-----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, PMyPdLL1kM0T1+nlTwUTpCqMbZA7upnOftONQ8ARbjY1nHhHxN/RfKBXWIF/+c70 2S4BTiLPZWBdyN5qvwI9yg== 0000062741-02-000026.txt : 20020515 0000062741-02-000026.hdr.sgml : 20020515 ACCESSION NUMBER: 0000062741-02-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARSHALL & ILSLEY CORP/WI/ CENTRAL INDEX KEY: 0000062741 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 390968604 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15403 FILM NUMBER: 02648734 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 fm10q302.txt FORM 10-Q DATED 03/31/2002 =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (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, 2002 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 1-15403 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) Registrant's telephone number, including area code: (414) 765-7801 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 30, 2002 ----- ---------------- Common Stock, $1.00 Par Value 106,104,412 =============================================================================== PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MARSHALL & ILSLEY CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) ($000's except share data)
March 31, December 31, March 31, 2002 2001 2001 ------------ ------------ ------------ Assets - ------ Cash and cash equivalents: Cash and due from banks $ 714,372 $ 617,183 $ 639,557 Federal funds sold and security resale agreements 64,368 119,561 13,577 Money market funds 1,116,767 827,021 288,161 ------------ ------------ ------------ Total cash and cash equivalents 1,895,507 1,563,765 941,295 Investment securities: Trading securities, at market value 7,350 6,119 45,300 Short-term investments, at cost which approximates market value 47,775 41,668 30,668 Available for sale at market value 3,229,268 3,383,632 4,575,569 Held to maturity at amortized cost, market value $1,035,696 ($1,049,952 December 31, and $1,131,004 March 31, 2001) 1,010,677 1,032,093 1,100,398 ------------ ------------ ------------ Total investment securities 4,295,070 4,463,512 5,751,935 Loans and leases 20,284,912 19,295,372 17,804,471 Less: Allowance for loan and lease losses 284,179 268,198 240,348 ------------ ------------ ------------ Net loans and leases 20,000,733 19,027,174 17,564,123 Premises and equipment 416,547 393,030 384,174 Goodwill 645,752 524,748 290,925 Other intangibles 85,200 63,337 47,655 Accrued interest and other assets 1,221,668 1,218,168 1,174,438 ------------ ------------ ------------ Total Assets $ 28,560,477 $ 27,253,734 $ 26,154,545 ============ ============ ============ Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $ 3,381,636 $ 3,558,571 $ 2,737,891 Interest bearing 14,447,074 12,934,476 15,035,449 ------------ ------------ ------------ Total deposits 17,828,710 16,493,047 17,773,340 Funds purchased and security repurchase agreements 3,404,461 1,111,412 2,028,462 Other short-term borrowings 2,205,009 4,745,830 2,189,732 Accrued expenses and other liabilities 876,332 850,300 806,981 Long-term borrowings 1,523,175 1,560,177 1,042,712 ------------ ------------ ------------ Total liabilities 25,837,687 24,760,766 23,841,227 Shareholders' equity: - --------------------- Series A convertible preferred stock, $1.00 par value; 336,370 shares issued 336 336 336 Common stock, $1.00 par value; 120,416,261 shares issued (117,301,755 December 31, and 112,757,546 March 31, 2001) 120,416 117,302 112,757 Additional paid-in capital 877,577 698,289 443,213 Retained earnings 2,416,242 2,331,776 2,174,964 Accumulated other comprehensive income, net of related taxes 41,793 40,600 59,548 Less: Treasury common stock, at cost: 13,946,539 shares (13,352,817 December 31, and 9,839,811 March 31, 2001) 712,590 673,494 457,375 Deferred compensation 20,984 21,841 20,125 ------------ ------------ ------------ Total shareholders' equity 2,722,790 2,492,968 2,313,318 ------------ ------------ ------------ Total Liabilities and Shareholders' Equity $ 28,560,477 $ 27,253,734 $ 26,154,545 ============ ============ ============
See notes to financial statements. MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ($000's except share data)
Three Months Ended March 31, ---------------------------- 2002 2001 ------------- ------------- Interest income - --------------- Loans and leases $ 309,982 $ 353,990 Investment securities: Taxable 50,767 77,951 Exempt from federal income taxes 15,156 15,900 Trading securities 59 328 Short-term investments 4,443 4,265 ------------- ------------ Total interest income 380,407 452,434 Interest expense - ---------------- Deposits 70,915 187,183 Short-term borrowings 38,853 54,101 Long-term borrowings 30,362 25,371 ------------- ------------ Total interest expense 140,130 266,655 Net interest income 240,277 185,779 Provision for loan and lease losses 15,196 11,063 ------------- ------------ Net interest income after provision for loan and lease losses 225,081 174,716 Other income - ------------ Data processing services: e-Finance solutions 33,807 26,248 Financial technology solutions 111,210 104,090 Other 2 2,654 ------------- ------------ Total data processing services 145,019 132,992 Item processing 10,336 12,457 Trust services 30,979 30,029 Service charges on deposits 25,574 20,827 Mortgage banking 9,376 7,795 Net investment securities (losses) gains (745) 6,105 Life insurance revenue 7,250 6,530 Other 31,212 29,836 ------------- ------------ Total other income 259,001 246,571 Other expense - ------------- Salaries and employee benefits 179,486 167,922 Net occupancy 17,090 15,897 Equipment 28,487 28,632 Software expenses 12,591 8,070 Processing charges 9,586 8,950 Supplies and printing 4,713 4,950 Professional services 9,795 7,160 Shipping and handling 12,054 11,317 Amortization of intangibles 4,299 7,615 Other 35,505 29,873 ------------- ------------ Total other expense 313,606 290,386 Income before income taxes and cumulative effect of changes in accounting principle 170,476 130,901 Provision for income taxes 54,847 44,299 ------------- ------------ Income before cumulative effect of changes in accounting principle 115,629 86,602 Cumulative effect of changes in accounting principle, net of income taxes -- (436) ------------- ------------ Net income $ 115,629 $ 86,166 ============= ============ Net income per common share Basic: Income before cumulative effect of changes in accounting principle $ 1.09 $ 0.83 Cumulative effect of changes in accounting principle, net of income taxes -- -- ------------- ------------ Net income $ 1.09 $ 0.83 ============= ============ Diluted: Income before cumulative effect of changes in accounting principle $ 1.05 $ 0.80 Cumulative effect of changes in accounting principle, net of income taxes -- -- ------------- ------------ Net income $ 1.05 $ 0.80 ============= ============ Dividends paid per common share $ 0.290 $ 0.265 ============= ============ Weighted average common shares outstanding: Basic 104,813 102,839 Diluted 109,771 107,819
See notes to financial statements. MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ($000's)
Three Months Ended March 31, ---------------------------- 2002 2001 ------------- ------------- Net Cash Provided (Used) by Operating Activities $ 427,929 $ (8,828) Cash Flows From Investing Activities: - ------------------------------------- Proceeds from sales of securities available for sale 1,167 10,875 Proceeds from maturities of securities available for sale 492,575 252,132 Proceeds from maturities of securities held to maturity 19,529 11,978 Purchases of securities available for sale (166,103) (23,040) Net increase in loans (606,725) (202,724) Purchases of assets to be leased (38,563) (124,366) Principal payments on lease receivables 103,239 174,957 Fixed asset purchases, net (6,400) (7,147) Purchase acquisitions, net of cash equivalents acquired (7,853) -- Other 2,632 5,534 ------------ ------------ Net cash provided/(used) in investing activities (206,502) 98,199 Cash Flows From Financing Activities: - ------------------------------------- Net increase/(decrease) in deposits 526,930 (1,476,456) Proceeds from issuance of commercial paper 928,180 604,163 Payments for maturity of commercial paper (928,845) (564,729) Net increase /(decrease) in other short-term borrowings (283,418) 867,938 Proceeds from issuance of long-term debt 200,300 625,651 Payments of long-term debt (259,561) (32,066) Dividends paid (31,164) (28,279) Purchases of treasury stock (48,492) (15,520) Other 6,385 6,529 ------------ ------------ Net cash provided/(used) by financing activities 110,315 (12,769) Net increase in cash and cash equivalents 331,742 76,602 ------------ ------------ Cash and cash equivalents, beginning of year 1,563,765 864,693 ------------ ------------ Cash and cash equivalents, end of period $ 1,895,507 $ 941,295 ============ ============ Supplemental cash flow information: Cash paid during the period for: Interest $ 151,744 $ 293,851 Income taxes 10,340 6,221
See notes to financial statements. MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) 1. The accompanying unaudited consolidated financial statements should be read in conjunction with Marshall & Ilsley Corporation's ("M&I" or "Corporation") 2001 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, 2002 and 2001. The results of operations for the three months ended March 31, 2002 and 2001 are not necessarily indicative of results to be expected for the entire year. Certain amounts in the 2001 consolidated financial statements and analyses have been reclassified to conform with the 2002 presentation. 2. Change in Method of Accounting On January 1, 2002, the Corporation adopted SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supercedes APB Opinion No. 17, INTANGIBLE ASSETS. SFAS 142 prescribes the accounting and reporting for intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) upon their acquisition. SFAS 142 also prescribes how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. SFAS 142 adopts an aggregate view of goodwill and bases the accounting for goodwill on the units of the combined entity into which an acquired entity is integrated (those units are referred to as Reporting Units). A Reporting Unit is an operating segment as defined in SFAS 131 or one level below an operating segment. Goodwill and intangible assets that have indefinite useful lives will not be amortized under the new standard but rather will be tested annually for impairment. Intangible assets with finite lives will continue to be amortized over their useful lives, but without the constraint of the prescribed ceilings required under APB Opinion 17. SFAS 142 provides specific guidance for testing goodwill and intangible assets that will not be amortized for impairment. Goodwill will be tested for impairment at least annually using a two-step process that begins with an estimation of the fair value of a Reporting Unit. The first step is a screen for potential impairment and the second step measures the amount of impairment, if any. Intangible assets that will not be amortized, will be tested annually by comparing the fair values of the assets with their recorded amounts. The provisions of SFAS 142 are now being applied by the Corporation. Goodwill and intangible assets acquired after June 30, 2001, are subject immediately to the nonamortization and amortization provisions of the statement. In addition, the Corporation has six months from the date it initially applies this standard to complete the first step of the transitional goodwill impairment test. The amounts used in the transitional goodwill impairment test shall be measured as of January 1, 2002. Impairment losses for goodwill and indefinite-lived intangible assets that arise due to initial application of this standard (resulting from a transitional impairment test) would be reported as a change in accounting principle. MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) Income before cumulative effect of changes in accounting principles and related earnings per share after giving effect to the nonamortization provision of SFAS 142 are as follows (dollars and shares in thousands, except per share data):
Three Months Ended March 31, ---------------------------- 2002 2001 ------------- ------------- Income before cumulative effect of changes in accounting principle $ 115,629 $ 86,602 Adjustments: Goodwill amortization, net of taxes -- 3,972 Negative goodwill amortization -- (390) ------------- ------------- Total adjustments -- 3,582 ------------- ------------- Income before cumulative effect of changes in accounting principle $ 115,629 $ 90,184 ============= ============= Income before cumulative effect of changes in accounting principle: Basic: Reported income before cumulative effect of changes in accounting principle $ 1.09 $ 0.83 Goodwill/negative goodwill amortization -- 0.03 ------------- ------------- $ 1.09 $ 0.86 ============= ============= Diluted: Reported income before cumulative effect of changes in accounting principle $ 1.05 $ 0.80 Goodwill/negative goodwill amortization -- 0.03 ------------- ------------- $ 1.05 $ 0.83 ============= =============
The changes in the carrying amount of goodwill for the three months ended March 31, 2002 are as follows (dollars in thousands):
Banking Metavante Others Total ------------- ------------- ------------- ------------- Goodwill balance as of January 1, 2002 $ 367,612 $ 125,587 $ 31,549 $ 524,748 Goodwill acquired during the period 128,691 -- -- 128,691 Purchase accounting adjustments -- (7,290) -- (7,290) Goodwill amortization (397) -- -- (397) ------------- ------------- ------------- ------------- Goodwill balance as of March 31, 2002 $ 495,906 $ 118,297 $ 31,549 $ 645,752 ============= ============= ============= =============
At March 31, 2002, the Corporation's intangible assets consisted of the following (dollars in thousands):
Amortized intangible assets: Core deposit intangible $ 53,764 Data processing contract rights/customer lists 19,312 Loan servicing rights 11,380 Trust customers 744 ------------ Total amortized intangible assets $ 85,200 ============ Goodwill: Amortized (SFAS 72) $ 2,989 Unamortized 642,763 ------------ Total goodwill $ 645,752 ============
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) Estimated aggregate amortization expense for the twelve months ended December 31, is as follows:
2002 $ 18,723 2003 16,081 2004 13,754 2005 11,726 2006 10,278
The Corporation has not yet completed its determination of how the impairment provisions of the standard applied to the five identified Reporting Units with recorded goodwill will affect its financial statements. 3. Business Combinations The following acquisitions, which were not considered material business combinations, were completed during the first quarter of 2002. On March 1, 2002 the Corporation acquired all of the common stock of Richfield State Agency, Inc. ("Richfield"), a Minnesota bank holding company. Richfield had consolidated total assets of approximately $0.8 billion at completion of the merger. The Corporation issued 2.5 million common shares and paid cash of approximately $10.0 million in a tax-free exchange for the outstanding common stock of Richfield using the purchase method of accounting. The core deposit intangible and other identifiable intangible assets recorded in this transaction amounted to $19.3 million and $0.8 million, respectively. Initial goodwill subject to the completion of appraisals and valuations of the assets acquired and liabilities assumed, amounted to $94.6 million. Also, on March 1, 2002 the Corporation acquired all of the common stock of Century Bancshares, Inc. ("Century"), a Minnesota bank holding company. Century had consolidated total assets of approximately $0.3 billion at completion of the merger. The Corporation issued 0.6 million common shares and paid cash of approximately $19.9 million in a tax-free exchange for the outstanding common stock of Century using the purchase method of accounting. The core deposit intangible recorded in this transaction amounted to $6.1 million. Initial goodwill subject to the completion of appraisals and valuations of the assets acquired and liabilities assumed, amounted to $34.1 million. The results of operations of the acquired entities have been included in the consolidated results since the dates the transactions were closed. MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) The summary of the intangible assets acquired during the first quarter of 2002 are as follows (dollars in thousands):
March 31, 2002 ---------------------------- Gross Accum- Carrying ulated Amount Amort ------------- ------------- Amortized intangible assets: Core deposit intangible $ 25,400 $ (361) Other intangible assets 750 (6) ------------- ------------- Total amortized intangible assets $ 26,150 $ (367) ============= ============= Unamortized intangible assets: Goodwill $ 128,691 ------------- Total unamortized intangible assets $ 128,691 =============
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, 2002 ------------------------------------- Income Average Share Per Share (Numerator) (Denominator) Amount ------------ ------------- ---------- Net Income $ 115,629 Convertible Preferred Dividends (1,115) ---------- Basic Earnings Per Share Income Available to Common Shareholders $ 114,514 104,813 $ 1.09 ======== Effect of Dilutive Securities Convertible Preferred Stock 1,115 3,844 Stock Options and Restricted Stock Plans -- 1,114 ---------- ---------- Diluted Earnings Per Share Income Available to Common Shareholders Plus Assumed Conversions $ 115,629 109,771 $ 1.05 ========
Three Months Ended March 31, 2001 ------------------------------------- Income Average Share Per Share (Numerator) (Denominator) Amount ------------ ------------- ---------- Net Income $ 86,166 Convertible Preferred Dividends (1,019) ----------- Basic Earnings Per Share Income Available to Common Shareholders $ 85,147 102,839 $ 0.83 ======== Effect of Dilutive Securities Convertible Preferred Stock 1,019 3,844 Stock Options and Restricted Stock Plans -- 1,136 ---------- ---------- Diluted Earnings Per Share Income Available to Common Shareholders Plus Assumed Conversions $ 86,166 107,819 $ 0.80 ========
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) 5. Selected investment securities, by type, held by the Corporation are as follows ($000's):
March 31, December 31, March 31, 2002 2001 2001 ------------- ------------- ------------- Investment securities available for sale: U.S. treasury and government agencies $ 2,125,690 $ 2,346,566 $ 3,201,179 State and political subdivisions 230,099 176,167 153,356 Mortgage backed securities 229,687 175,471 329,044 Other 643,792 685,428 891,990 ------------- ------------- ------------- Total $ 3,229,268 $ 3,383,632 $ 4,575,569 ============= ============= ============= Investment securities held to maturity: State and political subdivisions $ 1,007,140 $ 1,028,555 $ 1,095,239 Other 3,537 3,538 5,159 ------------- ------------- ------------- Total $ 1,010,677 $ 1,032,093 $ 1,100,398 ============= ============= =============
6. The Corporation's loan and lease portfolio consists of the following ($000's):
March 31, December 31, March 31, 2002 2001 2001 ------------- ------------- ------------- Commercial, financial & agricultural $ 6,106,708 $ 5,716,061 $ 5,329,597 Real estate: Construction 784,532 730,864 636,429 Residential mortgage 5,879,668 5,563,975 5,083,629 Commercial mortgage 5,426,945 5,099,093 4,497,606 ------------- ------------- ------------- Total real estate 12,091,145 11,393,932 10,217,664 Personal 1,165,470 1,210,808 1,180,833 Lease financing 912,384 962,356 1,064,813 Cash flow hedging instruments at fair value 9,205 12,215 11,564 ------------- ------------- ------------- Total $ 20,284,912 $ 19,295,372 $ 17,804,471 ============= ============= =============
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) 7. Sale of Receivables During the first quarter of 2002, $97.8 million of automobile loans were sold in securitization transactions and gains of $1.5 million were recognized. Other income associated with auto securitizations in the current quarter amounted to $0.6 million. Key economic assumptions used in measuring the retained interests at the date of securitization resulting from securitizations completed during the first quarter were as follows (rate per annum): Prepayment speed 25.0 % Weighted average life (in months) 20.8 Expected credit losses 0.12 % Residual cash flow discount rate 12.0 % Variable returns to transferees Forward one month LIBOR yield At March 31, 2002, securitized automobile loans and other automobile loans managed together with them along with delinquency and credit loss information consisted of the following:
Total Securitized Portfolio Managed ----------- --------- --------- Loan balances $ 474,844 $ 209,845 $ 684,689 Principal amounts of loans 60 days or more past 642 511 1,153 Net credit losses year to date 325 205 530
8. The Corporation's deposit liabilities consists of the following ($000's):
March 31, December 31, March 31, 2002 2001 2001 ------------- ------------- ------------- Noninterest bearing demand $ 3,381,636 $ 3,558,571 $ 2,737,891 Savings and NOW 8,171,884 7,867,106 7,758,708 CD's $100,000 and over 1,891,344 1,321,746 2,455,636 Other time deposits 2,914,585 2,962,724 3,307,283 Foreign deposits 1,469,261 782,900 1,513,822 ------------- ------------- ------------- Total $ 17,828,710 $ 16,493,047 $ 17,773,340 ============= ============= =============
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) 9. Comprehensive Income The following tables present the Corporation's comprehensive income ($000's):
Three Months Ended March 31, 2002 ------------------------------------------ Before-Tax Tax (Expense) Net-of-Tax Amount Benefit Amount ------------- ------------- ------------ Net income $ 115,629 Other comprehensive income: Unrealized gains (losses) on securities: Arising during the period $ (14,371) $ 4,846 (9,525) Reclassification for securities transactions included in net income -- -- -- ------------ ------------ ----------- Unrealized gains (losses) (14,371) 4,846 (9,525) Net gains (losses) on derivatives hedging variability of cash flows: Arising during the period 6,566 (2,298) 4,268 Reclassification adjustments for hedging activities included in net income 9,924 (3,474) 6,450 ------------ ------------ ----------- Net gains (losses) $ 16,490 $ (5,772) 10,718 ------------- ------------ ----------- Other comprehensive income 1,193 ----------- Total comprehensive income $ 116,822 ===========
Three Months Ended March 31, 2001 ------------------------------------------ Before-Tax Tax (Expense) Net-of-Tax Amount Benefit Amount ------------- ------------- ------------ Net income $ 86,166 Other comprehensive income: Unrealized gains (losses) on securities: Arising during the period $ 54,370 $ (20,006) 34,364 Reclassification for securities transactions included in net income -- -- -- ------------ ------------ ----------- Unrealized gains (losses) 54,370 (20,006) 34,364 Net gains (losses) on derivatives hedging variability of cash flows: Adoption of SFAS 133 (15,665) 5,483 (10,182) Arising during the period (5,294) 1,853 (3,441) Reclassification adjustments for hedging activities included in net income 1,047 (367) 680 ------------ ------------ ----------- Net gains (losses) $ (19,912) $ 6,969 (12,943) ------------ ------------ ----------- Other comprehensive income 21,421 ----------- Total comprehensive income $ 107,587 ===========
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) 10. Derivative Financial Instruments and Hedging Activities TRADING INSTRUMENTS The Corporation enters into interest rate swaps as part of its trading activities which enable its customers to manage their exposures to interest rate risk. The Corporation's market risk from unfavorable movements in interest rates is generally minimized by concurrently entering into offsetting positions with nearly identical notional values, terms and indices. At March 31, 2002, interest rate swaps designated as trading consisted of $451.1 million in notional amount of receive fixed/pay floating with an aggregate positive fair value of $1.0 million and $436.9 million in notional amount of pay fixed/receive floating with an aggregate negative fair value of $1.0 million. Interest rate swaps designated as trading are recorded at fair value. Gains and losses arising from changes in fair value are recorded in other income. FAIR VALUE HEDGES The following table presents information with respect to the Corporation's fair value hedges.
Fair Value Hedges March 31, 2002 Weighted Notional Fair Average Hedged Hedging Amount Value Remaining Item Instrument ($ in mil) ($ in mil) Term (Yrs) ------------------- ------------------- ----------- ----------- ----------- Callable CDs Receive Fixed Swap $ 82.5 $ (0.9) 7.1 Medium Term Notes Receive Fixed Swap 190.0 0.2 4.4 Long-term Borrowing Receive Fixed Swap 200.0 15.4 24.7
The impact from fair value hedges to total net interest income for the three months ended March 31, 2002 was a positive $5.3 million. MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) CASH FLOW HEDGES The following table presents information with respect to the Corporation's cash flow hedges.
Cash Flow Hedges March 31, 2002 Weighted Notional Fair Average Hedged Hedging Amount Value Remaining Item Instrument ($ in mil) ($ in mil) Term (Yrs) ------------------- ------------------- ----------- ----------- ----------- Variable Rate Loans Receive Fixed Swap $ 534.6 $ 9.2 1.3 Commercial Paper Pay Fixed Swap 200.0 (17.0) 4.7 Fed Funds Purchased Pay Fixed Swap 860.0 (13.3) 3.1 FHLB Advances Pay Fixed Swap 510.0 4.8 4.8
The impact from cash flow hedges to total net interest income for the three months ended March 31, 2002 was a negative $9.9 million. 11. Segments Generally, the Corporation organizes its segments based on legal entities. Each entity offers a variety of products and services to meet the needs of its customers and the particular market served. Each entity 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. 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. 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 March 31, 2002 & 2001 (Unaudited) Banking ------- Banking consists of two banks headquartered in Wisconsin, with branches in Wisconsin, Arizona, Nevada and Florida, two banks headquartered in Minnesota, one federally chartered thrift headquartered in Nevada, an asset-based lending subsidiary and an operational support subsidiary which includes item processing. 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. Data Services ------------- Data Services consists of Metavante and its nonbank subsidiaries. Metavante 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, Metavante derives revenue from the Corporation's credit card merchant operations. The majority of Metavante revenue is derived from internal and external processing. Intrasegment revenues, expenses and assets have been eliminated. 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 provides investment management and advisory services as well as personal, commercial and corporate trust services in Wisconsin, Florida, Arizona, North Carolina, Minnesota, Nevada and Illinois. 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): Total Revenues by type in All Others consist of the following:
Three Months Ended March 31, ---------------------- 2002 2001 ---------- ---------- Trust Services $ 30.9 $ 30.3 Residential Mortgage Banking 9.2 7.7 Capital Markets (0.5) 7.1 Brokerage and Insurance 6.5 5.5 Commercial Leasing 3.9 2.9 Commercial Mortgage Banking 0.9 0.6 Others 1.0 2.2 ---------- ---------- Total revenue $ 51.9 $ 56.3 ========== ==========
MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 2002 & 2001 (Unaudited) The following represents the Corporation's operating segments as of and for the three months ended March 31, 2002 and 2001. Intersegment expenses and assets have been eliminated. ($ in millions):
Three Months Ended March 31, 2002 ------------------------------------------------------------------------------------- Consol- Non- idated Reclass- Consol- recurring Income ifications idated & Before Corporate & Elim- Operating Goodwill Accounting Banking Metavante Others Overhead nations Income Charges Change ------------------------------------------------------------------------------------- Revenue: Net interest income $ 239.7 $ (1.1)$ 6.8 $ (5.1)$ -- $ 240.3 $ -- $ 240.3 Fees - Unaffiliated customers 73.3 145.1 39.6 1.3 (0.3) 259.0 -- 259.0 Fees - Affiliated customers 10.2 15.9 5.5 -- (31.6) -- -- -- ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- Total revenues 323.2 159.9 51.9 (3.8) (31.9) 499.3 -- 499.3 Expenses: Expenses - Unaffiliated customers 124.7 137.7 27.1 24.5 (0.4) 313.6 -- 313.6 Expenses - Affiliated customers 17.6 5.4 8.6 (0.1) (31.5) -- -- -- ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- Total expenses 142.3 143.1 35.7 24.4 (31.9) 313.6 -- 313.6 Provision for loan and lease losses 14.9 -- 0.3 -- -- 15.2 -- 15.2 ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- Operating income before taxes 166.0 16.8 15.9 (28.2) -- 170.5 -- 170.5 Income tax expense 52.0 7.0 6.5 (10.6) -- 54.9 -- 54.9 ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- Operating income $ 114.0 $ 9.8 $ 9.4 $ (17.6)$ -- $ 115.6 $ -- $ 115.6 ========== ========= ========= ========== ========== ========== ========== ========== Identifiable assets $ 27,572.9 $ 667.9 $ 635.4 $ 410.5 $ (726.2)$ 28,560.5 $ -- $ 28,560.5 ========== ========= ========= ========== ========== ========== ========== ========== Return on average tangible equity 24.3% 23.8% 17.3% 23.6% 23.6% ========= ========= ========= ========== ========== Return on average equity 19.4 % 13.7 % 17.1 % 18.0% 18.0% ========= ========= ========= ========== ==========
Three Months Ended March 31, 2001 ------------------------------------------------------------------------------------ Consol- Non- idated Reclass- Consol- recurring Income ifications idated & Before Corporate & Elim- Operating Goodwill Accounting Banking Metavante Others Overhead nations Income Charges Change ------------------------------------------------------------------------------------- Revenue: Net interest income $ 187.5 $ (0.6)$ 5.5 $ (6.6)$ -- $ 185.8 $ -- $ 185.8 Fees - Unaffiliated customers 68.2 131.6 47.2 (0.4) -- 246.6 -- 246.6 Fees - Affiliated customers 8.0 16.0 3.6 -- (27.6) -- -- -- ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- Total revenues 263.7 147.0 56.3 (7.0) (27.6) 432.4 -- 432.4 Expenses: Expenses - Unaffiliated customers 110.9 128.2 28.9 14.1 (1.6) 280.5 9.9 290.4 Expenses - Affiliated customers 15.7 3.2 7.4 (0.3) (26.0) -- -- -- ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- Total expenses 126.6 131.4 36.3 13.8 (27.6) 280.5 9.9 290.4 Provision for loan and lease losses 10.9 -- 0.2 -- -- 11.1 -- 11.1 ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- Operating income before taxes 126.2 15.6 19.8 (20.8) -- 140.8 (9.9) 130.9 Income tax expense 39.9 6.5 7.9 (8.2) -- 46.1 (1.8) 44.3 ---------- --------- --------- ---------- ---------- ---------- ---------- ---------- Operating income $ 86.3 $ 9.1 $ 11.9 $ (12.6)$ -- $ 94.7 $ (8.1)$ 86.6 ========== ========= ========= ========== ========== ========== ========== ========== Identifiable assets $ 25,230.2 $ 610.5 $ 759.0 $ 364.3 $ (809.5)$ 26,154.5 $ -- $ 26,154.5 ========== ========= ========= ========== ========== ========== ========== ========== Return on average tangible equity 18.8% 15.3% 20.5% 19.6% 17.7% ========= ========= ========= ========== ========== Return on average equity 16.4% 12.8% 20.4% 16.8% 15.4% ========= ========= ========= ========== ==========
MARSHALL & ILSLEY CORPORATION CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited) ($000's)
Three Months Ended March 31, ---------------------------- 2002 2001 ------------- ------------- Assets - ------ Cash and due from banks $ 649,555 $ 612,645 Investment securities: Trading securities 9,606 29,919 Short-term investments 1,085,962 318,075 Other investment securities: Taxable 2,932,812 4,488,625 Tax-exempt 1,229,325 1,293,755 ------------- ------------- Total investment securities 5,257,705 6,130,374 Total loans and leases 19,450,822 17,617,439 Less: Allowance for loan and lease losses 279,936 237,791 ------------- ------------- Net loans and leases 19,170,886 17,379,648 Premises and equipment, net 399,653 386,423 Accrued interest and other assets 1,865,135 1,524,781 ------------- ------------- Total Assets $ 27,342,934 $ 26,033,871 ============= ============= Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $ 3,184,224 $ 2,657,789 Interest bearing 13,848,258 15,020,398 ------------- ------------- Total deposits 17,032,482 17,678,187 Funds purchased and security repurchase agreements 2,362,303 1,916,858 Other short-term borrowings 2,111,971 1,759,942 Long-term borrowings 2,427,736 1,611,647 Accrued expenses and other liabilities 809,505 785,255 ------------- ------------- Total liabilities 24,743,997 23,751,889 Shareholders' equity 2,598,937 2,281,982 ------------- ------------- Total Liabilities and Shareholders' Equity $ 27,342,934 $ 26,033,871 ============= =============
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2002 and 2001 ------------------------------------------ Net income for the first quarter of 2002 amounted to $115.6 million compared to $86.2 million for the same period in the prior year. Basic and diluted earnings per share were $1.09 and $1.05 respectively for the three months ended March 31, 2002, compared with $.83 and $.80 respectively for the three months ended March 31, 2001. The return on average assets and average equity was 1.72% and 18.04% for the quarter ended March 31, 2002 and 1.34% and 15.31% for the quarter ended March 31, 2001. The results of operations and financial position as of and for the three months ended March 31, 2002, include the effects of Metavante's four acquisitions in the second, third and fourth quarters of 2001, the Corporation's acquisitions of National City Bancorporation ("National City") and certain Arizona branches in the third quarter of 2001 and the acquisitions of Richfield State Agency, Inc. ("Richfield") and Century Bancshares, Inc. ("Century") which both closed on March 1, 2002. All acquisitions were accounted for using the purchase method of accounting and accordingly the results of operations and financial position are included from the dates the transactions were closed. Net income for the prior year quarter includes expenses associated with the charter consolidation, the cumulative effect of adopting the accounting standard on accounting for derivative financial instruments and hedging activities and certain goodwill amortization and negative goodwill accretion which ceased on January 1, 2002 as a result of adopting Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. The impact of these items is shown in the following table ($000's):
Three Months ended March 31, ----------------------------- Pre-tax Effect 2002 2001 ------------- ------------ ------------- Income as Reported $ 115,629 $ 86,166 Charter Consolidation $ 5,980 -- 4,525 Change in Accounting for Derivatives and Hedging Activities 671 -- 436 Goodwill Amortization and Negative Goodwill Accretion 3,954 -- 3,582 ------------ ------------ Total Adjustments -- 8,543 ------------ ------------ Operating Income $ 115,629 $ 94,709 ============ ============
The following tables present a summary of each of the major elements of the consolidated operating income statement, certain financial statistics and a summary of the major operating income statement elements stated as a percent of average consolidated assets converted to a fully taxable equivalent basis (FTE) where appropriate for the current quarter and previous four quarters. Operating income for the third and fourth quarters of 2001 excludes certain expenses incurred in connection with acquisitions at the Corporation's Metavante subsidiary. Operating income for the second quarter of 2001 excludes certain losses and expenses incurred in connection with structural changes and acquisitions at the Corporation's Metavante subsidiary, auto lease residual value write-downs and the final charge for the charter consolidation initiative. Operating income for the first quarter of 2001 excludes those items previously discussed. In addition, operating income for the second, third and fourth quarters of 2001 exclude certain goodwill amortization and negative goodwill accretion which ceased on January 1, 2002 as a result of adopting the new accounting standard on goodwill and other intangible assets. Return on tangible equity is based on 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. This calculation was 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)
2002 2001 ---------- ----------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ----------- ----------- ----------- ----------- Interest income $ 380,407 $ 401,974 $ 423,248 $ 431,447 $ 452,434 Interest expense (140,130) (164,686) (204,746) (230,213) (266,655) ---------- ----------- ----------- ----------- ----------- Net interest income 240,277 237,288 218,502 201,234 185,779 Provision for loan and lease losses (15,196) (20,109) (12,206) (10,737) (11,063) Net investment securities gains (losses) (745) (572) 774 2,991 6,105 Other income 259,666 262,492 254,497 250,554 240,466 Other expense (313,526) (308,611) (297,057) (292,239) (280,452) ---------- ----------- ----------- ----------- ----------- Income before taxes 170,476 170,488 164,510 151,803 140,835 Income tax provision (54,847) (56,274) (54,223) (50,037) (46,126) ---------- ----------- ----------- ----------- ----------- Operating income $ 115,629 $ 114,214 $ 110,287 $ 101,766 $ 94,709 ========== =========== =========== =========== =========== Per Common Share Operating income Basic $ 1.09 $ 1.08 $ 1.03 $ 0.98 $ 0.91 Diluted 1.05 1.04 0.99 0.94 0.88 Dividends 0.290 0.290 0.290 0.290 0.265 Return on Average Equity Operating income 18.04 % 17.84 % 17.16 % 17.43 % 16.83 % Return on Average Tangible Equity 23.64 22.83 20.93 20.15 19.59
Summary Consolidated Operating Income Statement Components ---------------------------------------------------------- as a Percent of Average Total Assets ------------------------------------
2002 2001 ---------- ----------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ----------- ----------- ----------- ----------- Interest income (FTE) 5.76 % 6.02 % 6.48 % 6.78 % 7.16 % Interest expense (2.08) (2.42) (3.08) (3.55) (4.15) ---------- ----------- ----------- ----------- ----------- Net interest income 3.68 3.60 3.40 3.23 3.01 Provision for loan and lease losses (0.23) (0.30) (0.18) (0.17) (0.17) Net investment securities gains (losses) (0.01) (0.01) 0.01 0.05 0.10 Other income 3.85 3.85 3.82 3.87 3.75 Other expense (4.64) (4.52) (4.46) (4.51) (4.38) ---------- ----------- ----------- ----------- ----------- Income before taxes 2.65 2.62 2.59 2.47 2.31 Income tax provision (0.93) (0.94) (0.93) (0.90) (0.83) ---------- ----------- ----------- ----------- ----------- Return on average assets based on operating income 1.72 % 1.68 % 1.66 % 1.57 % 1.48 % ========== =========== =========== =========== =========== Return on tangible average assets based on tangible operating income 1.78 % 1.73 % 1.71 % 1.61 % 1.51 % ========== =========== =========== =========== ===========
NET INTEREST INCOME ------------------- Net interest income for the first quarter of 2002 amounted to $240.3 million compared to $185.8 million reported for the first quarter of 2001. Loan growth and increased spreads on loan products, the impact of the banking purchase acquisitions and the downward repricing of funding sources all contributed to the $54.5 million increase in net interest income. Factors negatively affecting net interest income included the ongoing process of lengthening liabilities in order to reduce future volatility in net interest income due to interest rate movements, the cost of treasury share repurchases and the cost of acquisitions. Average earning assets in the first quarter of 2002 increased $1.0 billion or 4.0% compared to the same period a year ago. Average loans accounted for $1.8 billion of the growth in earning assets compared to the first quarter of last year, while average investment securities and other short-term investments declined $0.8 billion. The Corporation estimates that approximately $1.7 billion of average earning asset growth was attributable to the banking related purchase acquisitions. Average interest bearing liabilities increased $0.4 billion or 2.2% in the first quarter of 2002 compared to the same period in 2001. Since the first quarter of 2001, average interest bearing deposits decreased $1.2 billion while average total short-term borrowings increased $0.8 billion and average long-term borrowings increased $0.8 billion. The Corporation estimates that approximately $1.3 billion of the growth in average interest bearing liabilities in the three months ended March 31, 2002, was attributable to the banking related purchase acquisitions. Average noninterest bearing deposits increased $0.5 billion or 19.8% compared to the same period last year. Approximately $0.3 billion of average noninterest bearing deposits in the three months ended March 31, 2002 are attributable to the banking related purchase acquisitions. The growth and composition of the Corporation's quarterly average loan portfolio for the current quarter and previous four quarters are reflected in the following table. ($ in millions): Consolidated Average Loans and Leases -------------------------------------
2002 2001 Growth Pct. --------- --------------------------------------- ------------------- First Fourth Third Second First Prior Quarter Quarter Quarter Quarter Quarter Annual Quarter --------- --------- --------- --------- --------- --------- --------- Commercial Commercial $ 5,848 $ 5,680 $ 5,640 $ 5,328 $ 5,258 11.2 % 2.9 % Commercial real estate Commercial mortgages 5,228 5,071 4,831 4,625 4,429 18.1 3.1 Construction 625 534 520 538 495 26.2 16.9 --------- --------- --------- --------- --------- -------- -------- Total commercial real estate 5,853 5,605 5,351 5,163 4,924 18.9 4.4 Commercial lease financing 410 399 394 382 385 6.4 2.8 --------- --------- --------- --------- --------- -------- -------- Total Commercial 12,111 11,684 11,385 10,873 10,567 14.6 3.6 Personal Residential real estate Residential mortgages 2,346 2,444 2,303 2,384 2,409 (2.6) (4.0) Construction 131 142 120 122 126 4.3 (7.6) --------- --------- --------- --------- --------- -------- -------- Total residential real estate 2,477 2,586 2,423 2,506 2,535 (2.3) (4.2) Personal loans Student 117 105 94 133 134 (12.5) 11.9 Credit card 164 161 174 184 190 (14.0) 1.3 Home equity loans and lines 3,176 2,944 2,723 2,641 2,647 20.0 7.9 Other 876 912 927 864 850 3.1 (3.9) --------- --------- --------- --------- --------- -------- -------- Total personal loans 4,333 4,122 3,918 3,822 3,821 13.4 5.1 Personal lease financing 530 572 612 668 695 (23.7) (7.3) --------- --------- --------- --------- --------- -------- -------- Total personal 7,340 7,280 6,953 6,996 7,051 4.1 0.8 --------- --------- --------- --------- --------- -------- -------- Total Consolidated Average Loans and Leases $ 19,451 $ 18,964 $ 18,338 $ 17,869 $ 17,618 10.4 % 2.6 % ========= ========= ========= ========= ========= ======== ========
Compared with the first quarter of 2001, total consolidated average loans and leases increased $1.8 billion or 10.4%. Approximately $1.5 billion of average total consolidated loan and lease growth in the first quarter of 2002 is attributable to acquisitions of which, approximately $0.2 billion is the estimated impact on average loans resulting from the Richfield and Century acquisitions which closed March 1, 2002. Excluding the impact of acquisitions, average commercial loans declined $0.2 billion while average commercial real estate loans grew approximately $0.7 billion. Portfolio decreases in indirect auto loans and leases and student loans, tighter spread products, were offset by growth in consumer and home equity portfolios, both wider spread products. Approximately $0.1 billion of indirect auto loan production was securitized and sold in the current quarter. Excluding the impact of acquisitions, average consumer loans grew approximately $0.2 billion. The decline in average residential real estate loans, excluding acquisitions, reflects the continued strategy of selling residential real estate loan production in the secondary market. Residential real estate loans sold to investors amounted to $0.6 billion in the first three months of 2002 and reflects in part the carryover of remaining inventory from year- end 2001. Approximately $0.3 billion of residential loans were sold in the first quarter of the prior year. Commercial loan growth in the quarter came from new business relationship activities, customers continuing to acquire and some modest expansion. Home equity loan and line sales were strong in the first quarter and continue to be the focus of direct mail and retail branch efforts. The growth and composition of the Corporation's quarterly average deposits for the current and prior year's quarters are as follows ($ in millions): Consolidated Average Deposits -----------------------------
2002 2001 Growth Pct. --------- --------------------------------------- ------------------- First Fourth Third Second First Prior Quarter Quarter Quarter Quarter Quarter Annual Quarter --------- --------- --------- --------- --------- --------- --------- Bank issued deposits Noninterest bearing deposits Commercial $ 2,160 $ 2,225 $ 1,968 $ 1,779 $ 1,639 31.8 % (2.9)% Personal 678 634 608 601 583 16.2 6.9 Other 346 388 365 347 436 20.5 (10.8) --------- --------- --------- --------- --------- -------- -------- Total noninterest bearing deposits 3,184 3,247 2,941 2,727 2,658 19.8 (1.9) Interest bearing deposits Savings & NOW 1,994 1,877 1,784 1,719 1,720 16.0 6.2 Money market 5,844 5,825 5,563 5,368 5,110 14.3 0.3 Foreign activity 694 704 640 532 476 45.8 (1.4) --------- --------- --------- --------- --------- -------- -------- Total interest bearing deposits 8,532 8,406 7,987 7,619 7,306 16.8 1.5 Time deposits Other CDs & time deposits 2,881 3,097 3,167 3,203 3,399 (15.2) (7.0) CDs greater than $100,000 651 721 751 749 819 (20.4) (9.6) --------- --------- --------- --------- --------- -------- -------- Total time deposits 3,532 3,818 3,918 3,952 4,218 (16.2) (7.5) --------- --------- --------- --------- --------- -------- -------- Total bank issued deposits 15,248 15,471 14,846 14,298 14,182 7.5 (1.4) Wholesale deposits Money market 83 78 -- 222 762 (89.2) 5.6 Brokered CDs 1,043 872 1,517 1,740 1,795 (41.9) 19.7 Foreign time 658 487 624 939 939 (29.9) 35.3 --------- --------- --------- --------- --------- -------- -------- Total wholesale deposits 1,784 1,437 2,141 2,901 3,496 (49.0) 24.2 --------- --------- --------- --------- --------- -------- -------- Total consolidated average deposits $ 17,032 $ 16,908 $ 16,987 $ 17,199 $ 17,678 (3.7)% 0.7 % ========= ========= ========= ========= ========= ======== ========
Average bank issued deposits increased $1.1 billion or 7.5% in the first quarter of 2002 compared to the first quarter of 2001. Average bank issued deposits associated with the acquisitions were approximately $1.3 billion of which approximately $0.3 billion is the estimated impact on average bank issued deposits resulting from the Richfield and Century acquisitions. Excluding the effect of the acquisitions, noninterest bearing deposits increased $0.3 billion and interest bearing activity accounts increased $0.8 billion of which average money market index accounts accounted for approximately $0.5 billion of the growth. Excluding acquisitions, average CDs and time deposits declined $1.2 billion. M&I's markets have experienced some irrational pricing on single service time deposit relationships to the extent of pricing time deposits above comparable wholesale levels which the Corporation has elected not to pursue. Recently the Corporation introduced two longer-term step-up CD products that provide consumers with an increasing rate over the term of the CD. The growth in bank issued deposits includes both commercial and retail banking. In commercial banking, the focus remains on developing deeper relationships through the sale of treasury management products and services along with revised incentive plans focused on growing deposits. The retail banking strategy continues to focus on aggressively selling the right products to meet the needs of customers and enhance the Corporation's profitability. Specific retail deposit initiatives include bank-at-work, single service calling, and retention calling programs as well as an aggressive checking promotion in the Arizona market. Compared with the first quarter of 2001, average wholesale deposits declined $1.7 billion and were replaced, in part, with borrowings. The Corporation has made greater use of wholesale funding alternatives especially institutional CDs. Average wholesale deposits were $0.3 billion greater in the current quarter compared with the fourth quarter of 2001. The Corporation's consolidated average interest earning assets and interest bearing liabilities, interest earned and interest paid for the current quarter and prior year first quarter are presented in the following table ($ in millions):
Three Months Ended Three Months Ended March 31, 2002 March 31, 2001 ------------------------------ ------------------------------ Average Average Average Yield or Average Yield or Balance Interest Cost (b) Balance Interest Cost (b) ------------------------------ ------------------------------ Loans and leases: (a) Commercial $ 6,257.8 $ 83.4 5.40% $ 5,643.8 $ 111.7 8.03% Commercial real estate 5,852.9 98.8 6.85 4,923.8 99.8 8.22 Residential real estate 2,476.7 44.0 7.21 2,534.7 48.0 7.68 Personal 4,863.4 84.3 7.03 4,515.1 95.0 8.53 ---------- --------- -------- ---------- --------- -------- Total loans and leases 19,450.8 310.5 6.47 17,617.4 354.5 8.16 Investment securities: (a) Taxable 2,932.8 50.8 7.24 4,488.6 77.9 7.16 Tax Exempt (a) 1,229.3 22.6 7.52 1,293.8 22.6 7.17 ---------- --------- -------- ---------- --------- -------- Total investment securities 4,162.1 73.4 7.32 5,782.4 100.5 7.16 Other short-term investments (a) 1,095.6 4.5 1.67 348.0 4.6 5.36 ---------- --------- -------- ---------- --------- -------- Total interest earning assets $ 24,708.5 $ 388.4 6.40% $ 23,747.8 $ 459.6 7.88% ========== ========= ======== ========== ========= ======== Interest bearing deposits: Bank issued deposits: Interest bearing activity $ 8,531.5 $ 27.3 1.30% $ 7,306.4 $ 74.6 4.14% Time deposits 3,532.6 32.6 3.74 4,217.4 61.5 5.91 ---------- --------- -------- ---------- --------- -------- Total bank issued deposits 12,064.1 59.9 2.01 11,523.8 136.1 4.79 Wholesale deposits 1,784.2 11.0 2.50 3,496.6 51.1 5.93 ---------- --------- -------- ---------- --------- -------- Total interest bearing deposits 13,848.3 70.9 2.08 15,020.4 187.2 5.05 Short-term borrowings 4,474.3 38.8 3.52 3,676.8 54.1 5.97 Long-term borrowings 2,427.7 30.4 5.07 1,611.6 25.3 6.38 ---------- --------- -------- ---------- --------- -------- Total interest bearing liabilities $ 20,750.3 $ 140.1 2.74% $ 20,308.8 $ 266.6 5.32% ========== ========= ======== ========== ========= ======== Net interest margin (FTE) as a percent of average earning assets $ 248.3 4.09% $ 193.0 3.31% ========= ======== ========= ======== Net interest spread (FTE) 3.66% 2.56% ======== ========
(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 decreased 148 basis points since the first quarter of 2001, which had a negative impact on interest income (FTE) of approximately $89.8 million. The increase in the volume of earning assets, primarily loans and short term investments, increased interest income by approximately $17.8 million compared with the first quarter of 2001. The cost of interest bearing deposits decreased 297 basis points from the same quarter of the previous year which reflects rate declines. Less reliance on wholesale deposits together with the favorable shift in the bank issued deposit mix as previously discussed also provided a benefit to the interest margin. Short-term borrowing costs decreased 245 basis points and long-term borrowing costs decreased 131 basis points compared with the first quarter of 2001. The overall decrease in the cost of interest bearing liabilities of 258 basis points decreased interest expense by approximately $128.6 million while the increase in the volume of interest bearing liabilities increased interest expense by approximately $2.1 million. The Corporation anticipates the net interest margin will be relatively flat in the second quarter, with net interest income growing with internal growth and the acquisitions. The Corporation intends to continue to manage its interest rate risk sensitivity by extending liabilities. The net interest margin can vary depending on loan and deposit growth, lending spreads and future interest rate changes. PROVISION FOR LOAN AND LEASE LOSSES AND CREDIT QUALITY ------------------------------------------------------ The following tables present comparative consolidated credit quality information as of March 31, 2002 and the prior four quarters. NONPERFORMING ASSETS -------------------- ($000's)
2002 2001 ---------- ----------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ----------- ----------- ----------- ----------- Nonaccrual $ 164,444 $ 166,434 $ 163,946 $ 137,355 $ 130,640 Renegotiated 366 378 389 249 560 Past due 90 days or more 5,520 6,982 7,185 7,166 7,080 ---------- ----------- ----------- ----------- ----------- Total nonperforming loans and leases 170,330 173,794 171,520 144,770 138,280 Other real estate owned 6,736 6,796 5,842 3,671 3,790 ---------- ----------- ----------- ----------- ----------- Total nonperforming assets $ 177,066 $ 180,590 $ 177,362 $ 148,441 $ 142,070 ========== =========== =========== =========== =========== Allowance for loan and lease losses $ 284,179 $ 268,198 $ 264,736 $ 244,486 $ 240,348 ========== =========== =========== =========== ===========
CONSOLIDATED STATISTICS -----------------------
2002 2001 ---------- ----------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ----------- ----------- ----------- ----------- Net Charge-offs to average loans and leases annualized 0.23 % 0.35 % 0.24 % 0.15 % 0.13 % Total nonperforming loans and leases to total loans and leases 0.84 0.90 0.90 0.81 0.78 Total nonperforming assets to total loans and leases and other real estate owned 0.87 0.94 0.93 0.83 0.80 Allowance for loan and lease losses to total loans and leases 1.40 1.39 1.39 1.37 1.35 Allowance for loan and lease losses to nonperforming loans and leases 167 154 154 169 174
NONACCRUAL LOANS AND LEASES BY TYPE ----------------------------------- ($000's)
2002 2001 ---------- ----------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ----------- ----------- ----------- ----------- Commercial Commercial, financial & agricultural $ 65,513 $ 70,256 $ 78,623 $ 54,576 $ 50,273 Lease financing receivables 4,876 12,041 2,022 1,892 2,959 ---------- ----------- ----------- ----------- ----------- Total commercial 70,389 82,297 80,645 56,468 53,232 Real estate Construction & land development 533 720 1,063 2,590 2,584 Commercial mortgage 39,436 34,546 38,117 38,440 38,797 Residential mortgage 52,504 47,783 42,147 38,389 34,244 ---------- ----------- ----------- ----------- ----------- Total real estate 92,473 83,049 81,327 79,419 75,625 Personal 1,582 1,088 1,974 1,468 1,783 ---------- ----------- ----------- ----------- ----------- Total nonaccrual loans and leases $ 164,444 $ 166,434 $ 163,946 $ 137,355 $ 130,640 ========== =========== =========== =========== ===========
RECONCILIATION OF ALLOWANCE FOR LOAN AND LEASE LOSSES ----------------------------------------------------- ($000's)
2002 2001 ---------- ----------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ----------- ----------- ----------- ----------- Beginning balance $ 268,198 $ 264,736 $ 244,486 $ 240,348 $ 235,115 Provision for loan and lease losses 15,196 20,109 12,206 10,737 11,063 Allowance of banks and loans acquired 11,965 -- 19,151 -- -- Loans and leases charged-off Commercial 4,505 11,323 5,266 3,607 2,577 Real estate 3,008 4,404 3,768 1,734 2,075 Personal 2,939 3,253 2,768 2,561 2,383 Leases 2,930 1,174 450 770 496 ---------- ----------- ----------- ----------- ----------- Total charge-offs 13,382 20,154 12,252 8,672 7,531 Recoveries on loans and leases Commercial 682 2,216 362 1,042 515 Real estate 474 292 357 403 410 Personal 733 954 354 531 728 Leases 313 45 72 97 48 ---------- ----------- ----------- ----------- ----------- Total recoveries 2,202 3,507 1,145 2,073 1,701 ---------- ----------- ----------- ----------- ----------- Net loans and leases charge-offs 11,180 16,647 11,107 6,599 5,830 ---------- ----------- ----------- ----------- ----------- Ending balance $ 284,179 $ 268,198 $ 264,736 $ 244,486 $ 240,348 ========== =========== =========== =========== ===========
Nonperforming assets consist of nonperforming loans and leases 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, 2002, OREO acquired in satisfaction of debts amounted to $6.5 million and branch premises held for sale amounted to $0.2 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, 2002, nonperforming loans and leases amounted to $170.3 million or 0.84% of consolidated loans and leases of $20.3 billion, a decrease of $3.5 million or 2.0% since December 31, 2001. Nonaccrual loans and leases accounted for $2.0 million of the decline. Since year end, nonaccrual commercial loans and leases declined $11.9 million while nonaccrual commercial real estate and nonaccrual residential real estate increased $4.9 million and $4.7 million, respectively. At March 31, 2002, approximately $33.8 million of nonperforming loans are related to recent acquisitions of which, approximately $9.4 million were attributable to the Richfield and Century acquisitions which were completed March 1, 2002. Net charge-offs amounted to $11.2 million or 0.23% of average loans in the first quarter of 2002 compared with net charge-offs of $16.6 million or 0.35% of average loans in the fourth quarter of 2001 and $5.8 million or 0.13% of average loans in the first quarter of the prior year. The allowance for loan and lease losses is determined using a methodology which reserves currently for those loans and leases in which it is determined that a loss is probable based on characteristics of the individual loan, historical loss patterns of similar "homogeneous" loans and environmental factors unique to each measurement date. This reserving methodology has the following components: Specific Reserve. ----------------- The amount of specific reserves is determined through a loan-by-loan analysis of problem loans over a minimum size 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. Problem loans also include those credits that have been internally classified as credits requiring management's attention due to underlying problems in the borrower's business or collateral concerns. Ranges of loss are determined based on best-and worst-case scenarios for each loan. Reserves for homogeneous loan pools. ------------------------------------ The Corporation makes a significant number of loans and leases, which due to their underlying similar characteristics, are assessed for loss as "homogeneous" pools. Included in the homogeneous pools are loans and leases from the retail sector and commercial loans under a certain size, which have been excluded from the specific reserve allocation previously discussed. The Corporation segments the pools by type of loan or lease and using historical loss information estimates a loss reserve for each pool. Special Reserve. ---------------- The Corporation's senior lending management also allocates reserves for special situations which are unique to the measurement period. These include environmental factors, such as economic conditions in certain geographical or industry segments of the portfolio, economic trends in the retail lending sector and peer-group loss history. Reserves allocated are based on estimates of loss that senior lending management has isolated based on these economic trends or conditions. At March 31, 2002, special reserves continue to be carried for exposures to the airline and travel industries, manufacturing, paper and allied products and dairy sectors. While most loans in these categories are still performing, the Corporation continues to believe that these sectors were more adversely affected by the economic slowdown and deteriorating operating results and the potential for reduced collateral values, especially in a liquidation, have not exhibited a significant improvement since year end. Based on the above loss estimates, senior lending and financial management determine their best estimate of the required reserve. Management's evaluation of the factors described above resulted in an allowance for loan and lease losses of $284.2 million at March 31, 2002 compared to $268.2 million at December 31, 2001 and $240.3 million at March 31, 2001. The resulting provisions for loan and lease losses are the amounts required to establish the allowance for loan and lease losses to the required level after considering charge-offs and recoveries. Management recognizes there are significant estimates in the process and the ultimate losses could be significantly different from those currently estimated. OTHER INCOME ------------ Total other income in the first quarter of 2002 amounted to $259.0 million compared to $246.6 million in the same period last year, an increase of $12.4 million or 5.0%. Total data processing services revenue amounted to $145.0 million in the first quarter of 2002 compared to $133.0 million in the first quarter of 2001. e-Finance solutions revenue increased $7.6 million or 28.8% compared the first quarter of 2001, but was relatively unchanged when compared with the fourth quarter of 2001. Despite the purging activity of one large customer in the fourth quarter of last year and first quarter of this year, Internet banking accounts continued to show growth. Active customers and transactions processed in bill presentment and payment showed strong linked quarter and year over year growth. Financial technology solutions revenue, the traditional outsourcing business, increased $7.1 million or 6.8%. Buyout fees, which can vary from period to period, accounted for $2.4 million of the revenue increase. Growth in this source of data processing services revenue has slowed due to continued bank consolidation and a weaker economy. However, the Corporation is beginning to experience some strengthening in the sales pipeline. Other revenue declined primarily due to lower professional services revenue. Revenue associated with acquisitions amounted to $6.3 million in the first quarter of 2002. Item processing revenue amounted to $10.3 million in the first quarter of 2002 compared to $12.5 million in the first quarter of 2001. During the latter part of 2001, the Corporation sold certain item processing relationships and also sold four Midwest item processing centers. Trust services revenue amounted to $31.0 million in the first quarter of 2002, an increase of $1.0 million or 3.2% compared to $30.0 million in the first quarter of 2001. Acquisitions contributed approximately $0.6 million to the revenue growth. Assets under management were approximately $13.0 billion at March 31, 2002 compared to $11.8 billion at March 31, 2001 an increase of $1.2 billion or 10.2%. For the first time in several quarters, managed assets experienced some slight shifting from fixed income and money market funds into equities which generally results in higher fee income. Service charges on deposits increased $4.7 million or 22.8% and amounted to $25.6 million in the first quarter of 2002. Acquisitions accounted for approximately $0.6 million of the revenue in the first quarter of 2002. The remainder of the increase was primarily attributable to service charges on commercial demand accounts. Mortgage banking revenue increased $1.6 million in the first quarter of 2002 compared to the first quarter of 2001. Gains on the sale of mortgage loans accounted for the majority of the increase which reflects the increased sale activity as previously discussed. Loan applications and closings were lower in the first quarter 2002 than the fourth quarter of 2001 and have shifted from predominantly refinance activity to purchase and construction. Net investment securities activities are primarily the result of the activities of the Corporation's Capital Markets Group and vary from period to period. Other income in the first quarter of 2002 amounted to $31.2 million compared to $29.8 million in the first quarter of 2001, an increase of $1.4 million or 4.6%. Approximately $0.9 million of increase was attributable to the banking acquisitions. OTHER EXPENSE ------------- Total other expense for the three months ended March 31, 2002, amounted to $313.6 million compared to $290.4 million for the three ended March 31, 2001. Nonrecurring expenses in the first quarter of 2001 consisted of the following: Single charter related expenses which are included in other expenses in the Consolidated Statement of Income amounted to $6.0 million in the first quarter of 2001. Included in amortization of intangibles for the three months ended March 31, 2001, is $4.0 million of goodwill amortization which ceased to be amortized under the new accounting standard for goodwill and intangibles which was adopted on January 1, 2002. Excluding these nonrecurring expenses, total other operating expense amounted to $313.6 million in the first quarter of 2002 compared to $280.5 million in the first quarter of 2001, an increase of $33.1 million or 11.8%. Approximately $5.9 million of operating expenses, excluding salaries and benefits, in the first quarter of 2002 were attributable to purchase acquisitions which were included in M&I's operating expenses since the merger dates. The Corporation's nonbanking businesses, especially its Data Services segment ("Metavante"), continue to be the primary contributors to operating expense growth. Excluding salaries and benefits expense, Metavante operating expense growth represents over half of all of the consolidated operating expense growth and reflects the cost of its acquisitions as well as ongoing investments in software, technology research and development and infrastructure in potentially high-growth areas. 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, 2002 and 2001 and December 31, 2001 are:
Three Months Three Months Three Months Ended Ended Ended March 31, December 31, March 31, 2002 2001 2001 ------------ ------------ ------------ Consolidated Corporation 61.8 % 60.7 % 63.8 % Consolidated Corporation Excluding Metavante Including Intangible Amortization 50.7 % 51.6 % 52.8 % Excluding Intangible Amortization 49.9 % 50.3 % 51.7 %
Salaries and employee benefits expense amounted to $179.5 million in the first quarter of 2002 compared to $167.9 million in the first quarter of 2001, an increase of $11.6 million or 6.9%. Operating salaries and employee benefits expense associated with banking acquisitions accounted for $2.9 million of the increase. Increased costs in employee health plans added $1.9 million to expense and variable incentive compensation charges increased $4.1 million in the current quarter compared to the same period in the prior year. The increase in salaries and benefits expense associated with Metavante's acquisitions were offset by the savings arising from the structural changes implemented in the second quarter of 2001. Occupancy and equipment expense in the first quarter of 2002 amounted to $45.6 million. Approximately $2.2 million of the expense in the current quarter was attributable to the banking and Metavante's acquisitions. Excluding the impact of acquisitions, occupancy and equipment expense decreased approximately $1.1 million compared to the first quarter of 2001. Metavante's operating expense growth accounted for approximately $2.3 million of the increase in software expenses in the first quarter of 2002 compared to the first quarter of 2001. During the first quarter of 2002, the Corporation's banking segment incurred nonrecurring software charges of approximately $1.7 million. Acquisitions accounted for approximately $0.6 million of the quarter over quarter increase in processing charges, supplies and printing and shipping and handling. The increase in professional services expense was primarily attributable to consulting services performed for the Corporation. Excluding the effect of the new accounting standard on accounting for goodwill and intangibles, amortization expense increased $0.6 million and was primarily attributable to increased core deposit intangible amortization and other intangible amortization associated with the banking and Metavante's acquisitions. Other expense amounted to $35.5 million in the first quarter of 2002 compared to $29.9 million in the first quarter of 2001. Included in this category in the prior year quarter were the single charter nonrecurring charges aggregating $6.0 million as previously discussed. Excluding these charges, other expense amounted to $35.5 million in the current quarter compared to $23.9 million in the first quarter of last year, an increase of $11.6 million. Losses arising from asset write-downs increased $3.9 million in the current quarter. Other operating expenses associated with acquisitions accounted for approximately $1.5 million of the increase. Other expense is affected by the capitalization of costs, net of amortization and write-downs associated with software development and customer data processing conversions. Net software and conversion capitalization was $6.4 million in the first quarter of 2001 and in the current quarter amounted to $0.9 million excluding acquisitions resulting in an increase of $5.5 million in other expense in the first quarter of 2002 compared to the first quarter of 2001. INCOME TAXES ------------ The provision for income taxes for the three months ended March 31, 2002 amounted to $54.8 million or 32.2% of pre-tax income compared to $44.3 million or 33.8% of pre-tax income for the three months ended March 31, 2001. The decline in the effective tax rate was due to the effect of discontinuing goodwill amortization and the recognition of income tax benefits associated with the sale of preferred stock. CAPITAL RESOURCES ----------------- Shareholders' equity was $2.72 billion at March 31, 2002 compared to $2.49 billion at December 31, 2001 and $2.31 billion at March 31, 2001. During the first quarter of 2002, the Corporation issued 3.1 million shares of its common stock ($186.6 million) in the purchase acquisitions of Richfield and Century. The Corporation acquired 0.8 million shares of its common stock during the first quarter of 2002 at an aggregate cost of $48.5 million. The Corporation continues to have a strong capital base and its regulatory capital ratios are significantly above the minimum requirements as shown in the following tables. RISK-BASED CAPITAL RATIOS ------------------------- ($ in millions)
March 31, 2002 December 31, 2001 --------------------------------- --------------------------------- Amount Ratio Amount Ratio --------------------------------- --------------------------------- Tier 1 Capital $ 2,165 9.42 % $ 2,091 9.70 % Tier 1 Capital Minimum Requirement 920 4.00 862 4.00 -------------------------------- -------------------------------- Excess $ 1,245 5.42 % $ 1,229 5.70 % ================================ ================================ Total Capital $ 2,865 12.46 % $ 2,775 12.88 % Total Capital Minimum Requirement 1,839 8.00 1,724 8.00 -------------------------------- -------------------------------- Excess $ 1,026 4.46 % $ 1,051 4.88 % ================================ ================================ Risk-Adjusted Assets $ 22,985 $ 21,555 ================= =================
LEVERAGE RATIOS --------------- ($ in millions)
March 31, 2002 December 31, 2001 --------------------------------- --------------------------------- Amount Ratio Amount Ratio --------------------------------- --------------------------------- Tier 1 Capital $ 2,165 8.16 % $ 2,091 7.93 % Minimum Leverage Requirement 796 - 1,327 3.00 - 5.00 791 - 1,318 3.00 - 5.00 -------------------------------- -------------------------------- Excess $ 1,369 - 838 5.16 - 3.16 % $ 1,300 - 773 4.93 - 2.93 % ================================ ================================ Adjusted Average Total Assets $ 26,537 $ 26,371 ================= =================
FORWARD-LOOKING STATEMENTS -------------------------- Items 2 and 3 of this Form 10-Q, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures about Market Risk," respectively, contain forward- looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding operating activities and results. Such statements are subject to important factors that could cause the Corporation's actual results to differ materially than those anticipated by the forward-looking statements. These factors include those referenced in the Corporation's Annual Report on Form 10-K for the period ending December 31, 2001 or as may be described from time to time in the Corporation's subsequent SEC filings, and such factors are incorporated herein by reference. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following updated information should be read in conjunction with the Corporation's 2001 Annual Report on Form 10-K. Updated information regarding the Corporation's use of derivative financial instruments is contained in Note 10, Notes to Financial Statements contained in Item 1 herein. 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 limit 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 of the 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 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 is 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 difference by the Corporation's budgeted operating income before taxes for the calendar year. 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 the indicated dates:
Impact to Annual Pretax Income as of ------------------------------------ March 31, December 31, 2002 2001 ----------------- ----------------- Hypothetical Change in Interest Rate - ------------------------------------ 100 basis point gradual: Rise in rates (0.9) % (3.9) % Decline in rates 0.2 % 3.1 %
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, 2002 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. 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 exist, but due to the nature of the investments, cannot be quantified within acceptable levels of precision. As of March 31, 2002, M&I Trust Services administered $57.2 billion in assets and directly managed a portfolio of $13.0 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 6 - Exhibits and Reports on Form 8-K ----------------------------------------- A. Exhibits: Exhibit (3)(ii)(a) - Certificate of Assistant Secretary Exhibit (3)(ii)(b) - 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 99 - Letter of Marshall & Ilsley Corporation regarding representations from Arthur Andersen LLP 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/ Patricia R. Justiliano ______________________________________ Patricia R. Justiliano Senior Vice President and Corporate Controller (Chief Accounting Officer) /s/ James E. Sandy ______________________________________ James E. Sandy Vice President May 14, 2002 EXHIBIT INDEX ------------- Exhibit Number Description of Exhibit -------------- ----------------------------------------------- (3)(ii)(a) Certificate of Assistant Secretary (3)(ii)(b) By-laws, as amended (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 (12) Computation of Ratio of Earnings to Fixed Charges (99) Letter of Marshall & Ilsley Corporation regarding representations from Arthur Andersen LLP EX-3 3 ex3a_302.txt EXHIBIT 3A OF FORM 10-Q DATED 03/31/2002 Exhibit 3(ii)(b) CERTIFICATE OF ASSISTANT SECRETARY OF MARSHALL & ILSLEY CORPORATION The undersigned, Victoria L. Strobel, on behalf of Marshall & Ilsley Corporation, a Wisconsin corporation (the "Corporation"), hereby certifies that she is the duly elected and acting Assistant 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 23, 2002. IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the 13th day of May, 2002. By: /s/ Victoria L. Strobel ---------------------------------- Name: Victoria L. Strobel Title: Assistant Secretary MW615623_1.DOC Exhibit A RESOLUTION ---------- "BE IT RESOLVED, That the By-Laws of this Corporation be and hereby are amended as follows: 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. BE IT FURTHER RESOLVED, That the By-Laws of this Corporation be and hereby are further amended by striking out paragraph 4.6. relating to the duties of the Vice Chairman of the Board." MW615702_1.DOC EX-3 4 ex3b_302.txt EXHIBIT 3B OF FORM 10-Q DATED 03/31/2002 Exhibit 3(ii)(b) 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 effective 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 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. 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. 4.7. 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. 4.8. 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. 4.9. 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. 4.10. 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. 4.11. 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. 4.12. Voting of Stock in Other Corporations. The Board of Directors by resolution hall 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 [180.0355] 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 4/23/02 MW415883_3.DOC EX-12 5 ex12_302.txt EXHIBIT 12 OF FORM 10-Q DATED 03/31/2002 EXHIBIT 12 MARSHALL & ILSLEY CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES ($000's)
Three Months Ended Years Ended December 31, March 31, --------------------------------------------------------------- 2002 2001 2000 1999 1998 1997 ----------- ----------- ----------- ----------- ----------- ----------- Earnings: Earnings before income taxes, extraordinary items and cumulative effect of changes in accounting principles $ 170,476 $ 501,045 $ 470,350 $ 527,939 $ 465,285 $ 388,172 Fixed charges, excluding interest on deposits 74,623 321,059 321,812 222,172 206,546 175,609 ----------- ----------- ----------- ----------- ----------- ----------- Earnings including fixed charges but excluding interest on deposits 245,099 822,104 792,162 750,111 671,831 563,781 Interest on deposits 70,915 566,899 772,016 585,864 564,540 460,418 ----------- ----------- ----------- ----------- ----------- ----------- Earnings including fixed charges and interest on deposits $ 316,014 $ 1,389,003 $ 1,564,178 $ 1,335,975 $ 1,236,371 $ 1,024,199 =========== =========== =========== =========== =========== =========== Fixed Charges: Interest Expense: Short-term borrowings $ 38,853 $ 188,587 $ 224,187 $ 142,294 $ 126,624 $ 111,193 Long-term borrowings 30,362 110,842 78,773 63,145 66,810 54,175 One-third of rental expense for all operating leases (the amount deemed representative of the interest factor) 5,408 21,630 18,852 16,733 13,112 10,241 ----------- ----------- ----------- ----------- ----------- ----------- Fixed charges excluding interest on deposits 74,623 321,059 321,812 222,172 206,546 175,609 Interest on deposits 70,915 566,899 772,016 585,864 564,540 460,418 ----------- ----------- ----------- ----------- ----------- ----------- Fixed charges including interest on deposits $ 145,538 $ 887,958 $ 1,093,828 $ 808,036 $ 771,086 $ 636,027 =========== =========== =========== =========== =========== =========== Ratio of Earnings to Fixed Charges: Excluding interest on deposits 3.28 x 2.56 x 2.46 x 3.38 x 3.25 x 3.21 x Including interest on deposits 2.17 x 1.56 x 1.43 x 1.65 x 1.60 x 1.61 x
EX-99 6 ex99_302.txt EXHIBIT 99 OF FORM 10-Q DATED 03/31/2002 Exhibit 99 MARSHALL & ILSLEY CORPORATION 770 North Water Street Milwaukee, Wisconsin 53202 May 14, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0408 Ladies and Gentlemen: Marshall & Ilsley Corporation ("M&I") has received a letter of representation from Arthur Andersen LLP ("Andersen") stating that Andersen's SAS 71 review of M&I's financial statements for the quarter ending March 31, 2002 was subject to their quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Andersen personnel working on the review and availability of national office consultation. No personnel at foreign affiliates of Andersen were required to conduct any portion of the review. Very truly yours, MARSHALL & ILSLEY CORPORATION /s/ Patricia R. Justiliano Patricia R. Justiliano Senior Vice President and Corporate Controller MW615343_1.DOC -----END PRIVACY-ENHANCED MESSAGE-----