative quarter of the prior year. Other income in the first quarter of 2000 amounted to $27.5 million compared to $23.5 million in the first quarter of 1999, an increase of $4.0 million or 17.0%. Reversion income associated with the final settlement of the former Security pension plan accounted for $1.8 million of the increase. The remainder of the increase was associated with increases in commissions and fees primarily discount brokerage revenue. OTHER EXPENSE ------------- Total other expense in the first quarter of 2000 amounted to $257.1 million compared with $234.3 million in the first quarter of 1999 an increase of $22.8 million or 9.7%. 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 approximately 75% of the consolidated operating expense growth and reflects the cost of adding processing capacity and other related costs associated with increased revenue growth, costs associated with developing new products and services and operating expenses associated with the recent acquisitions. 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 (including Capital Markets revenue but excluding investment securities gains or losses) and net interest income on a fully taxable equivalent basis. The Corporation's efficiency ratios for the three months ended March 31, 2000 and 1999 and the year ended December 31, 1999 are:
Three Months Year Three Months Ended Ended Ended March 31, December 31, March 31, 2000 1999 1999 ------------ ------------ ------------ Consolidated Corporation 63.1 % 63.0 % 62.5 % Consolidated Corporation Excluding Data Services Including Intangible Amortization 52.0 % 52.1 % 52.2 % Excluding Intangible Amortization 49.7 % 49.3 % 48.6 %
Salaries and employee benefits expense amounted to $156.2 million in the first quarter of 2000 compared to $134.1 million in the first quarter of 1999, an increase of $22.1 million or 16.5%. Salaries and employee benefits expense of Data Services increased $17.4 million. At March 31, 2000, Data Services had on average approximately 665 more full time equivalent employees when compared to March 31, 1999 which reflects increases in E-commerce (407 including acquisitions) and technology services. Compared to the first quarter of 1999, expense growth in the current quarter in salaries and employee benefits was $1.8 million or 3.8% for the banking segment. All other segments increased $1.5 million due to growth in the trust business and mortgage Internet development. Incentive compensation which includes incentive compensation based on the Corporation's common stock performance increased $1.0 million. Data Services expense growth accounted for approximately $3.0 million or all of the increase in net occupancy, equipment, software, supplies and printing and processing expenses in the first quarter of 2000 compared to the first quarter of 1999. Professional services expense amounted to $7.6 million in the current quarter compared to $7.2 million in the first quarter of the prior year. Data Services professional services expense accounted for $0.6 million of the increase. Expense increases associated with banking initiatives and mortgage internet development of approximately $1.3 million were offset by professional services fee recoveries recognized by Capital Markets. Amortization of intangibles decreased $7.3 million. Approximately $0.8 million of the decrease is due to lower amortization of mortgage servicing rights due to slower prepayments in the servicing portfolio and $0.7 million of the decrease is due to lower core deposit premium amortization. The remainder of the decline is due to accelerated amortization of goodwill by Data Services in the first quarter of 1999 relating to a 1996 acquisition. Other expense amounted to $25.7 million in the first quarter of 2000, an increase of $4.8 million or 23.2% compared to the first quarter of 1999. Other expense growth of Data Services which includes the effect of the capitalization of costs, net of amortization and write-downs associated with software development and customer data processing conversions accounted for $2.1 million of the increase. Advertising and promotion expense of other segments increased $1.8 million in the current quarter compared to the same period last year. During the first quarter of 1999, the Corporation reduced its recourse obligations associated with securitized ARMs by $0.8 million. INCOME TAXES ------------ The provision for income taxes for the three months ended March 31, 2000 amounted to $45.9 million or 33.6% of pre-tax income compared to $43.5 million or 33.7% of pre-tax income for the three months ended March 31, 1999. CAPITAL RESOURCES ----------------- Shareholders' equity was $2.08 billion at March 31, 2000 compared to $2.12 billion at December 31, 1999 and $2.18 billion at March 31, 1999. The Corporation had net unrealized losses on securities available for sale at March 31, 2000 of $45.1 million, a decrease in market value net of related income tax effects of $12.3 million since December 31, 1999. For the three months ended March 31, 2000, M&I repurchased 1.9 million shares of its Common Stock under the authorization by the Board of Directors to repurchase up to 6.0 million common shares annually. The aggregate cost of the shares repurchased was $94.7 million. During the first quarter of 2000, the Corporation filed a shelf registration with the Securities and Exchange Commission to offer debt securities from time to time that may consist of senior or subordinated debentures, notes, bonds and/or other forms of indebtedness up to an aggregate principal amount of $1.5 billion. The specific terms of debt securities, when issued, will be described in a prospectus supplement. Net proceeds from the sale of debt securities may be used for debt reduction or debt refinancing, investments in or advances to subsidiaries, acquisitions, repurchase of shares of common stock or other securities and other general corporate purposes. On April 25, 2000, the Corporation announced that its Board of Directors approved an increase in the quarterly cash dividend on common stock to $0.265 per share from $0.24 per share payable on June 14, 2000 to shareholders of record as of May 31, 2000. The Corporation continues to have a strong capital base and its regulatory capital ratios are significantly above the minimum requirements as shown in the following tables. RISK-BASED CAPITAL RATIOS ($ in millions)
March 31, 2000 December 31, 1999 ----------------------------------- ----------------------------------- Amount Ratio Amount Ratio ----------------- ----------------- ----------------- ----------------- Tier 1 Capital $ 2,005 10.89 % $ 1,993 11.11 % Tier 1 Capital Minimum Requirement 737 4.00 718 4.00 ----------------- ----------------- ----------------- ----------------- Excess $ 1,268 6.89 % $ 1,275 7.11 % ================= ================= ================= ================= Total Capital $ 2,295 12.46 % $ 2,277 12.69 % Total Capital Minimum Requirement 1,473 8.00 1,435 8.00 ----------------- ----------------- ----------------- ----------------- Excess $ 822 4.46 % $ 842 4.69 % ================= ================= ================= ================= Risk-Adjusted Assets $ 18,413 $ 17,937 ================= =================
LEVERAGE RATIOS ($ in millions)
March 31, 2000 December 31, 1999 ----------------------------------- ----------------------------------- Amount Ratio Amount Ratio ----------------- ----------------- ----------------- ----------------- Tier 1 Capital $ 2,005 8.26 % $ 1,993 8.49 % Minimum Leverage Requirement 728 - 1,213 3.00 - 5.00 704 - 1,174 3.00 - 5.00 ----------------- ----------------- ----------------- ----------------- Excess $ 1,277 - 792 5.26 - 3.26 % $ 1,289 - 819 5.49 - 3.49 % ================= ================= ================= ================= Adjusted Average Total Assets $ 24,255 $ 23,481 ================= =================
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following updated information should be read in conjunction with the Corporation's 1999 Annual Report on Form 10-K. Updated information regarding the Corporation's use of derivative financial instruments is contained in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS." Market risk arises from exposure to changes in interest rates, exchange rates, commodity prices, and other relevant market rate or price risk. The Corporation faces market risk through trading and other than trading activities. While market risk that arises from trading activities in the form of foreign exchange and interest rate risk is immaterial to the Corporation, market risk from other than trading activities in the form of interest rate risk is measured and managed through a number of methods. INTEREST RATE RISK The Corporation uses financial modeling techniques to identify potential changes in income under a variety of possible interest rate scenarios. Financial institutions, by their nature, bear interest rate and liquidity risk as a necessary part of the business of managing financial assets and liabilities. The Corporation has designed strategies to confine these risks within prudent parameters and identify appropriate risk/reward tradeoffs in the financial structure of the balance sheet. The financial models identify the specific cash flows, repricing timing and embedded option characteristics across the array of assets and liabilities held by the Corporation. Policies are in place to assure that neither earnings nor fair value at risk exceed appropriate limits. The use of a limited array of derivative financial instruments has allowed the Corporation to achieve the desired balance sheet repricing structure while simultaneously meeting the desired objectives of both its borrowing and depositing customers. The models used include measures of the expected repricing characteristics of administered rate (NOW, savings and money market accounts) and non-rate related products (demand deposit accounts, other assets and other liabilities). These measures recognize the relative insensitivity of these accounts to changes in market interest rates, as demonstrated through current and historical experiences. In addition to information about contractual payment information for most other assets and liabilities, the models also include estimates of expected prepayment characteristics for those items that are likely to materially change their payment structures in different rate environments, including residential mortgage products, certain commercial and commercial real estate loans and certain mortgage-related securities. Estimates for these sensitivities are based on industry assessments and are substantially driven by the differential between the contractual coupon of the item and current market rates for similar products. This information is incorporated into a model that allows the projection of future income levels in several different interest rate environments. Earnings at risk are calculated by modeling income in an environment where rates remain constant, and comparing this result to income in a different rate environment, and then dividing this result into the Corporation's budgeted/forecasted pre-tax income for the ensuing twelve months. Since future interest rate moves are difficult to predict, the following table presents two potential scenarios - a gradual increase of 100bp across the entire yield curve over the course of a year (+25bp per quarter), and a gradual decrease of 100bp across the entire yield curve over the course of a year (-25bp per quarter) for the balance sheet as of March 31,2000 and December 31, 1999:
Impact to Annual Pretax Income as of: ------------------------------------- Hypothetical Change in Interest Rate March 31, 2000 December 31,1999 - --------------------------------------- ---------------- ------------------ 100 basis point gradual: Rise in rates (7.8) % (8.6)% Decline in rates 7.7 % 8.6 %
These results are based solely on the modeled 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 changes in spread between key market rates, or accounting recognition for impairment of certain intangibles. These results are also considered to be conservative estimates due to the fact that they do not include any management action to mitigate potential income variances within the simulation process. Such action could potentially 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. Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. Another component of interest rate risk is measuring the fair value at risk for a given change in market interest rates. The Corporation also uses computer modeling techniques to determine the present value of all asset and liability cash flows (both on- and off-balance sheet), adjusted for prepayment expectations, using a market discount rate. The net change in the present value of the assets and liability cash flows in different market rate environments is the amount of fair value at risk from those rate movements. As of March 31, 2000 the fair value of equity at risk for a gradual 100bp shift in rates was less than 2.0% of the market value of the Corporation. In addition to using derivatives to manage interest rate exposure, the Corporation also uses derivatives to create synthetic financial instruments that more closely match desired rate and liquidity characteristics than would otherwise be available on cash instruments directly. A small amount of derivatives are sold to customers where the Corporation acts as an intermediary. These instruments are matched off by the Corporation through its trading accounts in order to minimize exposure to market risks. Customer interest rate derivatives held for trading amounted to $95 million of notional value, consisting of $47.5 million in notional value of received fixed and $47.5 million in notional value of pay fixed interest rate swaps as of March 31, 2000. EQUITY RISK In addition to interest rate risk, the Corporation incurs market risk in the form of equity risk. M&I's Capital Markets Group invests in private, medium- sized companies to help establish new businesses or recapitalize existing ones. Exposure to the change in equity values for the companies that are held in their portfolio exists, but due to the nature of the investments, cannot be quantified within acceptable levels of precision. M&I Trust Services administers more than $68 billion in assets and directly manages a portfolio of more than $11 billion. Exposure exists to changes in equity values due to the fact that fee income is partially based on equity balances. While this exposure is present, quantification remains difficult due to the number of other variables affecting fee income. Interest rate changes can also have an effect on fee income for the above stated reasons. PART II - OTHER INFORMATION Item 2 - Changes in Securities and Use of Proceeds - -------------------------------------------------- C. During the period covered by this report, 43,000 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 $51.8125 and $61.50 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 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- A. Exhibits: Exhibit 3(a)(i) - Amendment to Restated Articles of Incorporation Exhibit 3(a)(ii) - Restated Articles of Incorporation Exhibit 3(b)(i) - Certificate of Secretary Exhibit 3(b)(ii) - By-Laws, as amended Exhibit 11 - Statements - Computation of Earnings Per Share Incorporated by Reference to NOTE 4 of Notes to Financial Statements contained in Item 1 - Financial Statements (unaudited) of Part 1-Financial Information herein. 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 May 12, 2000 EX-3 2 10-Q FOR QUARTER ENDED MARCH 31, 2000/EXHIBIT 3(A)(I) EXHIBIT 3(a)(i) AMENDMENT TO RESTATED ARTICLES OF INCORPORATION OF MARSHALL & ILSLEY CORPORATION Pursuant to and in accordance with Section 180.1003 of the Wisconsin Statutes, the following amendment to the Restated Articles of Incorporation was duly adopted by the vote required on February 10, 2000 by the Board of Directors and April 25, 2000 by the shareholders of Marshall & Ilsley Corporation: BE IT RESOLVED, that the first paragraph of Article III of the Restated Articles of Incorporation of Marshall & Ilsley Corporation be, and hereby is, amended to read as follows: ARTICLE III ----------- The aggregate number of shares which the Corporation shall have the authority to issue, the designation of each class of shares, the authorized number of shares of each class of par value and the par value thereof per share, shall be as follows: Designation Par Value Authorized of Class per Share Number of Shares ----------- --------- ---------------- Preferred Stock $1.00 5,000,000 Common Stock $1.00 320,000,000 BE IT FURTHER RESOLVED, except as set forth above, Article III shall remain in full force and effect without further amendment or modification. Executed in duplicate as of the 28th day of April, 2000. MARSHALL & ILSLEY CORPORATION By: /s/ M.A. Hatfield ---------------------------------- M.A. Hatfield, Sr. Vice President and Secretary This instrument was drafted by: Renee M. Hardt Godfrey & Kahn, S.C. 780 North Water Street Milwaukee, Wisconsin 53202 MW388966_1.DOC EX-3 3 10-Q FOR QUARTER ENDED MARCH 31, 2000/EXHIBIT 3(A)(II) EXHIBIT 3(a)(ii) RESTATED ARTICLES OF INCORPORATION OF MARSHALL & ILSLEY CORPORATION These Restated Articles of Incorporation are executed by the undersigned to supersede and replace the heretofore existing Articles of Incorporation and amendments thereto of Marshall & Ilsley Corporation, a corporation organized under the laws of the State of Wisconsin: ARTICLE I The name of the corporation is Marshall & Ilsley Corporation (the "Corporation"). ARTICLE II The Corporation may engage in any lawful activity within the purpose for which corporations may be organized under the Wisconsin Business Corporation Law; provided, however, that the Corporation shall not engage in any activities prohibited by the United States Bank Holding Company Act of 1956. ARTICLE III The aggregate number of shares which the Corporation shall have the authority to issue, the designation of each class of shares, the authorized number of shares of each class of par value and the par value thereof per share, shall be as follows: Designation Par Value Authorized of Class per Share Number of Shares ----------- --------- ---------------- Preferred Stock $1.00 5,000,000 Common Stock $1.00 160,000,000 Any and all such shares of Common Stock and Preferred Stock may be issued for such consideration, not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. Any and all such shares so issued, the full consideration for which has been paid or delivered, shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments except as otherwise provided by the laws of the State of Wisconsin. The preferences, limitations and relative rights of such classes shall be as follows: (1) DESIGNATION OF SERIES. The Preferred Stock may from time to time as hereinafter provided, be divided into and issued in one or more series, and the Board of Directors is hereby expressly authorized to establish one or more series, to fix and determine the variations as among series and to fix and determine, prior to the issuance of any shares of a particular series, the following designations, terms, limitations and relative rights and preferences of such series: (a) The designations of such series and the number of shares which shall constitute such series, which number may at any time, or from time to time, be increased or decreased (but not below the number of shares thereof then outstanding) by the Board of Directors unless the Board of Directors shall have otherwise provided in establishing such series; (b) The voting rights to which the holders of the shares of such series are entitled, if any; (c) The yearly rate of dividends on the shares of such series, the dates in each year upon which such dividend shall be payable and, if such dividend shall be cumulative, the date or dates from which such dividend shall be cumulative; (d) The amount per share payable on the shares of such series in the event of the liquidation or dissolution or winding up of the Corporation (whether voluntary or involuntary); (e) The terms, if any, on which the shares of such series shall be redeemable, and, if redeemable, the amount per share payable thereon in the case of the redemption thereof (which amount may vary with regard to (i) shares redeemed on different dates; and (ii) shares redeemed through the operation of a sinking fund, if any, applicable to such shares, from the amount payable with respect to shares otherwise redeemed); (f) The extent to and manner in which a sinking fund, if any, shall be applied to the redemption or purchase of the shares of such series, and the terms and provisions relative to the operation of such fund; (g) The terms, if any, on which the shares of such series shall be convertible into shares of any other class or of any other series of the same or any other class and, if so convertible, the price or prices or the rate or rates of conversion, including the method, if any, for adjustments of such prices or rates, and any other terms and conditions applicable thereto; and (h) Such other terms, limitations and relative rights and preferences, if any, of such series as the Board of Directors may lawfully fix and determine and as shall not be inconsistent with the laws of the State of Wisconsin or these Amended and Restated Articles of Incorporation. All shares of the same series of Preferred Stock shall be identical in all respects, except that shares of any one series issued at different times may differ as to dates from which any cumulative dividends thereon shall be cumulative. All shares of the Preferred Stock of all series shall be equal and shall be identical in all respects, except as permitted by the foregoing provisions of this paragraph (1). (2) DIVIDENDS. The holders of Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends at the annual rate fixed by the Board of Directors with respect to each series of shares and no more. Such dividends shall be payable on such dates and in respect of such periods in such year as may be fixed by the Board of Directors to the holders of record thereof on such date as may be determined by the Board of Directors. Such dividends shall be paid or declared and set apart for payment for each dividend period before any dividend (other than a dividend payable solely in Common Stock) for the same period shall be paid upon or set apart for payment on the Common Stock, and, if dividends on the Preferred Stock shall be cumulative, all unpaid dividends thereon for any past dividend period shall be fully paid or declared and set apart for payment, but without interest, before any dividend (other than a dividend payable solely in Common Stock) shall be paid upon or set apart for payment on the Common Stock. The holders of Preferred Stock shall not, however, be entitled to participate in any other or additional earnings or profits of the Corporation, except for such premiums, if any, as may be payable in case of redemption, liquidation, dissolution or winding up. (3) REDEMPTION. In the event that the shares of any series of the Preferred Stock shall be made redeemable as provided in subparagraph (e) of paragraph (1), above, the Corporation may, at its option, redeem at any time or from time to time all or any part of such shares, upon notice duly given as hereinafter provided, by paying for each share the redemption price then applicable thereto fixed by the Board of Directors as provided in subparagraph (e) of paragraph (1), above. Notice of every such redemption shall be mailed at least thirty (30) days prior to the date fixed for such redemption to the holders of record of the shares called for redemption at their respective addresses as shown on the stock records of the Corporation. In case of a redemption of a part of a series of Preferred Stock at the time outstanding, the Corporation shall select by lot, in such manner as the Board of Directors may determine, the shares so to be redeemed. On or before the date fixed for a redemption specified therein, the Corporation shall deposit funds sufficient to redeem such shares with a bank or trust company in good standing, as designated in such notice, organized under the laws of the United States or of the State of Wisconsin, doing business in the City of Milwaukee, Wisconsin, and having a capital, surplus and undivided profit aggregating at least $50,000,000.00, according to its last published statement of condition, in trust for the pro rata benefit of the holders of the shares called for redemption, and if the name and address of such bank or trust company and the deposit or intent to deposit the redemption funds in such trust account shall have been stated in such notice of redemption, and the Corporation shall have given such bank or trust company irrevocable instructions and authorization to pay the amount payable upon redemption to the proper holders upon surrender of certificates representing such shares, then, from and after the mailing of such notice and the making of such deposit, all shares so called for redemption shall no longer be deemed to be outstanding for any purpose whatsoever and the right to receive dividends thereon and all rights of the holders of such shares in or with respect to such shares of the Corporation shall forthwith cease and terminate, except only the right of the holders thereof to receive from such bank or trust company the amount payable upon redemption together with all accrued but unpaid dividends to the date fixed for redemption, without interest, upon the surrender of the certificates representing the shares to be redeemed, and the right to exercise privileges of conversion, if any, on or before the date fixed for redemption or such earlier date as may be fixed for the expiration thereof. Any funds so deposited by the Corporation which shall not be required for such redemption because of the exercise of any right of conversion subsequent to the time of such deposit shall be released and repaid to the Corporation upon its request. Any funds so deposited and unclaimed at the end of five (5) years (or such shorter period as shall be provided by law) after the date fixed for redemption shall be released and repaid to the Corporation, after which holders of the shares called for redemption shall no longer look to the said bank or trust company but shall look only to the Corporation, or to others, as the case may be, for payment of any lawful claim for such funds which the holders of said shares may still have. Any interest accrued on funds so deposited shall be paid to the Corporation from time to time. (4) REISSUE OF SHARES. Shares of the Preferred Stock which shall have been converted, redeemed, purchased or otherwise acquired by the Corporation, whether through the operation of a sinking fund or otherwise, shall be retired and restored to the status of authorized but unissued shares, but may be reissued only as a part of the Preferred Stock other than the series of which they were originally a part. (5) LIQUIDATION. In the event of liquidation, dissolution or winding up (whether voluntary or involuntary) of the Corporation, the holders of shares of Preferred Stock shall be entitled to be paid the full amount payable on such shares upon the liquidation, dissolution or winding up of the Corporation fixed by the Board of Directors with respect to such shares as provided in subparagraph (d) of paragraph (1), above, before any amount shall be paid to the holders of the Common Stock. After payment to holders of the Preferred Stock of the full preferential amounts to which they are entitled, the remaining assets of the Corporation shall be distributed ratably among the holders of the Common Stock. (6) DESIGNATION OF RIGHTS AND PREFERENCES SERIES A CONVERTIBLE PREFERRED STOCK. (a) DESIGNATION OF SERIES. There is hereby established effective February 14, 1986 from the authorized preferred stock a series of preferred stock to be designated as Series A Convertible Preferred Stock, consisting of 500,000 shares, and having the powers, rights, limitations, restrictions and preferences set forth herein. The number of shares designated as Series A Convertible Preferred Stock may at any time, or from time to time, be increased or decreased (but not below the number of shares thereof then outstanding or then reserved for issuance in connection with the conversion of any securities of the Company) by the Board of Directors. (b) VOTING RIGHTS. The holders of Series A Convertible Preferred Stock shall have only such right to vote as provided by Sections 180.64(2) and 180.52 of the Wisconsin Statutes or by other applicable law. (c) DIVIDENDS. The holders of all issued and outstanding shares of Series A Convertible Preferred Stock shall be entitled to receive cash dividends when and as cash dividends are declared and become payable with respect to the Common Stock of the Corporation, in an amount, in the case of each holder of shares of Series A Convertible Preferred Stock with respect to each cash dividend declared with respect to the Common Stock, equal to the amount of the cash dividend that such holder would have received with respect to the resulting shares of Common Stock had he converted such shares of Preferred Stock into Common Stock immediately before the declaration of such dividend with respect to the Common Stock. Dividends on the Series A Convertible Preferred Stock shall be noncumulative. The holders of Series A Convertible Preferred Stock shall not be entitled to participate in any other or additional earnings or profits of the Corporation, except for such premiums, if any, as may be payable in case of liquidation, dissolution or winding up. (d) LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of the Common Stock or any other series or class of stock of the Corporation ranking junior to the Series A Convertible Preferred Stock upon liquidation, dissolution or winding up, the holders of the shares of the Series A Convertible Preferred Stock shall be entitled to receive $100 per share plus an amount equal to all dividends, if any, which have accrued thereon as the result of the declaration of dividends on the Common Stock but which remain unpaid to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation to be paid or distributed to the holders of the shares of the Series A Convertible Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and the preferential amount, if any, to be paid or distributed to the holders of any other preferred stock ranking as to liquidation, dissolution or winding up, on a parity with the Series A Convertible Preferred Stock, then such assets shall be distributed among the holders of Series A Convertible Preferred Stock and such other preferred stock, if any, ratably in accordance with the respective amounts that would be payable upon liquidation, dissolution or winding up to such holders with respect to such shares of Series A Convertible Preferred Stock and such other preferred stock, if any, if all preferential amounts payable thereon were paid in full. For the purposes of this subparagraph (d), a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. Subject to the rights of the holders of shares of any series or class of stock ranking on a parity with or prior to the Series A Convertible Preferred Stock upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the Series A Convertible Preferred Stock as provided in this subparagraph d, but not prior thereto, the holders of the Common Stock or any other series or class of stock ranking junior to the Series A Convertible Preferred Stock upon liquidation, dissolution or winding up shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the Series A Convertible Preferred Stock shall not be entitled to share therein. (e) CONVERSION RIGHTS. The holders of shares of Series A Convertible Preferred Stock shall have the right, at their option, to convert such shares into shares of Common Stock of the Corporation at any time on and subject to the following terms and conditions: (i) The shares of Series A Convertible Preferred Stock shall be convertible at the offices of the transfer agent or agents for the Series A Convertible Preferred Stock and at such other office or offices, if any, as the Board of Directors may designate, into fully paid and nonassessable shares (except as provided in Section 180.40(6) of the Wisconsin Statutes) of Common Stock of the Corporation, at the conversion price, determined as hereinafter provided, in effect at the time of conversion, each share of Series A Convertible Preferred Stock being valued at $100 for the purpose of such conversion. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "Conversion Price") shall be initially $78.75 per share of Common Stock, except that the initial Conversion Price applicable to shares of Series A Convertible Preferred Stock issued in exchange for Common Stock shall be the weighted average purchase price paid for such Common Shares as determined in good faith by the Board of Directors of the Company. The Conversion Price shall be adjusted in certain instances as provided in subparagraph (e)(iii), (iv), (v), (vi), (ix), (x) and (xi) below. (ii) In order to convert shares of Series A Convertible Preferred Stock into Common Stock, the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed or assigned to the Corporation or in blank, and give written notice to the Corporation at said office that such holder elects to convert such shares. Any such notice shall be irrevocable. No payment or adjustment shall be made upon conversion on account of any dividends, if any, which have accrued as the result of the declaration of dividends on the Common Stock on the shares of Series A Convertible Preferred Stock surrendered for conversion, but which remain unpaid, but payment or adjustment shall be made on account of any dividends payable with respect to the Common Stock issued upon conversion. Shares of Series A Convertible Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion in accordance with the foregoing provisions, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of Common Stock at such time. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at said office a certificate or certificates for the number of full shares of Common Stock issued upon such conversion, together with payment in lieu of any fraction of a share, as hereinafter provided, to the person or persons entitled to receive the same. (iii) In case the Corporation shall pay or make a dividend or other distribution on any class of Capital Stock of the Corporation in Common Stock, the Conversion Price shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the day fixed for the determination of shareholders entitled to receive such dividend or other distribution and of which the denominator shall be the sum of such number of shares plus the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this subparagraph (e)(iii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation. (iv) In case the Corporation shall issue rights or warrants to all holders of its Common Stock, entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in subparagraph (e)(viii) below) of the Common Stock on the date fixed for the determination of shareholders entitled to receive such rights or warrants, the Conversion Price shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate offering price for all of the shares of Common Stock so offered for subscription or purchase would purchase at such current market price and of which the denominator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (e)(iv), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation will not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation. (v) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares, the Conversion Price shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the date upon which such subdivision or combination becomes effective. (vi) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock, evidences of its indebtedness or assets (including securities, but excluding any rights or warrants referred to in subparagraph (e)(iv) above, any dividend or distribution paid in cash out of earned surplus of the Corporation and any dividend or distribution referred to in subparagraph (e)(iii) above), the Conversion Price shall be adjusted by multiplying such Conversion Price by a fraction of which the numerator shall be the difference of the current market price per share (determined as provided in subparagraph (e)(viii) below) of the Common Stock on the date fixed for the determination of the shareholders entitled to receive such distribution less the then fair market value (as determined by the Board of Directors, whose good faith determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed applicable to one share of the then outstanding Common Stock, and of which the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this subparagraph (e)(vi), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation will not distribute any evidences of its indebtedness or assets with respect to shares of Common Stock held in the treasury of the Corporation. (vii) A reclassification (including any reclassification upon a consolidation or merger of which the Corporation is the continuing corporation) of the Common Stock into securities including securities other than the Common Stock shall be deemed to involve (aa) a distribution of such securities other than Common Stock into which the Common Stock is reclassified to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of shareholders entitled to receive such distribution" within the meaning of subparagraph (e)(vi) above) and (bb) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the date upon which such subdivision or combination becomes effective" within the meaning of subparagraph (e)(v), above). (viii) For the purpose of any computation under subparagraph (e)(iv), (vi), and (x), the current market price per share of Common Stock on any date shall be deemed to be 90% (100%, in the case of subparagraph (e)(xvi) of (aa) the average of the daily closing prices for the five (5) consecutive business days commencing ten (10) business days before the date in question. The closing price for each day shall be the last reported sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on any exchange on which the Common Stock is listed or admitted to trading selected by the Board of Directors, or (bb) if the Common Stock is not listed or admitted to trading on any such exchange, the closing sale price in the over-the-counter market, or (cc) in case no such reported sale takes place or such data is not reported on such day, the average of the closing bid and asked prices in the over-the-counter market, as furnished by the National Association of Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting such information. If on any such day the Common Stock is not quoted by any such organization, the closing price for such day shall be the fair value of such Common Stock on such day, as determined by the Board of Directors in good faith. (ix) In case of any capital reorganization of the Corporation (other than any reorganization referred to in subparagraph (e)(iii), (iv), (v), (vi), or (vii), above), any reclassification of the Common Stock (other than any reclassification of the Common Stock referred to in subparagraph (e)(ii), (v) or (vii) above), the consolidation or merger of the Corporation with or into any other corporation or of the sale of all or substantially all of the properties and assets of the Corporation to any other corporation, each share of Series A Convertible Preferred Stock shall immediately thereafter be convertible into the number of shares of stock, other securities, assets and/or cash to which a holder of the number of shares of Common Stock into which such share was convertible immediately prior thereto would have been entitled to receive upon such reorganization, reclassification, consolidation, merger or sale. In case of any such reorganization, reclassification, consolidation, merger or sale, the provisions set forth in this subparagraph (e)(ix) with respect to the rights and interests of the holders of the Series A Convertible Preferred Stock shall automatically be appropriately adjusted so as to be applicable as nearly as possible to the shares of stock, other securities, assets and/or cash into which the Series A Convertible Preferred Stock thereby becomes convertible, and effective provision shall be made in the Articles of Incorporation of the resulting or surviving corporation or otherwise, so that such provisions shall thereafter be applicable, as nearly as possible, to any such shares of stock, other securities, assets and/or cash. The Corporation shall not effect any such consolidation, merger or sale, unless before the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger, the corporation purchasing such assets, or other appropriate corporation or entity shall expressly assume in writing the obligation to deliver to the holder of each share of Series A Convertible Preferred Stock, upon conversion thereof, such shares of stock, other securities, assets and/or cash as such holder shall be entitled to receive pursuant to the provisions hereof, and to make provisions for the protection of such conversion right as above provided. The provisions of this subparagraph (e)(ix) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers or sales. (x) In the event that the Corporation shall (except as hereinafter provided) issue any additional shares of Common Stock for cash at a price less than the Current Market Price per share of Common Stock then in effect, then the Conversion Price upon each such issuance shall be adjusted to that price determined by multiplying the Conversion Price in effect immediately prior to such event by a fraction: (aa) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares of Common Stock plus the number of full shares of Common Stock which the aggregate consideration for the total number of such additional shares of Common Stock so issued would purchase at the Current Market Price per share, and (bb) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares of Common Stock plus the number of such additional shares of Common Stock to issued; For purposes of clauses (aa) and (bb) the date as of which the Current Market Price per share of Common Stock shall be computed shall be the earlier of (xx) the date on which the Corporation shall enter into a firm contract for the issuance of such additional shares of Common Stock or (zz) the date of actual issuance of such additional shares of Common Stock; (xi) The Corporation may make such reductions in the Conversion Price, so as to increase the number of Common Shares into which the Series A Convertible Preferred Stock may be converted, in addition to those required by subparagraph (e)(iii), (iv), (v), (vi) and (ix), as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (xii) No adjustments to the Conversion Price will be made for the issuance of options or securities to employees of the Corporation or its subsidiaries pursuant to any stock option, restricted stock, thrift, stock purchase, savings or other employee benefit plan or to shareholders of the Corporation pursuant to any dividend reinvestment plan. No adjustment will be required to be made in the Conversion Price until accumulative adjustments require an adjustment of at least $.25, with any smaller adjustments not made hereunder cumulated with future adjustments. (xiii) The Corporation shall mail to each holder of Series A Convertible Preferred Stock notice of the proposed effective date of any action which would result in an adjustment in the Conversion Price determined as provided in this subparagraph (e) at least twenty (20) days prior to the record date thereof. Whenever the Conversion Price is adjusted as herein provided, the Corporation shall forthwith file with any transfer agent for the Series A Convertible Preferred Stock a certificate signed by the Chairman of the Board or one of the Vice Presidents of the Corporation and by its Treasurer or an Assistant Treasurer, stating the adjusted Conversion Price determined as provided in this subparagraph (e), and setting forth the facts requiring such adjustment. Any such transfer agent shall be under no duty to make any inquiry or investigation as to the statements contained in any such certificate or as to the manner in which any computation was made, but may accept such certificate as conclusive evidence of the statements therein contained, and any such transfer agent shall be fully protected with respect to any and all acts done or action taken or suffered by it in reliance thereon. No transfer agent in its capacity as transfer agent shall be deemed to have any knowledge with respect to any change of capital structure of the Corporation unless and until it receives a notice thereof pursuant to the provisions hereof, and, in the absence of any such notice, each transfer agent may conclusively assume that there has been no such change. Whenever the Conversion Price is adjusted, the Corporation shall forthwith cause a notice stating the adjustment, and describing the events requiring such adjustments and the Conversion Price to be mailed to the holders of record of Series A Convertible Preferred Stock. (xiv) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of Series A Convertible Preferred Stock, such number of shares as shall from time to time be sufficient to effect the conversion of all Series A Convertible Preferred Stock from time to time outstanding. The Corporation shall from time to time, in accordance with the laws of Wisconsin, increase the authorized amount of Common Stock if at any time the number of shares of Common Stock remaining unissued shah not be sufficient to permit the conversion of all the then outstanding shares of Series A Convertible Preferred Stock. (xv) The Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of Common Stock on conversion of Series A Convertible Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of Common Stock in a name other than that in which the Series A Convertible Preferred Stock so converted was registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. (xvi) No fractional shares of Common Stock will be issued upon conversion of the Series A Convertible Preferred Stock, and in lieu of any fractional shares that would otherwise be issuable, the Corporation will pay cash on the basis of the current market price per share of the Common Stock on the business day immediately preceding the day of conversion determined in accordance with subparagraph (e)(viii) above. (xvii) The Board of Directors of the Corporation shall not authorize for issuance any class of capital stock ranking prior to the Series A Convertible Preferred Stock without the consent of holders of two-thirds of the outstanding shares of Series A Convertible Preferred Stock. For purposes of this Agreement, any class or classes of stock of the Corporation shall be deemed to rank: (aa) Prior to the Series A Convertible Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Series A Convertible Preferred Stock; and (bb) On a parity with the Series A Convertible Preferred Stock as to dividends or as to distributions of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates, or liquidation amounts per share thereof be different from those of the Series A Convertible Preferred Stock, if the holders of such class and the Series A Convertible Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation amounts, without preference or priority of one over the other. ARTICLE IV PRE-EMPTIVE RIGHTS. No holder of any stock of the corporation shall have any pre-emptive or other subscription rights nor be entitled, as of right, to purchase or subscribe for any part of the unissued stock of this corporation or any of additional stock issued by reason of any increase of authorized capital stock of this corporation or other securities whether or not convertible into stock of this corporation. ARTICLE V The address of the registered office of the Corporation is 770 North Water Street, Milwaukee, Wisconsin 53202 and its registered agent at such address is Michael A. Hatfield. ARTICLE VI The business and affairs of the Corporation shall be managed by a Board of Directors. The number of directors (exclusive of directors, if any, elected by the holders of one or more series of Preferred Stock, voting separately as a series pursuant to the provisions of these Restated Articles of Incorporation applicable thereto) shall be not less than 3 directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors then in office. The directors shall be divided into three classes, designated Class I, Class II, and Class III, and the term of office of directors of each class shall be three years. Each class shall consist, as nearly as possible, of one-third of the total number of directors constituting the entire Board of Directors. If the number of directors is changed by resolution of the Board of Directors pursuant to this Article VI, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify. Any newly created directorship resulting from an increase in the number of directors and any other vacancy on the Board of Directors, however caused, shall be filled by the vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director so elected to fill any vacancy in the Board of Directors, including a vacancy created by an increase in the number of directors, shall hold office for the remaining term of directors of the class to which he has been elected and until his successor shall be elected and shall qualify. Exclusive of directors, if any, elected by the holders of one or more series of Preferred Stock, no director of the Corporation may be removed from office, except for Cause and by the affirmative vote of two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting of shareholders duly called for such purpose. As used in this Article VI, the term "Cause" shall mean solely malfeasance arising from the performance of a director's duties which has a materially adverse affect on the business of the Corporation. No person, except those nominated by or at the direction of the Board of Directors, shall be eligible for election as a director at any annual or special meeting of shareholders unless a written request, in the form established by the Corporation's By-laws, that his or her name be placed in nomination is received from a shareholder of record by the Secretary of the Corporation not less than 30 days prior to the date fixed for such meeting, together with the written consent of such person to serve as a director. Where such a request for nomination and such consent have been timely received, but such nominee is unable or declines to serve, the person who placed the individual's name in nomination may request that an alternative name be placed in nomination at the meeting. Notwithstanding the foregoing, whenever the holders of any one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately by series, to elect directors at an annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of these Restated Articles of Incorporation applicable thereto. Directors so elected shall not be divided into classes unless expressly provided by such terms, and during the prescribed terms of office of such directors the Board of Directors shall consist of such directors in addition to the number of directors determined as provided in the first paragraph of this Article VI. ARTICLE VII The period of existence of the Corporation shall be perpetual. ARTICLE VIII ACQUISITION AND DISPOSITION OF OWN SHARES. The Corporation shall have the right to purchase, take, receive or otherwise acquire, hold, own, pledge, transfer or otherwise dispose of its own shares; provided that no such acquisition, directly or indirectly, of its own shares of equal or subordinate rank shall be made unless: (a) At the time of such acquisition the Corporation is not and would not thereby be rendered insolvent; and (b) The net assets of the Corporation remaining after such acquisition would be not less than the aggregate preferential amount payable in the event of voluntary liquidation to the holders of shares having preferential rights to the assets of the corporation in the event of liquidation. ARTICLE IX Notwithstanding any other provision of these Restated Articles of Incorporation or the Corporation's By-Laws (and notwithstanding the fact that some lesser percentage may be specified by law, these Restated Articles of Incorporation or the Corporation's By-Laws), the Corporation's By-Laws may be amended, altered or repealed, and new By-Laws may be enacted, only by the affirmative vote of not less than two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting of shareholders duly called for such purpose, or by a vote of not less than three-quarters of the entire Board of Directors then in office. ARTICLE X Except as otherwise specified herein, the "requisite affirmative votes," and the recitals of votes which are "requisite for adoption" or "requisite for approval" under Section 180.25 of the Wisconsin Statutes for the approval or authorization of any (i) plan of merger or consolidation of the Corporation with or into any other corporation, (ii) sale, lease, exchange or disposition of all or substantially all the property and assets of the Corporation to or with any other person, corporation or entity not made in the ordinary course of business, or (iii) voluntary dissolution of the Corporation or revocation of voluntary dissolution proceedings, shall be the affirmative vote of the holders of two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting called for such purpose (unless any class or series of shares is entitled to vote thereon as a class, in which event the "requisite affirmative votes" shall be the affirmative votes of the holders of two-thirds of the outstanding shares of each class of shares and of each series entitled to vote thereon as a class and of the total shares entitled to vote thereon), provided, however, if the Board of Directors shall have approved any transaction described in clauses (i), (ii) or (iii) above by a resolution adopted by three-quarters of the Board of Directors then in office and entitled to vote thereon, the "requisite affirmative votes," and the recitals of votes which are "requisite for adoption" or "requisite for approval," shall be the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting called for such purpose (unless any class or series of shares is entitled to vote thereon as a class, in which event the "requisite affirmative votes" shall be the affirmative votes of the holders of a majority of the outstanding shares of each class of shares and of each series entitled to vote thereon as a class and of the total shares entitled to vote thereon). ARTICLE XI A. In addition to any affirmative vote required by law or these Restated Articles of Incorporation or the By-Laws of the Corporation, and except as otherwise expressly provided in Section (B) of this Article XI, a Business Combination (as hereinafter defined) shall require the affirmative vote of not less than: (1) Eighty percent (80%) of the votes entitled to be cast by the holders of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (hereinafter referred to in this Article XI as "Voting Stock"), voting together as a single class (it being understood that, for purposes of this Article XI, each share of the Voting Stock shall have the number of votes granted to it pursuant to the Wisconsin Business Corporation Law or as otherwise provided pursuant to Article III of these Restated Articles of Incorporation); or (2) Two-thirds of the votes entitled to be cast by holders of Voting Stock, voting together as a single class, other than Voting Stock beneficially owned by an Interested Stockholder (as defined below) who is a party to the Business Combination or an Affiliate or Associate of such Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified by law or in any agreement with any national securities exchange or otherwise, but such affirmative separate class vote shall be required in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law or pursuant to Article III of these Restated Articles of Incorporation. B. The provisions of Section (A) of this Article XI shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative separate class vote as is required by law and any other provision of these Restated Articles of Incorporation, and any resolution or resolutions adopted by the Board of Directors pursuant to these Restated Articles of Incorporation, as amended, if the conditions specified in either of the following paragraphs (1) or (2) are met: 1. The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined), it being understood that this condition shall not be capable of satisfaction unless there is at least one Disinterested Director; or 2. All of the following conditions are met: (a) the aggregate amount of cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of any Business Combination (the "Consummation Date") of consideration other than cash to be received per share of Common Stock as a result of such Business Combination shall be at least equal to the higher of the following: (i) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any shares of Common Stock acquired by it (aa) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date"), or (bb) in the transaction in which it became an Interested Stockholder, whichever is higher, PLUS interest compounded annually from the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date") through the Consummation Date at the base rate for interest rate determinations of M&I Marshall & Ilsley Bank in effect from time to time, LESS the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid other than in cash, per share of Common Stock from the Determination Date through the Consummation Date (but not exceeding the amount of such interest payable per share of Common Stock); and (ii) The Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher. The provisions of this Paragraph B(2)(a) of this Article XI shall be required to be met with respect to all shares of Common Stock outstanding whether or not the Interested Stockholder has previously acquired any shares of Common Stock. (b) The aggregate amount of cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share of any class or series of outstanding Capital Stock, other than Common Stock, shall be at least equal to the highest of the following (such requirement being applicable to each such class or series of outstanding Capital Stock, whether or not the Interested Stockholder has previously acquired beneficial ownership of any shares of such class or series): (i) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock acquired by it (aa) within the two-year period immediately prior to the Announcement Date, or (bb) in the transaction in which it became an Interested Stockholder, whichever is higher, PLUS interest compounded annually from the Determination Date through the Consummation Date at the base rate for interest rate determinations of M&I Marshall & Ilsley Bank in effect from time to time, LESS the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid other than in cash, per share of such class or series of Capital Stock from the Determination Date through the Consummation Date (but not exceeding the amount of such interest payable per share of such class of Capital Stock); (ii) (If applicable) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and (iii) The Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher. (c) The consideration to be received by holders of a particular class or series of outstanding Capital Stock (including Common Stock) in such Business Combination shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class or series of Capital Stock. If the Interested Stockholder has paid for shares of any class or series of Capital Stock with varying forms of consideration, the form of consideration of such class or series of Capital Stock shall be either cash or the form used to acquire the largest number of shares of such class or series of Capital Stock previously acquired by it. (d) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on the outstanding stock having a preference over the Common Stock as to dividends or upon liquidations; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (2) an increase in such annual rate of dividends (as necessary to prevent any reduction) in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (c) such Interested Stockholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which resulted in such Interested Stockholder becoming an Interested Stockholder. (e) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately, solely in such Interested Stockholder's capacity as a stockholder of the Corporation), of any loans, advances, guaranties, pledges or other financial assistance or any tax credits or other tax advantageous provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (f) A proxy or information statement describing the proposed Business Combination in accordance with the requirements of the 1934 Act (or any subsequent provisions replacing such Act) shall be mailed to all Stockholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The first page of such proxy or information statement shall prominently display the recommendation, if any, which a majority of the Disinterested Directors then in office may choose to make to the holders of Capital Stock regarding the proposed Business Combination. Such proxy or information statement shall also contain, if a majority of the Disinterested Directors then in office so request, an opinion of a reputable investment banking firm of recognized national standing (which firm shall be selected by a majority of the Disinterested Directors then in office, furnished with all information it reasonably requests, and paid a reasonable fee for its services by the Corporation upon the Corporation's receipt of such opinion) as to the fairness (or lack of fairness) of the terms of the proposed Business Combination from the point of view of the holders of Capital Stock other than the Interested Stockholder. (g) For purposes of this Article XI, the following definitions shall apply: (i) The term "Business Combination" shall mean any transaction referred to any one or more of the following clauses: (aa) Any merger or consolidation of the Corporation or any Subsidiary, with (1) any Interested Stockholder or (2) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate or an Associate of any Interested Stockholder; or (bb) Any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value of $25,000,000 or more; or (cc) The issuance or transfer by the Corporation or any Subsidiary (in any one transaction or a series of transactions) of any Securities of the Corporation or any Subsidiary having an aggregate Fair Market Value of $25,000,000 or more to any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (dd) The adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (ee) Any reclassification of Securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries of any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible Securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or an Affiliate of any Interested Stockholder; or (ff) Any series or combination of transactions directly or indirectly having the same effect as any of the foregoing. (ii) "Interested Stockholder" shall mean any person (other than the Corporation, any Subsidiary, or any pension, savings or other employee benefit plan for the benefit of employees of the Corporation and/or any Subsidiary) who or which: (aa) is the beneficial owner, directly or indirectly, of more than 10% of the Corporation's outstanding Voting Stock; or (bb) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was a beneficial owner, directly or indirectly, of 10% or more of the Corporation's then outstanding Voting Stock; or (cc) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any other Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the 1933 Act. (iii) A person shall be deemed the "beneficial owner" of any Voting Stock; (aa) which such person or any of its Affiliates or Associates owns, directly or indirectly; or (bb) which such person or any of its Affiliates or Associates has (y) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (z) the right to vote pursuant to any agreement, arrangement or understanding; or (cc) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. (iv) In determining whether a person is an Interested Stockholder pursuant to Subparagraph (g)(ii) of this Article XI, the number of shares of Voting Securities deemed to be outstanding shall include shares deemed owned through application of Subparagraph (g)(iii) of this Article XI, but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (v) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purpose of the definition of Interested Stockholder set forth in Subparagraph (g)(ii) of this Article XI, the term "Subsidiary" shall mean only a corporation of which a majority of each class of Voting Securities is owned, directly or indirectly, by the Corporation. (vi) "Disinterested Director" means any member of the Board of Directors of the Corporation who is not affiliated with the Interested Stockholder and who either was a member of the Board of Directors prior to the Determination Date or was elected or recommended for election by majority of the Disinterested Directors in office at the time such Director was nominated for election. (vii) "Fair Market Value" means: (aa) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the composite tape for the New York Stock Exchange listed stocks, or, if such stock is not quoted on the composite tape, on the New York Stock Exchange, or, if such stock is not listed or admitted for trading on such exchange, on the principal United States Securities Exchange registered under the 1934 Act on which such stock is listed or admitted for trading, or, if such stock is not listed or admitted for trading on any such exchange, the highest closing sale price (if applicable) or bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. automated quotations system or any system then in use, or if no such quotations are available, the Fair Market Value on the date in question of a share of such stock as determined in good faith by a majority of the Disinterested Directors then in office, in each case with respect to any class or series of stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (bb) in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined in good faith by a majority of the Disinterested Directors then in office. (viii) Reference to "highest per share price" shall in each case with respect to any class or series of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock. (ix) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs B(2)(a) and (b) of this Article XI, shall include the shares of Common Stock and/or shares of any other class or series of Capital Stock retained by the holders of such shares. (x) "Capital Stock" shall mean all capital stock of the Corporation issued from time to time under Article III of the Corporation's Restated Articles of Incorporation. ARTICLE XII These Restated Articles of Incorporation supersede and take the place of the heretofore existing Articles of Incorporation of the Corporation and amendments thereto. Executed in duplicate this 25th day of March, 1994. MARSHALL & ILSLEY CORPORATION By: /s/ James B. Wigdale ----------------------------- James B. Wigdale, Chairman Attest: /s/ M.A. Hatfield --------------------------------- M.A. Hatfield, Secretary This instrument was drafted by: Scott A. Moehrke Godfrey & Kahn, S.C. 780 North Water Street Milwaukee, Wisconsin 53202-3590 MW415898_1.DOC EX-3 4 10-Q FOR QUARTER ENDED MARCH 31, 2000/EXHIBIT 3(B)(I) EXHIBIT 3(b)(i) CERTIFICATE OF SECRETARY OF MARSHALL & ILSLEY CORPORATION The undersigned, Michael A. Hatfield, on behalf of Marshall & Ilsley Corporation, a Wisconsin corporation (the "Corporation"), hereby certifies that he is the duly elected and acting Secretary of the Corporation and certifies that attached hereto as EXHIBIT A is a true and correct copy of an Amendment to the By-Laws of Marshall & Ilsley Corporation that was adopted by the Board of Directors of the Corporation on April 25, 2000. IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the 8th day of May, 2000. /s/ Michael A. Hatfield ---------------------------- Michael A. Hatfield, Secretary EXHIBIT A ----------- Resolutions Approving Amendment to By-Laws RESOLVED, that Sections 2.4, 2.10 and 3.5 of the Corporation's By-Laws shall be amended to read as follows: 2.4. NOTICE OF MEETING. The Corporation shall notify shareholders of the date, time and place of each annual and special shareholders' meeting not less than ten nor more than sixty days before the date of the meeting. Notice of a special meeting shall include a description of each purpose for which the meeting is called. Notice of the meeting shall be given only to those shareholders entitled to vote at the meeting, unless otherwise required by the law. Notice may be communicated in person, by telephone, telegraph, teletype, facsimile or other forms of wire or wireless communication, by mail or private carrier, or by electronic transmission. Written notice, which includes notice by electronic transmission, to a shareholder shall be deemed to be effective on the earlier of: (a) the date received; (b) the date it is deposited in the United States mail when addressed to the shareholder's address shown in the Corporation's current record of shareholders, with postage prepaid; (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee; (d) the date sent, if transmitted by telegraph, teletype, facsimile or other form of wire or wireless communication; (e) the date delivered to a courier or deposited in a designated receptacle, if sent by private carrier, when addressed to the shareholder's address shown in the Corporation's current record of shareholders; or (f) when electronically transmitted to the shareholder in a manner authorized by the shareholder. 2.10.PROXIES. At all meetings of shareholders, a shareholder entitled to vote may authorize another person to act for the shareholder by appointing the person as proxy. A shareholder or the shareholder's authorized officer, director, employee, agent, or attorney-in-fact may use any of the following means to appoint a proxy: (a) In writing by signing or causing the shareholder's signature to be affixed to an appointment form by any reasonable means, including, but not limited to, by facsimile signature. (b) By transmitting or authorizing the transmission of an electronic transmission of the appointment to the person who will be appointed as proxy or to a proxy solicitation firm, proxy support service organization or like agent authorized to receive the transmission by the person who will be appointed as proxy. (c) By any other means permitted by the WBCL. Such proxy shall be filed with the Secretary of the Corporation, in the form of a signed appointment form or an electronic transmission of the appointment, before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. 3.5. NOTICE. Notice of meetings of the Board of Directors may be communicated in person, by telephone, telegraph, teletype, facsimile or other form of wire or wireless communication, or by mail or private carrier. Notice of meetings, except the regular annual meeting, shall be given at least 48 hours prior to the time set for the meeting if communicated orally or by telegraph, teletype, facsimile, other form of wire or wireless communication or by electronic transmission, and at least 5 days prior to the date set for the meeting if communicated by any other means. Written notice, which includes notice by electronic transmission, shall be deemed effective and given on the earlier of: (a) when received; (b) 2 days after the date it is deposited in the United States mail, with postage prepaid, when addressed to the director at an address designated by him or her to receive such notice or, in the absence of such designation, at his or her business or home address as they appear in the Corporation's records; (c) the date and time sent, if transmitted by telegraph, teletype, facsimile or other form of wire or wireless communication when sent to the director at a location designated by the director to receive such notice or, in the absence of such designation, at his or her business or home as those locations appear in the Corporation's records; (d) the date delivered to a courier or deposited in a designated receptacle, if sent by private carrier, when addressed to the director at an address designated by him or her to receive such notice or, in the absence of such designation, at his or her business or home address as it appears in the Corporation's records; or (e) when electronically transmitted. Oral notice shall be deemed effective when communicated. Whenever any notice whatever is required to be given to any director of the Corporation under these By-laws, the Articles or under the provisions of any statute, a waiver thereof in writing, signed at any time whether before or after the time of meeting, by the director entitled to such notice, shall be deemed equivalent to timely notice. A director's attendance at, or participation in, a meeting waives any required notice unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of such meeting. MW416442_1.DOC EX-3 5 10-Q FOR QUARTER ENDED MARCH 31, 2000/EXHIBIT 3(B)(II) EXHIBIT 3(b)(ii) BY-LAWS MARSHALL & ILSLEY CORPORATION 1. OFFICES 1.1. Principal and Other Offices. The principal office of the Corporation shall be located at any place either within or outside the State of Wisconsin as shall be designated in the Corporation's most recent annual report filed with the Wisconsin Secretary of State. The executive offices of the Corporation shall be located at its principal office. The Corporation may have such other offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the Corporation may require from time to time. 1.2. Registered Office. The registered office of the Corporation required by the Wisconsin Business Corporation Law (the "WBCL") to be maintained in the State of Wisconsin may be, but need not be, the same as any of its places of business within the State of Wisconsin. The registered office may be changed from time to time as provided in Section 180.0502 of the WBCL or any successor thereto. 2. SHAREHOLDERS 2.1. Annual Meeting. The annual meeting of shareholders shall be held on the fourth Tuesday in the month of April in each year at 10 A.M., or at such other time and/or date as shall be fixed by the Secretary of the Corporation or the Board of Directors, for the purposes of electing directors and for the transaction of such other business as may have been properly brought before the meeting in compliance with the provisions of Section 2.5 of the By-laws. If the day fixed for the annual meeting shall be a legal holiday in the State of Wisconsin, such meeting shall be held on the next succeeding business day. 2.2. Special Meetings. Except as otherwise provided by the WBCL and subject to the rights of the holders of any class of series of capital stock having a preference over the common stock as to dividends or upon liquidation, special meetings of shareholders of the Corporation may be called only by the Chief Executive Officer or the President of the Corporation pursuant to a resolution approved by not less than three-quarters of the Board of Directors. 2.3. Place of Meeting. The Board of Directors, Chief Executive Officer or President may designate any place, within or without the State of Wisconsin, as the place of meeting for the annual meeting or for any special meeting. If no designation is made, the place of meeting shall be the principal office of the Corporation. Any meeting may be adjourned to reconvene at any place designated by vote of a majority of the shares represented at the meeting. 2.4. Notice of Meeting. The Corporation shall notify shareholders of the date, time and place of each annual and special shareholders' meeting not less than ten nor more than sixty days before the date of the meeting. Notice of a special meeting shall include a description of each purpose for which the meeting is called. Notice of the meeting shall be given only to those shareholders entitled to vote at the meeting, unless otherwise required by the law. Notice may be communicated in person, by telephone, telegraph, teletype, facsimile or other forms of wire or wireless communication, by mail or private carrier, or by electronic transmission. Written notice, which includes notice by electronic transmission, to a shareholder shall be deemed to be effective on the earlier of: (a) the date received; (b) the date it is deposited in the United States mail when addressed to the shareholder's address shown in the Corporation's current record of shareholders, with postage prepaid; (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee; (d) the date sent, if transmitted by telegraph, teletype, facsimile or other form of wire or wireless communication;(e) the date delivered to a courier or deposited in a designated receptacle, if sent by private carrier, when addressed to the shareholder's address shown in the Corporation's current record of shareholders; or (f) when electronically transmitted to the shareholder in a manner authorized by the shareholder. 2.5. Advance Notice of Shareholder-Proposed Business at Annual Meetings. At an annual meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given in accordance with Section 2.4 of these By-laws, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, the Chief Executive Officer or the President, or (c) otherwise properly brought before the meeting by a shareholder. In addition to any other applicable requirements for business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice of such business in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 90 days prior to the anniversary date of the annual meeting of shareholders in the immediately preceding year. A shareholder's notice to the Secretary of the Corporation shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the shareholder proposing such business, and the beneficial owner or owners, if any, on whose behalf the proposal is made, (iii) a representation that the shareholder is a shareholder of record and will remain such through the record date for the meeting and that the shareholder intends to appear in person or by proxy at such meeting to move the consideration of the business set forth in the notice, (iv) the class and number of shares of the Corporation which are beneficially owned by the shareholder and the beneficial owner or owners on whose behalf the proposal is made, and (v) any material interest of the shareholder in such business. In addition, any such shareholders shall be required to provide such further information as may be requested by the Corporation in order to comply with federal securities laws, rules and regulations. Notwithstanding anything contained in these By-laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2.5; provided, however, that nothing in this Section 2.5 shall be deemed to preclude discussion by any shareholder of any business properly brought before the annual meeting in accordance with said procedure. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2.5, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. 2.6. Procedure for Nomination of Directors. Only persons nominated in accordance with the following procedures shall be eligible for election as directors, except as may otherwise be provided by the terms of the Corporation's Amended and Restated Articles of Incorporation (the "Articles") with respect to the rights of holders of any class or series of preferred stock to elect directors under specified circumstances. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders by or at the direction of the Board of Directors, by any nominating committee or persons appointed by the Board, or by any shareholder of the Corporation entitled to vote for election of directors at the meeting who complies with the notice procedures set forth in this Section 2.6. Nominations other than those made by or at the direction of the Board of Directors or any nominating committee or person appointed by the Board shall be made pursuant to timely notice in proper written form to the Secretary of the Corporation. To be timely, a shareholder's request to nominate a person for election to the Board of Directors, together with the written consent of such person to serve as a director, must be received by the Secretary of the Corporation not less than 90 days prior to the anniversary date of the annual meeting of shareholders in the immediately preceding year. To be in proper written form, such shareholder's notice shall set forth in writing (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by such person, (iv) a description of all arrangements and understandings between the shareholder or beneficial owner or owners on whose behalf the nomination is made and each proposed nominee and any person or persons (naming such person or persons) pursuant to which the intended nomination or nominations are to be made by the shareholder, and (v) such other information relating to such person as is required to be disclosed in solicitations of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended; and (b) as to the shareholder giving the notice, (i) the name and address, as they appear on the Corporation's books, of such shareholder and the beneficial owner or owners, if any, on whose behalf the nomination is made, (ii) a representation that the shareholder is a shareholder of record and will remain such through the record date for the meeting and that the shareholder intends to appear in person or by proxy at such meeting to make the nomination(s) set forth in the notice, and (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by such shareholder and the beneficial owner or owners on whose behalf the nomination is made. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No persons shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein and in the Articles. The Chairman of any meeting of shareholders shall, if the facts so warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Articles and these By-laws; and if he should so determine, he shall so declare to the meeting and the defective nomination(s) shall be disregarded. 2.7. Fixing of Record Date. For the purpose of determining any voting group entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive any distribution or dividend from the Corporation, or in order to determine those shareholders entitled to take any other action authorized by these By-laws or the WBCL, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders. Such record date shall not be more than 70 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is so fixed for the determination of shareholders entitled to notice of, or to vote at a meeting of shareholders, or shareholders entitled to receive a dividend or any other distribution, the record date for determination of such shareholders shall be at the close of business on: (a) with respect to an annual shareholders' meeting or any special shareholders' meeting called by the Board of Directors or any person specifically authorized by these By-laws to call a meeting, the day before the first notice is given to shareholders; (b) with respect to a special shareholders' meeting demanded by one or more shareholders, the date the first shareholder signs a demand for the special meeting; (c) with respect to the payment of a dividend, the date the Board of Directors authorizes the dividend; and (d) with respect to any other distribution to shareholders, other than one involving a repurchase or reacquisition of shares, the date the Board of Directors authorizes the distribution. When a determination of shareholders entitled to notice of or to vote at any meeting of shareholders has been made as provided in this section, such determination shall be applied to any adjournment thereof unless the Board of Directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. 2.8. Shareholders' List. After fixing a record date for a meeting of shareholders, the Corporation shall prepare a list of the names of all its shareholders who are entitled to notice of a shareholders' meeting. The list shall be arranged by class or series of shares and show the address of and the number of shares held by each shareholder. The shareholder list shall be available for inspection by any shareholder beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting. The list shall be available at the Corporation's principal office or at a place identified in the meeting notice in the city where the meeting is to be held. A shareholder, or his or her agent or attorney, is entitled, on written demand, to inspect and to copy the list during regular business hours and at his expense, during the period it is available for inspection, provided the shareholder, or his or her agent or attorney, demonstrates to the satisfaction of the Corporation he or she satisfies the requirements of the WBCL. The Corporation shall make the shareholders' list available at the meeting and shall be subject to the inspection of any shareholder, or his or her agent or attorney, during the time of the meeting or any adjournment thereof. Refusal or failure to prepare or make available the shareholders' list shall not affect the validity of any action taken at such meeting. 2.9. Quorum; Votes. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the Articles or the WBCL provides otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. If the Articles or the WBCL provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately. Action may be taken by one voting group on a matter even though no action is taken by another voting group entitled to vote on the matter. Once a share is represented for any purpose at a meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is deemed present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. If a quorum exists, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Articles or the WBCL requires a greater number of affirmative votes, provided, however, that unless otherwise provided in the Articles, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. 2.10. Proxies. At all meetings of shareholders, a shareholder entitled to vote may authorize another person to act for the shareholder by appointing the person as proxy. A shareholder or the shareholder's authorized officer, director, employee, agent, or attorney-in-fact may use any of the following means to appoint a proxy: (a) In writing by signing or causing the shareholder's signature to be affixed to an appointment form by any reasonable means, including, but not limited to, by facsimile signature. (b) By transmitting or authorizing the transmission of an electronic transmission of the appointment to the person who will be appointed as proxy or to a proxy solicitation firm, proxy support service organization or like agent authorized to receive the transmission by the person who will be appointed as proxy. (c) By any other means permitted by the WBCL. Such proxy shall be filed with the Secretary of the Corporation, in the form of a signed appointment form or an electronic transmission of the appointment, before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. 2.11. Voting Shares Owned by the Corporation. Shares of the Corporation belonging to it shall not be voted directly or indirectly at any meeting of shareholders and shall not be considered in determining whether a quorum exists or for any other purpose relating to the voting of shares. Notwithstanding the foregoing, shares held by the Corporation in a fiduciary capacity are outstanding shares and may be voted and shall be considered in any such determination. 2.12. Shares in the Name of Another Corporation or a Trustee. Shares issued in the name of another corporation may be voted by the president of such corporation, or any other officer or proxy appointed by such president in the absence of express written notice to the Corporation of the designation of some other person by the board of directors or by-laws of such other corporation. Shares in the name of a trustee shall be voted in the manner designated by a majority of the trustees or their proxy unless a greater concurrence of trustees is required by the trust, of which the Corporation shall have actual notice. 2.13. Adjournments. An annual or special meeting of shareholders may be adjourned by a vote of a majority of the shares represented at the meeting entitled to vote in the election of directors, even if less than a quorum. Upon being reconvened, the adjourned meeting shall be deemed to be a continuation of the initial meeting. A quorum will be deemed present if a quorum of shares was represented at the initial meeting and any business that could be conducted at the initial meeting may be considered at the adjourned meeting. A meeting may be adjourned at any time, including after action on one or more matters, and for any purpose, including, but not limited to, allowing additional time to solicit votes on one or more matters, to disseminate additional information to shareholders or to count votes. Notice is not required for an adjourned meeting if the date, time and place of the adjournment are announced at the meeting before adjournment. If a new record date for an adjourned meeting is fixed, notice of the adjourned meeting must be given to persons who are shareholders as of the new record date. Only those shares entitled to vote at the initial meeting will be entitled to vote at the adjourned meeting. 2.14. Polling. In the discretion of the chairman of an annual or special meeting of shareholders, polls may be closed at any time after commencement of the meeting. When there are several matters to be considered at a meeting, the polls may remain open during the meeting as to any or all matters to be considered, as the chairman may declare. Polls will remain open as to matters to be considered at any adjournment of the meeting unless the chairman declares otherwise. At the discretion of the chairman, the polls may remain open after adjournment of a meeting for not more than 72 hours for the purpose of collecting proxies and counting votes. All votes submitted prior to the announcement of the results of the balloting shall be valid and counted. The results of balloting shall be final and binding after announcement of such results. 2.15 Chairman of Meetings. The Chairman of the Board or, in his absence or inability or refusal to act, the Chairman of the Executive Committee, shall preside at all meetings of the shareholders. 3. BOARD OF DIRECTORS 3.1. General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation managed under the direction of, its Board of Directors, subject to any limitations set forth in the Articles. 3.2. Number, Tenure and Qualifications. The number of directors (exclusive of directors, if any, elected by the holders of one or more series of preferred stock, voting separately as a series pursuant to the provisions of the Articles applicable thereto) shall not be less than three directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors then in office. The directors shall be divided into three classes, designated Class I, Class II and Class III, and the term of directors of each class shall be three years. Each class shall consist, as nearly as possible, of one-third of the total number of directors constituting the entire Board of Directors. If the number of directors is changed by resolution of the Board of Directors pursuant to this Section 3.2, any increase or decrease shall be apportioned among the various classes of directors so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be duly elected and shall qualify. Directors need not be residents of the State of Wisconsin or shareholders of the Corporation. No person shall be eligible to be elected a director at any meeting of shareholders held on or after the date he attains age seventy-two (72). The Board of Directors, at its discretion, may waive the age limitation or establish a greater age from time to time. The Board of Directors, at its discretion, may designate a person who has served as a director of the Corporation as a "Director Emeritus" upon such terms and conditions and at such compensation as may be fixed by resolution of the Board from time to time. A Director Emeritus shall have the right to attend meetings of the Board of Directors but shall have no vote and shall not be counted in determining the presence of a quorum. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Articles applicable thereto. Directors so elected shall not be divided into classes unless expressly provided by such Articles, and during the prescribed terms of office of such directors, the Board of Directors shall consist of such directors in addition to the number of directors determined as provided in the first paragraph of this Section 3.2. 3.3. Regular Meeting. A regular meeting of the Board of Directors shall be held, without other notice, immediately after and at the same place as the annual meeting of shareholders, and each adjourned session thereof. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. 3.4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, President, Secretary or three-quarters of the members of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place either within or without the State of Wisconsin as the place for holding any special meeting of the Board of Directors called by them. 3.5. Notice. Notice of meetings of the Board of Directors may be communicated in person, by telephone, telegraph, teletype, facsimile or other form of wire or wireless communication or by mail or private carrier. Notice of meetings, except the regular annual meeting, shall be given at least 48 hours prior to the time set for the meeting if communicated orally or by telegraph, teletype, facsimile, other form of wire or wireless communication or by electronic transmission, and at least 5 days prior to the date set for the meeting if communicated by any other means. Written notice, which includes notice by electronic transmission, shall be deemed effective and given on the earlier of: (a) when received; (b) 2 days after the date it is deposited in the United States mail, with postage prepaid, when addressed to the director at an address designated by him or her to receive such notice or, in the absence of such designation, at his or her business or home address as they appear in the Corporation's records; (c) the date and time sent, if transmitted by telegraph, teletype, facsimile or other form of wire or wireless communication when sent to the director at a location designated by the director to receive such notice or, in the absence of such designation, at his or her business or home as those locations appear in the Corporation's records; (d) the date delivered to a courier or deposited in a designated receptacle, if sent by private carrier, when addressed to the director at an address designated by him or her to receive such notice or, in the absence of such designation, at his or her business or home address as it appears in the Corporation's records; or (e) when electronically transmitted. Oral notice shall be deemed effective when communicated. Whenever any notice whatever is required to be given to any director of the Corporation under these By-laws, the Articles or under the provisions of any statute, a waiver thereof in writing, signed at any time whether before or after the time of meeting, by the director entitled to such notice, shall be deemed equivalent to timely notice. A director's attendance at, or participation in, a meeting waives any required notice unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of such meeting. 3.6. Quorum; Votes. A majority of the number of directors in accordance with Section 3.2 shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but though less than such quorum is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. The affirmative vote of a majority of directors present shall be the act of the Board of Directors, or a committee of the Board of Directors created under Section 3.11, unless the Articles or these By-laws require the vote of a greater number of directors. 3.7. Removal and Resignation. Exclusive of directors, if any, elected by the holders of one or more classes of preferred stock, no director of the Corporation may be removed from office except for "Cause" and by the affirmative vote of two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting of shareholders duly called for such purpose. As used in this Section 3.7, the term "Cause" shall mean solely malfeasance arising from the performance of a director's duties which has a materially adverse effect on the business of the Corporation. A director may resign at any time by delivering written notice to the Board of Directors, Chairman of the Board or to the Corporation. 3.8. Vacancies. Any vacancy on the Board of Directors, however caused, including, without limitation, any vacancy resulting from an increase in the number of directors, shall be filled by the vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director so elected to fill any vacancy on the Board of Directors, including a vacancy created by an increase in the size of the Board of Directors, shall hold office for the remaining term of directors of the class to which he has been elected and until his successor shall be elected and shall qualify. 3.9. Compensation. The Board of Directors, by affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, may establish reasonable compensation of all directors for services to the Corporation as directors or otherwise, or may delegate such authority to an appropriate committee. 3.10. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors or a committee thereof at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless: (a) the director objects at the beginning of the meeting (or promptly upon his arrival) to holding the meeting or transacting business at the meeting; or (b) the director dissents or abstains from an action taken and minutes of the meeting are prepared that show the director's dissent or abstention from the action taken; or (c) the director delivers written notice of his dissent or abstention to the presiding officer of the meeting before its adjournment or to the Corporation immediately after adjournment of the meeting; or (d) the director dissents or abstains from an action taken, minutes of the meeting are prepared that fail to show the director's dissent or abstention from the action taken and the director delivers to the Corporation a written notice of that failure promptly after receiving the minutes. Such right to dissent shall not apply to a director who voted in favor of such action. 3.11. Committees. The Board of Directors, by resolution adopted by the affirmative vote of a majority of the number of directors then in office, may designate one or more committees, each committee to consist of two or more directors elected by the Board of Directors. The Board of Directors may elect one or more of its members as alternate members of any such committee and such alternate member may take the place of any absent member or members at any meeting of such committee upon request of the Chairman of the Board or upon request of the chairman of such meeting. Unless limited by the Articles, each committee may exercise those aspects of the authority of the Board of Directors which are within the scope of the committee's assigned responsibilities or which the Board of Directors otherwise specifically confers upon such committee; provided, however, that no committee of the Board may do any of the following: (a) authorize distributions; (b) approve or propose to shareholders action that the WBCL requires be approved by shareholders; (c) fill vacancies on the Board of Directors or on any of its committees, unless the Board of Directors has specifically granted such authority to the committee; (d) amend the Articles; (e) adopt, amend, or repeal these By-laws; (f) approve a plan of merger not requiring shareholder approval; (g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; or (h) authorize or approve the issuance or sale or contract for sale of shares or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize a committee (or a senior executive officer of the Corporation) to do so within limits specifically prescribed by the Board of Directors. 3.12. Informal Action Without Meeting. Any action required or permitted by the Articles or these By-laws or any provision of law to be taken by the Board of Directors or a committee at a meeting may be taken without a meeting if the action is taken by all members of the Board of Directors. The action shall be evidenced by one or more written consents describing the action taken, signed by each director and retained by the Corporation. 3.13. Telephonic Meetings. Any or all directors may participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication which allows all directors participating to simultaneously hear each other during the meeting. In the case of any such meeting all participating directors must be informed that a meeting is taking place at which official business may be transacted. A director participating in a meeting by this means is deemed to be present in person at the meeting. 3.14 Chairman of Meetings. The Chairman of the Board or, in his absence or inability or refusal to act, the Chairman of the Executive Committee, shall preside at all meetings of the Board of Directors. 4. OFFICERS 4.1. Number. The principal officers of the Corporation shall be a Chairman of the Board, a Vice Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents, any one of whom may be designated as Executive Vice President, and a Secretary, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. 4.2. Election and Term of Office. The officers of the Corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his successor shall have been duly elected or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. 4.3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment shall not of itself create contract rights. 4.4. Vacancies. A vacancy in any principal office occurring for any reason shall be filled by the Board of Directors for the unexpired portion of the term as soon as reasonably practicable at the convenience of the Board. 4.5. Chairman of the Board. The Chairman of the Board shall have such duties as the Board of Directors shall prescribe from time to time. 4.6. Vice Chairman of the Board. The Vice Chairman of the Board shall be responsible for the administration and management of the areas of the business and affairs of the Corporation assigned to him from time to time by the Board of Directors or the Chief Executive Officer. 4.7. Chief Executive Officer. The Chief Executive Officer shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall have general supervision and control of the business and affairs of the Corporation and its officers. The Chief Executive Officer shall have the authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the Corporation as the Chief Executive Officer deems necessary, prescribe their powers, duties and compensation, and delegate authority to them. Such agents and employees shall hold offices at the discretion of the Chief Executive Officer. The Chief Executive Officer shall have authority to sign, execute and acknowledge, on behalf of the Corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the Corporation's regular business or which shall be authorized by the Board of Directors. Except as otherwise provided by the WBCL or the Board of Directors, the Chief Executive Officer may authorize any other officer or agent of the Corporation to sign, execute and acknowledge such documents or instruments in his place and stead. In general, the Chief Executive Officer shall have all authority and perform all duties incident to the office of the chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time. 4.8. President. In the absence of the Chief Executive Officer or in the event of his death, inability or refusal to act, the President shall perform the duties of the Chief Executive Officer, and when so acting shall have all the powers and duties of the Chief Executive Officer. In addition, the President shall be responsible for the administration and management of the areas of the business and affairs of the Corporation assigned to him from time to time by the Board of Directors or the Chief Executive Officer. 4.9. Vice Presidents. One or more of the Vice Presidents may be designated as Executive Vice President. In the absence of the President or in the event of his death, inability or refusal to act, the Vice Presidents in the order designated at the time of their election (or in the absence of any designation, then in the order of their appointment), shall perform the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign with the Secretary or Assistant Secretary certificates for shares of the Corporation and shall perform such other duties as from time to time may be assigned to him by the Chief Executive Officer, the President or the Board of Directors. 4.10. Secretary. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by the WBCL; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder or delegate that responsibility to a stock transfer agent; (e) sign with the President or a Vice President certificates for shares of the Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; and (f) in general have all authority and perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Chief Executive Officer or by the Board of Directors. 4.11. Assistant Secretaries. The Assistant Secretaries, when authorized by the Board of Directors, may sign with the President or a Vice President certificates for shares of the Corporation, the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Secretaries, in general, shall have such authority and perform such duties as shall be assigned to them by the Secretary, the President or the Board of Directors. 4.12. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors or a committee authorized by the Board to fix the same and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation or a member of such a committee. 4.13. Voting of Stock in Other Corporations. The Board of Directors by resolution shall from time to time designate one or more persons who shall vote all stock held by this Corporation in any other corporation, banking corporation or banking association. Such resolution may designate such persons in the alternative and may empower them to execute proxies to vote in their stead. Where time permits, however, the manner in which such shares shall be voted shall be determined by the Board of Directors of this Corporation or the appropriate committee thereof while the Board is not in session. 5. CERTIFICATES FOR SHARES AND THEIR TRANSFER 5.1. Certificates for Shares. Subject to the requirements of the WBCL, certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed, either manually or by facsimile, by the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in the case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors or the Secretary may prescribe. 5.2. Transfer of Shares. Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. 5.3. Stock Regulations. The Board of Directors shall have the power and authority to make all such further rules and regulations not inconsistent with the WBCL as they may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation, including the appointment or designation of one or more stock transfer agents and one or more stock registrars. 6. EMERGENCY BY-LAWS Unless the Articles provide otherwise, the following provisions of this Article 6 shall be effective during an "emergency" which is defined as a catastrophic event that prevents a quorum of the Corporation's directors from being readily assembled. During such emergency: (a) Any one member of the Board of Directors or any one of the following officers: Chief Executive Officer, President, any Vice-President or Secretary, may call a meeting of the Board of Directors. Notice of such meeting need be given only to those directors whom it is practicable to reach, and may be given in any practical manner, including by publication or radio. Such notice shall be given at least six hours prior to the commencement of the meeting. (b) One or more officers of the corporation present at the emergency meeting of the Board of Directors, as is necessary to achieve a quorum, shall be considered to be directors for the meeting, and shall so serve in order of rank, and within the same rank, in order of seniority. In the event that less than a quorum of the directors are present (including any officers who are to serve as directors for the meeting), those directors present (including the officers serving as directors) shall constitute a quorum. (c) The Board of Directors as constituted in paragraph (b), and after notice as set forth in paragraph (a), may: (1) prescribe emergency powers to any officer of the corporation; (2) delegate to any officer or director, any of the powers of the Board of Directors; (3) designate lines of succession of officers and agents, in the event that any of them are unable to discharge their duties; (4) relocate the principal place of business, or designate successive or simultaneous principal places of business; and (5) take any other action, convenient, helpful, or necessary to carry on the business of the corporation. Corporate action taken in good faith in accordance with this Article 6 binds the Corporation and may not be used to impose liability on a corporate director, officer, employee or agent. 7. GENERAL 7.1. Indemnify of Officers and Directors. (a) Definitions to Indemnification and Insurance Provisions. (1) "Director, Officer, Employee or Agent" means any of the following: (i) a natural person who, is or was a director, officer, employee or agent of the Corporation; (ii) a natural person who, while a director, officer, employee or agent of the Corporation, is or was serving either pursuant to the Corporation's specific request or as a result of the nature of such person's duties to the Corporation as a director, officer, partner, trustee, member of any governing or decision making committee, employee or agent of another corporation or foreign corporation, partnership, joint venture, trust or other enterprise; (iii) a natural person who, while a director, officer, employee or agent of the Corporation, is or was serving an employee benefit plan because his or her duties to the Corporation also impose duties on, or otherwise involve services by, the person to the plan or to participants in or beneficiaries of the plan; or (iv) unless the context requires otherwise, the estate or personal representative of a director, officer, employee or agent. (2) "Liability" means the obligation to pay a judgment, penalty, assessment, forfeiture or fine, including an excise tax assessed with respect to an employee benefit plan, the agreement to pay any amount in settlement of a Proceeding (whether or not approved by a court order), and reasonable expenses and interest related to the foregoing. (3) "Party" means a natural person who was or is, or who is threatened to be made, a named defendant or respondent in a Proceeding. (4) "Proceeding" means any threatened, pending or completed civil, criminal, administrative or investigative action, suit, arbitration or other proceeding, whether formal or informal (including but not limited to any act or failure to act alleged or determined to have been negligent, to have violated the Employee Retirement Income Security Act of 1974, or to have violated Section 180.40 [180.0826, 180.0832 and 180.0833] of the Wisconsin Statutes, or any successor thereto, regarding improper dividends, distributions of assets, purchases of shares of the Corporation, or loans to officers), which involves foreign, federal, state or local law and which is brought by or in the right of the Corporation or by any other person or entity, to which the Director, Officer, Employee or Agent was a party because he or she is a Director, Officer, Employee or Agent. (5) "Expenses" means all reasonable fees, costs, charges, disbursements, attorneys' fees and any other expenses incurred in connection with the Proceeding. (b) Indemnification of Officers, Directors, Employees and Agents. (1) The Corporation shall indemnify a Director, Officer, Employee or Agent to the extent he or she has been successful on the merits or otherwise in the defense of any Proceeding, for all reasonable Expenses. (2) In cases not included under subsection (1), the Corporation shall indemnify a Director, Officer, Employee or Agent against Liability and Expenses incurred by such person in a Proceeding unless it shall have been proven by final judicial adjudication that such person breached or failed to perform a duty owned to the Corporation which constituted: (i) A willful failure to deal fairly with the Corporation or its shareholders in connection with a matter in which the Director, Officer, Employee or Agent has a material conflict of interest; (ii) A violation of criminal law, unless the Director, Officer, Employee or Agent had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful; (iii) A transaction from which the Director, Officer, Employee or Agent derived an improper personal profit; or (iv) Willful misconduct. (c) Determination that Indemnification is Proper. (1) Unless provided otherwise by a written agreement between the Director, Officer, Employee or Agent and the Corporation, determination of whether indemnification is required under Section (b) shall be made by any method set forth in Section 180.046 [180.0855] of the Wisconsin Statutes. (2) A Director, Officer, Employee or Agent who seeks indemnification under this section shall make a written request to the Corporation. As a further pre-condition to any right to receive indemnification, the writing shall contain a declaration that the Corporation shall have the right to exercise all rights and remedies available to such Director, Officer, Employee or Agent against any other person, corporation, foreign corporation, partnership, joint venture, trust or other enterprise, arising out of, or related to, the Proceeding which resulted in the Liability and the Expense for which such Director, Officer, Employee or Agent is seeking indemnification, and that the Director, Officer, Employee or Agent is hereby deemed to have assigned to the Corporation all such rights and remedies. (3) Indemnification under subsection (b)(1) shall be made within 10 days of receipt of a written demand for indemnification. Indemnification required under subsection (b)(2) shall be made within 30 days of receipt of a written demand for indemnification. (4) Indemnification under this section is not required to the extent the Director, Officer, Employee or Agent has previously received indemnification or allowance of expenses from any person or entity, including the Corporation, in connection with the same Proceeding. (5) Upon written request by a Director, Officer, Employee or Agent who is a Party to a Proceeding, the Corporation shall pay or reimburse his or her reasonable Expenses as incurred if the Director, Officer, Employee or Agent provides the Corporation with all of the following: (i) A written affirmation of his or her good faith belief that he or she is entitled to indemnification under Article 7.1; and (ii) A written undertaking, executed personally or on his or her behalf, to repay all amounts advanced without interest to the extent that it is ultimately determined that indemnification under 7.1(b)(2) is prohibited. The undertaking under this subsection shall be accepted without reference to the Director's, Officer's, Employee's or Agent's ability to repay the allowance. The undertaking shall be unsecured. (6) The right to indemnification under this Article may be amended only by a subsequent vote of not less than two- thirds of the Corporation's outstanding capital stock entitled to vote on such matters. Any reduction in the right to indemnification may only be prospective from the date of such vote. (d) Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is a Director, Officer, Employee or Agent against any Liability asserted against or incurred by the individual in any such capacity or arising out of his status as such, regardless of whether the Corporation is required or authorized to indemnify or allow Expenses to the individual under this section. (e) Severability. The provisions of this Article shall not apply in any circumstance where a court of competent jurisdiction determines that indemnification would be invalid as against public policy. 8. AMENDMENT These By-laws may be amended, altered or repealed, and new By-laws may be enacted, only by the affirmative vote of not less than two- thirds of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting of shareholders duly called for such purpose, upon a proposal adopted by the Board of Directors, or by a vote of not less than three-quarters of the entire Board of Directors then in office; provided, however, that no By-law hereafter adopted, amended or repealed by the shareholders as provided herein shall thereafter be enacted, amended or repealed by the directors unless such action by the shareholders shall expressly confer upon the directors authority to thereafter enact, amend or repeal such By-law as so amended, and; provided, further, that any By-law adopted, repealed or amended by the Board of Directors as provided herein shall be subject to reenactment, repeal or amendment by the shareholders acting at any meeting of the shareholders in accordance with the terms hereof. Updated through 05/09/2000 EX-12 6 10-Q FOR QUARTER ENDED MARCH 31, 2000/EXHIBIT 12 EXHIBIT 12 MARSHALL & ILSLEY CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES ($000's)
Three Months Ended Years Ended December 31, March 31, --------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 ----------- ----------- ----------- ----------- ----------- ----------- Earnings: Earnings before income taxes, extraordinary items and cumulative effect of changes in accounting principles $ 136,499 $ 527,939 $ 465,285 $ 388,172 $ 317,949 $ 312,938 Fixed charges, excluding interest on deposits 77,109 222,172 206,546 175,609 126,261 119,412 ----------- ----------- ----------- ----------- ----------- ----------- Earnings including fixed charges but excluding interest on deposits 213,608 750,111 671,831 563,781 444,210 432,350 Interest on deposits 172,578 585,864 564,540 460,418 392,473 363,488 ----------- ----------- ----------- ----------- ----------- ----------- Earnings including fixed charges and interest on deposits $ 386,186 $ 1,335,975 $ 1,236,371 $ 1,024,199 $ 836,683 $ 795,838 =========== =========== =========== =========== =========== =========== Fixed Charges: Interest Expense: Short-term borrowings $ 57,039 $ 142,294 $ 126,624 $ 111,193 $ 63,892 $ 48,390 Long-term borrowings 15,887 63,145 66,810 54,175 53,615 63,701 One-third of rental expense for all operating leases (the amount deemed representative of the interest factor) 4,183 16,733 13,112 10,241 8,754 7,321 ----------- ----------- ----------- ----------- ----------- ----------- Fixed charges excluding interest on deposits 77,109 222,172 206,546 175,609 126,261 119,412 Interest on deposits 172,578 585,864 564,540 460,418 392,473 363,488 ----------- ----------- ----------- ----------- ----------- ----------- Fixed charges including interest on deposits $ 249,687 $ 808,036 $ 771,086 $ 636,027 $ 518,734 $ 482,900 =========== =========== =========== =========== =========== =========== Ratio of Earnings to Fixed Charges: Excluding interest on deposits 2.77 x 3.38 x 3.25 x 3.21 x 3.52 x 3.62 x Including interest on deposits 1.55 x 1.65 x 1.60 x 1.61 x 1.61 x 1.65 x
EX-27 7 10-Q FOR QUARTER ENDED MARCH 31, 2000/EXHIBIT 27
9 1,000 3-MOS DEC-31-2000 MAR-31-2000 674,604 170,034 64,655 43,342 4,306,051 1,160,104 1,130,123 16,965,521 232,471 24,921,388 17,068,321 4,169,689 568,334 1,038,184 0 336 112,757 1,963,768 24,921,388 326,478 84,337 3,810 414,625 172,578 245,504 169,121 5,819 14,765 257,106 136,499 90,582 0 0 90,582 0.86 0.83 3.17 111,642 9,334 688 121,664 225,862 2,844 3,634 232,471 232,471 0 0
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