-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, N3K1NrhNbSFepu8xGQM/L3qzfChG2tiVQG5+ovYwCPZFjzXPsCySC4b5+9ZibW/N bpauiwbGh0UTNaKV84zwug== 0000062741-94-000013.txt : 19940331 0000062741-94-000013.hdr.sgml : 19940331 ACCESSION NUMBER: 0000062741-94-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARSHALL & ILSLEY CORP/WI/ CENTRAL INDEX KEY: 0000062741 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 390968604 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-01220 FILM NUMBER: 94519059 BUSINESS ADDRESS: STREET 1: 770 N WATER ST CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4147657801 10-K 1 10-K FOR 12/31/93 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________ FORM 10-K _______________________ [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-1220 MARSHALL & ILSLEY CORPORATION (Exact name of registrant as specified in its charter) Wisconsin 39-0968604 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 770 North Water Street Milwaukee, Wisconsin 53202 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (414) 765-7801 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock - $1.00 par value (Title of Class) 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by nonaffiliates of the registrant is $1,295,000,000 as of February 28, 1994. The number of shares of common stock outstanding as of February 28, 1994 is 60,232,560. ================================================================================ PART I Item 1. Business. THE CORPORATION Marshall & Ilsley Corporation ("M&I" or the "Corporation") is a Wisconsin corporation incorporated in 1959 as a registered bank holding company under the Bank Holding Company Act of 1956, as amended. M&I's principal assets are the stock of its subsidiaries. M&I presently owns substantially all the capital stock of 36 banks with a total of 129 offices in Wisconsin and 12 offices in Arizona. M&I also owns all of the stock of a number of companies engaged in businesses that the Federal Reserve Board (the "Board") has determined to be closely-related to banking, including the businesses of investment management, trust, insurance agency, equipment leasing, mortgage banking, venture capital, brokerage services, financial advisory services, and data processing. As a bank holding company, M&I provides financial and managerial assistance and services to its subsidiaries. At December 31, 1993, M&I had consolidated total assets of approximately $8.0 billion and consolidated total deposits of approximately $6.2 billion. Based on consolidated assets as of December 31, 1993, M&I was the second largest bank holding company headquartered in the State of Wisconsin. The executive offices of M&I are located at 770 North Water Street, Milwaukee, Wisconsin 53202 (telephone number: (414) 765-7801). Pending Merger with Valley Bancorporation On September 19, 1993, M&I entered into an Agreement and Plan of Merger ("Merger Agreement") with Valley Bancorporation ("Valley") which provided for, among other things, the merger of Valley with and into M&I (the "Merger"). The Merger Agreement provides that each share of Valley common stock outstanding at the effective date of the Merger will be converted into 1.72 shares of M&I common stock. The Merger Agreement was approved by the shareholders of M&I and Valley on February 15, 1994. Completion of the Merger is subject to the conditions set forth in the Merger Agreement, including receipt of all required regulatory approvals. M&I currently expects the Merger to be completed in the second quarter of 1994. The foregoing description of the Merger and the Merger Agreement is qualified in its entirety by reference to M&I's Registration Statement on Form S-4 (Reg. No. 33-51753) and M&I's Form 8-K dated February 23, 1994 as filed with the Securities and Exchange Commission. Valley is a Wisconsin corporation incorporated in 1962 and a registered bank holding company under the Bank Holding Company Act of 1956, as amended and registered savings and loan holding company under the Home Owners' Loan Act of 1933, as amended. Valley's principal assets are the stock of its subsidiaries. Valley presently owns substantially all of the capital stock of 15 banks and 2 savings associations with a total of 160 offices in Wisconsin. Valley also owns several companies engaged in businesses which are closely related to banking, including the businesses of trust and fiduciary services, credit card products and processing, brokerage services, mortgage banking and insurance agency services. Valley provides financial and managerial assistance and services to its subsidiaries. At December 31, 1993, Valley had consolidated total assets of approximately $4.6 billion, consolidated total deposits of approximately $4.0 billion, and consolidated shareholders' equity of approximately $366 million. BUSINESS OF M&I M&I, through its subsidiaries, engages principally in one line of business, that of providing financial services to a wide variety of corporate, institutional, government and individual customers. Activities in which M&I and its subsidiaries are presently engaged or may undertake in the future are subject to certain statutory and regulatory restrictions. In addition, applicable law and regulations limit the amount of dividends payable to M&I by its bank subsidiaries (which indirectly limits the amount of dividends payable by M&I to its shareholders), the amount of loans made by M&I's bank subsidiaries to any one borrower, the amount of funds transferred by M&I's bank subsidiaries to M&I's other subsidiaries, and the total assets owned by M&I in relation to its capital (which indirectly limits the total income generated by M&I). See "Government Supervision and Regulation." As a registered bank holding company, M&I owns directly or indirectly all or substantially all of the capital stock of 35 commercial banks in Wisconsin and one commercial bank in Phoenix, Arizona, and all of the capital stock of subsidiaries engaged in the following non-banking businesses approved by the Board for bank holding companies: personal property lease financing; investment management and advisory activities; data processing services and software sales to financial institutions; commercial mortgage banking; residential mortgage banking; venture capital and financial advisory services; trust services to residents of Wisconsin, Arizona and Florida; brokerage services; and general insurance agency activities. The Bank Holding Company Act and rules promulgated thereunder authorize M&I to engage in activities deemed by the Board to be so closely related to banking as to be a proper incident thereto. Financial services and products which are or may be provided by M&I and its direct and indirect subsidiaries are subject to certain statutory and regulatory restrictions. See "Government Supervision and Regulation." M&I's principal role is to provide its subsidiaries with financial and managerial assistance. M&I assists its subsidiaries in such areas as budgeting, tax planning and compliance, asset and liability management, investment administration and portfolio planning, business development, advertising, and human resources management. Although the officers and directors of each subsidiary are responsible for conducting the day to day affairs of the subsidiary, M&I establishes lending and accounting policies, budgetary goals and long-range plans and assures compliance therewith through its centralized audit and accounting systems and loan examinations. M&I derives substantially all its income from investments in, advances to and service fees from its subsidiaries. Dividends and interest from subsidiaries are M&I's major sources of cash. Dividend payments from subsidiaries are determined on an individual basis and generally in relation to the earnings, credit quality and capital position of each subsidiary. M&I increases the capital of its banking subsidiaries primarily through the retention of earnings and, if necessary, the purchase of securities by M&I, rather than through direct capital financing by the subsidiary banks. However, the subsidiary banks may issue debt securities directly in order to fund their operations. BANKING AND BANK-RELATED SUBSIDIARIES M&I's 36 bank subsidiaries ("M&I bank subsidiaries") are located in communities throughout the State of Wisconsin and the Phoenix, Arizona metropolitan area and provide a full range of banking services to individuals, corporations and local governments in each of the areas they serve. M&I's largest bank subsidiary is M&I Marshall & Ilsley Bank ("M&I Bank"), which was founded in 1847. Based on consolidated assets of approximately $2.8 billion as of December 31, 1993, M&I Bank was the third largest bank and the largest state-chartered bank in the State of Wisconsin. M&I Bank maintains its headquarters in the City of Milwaukee and operates 23 additional branches and divisions in Milwaukee and in surrounding suburban communities, as well as a branch in the Cayman Islands. Banking services provided by M&I Bank and other M&I bank subsidiaries include retail, international and corporate banking, investment, trust and insurance agency activities. In addition, M&I Bank engages in correspondent banking services. All M&I bank subsidiaries are members of the Federal Deposit Insurance Corporation ("FDIC"). In addition, M&I Bank and M&I's seven national bank subsidiaries are members of the Federal Reserve System (the "System"). All M&I bank subsidiaries operate under names which incorporate the designation "M&I." Insurance Agencies M&I offers insurance agency services through M&I Insurance Services, Inc., a subsidiary of a state chartered subsidiary bank with offices located in numerous communities throughout Wisconsin. M&I, through its subsidiaries, offers a full line of annuity, life, health and casualty insurance products. Investment Management and Trust Services M&I Investment Management Corp., a subsidiary of M&I, located in Milwaukee, Wisconsin, offers a full range of asset management services to the M&I trust company subsidiaries and to other corporate, institutional and individual customers, including the Marshall Funds, an open-end investment company consisting of six portfolios. As of December 31, 1993, M&I Investment Management Corp. had $5.7 billion in assets under management. Marshall and Ilsley Trust Company, a subsidiary of M&I ("M&I Trust"), provides a full range of trust services to individual, not-for-profit and corporate customers. The Personal Trust Administrative Group provides trust, estate and agency services for individuals. The Employee Benefits Administrative Group administers pension, profit sharing and other forms of employee benefit plans, including a Keogh Plan for self-employed individuals. In addition to trust services provided by its Milwaukee office, M&I Trust operates six trust service offices located in M&I subsidiary banks in Beloit, Madison, Racine, Stevens Point, Watertown and Wausau, Wisconsin, and another office in Brookfield, Wisconsin (not a trust service office). M&I also provides trust and investment counseling services through two out-of-state subsidiaries. M&I Marshall and Ilsley Trust Company of Arizona ("M&I Trust Arizona") was organized in 1976, with a primary emphasis on providing trust and investment counseling services to the growing number of Wisconsin natives retired in the Southwest. M&I Trust Arizona has offices in Phoenix and in Sun City serving residents of those areas. The Marshall and Ilsley Trust Company of Florida, located in Naples, was organized in 1984 to provide trust and investment counseling services to residents of the area, including Wisconsin natives who have retired in Florida. As of December 31, 1993, the market value of assets held in trust by the three trust companies totalled $17.3 billion. Equipment Leasing M&I's subsidiary, M&I First National Leasing Corp. ("FNL"), acting as owner and lessor, leases a variety of equipment and machinery, including industrial machinery, computers, hospital and nursing home equipment and construction equipment to both large and small businesses. FNL has its headquarters in Milwaukee, Wisconsin and has offices in numerous other states. Approximately 28% of its business comes from Wisconsin and 72% from other states. At December 31, 1993, FNL held net lease and installment receivables of approximately $236 million. FNL's competitors include other independent leasing companies, banks and other institutions, some of which have larger volume businesses and substantially greater resources. Mortgage Banking M&I has two subsidiaries engaged in mortgage banking, one providing commercial financing and the other providing residential financing. M&I Mortgage Corp. ("M&I Mortgage"), located in Milwaukee, Wisconsin, with offices in Green Bay, La Crosse and Madison, Wisconsin, originates and purchases long-term mortgages on one-to-four family owner-occupied residences for sale in the secondary market. After sale to the secondary market, these mortgages are serviced for the investor by M&I Mortgage. At December 31, 1993, M&I Mortgage had a mortgage servicing portfolio of approximately $1.9 billion. M&I Mortgage serves homeowners throughout the State of Wisconsin and offers financing alternatives beyond those offered through traditional banking institutions. M&I Mortgage also assists M&I bank subsidiaries in originating, selling and servicing residential mortgage loans. Richter-Schroeder Company ("RSC"), located in Milwaukee, Wisconsin, originates long-term commercial real estate loans for institutional investors such as large life insurance companies. RSC services the mortgages for the purchasing investor. RSC is one of the few mortgage banking firms in Wisconsin that specializes in income property financing, seeking investment opportunities for mortgage lenders in the retail, industrial and office sectors. RSC is one of the largest income property mortgage banking firms in Wisconsin, servicing a portfolio of approximately $235 million for investors. Venture Capital and Financial Advisory Services M&I Capital Markets Group, Inc. ("Capital Markets"), a subsidiary of M&I, located in Milwaukee, Wisconsin, provides venture capital and financial advisory services to a variety of customers, primarily in Southeastern Wisconsin and surrounding areas. Capital Markets seeks to invest in businesses that have talented management and technological advantages in their particular field. Capital Markets also provides a broad range of financial advisory and strategic planning services, including assistance in connection with the private placement of securities, raising of funds for expansion, leveraged buy- outs, divestitures and mergers and acquisitions. A subsidiary company of Capital Markets, M&I Ventures Corporation, is licensed as a small business investment company. Brokerage Services M&I Brokerage Services, Inc. ("M&I Brokerage"), a subsidiary of M&I Capital Markets Group, Inc., located in Milwaukee, Wisconsin, provides brokerage and other investment related services to a variety of retail and commercial customers. As a broker-dealer firm registered with the National Association of Securities Dealers and the Securities Exchange Commission, M&I Brokerage serves as an introducing broker-dealer. Customer accounts and securities are carried on a "fully disclosed" basis with the Pershing division of Donaldson, Lufkin and Jenrette. Data Services M&I Data Services, Inc. ("M&I Data Services"), a subsidiary of M&I, is a major supplier of data processing services and software to financial institutions in the United States, including M&I and the M&I bank subsidiaries. M&I Data Services presently serves over 500 financial institutions in 40 states and the District of Columbia. In addition to data processing services, M&I Data Services develops a comprehensive line of financial services software products. M&I Data Services also sells software to foreign financial institutions, and has contracts with sixteen foreign based institutions, including banks in Canada, Great Britain, India, Indonesia, Italy, Malaysia, Switzerland and Thailand. M&I Data Services' processing systems encompass five major processing functions: Deposits, Loans, Financial Accounting, Customer Information and Trust Accounting. M&I Data Services' main data processing center and headquarters are located in a 328,000 square foot building on 20 acres of land situated in Brown Deer, a Milwaukee suburb, (the "Brown Deer Operations Center"). A new addition that nearly doubled the size of the Brown Deer Operations Center was completed in 1993. M&I Data Services also leases 50,000 square feet of commercial office space in Brown Deer for the development and sale of software packages, the sale and support of personal computer networks and the development and support of trust processing services. The Brown Deer Operations Center acts as an intermediary in bank-to-bank transactions and provides funds processing services in connection with both incoming deposits and outgoing payments, including transfers by check and by the bank's wire and money transfer systems. M&I Data Services operates eight remote processing centers in Arizona, Illinois, New York, Florida and Wisconsin. All remote processing centers transmit information taken from checks and other documents to the host sites, where the information is processed and printed on reports which are subsequently sent to customers. During recent years the financial services industry has witnessed an acceleration of both state and federal deregulation, advances in technology, increased consumer awareness and expectations as to banking services, and new product development. These factors have lessened distinctions between the various types of financial institutions and have increased competition and pressure on operating margins. Accordingly, the financial services industry has emphasized the development of new technology-based products and services in order to reduce operating costs while responding to consumer demands and the need for product differentiation. Software, support operations, and new product development have become more complex and expensive for financial institutions to do on their own, and hence there is an increased need for the services offered by third-parties such as M&I Data Services. Large third-party servicers have the technical ability to respond to the data processing requirements of new products and services and are able to spread development and maintenance costs over a broader customer base, resulting in more efficient service. Some larger financial institutions have ceased providing data processing services to their correspondent banks or have decided to terminate their in-house data processing operations in order to conserve resources and concentrate on core banking business. M&I Data Services is concentrating its sales efforts on the outsourcing opportunities at these larger financial institutions. The market for banking technology services is national in scope because customers' data can be transmitted to and from, and processed on-line by, a data center in any part of the United States. In any given geographic area, M&I Data Services' competitors vary in size and include national, regional and local operations. While historically the bank data processing industry has been highly decentralized, there is an accelerating trend toward consolidation in the industry, resulting in fewer companies competing over larger geographic regions. As consolidation continues, successful companies in this business are likely to increase substantially in size as the scale of activity necessary to compete increases. PRINCIPAL SOURCES OF REVENUE The table below shows the amount and percentages of M&I's total consolidated operating income resulting from interest and fees on loans, interest on investment securities and fees for data processing services for each of the last three years:
Interest and Interest on Fees for Data Fees on Loans Investment Securities Processing Services ______________________ _______________________ _____________________ Percent Percent Percent of Total of Total of Total Total Year Ended Operating Operating Operating Operating December 31 Amount Income Amount Income Amount Income Income ______________ ______________________ _______________________ _____________________ ($000's) ($000's) ($000's) ($000's) 1991 $ 463,867 55.5% $ 124,935 15.0% $ 92,580 11.1% $ 835,436 1992 400,414 50.2 118,809 14.9 112,964 14.2 797,948 1993 383,560 48.7 98,052 12.5 136,044 17.3 787,408
M&I business segment information is contained in note 17 of the Notes to the Consolidated Financial Statements contained in Item 8 hereof. COMPETITION M&I and its subsidiaries face substantial competition in the financial service markets they serve. M&I's banking subsidiaries compete for deposits and other sources of funds and for credit relationships with other national and state banks, savings and loan associations, credit unions, finance companies, money market funds, life insurance companies (and other long-term lenders) and other financial and non-financial companies, many of which offer products functionally equivalent to bank products and located both within and outside M&I's primary market area. M&I's non-bank subsidiaries compete with numerous banks, finance companies, data servicing companies, leasing companies, mortgage bankers, insurance companies, brokerage firms, financial advisors, trust companies, mutual funds and investment bankers in Wisconsin and throughout the United States. In addition, M&I competes for funds with both financial and non-financial institutions in a variety of financial markets. Improving the quality and broadening the range of financially related services to customers, easier access to facilities and competitive pricing are among the principal methods of meeting competition in the financial service industry. EMPLOYEES As of December 31, 1993, M&I and its subsidiaries employed in the aggregate approximately 6,611 full and part-time employees. M&I and its subsidiaries maintain retirement plans for the benefit of all qualified employees. M&I considers employee relations to be excellent. None of the employees of M&I and its subsidiaries are represented by a collective bargaining group. GOVERNMENT SUPERVISION AND REGULATION Governance of Bank Holding Companies M&I is a bank holding company registered with and subject to regulation by the Board of Governors of the Federal Reserve System (the "Board") under the Bank Holding Company Act of 1956, as amended (the "Act"). The Act requires M&I to file with the Board annual reports and such additional information as the Board may require and authorizes the Board to conduct examinations of M&I and its subsidiaries. The Act requires every bank holding company to obtain the prior approval of the Board before it may acquire substantially all the assets of any bank, or ownership or control of any voting shares of any bank, if, after such acquisition, it would own or control, directly or indirectly, more than 5% of the voting shares of such bank. Under existing federal and state laws, the Board generally may not approve the acquisition by M&I of the voting shares of, or substantially all the assets of, any bank located outside the State of Wisconsin, except for the acquisition of certain failing banks, as permitted under Section 13(f) of the Federal Deposit Insurance Act, or as otherwise permitted by state law in compliance with Section 3(d) of the Act. Section 3(d) of the Act provides that interstate acquisitions of banks may be approved by the Board where such acquisition is specifically authorized by the laws of the state in which the acquired bank is located. A number of states have laws allowing interstate acquisitions within a specified geographic region if one or more other states within the region permit reciprocal acquisitions of banks and bank holding companies located in their states. Wisconsin enacted a regional interstate banking statute in 1987. The law provides for a region comprised of Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Ohio and Wisconsin. The law allows an in-state bank and in-state bank holding company (institutions which have their principal office in Wisconsin) to acquire or merge with a regional state bank or bank holding company (institutions which have their principal office in a state within the region) subject to certain filing requirements with the Wisconsin Commissioner of Banking (the "Commissioner"). Similarly, a regional state bank holding company may acquire or merge with an in-state bank or bank holding company if various conditions are met. In addition, M&I may be able to acquire or establish banks outside of the midwest region which are located in numerous states and the District of Columbia which have adopted interstate banking not regionally restricted or subject to the existence of reciprocal legislation, or other states that have "trigger" dates which convert regional interstate legislation into full national, non-reciprocal, interstate legislation. The Act limits the activities of bank holding companies to managing, controlling, and servicing their subsidiary banks and to engaging in certain non-banking activities determined by the Board to be so "closely related" to banking or to managing or controlling banks as to be a "proper incident" thereto. With the exception of such closely related activities, bank holding companies are prohibited from acquiring direct or indirect ownership of more than 5% of the voting stock of any company which is not a bank. The Board's approval must be obtained prior to M&I's engaging in any such closely-related activities, or in acquiring more than 5% of the voting shares of any company engaged in such activities, or in some instances expanding the nature of such activities or opening new offices. The Board also has permitted bank holding companies to engage in certain additional activities on a case-by-case basis. The Board has generally followed a restrictive policy in permitting the entry or expansion of bank holding companies and other bank affiliates into domestic and foreign bank and bank-related activities. Neither the Act nor applicable law generally imposes geographic restrictions on the activities of non-bank subsidiaries of bank holding companies. The Act and the Federal Reserve Act (which applies to M&I's largest subsidiary bank) and other state and Federal laws and regulations promulgated thereunder limit the products and services offered by M&I and its subsidiaries (as discussed above), the amount of loans made to any one borrower, the nature of securities in which M&I may invest, deal in or underwrite, and the total assets owned by M&I relative to its capital (which, in turn, restricts the income generated by M&I). The Act and regulations of the Board also prohibit M&I and its subsidiaries from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services. In addition to the Act, M&I's ability to enter various aspects of the securities business may be limited by the Glass-Steagall Act. (The "Glass- Steagall Act" is the name commonly used to refer to sections 16, 20, 21 and 32 of the Banking Act of 1933, 12 U.S.C. 24 (seventh), 78, 377-78.) The Board has permitted bank holding companies to establish non-bank subsidiaries for the purpose of conducting securities related activities under certain conditions and restrictions. In 1991, Congress passed the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). FDICIA created a comprehensive new regulatory structure for banks based on five categories of capitalization. The primary focus of FDICIA was on the regulation of undercapitalized institutions, though the law also placed limitations on the corporate activities of financially strong institutions and their holding companies. Those institutions which qualify as undercapitalized are subject to substantial restrictions on their activities and to strict regulatory oversight. For severely undercapitalized institutions, regulators may limit the institution's ability to conduct transactions with affiliates, prohibit deposits from correspondent institutions, require prior approval for capital distributions by the institution's holding company and require the holding company to divest the institution or any nondepository affiliate of the institution which is in danger of becoming insolvent. Similarly, all depository institutions are subject to capital distribution restrictions if making such distribution would cause the institution to become undercapitalized. FDICIA required banking regulators to propose and adopt regulations addressing a number of subjects, many of which were adopted in 1992 and 1993 and are discussed more fully below. FDICIA and the regulations promulgated thereunder have not materially affected the operations of M&I or the M&I bank subsidiaries and M&I does not believe that any further regulations to be promulgated in the future under FDICIA will have an adverse effect on its operations or those of its subsidiaries. M&I is a legal entity separate and distinct from its subsidiaries. Accordingly, the right of M&I, and thus the right of M&I's creditors and shareholders, to participate in any distribution of the assets or income of any subsidiary is necessarily subject to the prior claims of creditors of such subsidiary, except to the extent that claims of M&I itself as a creditor may be recognized. Payment of dividends to M&I by M&I bank subsidiaries is subject to various state and federal regulatory limitations. In general, under Wisconsin banking law, the board of directors of a state chartered subsidiary bank may declare and pay a dividend from so much of the bank's undivided profits as the board shall deem expedient, provided the payment of such dividend does not in any way impair or diminish the bank's capital, or reduce the capital level below minimum required levels set by regulatory agencies. Under Federal law, which applies to national banks and state banks which are members of the System, regulatory approval is required for the payment of dividends by any bank in any calendar year in excess of such bank's net income for that year combined with the retained net income of the two preceding years, plus any required transfers to surplus. Under these provisions, at December 31, 1993, the M&I bank subsidiaries would have been permitted to pay dividends to M&I of approximately $109.8 million without prior regulatory approval. At December 31, 1993, the M&I subsidiaries (both bank and non-bank) would have been permitted to pay dividends to M&I of approximately $202 million. The Federal and state bank regulatory agencies also have authority to prohibit banks and bank holding companies from paying dividends which would constitute an unsafe and unsound banking practice. The Board and the Comptroller of the Currency have indicated that it would generally be an unsafe and unsound banking practice for banks to pay dividends except out of current operating earnings. Dividends paid to M&I by the M&I bank subsidiaries in 1993 totaled $71.2 million. M&I does not expect that the restrictions referred to above will impair M&I's ability to pay normal quarterly dividends to its stockholders. Commitments to Affiliated Institutions Under Board policy, M&I is expected to act as a source of financial strength to each of its bank subsidiaries and to commit resources to support each bank subsidiary in circumstances when it might not do so absent such requirements. In addition, any capital loans by M&I to any of its bank subsidiaries would also be subordinate in right of payment to depositors and to certain other indebtedness of such bank. As a result of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), a depository institution insured by the FDIC can be held liable for any loss incurred by the FDIC in connection with (i) the default of a commonly controlled FDIC insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC insured depository institution in danger of default. "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur in the absence of regulatory assistance. All of the M&I bank subsidiaries are FDIC insured depository institutions within the meaning of FIRREA. Capital Requirements Information regarding capital requirements for bank holding companies and tables reflecting M&I's regulatory capital position at December 31, 1993 can be found in note 11 of the Notes to the Consolidated Financial Statements contained in Item 8 hereof. Other Regulation of M&I and its Subsidiaries Section 23A of the Federal Reserve Act restricts the extent to which M&I's bank subsidiaries may supply funds to M&I, or to M&I's non-bank subsidiaries ("Affiliates") whether through direct extensions of credit, or through purchase of securities, issuance of guaranties and the like. Unless fully secured by obligations of or guaranteed by the U.S. Government or its agencies, or by certain bank deposits, with certain limited exceptions, M&I bank subsidiaries may not: (i) loan money or otherwise extend credit to; (ii) purchase or invest in the stock of securities of; (iii) purchase the assets of; (iv) issue a guarantee, acceptance, or letter of credit on behalf of; or (v) accept as collateral for a loan or extension of credit the stock or securities of, a bank holding company or its non-bank subsidiaries in an amount exceeding 10% of the capital stock and surplus of the bank in the case of any Affiliate and in an amount exceeding 20% of the capital stock and surplus of the bank in the case of all Affiliates in the aggregate. In addition, every such loan, extension of credit, investment, purchase, guarantee, letter of credit or acceptance must be secured to the extent required under the Federal Reserve Act (at a minimum of 100%). Section 23B of the Federal Reserve Act applies to certain transactions by banks with affiliates that are not covered by Section 23A. Section 23B's basic purpose is to ensure that an insured bank does not subsidize its bank holding company or its sister nonbank subsidiaries by giving them more advantageous terms, whether on loans, or any other contracts with the bank, than they would be able to obtain from an unrelated party. All of M&I's state chartered bank subsidiaries are members of and subject to regulation and examination by the FDIC. M&I's nationally chartered bank subsidiaries are subject to regulation and examination by the Comptroller of the Currency, and its state chartered bank subsidiaries are subject to further regulation and examination by the Commissioner of Banking for the State of Wisconsin and in the case of M&I Thunderbird Bank, the Arizona State Banking Department. In addition, subsidiary banks that are members of the System are subject to regulation and examination by the Board. Areas of banking that are regulated by state and federal law include reserve requirements, investments, loans, mergers, issuances of securities, dividend payments and branch banking. The laws of the jurisdictions in which they operate impose restrictions on many of M&I's non-bank subsidiaries in terms of the activities in which they may engage and the amounts of, and interest rates on, credit they provide. Additional restrictions may be imposed by Federal or state regulatory agencies having authority to supervise or regulate specific types of companies or activities conducted by such subsidiaries. Additionally, the Securities Exchange Act of 1934, as amended (the "1934 Act") imposes regulatory and reporting requirements on various activities conducted by banks, including beneficial ownership of certain securities, dealing in municipal securities, acting as transfer agent, providing certain types of investment management services, and in certain instances, acting as a securities broker. M&I Bank is licensed as a municipal securities broker under the Federal Municipal Securities Rule-Making Act. A subsidiary of M&I, M&I Investment Management Corp., is registered with the Securities and Exchange Commission (the "Commission") under the Investment Advisers Act of 1940. M&I Brokerage Services, Inc., a subsidiary of M&I Capital Markets Group Inc., is registered with the Commission as a broker-dealer and is regulated by the Commission under the 1934 Act. The 1934 Act also requires certain types of investment managers, including M&I Bank, to file reports with the Commission with respect to the holding of certain securities. M&I Bank has also registered with the Commission as a transfer agent and must comply with certain record keeping and reporting requirements. Pursuant to the Government Securities Act of 1986, M&I Bank has filed notice with the Board that it is acting as a government securities broker-dealer. The activities and operations of banks are subject to a number of other federal and state laws and regulations, including state usury and consumer credit laws, state laws relating to fiduciaries, the federal Truth-In-Lending Act and Regulation Z promulgated thereunder, the federal Equal Credit Opportunity Act and Regulation B, the federal Home Mortgage Disclosure Act and Regulation C, the federal Expedited Funds Availability Act and Regulation CC, the federal Fair Credit Reporting Act, the federal Bank Secrecy Act, the federal Community Reinvestment Act, the federal antitrust laws, insider transactions, changes in Bank ownership, management interlocks between depository institutions and the disclosure of bank records. Regulations promulgated by Federal banking regulators in 1992 pursuant to FDICIA broadly impacted the operations of financial institutions and their holding companies. These regulations which were intended to strengthen the industry imposed new standards on various activities including real estate secured lending, acceptance of brokered deposits, interbank liabilities and loans to directors and executive officers of financial institutions and their holding companies. Additional regulations resulting from FDICIA bar state chartered banks from engaging as principal in any activity deemed impermissible for a federally chartered bank and from acquiring or maintaining any equity investment not permissible for a national bank. Furthermore, Regulation DD implementing the Truth-in-Savings provisions of FDICIA was issued by the Board in 1992 and became effective in June, 1993. Regulation DD requires banks to make various new disclosures regarding deposit accounts. Federal bank agencies have comprehensive enforcement authority over banking institutions within their jurisdiction. Pursuant to FDICIA, these agencies possess broad powers over undercapitalized institutions. Actions available to the agencies include the termination of deposit insurance, restrictions on asset growth, denying approval for acquisitions, branching or new lines of business, requiring an institution to recapitalize, requiring divestiture of a financial institution, issuance of temporary and permanent cease and desist orders, imposition of civil money penalties, restrictions on senior officers' compensation, and suspension and removal of directors and officers and the prohibition of other persons from participating in the management of a bank. The agencies frequently use their authority to institute formal enforcement actions to persuade banking organizations on an informal basis to take specified actions designed to insure compliance with applicable laws and regulations. The federal bank agencies are broadly empowered to define "unsafe and unsound" practices. M&I, as the holder of stock of subsidiary banks, may be subject to assessment to restore impaired capital of its national bank subsidiaries to the extent provided in Section 5205 of the Revised Statutes of the United States (12 U.S.C. 55) and of its state banks to the extent provided in Section 220.07 of the Wisconsin Statutes. At present, there is no such impairment of capital of any M&I bank subsidiaries. Any such assessment would be applicable only to M&I and not to any M&I shareholder. Under Section 221.56 of the Wisconsin Statutes, M&I, as a Wisconsin corporation that owns, holds or controls a majority of stock in a state bank or trust company is deemed to be engaged in the banking business and subject to supervision of the Office of the Commissioner, including the requirement that it file reports with and be subject to examination by the Office. The Commissioner is also empowered to issue orders to a bank holding company to remedy any condition or policy that, in the opinion of the Commissioner, endangers the safety of deposits in any subsidiary bank or trust company. In the event of noncompliance with such an order, the Commissioner has power to direct the operations of the bank or trust company and to withhold dividends from the holding company. The foregoing references to applicable laws, statutes, regulations and legislation are brief summaries thereof which do not purport to be complete and are qualified in their entirety by reference to such statutes, regulations and legislation. GOVERNMENT POLICIES AND ECONOMIC CONDITIONS The earnings and business of M&I and the M&I bank subsidiaries are and will be affected by the general economic and political conditions in the United States and abroad and by the monetary and fiscal policies of various Federal agencies, particularly those of the Board. In addition to the functions enumerated under "Government Supervision and Regulation," the Board regulates the supply (and thereby the cost) of funds and bank credit and deals with general economic conditions in the United States and internationally. From time to time, the Board has taken specific steps to curtail domestic inflation, to support the value of U.S. dollars in foreign currency markets and to control the nation's money supply. Policies employed by the Board for these purposes influence the interest rates paid on interest-bearing liabilities, the interest received on earning assets, and the levels of bank loans, investments and deposits. The economic conditions in which M&I has operated have varied greatly over recent years, ranging from extremely high to low rates of inflation, volatile interest rates, and sharp fluctuations in the value of the U.S. dollar compared to other currencies. Government and Board monetary policies have significantly affected the operating results of commercial banks in the past and are expected to do so in the future. The impact of fluctuating economic conditions and federal regulatory policies on the future profitability of M&I and its subsidiaries cannot be predicted with certainty. The cost of funding bank assets has shifted from a reliance on fixed rate sources of funds to funding sources which reflect market rates of interest. This shift was commenced in 1980 pursuant to federal legislation which began a gradual phase out of interest rate ceilings applicable to time and savings deposits at commercial banks and thrift institutions. The only remaining limitation on interest rates payable on transaction deposit accounts, with certain minor exceptions and conditions, is the prohibition on the payment of interest on demand deposits. The legislative and regulatory changes relating to interest rate ceilings have enabled banks to compete more effectively with other unregulated entities for deposits by offering market rates of interest, but have increased the cost of core deposits. SELECTED STATISTICAL INFORMATION The following tables set forth certain statistical information relating to M&I and its subsidiaries on a consolidated basis. Average Balance Sheets and Analysis of Net Interest Income The Corporation's consolidated average balance sheets, interest earned and interest paid, and the average interest rates earned and paid for each of the last three years are (dollars in thousands):
1991 1992 1993 ____________________________________________________________________________________________ Average Interest Average Average Interest Average Average Interest Average Balance Earned Yield Balance Earned Yield Balance Earned Yield ____________________________________________________________________________________________ Loans (1, 2) $4,745,683 $466,788 9.84% $4,803,413 $402,362 8.38% $5,035,183 $385,315 7.65% Investment securities: Taxable 1,155,005 97,348 8.43 1,315,545 98,031 7.45 1,525,630 85,201 5.58 Tax-exempt (1) 392,753 38,693 9.85 345,491 29,647 8.58 250,677 18,703 7.46 Interest bearing deposits in other banks 55,964 3,387 6.05 118,237 4,340 3.67 80,853 2,413 2.98 Funds sold and security resale agreements 189,306 10,147 5.36 160,534 5,697 3.55 60,786 1,907 3.14 Trading securities (1) 5,648 366 6.48 5,387 258 4.79 4,304 188 4.37 Other short-term investments 84,214 5,180 6.15 63,405 2,578 4.07 41,090 1,437 3.50 ____________________________________________________________________________________________ Total interest earning assets 6,628,573 621,909 9.38 6,812,012 542,913 7.97 6,998,523 495,164 7.08 Cash and demand deposits due from banks 396,232 421,289 454,014 Premises and equipment, net 154,947 156,600 178,865 Other assets 182,111 171,230 183,313 Allowance for loan losses (72,320) (78,956) (90,120) ___________ ___________ __________ Total Assets $7,289,543 $7,482,175 $7,724,595
Average Balance Sheets and Analysis of Net Interest Income - concluded
1991 1992 1993 ____________________________________________________________________________________________ Average Interest Average Average Interest Average Average Interest Average Balance Earned Yield Balance Earned Yield Balance Earned Yield ____________________________________________________________________________________________ Savings and interest bearing demand deposits $2,225,954 $107,631 4.84% $2,572,455 $ 82,349 3.20% $2,701,854 $ 65,109 2.41% Other time deposits 2,349,341 163,823 6.97 1,999,673 108,233 5.41 1,785,318 80,608 4.52 Short-term borrowings 498,845 27,288 5.47 439,935 14,600 3.32 571,594 16,714 2.92 Long-term borrowings 211,310 20,146 9.53 212,657 19,085 8.97 208,772 15,927 7.63 ____________________________________________________________________________________________ Total interest bearing liabilities 5,285,450 318,888 6.03 5,224,720 224,267 4.29 5,267,538 178,358 3.39 Noninterest bearing deposits 1,200,345 1,367,413 1,510,414 Other liabilities 165,650 175,690 167,819 Shareholders' equity 638,098 714,352 778,824 ___________ ___________ __________ Total liabilities and shareholders' equity $7,289,543 $7,482,175 $7,724,595 Net interest income $303,021 $318,646 $316,806 Net yield on interest earning assets 4.57% 4.68% 4.53%
Notes: (1) Fully taxable equivalent basis, assuming a Federal income tax rate of 34% for the years 1991 and 1992, 35% for 1993, and excluding disallowed interest expense. (2) Loans on a nonaccrual status have been included in the computation of average balances. Analysis of Changes in Interest Income and Interest Expense The effect on interest income and interest expense of volume and rate changes for 1992 and 1993 are outlined below. Changes not due solely to either volume or rate are allocated to rate (in thousands of dollars).
1992 versus 1991 1993 versus 1992 ____________________________ ______________________________ Increase (Decrease) Increase (Decrease) Due to Change in Due to Change in __________________ _________________ Total Total Average Average Increase Average Average Increase Volume Rate (Decrease) Volume Rate (Decrease) ____________________________ ______________________________ Interest on earning assets: Loans (1) $5,681 ($70,107) ($64,426) $19,422 ($36,469) ($17,047) Investment securities: Taxable 13,534 (12,851) 683 15,651 (28,481) (12,830) Tax-exempt (1) (4,655) (4,391) (9,046) (8,135) (2,809) (10,944) Interest bearing deposits in other banks 3,768 (2,815) 953 (1,372) (555) (1,927) Funds sold and security resale agreements (1,542) (2,908) (4,450) (3,541) (249) (3,790) Trading securities (1) (17) (91) (108) (52) (18) (70) Other short-term investments (1,280) (1,322) (2,602) (908) (233) (1,141) Total interest income change $15,489 ($94,485) ($78,996) $21,065 ($68,814) ($47,749) Expense on interest bearing liabilities: Savings and interest bearing demand deposits $16,771 ($42,053) ($25,282) $ 4,141 ($21,381) ($17,240) Other time deposits (24,372) (31,218) (55,590) (11,597) (16,028) (27,625) Short-term borrowings (3,222) (9,466) (12,688) 4,371 (2,257) 2,114 Long-term borrowings 128 (1,189) (1,061) (348) (2,810) (3,158) Total interest expense change ($10,695) ($83,926) ($94,621) ($ 3,433) ($42,476) ($45,909)
(1) Fully taxable equivalent basis, assuming a Federal income tax rate of 34% for the years 1991 and 1992, 35% for 1993, and excluding disallowed interest expense. Investment Securities The book value of the Corporation's consolidated investment securities at December 31 of each year are:
(In thousands) ______________________________________________________ 1991 1992 1993 ______________________________________________________ U.S. Treasury and government agencies $1,125,371 $1,545,000 $1,460,009 States and political subdivisions 365,197 280,349 160,238 Other 70,285 57,422 53,434 ______________________________________________________ $1,560,853 $1,882,771 $1,673,681
The maturities, at book value, and weighted average yields (for tax-exempt obligations on a fully taxable basis assuming a 35% tax rate) of investment securities at December 31, 1993, are (in thousands):
After One but After Five but Within One Year Within Five Years Within Ten Years After Ten Years Total Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield ______________________________________________________________________________________ U.S. Treasury and government agencies $723,980 5.57% $732,151 4.67% $ 0 0.00% $ 3,878 4.93% $1,460,009 5.12% States and other political subdivisions 76,091 6.62 62,595 9.24 20,774 9.08 778 8.85 160,238 7.97 Other 4,371 9.81 5,581 10.10 1,281 9.80 42,201 3.41 53,434 4.78 ______________________________________________________________________________________ $804,442 5.69% $800,327 5.07% $22,055 9.12% $46,857 3.63% $1,673,681 5.38%
Types of Loans The Corporation's consolidated loans, classified by type, at December 31 of each year are:
1989 1990 1991 1992 1993 _________________________________________________________________ (In thousands) Commercial, financial and agricultural . . . . $1,707,161 $1,650,158 $1,671,521 $1,717,874 $1,861,757 Industrial development revenue bonds . . . . . 89,706 70,928 52,288 37,878 27,821 Real estate: Construction . . . . . . . . . . . . . . . 173,397 186,026 164,723 158,607 214,369 Mortgage: Residential . . . . . . . . . . . . . . 1,087,718 1,220,476 1,203,477 1,199,407 1,254,748 Commercial. . . . . . . . . . . . . . . 755,388 879,4 891,993 933,585 1,061,635 _________________________________________________________________ Total mortgage . . . . . . . . . . . . . . 1,843,106 2,099,946 2,095,470 2,132,992 2,316,383 Personal . . . . . . . . . . . . . . . . . . . 648,065 579,831 583,032 602,218 711,194 Lease financing. . . . . . . . . . . . . . . . 163,568 180,889 206,507 229,155 239,561 _________________________________________________________________ 4,625,003 4,767,778 4,773,541 4,878,724 5,371,085 Less: Allowance for loan losses . . . . . . . 57,308 68,723 73,915 85,884 93,189 _________________________________________________________________ Net loans. . . . . . . . . . . . . . . . . . . $4,567,695 $4,699,055 $4,699,626 $4,792,840 $5,277,896
Loan Maturity and Interest Rate Sensitivity The analysis of loan maturities at December 31, 1993, and the rate structure for the categories indicated are:
Rate Structure of Loans Maturity Due After One Year ________________________________________ ___________________________ Over One With Pre With One Year Year Through Over Five determined Floating Or Less Five Years Years Total Rate Rate ________________________________________ ___________________________ (In thousands) (In thousands) Commercial, financial and agricultural . $1,315,804 $521,346 $24,607 $1,861,757 $343,574 $202,379 Industrial development revenue bonds . . 9,028 10,000 8,793 27,821 11,369 7,424 Real estate - construction . . . . . . . 159,636 54,733 -- 214,369 35,128 19,605 Lease financing. . . . . . . . . . . . . 80,027 158,047 1,487 239,561 159,534 -- _________________________________________________________________________ $1,564,495 $744,126 $34,887 $2,343,508 $549,605 $229,408
Nonaccrual, Past Due and Restructured Loans The Corporation's nonaccrual, past due and restructured loans at December 31, of each year are:
1989 1990 1991 1992 1993 __________________________________________________________ Nonaccrual loans . . . . . . . . . . . . . . $34,920 $45,706 $47,519 $31,630 $27,880 Loans past due 90 days or more . . . . . . . 5,613 3,682 6,148 5,009 5,694 Restructured loans . . . . . . . . . . . . . 6,892 5,464 4,075 3,601 2,195 __________________________________________________________ $47,425 $54,852 $57,742 $40,240 $35,769
Generally, a loan is placed on nonaccrual if payment of interest is more than 60 days delinquent and the loan has been determined by management to be a "problem" loan. In addition, loans which are past due 90 days or more as to interest or principal are also placed on non-accrual. Exceptions to these rules are generally only for loans fully collateralized by readily marketable securities or other relatively risk free collateral. Information with respect to nonaccrual and restructured loans (in thousands) at December 31, 1993, is as follows: Gross interest income which would have been recorded under original terms . . . . . . . $3,557 Interest income recorded during the period. . . $1,804 Potential Problem Loans At December 31, 1993, the Corporation had $14,475 of loans for which payments are presently current, but the borrowers are experiencing serious financial problems. These loans are subject to constant management attention and their classification is reviewed on a quarterly basis. Other Interest Bearing Assets At December 31, 1993, the Corporation's commercial finance subsidiary had $2,342 of corporate debt investment securities on nonaccrual status. The gross interest that would have been recorded in 1993 under the original terms amounted to $257. Interest income recorded during 1993, with respect to such debt securities was $35. Summary of Loan Loss Experience Information relating to the Corporation's consolidated allowance for loan losses and the amount of loans charged off and recoveries, by type, for each of the years ended December 31 is:
1989 1990 1991 1992 1993 ___________________________________________________________ Average loans outstanding during the year, net of unearned income . . . . . . . . . . . . $4,382,709 $4,735,080 $4,745,683 $4,803,413 $5,035,183 Allowance for loan losses at beginning of year . . $ 54,109 $ 57,308 $ 68,723 $ 73,915 $ 85,884 Allowance of banks acquired or sold. . . . . . . . 1,058 1,782 -- -- -- Loans charged off: Commercial, financial and agricultural . . . . 5,538 18,026 8,429 3,963 2,289 Real estate--construction. . . . . . . . . . . 40 851 342 461 41 Real estate--mortgage. . . . . . . . . . . . . 2,536 6,678 6,272 3,980 1,327 Personal . . . . . . . . . . . . . . . . . . . 5,428 9,493 4,760 3,762 2,314 Lease financing. . . . . . . . . . . . . . . . 554 925 1,430 1,426 815 ___________________________________________________________ Total loans charged off. . . . . . . . . . . . . . 14,096 35,973 21,233 13,592 6,786 Recoveries on loans previously charged off: Commercial, financial and agricultural . . . . 1,786 2,136 3,375 7,552 2,153 Real estate--construction. . . . . . . . . . . 2 116 175 92 40 Real estate--mortgage. . . . . . . . . . . . . 208 284 465 1,217 1,371 Personal . . . . . . . . . . . . . . . . . . . 1,752 3,256 1,809 1,426 1,246 Lease financing. . . . . . . . . . . . . . . . 145 39 46 123 216 ___________________________________________________________ Total recoveries on loans previously charged off . . . 3,893 5,831 5,870 10,410 5,026
Summary of Loan Loss Experience - continued
1989 1990 1991 1992 1993 ___________________________________________________________ Net loans charged off. . . . . . . . . . . . . . . 10,203 30,142 15,363 3,182 1,760 Additions to allowance charged to operating expense 12,344 39,775 20,555 15,151 9,065(1) ___________________________________________________________ Allowance for loan losses at end of year . . . . . $57,308 $68,723 $73,915 $85,884 $93,189 Ratio of net loans charged off to average loans outstanding. . . . . . . . . . . .23% .64% .32% .07% .03%
(1) The amount of the addition to the allowance charged to operating expense for the year ended December 31, 1993, is the amount necessary to bring the allowance for loan losses at December 31, 1993, to a level believed adequate by management to absorb current estimated potential losses in the loan portfolio. Management's determination of the adequacy of the allowance is based on a continual review of the loan portfolio, loan loss experience, economic conditions, growth and composition of the portfolio, and other relevant factors. As a result of management's continual review, the allowance is adjusted through provisions for loan losses charged against income. SUMMARY OF LOAN LOSS EXPERIENCE - CONTINUED The Corporation's evaluation of the adequacy of the allowance for loan losses broadly consists of two levels of analysis. The first level focuses primarily on assessments of specific credits, as described more fully below. The second more general level of analysis focuses on categories of similar type loans and portfolio segments (e.g., commercial/individual; real estate/non-real estate; geographical regions related to the locations of affiliate banks). These methodologies include multiple analytical approaches which are viewed together to assess overall reserve and provision levels. The analyses consider, among other factors, historical loss experience, current and anticipated economic conditions, loan portfolio trends, portfolio composition by segment, assigned credit grades, and estimates of potential loss exposures. The loan portfolios of the Corporation's affiliate banks and leasing subsidiary are subject to continual management oversight and quarterly analyses. Management's analyses are based on the Corporation's credit grading system which classifies loans in a manner similar to that of bank regulatory examiners, with estimates of probable and potential losses derived. Management's assigned credit grades and quarterly portfolio analyses are subject to independent monitoring by the Corporation's credit review group, which also performs periodic portfolio reviews at each affiliate. The credit review group prepares reports on the results of their evaluations of affiliate loan portfolios, which together with quarterly analyses of credit exposure provided by affiliate management, serve as the basis for determining the adequacy of the allowance for loan losses. Management utilizes the above-described reserve analysis approaches to determine the overall adequacy of the allowance for loan losses. Management's overall assessment is based on its view of the loan portfolio as consisting of commercial business loans, real estate loans, personal loans, and direct financing leases. Industrial development revenue bonds are viewed as commercial real estate loans. During 1993, consolidated net charge-offs decreased to $1.8 million, representing $6.8 million of charge-offs, offset by $5.0 million of recoveries. This decrease follows the lower than normal $3.2 million of losses experienced in 1992. The lower than normal levels experienced in 1992 and 1993 contrast with the higher than historic levels of losses experienced in 1990 and 1991. The $5.0 million of recoveries recognized in 1993 reflect a return to more normal historic levels. The higher $10.4 million of recoveries recognized in 1992 were primarily due to collection of a large commercial loan charge-off recorded in 1990. The reduction in consolidated charge-off levels in 1992 and further reduction in 1993, reflect the relative strength of the Wisconsin economy and stabilization in the Arizona economy and real estate values. The Corporation's Arizona-based loan portfolio represents approximately 4% of the total portfolio. The Corporation's 1993 provision level of $9.1 million, which is the lowest provision level in the last five years, results in a year-end 1993 loan loss reserve of $93.2 million or 1.74% of total loans, as compared to the year-end 1992 reserve level of 1.76%. The increased reserve levels in 1992 and 1993, reflect the Corporation's favorable net charge-off experience and the inherent cyclical nature of economic conditions and related credit impacts. The year-end 1993 reserve level is considered adequate given uncertainties regarding the economic conditions in the country and the Corporation's primary service areas. The 1993 charge-off levels for commercial and real estate loans decreased to their lowest level in five years and were offset by nearly equal levels of recoveries. The minimal net charge-offs for commercial loans in 1993 reflect the general stability of the Wisconsin and Arizona economies relative to the less favorable conditions experienced in 1990 and 1991. The minimal net recoveries on real estate loans in 1993, compare to net charge-off levels of $7.1 million, $6.0 million, and $3.1 million experienced in 1990, 1991 and 1992, respectively. This trend reflects the weakness in economic conditions and real estate values which had significantly impacted the Corporation's Arizona-based portfolio, and resulted in the higher than historic levels of losses experienced in 1990 and 1991. Personal loan net charge-offs decreased further in 1993, as compared to 1992 and prior year levels, reflecting, in part, a continued de-emphasis on certain consumer oriented products which had resulted in higher loss levels in 1989 and 1990, and the impact of overall economic conditions. In 1993, the Corporation's lease financing portfolio net charge-offs decreased to the lowest level since 1989 reflecting the favorable impact of economic conditions on this portfolio segment which has experienced growth in recent years. Disregarding the undetermined impacts of the pending Valley Bancorporation acquisition, the existing Corporation's charge-off and provision levels for 1994 are expected to continue to be largely dependent on economic conditions in the Corporation's primary service areas. While Wisconsin's economy continues to be relatively stable and the Arizona and national economies reflect some continued strengthening, should the country's economic conditions deteriorate, the Corporation's Wisconsin and Arizona markets may be adversely affected. Absent deterioration in these conditions, total charge- offs for 1994 are not currently expected to vary significantly from 1993 levels and offsetting recoveries are currently expected to decrease from 1993 levels. At the present time, there are no material loans which are known or believed to be in imminent danger of deteriorating or defaulting which are currently expected to give rise to material charge-offs; however, loss levels can be significantly impacted by a few large loans which could deteriorate unexpectedly or be adversely impacted by economic conditions. Based on current conditions, commercial loan losses for 1994 are expected to remain below peak 1990 levels, with net charge-offs anticipated to more closely parallel historic levels. Commercial real estate loans continue to be highly vulnerable to regional economic conditions and real estate values; however, based on current conditions, real estate loan losses for 1994 are expected to remain below the higher than normal levels experienced in 1990 and 1991. Based on the existing portfolio size and composition, personal loan losses for 1994 are currently expected to increase somewhat from 1993 levels, but remain below the peak levels experienced in 1990. At the present time, direct lease financing losses for 1994 are expected to increase somewhat from 1993 levels, to more closely parallel historic levels; however, actual losses could be impacted by portfolio growth, fraud, or unanticipated weaknesses in industry segments within the portfolio. Deposits The average amount of and the average rate paid on selected deposit categories for each of the years ended December 31 is as follows:
1991 1992 1993 _________________ _________________ _________________ Amount Rate Amount Rate Amount Rate _________________ _________________ _________________ Noninterest bearing demand deposits $1,200,345 $1,367,413 $1,510,414 Interest bearing demand deposits 565,842 4.35% 651,960 2.79% 703,498 1.95% Savings deposits 1,660,112 5.00 1,920,495 3.34 1,998,356 2.57 Time deposits 2,349,341 6.97 1,999,673 5.41 1,785,318 4.52 _________________ _________________ _________________ Total deposits $5,775,640 $5,939,541 $5,997,586
The maturity distribution of time deposits issued in amounts of $100,000 and over and outstanding at December 31, 1993 (in thousands) is: Three months or less. . . . . . . . . . . . . . . . . . . . . $109,803 Over three and through six months . . . . . . . . . . . . . . 32,732 Over six and through twelve months. . . . . . . . . . . . . . 30,117 Over twelve months. . . . . . . . . . . . . . . . . . . . . . 67,500 $240,152 At December 31, 1993, time deposits issued by foreign offices totalled $29,083. Return on Equity and Assets
1989 1990 1991 1992 1993 _____ _____ ____ _____ _____ Return on assets: Before cumulative effect of changes in accounting principles 1.26% 1.00% 1.36% 1.56% 1.62% After cumulative effect of changes in accounting principles 1.26 1.00 1.36 1.46 1.62 Return on equity: Before cumulative effect of changes in accounting principles 16.02 12.14 15.57 16.16 16.11 After cumulative effect of changes in accounting principles 16.02 12.14 15.57 15.29 16.11 Dividend payout ratio 28.93 37.86 30.64 31.51 30.68 Average equity to average assets ratio 7.88 8.23 8.75 9.55 10.08 Ratio of earnings to fixed charges (a) Excluding interest on deposits 2.39 x 2.42 x 3.79 x 5.51 x 6.21 x Including interest on deposits 1.34 x 1.28 x 1.45 x 1.76 x 2.07 x
(a) - See Exhibit 12 for detailed computation of these ratios. Short-Term Borrowings Information related to the Corporation's funds purchased and security repurchase agreements for the last three years is as follows (in thousands):
1991 1992 1993 ______________________________ (In thousands) Amount outstanding at year end $381,473 $398,673 $454,980 Average amount outstanding during the year 447,819 394,129 495,806 Maximum amount outstanding at any month's end 516,194 510,493 749,567 Weighted average interest rate at year end 3.71% 2.56% 2.75% Weighted average interest rate during the year 5.43% 3.31% 2.90%
Item 2. Properties. Both M&I and M&I Bank occupy offices on all or portions of 16 floors of a 21-story building, completed in 1969 and located at 770 North Water Street, Milwaukee, Wisconsin. A subsidiary of M&I Bank owns the building and its adjacent 10-story parking lot and leases unoccupied floors to a professional tenant. Bank facilities at this location include five closed circuit TV drive-in stations and six closed circuit TV walk-in stations. In addition, various subsidiaries of M&I lease commercial office space in downtown Milwaukee office buildings near the 770 North Water Street facility. M&I Bank operates 24 branch offices or divisions located in Milwaukee and in surrounding suburban communities. A wholly-owned subsidiary of M&I Bank owns the buildings at four branch sites, located in the western and in the southern sections of downtown Milwaukee, and in Glendale, a Milwaukee suburb. Eight branches, located in Milwaukee suburbs, occupy buildings owned by M&I Bank. The remaining branches occupy leased facilities. Thirty-four of M&I's other subsidiary banks are located in cities throughout Wisconsin. M&I Thunderbird Bank, a wholly-owned subsidiary of M&I, is located in Phoenix, Arizona and has 12 offices in surrounding Maricopa County communities. Thirty-four subsidiary banks occupy modern facilities owned by the banks or by M&I. M&I Data Services owns a 328,000 square foot data processing facility located in Brown Deer, a suburb of Milwaukee, from which it conducts data processing activities for M&I, its subsidiaries and other financial institutions throughout the nation. A new addition that nearly doubled the size of the Brown Deer Operations Center was completed in 1993. M&I Data Services leases 50,000 square feet of commercial office space in Brown Deer for the development and marketing of software packages, the sale and support of personal computer networks and the development and support of trust processing services; leases additional processing centers in Elk Grove Village, Illinois; Madison and Wausau, Wisconsin; Tampa and Fort Lauderdale, Florida and Phoenix, Arizona; and leases space for sales offices in Glastonbury, Connecticut; West Palm Beach, Florida; Wayne, Pennsylvania and De Pere, Wisconsin. In addition, M&I Data Services manages a processing center in New York, New York under a facility management contract. Item 3. Legal Proceedings. M&I is not currently involved in any material pending legal proceedings other than litigation of a routine nature and various legal matters which are being defended and handled in the ordinary course of business. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT Name of Officer Office J.B. Wigdale Chairman of the Board since December, 1992, Chief Executive Age 57 Officer since October, 1992, Director since December, 1988, Vice Chairman of the Board, December, 1988 to December, 1992, Vice President, 1984 to December, 1988, Marshall & Ilsley Corporation; Chairman of the Board since January, 1989, Chief Executive Officer since 1987, Director since 1981, President, 1981 to January, 1989, M&I Marshall & Ilsley Bank; President and Director - M&I Financial Corp., M&I Insurance Company of Arizona, Inc., M&I Building Corp. and M&I Capital Markets Group, Inc.; Director - M&I First National Leasing Corp., M&I Mortgage Corp., Richter-Schroeder Company, Inc., M&I Data Services, Inc., Loujo Company and Marshall & Ilsley Trust Company. D.J. Kuester Director since February, 1994, President since 1987, Marshall Age 52 & Ilsley Corporation; President and Director since January, 1989, Vice President, 1979 to January, 1989, M&I Marshall & Ilsley Bank; Chairman of the Board, Chief Executive Officer and Director, M&I Data Services, Inc.; Director - M&I Financial Corp., M&I Building Corp and M&I Insurance Company of Arizona, Inc. G.H. Director since February, 1994, Executive Vice President and Gunnlaugsson Chief Financial Officer since 1987, Marshall & Ilsley Age 49 Corporation; Vice President of M&I Marshall & Ilsley Bank since 1976; Vice President and Director, M&I Insurance Company of Arizona, Inc.; Director - M&I Mortgage Corp. and M&I Data Services, Inc.; Director - Loujo Company. G.D. Strelow Senior Vice President and Human Resources Director of Marshall Age 59 & Ilsley Corporation since 1993; Vice President and Human Resources Director of M&I Marshall & Ilsley Bank since 1980. M.A. Hatfield Senior Vice President since 1993, Treasurer since 1986 and Age 49 Secretary since 1981, Marshall & Ilsley Corporation; Vice President and Secretary, M&I Marshall & Ilsley Bank; Secretary - M&I First National Leasing Corp., M&I Capital Markets Group, Inc., Marshall & Ilsley Trust Company, M&I Investment Management Corp., Marshall & Ilsley Trust Company of Florida, M&I Ventures Corporation and M&I Brokerage Services, Inc.; Secretary, Treasurer and Director - M&I Financial Corp., M&I Building Corp., M&I Insurance Company of Arizona, Inc. and M&I Insurance Services, Inc.; Secretary and Treasurer, M&I Mortgage Corp.; Secretary and Director, M&I Data Services, Inc.; Director - Richter-Schroeder Company, Inc., Loujo Company and M&I Wauwatosa State Bank. P.R. Vice President and Corporate Controller since April, 1989, Justiliano Vice President, December, 1986 to April, 1989, Marshall & Age 43 Ilsley Corporation. J.L. Roberts Vice President and Corporate Banking Controller of Marshall Age 41 & Ilsley Corporation since April, 1989; Vice President and Controller of M&I Marshall & Ilsley Bank since 1986. J.L. Senior Vice President of Marshall & Ilsley Corporation since Delgadillo 1993; Director of M&I Data Services, Inc. since 1994; Age 42 President and Chief Operating Officer of M&I Data Services, Inc. since 1993; Senior Vice President of M&I Data Services, Inc. since 1989. If M&I completes the Merger with Valley, additional executive officers of M&I will be appointed as described in M&I's Registration Statement on Form S-4 (Reg. No. 33-51753) as filed with the Securities and Exchange Commission. PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters Stock Listing Marshall & Ilsley Corporation common stock is traded under the symbol "MRIS" in the "NASDAQ National Market," and quotations are supplied by the National Association of Securities Dealers. Common Dividends Declared* 1993 1992 ____ _____ First Quarter $.12 $.11 Second Quarter .14 .12 Third Quarter .14 .12 Fourth Quarter .14 .12 ____ _____ $.54 $.48 Price Range of Stock (Low and High Bid) First Quarter $21.06-23.31 $17.25-18.25 Second Quarter 22.94-25.75 16.94-20.56 Third Quarter 21.25-25.00 19.19-21.81 Fourth Quarter 21.75-24.25 20.06-22.06 * May not add due to rounding. A discussion of the regulatory restrictions on the payment of dividends can be found under Item 1. Business, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation, and in footnote 11 to M&I's Consolidated Financial Statements in Item 8 of this Form 10-K. Holders of Common Equity At December 31, 1993 M&I had approximately 10,374 record holders of its Common Stock. Item 6. Selected Financial Data
CONSOLIDATED SUMMARY OF EARNINGS Years ended December 31 ($000's except share data) 1993 1992 1991 1990 1989 ________________________________________________________ Interest Income: Loans $383,560 $400,414 $463,867 $501,005 $473,088 Investment Securities: Taxable 85,201 98,031 97,348 99,466 95,448 Tax Exempt 12,851 20,778 27,587 28,907 30,716 Short-term Investments 5,924 12,849 19,054 12,381 12,707 ________________________________________________________ Total Interest Income 487,536 532,072 607,856 641,759 611,959 Interest Expense: Deposits 145,717 190,582 271,454 297,063 273,546 Short-term Borrowings 16,714 14,600 27,288 50,763 66,866 Long-term Borrowings 15,927 19,085 20,146 18,540 18,004 ________________________________________________________ Total Interest Expense 178,358 224,267 318,888 366,366 358,416 ________________________________________________________ Net Interest Income 309,178 307,805 288,968 275,393 253,543 Provision for Loan Losses 9,065 15,151 20,555 39,775 12,344 ________________________________________________________ Net Interest Income After Provision for Loan Losses 300,113 292,654 268,413 235,618 241,199 Other Income: Data Processing Services 136,044 112,964 92,580 75,047 63,298 Trust Services 48,595 45,595 43,133 39,942 37,938 Other 115,233 107,317 91,867 76,537 69,513 ________________________________________________________ Total Other Income 299,872 265,876 227,580 191,526 170,749 Other Expense: Salaries and Benefits 233,564 215,932 187,456 172,690 161,023 Other 169,858 168,141 162,055 150,199 127,741 ________________________________________________________ Total Other Expense 403,422 384,073 349,511 322,889 288,764 ________________________________________________________ Income Before Taxes 196,563 174,457 146,482 104,255 123,184 Provision for Income Taxes 71,072 57,835 47,135 32,921 37,736 ________________________________________________________ Income Before Accounting Changes 125,491 116,622 99,347 71,334 85,448 Changes in Accounting Methods -- (7,387) -- -- -- ________________________________________________________ Net Income $125,491 $109,235 $ 99,347 $ 71,334 $ 85,448
CONSOLIDATED SUMMARY OF EARNINGS - continued Years ended December 31 ($000's except share data)
1993 1992 1991 1990 1989 ________________________________________________________ Per Share*: Primary Net Income Before Accounting Changes $1.87 $1.73 $1.50 $1.08 $1.28 Primary net Income After Accounting Changes 1.87 1.62 1.50 1.08 1.28 Fully Diluted Net Income Before Accounting Changes 1.76 1.62 1.40 1.03 1.21 Fully Diluted Net Income After Accounting Changes 1.76 1.52 1.40 1.03 1.21 Common Dividend Declared .54 .48 .43 .39 .35 Other Significant Data: Year-End Common Stock Price 23.63 21.17 18.33 9.58 11.50 Return on Average Shareholders' Equity Before Accounting Changes 16.11% 16.16% 15.57% 12.14% 16.02% Return on Average Shareholders' Equity After Accounting Changes 16.11 15.29 15.57 12.14 16.02 Return on Average Assets Before Accounting Changes 1.62 1.56 1.36 1.00 1.26 Return on Average Assets After Accounting Changes 1.62 1.46 1.36 1.00 1.26 Stock Splits 3 for 1 -- -- -- --
_______________ *Restated for the 3 for 1 stock split effected in the form of a 200% stock dividend distributed to shareholders in May, 1993. CONSOLIDATED AVERAGE BALANCE SHEETS Years ended December 31 ($000's except share data)
1993 1992 1991 1990 1989 _________________________________________________________________ Assets: Cash and Due from Banks $ 454,014 $ 421,289 $ 396,232 $ 409,963 $ 411,943 Short-term Investments 182,729 342,176 329,484 143,916 131,730 Trading Securities 4,304 5,387 5,648 7,165 8,983 Investment Securities: Taxable 1,525,630 1,315,545 1,155,005 1,169,995 1,145,256 Tax Exempt 250,677 345,491 392,753 392,184 414,199 Loans: Commercial 1,821,254 1,757,691 1,738,436 1,778,950 1,744,822 Real Estate 2,340,623 2,236,908 2,236,168 2,129,184 1,896,388 Personal 641,205 586,535 583,933 656,881 586,195 Lease Financing 232,101 222,279 187,146 170,065 155,304 _________________________________________________________________ 5,035,183 4,803,413 4,745,683 4,735,080 4,382,709 Allowance for Loan Losses 90,120 78,956 72,320 62,011 56,953 _________________________________________________________________ Net Loans 4,945,063 4,724,457 4,673,363 4,673,069 4,325,756 Other Assets 362,178 327,830 337,058 343,675 332,867 _________________________________________________________________ Total Assets $7,724,595 $7,482,175 $7,289,543 $7,139,967 $6,770,734 Liabilities and Shareholders' Equity: Noninterest Bearing Deposits $1,510,414 $1,367,413 $1,200,345 $1,140,637 $1,118,457 Interest Bearing Deposits: Savings and NOW Accounts 1,563,517 1,401,969 1,159,678 1,087,503 1,062,938 Money Market Savings 1,138,337 1,170,486 1,066,276 939,803 950,329 CDs of $100 or more 204,265 233,145 362,184 489,642 361,088 Other 1,581,053 1,766,528 1,987,157 1,891,991 1,659,800 _________________________________________________________________ Total Deposits 5,997,586 5,939,541 5,775,640 5,549,576 5,152,612 Short-term Borrowings 571,594 439,935 498,845 648,541 746,967 Long-term Borrowings 208,772 212,657 211,310 192,126 188,348 Accrued Expenses and Other Liabilities 167,819 175,690 165,650 162,216 149,276 Shareholders' Equity 778,824 714,352 638,098 587,508 533,531 _________________________________________________________________ Total Liabilities and Shareholders' Equity $7,724,595 $7,482,175 $7,289,543 $7,139,967 $6,770,734 Other Significant Data: Book Value at Year End*** $11.99 $11.47 $10.31 $9.28 $8.59 Average Common Shares Outstanding*** 63,537,534 63,859,455 63,063,834 63,284,286 63,737,022 Shareholders of Record at Year End* 10,374 9,381 9,462 10,129 9,979 Employees at Year End* 6,611 6,315 6,137 6,001 5,953 Historically Reported Credit Quality Ratios:* Net Loan Charge-offs to Average Loans .03% .07% .32% .64% .23% Total Nonperforming Loans** & OREO to End of Period Loans & OREO .86 1.14 1.49 1.41 1.24 Allowance for Loan Losses to End of Period Loans 1.74 1.76 1.55 1.44 1.24 Allowance for Loan Losses to Total Nonperforming Loans** 261 213 128 125 121
____________ *Not restated for acquisitions accounted for as poolings of interests **Nonaccrual loans, restructured loans, and loans past due 90 days or more ***Restated for 3 for 1 stock split YIELD & COST ANALYSIS (Tax equivalent basis) Years ended December 31
1993 1992 1991 1990 1989 ____________________________________________________________ Average Rates Earned: Loans 7.65% 8.38% 9.84% 10.67% 10.90% Investment Securities - Taxable 5.58 7.45 8.43 8.50 8.33 Investment Securities - Tax Exempt 7.46 8.58 9.85 10.24 10.36 Trading Securities 4.37 4.79 6.48 7.68 7.95 Short-term Investments 3.15 3.69 5.68 8.24 9.12 Average Rates Paid: Interest Bearing Deposits 3.25% 4.17% 5.93% 6.74% 6.78% Short-term Borrowings 2.92 3.32 5.47 7.83 8.95 Long-term Borrowings 7.63 8.97 9.53 9.65 9.56 M&I Marshall & Ilsley Bank Average Prime Rate 6.00% 6.25% 8.46% 10.01% 10.87% Summary Yield and Cost Analysis: (As a % of Average Assets) Average Yield 6.41% 7.26% 8.53% 9.20% 9.29% Average Cost 2.31 3.00 4.37 5.13 5.29 ____________________________________________________________ Net Interest Income 4.10 4.26 4.16 4.07 4.00 Provision for Loan Losses .12 .20 .28 .56 .18 ____________________________________________________________ Net Interest Income After Provision for Loan Losses 3.98 4.06 3.88 3.51 3.82 Net Securities Gains .10 .11 .06 .02 .05 Other Income 3.78 3.44 3.06 2.66 2.48 Other Expense 5.22 5.13 4.80 4.51 4.28 ____________________________________________________________ Income Before Income Taxes 2.64 2.48 2.20 1.68 2.07 Provision for Income Taxes 1.02 .92 .84 .68 .81 ____________________________________________________________ Income Before Cumulative Effect of Accounting Changes 1.62 1.56 1.36 1.00 1.26 Net Income 1.62% 1.46% 1.36% 1.00% 1.26%
Item 7. Management's Discussion and Analysis of Financial Position and Results of Operations Marshall & Ilsley Corporation reported consolidated operating earnings of $125.5 million in 1993, an increase of $8.9 million or 7.6% from the $116.6 million reported in the same period a year ago. Fully diluted earnings per share on the same basis was $1.76 compared to $1.62 for 1992, an increase of 8.6%. The return on average assets and average shareholders' equity was 1.62% and 16.11%, respectively, for the year ended December 31, 1993 and 1.56% and 16.16%, respectively, for 1992. Operating earnings increased $17.3 million or 17.4% in 1992 compared to 1991 while 1992 fully diluted earnings per share increased 15.7% over the prior year. The increase in 1993 net income was due to higher net interest income, a lower loan loss provision and higher noninterest related revenues. During 1992, the Corporation adopted two new accounting standards which required the recognition of unrecorded post retirement benefits and that current enacted tax rates be used in determining deferred tax balances. The cumulative effect of the adoption of these accounting standards which was recognized as of January 1, 1992, amounted to an after tax charge of $7.4 million or $.10 per share on a fully diluted basis. Provision for Loan Losses and Credit Quality The provision for loan losses amounted to $9.1 million for 1993 a decrease of $6.1 million or 40.2% when compared to $15.2 million in 1992 and $20.6 million in 1991. The decline in the 1993 provision level reflects current favorable trends in nonperforming assets and net charge-offs in relation to the allowance for loan losses. Nonperforming assets at December 31, 1993 amounted to $46.4 million compared to $55.6 million at December 31, 1992. Nonperforming loans declined by $4.5 million while other real estate owned declined $4.7 million. The largest contributor in the decline in nonperforming loans was nonaccrual loans which declined $3.8 million and amounted to $27.9 million at December 31, 1993. Each major category of nonaccrual loans declined from the prior year. Other real estate owned declined due to the sale of properties across all major affiliate groups. Net charge-offs amounted to $1.8 million for the year ended December 31, 1993 compared to $3.2 million in the prior year. Loan charge-offs in 1993 were at the lowest level reported for the past five years. Recoveries for the year ended December 31, 1993 amounted to $5.0 million, a decline of $5.4 million from that reported for 1992 when recoveries amounted to $10.4 million. During 1992, a $4.4 million recovery on one large commercial loan, partially charged-off in 1990, was realized by our lead bank (M&I Marshall & Ilsley Bank). The allowance for loan losses amounted to $93.2 million at December 31, 1993 compared to $85.9 million a year ago, an increase of $7.3 million or 8.5%. While the allowance for loan losses to nonperforming loan coverage ratio increased from 213% at December 31, 1992 to 261% at December 31, 1993, the allowance for loan losses to total loans coverage ratio declined slightly to 1.74% due to the increase in loans outstanding. Since the third quarter of 1993, nonperforming assets declined $4.8 million or 9.4%. Nonaccrual loans declined by $3.9 million while other real estate owned declined $1.6 million. Net charge-offs for the fourth quarter of 1993 amounted to $1.2 million which were $1.0 million higher than the third quarter of 1993. CREDIT QUALITY December 31, ($ 000's) Consolidated Credit Quality Information Nonperforming Assets by Type
1993 1992 1991 1990 1989 ____________________________________________________________ Loans: Nonaccrual $27,880 $31,630 $47,519 $45,706 $34,920 Renegotiated 2,195 3,601 4,075 5,464 6,892 Past Due 90 Days or More 5,694 5,009 6,148 3,682 5,613 ____________________________________________________________ Total Nonperforming Loans 35,769 40,240 57,742 54,852 47,425 Other Real Estate Owned (OREO) 10,634 15,341 13,797 12,543 10,255 ____________________________________________________________ Total Nonperforming Assets $46,403 $55,581 $71,539 $67,395 $57,680 Allowance for Loan Losses $93,189 $85,884 $73,915 $68,723 $57,308 Net Loan Charge-offs Loan Charge-offs $ 6,786 $13,592 $21,233 $35,973 $14,096 Loan Recoveries (5,026) (10,410) (5,870) (5,831) (3,893) ____________________________________________________________ Total Net Loan Charge-offs $ 1,760 $ 3,182 $15,363 $30,142 $10,203 Consolidated Statistics Net Charge-offs to Average Loans .03% .07% .32% .64% .23% Total Nonperforming Loans to Total Loans .67 .82 1.21 1.15 1.03 Total Nonperforming Assets to Total Loans and Other Real Estate Owned .86 1.14 1.49 1.41 1.24 Allowance for Loan Losses to Total Loans 1.74 1.76 1.55 1.44 1.24 Allowance for Loan Losses to Nonperforming Loans 261 213 128 125 121
Major Affiliate Group Credit Quality Information Total Nonperforming Assets by Major Affiliate Group
1993 1992 1991 1990 1989 ____________________________________________________________ M&I Marshall & Ilsley Bank $13,656 $13,847 $17,628 $17,392 $13,367 Other Wisconsin Affiliates 28,733 32,982 38,335 37,848 34,352 M&I Thunderbird Bank 4,014 8,752 15,576 12,155 9,961 Total Nonperforming Assets $46,403 $55,581 $71,539 $67,395 $57,680 Loan Loss Provisions by Major Affiliate Group M&I Marshall & Ilsley Bank $ 1,200 $ 2,500 $ 4,316 $12,001 $ 3,336 Other Wisconsin Affiliates 7,190 10,926 13,539 7,309 5,678 M&I Thunderbird Bank 675 1,725 2,700 20,465 3,330 Total Loan Loss Provisions $ 9,065 $15,151 $20,555 $39,775 $12,344 Ratio of Allowance for Loan Losses to Nonperforming Loans by Major Affiliate Group M&I Marshall & Ilsley Bank 455% 471% 173% 161% 186% Other Wisconsin Affiliates 193 163 122 113 119 M&I Thunderbird Bank 434 177 85 116 48 Consolidated 261% 213% 128% 125% 121%
The table below presents a summary of the major categories of consolidated nonaccrual loans:
1993 1992 ___________________________________ __________________________________ % of % of Loan % of Loan % of Nonaccrual Type Nonaccrual Nonaccrual Type Nonaccrual ___________________________________ __________________________________ Commercial Commercial $ 5,663 .30% 20.3% $ 7,745 .44% 24.5% Lease Financing Receivables 2,819 1.18 10.1 2,091 .91 6.6 ___________________________________ __________________________________ Total Commercial 8,482 .40 30.4 9,836 .50 31.1 Real Estate Construction and Land Development 388 .18 1.4 1,237 .78 3.9 Commercial Real Estate 12,578 1.18 45.1 12,245 1.31 38.7 Residential Real Estate 5,014 .40 18.0 6,166 .51 19.5 ___________________________________ __________________________________ Total Real Estate 17,980 .71 64.5 19,648 .86 62.1 Personal 1,418 .20 5.1 2,146 .36 6.8 ___________________________________ __________________________________ Total $27,880 .52% 100.0% $31,630 .65% 100.0%
INCOME STATEMENT COMPONENTS AS A PERCENT OF AVERAGE TOTAL ASSETS The table below presents a summary of the major elements of the income statement for 1993, 1992, and 1991. Each of the elements is stated as a percent of average total assets outstanding for the respective year and, where appropriate, is converted to a fully taxable equivalent basis (FTE). 1993 1992 1991 ______ ______ ______ Interest Income 6.41% 7.26% 8.53% Interest Expense (2.31) (3.00) (4.37) ______ ______ ______ Net Interest Income 4.10 4.26 4.16 Provision for Loan Losses (.12) (.20) (.28) Net Securities Gains .10 .11 .06 Other Income 3.78 3.44 3.06 Other Expense (5.22) (5.13) (4.80) ______ ______ ______ Income Before Income Taxes 2.64 2.48 2.20 Income Taxes (1.02) (.92) (.84) ______ ______ ______ Income Before Cumulative Effect of Accounting Changes 1.62% 1.56% 1.36% Net Income 1.62% 1.46% 1.36% Net Interest Income Net interest income was $309.2 million in 1993, a slight increase from $307.8 million earned in 1992. The benefit was a result of a modest increase in average earning assets combined with a shift in the asset and funding mix. Average earning assets increased $186.5 million or 2.7% in 1993 and amounted to $7.0 billion. Short-term investments declined $160.5 million while long-term investments increased $115.3 million and amounted to $1.78 billion. The tax-exempt portion of our long-term investment portfolio continues to decline as the availability of such securities diminish and therefore are replaced with taxable investments. Total average loans increased $231.8 million or 4.8% and amounted to $5.04 billion for the year ended December 31, 1993. Average commercial loans grew $63.6 million or 3.6% in 1993 compared to the prior year. Average total real estate loans amounted to $2.34 billion compared to $2.24 billion last year, an increase of 4.6%. Of this increase, commercial real estate increased 9.3% or $91.6 million with business real estate loans contributing $53.4 million of the growth. Residential real estate loans grew a modest 1.0% or $12.1 million and amounted to $1.27 billion in 1993. Personal loans amounted to $641.2 million in 1993, an increase of 9.3% from the prior year. Student loan activity was the largest contributor to the increase. Lease financing grew 4.4% or $9.8 million in 1993 compared to 1992. As discussed throughout the year, the shift in our funding mix also helped contribute to the slight increase in net interest income. Average noninterest bearing deposits amounted to $1.51 billion for the year ended December 31, 1993, an increase of $143.0 million or 10.5% from that reported in 1992. Total interest bearing deposits amounted to $4.49 billion a decline of $85.0 million or 1.9% compared to 1992. Core interest bearing deposit accounts increased $129.4 million for 1993 compared to the prior year. Regular savings increased $110.0 million or 14.7% while NOW/Super NOW accounts increased $51.5 million or 7.9% in the current year when compared to 1992. Money market accounts declined $32.1 million or 2.7%. Large dollar certificate of deposit accounts and other certificates of deposit and time accounts decreased $28.8 million or 12.4%, and $185.5 million or 10.5%, respectively, when comparing 1993 to the prior year. In November 1992, the Corporation redeemed, at par, the $60 million 10 1/2% notes due in 1995. In July 1993, the Corporation issued $100 million of 10 year 6.375% unsecured subordinated notes. The proceeds were used for general corporate purposes which included the financing of the treasury share repurchase program announced in April, 1993. The net interest margin as a percent of average earning assets declined from 4.68% for the year ended December 31, 1992 to 4.53% in the current year. The average yield on our interest earning assets was 7.08%, a decline of 89 basis points from 1992. Loan yields declined by 73 basis points to 7.65% and our long-term investment securities yielded 5.85%, a decline of 184 basis points from that earned a year ago. The total cost of our interest bearing liabilities amounted to 3.39% for 1993, a decline of 90 basis points when compared to the prior year. The cost of our core interest bearing deposit accounts declined 79 basis points in the current year compared to 1992, while the cost of our other time deposit accounts declined 89 basis points. Due to the above noted realignment of our long-term borrowings, the cost associated with this funding source declined 134 basis points and amounted to 7.63% compared to 8.97% in 1992. While the spread between interest earning assets and interest bearing liabilities declined by 1 basis point, the value of our noninterest bearing deposit accounts declined by 89 basis points. Net interest income was $307.8 million in 1992, an increase of $18.8 million or 6.5% from the $289.0 million earned in 1991. The improvement was primarily due to an increase in the interest margin, an increase in average earning assets and a continued favorable shift in the funding mix. Average earning assets increased $183.4 million or 2.8% in 1992 and grew to $6.8 billion. Total securities increased 7.3% while relatively slower loan growth amounted to 1.2% and was exhibited across all major categories of loans. The margin continued to benefit from a more favorable mix of funding sources and interest rate environment trends. Noninterest bearing deposits increased $167.0 million or 13.9% in 1992 compared to the prior year. While total average interest bearing deposit balances remained relatively unchanged in 1992, the changes within the individual categories of deposits helped contribute to the margin increase. The interest margin also benefitted from the more recent interest rate environment trends. While the yield on total average interest earning assets declined from 9.38% in 1991 to 7.97% in 1992, a decline of 141 basis points, the rate paid on our interest bearing liabilities declined 174 basis points. These rates resulted in a net interest margin on average earning assets of 4.68% in 1992 compared to 4.57% in the prior year. The table below shows the composition of net interest income on a FTE basis: ANALYSIS OF NET INTEREST INCOME ($000's)
1993 1992 ____________________________________ __________________________________ Average Average Average Yield or Average Yield or Balance Interest Cost Balance Interest Cost ____________________________________ __________________________________ Average Assets: Loans $5,035,183 $385,315 7.65% $4,803,413 $402,362 8.38% Investment Securities: Taxable 1,525,630 85,201 5.58 1,315,545 98,031 7.45 Tax Exempt 250,677 18,703 7.46 345,491 29,647 8.58 Interest-bearing deposits in other banks 80,853 2,413 2.98 118,237 4,340 3.67 Funds sold and security resale agreements 60,786 1,907 3.14 160,534 5,697 3.55 Trading securities 4,304 188 4.37 5,387 258 4.79 Other short-term investments 41,090 1,437 3.50 63,405 2,578 4.07 ____________________________________ __________________________________ Total interest-earning assets 6,998,523 495,164 7.08% 6,812,012 542,913 7.97% Cash and demand deposits due from banks 454,014 421,289 Premises and equipment, net 178,865 156,600 Other assets 183,313 171,230 Allowance for loan losses (90,120) (78,956) __________ __________ Total Assets $7,724,595 $7,482,175
1993 1992 ____________________________________ __________________________________ Average Average Average Liabilities and Average Yield or Average Yield or Shareholders' Equity Balance Interest Cost Balance Interest Cost ____________________________________ __________________________________ Savings and interest-bearing demand deposits $2,701,854 $ 65,109 2.41% $2,572,455 $ 82,349 3.20% Other time deposits 1,785,318 80,608 4.52 1,999,673 108,233 5.41 Short-term borrowings 571,594 16,714 2.92 439,935 14,600 3.32 Long-term borrowings 208,772 15,927 7.63 212,657 19,085 8.97 ____________________________________ __________________________________ Total interest-bearing liabilities 5,267,538 178,358 3.39% 5,224,720 224,267 4.29% Noninterest bearing deposits 1,510,414 1,367,413 Other liabilities 167,819 175,690 Shareholders' equity 778,824 714,352 __________ __________ Total Liabilities and Shareholders' Equity $7,724,595 $7,482,175 Net interest margin (FTE) as a percent of earning assets 316,806 4.53% 318,646 4.68% Fully taxable equivalent adjustment (7,628) (10,841) ________ ________ Net Interest Income $309,178 $307,805
Other Income Total other income amounted to $299.9 million for 1993, an increase of $34.0 million or 12.8% from $265.9 million reported in 1992. The largest contributor was data processing services revenue which increased $23.1 million or 20.4% in 1993, and amounted to $136.0 million. Processing revenue and software related revenue contributed to the increase. Certain contract termination fees were paid by our customers who terminated their processing agreements due to their being acquired by another entity. The amount recorded as contract termination revenue amounted to $5.4 million in 1993 compared to $1.1 million in 1992. Trust services revenue increased $3.0 million or 6.6% in 1993 compared to the prior year. Other customer service revenue amounted to $82.4 million for 1993, an increase of $4.3 million or 5.5%, when compared to $78.1 million earned in 1992. Service charges on commercial demand accounts continue to increase and amounted to $21.4 million, an increase of 9.3% or $1.8 million when compared to $19.6 million earned in 1992. Credit card fees increased $1.1 million or 12.9% in 1993 as compared to the prior year. Fees from our brokerage operations increased $1.3 million or 50.3% and amounted to $3.8 million for 1993. Total loan fees amounted to $16.8 million for 1993 compared to $15.8 million in the prior year. Other miscellaneous income also increased in 1993 and amounted to $25.0 million, an increase of 19.9% or $4.1 million, when compared to $20.8 million earned in 1992. Income from the sale of 15 and 30 year mortgages acquired and sold in the secondary market amounted to $6.7 million compared to $3.4 million in 1992, an increase of $3.3 million. Net securities gains from Investment Securities Available for Sale amounted to $7.8 million in 1993 compared to $8.3 million in the prior year. The primary sources of this activity were gains realized by the Corporation from the sale of certain equity securities and gains realized by our Capital Markets affiliate. Gains realized by Capital Markets were $3.3 million in 1993 and $6.7 million in 1992. Other income amounted to $265.9 million in 1992, a $38.3 million or 16.8% increase from $227.6 million reported in 1991. The largest contributor was data processing fees which increased 22% in 1992 and amounted to $113.0 million. This growth was driven by both processing and software revenue growth. Trust services revenue increased 5.7% in 1992 compared to the prior year. Other customer services amounted to $78.1 million in 1992 compared to $66.1 million in 1991. Service charges on deposit accounts, primarily commercial deposit accounts, contributed $3.6 million of the increase in 1992. Fees earned on the origination of real estate loans amounted to $3.9 million in 1992 compared to $2.4 million in 1991. Loan servicing income increased $1.2 million in 1992 and amounted to $4.9 million. Our servicing portfolio grew 48.5% in 1992 and amounted to $1.5 billion at December 31, 1992. Corporate finance fees increased $1.1 million in 1992 while brokerage income increased $1.5 million in 1992 compared to the prior year. Net securities gains amounted to $8.3 million in 1992 compared to $4.4 million in 1991. During 1992, our Capital Markets affiliate reported net gains of $6.7 million due primarily to the sale of one of its investments, whereas a loss of $.4 million was recognized in the prior year. The Corporation also sold certain equity securities, carried at the lower of cost or market, and realized a gain of $1.2 million in 1992 and $3.6 million in 1991. Other miscellaneous income amounted to $20.8 million in 1992 compared to $21.4 million in the prior year. Income from the sale of 15 and 30 year mortgages acquired and sold in the secondary market amounted to $3.4 million in 1992 compared to $.4 million in the prior year. During 1991, the Corporation accrued $5 million for recovery of losses arising out of litigation settled in 1990. Other Expense Other expense amounted to $403.4 million in 1993 compared to $384.1 million in 1992, an increase of $19.3 million or 5.0%. Salaries and employee benefits expense increased $17.6 million or 8.2% in 1993 compared to the prior year and amounted to $233.6 million. Our data processing subsidiary contributed $16.7 million or 94.5% of the increase which was partially the result of their number of full-time employees increasing from 1600 to 1866. The purchase of a data center in the Southeast resulted in the addition of 144 full-time employees. Net occupancy expense for 1993 remained relatively unchanged from the prior year. Equipment expense amounted to $42.5 million, an increase of 9.9% or $3.8 million from 1992. Expanded computer capacity, more data storage devices and other related data processing equipment all contributed to the increase in equipment expense. Processing expense increased 25.2% during 1993 and amounted to $13.2 million compared to $10.5 million in the prior year. Our data processing subsidiary contributed a significant portion of this increase. The outsourcing of certain record retention functions resulted in the increase in processing charges by approximately $1.3 million. Other miscellaneous expense amounted to $58.6 million, a decrease of $5.0 million or 7.8%, from $63.6 million reported in 1992. This category is affected by the capitalization of costs, net of amortization, associated with software development and data processing conversions. During 1993 the amount of expense capitalized, net of amortization, exceeded the amount recorded in 1992 by approximately $8.0 million. Of this net increase, $4.9 million related to costs associated with conversion activity while $3.1 million related to increased software development work. Total other expense in 1992 increased $34.6 million or 9.9% from $349.5 million reported in the prior year. Salaries and benefits expense amounted to $215.9 million in 1992, an increase of 15.2% from that reported in 1991. Our data processing subsidiary contributed $12.4 million of the increase. Contributing to this growth was an increase in the number of full time employees at that subsidiary. This was driven primarily by the revenue growth discussed above. During 1992, the Corporation established supplemental retirement plans for certain key executives. The expense for these plans included $4.0 million which was nonrecurring. Net occupancy expense increased a modest 1.1% in 1992 as compared to 1991. Equipment expense amounted to $38.7 million for 1992 as compared to $36.0 million in 1991. A substantial portion of this increase was due to increased depreciation charges on equipment used by our data processing subsidiary. Payments to regulatory agencies amounted to $14.0 million in 1992, an increase of $1.4 million when compared to 1991. The increase was primarily due to higher FDIC insurance costs related to increased deposits in addition to a full year's impact of 1991 insurance rate increases. Processing charges increased $1.3 million or 14.0% in 1992 when compared to the prior year. Approximately 57% of the increase is due to our data processing business. Income Tax Provision The provision for income taxes was $71.1 million in 1993 compared to $57.8 million in 1992 and $47.1 million in 1991. The increases in the provision are due to higher pre-tax earnings and declines in tax exempt income along with an increase of $1.2 million in 1993 due to a change in the Federal tax rate. Asset/Liability Management Asset/Liability management involves the funding and investment strategies necessary to maintain an appropriate balance between interest sensitive assets and liabilities as well as to assure adequate liquidity. These strategies determine the characteristics and mix of the balance sheet. They affect net interest margins, maturity patterns, interest rate sensitivity and risk, as well as resource allocations. The Corporation combines the active management of the balance sheet position over interest rate cycles with the limited use of hedging products, to confine interest rate risk within prudent parameters. We position the balance sheet in a manner which will match asset and liability repricing schedules to insulate our net interest margin from cyclical swings in interest rates, while consciously matching or mismatching discretionary asset and liability repricing schedules to take advantage of interest rate swings over short periods of time. Adequate funding sources are maintained through a full line of deposit and short-term borrowing products, competitively priced to a diversified customer base. Asset diversification provides a proper mix of variable and fixed rate loans, while investment decisions are primarily designed to balance the overall interest rate risk in the balance sheet. Liquidity is provided through marketability and an appropriate schedule of maturing investments. A portion of demand deposits are considered rate sensitive under the following assumptions. A core amount of demand deposits is calculated at the beginning of each year. This core number is the average of the previous six months actual and upcoming twelve months forecasted balances. The core balance is considered nonrate sensitive and classified as a nonrate sensitive liability in the "1 year +" time frame. Actual demand deposit balances are compared to the core balance monthly. The difference, positive or negative, is considered rate sensitive and classified as a rate sensitive liability. At December 31, 1993, $314 million of demand deposits were classified as rate sensitive in the "1-30 Days" time frame. ASSET/LIABILITY MANAGEMENT ($ in millions)
1-30 31-90 91-180 181-364 1 Days Days Days Days Subtotal Year + Total __________________________________________________________________________________ Loans $2,142 $ 397 $ 314 $ 476 $3,329 $ 1,949 $5,278 Securities 132 147 127 398 804 870 1,674 Other Interest Bearing Assets 129 18 -- -- 147 -- 147 Other Assets -- -- -- -- -- 871 871 __________________________________________________________________________________ Total Assets $2,403 $ 562 $ 441 $ 874 $4,280 $ 3,690 $7,970 Rate Sensitive Liabilities $2,420 $ 231 $ 309 $ 286 $3,246 $ 2,376 $5,622 Nonrate Sensitive Liabilities -- -- -- -- -- 2,348 2,348 __________________________________________________________________________________ Total Liabilities & Equity $2,420 $ 231 $ 309 $ 286 $3,246 $ 4,724 $7,970 Gap $ (17) $ 331 $ 132 $ 588 $(1,034) Cumulative Gap (17) 314 446 1,034 Cumulative Gap as a % of Total Assets -0.21% 3.94% 5.60% 12.97%
Capital Resources Shareholders' equity was $750.4 million at December 31, 1993 compared to $760.6 million at December 31, 1992. This decrease resulted from the repurchase of treasury shares which amounted to $117.9 million in 1993. The Corporation continues to have a strong capital base and its regulatory capital ratios are significantly above the defined minimum regulatory ratios. At December 31, 1993, the Corporation had a total risk-based capital ratio of 15.49% and a 12.17% core capital to risk-based asset ratio. Selected leverage capital ratios must also be maintained. The Corporation's leverage ratio at December 31, 1993 was substantially in excess of the minimum 3% to 5% guidelines. The Corporation's subsidiaries, primarily its banking subsidiaries, are restricted by regulations from making dividend distributions above prescribed amounts. In addition, banking subsidiaries are limited in making loans and advances to the Corporation. At December 31, 1993 approximately $109.8 million and $92.3 million were available for distribution without regulatory approval from the Corporation's banking and nonbanking subsidiaries, respectively. Under Federal Reserve Board policy, the Corporation is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each subsidiary bank in circumstances when it might not do so absent such policy. In April, 1993 the Board of Directors authorized a common share repurchase program for 5.7 million shares in anticipation of the conversion of its $50 million convertible note. The Corporation also reaffirmed its on-going program to annually purchase up to 1.5 million shares to fund obligations of its stock option and other benefit plans. During 1993 approximately 5.0 million shares were purchased. In July, the Corporation issued $100 million of 10 year, 6.375% unsecured subordinated notes. The newly issued notes are considered an element of total capital for risk-based capital purposes. The proceeds were used for general corporate purposes and to help finance the common share repurchase program. The Corporation also filed a shelf registration statement with the Securities and Exchange Commission to issue up to $150 million of medium-term unsecured and unsubordinated Series C notes which will be due from 9 months to 30 years from the date of issue, at a fixed and floating rate. In December, 1993 the Corporation's Board of Directors approved a proposal to amend the Corporation's Restated Articles of Incorporation, as amended, in order to, among other things, increase the authorized Common Stock of the Corporation from 80 million shares to 160 million shares. The proposal is contingent upon shareholder approval and is to be considered at the special meeting of shareholders which is scheduled to be held in February, 1994. During 1992 and 1993, the Financial Accounting Standards Board issued numerous standards which affect the accounting and reporting of investment securities, impaired loans and postemployment benefits beginning as early as 1994. As discussed in the Notes to the Consolidated Financial Statements, the Corporation does not anticipate that the pronouncements, taken individually, will have a material impact on the Consolidated Financial Statements. Item 8. Consolidated Financial Statements and Supplementary Data CONSOLIDATED BALANCE SHEETS December 31 ($000's except share data)
1993 1992 Assets _______________________________ Cash and Cash Equivalents: Cash and Due from Banks $ 479,473 $ 491,826 Funds Sold and Security Resale Agreements 59,696 17,435 Money Market Funds 35,866 34,768 _______________________________ Total Cash and Cash Equivalents 575,035 544,029 Trading Securities, at Market Value 2,305 12,633 Other Short-term Investments, at Cost which Approximates Market Value 49,365 244,345 Investment Securities Held to Maturity, Market Value $173,262 ($305,467 in 1992) 169,484 300,710 Investment Securities Available for Sale, Market Value $1,521,401 ($1,610,377 in 1992) 1,504,197 1,582,061 Loans, Net of Unearned Income of $37,939 ($38,238 in 1992) 5,371,085 4,878,724 Less: Allowance for Loan Losses 93,189 85,884 _______________________________ Net Loans 5,277,896 4,792,840 Premises and Equipment 196,530 168,889 Accrued Interest and Other Assets 195,402 204,837 _______________________________ Total Assets $7,970,214 $7,850,344 Liabilities and Shareholders' Equity Deposits: Noninterest Bearing $1,724,256 $1,636,153 Interest Bearing 4,471,618 4,575,976 _______________________________ Total Deposits 6,195,874 6,212,129 Short-term Borrowings 633,668 550,376 Accrued Expenses and Other Liabilities 187,503 196,998 Long-term Borrowings 202,817 130,201 _______________________________ Total Liabilities 7,219,862 7,089,704 Shareholders' Equity: Series A Convertible Preferred Stock, $1.00 par value, 500,000 Shares Authorized, 185,314 Shares Issued; Liquidation Preference of $18,531 185 185 Common Stock, $1.00 par value, 80,000,000 Shares Authorized, 66,424,646 Shares Issued (22,096,832 in 1992) 66,425 22,097 Additional Paid-in Capital 50,184 93,792 Retained Earnings 756,556 666,499 _______________________________ 873,350 782,573 Less:Treasury Stock, at Cost, 5,821,786 Shares (644,963 in 1992) 121,106 18,798 Deferred Compensation 1,892 3,135 _______________________________ Total Shareholders' Equity 750,352 760,640 _______________________________ Total Liabilities and Shareholders' Equity $7,970,214 $7,850,344
The accompanying notes are an integral part of the Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF INCOME Years ended December 31 ($000's except share data)
1993 1992 1991 _________________________________________ Interest Income Loans $383,560 $400,414 $463,867 Investment Securities: Taxable 85,201 98,031 97,348 Exempt from Federal Income Taxes 12,851 20,778 27,587 Trading Securities 167 234 340 Other Short-term Investments 5,757 12,615 18,714 _________________________________________ Total Interest Income 487,536 532,072 607,856 Interest Expense Deposits 145,717 190,582 271,454 Short-term Borrowings 16,714 14,600 27,288 Long-term Borrowings 15,927 19,085 20,146 _________________________________________ Total Interest Expense 178,358 224,267 318,888 _________________________________________ Net Interest Income 309,178 307,805 288,968 Provision for Loan Losses 9,065 15,151 20,555 _________________________________________ Net Interest Income After Provision for Loan Losses 300,113 292,654 268,413 Other Income Data Processing Services 136,044 112,964 92,580 Trust Services 48,595 45,595 43,133 Other Customer Services 82,415 78,133 66,064 Net Securities Gains 7,837 8,343 4,381 Other 24,981 20,841 21,422 _________________________________________ Total Other Income 299,872 265,876 227,580 Other Expense Salaries and Employee Benefits 233,564 215,932 187,456 Net Occupancy 23,560 23,805 23,543 Equipment 42,538 38,691 36,043 Payments to Regulatory Agencies 14,119 14,027 12,658 Processing Charges 13,197 10,541 9,246 Supplies and Printing 9,808 9,352 8,731 Professional Services 8,038 8,161 7,935 Other 58,598 63,564 63,899 _________________________________________ Total Other Expense 403,422 384,073 349,511 Income Before Income Taxes and Cumulative Effect of Changes in Accounting Principles 196,563 174,457 146,482 Provision for Income Taxes 71,072 57,835 47,135 _________________________________________ Income Before Cumulative Effect of Changes in Accounting Principles 125,491 116,622 99,347 Cumulative Effect of Changes in Accounting Principles, Net of Income Taxes -- (7,387) -- _________________________________________ Net Income $125,491 $109,235 $ 99,347 Net Income Per Common Share Primary: Income Before Cumulative Effect of Changes in Accounting Principles $ 1.87 $ 1.73 $ 1.50 Cumulative Effect of Changes in Accounting Principles -- (.11) -- _________________________________________ Net Income $ 1.87 $ 1.62 $ 1.50 Fully Diluted: Income Before Cumulative Effect of Changes in Accounting Principles $ 1.76 $ 1.62 $ 1.40 Cumulative Effect of Changes in Accounting Principles -- (.10) -- _________________________________________ Net Income $ 1.76 $ 1.52 $ 1.40
The accompanying notes are an integral part of the Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31 ($000's)
1993 1992 1991 ____________________________________________ Cash Flows From Operating Activities Net Income $ 125,491 $ 109,235 $ 99,347 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 34,392 20,348 20,578 Provision for Loan Losses 9,065 15,151 20,555 Gains on Sales of Assets (13,078) (14,334) (7,624) Proceeds from Sales of Trading Securities and Loans Held for Resale 2,629,311 2,911,508 2,681,022 Purchases of Trading Securities and Loans Held for Resale (2,641,981) (2,962,291) (2,699,940) Other (2,667) (11,334) 4,509 ____________________________________________ Total Adjustments 15,042 (40,952) 19,100 ____________________________________________ Net Cash Provided by Operating Activities 140,533 68,283 118,447 Cash Flows From Investing Activities Net (Increase) Decrease in Shorter Term Securities 50,050 36,615 (25,145) Proceeds from Maturities of Longer Term Securities 1,033,029 911,863 589,169 Proceeds from Sales of Securities Available for Sale 18,648 17,692 72,774 Purchases of Longer Term Securities (702,318) (1,311,362) (736,861) Net (Increase) Decrease in Loans (463,298) (49,921) 13,536 Purchases of Assets to be Leased (94,187) (95,964) (89,860) Principal Payments on Lease Receivables 105,352 96,062 85,840 Purchases of Premises and Equipment, net (55,129) (38,341) (20,348) Other (393) 28,795 12,338 ____________________________________________ Net Cash Used in Investing Activities (108,246) (404,561) (98,557) Cash Flows From Financing Activities Net Increase (Decrease) in Deposits (16,255) 79,050 153,458 Proceeds from Issuance of Commercial Paper 1,348,661 597,794 607,787 Principal Payments on Commercial Paper (1,325,634) (522,616) (644,483) Net Increase (Decrease) in Other Short-term Borrowings 62,848 888 (60,767) Proceeds from Issuance of Long-term Debt 116,959 53,121 37,730 Payments of Long-term Debt (48,659) (95,768) (28,149) Dividends Paid (35,421) (31,634) (27,998) Purchase of Treasury Stock (114,686) (99) (1,588) Other 10,906 6,742 4,089 ____________________________________________ Net Cash Provided (Used) by Financing Activities (1,281) 87,478 40,079 ____________________________________________ Net Increase (Decrease) in Cash and Cash Equivalents 31,006 (248,800) 59,969 Cash and Cash Equivalents, Beginning of Year 544,029 792,829 732,860 ____________________________________________ Cash and Cash Equivalents, End of Year $ 575,035 $ 544,029 $ 792,829 Supplemental Cash Flow Information: Cash Paid During the Year for: Interest $ 177,484 $ 233,069 $ 324,923 Income Taxes 69,299 67,490 47,507
The accompanying notes are an integral part of the Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ($000's except share data)
Additional Treasury Preferred Common Paid-in Retained Common Deferred Stock Stock Capital Earnings Stock Compensation ______________________________________________________________________ Balance, December 31, 1990 $ 185 $ 21,995 $ 93,066 $517,690 $ 32,753 $ 967 Net Income -- -- -- 99,347 -- -- Issuance of 69,766 Common Shares on Conversion of Convertible Notes -- 69 738 -- -- -- Issuance of 280,469 Common Shares Under Stock Option and Restricted Stock Plans -- -- (1,221) -- (8,145) -- Acquisition of 56,413 Common Shares -- -- -- -- 1,587 -- Dividends Declared on Preferred Stock - $4.55 Per Share -- -- -- (844) -- -- Dividends Declared on Common Stock - $0.43 Per Share -- -- -- (27,154) -- -- Net Change in Deferred Compensation -- -- -- -- -- 1,641 Other -- -- -- (66) -- -- ______________________________________________________________________ Balance, December 31, 1991 185 22,064 92,583 588,973 26,195 2,608 Net Income -- -- -- 109,235 -- -- Issuance of 32,558 Common Shares on Conversion of Convertible Notes -- 33 344 -- -- -- Issuance of 260,669 Common Shares Under Stock Option and Restricted Stock Plans -- -- (938) -- (7,589) -- Acquisition of 5,148 Common Shares -- -- -- -- 192 -- Dividends Declared on Preferred Stock - $5.08 Per Share -- -- -- (942) -- -- Dividends Declared on Common Stock - $0.48 Per Share -- -- -- (30,692) -- -- Net Change in Deferred Compensation -- -- -- -- -- 527 Other -- -- 1,803 (75) -- -- ______________________________________________________________________ Balance, December 31, 1992 185 22,097 93,792 666,499 18,798 3,135 Net Income -- -- -- 125,491 -- -- 3 for 1 Stock Split Effected in the Form of a 200% Stock Dividend -- 44,194 (44,194) -- -- -- Issuance of 134,150 Common Shares on Conversion of Convertible Notes -- 134 383 -- -- -- Issuance of 1,166,420 Common Shares Under Stock Option and Restricted Stock Plans -- -- (4,675) -- (15,582) -- Acquisition of 5,053,317 Common Shares -- -- -- -- 117,890 -- Dividends Declared on Preferred Stock - $5.76 Per Share -- -- -- (1,067) -- -- Dividends Declared on Common Stock - $0.54 Per Share -- -- -- (34,354) -- -- Net Change in Deferred Compensation -- -- -- -- -- (1,243) Other -- -- 4,878 (13) -- -- ______________________________________________________________________ Balance, December 31, 1993 $ 185 $ 66,425 $ 50,184 $756,556 $121,106 $ 1,892
The accompanying notes are an integral part of the Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1993, 1992, and 1991 ($000's except share data) 1. Summary of Significant Accounting Policies Consolidation principles - The Consolidated Financial Statements include the accounts of Marshall & Ilsley Corporation (the "Corporation") and all subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. Certain amounts in the 1992 and 1991 Consolidated Financial Statements have been reclassified to conform with the 1993 presentation. Cash and cash equivalents - For purposes of the Consolidated Financial Statements, the Corporation defines cash equivalents as short-term investments which have an original maturity of three months or less and are readily convertible into cash. Securities - Securities, when purchased, are designated as Trading, Investment Securities Held to Maturity, or Investment Securities Available for Sale and remain in that category until they are sold or mature. The specific identification method is used in determining the cost of securities sold. Investment Securities Held to Maturity are carried at cost, adjusted for amortization of premiums and accretion of discounts. Investment Securities Available for Sale are carried at the lower of amortized cost or market. See Note 6 for changes affecting Investment Securities Available for Sale beginning January 1, 1994. Short-term Investments other than Trading Securities are stated at cost, which approximates market value. Trading Securities are carried at market value. Adjustments to the carrying value of securities are reflected in the consolidated income statements. Loans - Interest on loans, other than direct financing leases, is recognized as income based on the loan principal outstanding during the period. Unearned income on direct financing leases is recognized over the lease term on a basis that results in an approximate level rate of return on the lease investment. Loans are generally placed on nonaccrual status when they are past due 90 days as to either interest or principal. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is charged to interest income on loans. A nonaccrual loan may be restored to an accrual basis when interest and principal payments are brought current and collectibility of future payments is not in doubt. The Corporation defers and amortizes fees and certain incremental direct costs, primarily salary and employee benefit expenses, over the contractual term of the loan or lease as an adjustment to the yield. The unamortized net fees and costs are reported as part of the loan balance outstanding. Allowance for loan losses - The allowance for loan losses is maintained at a level believed adequate by management to absorb estimated potential losses in the loan portfolio. Management's determination of the adequacy of the allowance is based on a continual review of the loan portfolio, loan loss experience, economic conditions, growth and composition of the portfolio, and other relevant factors. As a result of management's continual review, the allowance is adjusted through provisions for loan losses charged against income. Premises and equipment - Premises and equipment are recorded at cost and depreciated principally on the straight-line method with annual rates varying from 2% to 10% for buildings and 10% to 35% for equipment. Maintenance and repairs are charged to expense and betterments are capitalized. Other real estate owned - Other real estate owned includes assets that have been acquired in satisfaction of debts, accounted for as insubstance foreclosures, or bank branch premises held for sale. Other real estate is recorded at the lower of cost or fair value, less estimated selling costs, at the date of transfer. Valuation adjustments required at the date of transfer for assets acquired in satisfaction of debts or accounted for as insubstance foreclosures are charged to the allowance for loan losses, whereas any valuation adjustments on bank branch premises are reported in other expense. Subsequent to transfer, other real estate owned is carried at the lower of cost or fair market value, less estimated selling costs, based upon periodic evaluations. Rental income from properties and gains on sales are included in other income, and property expenses, which include carrying costs, required valuation adjustments and losses on sales, are recorded in other expense. Mortgage servicing - Normal fees related to the servicing of mortgage loans are recorded as income when payments are received from mortgagors. Gains or losses recognized on the sale of mortgage loans are adjusted to reflect any excess or below market servicing fee generated at the time of sale. Mortgage loans held for sale to investors are carried at the lower of cost or market, determined on an aggregate basis, based on outstanding firm commitments received for such loans or on current market prices. Data processing services - Direct costs associated with the production of computer software which will be marketed or used in data processing operations are capitalized and amortized on the straight-line method over the estimated economic life of the product, generally four years. Direct costs associated with customer system conversions to the data services operations are capitalized and amortized on the straight-line method over the terms, generally five to seven years, of the related servicing contract. Routine maintenance of software products, design costs and development costs incurred prior to establishment of a product's technological feasibility are expensed as incurred. Net unamortized capitalized costs were $16,979 at December 31, 1993, and $11,189 at December 31, 1992. Amortization expense was $4,668, $5,161, and $6,059, for 1993, 1992, and 1991, respectively. Intangibles - Unamortized intangibles resulting from acquisitions, primarily goodwill, core deposit premiums and purchased mortgage servicing rights were $23,636 at December 31, 1993, and $22,059 at December 31, 1992. Purchased mortgage servicing rights are amortized primarily over the periods during which the corresponding servicing revenues are anticipated to be generated. Adjustments for portfolio runoff in excess of that originally anticipated are made in the period when the excess runoff appears permanent. The other intangibles are amortized principally on the straight-line method over periods ranging from 6 to 20 years. Amortization expense was $3,698, $3,660, and $4,040, for 1993, 1992, and 1991, respectively. Foreign exchange contracts - The Corporation enters into foreign exchange contracts primarily to enable customers involved in international trade to hedge their exposure to foreign currency fluctuations. These contracts are carried at market value, with realized and unrealized gains and losses included in other income. Stock split - Common stock per share and average share information for years 1992 and prior have been retroactively restated for the 3 for 1 stock split effected in the form of a 200% stock dividend which was distributed to shareholders in May 1993. Net income per share - Primary net income per share is computed using the weighted average number of common shares outstanding plus common equivalent shares issuable upon the assumed conversion of the preferred stock outstanding and shares issuable under outstanding stock option plans. The average number of common and common equivalent shares used in computing primary net income per share was 67,046,820 in 1993, 67,522,944 in 1992, and 66,162,405 in 1991. Fully diluted net income per share also includes dilution resulting from the assumed conversion of the convertible notes. The average number of shares used in the computation of fully diluted net income per share was 72,957,677 in 1993, 73,673,022 in 1992, and 72,961,527 in 1991. 2. Business Combination In September 1993, the Corporation entered into an Agreement and Plan of Merger ("Merger Agreement") whereby Valley Bancorporation ("Valley"), a Wisconsin bank holding company located in Appleton, Wisconsin, with consolidated assets of approximately $4.6 billion, will merge with and into the Corporation ("the Merger"). Under the terms of the Merger Agreement, each share of Valley common stock will be converted into the right to receive 1.72 shares of the Corporation's common stock in a tax-free reorganization which is to be accounted for as a pooling of interests. The following unaudited pro forma data combines the results of operations for the Corporation and Valley, giving effect to the Merger as if it had been consummated at December 31, 1993. 1993 1992 1991 ________ ________ ________ Net Interest Income $484,588 $474,345 $430,573 Income Before Cumulative Effects of Changes in Accounting Principles (Operating Income) 171,487 156,270 130,013 Net Income 171,487 147,266 130,013 Income Per Common Share Primary Operating Income 1.67 1.55 1.33 Net Income 1.67 1.46 1.33 Fully Diluted Operating Income 1.60 1.48 1.27 Net Income 1.60 1.40 1.27 The Merger Agreement is to be approved by the shareholders of the Corporation and Valley at their respective special shareholders' meetings which are scheduled for February 1994. The Merger is also subject to the approval of certain regulatory authorities. Certain divestitures by the Corporation and Valley will be required in order to obtain regulatory approvals. The Corporation has filed applications with such authorities proposing the divestiture of certain bank branches in the State of Wisconsin with total deposits of approximately $300 million. It is anticipated that Federal Regulators will require the Corporation to obtain commitments for the divestitures prior to consummation of the merger and complete the divestitures within six months of the consummation of the merger. The Corporation does not anticipate that such divestitures will have a material impact on the Consolidated Financial Statements. Consummation of the Merger is expected to occur in the second quarter of 1994. The Corporation estimates that employee severance and contract costs, write-downs and write-offs of duplicative facilities, equipment and data processing software associated with the Merger will result in a one-time restructuring charge of approximately $80 million, $48 million net of tax, in 1994. Also, an additional loan loss provision may be recorded at or near the consummation of the Merger to conform Valley's loan valuation policies with those of the Corporation. While the amounts have not been quantified, it is not anticipated that the amount of such provision will be material to the combined entity. 3. Changes in Method of Accounting During 1992, the Corporation adopted Financial Accounting Standard No. 106 "Employers' Accounting for Postretirement Benefits, Other than Pensions" (FAS 106). This standard, which applies to the Corporation's employee health plans, requires that the expected cost of these postretirement benefits be charged to expense in the years the employees render the services necessary to earn their benefits. The Corporation elected immediate recognition of the accumulated postretirement benefit obligation at January 1, 1992. The Corporation also adopted during 1992, Financial Accounting Standard No. 109 "Accounting for Income Taxes." Statement 109 requires a change from the deferred method of accounting for income taxes to an asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The cumulative effect of the change in accounting for income taxes at January 1, 1992, amounted to a $4.8 million reduction of beginning net deferred tax liabilities. The following table summarizes the January 1, 1992 effects of these changes in methods of accounting: Earnings Per Share Net Income Increase (Decrease) Increase (Decrease) Primary Fully Diluted ____________________________________________ Adoption of accounting standard on postretirement benefits, net of income tax benefits of $7,744 $(12,190) $ (.18) $ (.17) Adoption of accounting standard on income taxes 4,803 .07 .07 ____________________________________________ $ (7,387) $ (.11) $ (.10) 4. Cash and Due from Banks At December 31, 1993, $136,985 of cash and due from banks was restricted, primarily due to requirements of the Federal Reserve System to maintain certain reserve balances. 5. Other Short-term Investments Other short-term investments at December 31 were: 1993 1992 ________ ________ Commercial paper $ 22,550 $ 72,600 Interest bearing deposits in other banks 26,815 171,745 ________ ________ Total other short-term investments $ 49,365 $244,345 6. Securities The book and market values of securities at December 31 were: 1993 1992 ______________________ ________________________ Book Market Book Market Value Value Value Value ______________________ ________________________ Investment Securities Held to Maturity: States and political subdivisions $ 160,238 $ 163,999 $ 280,349 $ 284,878 Mortgage backed securities 58 58 12,014 12,227 Other 9,188 9,205 8,347 8,362 ______________________ ________________________ Total $ 169,484 $ 173,262 $ 300,710 $ 305,467 Investment Securities Available for Sale: U.S. Treasury and government agencies $1,460,009 $1,463,644 $1,545,000 $1,560,183 Other 44,188 57,757 37,061 50,194 ______________________ ________________________ Total $1,504,197 $1,521,401 $1,582,061 $1,610,377 The unrealized gains and losses of securities at December 31 were: 1993 1992 ______________________ ________________________ Unrealized Unrealized Unrealized Unrealized Gains Losses Gains Losses ______________________ ________________________ Investment Securities Held to Maturity: States and political subdivisions $ 4,307 $ 546 $ 5,954 $ 1,425 Mortgage backed securities -- -- 214 1 Other 23 6 22 7 ______________________ ________________________ Total $ 4,330 $ 552 $ 6,190 $ 1,433 Investment Securities Available for Sale: U.S. Treasury and government agencies $ 5,546 $ 1,911 $ 18,479 $ 3,296 Other 13,570 1 13,133 -- ______________________ ________________________ Total $ 19,116 $ 1,912 $ 31,612 $ 3,296 The book value and market value of securities by contractual maturity at December 31, 1993 were: Investment Securities Investment Securities Held to Maturity Available for Sale ______________________ ________________________ Book Market Book Market Value Value Value Value ______________________ ________________________ Within one year $ 77,316 $ 77,793 $ 727,126 $ 730,417 From one through five years 64,978 67,481 735,349 735,677 From five through ten years 21,596 22,365 459 474 After ten years 5,594 5,623 41,263 54,833 ______________________ ________________________ Total $169,484 $173,262 $1,504,197 $1,521,401 Securitized assets are included in the maturity table at contractual estimated liquidation dates and not at the scheduled maturity dates of the underlying collateral. The gross realized gains and losses amounted to $7,897 and $60 in 1993 and $13,781 and $5,438 in 1992, and $6,013 and $1,632 in 1991, respectively. At December 31, 1993, securities with a book value of approximately $260,111 were pledged to secure public deposits, short-term borrowings, and for other purposes required by law. In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," (FAS 115). FAS 115 requires, among other things, that securities classified as available for sale be carried at fair value, however, fair value adjustments and the related income tax effects, are excluded from earnings and reported separately as a component of shareholders' equity. This new standard which must be adopted by the Corporation on January 1, 1994 will not have a material impact on the Consolidated Financial Statements. 7. Loans Loans at December 31 were: 1993 1992 __________ __________ Commercial, financial, and agricultural $1,861,757 $1,717,874 Industrial development revenue bonds 27,821 37,878 Real estate: Construction 214,369 158,607 Residential mortgage 1,254,748 1,199,407 Commercial mortgage 1,061,635 933,585 Personal 711,194 602,218 Lease financing 239,561 229,155 __________ __________ Total loans $5,371,085 $4,878,724 The Corporation's lending activities are concentrated primarily in the Midwest with approximately 86% of its customers located in Wisconsin. Approximately 4% of its portfolio consists of loans granted to customers located in Arizona. The Corporation had $3,029 in foreign credits at December 31, 1993. The Corporation's loan portfolio consists of business loans extending across many industry types, as well as loans to individuals. As of December 31, 1993, total loans to any group of customers engaged in similar activities and having similar economic characteristics, as defined by standard industrial classifications, did not exceed 10% of total loans. The Corporation evaluates the credit risk of each customer on an individual basis and, where deemed appropriate, collateral is obtained. Collateral varies by individual loan customer but may include accounts receivable, inventory, real estate, equipment, deposits, personal and government guaranties, and general security agreements. Access to collateral is dependent upon the type of collateral obtained. On an on- going basis, the Corporation monitors its collateral and the collateral value related to the loan balance outstanding. An analysis of loans outstanding to directors and officers, including their related interests, of the Corporation and its significant subsidiaries for 1993 is presented below. All of these loans were made in the ordinary course of business with normal credit terms, including interest rates and collateral. The beginning balance has been adjusted to reflect the activity of newly-appointed directors and executive officers and directors and executive officers of subsidiaries previously not considered significant. Balance, beginning of year $ 79,302 New loans 101,904 Repayments (110,863) __________ Balance, end of year $ 70,343 At December 31, 1993, 85% of these loans were to companies in which directors are principal owners. An analysis of the allowance for loan losses follows: 1993 1992 1991 ________ ________ ________ Balance, beginning of year $ 85,884 $ 73,915 $ 68,723 Provision charged to expense 9,065 15,151 20,555 Charge-offs (6,786) (13,592) (21,233) Recoveries 5,026 10,410 5,870 ________ ________ ________ Balance, end of year $ 93,189 $ 85,884 $ 73,915 As of December 31, 1993, and 1992, nonaccrual loans totalled $27,880 and $31,630, respectively. The effect of nonaccrual loans on net income in 1993, 1992, and 1991, was not significant. In May 1993, the FASB also issued Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan," (FAS 114). FAS 114 requires that a loan's value be measured when it has been determined that the loan is impaired and loss is probable. Write-downs which result from the measurement process are to be expensed. This new standard must be adopted by the first quarter of 1995. Based upon the current status of the Corporation's loan portfolio, it is not anticipated that this pronouncement will have a material impact on the Consolidated Financial Statements. 8. Premises and Equipment The composition of premises and equipment at December 31 was: 1993 1992 _________ _________ Land $ 24,713 $ 24,359 Buildings and leasehold improvements 158,920 141,198 Furniture and equipment 198,254 169,146 381,887 334,703 Less accumulated depreciation 185,357 165,814 _________ _________ Total premises and equipment $196,530 $168,889 Depreciation expense was $29,018 in 1993, $24,430 in 1992, and $21,421 in 1991. The Corporation leases certain of its facilities and equipment. Rent expense under such operating leases was $15,206 in 1993, $15,071 in 1992, and $15,244 in 1991, respectively. The future minimum lease payments under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December 31, 1993 are: 1994 $ 4,498 1995 3,783 1996 3,261 1997 2,941 1998 2,224 _______ $16,707 9. Short-term Borrowings Short-term borrowings at December 31 were: 1993 1992 _________ _________ Funds purchased and security repurchase agreements $454,980 $398,673 U.S. Treasury demand notes 33,977 27,768 Commercial paper 100,292 77,265 Current maturities of long-term borrowings 40,148 42,730 Other 4,271 3,940 _________ _________ Total short-term borrowings $633,668 $550,376 Unused lines of credit to support commercial paper borrowings were $40,000 at December 31, 1993 and 1992. 10. Long-term Borrowings Long-term borrowings at December 31 were: 1993 1992 _________ _________ Corporation: 8.5% convertible subordinated notes due in 1997 $ 50,000 $ 50,000 6.375% subordinated notes due in 2003 99,373 -- Medium-term Series B notes 38,000 54,000 Other -- 6,194 Subsidiaries: Nonrecourse notes 34,116 32,331 Mortgages 3,945 4,195 9.75% obligation under capital lease due through 2006 5,156 5,353 Other 12,375 20,858 _________ _________ 242,965 172,931 Less current maturities 40,148 42,730 _________ _________ Total long-term borrowings $202,817 $130,201 The 8.5% convertible subordinated notes (the "Notes") require semi- annual interest payments and are convertible at the option of the holder into common stock at a conversion price of $8.75. The holder has the right to exchange common stock, acquired by conversion of the Notes or otherwise, for Series A convertible preferred stock ("Series A"). The holder may own up to 24.9% (computed as the percentage of common shares owned directly or indirectly through conversion privileges) of the Corporation's outstanding common stock and convertible securities, but may not own directly more than 5% of the Corporation's outstanding common stock. Except under limited circumstances, the holder may not sell, transfer or otherwise dispose of the Notes or common stock acquired by conversion, and then, only under prescribed conditions and subject to the Corporation's right of first refusal. A portion of the Notes qualify as equity contract notes as defined by the applicable guidelines of the Board of Governors of the Federal Reserve System. The Notes require the holder to take common stock (or other equity securities) in lieu of cash in satisfaction of the claim for principal repayment, unless the Corporation sells new common stock (or certain other equity securities) and dedicates the proceeds thereof to the redemption or retirement of the Notes. In July 1993, the Corporation issued $100 million of unsecured subordinated notes at a price of 99.351%. Interest is payable semiannually in January and July of each year and the notes mature July 15, 2003. The notes are not redeemable prior to maturity and qualify as "Tier 2" or supplementary capital for regulatory capital purposes. The Corporation has filed registration statements with the Securities and Exchange Commission to issue up to $100 million of medium-term unsecured and unsubordinated Series B and up to $150 million of medium-term unsecured and unsubordinated Series C notes. Both issues have maturities which range from 9 months to 30 years from the date of issue, at a fixed or floating rate. The Series B notes outstanding at December 31, 1993 mature in 1994 through 1996, and have fixed interest rates of 4.60% to 8.65%. Approximately $35,730 of unissued Series B notes are remaining and available to be issued in the future. At December 31, 1993, there were no Series C notes outstanding. The nonrecourse notes are reported net of prepaid interest and represent borrowings by the leasing subsidiary from banks and other financial institutions. These notes have a weighted average interest rate of 7.77% at December 31, 1993, and are due in installments over varying periods through 2001. Lease financing receivables at least equal to the amount of the notes are pledged as collateral. The mortgages are secured by land and buildings with a net book value of $8,732 at December 31, 1993. Scheduled maturities of long-term borrowings are: $35,254, $19,150, $43,578, and $751 for 1995 through 1998, respectively. 11. Shareholders' Equity The Corporation has 5,000,000 shares of preferred stock authorized, of which the Board of Directors has designated 500,000 shares as Series A convertible, with a $100 value per share for conversion purposes. Series A is nonvoting preferred stock. The same cash dividends will be paid on Series A as would have been paid on the common stock exchanged for Series A. Series A has the same restrictions on sale as are applicable to the 8.5% convertible subordinated notes. The holder of the convertible subordinated notes has the option through 1997 to exchange common stock of the Corporation for Series A. If the common stock is acquired by the holder in conversion of the Notes, the exchange ratio is one share of Series A for 11.43 shares of common stock. If acquired otherwise, the exchange ratio is one share of Series A, valued at $100, to the holder's weighted average purchase price per common share. Also, the holder has the option to convert Series A into common stock at the same ratio that the common stock was exchanged for Series A. The Corporation has issued 185,314 shares of its Series A convertible preferred stock in exchange for 1,962,900 shares of common stock, which were subsequently retired. The preferred stock is treated as a common stock equivalent in all per share calculations. In April 1993, the Corporation's Board of Directors authorized a common share repurchase program for 5.7 million shares in anticipation of the conversion of its 8.5% convertible subordinated notes and reaffirmed the Corporation's on-going program for the repurchase of up to 1.5 million shares annually to fund obligations to deliver or have available shares of common stock for stock option and other employee benefit plans. During 1993, the Corporation purchased 5.0 million common shares. Federal banking regulatory agencies have established capital adequacy rules which take into account risk attributable to balance sheet assets and off-balance sheet activities. All banks and bank holding companies must meet a minimum total risk-based capital ratio of 8%. Of the 8% required, half must be comprised of core capital elements defined as Tier 1 capital. The federal banking agencies also have adopted leverage capital guidelines which banking organizations must meet. Under these guidelines, the most highly rated banking organizations must meet a minimum leverage ratio of at least 3% Tier 1 capital to total assets, while lower rated banking organizations must maintain a ratio of at least 4% to 5%. The Corporation's risk-based capital and leverage ratios are as follows: RISK-BASED CAPITAL RATIOS As of December 31, 1993 ($ in millions) Amount Ratio _______ ______ Tier 1 capital $ 731 12.17% Tier 1 capital minimum requirement 240 4.00 _______ ______ Excess $ 491 8.17% Total capital $ 931 15.49% Total capital minimum requirement 481 8.00 _______ ______ Excess $ 450 7.49% Risk-adjusted assets $ 6,008 LEVERAGE RATIO as of December 31, 1993 ($ in millions) Amount Ratio _________________________ Tier 1 capital to adjusted total assets $ 731 9.29% Minimum leverage requirement 236 - 394 3.00 - 5.00 _________________________ Excess $495 - 337 6.29 - 4.29% Adjusted average total assets $ 7,877 All of the Corporation's banking subsidiaries' risk-based capital and leverage ratios meet or exceed the defined minimum requirements. Banking subsidiaries are restricted by banking regulations from making dividend distributions above prescribed amounts and are limited in making loans and advances to the Corporation. At December 31, 1993, the retained earnings of subsidiaries available for distribution as dividends without regulatory approval was approximately $202,072. 12. Income Taxes Total income tax expense for the years ended December 31, 1993 and 1992 was allocated as follows: 1993 1992 _________ _________ Income before Cumulative Changes in Accounting $71,072 $57,835 Cumulative Effect of Change in Accounting for Postretirement Benefits, Other than Pensions and Accounting for Income Taxes -- (12,547) Shareholders' Equity, for Compensation Expense for Tax Purposes in Excess of Amounts Recognized for Financial Reporting Purposes (4,878) (1,803) _________ _________ $66,194 $43,485 As discussed in Note 3, the Corporation adopted Financial Accounting Standard No. 109 in 1992. This change had no significant effect on net income, excluding the cumulative effect, in 1992. Financial statements for 1991 have not been restated to apply the new standard. The current and deferred portions of the provision for income taxes were: 1993 1992 1991 _______ _______ _______ Current: Federal $63,783 $56,582 $38,461 State 10,992 10,626 10,858 _______ _______ _______ 74,775 67,208 49,319 Deferred: Federal (3,998) (9,141) (1,856) State 295 (232) (328) _______ _______ _______ (3,703) (9,373) (2,184) _______ _______ _______ Total provision for income taxes $71,072 $57,835 $47,135 The following is a reconciliation between the amount of the provision for income taxes and the amount of tax computed by applying the statutory Federal income tax rate (35% in 1993, 34% in 1992 and 1991, respectively): 1993 1992 1991 _______ _______ _______ Tax computed at statutory rates $68,797 $59,315 $49,804 Increase (decrease) in taxes resulting from: Federal tax-exempt income (4,578) (7,368) (9,785) State income taxes, net of Federal tax benefit 7,546 7,292 7,061 Adjustment to deferred tax assets/liabilities for an enacted change in tax rate (469) -- -- Other (224) (1,404) 55 _______ _______ _______ Total provision for income taxes $71,072 $57,835 $47,135 The tax effects of temporary differences that give rise to significant elements of the deferred tax assets and deferred tax liabilities at December 31, are as follows: 1993 1992 ________ ________ Deferred tax assets: Deferred compensation $ 6,307 $ 5,212 Allowance for loan losses 27,216 23,945 Accrued postretirement benefits 10,661 9,097 Other 16,531 13,280 ________ ________ Total deferred tax assets $60,715 $51,534 Deferred tax liabilities: Lease revenue reporting $20,805 $15,315 Deferred expense, net of unearned income 7,224 4,491 Fixed assets, principally due to depreciation 13,060 12,219 Other 2,409 6,551 ________ ________ Total deferred tax liabilities 43,498 38,576 ________ ________ Net deferred tax assets $17,217 $12,958 Deferred taxes resulted from timing differences in the recognition of income and expense for tax and financial statement purposes. The sources of these differences and the tax effect of each were: 1991 ________ Cash basis reporting $ (925) Loan loss provision (2,056) Other 797 ________ Total deferred taxes $(2,184) The amount of income tax expense related to net securities gains amounted to $2,929, $3,381, and $1,330, in 1993, 1992, and 1991, respectively. 13. Stock Option and Restricted Stock Plans The Corporation has Executive Stock Option and Restricted Stock Plans which provide for the grant of nonqualified and incentive stock options, stock appreciation rights and rights to purchase restricted shares to key employees at prices ranging from not less than the par value of the common shares to the fair market value of the shares at the date of grant. Activity relating to common stock options, restated for the 3 for 1 stock split, was: Number Option Price Of Shares Per Share __________ _________________ Shares under option at December 31, 1991 5,655,012 $ 2.17 - 17.21 Options granted 321,150 19.50 - 19.92 Options lapsed or surrendered (19,128) 2.17 - 17.21 Options exercised (696,507) 2.17 - 13.38 __________ _________________ Shares under option at December 31, 1992 5,260,527 $ 4.47 - 19.92 Options granted 766,800 22.75 - 23.25 Options lapsed or surrendered (4,025) 9.42 - 19.50 Options exercised (1,166,420) 5.35 - 19.50 __________ _________________ Shares under option at December 31, 1993 4,856,882 $ 4.47 - 23.25 Options exercisable at December 31, 1993, and 1992, were 4,004,095 and 4,365,666, respectively. Shares reserved for the granting of additional options at December 31, 1993, were 3,039,305. There were no restricted stock purchase rights outstanding at December 31, 1993, and 1992. In addition, there were no stock purchase rights exercised during 1993 and 85,500 rights exercised in 1992. Restrictions on stock issued pursuant to the exercise of stock purchase rights lapse within a seven-year period. Accordingly, the compensation related to issuance of the rights is deferred and amortized over the vesting period. Unamortized deferred compensation is reflected as a reduction of shareholders' equity. Aggregate compensation expense related to stock purchase rights was $1,008, $1,004, and $1,129, in 1993, 1992, and 1991, respectively. 14. Employee Retirement and Health Plans The Corporation has a defined contribution retirement plan for substantially all employees. The plan provides for a guaranteed contribution for eligible participants equal to 2% of compensation. At the Corporation's option, a profit sharing amount may also be contributed and may vary from year to year up to a maximum of 6% of eligible compensation. Total retirement plan expense was $12,915, $11,927, and $10,591, in 1993, 1992, and 1991, respectively. The Corporation also has supplemental retirement plans which were established in 1992 to provide retirement benefits to certain of its key executives. Total expense relating to these plans amounted to $2,280 in 1993 and $4,323 in 1992. The Corporation sponsors a defined benefit health plan that provides health care benefits to all eligible current and retired employees. The plan is contributory, with contributions adjusted periodically such that participants contribute approximately 40% of the cost of health care benefits. The plan also contains other cost-sharing features such as deductibles and coinsurance. Retiree eligibility is dependent upon age, years of service, and participation in the health plan during active service. The plan is not funded. As discussed in Note 3, the Corporation adopted FAS 106, "Employers' Accounting for Postretirement Benefits, Other than Pensions" as of January 1, 1992. The Corporation elected immediate recognition of the accumulated postretirement benefit obligation as of the beginning of the year through a one-time charge to earnings of $19,934 before income taxes. Postretirement benefit costs for 1991 were recorded on the cash basis and amounted to $756. The components of the accumulated postretirement benefit obligation (APBO) reconciled with the amount recognized in the Corporation's Consolidated Balance Sheets at December 31, were: 1993 1992 ________ ________ Accumulated postretirement benefit obligation: Retirees $ 11,244 $ 8,643 Fully eligible active plan participants 8,748 3,805 Active plan participants 16,667 9,738 ________ ________ 36,659 22,186 Unrecognized gain (loss) (11,265) 29 ________ ________ Accrued postretirement benefit cost $ 25,394 $ 22,215 Weighted average discount rate used in determining APBO 7.5% 8.5% Net periodic postretirement benefit cost for the years ended December 31, 1993 and 1992 includes the following components: 1993 1992 ________ ________ Service cost $ 1,382 $ 1,212 Interest on APBO 1,917 1,668 ________ ________ $ 3,299 $ 2,880 For measurement purposes, the assumed health care cost trend rate was 14% and 13% in 1992 and 1993, respectively, and gradually declines to 6.5% in the year 2021. The health care cost trend rate assumption has a significant effect on the amounts reported. An increase in the assumed health care cost trend rate of one percentage point would increase the APBO at December 31, 1993 by $4,128 and increase 1993 postretirement benefit expense by $680. In November 1992, the FASB issued Statement of Financial Accounting Standard No. 112 "Employers' Accounting for Postemployment Benefits," (FAS 112). FAS 112 establishes accounting and reporting standards for employers who provide benefits to former or inactive employees after employment but before retirement and must be adopted in the first quarter of 1994. Based on the current types of postemployment benefits provided by the Corporation, it is not anticipated that this new standard will have a material impact on the Consolidated Financial Statements. 15. Financial Instruments with Off-Balance Sheet Risk Financial instruments with off-balance sheet risk at December 31 were: 1993 1992 __________ __________ Financial instruments whose amounts represent credit risk: Commitments to extend credit: To commercial customers $2,500,465 $2,059,126 To individuals 421,504 331,920 Standby letters of credit, net of participations 226,001 199,944 Commercial letters of credit 16,434 14,350 Mortgage loans sold with recourse 8,408 12,695 Financial instruments whose amounts exceed the amount of credit risk: Foreign exchange contracts: Commitments to purchase foreign exchange 229,061 152,544 Commitments to deliver foreign exchange 231,925 154,287 Options written 24,251 20,263 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer's credit worthiness on an individual basis. Collateral obtained, if any, upon extension of credit, is based upon management's credit evaluation of the customer. Collateral requirements and the ability to access collateral is generally similar to that required on loans outstanding as discussed in Note 7. Standby and commercial letters of credit are contingent commitments issued by the Corporation to support the financial obligations of a customer to a third party. Standby letters of credit are issued to support public and private financing, and other financial or performance obligations of customers. Commercial letters of credit are issued to support payment obligations of a customer as buyer in a commercial contract for the purchase of goods. Letters of credit have maturities which generally reflect the maturities of the underlying obligations. The credit risk involved in issuing letters of credit is the same as that involved in extending loans to customers. If deemed necessary, the Corporation holds various forms of collateral to support letters of credit. Mortgage loans sold with recourse are pools of residential mortgage loans sold to government agencies subject to certain underwriting requirements. If the loans do not meet the underwriting requirements of the government agencies, the Corporation may be required to reacquire the loans. Foreign exchange contracts are commitments to purchase or deliver foreign currency at a specified exchange rate. These contracts are entered into to hedge the Corporation's own exposure, and to enable customers involved in international trade to hedge their exposure, to foreign currency fluctuations. Generally, the Corporation does not require collateral to support these financial instruments. The Corporation's market risk from unfavorable movements in currency exchange rates is minimized by essentially matching commitments to deliver foreign exchange with commitments to purchase foreign exchange. 16. Fair Value of Financial Instruments The book values and estimated fair values for on and off-balance sheet financial instruments as of December 31, 1993 and 1992 are reflected below. BALANCE SHEET FINANCIAL INSTRUMENTS ($ In Millions) 1993 1992 ______________________ ______________________ Book Value Fair Value Book Value Fair Value ______________________ ______________________ Financial Assets: Cash and short-term investments $ 624.4 $ 624.4 $ 788.4 $ 788.4 Trading securities 2.3 2.3 12.6 12.6 Investment securities held to maturity 169.5 173.3 300.7 305.5 Investment securities available for sale 1,504.2 1,521.4 1,582.1 1,610.4 Net loans 5,277.9 5,434.2 4,792.8 4,933.9 Interest receivable 46.7 46.7 55.4 55.4 Financial Liabilities: Deposits 6,195.9 6,228.1 6,212.1 6,233.1 Short-term borrowings 593.5 593.5 507.6 507.6 Long-term borrowings: Convertible debt 50.0 135.0 50.7 124.8 Other long-term borrowings 193.0 198.4 122.2 128.6 Interest payable 19.3 19.3 18.4 18.4 Where readily available, quoted market prices were utilized by the Corporation. If quoted market prices were not available, fair values were based on estimates using present value or other valuation techniques. These techniques were significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The calculated fair value estimates, therefore, cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Statement 107 excludes certain financial instruments and all nonfinancial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Corporation. The following methods and assumptions were used in estimating the fair value for financial instruments. Cash and Short-term Investments The carrying amounts reported for cash and short-term investments approximates the fair values for those assets. Trading and Investment Securities Fair value is based on quoted market prices or dealer quotes. See Note 6, Securities, for additional information. Loans Loans that reprice or mature within three months of December 31 were assigned fair values based on their book value. Market values were used on performing loans where available. Most remaining loan balances were assigned fair values based on a discounted cash flow analysis. The discount rate was based on the treasury yield curve, with rate adjustments for credit quality, cost and profit factors. Deposits The fair value for demand deposits or any interest bearing deposits with no fixed maturity date was considered to be equal to the carrying value. Time deposits with defined maturity dates were considered to have a fair value equal to the book value if the maturity date was within three months of December 31. The remaining time deposits were assigned fair values based on a discounted cash flow analysis using discount rates which approximate interest rates currently being offered on time deposits with comparable maturities. Borrowings Short-term borrowings are carried at cost which approximates fair value. The Corporation has convertible debt (see Note 10) for which fair value was considered to be the current market value of the shares that would be issued in a full conversion. Other long-term debt was generally valued using a discounted cash flow analysis with a discount rate based on current incremental borrowing rates for similar types of arrangements or, if not readily available, based on a build up approach similar to that used for loans and deposits. Long-term borrowings include their related current maturities. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS ($ in millions) Fair values of Loan Commitments and Letters of Credit have been estimated based on the equivalent fees, net of expenses, that would be charged for similar contracts and customers at December 31. 1993 1992 ______ ______ Loan commitments $ 1.4 $ 1.4 Letters of credit 1.8 1.6 Foreign exchange contracts are carried at market value (U.S. dollar equivalent of the underlying contract). 1993 1992 ______ ______ Commitments to purchase foreign exchange $229.1 $152.5 Commitments to deliver foreign exchange 231.9 154.3 Options written .5 2.4 See Note 15 for additional information on financial off-balance sheet instruments. 17. Business Segments The following table reflects certain information regarding our banking and data processing businesses: Adjustments Data and Banking Processing Eliminations Consolidation ____________________________________________________________ 1993 Revenue from: Unaffiliated customers $ 651,364 $ 136,044 -- $ 787,408 Affiliated customers 5,580 42,300 $ (47,880) -- ____________________________________________________________ Total revenue $ 656,944 $ 178,344 $ (47,880) $ 787,408 Operating profit $ 172,752 $ 23,811 -- $ 196,563 Identifiable assets $ 7,855,255 $ 138,294 $ (23,335) $ 7,970,214 Net capital expenditures $ 11,392 $ 43,737 -- $ 55,129 1992 Revenue from: Unaffiliated customers $ 684,984 $ 112,964 -- $ 797,948 Affiliated customers 4,847 38,630 $ (43,477) -- ____________________________________________________________ Total revenue $ 689,831 $ 151,594 $ (43,477) $ 797,948 Operating profit $ 154,277 $ 20,180 -- $ 174,457 Identifiable assets $ 7,761,678 $ 100,268 $ (11,602) $ 7,850,344 Net capital expenditures $ 14,644 $ 23,697 -- $ 38,341 1991 Revenue from: Unaffiliated customers $ 742,856 $ 92,580 -- $ 835,436 Affiliated customers 5,173 38,022 $ (43,195) -- ____________________________________________________________ Total revenue $ 748,029 $ 130,602 $ (43,195) $ 835,436 Operating profit $ 130,624 $ 15,858 -- $ 146,482 Identifiable assets $ 7,555,205 $ 87,344 $ (14,735) $ 7,627,814 Net capital expenditures $ 9,781 $ 10,567 -- $ 20,348 The Corporation owns 38 banks and 12 nonbank subsidiaries. Each subsidiary is a separate legal and operating entity. Our banking operations provide traditional banking products along with trust, mortgage banking, leasing, insurance agency and venture capital services. M&I Data Services, Inc. (DSI) provides data processing, software, and other related services to both affiliated and unaffiliated customers. See Item 1 for a complete description of the businesses. Revenues from affiliated customers are primarily accounted for at rates similar to those charged to unaffiliated customers. Operating profit is pretax net income. Depreciation and amortization expense for the banking services business amounted to $11,810, $1,171, and $3,765 in 1993, 1992, and 1991, respectively, and for DSI amounted to $22,582 in 1993, $19,171 in 1992, and $16,813 in 1991. 18. Condensed Financial Information - Parent Corporation Only Condensed Balance Sheets December 31 1993 1992 _____________________________ Assets Cash and cash equivalents $ 1,351 $ 14,441 Indebtedness of affiliates: Banks 5,000 5,000 Nonbanks 264,366 197,837 Investments in affiliates: Banks 619,597 593,967 Nonbanks 155,753 138,393 Other assets 30,323 27,875 _____________________________ Total assets $1,076,390 $977,513 Liabilities and shareholders' equity Commercial paper issued $ 100,292 $ 77,265 Other liabilities 38,373 29,414 Long-term borrowings 187,373 110,194 _____________________________ Total liabilities 326,038 216,873 Shareholders' equity 750,352 760,640 _____________________________ Total liabilities and shareholders' equity $1,076,390 $977,513 Scheduled maturities of long-term borrowings are $22,900 in 1994, $13,500 in 1995, $11,600 in 1996, $40,000 in 1997, and $100,000 in 2003. Condensed Statements of Income Years Ended December 31 1993 1992 1991 _________ ________ ________ Income Cash dividends: Bank affiliates $ 71,196 $ 64,856 $ 62,511 Nonbank affiliates 13,482 12,452 8,726 Interest from affiliates 10,540 9,601 9,988 Service fees and other 27,889 23,198 30,447 _________ ________ ________ Total income 123,107 110,107 111,672 Expense Interest 12,523 14,475 16,487 Administrative and general 26,749 32,767 26,585 _________ ________ ________ Total expense 39,272 47,242 43,072 Income before income taxes, cumulative effect of changes in accounting principles and equity in undistributed net income of affiliates 83,835 62,865 68,600 Income tax benefit 563 6,258 612 Income before cumulative effect of changes in accounting principles and equity in undistributed net income of affiliates 84,398 69,123 69,212 Cumulative effect of changes in accounting principles, net of income taxes -- (1,327) -- _________ ________ ________ Income before equity in undistributed net income of affiliates 84,398 67,796 69,212 Equity in undistributed net income of affiliates: Banks 25,451 21,083 17,175 Nonbanks 15,642 20,356 12,960 _________ ________ ________ Net income $125,491 $109,235 $99,347 Condensed Statements of Cash Flows Years Ended December 31 1993 1992 1991 _________ ________ ________ Cash Flows From Operating Activities: Net Income $ 125,491 $ 109,235 $ 99,347 Noncash items included in income: Equity in undistributed net income of affiliates (41,093) (41,439) (30,135) Depreciation and amortization 3,803 4,270 5,241 Other (366) 2,109 (6,371) _________ ________ ________ Net cash provided by operating activities 87,835 74,175 68,082 Cash Flows From Investing Activities: Increases in indebtedness of affiliates (502,651) (299,638) (161,300) Decreases in indebtedness of affiliates 436,122 237,390 161,565 Increases in investments in affiliates -- (9,733) (8,200) Other 4,104 3,326 7,144 _________ ________ ________ Net cash used in investing activities (62,425) (68,655) (791) Cash Flows From Financing Activities: Dividends paid (35,421) (31,634) (27,998) Proceeds from issuance of commercial paper 1,348,661 597,794 607,787 Principal payments on commercial paper (1,325,634) (522,616) (644,483) Proceeds from issuance of long-term debt 99,351 24,598 17,339 Payments on long-term debt (21,677) (74,413) (13,070) Purchase of treasury stock (114,686) (99) (1,588) Proceeds from exercise of stock options 10,920 5,014 4,039 Other (14) (74) (67) _________ ________ ________ Net cash used in financing activities (38,500) (1,430) (58,041) Net increase (decrease) in cash and cash equivalents (13,090) 4,090 9,250 Cash and cash equivalents, beginning of year 14,441 10,351 1,101 _________ ________ ________ Cash and cash equivalents, end of year $ 1,351 $ 14,441 $ 10,351 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and the Board of Directors of Marshall & Ilsley Corporation: We have audited the accompanying consolidated balance sheets of Marshall & Ilsley Corporation (a Wisconsin corporation) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity and cash flows for the years ended December 31, 1993, 1992 and 1991. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Marshall & Ilsley Corporation and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and cash flows for the years ended December 31, 1993, 1992 and 1991, in conformity with generally accepted accounting principles. As discussed in note three to the consolidated financial statements, effective January 1, 1992, the Corporation changed its method of accounting for postretirement benefits other than pensions and income taxes. /s/ Arthur Andersen & Co. Milwaukee, Wisconsin, January 28, 1994. QUARTERLY FINANCIAL INFORMATION ($000's except share data) Following is unaudited financial information for each of the calendar quarters during the years ended December 31, 1993 and 1992. All per share information has been restated for the 3 for 1 stock split effected in the form of a 200% stock dividend distributed to shareholders in May, 1993. Quarter ended Quarter ended Quarter ended Quarter ended December 31 September 30 June 30 March 31 ________________________________________________________ 1993 Total Interest Income $120,967 $121,299 $122,430 $122,840 Net Interest Income 77,787 77,109 77,708 76,574 Provision for Loan Losses 2,391 2,246 2,282 2,146 Income Before Income Taxes 50,412 49,158 49,424 47,569 Net Income 31,569 30,954 31,933 31,035 Net Income Per Share: Primary .49 .46 .47 .46 Fully Diluted .46 .44 .44 .43 1992 Total Interest Income $128,721 $130,872 $135,162 $137,317 Net Interest Income 79,297 77,120 76,922 74,466 Provision for Loan Losses 4,266 3,461 3,789 3,635 Income Before Income Taxes and Cumulative Effect of Changes in Accounting Principles 46,061 43,186 43,339 41,871 Income Before Cumulative Effect of Changes in Accounting Principles 31,324 28,590 28,823 27,885 Net Income 31,324 28,590 28,823 20,498 Net Income Per Share: Primary Income Before Cumulative Effect of Changes in Accounting Principles .46 .42 .43 .41 Net Income .46 .42 .43 .31 Fully Diluted Income Before Cumulative Effect of Changes in Accounting Principles .43 .40 .40 .39 Net Income .43 .40 .40 .29 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant Directors of the Registrant M&I's Restated Articles of Incorporation provide that M&I's Directors are divided into three classes, designated Class I, Class II and Class III. Each director serves a term of three years and until his successor is elected and qualified. The following table sets forth certain information with regard to the Class I, Class II and Class III Directors. Principal Occupation Name of Director and Directorships Class I Directors (terms expiring in 1994) Wendell F. President, Chief Executive Officer and Director, IMC Bueche Fertilizer Group, Inc., February 1993 to present; Chairman Age 63 of the Board and Chief Executive Officer from January 1986 through 1988, President and Chief Executive Officer, January 1984 through 1985, and Director, Allis-Chalmers Corp., a diversified manufacturer of specialized machinery. Also a director of WICOR, Inc. A Director since 1983. G.H. Executive Vice President and Chief Financial Officer of Gunnlaugsson Marshall & Ilsley Corporation since 1987; Vice President of Age 49 M&I Marshall & Ilsley Bank since 1976; Vice President and Director, M&I Insurance Company of Arizona, Inc.; Director - M&I Mortgage Corp. and M&I Data Services, Inc. A Director since 1994. Jack F. Chairman from July 1991 to present, President, Chief Kellner Executive Officer and Director until July 1991, Western Age 77 Industries, Inc., a manufacturer of metal stampings and sheet metal fabrication. A Director since 1976. J.B. Wigdale Chairman of the Board since December, 1992, Chief Executive Age 57 Officer since October, 1992, Director since December, 1988, Vice Chairman of the Board, December, 1988 to December, 1992, Vice President, 1984 to December, 1988, Marshall & Ilsley Corporation; Chairman of the Board since January, 1989, Chief Executive Officer since 1987, Director since 1981, President, 1981 to January, 1989, M&I Marshall & Ilsley Bank. James O. Chairman of the Board and Director, Badger Meter, Inc., a Wright manufacturer of products using flow measurement technology Age 73 serving utility, industrial and commercial markets. A Director since 1960. Class II Directors (terms expiring in 1995) Jon F. Chait Executive Vice President, Secretary and Director, August Age 43 1991 to present, Manpower Inc. and Executive Vice President, September 1989 to present, Manpower International Inc., a provider of temporary employment services; shareholder, January 1982 to September 1989, Godfrey & Kahn, S.C., counsel to the Company. A Director since 1990. D.J. Kuester President of Marshall & Ilsley Corporation since 1987; Age 52 President and Director since January, 1989, Vice President, 1979 to January, 1989, M&I Marshall & Ilsley Bank; Chairman of the Board, Chief Executive Officer and Director, M&I Data Services, Inc. A Director since 1994. Don R. O'Hare Consultant to Sundstrand Corporation, August 1991 to Age 71 present; Chairman of the Board, January 1989 to August 1991, Vice Chairman until January 1989 and Director, Sundstrand Corporation, a manufacturer of aerospace, power transmission, fluid and heat transfer components and systems. Also a director of Modine Manufacturing Company and Sauer, Inc. A Director since 1977. J.A. Puelicher Retired; Chairman of the Board of the Company from April Age 73 1981 to December 1992, Chief Executive Officer of the Company from April 1981 to October 1992, President of the Company from May 1963 to April 1981 and November 1985 to October 1987. Also a director of Modine Manufacturing Company, Sentry Insurance, A Mutual Company, Sundstrand Corporation, and W.R. Grace & Co. A Director since 1959. Stuart W. Retired; Chairman of the Board and Chief Executive Officer, Tisdale August 1992 to January 1994, President and Chief Executive Age 65 Officer, April 1986 to August 1992, President, April 1984 to April 1986, and Director, WICOR, Inc. A director of Modine Manufacturing Company and Twin Disc, Inc. A Director since 1986. Class III Directors (terms expiring in 1996) J.P. Bolduc President and Chief Executive Officer, January 1993 to Age 54 present, President and Chief Operating Officer, August 1990 to January 1993, Vice Chairman, November 1986 to August 1990, Executive Vice President and Chief Financial Officer, February 1986 to November 1986, Senior Vice President 1983 to November 1986, W.R. Grace & Co.; Chief Operating Officer of President Reagan's Private Sector Survey on Cost Control in the Federal Government from 1982 through 1984. Also a director of W.R. Grace & Co., Sundstrand Corporation and Unisys Corporation. A Director since 1987. Glenn A. Retired; Chairman of the Board, 1971 through January 1987, Francke M&I Northern Bank, a subsidiary of the Company. A Director Age 72 since 1960. Burleigh E. Chairman of the Board, Chief Executive Officer and Director, Jacobs Grede Foundries, Inc., a manufacturer of grey and ductile Age 74 iron, steel, and alloyed castings. A Director since 1967. James F. Kress President, Chief Executive Officer and Director, Green Bay Age 64 Packaging, Inc., a manufacturer of corrugated and packaging materials. A Director since 1986. If M&I completes the Merger with Valley, additional directors will be elected to the M&I Board of Directors as described in M&I's Registration Statement on Form S-4 (Reg. No. 33-51753) as filed with the Securities and Exchange Commission. Executive Officers of the Registrant Information with regard to the Executive Officers of the Registrant is found in Part I of this Form 10-K. No Director or executive officer is an adverse party or has an interest adverse to M&I or any of its subsidiaries in any material pending legal proceeding. Item 11. Executive Compensation SUMMARY COMPENSATION TABLE
Long-Term Compensation Awards(1) Securities Annual Compensation Underlying All Other Name and Principal Position Year Salary($) Bonus($) Options/SARs(#) Compensation($)(2) J.B. Wigdale 1993 $450,000 $325,000 $204,092 Chairman of the 1992 400,000 300,000 214,980 Board and Chief 1991 350,000 250,000 150,000 56,432 Executive Officer D.J. Kuester 1993 375,000 277,335 141,193 President 1992 350,000 227,108 149,545 1991 300,000 201,931 120,000 43,231 G.H. Gunnlaugsson 1993 300,000 201,954 87,283 Executive Vice 1992 275,000 166,775 94,763 President and Chief 1991 230,000 151,611 90,000 33,567 Financial Officer J.L. Delgadillo 1993 173,750 130,889 27,562 Senior Vice President 1992 150,000 103,956 32,140 1991 130,000 93,785 9,000 21,068 E.I. Van Housen(3) 1993 175,000 125,000 27,597 Vice President 1992 150,000 150,000 34,940 1991 150,000 75,000 21,262 M.J. Revane(4) 1993 261,250 105,417 150,296 Vice President 1992 285,000 115,000 157,233 1991 275,000 110,000 90,000 49,671
___________ (1) As of December 31, 1993, the following individuals have unreleased Key Restricted Stock: Mr. Wigdale, 48,000 shares valued at $1,134,000; Mr. Kuester, 36,000 shares valued at $850,500; Mr. Gunnlaugsson, 24,000 shares valued at $567,000; and Mr. Delgadillo, 6,300 shares valued at $148,838. Dividends are paid on restricted stock. (2) Includes the following amounts paid by M&I under a 401(k) Thrift Plan for the years 1993, 1992 and 1991, respectively: J.B. Wigdale - $4,497, $4,364 and $4,237; D.J. Kuester - $4,497, $4,364 and 4,237; G.H. Gunnlaugsson - $4,497, $4,364 and $4,237; J.L. Delgadillo - $4,459, $4,364 and $4,237; E.I. Van Housen - $4,497, $4,364 and $4,237; and M.J. Revane - $4,497, $4,364 and $4,237. Includes the following amounts paid by M&I under the Retirement Growth Plan for the years 1993, 1992 and 1991, respectively: J.B. Wigdale - $16,509, $16,908 and $17,287; D.J. Kuester - $16,509, $16,908 and $17,287; G.H. Gunnlaugsson - $16,509, $16,908 and $17,287; J.L. Delgadillo - $16,622, $16,908 and $16,705; E.I. Van Housen - $16,509, $16,908 and $16,800; and M.J. Revane - $16,509, $16,908 and $17,287. Includes the following amounts paid by M&I under a Split Dollar Life Insurance Plan for the benefit of the executives for the years 1993, 1992 and 1991, respectively: J.B. Wigdale - $13,842, $13,842 and $13,842; D.J. Kuester - $8,430, $8,657 and $6,241; G.H. Gunnlaugsson - $7,688, $7,867 and $5,777; and M.J. Revane - $15,881, $15,881 and $15,881. Includes the following amounts accrued by M&I under the Supplementary Retirement Benefits Plan for the years 1993, 1992 and 1991, respectively: J.B. Wigdale -$43,166, $59,668 and $21,066; D.J. Kuester - $33,541, $45,668 and $15, 466; G.H. Gunnlaugsson - $21,991, $30,868 and $6,266; J.L. Delgadillo - $6,481, $10,868 and $126; E.I. Van Housen - $6,591, $13,668 and $225; and M.J. Revane - $12,824, $24,468 and $12,266. Also includes the following amounts accrued by M&I under the Nonqualified Supplemental Retirement Plan for the years 1993 and 1992, respectively: J.B. Wigdale - $126,078 and $120,198; D.J. Kuester - $78,216 and $73,948; G.H. Gunnlaugsson - $36,598 and $34,756; and M.J. Revane - $100,585 and $95,612. (3) Mr. Van Housen died on March 6, 1994. (4) Mr. Revane retired in November 1993, but is included herein pursuant to the rules of the Securities and Exchange Commission. The following table provides information on option exercises by the named executive officers during fiscal 1993. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised Shares Underlying Unexercised In-the-Money Options/SARs Acquired on Value Options/SARs at FY-End(#) at FY-End*($) Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable ___________________________________________________________________________________ J.B. Wigdale 0 $ 0 315,000 0 $3,196,245 $ 0 D.J. Kuester 0 0 270,000 0 2,818,740 0 G.H. Gunnlaugsson 78,000 1,126,488 165,000 0 1,558,755 0 J.L. Delgadillo 0 0 36,000 0 425,619 0 E.I. Van Housen 82,800 1,195,963 60,000 0 852,466 0 M.J. Revane 135,000 1,796,205 90,000 0 577,530 0
* For valuation purposes, a December 31, 1993 market price of $23.625 was used. NONQUALIFIED RETIREMENT PLAN M&I adopted the Marshall & Ilsley Corporation Nonqualified Retirement Benefit Plan (the "Nonqualified Plan") on December 12, 1991. The goal of the Nonqualified Plan is to provide six of the executive officers of M&I with a monthly supplemental retirement benefit such that the sum of their benefits from the Retirement Growth Plan, Social Security, the Supplementary Retirement Benefits Plan and the Nonqualified Plan will equal 60% of each participant's average salary for his last five years of employment. The monthly benefit under the Nonqualified Plan, starting in most instances when an individual reaches age 65, is fixed based on various actuarial and interest rate assumptions. The annual benefits are $160,000, $180,000, $100,000 and $100,000 for Messrs. Wigdale, Kuester, Revane and Gunnlaugsson, respectively, and a total of $45,000 for two other executive officers. The annual benefit will be adjusted in the event of death before age 62 or early retirement and can be paid for life with a 120-month certain payout or on a joint and survivor basis at the option of the participant. The pay-out option elected will also affect the amount of the annual benefit. If a participant leaves the employ of the Company prior to age 55, he will receive no benefits under the Nonqualified Plan, except that, in the event of a Change in Control (as defined in the Nonqualified Plan), each participant will receive the present value of the benefits to which he is entitled under the Nonqualified Plan within 30 days of such Change in Control regardless of his age at that point. EMPLOYMENT AGREEMENTS AND RELATED MATTERS In order to assure management continuity and stability, M&I has entered into substantially similar Employment Agreements (the "Employment Agreements") with Messrs. Wigdale, Kuester, Delgadillo, and Gunnlaugsson, two additional executive officers and 13 officers and other employees of the Company and its subsidiaries (collectively, the "Executives"). The Employment Agreements with Messrs. Wigdale, Kuester and Gunnlaugsson each have a term of three years, and the Employment Agreement with Mr. Delgadillo has a term of two years. The Employment Agreements with the other Executives have terms of two or three years. The Employment Agreements guarantee the Executives specific payments and benefits upon a termination of employment as a result of a change of control of M&I. If a change of control occurs the contract becomes effective and continues for a two- or three-year employment term. The employment term renews on a daily basis until M&I gives notice to terminate the daily renewal. The Employment Agreements provide for specified benefits after a change of control if the Executive voluntarily terminates for "good reason" or is involuntarily terminated other than for "cause" (as defined in the Employment Agreements). In addition, in the case of some Employment Agreements, at the end of six months after a change of control, the Executive may terminate employment for any reason and is entitled to receive full benefits. Upon a termination, the Executive is entitled to (a) a lump sum payment equal to two or three times (depending on whether the contract is a two- or three-year contract) the sum of the Executive's current base salary plus the higher of the Executive's bonus for the last year or the Executive's average bonus for the past three years, (b) a proportionate amount of any unpaid bonus deemed earned for the year of termination, (c) a lump sum payment equal to the retirement benefits lost as a result of not having been employed for the remaining contract term, (d) health and other benefits for the remaining contract term, and (e) payments for certain other fringe benefits. In the event of a termination of employment as a result of his death, the Executive's beneficiary is entitled to six months of base salary. No additional benefits are guaranteed under the contract upon an Executive's disability or termination by M&I for cause. The Employment Agreements provide that upon a change of control most restrictions limiting the exercise, transferability or other incidents of ownership of any outstanding award, restricted stock, options, stock appreciation rights, or other property rights of M&I granted to the Executive shall lapse, and such awards shall become fully vested, except in certain circumstances. Some of the Employment Agreements also provide for "gross-up" payments in the event payments to an Executive under the Employment Agreement are subject to Section 4999 of the Code (the "Excise Tax") or any similar federal, state or local tax which may be imposed, in an amount such that the net amount retained by the Executive, after deduction of any Excise Tax on the payments and any federal, state and local income tax and Excise Tax upon the gross-up payment, shall be equal to the payments then due. In connection with Mr. Revane's retirement in November 1993, he entered into an Agreement with M&I ("Retirement Agreement") and a Consulting and Noncompetition Agreement with M&I ("Consulting Agreement"). Pursuant to the Retirement Agreement (1) M&I determined that Mr. Revane's retirement constituted "early retirement" for purposes of applicable benefit plans and, accordingly, all options to acquire M&I Common Stock held by Mr. Revane vested to the extent not already vested and all restrictions applicable to Mr. Revane's Key Restricted Stock lapsed, (2) Mr. Revane will receive 36 monthly payments of $10,278 commencing on January 1, 1996, provided that if Mr. Revane dies prior to December 1, 1998, his estate or designated beneficiary shall receive in lieu of such monthly payments either a lump sum or monthly payment, depending upon the date of death, and (3) Mr. Revane is allowed to participate in M&I's Non-Qualified Retirement Benefit Plan and split-dollar life insurance arrangement while he is engaged as a consultant to M&I. Under the Consulting Agreement, Mr. Revane provides various consulting and advisory services to M&I and is prohibited from participating in certain competing activities. The Consulting Agreement has a term of 25 months and provides for a payment to Mr. Revane, or his estate in the case of his death, of $32,000 per month in exchange for his consulting services and agreement not to compete. NON-EMPLOYEE DIRECTOR COMPENSATION Directors of M&I who are not employees are paid a retainer fee of $12,000 per year. In addition, non-employee directors receive a fee of $1,500 for each Board meeting which they attend and $500 for each Committee meeting which they attend. M&I has established a deferred compensation plan for its Directors. Under such plan, all or part of the fees received by a Director may be deferred at the election of the Director. Amounts deferred are credited with an earnings factor based on the Director's allocation among 13-week U.S. Treasury Bills, the Common Stock or any common trust fund offered by the Trust Company. Deferred amounts are payable in not less than 36 nor more than 180 monthly installments, as elected by the participating Director, unless the Board elects to distribute amounts over a shorter period. One Director, Mr. Chait, elected to defer compensation under the plan during 1993. Directors of M&I who are also Directors of subsidiaries of M&I receive compensation from such subsidiaries in varying amounts based on the Director compensation schedule of such subsidiaries. Mr. Puelicher receives various supplemental retirement benefits from M&I which are not related to or conditioned upon his service as a director of M&I. In 1993, M&I determined to increase Mr. Puelicher's supplemental retirement benefit under his Supplemental Retirement Plan dated December 10, 1992 from $41,667 per month to $58,333 per month. In addition, M&I made a special payment of $200,000 to Mr. Puelicher in December 1993 in recognition of Mr. Puelicher's extraordinary contributions to M&I. Mr. Puelicher and M&I entered into a Consulting Agreement and Supplemental Retirement Plan in 1986, which was amended in 1992 (the "Consulting/Retirement Agreement"). The Consulting/Retirement Agreement went into effect in January 1993 and provides for Mr. Puelicher to serve as a consultant to M&I for five years. As compensation for his commitment to provide consulting services, Mr. Puelicher receives a retirement benefit of $25,000 per month for his life, and, if Mr. Puelicher predeceases his wife, his wife will receive $12,500 per month for her life. In addition, M&I pays an annual insurance premium for Mr. Puelicher of $112,470 until the earlier of (i) Mr. Puelicher's death, (ii) 19 years from the date of the policy's issue, or (iii) such time as the policy is paid up. M&I will also reimburse Mr. Puelicher for all travel and other expenses incurred in the performance of his duties and will provide him with secretarial services and office space. Mr. Puelicher will continue to participate in M&I's group health insurance (or equivalent plan) while receiving retirement benefits under the Consulting/Retirement Agreement. M&I may terminate the Consulting/Retirement Agreement for "cause" (as defined in the Consulting/Retirement Agreement). The Consulting/Retirement Agreement provides that Mr. Puelicher may not compete with M&I and must maintain the confidentiality of certain information regarding M&I, its business and customers. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table lists as of February 28, 1994 information regarding the beneficial ownership of shares of Common Stock by each Director and named executive officer of M&I, by each person believed by M&I to be a beneficial owner of more than 5% of the Common Stock, and by all Directors and executive officers of M&I as a group: Amount and Name and Nature of Address of Beneficial Percent Beneficial Owner Ownership(1) of Class _______________________________________________________________________ The Northwestern Mutual 8,665,374(2) 12.8% Life Insurance Company 720 East Wisconsin Ave. Milwaukee, WI 53202 Marshall & Ilsley 4,830,181(3) 8.0% Trust Company 770 North Water St. Milwaukee, WI 53202 Nicholas Company, Inc. 3,706,550(4) 6.2% 700 North Water St. Milwaukee, WI 53202 J.P. Bolduc -0- * Glenn A. Francke 190,283 * Burleigh E. Jacobs 40,500 * James F. Kress 10,500 * Wendell F. Bueche 10,500 * Jack F. Kellner 480,702 * J.B. Wigdale 610,603(5) 1.0% James O. Wright 11,620(6) * Jon F. Chait 17,486 * Don R. O'Hare 3,600 * J.A. Puelicher 653,817(7) 1.1% Stewart W. Tisdale 1,602 * D.J. Kuester 421,853(8) * G.H. Gunnlaugsson 274,653(9) * J.L. Delgadillo 48,000(10) * All Directors and officers of the Company as a group (27 persons, including the above) own 3,604,642 shares of Common Stock or 6.0% of the total common stock outstanding.(11) _______________ *less than 1% (1) Except as indicated below, all shares shown in the table are owned with sole voting and investment power. (2) This information is based on Amendment No. 7 to Form 13-G dated February 7, 1991. Of the shares held, 5,714,286 shares of Common Stock may be acquired upon conversion of the Company's 8.5% Convertible Subordinated Notes Due 1997 (the "Notes") held by The Northwestern Mutual Life Insurance Company ("NML"). NML also holds 988,188 shares of Common Stock and 185,314 shares of Preferred Stock. NML has sole voting and investment power as to all such shares, subject to the terms and conditions of a certain Investment Agreement (the "Investment Agreement") between the Company and NML dated August 30, 1985. NML may exchange shares of Common Stock, regardless of how they were acquired, for shares of Preferred Stock. The Preferred Stock is non-voting and convertible into 1,962,900 shares of Common Stock at the same ratio that the Common Stock was exchanged for the Preferred Stock. The Investment Agreement provides for the purchase by NML of up to 24.9%, on a fully diluted basis, of the Common Stock. Purchases may take the form of Common Stock, Preferred Stock, notes or other securities of the Company (together with the Notes, the "Securities") at such prices as may be agreed upon by the parties from time to time. Pursuant to the Investment Agreement, on December 31, 1985, NML purchased $50 million in principal amount of the Notes. The Notes are convertible into 5,714,286 shares of the Common Stock (which would be approximately 8.6% of the Company's outstanding pro forma Common Stock as of February 28, 1994) at a conversion price of $8.75 per share. The Notes are callable by the Company upon payment of prescribed premiums through 1995 and at par thereafter. The Investment Agreement restricts in certain respects NML's right to transfer, acquire and vote any Securities. Under certain conditions, NML may require the Company to repurchase its stock at not less than prescribed prices after a "Change-in-Control" or upon the occurrence of a "Business Combination" (as such terms are defined in the Investment Agreement). For further information concerning the Investment Agreement, the Notes and the Preferred Stock, reference is hereby made to the Company's Current Reports on Form 8-K dated May 20, 1985, August 30, 1985 and January 2, 1986. (3) This information is based on Amendment No. 12 to Form 13-G dated February 9, 1994. Marshall & Ilsley Trust Company (the "Trust Company") owned beneficially 4,830,181 shares (approximately 8.0%) of the outstanding Common Stock. All such shares are owned by the Trust Company as trustee or in other fiduciary capacities. The Trust Company has no economic interest in such shares. Of these shares, the Trust Company has sole voting power as to 1,076,669 shares (approximately 1.8%), and shared voting power as to 249,954 shares (less than .1%); sole investment power as to 3,967,838 shares (approximately 6.6%), shared investment power as to 862,343 shares (approximately 1.4%). The Company owns all of the issued and outstanding capital stock of the Trust Company. (4) This information is based on Amendment No. 5 to Form 13-G dated February 8, 1994. Nicholas Company, Inc. ("Nicholas") is an investment adviser registered under the Investment Advisers Act of 1940. Nicholas does not have sole or shared voting power with respect to any of the shares held but sole investment power as to all of such shares. (5) Includes 11,550 held by Mr. Wigdale's family as to which he disclaims beneficial ownership and 315,000 shares which could be acquired pursuant to exercise of stock options within sixty days of February 28, 1994. (6) Includes 6,120 shares held in trust for the benefit of Mr. Wright's family and 1,500 shares owned by Badger Meter Foundation as to which he disclaims beneficial ownership. (7) Includes 41,217 shares as to which Mr. Puelicher exercises sole voting power and 450,000 shares which could be acquired pursuant to exercise of stock options within sixty days of February 28, 1994. (8) Includes 270,000 shares which could be acquired pursuant to exercise of stock options within sixty days of February 28, 1994. (9) Includes 2,700 shares held by Mr. Gunnlaugsson's family as to which he disclaims beneficial ownership and 165,000 shares which could be acquired pursuant to exercise of stock options within sixty days of February 28, 1994. (10) Includes 36,000 shares which could be acquired pursuant to exercise of stock options within sixty days of February 28, 1994. (11) Includes 147,600 shares of restricted stock as to which the holders exercise sole voting power and 1,596,500 shares which could be acquired pursuant to exercise of stock options with sixty days of February 28, 1994. Item 13. Certain Relationships and Related Transactions Customers of the bank subsidiaries of M&I include nominees, directors and officers of M&I and their associates. Since January 1, 1993, such persons and firms have been indebted to M&I's bank subsidiaries for loans made in the ordinary course of business. All such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others and did not involve more than the normal risk of collectibility or present other unfavorable features. Loans to directors and executive officers or represented 9.4% of shareholders equity at December 31, 1993. See also Item 11 - Executive Compensation and Item 8 - Consolidated Financial Statements and Supplementary Data, Note 7 to Consolidated Financial Statements. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements Consolidated financial statements: Balance sheets - December 31, 1993 and 1992 Statements of income - years ended December 31, 1993, 1992, and 1991 Statements of cash flows - years ended December 31, 1993, 1992, and 1991 Statements of shareholders' equity - years ended December 31, 1993, 1992, and 1991 Notes to financial statements Report of Independent Public Accountants 2. Financial Statement Schedules All schedules are omitted because they are not required, not applicable or the required information is contained elsewhere. 3. Exhibits See Index to Exhibits of this Form 10-K. (b) Reports on Form 8-K During the last quarter of 1993, M&I did not file any Current Reports on Form 8-K with the Securities and Exchange Commission. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By /s/ J.B. Wigdale ____________________________ J. B. Wigdale Chairman of the Board Date: March 28, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: /s/ J.B. Wigdale ________________________________________ J. B. Wigdale Chairman of the Board and a Director (Principal Executive Officer) Date: March 28, 1994 /s/ G.H. Gunnlaugsson ________________________________________ G. H. Gunnlaugsson Executive Vice President (Principal Financial Officer) Date: March 28, 1994 /s/ P.R. Justiliano ________________________________________ P. R. Justiliano Vice President and Corporate Controller (Principal Accounting Officer) Date: March 28, 1994 Directors: J.P. Bolduc, Wendell F. Bueche, Jon F. Chait, Glenn A. Francke, G.H. Gunnlaugsson, Burleigh E. Jacobs, Jack F. Kellner, D.J. Kuester, Don R. O'Hare, J.A. Puelicher, J.B. Wigdale and James O. Wright By /s/ M.A. Hatfield Date: March 28, 1994 ____________________________________ M. A. Hatfield Attorney-In-Fact* * Pursuant to authority granted by powers of attorney, copies of which are filed herewith. MARSHALL & ILSLEY CORPORATION INDEX TO EXHIBITS (Item 14(a)3) ITEM (2) Agreement and Plan of Merger dated as of September 19, 1993, between M&I and Valley Bancorporation, incorporated by reference to M&I's Current Report on Form 8-K dated September 19, 1993 (as amended by M&I's Current Report on Form 8-K/A dated September 19, 1993), SEC File No. 0-1220 (3)(a) Restated Articles of Incorporation (b) By-laws, as amended, incorporated by reference to M&I's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, SEC File No. 0-1220 (4)(a) Indenture between M&I and Chemical Bank (as successor to Manufacturers Hanover Trust Company) dated as of November 15, 1985 ("Senior Indenture"), incorporated by reference to M&I's Registration Statement on Form S-3 (Registration No. 33-21377), as supplemented by the First Supplemental Indenture to the Senior Indenture dated as of May 31, 1990, incorporated by reference to M&I's Current Report on Form 8-K dated May 31, 1990, and as supplemented by the Second Supplemental Indenture to the Senior Indenture dated as of July 15, 1993, incorporated by reference to M&I's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, SEC File No. 0-1220 (b) Form of Medium Term Notes, Series B, issued pursuant to the Senior Indenture, incorporated by reference to M&I's Current Report on Form 8-K dated May 31, 1990, SEC File No. 0-1220 (c) Form of Medium Term Notes, Series C, issued pursuant to the Senior Indenture, incorporated by reference to M&I's Registration Statement on Form S-3 (Reg. No. 33-64054) (d) Indenture between M&I and Chemical Bank dated as of July 15, 1993 ("Subordinated Indenture"), incorporated by reference to M&I's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, SEC File No. 0-1220 (e) Form of Subordinated Note issued pursuant to the Subordinated Indenture, incorporated by reference to M&I's Registration Statement on Form S-3 (Reg. No. 33-64054) (f) Investment Agreement between M&I and The Northwestern Mutual Life Insurance Company dated August 30, 1985, incorporated by reference to M&I's Current Report on Form 8-K dated May 20, 1985, SEC File No. 0-1220 (g) Subordinated Convertible Note Agreement between The Northwestern Mutual Life Insurance Company dated December 31, 1985, incorporated by reference to M&I's Current Report on Form 8-K dated May 20, 1985, SEC File No. 0-1220 (h) Form of Convertible Subordinated Note, incorporated by reference to M&I's Current Report on Form 8-K dated May 20, 1985, SEC File No. 0-1220 (i) Designation of Rights and Preferences of holders of Series A Preferred Stock, incorporated by reference to M&I's Current Report on Form 8-K dated May 20, 1985, SEC File No. 0-1220 (10)(a) 1983 Executive Stock Option and Restricted Stock Plan, as amended, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, SEC File No. 0-1220* (b) 1985 Executive Stock Option and Restricted Stock Plan, as amended, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, SEC File No. 0-1220* (c) M&I Marshall & Ilsley Bank Supplementary Retirement Benefits Plan, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1983, SEC File No. 0-1220* (d) Directors Deferred Compensation Plan, adopted on February 14, 1985, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1984, SEC File No. 0-1220* (e) Consulting Agreement and Supplemental Retirement Plan dated as of October 1, 1986 between M&I and J.A. Puelicher, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1986, SEC File No. 0-1220* (f) Amendment to Consulting Agreement and Supplemental Retirement Plan dated as of August 13, 1992.* (g) Deferred Compensation Trust between Marshall & Ilsley Corporation and Bessemer Trust Company dated April 28, 1987, as amended, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, SEC File No. 0-1220* (h) 1986 Non-Qualified Stock Option Plan of M&I and related Stock Option Agreement between J.A. Puelicher and M&I, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1986, SEC File No. 0-1220* (i) Form of employment agreements, dated November 5, 1990, between M&I and Messrs. Gunnlaugsson, Kuester, Strelow and Wigdale incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, SEC File No. 0-1220* (j) Employment agreement, dated November 5, 1990, between M&I and Mr. Michael A. Hatfield incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, SEC File No. 0-1220* (k) Employment agreement, dated as of November 5, 1990, between M&I and Mr. Delgadillo* (l) Restricted Stock Plan of Marshall & Ilsley Corporation, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, SEC File No. 0-1220* (m) 1989 Executive Stock Option and Restricted Stock Plan, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, as amended by M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, SEC File No. 0-1220* (n) Marshall & Ilsley Corporation Nonqualified Retirement Benefit Plan, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, SEC File No. 0-1220* (o) Marshall & Ilsley Corporation Supplemental Retirement Benefits Plan, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, SEC File No. 0-1220* (p) Marshall & Ilsley Trust Company Supplemental Retirement Benefits Plan, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, SEC File No. 0-1220* (q) Supplemental Retirement Agreement dated December 10, 1992, between M&I and J.A. Puelicher, incorporated by reference to M&I's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, SEC File No. 0-1220* (r) Amendment to Supplemental Retirement Agreement dated December 16, 1993, between M&I and J.A. Puelicher* (s) Marshall & Ilsley Corporation 1993 Executive Stock Option Plan, incorporated by reference to M&I's Registration Statement on Form S-4 (Reg. No. 33-51753)* (t) Agreement dated July 1, 1993 between M&I and Mr. Revane* (u) Consulting and Noncompetition Agreement dated as of December 1, 1993 between M&I and Mr. Revane (11) Computation of net income per common share (12) Computation of Ratio of Earnings to Fixed Charges (21) Subsidiaries (23) Consent of Arthur Andersen & Co. (24) Powers of attorney for Messrs. Bolduc, Bueche, Chait, Francke, Gunnlaugsson, Jacobs, Kellner, Kress, Kuester, O'Hare, Puelicher, Tisdale and Wright _______________ * Management contract or compensatory plan or agreement EX-3 2 EXHIBIT 3(A)/ARTICLES OF INCORPORATION/10K - 12/31/93 RESTATED ARTICLES OF INCORPORATION OF MARSHALL & ILSLEY CORPORATION These Restated Articles of Incorporation are executed by the undersigned to supersede and replace the heretofore existing Articles of Incorporation and amendments thereto of Marshall & Ilsley Corporation, a corporation organized under the laws of the State of Wisconsin: ARTICLE I The name of the corporation is Marshall & Ilsley Corporation (the "Corporation"). ARTICLE II The Corporation may engage in any lawful activity within the purpose for which corporations may be organized under the Wisconsin Business Corporation Law; provided, however, that the Corporation shall not engage in any activities prohibited by the United States Bank Holding Company Act of 1956. ARTICLE III The aggregate number of shares which the Corporation shall have the authority to issue, the designation of each class of shares, the authorized number of shares of each class of par value and the par value thereof per share, shall be as follows: Designation Par Value Authorized of Class Per Share Number of Shares Preferred Stock. . . . . . . . $1.00 5,000,000 Common Stock . . . . . . . . . $1.00 160,000,000 Any and all such shares of Common Stock and Preferred Stock may be issued for such consideration, not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. Any and all such shares so issued, the full consideration for which has been paid or delivered, shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments except as otherwise provided by the laws of the State of Wisconsin. The preferences, limitations and relative rights of such classes shall be as follows: (1) Designation of Series. The Preferred Stock may from time to time as hereinafter provided, be divided into and issued in one or more series, and the Board of Directors is hereby expressly authorized to establish one or more series, to fix and determine the variations as among series and to fix and determine, prior to the issuance of any shares of a particular series, the following designations, terms, limitations and relative rights and preferences of such series: (a) The designations of such series and the number of shares which shall constitute such series, which number may at any time, or from time to time, be increased or decreased (but not below the number of shares thereof then outstanding) by the Board of Directors unless the Board of Directors shall have otherwise provided in establishing such series; (b) The voting rights to which the holders of the shares of such series are entitled, if any; (c) The yearly rate of dividends on the shares of such series, the dates in each year upon which such dividend shall be payable and, if such dividend shall be cumulative, the date or dates from which such dividend shall be cumulative; (d) The amount per share payable on the shares of such series in the event of the liquidation or dissolution or winding up of the Corporation (whether voluntary or involuntary); (e) The terms, if any, on which the shares of such series shall be redeemable, and, if redeemable, the amount per share payable thereon in the case of the redemption thereof (which amount may vary with regard to (i) shares redeemed on different dates; and (ii) shares redeemed through the operation of a sinking fund, if any, applicable to such shares, from the amount payable with respect to shares otherwise redeemed); (f) The extent to and manner in which a sinking fund, if any, shall be applied to the redemption or purchase of the shares of such series, and the terms and provisions relative to the operation of such fund; (g) The terms, if any, on which the shares of such series shall be convertible into shares of any other class or of any other series of the same or any other class and, if so convertible, the price or prices or the rate or rates of conversion, including the method, if any, for adjustments of such prices or rates, and any other terms and conditions applicable thereto; and (h) Such other terms, limitations and relative rights and preferences, if any, of such series as the Board of Directors may lawfully fix and determine and as shall not be inconsistent with the laws of the State of Wisconsin or these Amended and Restated Articles of Incorporation. All shares of the same series of Preferred Stock shall be identical in all respects, except that shares of any one series issued at different times may differ as to dates from which any cumulative dividends thereon shall be cumulative. All shares of the Preferred Stock of all series shall be equal and shall be identical in all respects, except as permitted by the foregoing provisions of this paragraph (1). (2) Dividends. The holders of Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends at the annual rate fixed by the Board of Directors with respect to each series of shares and no more. Such dividends shall be payable on such dates and in respect of such periods in such year as may be fixed by the Board of Directors to the holders of record thereof on such date as may be determined by the Board of Directors. Such dividends shall be paid or declared and set apart for payment for each dividend period before any dividend (other than a dividend payable solely in Common Stock) for the same period shall be paid upon or set apart for payment on the Common Stock, and, if dividends on the Preferred Stock shall be cumulative, all unpaid dividends thereon for any past dividend period shall be fully paid or declared and set apart for payment, but without interest, before any dividend (other than a dividend payable solely in Common Stock) shall be paid upon or set apart for payment on the Common Stock. The holders of Preferred Stock shall not, however, be entitled to participate in any other or additional earnings or profits of the Corporation, except for such premiums, if any, as may be payable in case of redemption, liquidation, dissolution or winding up. (3) Redemption. In the event that the shares of any series of the Preferred Stock shall be made redeemable as provided in subparagraph (e) of paragraph (1), above, the Corporation may, at its option, redeem at any time or from time to time all or any part of such shares, upon notice duly given as hereinafter provided, by paying for each share the redemption price then applicable thereto fixed by the Board of Directors as provided in subparagraph (e) of paragraph (1), above. Notice of every such redemption shall be mailed at least thirty (30) days prior to the date fixed for such redemption to the holders of record of the shares called for redemption at their respective addresses as shown on the stock records of the Corporation. In case of a redemption of a part of a series of Preferred Stock at the time outstanding, the Corporation shall select by lot, in such manner as the Board of Directors may determine, the shares so to be redeemed. On or before the date fixed for a redemption specified therein, the Corporation shall deposit funds sufficient to redeem such shares with a bank or trust company in good standing, as designated in such notice, organized under the laws of the United States or of the State of Wisconsin, doing business in the City of Milwaukee, Wisconsin, and having a capital, surplus and undivided profit aggregating at least $50,000,000.00, according to its last published statement of condition, in trust for the pro rata benefit of the holders of the shares called for redemption, and if the name and address of such bank or trust company and the deposit or intent to deposit the redemption funds in such trust account shall have been stated in such notice of redemption, and the Corporation shall have given such bank or trust company irrevocable instructions and authorization to pay the amount payable upon redemption to the proper holders upon surrender of certificates representing such shares, then, from and after the mailing of such notice and the making of such deposit, all shares so called for redemption shall no longer be deemed to be outstanding for any purpose whatsoever and the right to receive dividends thereon and all rights of the holders of such shares in or with respect to such shares of the Corporation shall forthwith cease and terminate, except only the right of the holders thereof to receive from such bank or trust company the amount payable upon redemption together with all accrued but unpaid dividends to the date fixed for redemption, without interest, upon the surrender of the certificates representing the shares to be redeemed, and the right to exercise privileges of conversion, if any, on or before the date fixed for redemption or such earlier date as may be fixed for the expiration thereof. Any funds so deposited by the Corporation which shall not be required for such redemption because of the exercise of any right of conversion subsequent to the time of such deposit shall be released and repaid to the Corporation upon its request. Any funds so deposited and unclaimed at the end of five (5) years (or such shorter period as shall be provided by law) after the date fixed for redemption shall be released and repaid to the Corporation, after which holders of the shares called for redemption shall no longer look to the said bank or trust company but shall look only to the Corporation, or to others, as the case may be, for payment of any lawful claim for such funds which the holders of said shares may still have. Any interest accrued on funds so deposited shall be paid to the Corporation from time to time. (4) Reissue of Shares. Shares of the Preferred Stock which shall have been converted, redeemed, purchased or otherwise acquired by the Corporation, whether through the operation of a sinking fund or otherwise, shall be retired and restored to the status of authorized but unissued shares, but may be reissued only as a part of the Preferred Stock other than the series of which they were originally a part. (5) Liquidation. In the event of liquidation, dissolution or winding up (whether voluntary or involuntary) of the Corporation, the holders of shares of Preferred Stock shall be entitled to be paid the full amount payable on such shares upon the liquidation, dissolution or winding up of the Corporation fixed by the Board of Directors with respect to such shares as provided in subparagraph (d) of paragraph (1), above, before any amount shall be paid to the holders of the Common Stock. After payment to holders of the Preferred Stock of the full preferential amounts to which they are entitled, the remaining assets of the Corporation shall be distributed ratably among the holders of the Common Stock. (6) Designation of Rights and Preferences Series A Convertible Preferred Stock. (a) Designation of Series. There is hereby established effective February 14, 1986 from the authorized preferred stock a series of preferred stock to be designated as Series A Convertible Preferred Stock, consisting of 500,000 shares, and having the powers, rights, limitations, restrictions and preferences set forth herein. The number of shares designated as Series A Convertible Preferred Stock may at any time, or from time to time, be increased or decreased (but not below the number of shares thereof then outstanding or then reserved for issuance in connection with the conversion of any securities of the Company) by the Board of Directors. (b) Voting Rights. The holders of Series A Convertible Preferred Stock shall have only such right to vote as provided by Sections 180.64(2) and 180.52 of the Wisconsin Statutes or by other applicable law. (c) Dividends. The holders of all issued and outstanding shares of Series A Convertible Preferred Stock shall be entitled to receive cash dividends when and as cash dividends are declared and become payable with respect to the Common Stock of the Corporation, in an amount, in the case of each holder of shares of Series A Convertible Preferred Stock with respect to each cash dividend declared with respect to the Common Stock, equal to the amount of the cash dividend that such holder would have received with respect to the resulting shares of Common Stock had he converted such shares of Preferred Stock into Common Stock immediately before the declaration of such dividend with respect to the Common Stock. Dividends on the Series A Convertible Preferred Stock shall be noncumulative. The holders of Series A Convertible Preferred Stock shall not be entitled to participate in any other or additional earnings or profits of the Corporation, except for such premiums, if any, as may be payable in case of liquidation, dissolution or winding up. (d) Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of the Common Stock or any other series or class of stock of the Corporation ranking junior to the Series A Convertible Preferred Stock upon liquidation, dissolution or winding up, the holders of the shares of the Series A Convertible Preferred Stock shall be entitled to receive $100 per share plus an amount equal to all dividends, if any, which have accrued thereon as the result of the declaration of dividends on the Common Stock but which remain unpaid to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation to be paid or distributed to the holders of the shares of the Series A Convertible Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and the preferential amount, if any, to be paid or distributed to the holders of any other preferred stock ranking as to liquidation, dissolution or winding up, on a parity with the Series A Convertible Preferred Stock, then such assets shall be distributed among the holders of Series A Convertible Preferred Stock and such other preferred stock, if any, ratably in accordance with the respective amounts that would be payable upon liquidation, dissolution or winding up to such holders with respect to such shares of Series A Convertible Preferred Stock and such other preferred stock, if any, if all preferential amounts payable thereon were paid in full. For the purposes of this subparagraph (d), a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. Subject to the rights of the holders of shares of any series or class of stock ranking on a parity with or prior to the Series A Convertible Preferred Stock upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the Series A Convertible Preferred Stock as provided in this subparagraph d, but not prior thereto, the holders of the Common Stock or any other series or class of stock ranking junior to the Series A Convertible Preferred Stock upon liquidation, dissolution or winding up shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the Series A Convertible Preferred Stock shall not be entitled to share therein. (e) Conversion Rights. The holders of shares of Series A Convertible Preferred Stock shall have the right, at their option, to convert such shares into shares of Common Stock of the Corporation at any time on and subject to the following terms and conditions: (i) The shares of Series A Convertible Preferred Stock shall be convertible at the offices of the transfer agent or agents for the Series A Convertible Preferred Stock and at such other office or offices, if any, as the Board of Directors may designate, into fully paid and nonassessable shares (except as provided in Section 180.40(6) of the Wisconsin Statutes) of Common Stock of the Corporation, at the conversion price, determined as hereinafter provided, in effect at the time of conversion, each share of Series A Convertible Preferred Stock being valued at $100 for the purpose of such conversion. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "Conversion Price") shall be initially $78.75 per share of Common Stock, except that the initial Conversion Price applicable to shares of Series A Convertible Preferred Stock issued in exchange for Common Stock shall be the weighted average purchase price paid for such Common Shares as determined in good faith by the Board of Directors of the Company. The Conversion Price shall be adjusted in certain instances as provided in subparagraph (e)(iii), (iv), (v), (vi), (ix), (x) and (xi) below. (ii) In order to convert shares of Series A Convertible Preferred Stock into Common Stock, the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed or assigned to the Corporation or in blank, and give written notice to the Corporation at said office that such holder elects to convert such shares. Any such notice shall be irrevocable. No payment or adjustment shall be made upon conversion on account of any dividends, if any, which have accrued as the result of the declaration of dividends on the Common Stock on the shares of Series A Convertible Preferred Stock surrendered for conversion, but which remain unpaid, but payment or adjustment shall be made on account of any dividends payable with respect to the Common Stock issued upon conversion. Shares of Series A Convertible Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion in accordance with the foregoing provisions, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of Common Stock at such time. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at said office a certificate or certificates for the number of full shares of Common Stock issued upon such conversion, together with payment in lieu of any fraction of a share, as hereinafter provided, to the person or persons entitled to receive the same. (iii) In case the Corporation shall pay or make a dividend or other distribution on any class of Capital Stock of the Corporation in Common Stock, the Conversion Price shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the day fixed for the determination of shareholders entitled to receive such dividend or other distribution and of which the denominator shall be the sum of such number of shares plus the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this subparagraph (e)(iii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation. (iv) In case the Corporation shall issue rights or warrants to all holders of its Common Stock, entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in subparagraph (e)(viii) below) of the Common Stock on the date fixed for the determination of shareholders entitled to receive such rights or warrants, the Conversion Price shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate offering price for all of the shares of Common Stock so offered for subscription or purchase would purchase at such current market price and of which the denominator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (e)(iv), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation will not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation. (v) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares, the Conversion Price shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the date upon which such subdivision or combination becomes effective. (vi) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock, evidences of its indebtedness or assets (including securi- ties, but excluding any rights or warrants referred to in subparagraph (e)(iv) above, any dividend or distribution paid in cash out of earned surplus of the Corporation and any dividend or distribution referred to in subparagraph (e)(iii) above), the Conversion Price shall be adjusted by multiplying such Conversion Price by a fraction of which the numerator shall be the difference of the current market price per share (determined as provided in subparagraph (e)(viii) below) of the Common Stock on the date fixed for the determination of the shareholders entitled to receive such distribution less the then fair market value (as determined by the Board of Directors, whose good faith determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed applicable to one share of the then outstanding Common Stock, and of which the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this subparagraph (e)(vi), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation will not distribute any evidences of its indebtedness or assets with respect to shares of Common Stock held in the treasury of the Corporation. (vii) A reclassification (including any reclassifi- cation upon a consolidation or merger of which the Corporation is the continuing corporation) of the Common Stock into securities including securities other than the Common Stock shall be deemed to involve (aa) a distribution of such securities other than Common Stock into which the Common Stock is reclassified to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of shareholders entitled to receive such distribution" within the meaning of subparagraph (e)(vi) above) and (bb) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the date upon which such subdivision or combination becomes effective" within the meaning of subparagraph (e)(v), above). (viii) For the purpose of any computation under subparagraph (e)(iv), (vi), and (x), the current market price per share of Common Stock on any date shall be deemed to be 90% (100%, in the case of subparagraph (e)(xvi) of (aa) the average of the daily closing prices for the five (5) consecutive business days commencing ten (10) business days before the date in question. The closing price for each day shall be the last reported sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on any exchange on which the Common Stock is listed or admitted to trading selected by the Board of Directors, or (bb) if the Common Stock is not listed or admitted to trading on any such exchange, the closing sale price in the over-the-counter market, or (cc) in case no such reported sale takes place or such data is not reported on such day, the average of the closing bid and asked prices in the over-the-counter market, as furnished by the National Association of Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting such information. If on any such day the Common Stock is not quoted by any such organization, the closing price for such day shall be the fair value of such Common Stock on such day, as determined by the Board of Directors in good faith. (ix) In case of any capital reorganization of the Corporation (other than any reorganization referred to in subparagraph (e)(iii), (iv), (v), (vi), or (vii), above), any reclassification of the Common Stock (other than any reclassification of the Common Stock referred to in subparagraph (e)(ii), (v) or (vii) above), the consolidation or merger of the Corporation with or into any other corporation or of the sale of all or substantially all of the properties and assets of the Corporation to any other corporation, each share of Series A Convertible Preferred Stock shall immediately thereafter be convertible into the number of shares of stock, other securities, assets and/or cash to which a holder of the number of shares of Common Stock into which such share was convertible immediately prior thereto would have been entitled to receive upon such reorganization, reclassification, consolidation, merger or sale. In case of any such reorganization, reclassification, consolidation, merger or sale, the provisions set forth in this subparagraph (e)(ix) with respect to the rights and interests of the holders of the Series A Convertible Preferred Stock shall automatically be appropriately adjusted so as to be applicable as nearly as possible to the shares of stock, other securities, assets and/or cash into which the Series A Convertible Preferred Stock thereby becomes convertible, and effective provision shall be made in the Articles of Incorporation of the resulting or surviving corporation or otherwise, so that such provisions shall thereafter be applicable, as nearly as possible, to any such shares of stock, other securities, assets and/or cash. The Corporation shall not effect any such consolidation, merger or sale, unless before the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger, the corporation purchasing such assets, or other appropriate corporation or entity shall expressly assume in writing the obligation to deliver to the holder of each share of Series A Convertible Preferred Stock, upon conversion thereof, such shares of stock, other securities, assets and/or cash as such holder shall be entitled to receive pursuant to the provisions hereof, and to make provisions for the protection of such conversion right as above provided. The provisions of this subpara- graph (e)(ix) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers or sales. (x) In the event that the Corporation shall (except as hereinafter provided) issue any additional shares of Common Stock for cash at a price less than the Current Market Price per share of Common Stock then in effect, then the Conversion Price upon each such issuance shall be adjusted to that price determined by multiplying the Conversion Price in effect immediately prior to such event by a fraction: (aa) the numerator of which shall be the number of shares of Common Stock outstanding immedi- ately prior to the issuance of such additional shares of Common Stock plus the number of full shares of Common Stock which the aggregate consideration for the total number of such additional shares of Common Stock so issued would purchase at the Current Market Price per share, and (bb) the denominator of which shall be the number of shares of Common Stock outstanding immedi- ately prior to the issuance of such additional shares of Common Stock plus the number of such additional shares of Common Stock to issued; For purposes of clauses (aa) and (bb) the date as of which the Current Market Price per share of Common Stock shall be computed shall be the earlier of (xx) the date on which the Corporation shall enter into a firm contract for the issuance of such additional shares of Common Stock or (zz) the date of actual issuance of such additional shares of Common Stock; (xi) The Corporation may make such reductions in the Conversion Price, so as to increase the number of Common Shares into which the Series A Convertible Preferred Stock may be converted, in addition to those required by subparagraph (e)(iii), (iv), (v), (vi) and (ix), as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (xii) No adjustments to the Conversion Price will be made for the issuance of options or securities to employees of the Corporation or its subsidiaries pursuant to any stock option, restricted stock, thrift, stock purchase, savings or other employee benefit plan or to shareholders of the Corporation pursuant to any dividend reinvestment plan. No adjustment will be required to be made in the Conversion Price until accumulative adjustments require an adjustment of at least $.25, with any smaller adjustments not made hereunder cumulated with future adjustments. (xiii) The Corporation shall mail to each holder of Series A Convertible Preferred Stock notice of the pro- posed effective date of any action which would result in an adjustment in the Conversion Price determined as provided in this subparagraph (e) at least twenty (20) days prior to the record date thereof. Whenever the Conversion Price is adjusted as herein provided, the Corporation shall forthwith file with any transfer agent for the Series A Convertible Preferred Stock a certificate signed by the Chairman of the Board or one of the Vice Presidents of the Corporation and by its Treasurer or an Assistant Treasurer, stating the adjusted Conversion Price determined as provided in this subparagraph (e), and setting forth the facts requiring such adjustment. Any such transfer agent shall be under no duty to make any inquiry or investigation as to the statements contained in any such certificate or as to the manner in which any computation was made, but may accept such certificate as conclusive evidence of the statements therein contained, and any such transfer agent shall be fully protected with respect to any and all acts done or action taken or suffered by it in reliance thereon. No transfer agent in its capacity as transfer agent shall be deemed to have any knowledge with respect to any change of capital structure of the Corporation unless and until it receives a notice thereof pursuant to the provisions hereof, and, in the absence of any such notice, each transfer agent may conclusively assume that there has been no such change. Whenever the Conversion Price is adjusted, the Corporation shall forthwith cause a notice stating the adjustment, and describing the events requiring such adjustments and the Conversion Price to be mailed to the holders of record of Series A Convertible Preferred Stock. (xiv) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of Series A Convertible Preferred Stock, such number of shares as shall from time to time be sufficient to effect the conversion of all Series A Convertible Preferred Stock from time to time outstanding. The Corporation shall from time to time, in accordance with the laws of Wisconsin, increase the authorized amount of Common Stock if at any time the number of shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all the then outstanding shares of Series A Convertible Preferred Stock. (xv) The Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of Common Stock on conversion of Series A Convertible Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of Common Stock in a name other than that in which the Series A Convertible Preferred Stock so converted was registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. (xvi) No fractional shares of Common Stock will be issued upon conversion of the Series A Convertible Preferred Stock, and in lieu of any fractional shares that would otherwise be issuable, the Corporation will pay cash on the basis of the current market price per share of the Common Stock on the business day immediately preceding the day of conversion determined in accordance with subparagraph (e)(viii) above. (xvii) The Board of Directors of the Corporation shall not authorize for issuance any class of capital stock ranking prior to the Series A Convertible Preferred Stock without the consent of holders of two-thirds of the outstanding shares of Series A Convertible Preferred Stock. For purposes of this Agreement, any class or classes of stock of the Corporation shall be deemed to rank: (aa) Prior to the Series A Convertible Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Series A Convertible Preferred Stock; and (bb) On a parity with the Series A Convert- ible Preferred Stock as to dividends or as to distributions of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates, or liquidation amounts per share thereof be different from those of the Series A Convertible Preferred Stock, if the holders of such class and the Series A Convertible Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation amounts, without preference or priority of one over the other. ARTICLE IV Pre-emptive Rights. No holder of any stock of the corporation shall have any pre-emptive or other subscription rights nor be entitled, as of right, to purchase or subscribe for any part of the unissued stock of this corporation or any of additional stock issued by reason of any increase of authorized capital stock of this corporation or other securities whether or not convertible into stock of this corporation. ARTICLE V The address of the registered office of the Corporation is 770 North Water Street, Milwaukee, Wisconsin 53202 and its registered agent at such address is Michael A. Hatfield. ARTICLE VI The business and affairs of the Corporation shall be managed by a Board of Directors. The number of directors (exclusive of directors, if any, elected by the holders of one or more series of Preferred Stock, voting separately as a series pursuant to the provisions of these Restated Articles of Incorporation applicable thereto) shall be not less than 3 directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors then in office. The directors shall be divided into three classes, designated Class I, Class II, and Class III, and the term of office of directors of each class shall be three years. Each class shall consist, as nearly as possible, of one-third of the total number of directors constituting the entire Board of Directors. If the number of directors is changed by resolution of the Board of Directors pursuant to this Article VI, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify. Any newly created directorship resulting from an increase in the number of directors and any other vacancy on the Board of Directors, however caused, shall be filled by the vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director so elected to fill any vacancy in the Board of Directors, including a vacancy created by an increase in the number of directors, shall hold office for the remaining term of directors of the class to which he has been elected and until his successor shall be elected and shall qualify. Exclusive of directors, if any, elected by the holders of one or more series of Preferred Stock, no director of the Corporation may be removed from office, except for Cause and by the affirmative vote of two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting of shareholders duly called for such purpose. As used in this Article VI, the term "Cause" shall mean solely malfeasance arising from the performance of a director's duties which has a materially adverse affect on the business of the Corporation. No person, except those nominated by or at the direction of the Board of Directors, shall be eligible for election as a director at any annual or special meeting of shareholders unless a written request, in the form established by the Corporation's By-laws, that his or her name be placed in nomination is received from a shareholder of record by the Secretary of the Corporation not less than 30 days prior to the date fixed for such meeting, together with the written consent of such person to serve as a director. Where such a request for nomination and such consent have been timely received, but such nominee is unable or declines to serve, the person who placed the individual's name in nomination may request that an alternative name be placed in nomination at the meeting. Notwithstanding the foregoing, whenever the holders of any one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately by series, to elect directors at an annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of these Restated Articles of Incorporation applicable thereto. Directors so elected shall not be divided into classes unless expressly provided by such terms, and during the prescribed terms of office of such directors the Board of Directors shall consist of such directors in addition to the number of directors determined as provided in the first paragraph of this Article VI. ARTICLE VII The period of existence of the Corporation shall be perpetual. ARTICLE VIII Acquisition and Disposition of Own Shares. The Corporation shall have the right to purchase, take, receive or otherwise acquire, hold, own, pledge, transfer or otherwise dispose of its own shares; provided that no such acquisition, directly or indirectly, of its own shares of equal or subordinate rank shall be made unless: (a) At the time of such acquisition the Corporation is not and would not thereby be rendered insolvent; and (b) The net assets of the Corporation remaining after such acquisition would be not less than the aggregate preferential amount payable in the event of voluntary liquidation to the holders of shares having preferential rights to the assets of the corporation in the event of liquidation. ARTICLE IX Notwithstanding any other provision of these Restated Articles of Incorporation or the Corporation's By-Laws (and notwithstanding the fact that some lesser percentage may be specified by law, these Restated Articles of Incorporation or the Corporation's By-Laws), the Corporation's By-Laws may be amended, altered or repealed, and new By-Laws may be enacted, only by the affirmative vote of not less than two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting of shareholders duly called for such purpose, or by a vote of not less than three-quarters of the entire Board of Directors then in office. ARTICLE X Except as otherwise specified herein, the "requisite affirmative votes," and the recitals of votes which are "requisite for adoption" or "requisite for approval" under Section 180.25 of the Wisconsin Statutes for the approval or authorization of any (i) plan of merger or consolidation of the Corporation with or into any other corporation, (ii) sale, lease, exchange or disposition of all or substantially all the property and assets of the Corporation to or with any other person, corporation or entity not made in the ordinary course of business, or (iii) voluntary dissolution of the Corporation or revocation of voluntary dissolution proceedings, shall be the affirmative vote of the holders of two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting called for such purpose (unless any class or series of shares is entitled to vote thereon as a class, in which event the "requisite affirmative votes" shall be the affirmative votes of the holders of two-thirds of the outstanding shares of each class of shares and of each series entitled to vote thereon as a class and of the total shares entitled to vote thereon), provided, however, if the Board of Directors shall have approved any transaction described in clauses (i), (ii) or (iii) above by a resolution adopted by three-quarters of the Board of Directors then in office and entitled to vote thereon, the "requisite affirmative votes," and the recitals of votes which are "requisite for adoption" or "requisite for approval," shall be the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote at a meeting called for such purpose (unless any class or series of shares is entitled to vote thereon as a class, in which event the "requisite affirmative votes" shall be the affirmative votes of the holders of a majority of the outstanding shares of each class of shares and of each series entitled to vote thereon as a class and of the total shares entitled to vote thereon). ARTICLE XI A. In addition to any affirmative vote required by law or these Restated Articles of Incorporation or the By-Laws of the Corporation, and except as otherwise expressly provided in Section (B) of this Article XI, a Business Combination (as hereinafter defined) shall require the affirmative vote of not less than: (1) Eighty percent (80%) of the votes entitled to be cast by the holders of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (hereinafter referred to in this Article XI as "Voting Stock"), voting together as a single class (it being understood that, for purposes of this Article XI, each share of the Voting Stock shall have the number of votes granted to it pursuant to the Wisconsin Business Corporation Law or as otherwise provided pursuant to Article III of these Restated Articles of Incorporation); or (2) Two-thirds of the votes entitled to be cast by holders of Voting Stock, voting together as a single class, other than Voting Stock beneficially owned by an Interested Stockholder (as defined below) who is a party to the Business Combination or an Affiliate or Associate of such Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified by law or in any agreement with any national securities exchange or otherwise, but such affirmative separate class vote shall be required in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law or pursuant to Article III of these Restated Articles of Incorporation. B. The provisions of Section (A) of this Article XI shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative separate class vote as is required by law and any other provision of these Restated Articles of Incorporation, and any resolution or resolutions adopted by the Board of Directors pursuant to these Restated Articles of Incorporation, as amended, if the conditions specified in either of the following paragraphs (1) or (2) are met: 1. The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined), it being understood that this condition shall not be capable of satisfaction unless there is at least one Disinterested Director; or 2. All of the following conditions are met: (a) the aggregate amount of cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of any Business Combination (the "Consummation Date") of consideration other than cash to be received per share of Common Stock as a result of such Business Combination shall be at least equal to the higher of the following: (i) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any shares of Common Stock acquired by it (aa) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date"), or (bb) in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date") through the Consummation Date at the base rate for interest rate determinations of M&I Marshall & Ilsley Bank in effect from time to time, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid other than in cash, per share of Common Stock from the Determination Date through the Consummation Date (but not exceeding the amount of such interest payable per share of Common Stock); and (ii) The Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher. The provisions of this Paragraph B(2)(a) of this Article XI shall be required to be met with respect to all shares of Common Stock outstanding whether or not the Interested Stockholder has previously acquired any shares of Common Stock. (b) The aggregate amount of cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share of any class or series of outstanding Capital Stock, other than Common Stock, shall be at least equal to the highest of the following (such requirement being applicable to each such class or series of outstanding Capital Stock, whether or not the Interested Stockholder has previously acquired beneficial ownership of any shares of such class or series): (i) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock acquired by it (aa) within the two-year period immediately prior to the Announcement Date, or (bb) in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the base rate for interest rate determinations of M&I Marshall & Ilsley Bank in effect from time to time, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid other than in cash, per share of such class or series of Capital Stock from the Determination Date through the Consummation Date (but not exceeding the amount of such interest payable per share of such class of Capital Stock); (ii) (If applicable) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and (iii) The Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher. (c) The consideration to be received by holders of a particular class or series of outstanding Capital Stock (including Common Stock) in such Business Combination shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class or series of Capital Stock. If the Interested Stockholder has paid for shares of any class or series of Capital Stock with varying forms of consideration, the form of consideration of such class or series of Capital Stock shall be either cash or the form used to acquire the largest number of shares of such class or series of Capital Stock previously acquired by it. (d) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on the outstanding stock having a preference over the Common Stock as to dividends or upon liquidations; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (2) an increase in such annual rate of dividends (as necessary to prevent any reduction) in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (c) such Interested Stockholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which resulted in such Interested Stockholder becoming an Interested Stockholder. (e) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately, solely in such Interested Stockholder's capacity as a stockholder of the Corporation), of any loans, advances, guaranties, pledges or other financial assistance or any tax credits or other tax advantageous provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (f) A proxy or information statement describing the proposed Business Combination in accordance with the requirements of the 1934 Act (or any subsequent provisions replacing such Act) shall be mailed to all Stockholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The first page of such proxy or information statement shall prominently display the recommendation, if any, which a majority of the Disinterested Directors then in office may choose to make to the holders of Capital Stock regarding the proposed Business Combination. Such proxy or information statement shall also contain, if a majority of the Disinterested Directors then in office so request, an opinion of a reputable investment banking firm of recognized national standing (which firm shall be selected by a majority of the Disinterested Directors then in office, furnished with all information it reasonably requests, and paid a reasonable fee for its services by the Corporation upon the Corporation's receipt of such opinion) as to the fairness (or lack of fairness) of the terms of the proposed Business Combination from the point of view of the holders of Capital Stock other than the Interested Stockholder. (g) For purposes of this Article XI, the following definitions shall apply: (i) The term "Business Combination" shall mean any transaction referred to any one or more of the following clauses: (aa) Any merger or consolidation of the Corporation or any Subsidiary with (1) any Interested Stockholder or (2) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate or an Associate of any Interested Stockholder; or (bb) Any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value of $25,000,000 or more; or (cc) The issuance or transfer by the Corporation or any Subsidiary (in any one transaction or a series of transactions) of any Securities of the Corporation or any Subsidiary having an aggregate Fair Market Value of $25,000,000 or more to any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (dd) The adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (ee) Any reclassification of Securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries of any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible Securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or an Affiliate of any Interested Stockholder; or (ff) Any series or combination of transactions directly or indirectly having the same effect as any of the foregoing. (ii) "Interested Stockholder" shall mean any person (other than the Corporation, any Subsidiary, or any pension, savings or other employee benefit plan for the benefit of employees of the Corporation and/or any Subsidiary) who or which: (aa) is the beneficial owner, directly or indirectly, of more than 10% of the Corporation's outstanding Voting Stock; or (bb) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was a beneficial owner, directly or indirectly, of 10% or more of the Corporation's then outstanding Voting Stock; or (cc) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any other Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the 1933 Act. (iii) A person shall be deemed the "beneficial owner" of any Voting Stock; (aa) which such person or any of its Affiliates or Associates owns, directly or indirectly; or (bb) which such person or any of its Affiliates or Associates has (y) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (z) the right to vote pursuant to any agreement, arrangement or understanding; or (cc) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. (iv) In determining whether a person is an Interested Stockholder pursuant to Subparagraph (g)(ii) of this Article XI, the number of shares of Voting Securities deemed to be outstanding shall include shares deemed owned through application of Subparagraph (g)(iii) of this Article XI, but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (v) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purpose of the definition of Interested Stockholder set forth in Subparagraph (g)(ii) of this Article XI, the term "Subsidiary" shall mean only a corporation of which a majority of each class of Voting Securities is owned, directly or indirectly, by the Corporation. (vi) "Disinterested Director" means any member of the Board of Directors of the Corporation who is not affiliated with the Interested Stockholder and who either was a member of the Board of Directors prior to the Determination Date or was elected or recommended for election by majority of the Disinterested Directors in office at the time such Director was nominated for election. (vii) "Fair Market Value" means: (aa) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the composite tape for the New York Stock Exchange listed stocks, or, if such stock is not quoted on the composite tape, on the New York Stock Exchange, or, if such stock is not listed or admitted for trading on such exchange, on the principal United States Securities Exchange registered under the 1934 Act on which such stock is listed or admitted for trading, or, if such stock is not listed or admitted for trading on any such exchange, the highest closing sale price (if applicable) or bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. automated quotations system or any system then in use, or if no such quotations are available, the Fair Market Value on the date in question of a share of such stock as determined in good faith by a majority of the Disinterested Directors then in office, in each case with respect to any class or series of stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (bb) in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined in good faith by a majority of the Disinterested Directors then in office. (viii) Reference to "highest per share price" shall in each case with respect to any class or series of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock. (ix) In the event on any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs B(2)(a) and (b) of this Article XI, shall include the shares of Common Stock and/or shares of any other class or series of Capital Stock retained by the holders of such shares. (x) "Capital Stock" shall mean all capital stock of the Corporation issued from time to time under Article III of the Corporation's Restated Articles of Incorporation. ARTICLE XII These Restated Articles of Incorporation supersede and take the place of the heretofore existing Articles of Incorporation of the Corporation and amendments thereto. Executed in duplicate this 25th day of March, 1994. MARSHALL & ILSLEY CORPORATION By: /s/ James B. Wigdale _________________________________ James B. Wigdale, Chairman Attest: /s/ M.A. Hatfield _______________________________ M.A. Hatfield, Secretary This instrument was drafted by: Scott A. Moehrke Godfrey & Kahn, S.C. 780 North Water Street Milwaukee, Wisconsin 53202-3590 EX-10 3 EXHIBIT 10(F)/AGREEMENT/10K - 12/31/93 AMENDMENT TO CONSULTING AGREEMENT AND SUPPLEMENTAL RETIREMENT PLAN THIS AMENDMENT, made and entered into as of the 13th day of August, 1992, between Marshall & Ilsley Corporation, a Wisconsin corporation (the "Company") and J.A. Puelicher (the "Executive"). W I T N E S S E T H: WHEREAS, the Executive Compensation Committee of the Board of Directors of Marshall & Ilsley Corporation adopted the following resolution at their meeting of August 13, 1992: "FURTHER RESOLVED, that the Consulting Agreement and Supplemental Retirement Plan dated as of October 1, 1986, between Mr. Puelicher and the Company (the "Consulting Agreement") be amended to provide that the Company, after the retirement of Mr. Puelicher, will pay an annual insurance premium of $112,470 to NML in connection with the Policy until the earlier of (i) Mr. Puelicher's death, (ii) nineteen years from the date of the Policy's issue, or (iii) such time as the Policy is paid up." NOW, THEREFORE, the parties hereby agree as follows: 1. The following Paragraph 4D is added immediately following Paragraph 4C: "D. Payment of Insurance Premiums. During the period that the Executive is receiving Retirement Benefits pursuant to Paragraph 4A hereof, the Company shall pay to Northwestern Mutual Life Insurance Company in connection with Policy Number 12 236 596 (the "Policy") an annual insurance premium of $112,470 until the earlier of (i) Mr. Puelicher's death, (ii) nineteen years from the date of the Policy's issue, or (iii) such time as the policy is paid up." 2. Except as specifically amended above, the Consulting Agreement is hereby ratified and confirmed and shall remain in full force and effect. IN WITNESS WHEREOF, this Amendment has been executed by the parties as of the day, month and year first above written. MARSHALL & ILSLEY CORPORATION By: /s/ Jack F. Kellner ____________________________________ Jack F. Kellner, Chairman Compensation Committee, Board of Directors Attest: /s/ M.A. Hatfield ________________________________ M.A. Hatfield, Secretary EXECUTIVE /s/ J.A. Puelicher ________________________________________ J.A. Puelicher EX-10 4 EXHIBIT 10(K)/AGREEMENT/10K - 12/31/93 EMPLOYMENT AGREEMENT THIS AGREEMENT, entered into as of the 5th day of November, 1990, by and between MARSHALL & ILSLEY CORPORATION (the "Company"), and JOSEPH L. DELGADILLO (the "Executive") (hereinafter collectively referred to as "the parties"). W I T N E S S E T H : WHEREAS, the Board of Directors of the Company (the "Board") recognizes that the possibility of a Change of Control (as hereinafter defined in Section 2) exists and that the threat of or the occurrence of a Change of Control can result in significant distractions of its key management personnel because of the uncertainties inherent in such a situation; and WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its shareholders to retain the services of the Executive in the event of a threat or occurrence of a Change of Control and to ensure his continued dedication and efforts in such event without undue concern for his personal financial and employment security; and WHEREAS, in order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat of or the occurrence of a Change of Control, the Company desires to enter into this Agreement with the Executive. NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. Employment Term. (a) The "Employment Term" shall commence on the first date during the Protected Period (as defined in Section 1(c), below) on which a Change of Control (as defined in Section 2, below) occurs (the "Effective Date") and shall expire on the second anniversary of the Effective Date; provided, however, that at the end of each day of the Employment Term the Employment Term shall automatically be extended for one (1) day unless either the Company or the Executive shall have given written notice to the other at least thirty (30) days prior thereto that the Employment Term shall not be so extended; and provided, further, that the Employment Term shall not be auto- matically extended beyond the first day of the month following the month in which the Executive attains age sixty-five (65). (b) Notwithstanding anything contained in this Agreement to the contrary, if the Executive's employment is terminated prior to the Effective Date and the Executive reasonably demonstrates that such termination (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control, or (ii) otherwise occurred in connection with or in anticipation of a Change of Control, then for all purposes of this Agreement, the Effective Date shall mean the date immediately prior to the date of such termination of the Executive's employment. (c) For purposes of this Agreement, the "Protected Period" shall be the two (2) year period commencing on the date hereof, provided, however, that at the end of each day the Protected Period shall be automatically extended for one (1) day unless at least thirty (30) days prior thereto the Company shall have given written notice to the Executive that the Protected Period shall not be so extended; and provided, further, that notwithstanding any such notice by the Company not to extend, the Protected Period shall not end if prior to the expiration thereof any third party has indicated an intention or taken steps reasonably calculated to effect a Change of Control, in which event the Protected Period shall end only after such third party publicly announces that it has abandoned all efforts to effect a Change of Control. 2. Change of Control. For purposes of this Agreement, a "Change of Control" shall mean the first to occur of the following: (a) The acquisition by any individual, entity or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-three percent (33%) or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions of common stock shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege or by one person or a group of persons acting in concert), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation which would not be a Change of Control under subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened "election contest" or other actual or threatened "solicitation" (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) of proxies or consents by or on behalf of a person other than the Incumbent Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, unless, following such reorganization, merger or consolidation, (i) more than two-thirds (2/3) of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, (ii) no person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, thirty- three percent (33%) or more of the Outstanding Company Common Stock or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, thirty-three percent (33%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation, entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than two-thirds (2/3) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the benefi- cial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation and any person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, thirty-three percent (33%) or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, thirty-three percent (33%) or more of, respectively, the then outstanding shares of common stock of such corporation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. 3. Employment. (a) Subject to the provisions of Section 3, hereof, the Company agrees to continue to employ the Executive and the Executive agrees to remain in the employ of the Company during the Employment Term. During the Employment Term, the Executive shall be employed as Senior Vice President Financial Services Group Manager of M&I Data Services, Inc. or in such other executive capacity as may be mutually agreed to in writing by the parties. During the Employment Term, Executive's position (including status, offices, titles and reporting requirements), authority duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held or assigned at any time during the twelve (12) month period immediately preceding the Effective Date, and Executive's services shall be performed at the location where Executive was employed immediately preceding the Effective Date or at any office or location less than thirty-five (35) miles from such location, unless mutually agreed to in writing by the parties. (b) Excluding periods of vacation and sick leave to which the Executive is entitled, during the Employment Term the Executive agrees to devote full time attention to the business and affairs of the Company to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, provided that the Executive may take reasonable amounts of time to (i) serve on corporate, civil or charitable boards or committees, and (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, if such activities do not significantly interfere with the performance of the Executive's responsibilities hereunder. It is expressly understood and agreed that to the extent any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive's responsibilities hereunder. 4. Compensation. (a) Base Salary. During the Employment Term, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve (12) times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve (12) month period immediately preceding the month in which the Effective Date occurs. During the Employment Term, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (b) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Term, an annual bonus (the "Annual Bonus") in cash at least equal to the average annualized (for any fiscal year consisting of less than twelve (12) full months or with respect to which the Executive has been employed by the Company for less than twelve (12) full months) bonuses paid or payable, including any amounts which were deferred under any plans of the Company and its affiliated companies, to the Executive by the Company and its affiliated companies in respect of the three (3) fiscal years immediately preceding the fiscal year in which the Effective Date occurs (the "Recent Average Bonus"). Each such Annual Bonus shall be paid no later than seventy-five (75) days after the end of the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus under any plan or arrangement of the Company allowing therefor. (c) Incentive, Savings and Retirement Plans. During the Employment Term, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the twelve (12) month period immediately preceding the Effective Date, or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (d) Benefit Plans. During the Employment Term, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription drug, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies and their families; but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive and his family at any time during the twelve (12) month period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies and their families. (e) Expenses. During the Employment Term, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the twelve (12) month period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (f) Fringe Benefits. During the Employment Term, the Executive shall be entitled to fringe benefits (including but not limited to Company cars, club dues and physical examinations) in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the twelve (12) month period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (g) Office and Support Staff. During the Employment Term, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the twelve (12) month period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (h) Vacation and Sick Leave. During the Employment Term, the Executive shall be entitled to paid vacation and sick leave (without loss of pay) in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the twelve (12) month period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (i) Restrictions. As of the Effective Date, all restrictions limiting the exercise, transferability or other incidents of ownership of any outstanding award, including but not limited to restricted stock, options, stock appreciation rights, or other property or rights of the Company granted to the Executive shall lapse, and such awards shall become fully vested and be held by the Executive free and clear of all such restrictions. This provision shall apply to all such property or rights notwithstanding the provisions of any other plan or agreement, unless the effect of the application of this provision to a particular right or property would result in such right or property failing to qualify for favorable tax treatment under the particular section of the Internal Revenue Code for which it was designed to qualify, or would result in the loss of favorable securities law treatment for participants under the plan pursuant to which the award was granted. 5. Termination of Employment. During the Employment Term, the Executive's employment hereunder may be terminated under the following circumstances: (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Term. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Term (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 5 of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the thirtieth (30th) day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for one hundred eighty (180) consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative, provided if the parties are unable to agree, the parties shall request the Dean of the Medical College of Wisconsin to choose such physician. (b) Cause. The Company may terminate the Executive's employment for "Cause." A termination for Cause is a termination evidenced by a resolution adopted in good faith by a majority of the Board that the Executive (i) willfully, deliberately and continually failed to substantially perform his duties under Section 3, above (other than a failure resulting from the Executive's incapacity due to physical or mental illness) which failure constitutes gross misconduct, and results in and was intended to result in demonstrable material injury to the Company, monetary or otherwise, or (ii) committed acts of fraud and dishonesty constituting a felony, as determined by a final judgment or order of a court of competent jurisdiction, and resulting or intended to result in gain to or personal enrichment of the Executive at the Company's expense, provided, however, that no termination of the Executive's employment shall be for Cause as set forth in (i), above, until (a) Executive shall have had at least sixty (60) days to cure any conduct or act alleged to provide Cause for termination after a written notice of demand has been delivered to the Executive specifying in detail the manner in which the Executive's conduct violates this Agreement, and (b) the Executive shall have been provided an opportunity to be heard by the Board (with the assistance of the Executive's counsel if the Executive so desires). No act, or failure to act, on the Executive's part, shall be considered "willful" unless he has acted or failed to act in bad faith and without a reasonable belief that his action or failure to act was in the best interest of the Company. Notwithstanding anything contained in this Agreement to the contrary, no failure to perform by the Executive after Notice of Termination is given by the Executive shall constitute Cause for purposes of this Agreement. (c) Good Reason. (1) The Executive may terminate his employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change of Control of any of the events or conditions described in Subsections (i) through (vi) hereof: (i) A change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, does not represent a promotion from his status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with his status, title, position or responsibilities in effect immediately prior to such assignment; or any removal of the Executive from or failure to reappoint or reelect him to any position, except in connection with the termination of his employment for Disabil- ity, Cause, as a result of his death or by the Executive other than for Good Reason; (ii) Any failure by the Company to comply with any of the provisions of Section 4 of this Agreement. (iii) The insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company; (iv) Any material breach by the Company of any provision of this Agreement; (v) Any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of Section 5 of this Agreement; and (vi) The failure of the Company to obtain an agreement, satisfactory to the Executive, from any successor or assign of the Company, to assume and agree to perform this Agreement, as contemplated in Section 10 hereof. (2) Any event or condition described in Section 5(c)(1) which occurs prior to the Effective Date but which the Executive reasonably demonstrates (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control, or (ii) otherwise arose in connection with or in anticipation of a Change of Control, shall constitute Good Reason for purposes of this Agreement notwithstanding that it occurred prior to the Effective Date. (3) The Executive's right to terminate his employment pursuant to this Section 5(c) shall not be affected by his incapacity due to physical or mental illness. The Executive's continued employment or failure to give Notice of Termination shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. (4) For purposes of this Section 5(c), any good faith determination of Good Reason made by the Executive shall be conclusive. (d) Voluntary Termination. The Executive may voluntarily terminate his employment hereunder at any time. (e) Notice of Termination. Any purported termination by the Company or by the Executive (other than by death of the Executive) shall be communicated by Notice of Termination to the other. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) the Termination Date. For purposes of this Agreement, no such purported termination of employment shall be effective without such Notice of Termination. (f) Termination Date, etc. "Termination Date" shall mean in the case of the Executive's death, his date of death, or in all other cases, the date specified in the Notice of Termination subject to the following: (1) If the Executive's employment is terminated by the Company, the date specified in the Notice of Termination shall be at least thirty (30) days after the date the Notice of Termination is given to the Executive, provided, however, that in the case of Disability, the Executive shall not have returned to the full-time performance of his duties during such period of at least thirty (30) days; (2) If the Executive's employment is terminated for Good Reason, the date specified in the Notice of Termination shall not be more than sixty (60) days after the date the Notice of Termination is given to the Company; and (3) In the event that within thirty (30) days following the date of receipt of the Notice of Termination, one party notifies the other that a dispute exists concerning the basis for termination, the Executive's employment hereunder shall not be terminated except after the dispute is finally resolved and a Termination Date is determined either by a mutual written agreement of the parties, or by a binding and final judgment order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 6. Obligations of the Company Upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Term, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) The Company shall pay to the Executive in a lump sum in cash within five (5) days after the Termination Date the aggregate of the following amounts: A. The sum of: (1) The Executive's Annual Base Salary through the Termination Date to the extent not theretofore paid. (2) The product of (x) the higher of (I) the Recent Average Bonus and (II) the Annual Bonus paid or payable, including any amount deferred, (and annualized for any fiscal year consisting of less than twelve (12) full months or for which the Executive has been employed for less than twelve (12) full months) for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days completed in the current fiscal year through the Termination Date, and the denominator of which is 365; and (3) Any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid. The sum of the amounts described in Clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations." B. The amount equal to the product of (1) two and (2) the sum of (x) the Executive's Annual Base Salary (increased for this purpose by any Section 401(k) deferrals, cafeteria plan elections, or other deferrals that would have increased Executive's Annual Base Salary if paid in cash to Executive when earned) and (y) the Executive's Highest Annual Bonus; C. A separate lump-sum supplemental retirement benefit equal to the difference between (1) the actuarial equivalent (utilizing for this purpose the most favorable to the Executive actuarial assumptions and Company contribution history with respect to the applicable retirement plan, incentive plans, savings plans and other plans described in Section 4(c) (or any successor plan thereto) (the "Retirement Plans") during the twelve (12) month period immediately preceding the Effective Date) of the benefit payable under the Retirement Plans and any supplemental and/or excess retirement plan providing benefits for the Executive (the "SERP") which the Executive would receive if the Executive's employment continued for an additional two (2) years after the Termination Date with annual compensation equal to the sum of the Annual Base Salary and Highest Annual Bonus, assuming for this purpose that all accrued benefits and contributions are fully vested and that benefit accrual formulas and Company contributions are no less advantageous to the Executive than those in effect during the twelve (12) month period immediately preceding the Effective Date, and (2) the actuarial equivalent (utilizing for this purpose the actuarial assumptions utilized with respect to the Retirement Plans during the twelve (12) month period immediately preceding the Effective Date) of the Executive's actual benefit (paid or payable), if any, under the Retirement Plans and the SERP. For example, if there were a termination today this supplemental retirement benefit would be interpreted with respect to two plans in existence today as follows: (i) with respect to the Retirement Growth Plan of the Company, the Executive would receive no less than two times eight percent (8%) of the maximum compensation that can be taken into account under the Plan assuming Executive's compensation is as set forth above, and (ii) with respect to the Incentive Savings Plan of the Company, the Executive would receive no less than two times an annual Company match of fifty percent (50%) of Employee's maximum allowable contribution to the Plan assuming Executive's compensation is as set forth above; D. The amount equal to the product of (i) two and (ii) the sum of (x) the imputed income reflected on Executive's W-2 attributable to the car provided to Executive by the Company or its affiliates for the last calendar year ending before the Effective Date and (y) the club dues for Executive paid by the Company or its affiliates attributable to such year. (ii) For twenty-four (24) months after the Termination Date, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(d) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies applicable generally to other peer executives and their families during the twelve (12) month period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other benefits under another employer provided plan, the medical and other benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility, provided that the aggregate coverage of the combined benefit plans is no less favorable to the Executive, in terms of amounts and deductibles and costs to him, than the coverage required hereunder. For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of such twenty-four (24) month period and to have retired on the last day of such period. (iii) The Executive shall have the right to purchase the car provided to him by the Company or its affiliates during the twelve (12) month period immediately preceding the Effective Date (or a comparable car acceptable to the Executive if such car is no longer owned by the Company or its affiliates), at the book value thereof on the Termination Date, exercisable within thirty (30) days after the Termination Date; and if the car is not purchased, Executive shall return the car to the Company. (iv) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive pursuant to this Agreement under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Term, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, except that the Company shall pay or provide the Accrued Obligations, six (6) months of Annual Base Salary, and the Other Benefits. The Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days of the Termination Date. The six (6) months of Annual Base Salary shall be paid during the six (6) month period following the Termination Date on a monthly basis. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, and the Executive's family shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and any of its affiliated companies to surviving families of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to family death benefits, if any, as in effect with respect to other peer executives and their families at any time during the twelve (12) month period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their families. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Term, this Agreement shall terminate without further obligations to the Executive, except that the Company shall pay or provide the Accrued Obligations and the Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within thirty (30) days of the Termination Date. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the twelve (12) month period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other Than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Term, or if the Executive voluntarily terminates employment during the Employment Term for other than Good Reason, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination, any other amounts earned or accrued through the Termination Date, and the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid; provided that if Executive voluntarily terminates Executive shall receive the benefits normally provided upon normal or early retirement with respect to other peer Executives and their families to the extent he qualifies therefore. All salary or compensation hereunder shall be paid to the Executive in a lump sum in cash within thirty (30) days of the Date of Termination. (e) If any of the payments referred to in this Section 6 are not paid within the time specified after the Termination Date (hereinafter a "Delinquent Payment"), in addition to such principal sum, the Company will pay to the Executive interest on all such Delinquent Payments computed at the prime rate as announced from time to time by M&I Marshall & Ilsley Bank, or its successor, compounded monthly. 7. No Mitigation. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced (except to the extent set forth in Section 6(a)(ii)) whether or not the Executive obtains other employment. 8. Unauthorized Disclosure. The Executive shall not make any Unauthorized Disclosure. For purposes of this Agreement, "Unauthorized Disclosure" shall mean disclosure by the Executive without the consent of the Board to any person, other than an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the per- formance by the Executive of his duties as an executive of the Company or as may be legally required, of any confidential information obtained by the Executive while in the employ of the Company (including, but not limited to, any confidential information with respect to any of the Company's customers or methods of operation) the disclosure of which he knows or has reason to believe will be materially injurious to the Company; provided, however, that such term shall not include the use or disclosure by the Executive, without consent, of any information known generally to the public (other than as a result of disclosure by him in violation of this Section 8) or any information not otherwise considered confidential by a reasonable person engaged in the same business as that conducted by the Company. In no event shall an asserted violation of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 9. Successors and Assigns. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns and the Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. The term "Company" as used herein shall include such successors and assigns. The term "successors and assigns" as used herein shall mean a corporation or other entity acquiring all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representative. 10. Fees and Expenses. From and after the Effective Date, the Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) reasonably incurred by the Executive as they become due as a result of (i) the Executive's termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive's hearing before the Board as contemplated in Section 5(b) of this Agreement or (iii) the Executive's seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits. 11. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, if to the Company, to Marshall & Ilsley Corporation, 770 North Water Street, Milwaukee, Wisconsin 53202, or if to Executive, to the address set forth below Executive's signature, or to such other address as the party may be notified, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt. 12. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its subsidiaries for which the Executive may qualify. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 13. Settlement of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others. 14. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compli- ance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 15. Employment. The Executive and the Company acknowledge that the employment of the Executive by the Company is "at will" and prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Moreover, if prior to the Effective Date, the Executive's employment with the Company terminates then the Executive shall have no further rights under this Agreement. 16. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Wisconsin without giving effect to the conflict of law principles thereof. 17. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 18. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. In consideration of the terms, conditions and benefits to be provided under this Agreement, the Executive hereby expressly waives all rights under that certain Employment Agreement between the Executive and the Company dated May 18, 1988. 19. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement. 20. Modification. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing signed by both the Executive and the Company. 21. Withholding. The Company shall be entitled to withhold from amounts paid to the Executive hereunder any federal, estate or local withholding or other taxes or charges which it is, from time to time, required to withhold. The Company shall be entitled to rely on an opinion of counsel if any question as to the amount or requirement of any such withholding shall arise. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. MARSHALL & ILSLEY CORPORATION By: /s/ J.B. Wigdale ____________________________________ Title: Vice Chair. ATTEST: /s/ M.A. Hatfield _____________________________ Secretary EXECUTIVE: /s/ Joseph L. Delgadillo ________________________________________ Joseph L. Delgadillo Address: 240 W. Aster Ln ___________________________ Mequon, WI 53092 ___________________________ EX-10 5 EXHIBIT 10(R)/AGREEMENT/10K - 12/31/93 AMENDMENT TO SUPPLEMENTAL RETIREMENT AGREEMENT THIS AMENDMENT, dated this 16th day of December, 1993, between MARSHALL & ILSLEY CORPORATION, a Wisconsin corporation (the "Company") and J.A. PUELICHER (the "Executive"). W I T N E S S E T H: WHEREAS, the Executive and the Company entered into a Supplemental Retirement Agreement dated December 10, 1992 (the "Agreement"); and WHEREAS, the Compensation Committee of the Board of Directors of the Company has determined, in light of the events of the past year, that the monthly supplemental retirement benefit contained in Paragraph 1 of the Agreement should be increased. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: 1. Amendment to Paragraph 1 of Agreement. The first two sentences of Paragraph 1 of the Agreement are hereby deleted and the following is substituted therefor. "The Company shall pay to the Executive a supplemental retirement benefit in the amount of $58,333.33 per month for life ("the Retirement Benefit"). The Retirement Benefit shall be payable on a monthly basis on the first business day of each month during the Executive's life." 2. Amendment to Paragraph 4(a) of Agreement. Paragraph 4(a) is deleted in its entirety and the following is substituted therefor. "(a) Successors and Assigns. (i) This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns, and the Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. The term "Company" as used herein shall include such successors and assigns. The term "successors and assigns" as used herein shall mean a corporation or other entity acquiring all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. (ii) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, nor shall Executive's rights hereunder be subject to encumbrance or to the claims of the Company's creditors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, Estate, executors, administrators, heirs and beneficiaries." 3. No Other Amendments. Except as amended hereby, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written. MARSHALL & ILSLEY CORPORATION By: /s/ Jack F. Kellner ______________________________ Jack F. Kellner, Chairman, Compensation Committee Attest: /s/ M.A. Hatfield _________________________ M.A. Hatfield, Secretary EXECUTIVE /s/ J. A. Puelicher ________________________________ J. A. PUELICHER Address: 9080 North Range Line Road ________________________________ Milwaukee, Wisconsin 53217 ________________________________ EX-10 6 EXHIBIT 10(T)/AGREEMENT/10K - 12/31/93 AGREEMENT THIS AGREEMENT, made and entered into this 1st day of July, 1993, by and between MARSHALL & ILSLEY CORPORATION ("M&I") and MICHAEL J. REVANE ("Revane"). WHEREAS, Revane has had long service with M&I and its subsidiaries in an executive capacity and now desires to take early retirement; and WHEREAS, Revane's experience, knowledge and relationship is of significant value to M&I and M&I desires to retain Revane in a consulting capacity; and WHEREAS, the parties desire to set forth the terms and conditions of Revane's early retirement. NOW, THEREFORE, in consideration of good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: 1. Early Retirement. Revane hereby delivers notice of his early retirement, effective November 30, 1993, upon the terms and conditions set forth in this Agreement, and conditioned upon the receipt of the items to be provided to him hereunder. Such effective date may be adjusted upon the consent of both Revane and M&I. The effective date, as adjusted, is hereinafter referred to as the "Effective Date." Prior to the Effective Date, Revane agrees to serve, and M&I agrees to employ Revane, in his current full-time position subject to his existing duties and obligations and agreements, including but not limited to his Employment Agreement with M&I. In the event that Revane should terminate employment prior to the Effective Date, whether due to death, disability, voluntary termination or involuntary termination, he shall be subject to and receive the benefits of such plans, practices, and programs then in effect, and this Agreement shall be null and void and of no further force or effect. Upon Revane's early retirement hereunder, upon the Effective Date all agreements applicable only during his employment, such as his group-term life insurance and Employment Agreement with M&I, shall terminate. 2. Effects of Early Retirement. Upon early retirement of Revane in accordance with this Agreement, the following shall occur: (a) Bonus. To the extent Revane has not received all of his regular compensation through the Effective Date, or the bonus for periods which precede the Effective Date, Revane shall receive the unpaid salary and shall receive a prorated bonus for such period. The amount of the bonus, unless otherwise agreed to by M&I and Revane, shall be paid at the same rate as the bonus received by Revane for the preceding year. (b) Key Restricted Stock. The Stock Option Committee has determined that Revane's early retirement under the conditions set forth herein shall qualify as early retirement under the terms of applicable stock plans of M&I. Accordingly, in accordance with the plans, at the Effective Date, the options of M&I to repurchase at a favorable price the key restricted stock held by Revane shall terminate, and Revane shall thereafter hold such stock free of all such restrictions, provided that he makes adequate arrangements with M&I for any withholding or employment taxes due at such time. (c) Options. The Stock Option Committee has determined that Revane's early retirement under the conditions set forth herein shall qualify as early retirement under the terms of applicable stock plans of M&I. Accordingly, in accordance with the plans, at the Effective Date, any options held by Revane to acquire M&I stock which have not yet vested shall vest, and the options shall thereafter be exercisable in accordance with their terms. (d) Non-Qualified Retirement Benefit Plan. Revane is a participant in the Marshall & Ilsley Corporation Non-Qualified Retirement Benefit Plan dated December 12, 1991 (the "Non-Qualified Retirement Benefit Plan"). Solely for purposes of the Non-Qualified Retirement Benefit Plan, M&I hereby confirms that, for so long as Revane is engaged as a Consultant to M&I pursuant to the Consulting Agreement (as hereinafter defined), Revane shall continue to be treated as in the employ of M&I for purposes of establishing benefits for Revane under the Non-Qualified Retirement Benefit Plan. (e) Severance. As severance to Revane for his many years of service, M&I shall make thirty-six (36) monthly payments of $10,277.78 to Revane commencing on January 1, 1996, and continuing on the same day of each succeeding month thereafter until December 1, 1998 (such period of payments is hereinafter referred to as the "Payment Period"). In the event of Revane's death prior to December 1, 1998, in lieu of the foregoing, payments shall be made to his estate or beneficiary acceptable to M&I that Revane designates to M&I in writing, only as follows: (i) In the event of Revane's death after November 30, 1993 and before December 1, 1995, his estate or designated beneficiary shall receive a lump sum payment equal to $70,000.00 multiplied by a fraction, the numerator of which is the number of whole months between November 30, 1993, and the date of death, and the denominator of which is twenty-four (24); and (ii) In the event of Revane's death after November 30, 1995, his estate or designated beneficiary shall receive monthly payments over the remaining Payment Period equal to $1,944.44 per month. (f) Split-Dollar Insurance. Revane has a split- dollar insurance arrangement with M&I pursuant to which M&I has paid the premiums on two (2) life insurance policies on the life of Revane and has a right of repayment of such premiums upon termination of the arrangement. For so long as Revane is engaged as a consultant to M&I pursuant to the Consulting Agreement (as hereinafter defined) M&I shall continue to pay the premium on such policies. Upon the termination of the consulting services under the Consulting Agreement, M&I shall be entitled to the return of all its premiums and any other amounts due it under the split-dollar arrangement. (g) Withholding. M&I shall be entitled to withhold from any amounts paid to Revane hereunder any withholding or other employment taxes which it is required to withhold. 3. Consulting. On the Effective Date, Revane and M&I shall enter into a Consulting Agreement in the form of the Consulting Agreement attached as Exhibit 3 attached hereto (the "Consulting Agreement"). 4. Miscellaneous. This Agreement shall be binding upon the parties hereto and their heirs, successors and assigns. This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin. This Agreement and the attached exhibit supersede all other agreements between the parties hereto covering the subject matter hereof. This Agreement may not be amended or modified unless such amendment or modification is agreed to in writing and signed by all parties hereto. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date written above. MARSHALL & ILSLEY CORPORATION By /s/ J.B. Wigdale ___________________________ /s/ Michael J. Revane ______________________________ Michael J. Revane EX-10 7 EXHIBIT 10(U)/AGREEMENT/10K - 12/31/93 CONSULTING AND NONCOMPETITION AGREEMENT THIS AGREEMENT, made as of the 1st day of December, 1993, between MICHAEL J. REVANE ("Consultant") and MARSHALL & ILSLEY CORPORATION, a Wisconsin corporation (the "Company"). BACKGROUND: For the past 26 years, Consultant has served as a full-time employee of the Company and/or its subsidiaries. Effective as of this date, Consultant has taken early retirement. Consultant's experience, knowledge and relationships in the trust area are of significant continuing value to the Company and its subsidiaries, and the Company desires to retain Consultant, and Consultant desires to serve, as a consultant for the Company and its subsidiaries in the trust area. In addition, the Company desires to enter into a noncompetition agreement with Consultant, and the Company views the noncompetition agreement as an integral part the mutual arrangements entered into by the parties surrounding Consultant's early retirement. NOW, THEREFORE, in consideration of the mutual promises and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: ARTICLE I Consulting 1.1. Consulting Services. For a period of twenty-five (25) months from the date hereof (the "Consulting Period"), Consultant shall act as a consultant and advisor to the Company and shall render such advice and assistance respecting the affairs and activities of the various trust departments and services of the Company and its subsidiaries as the officers of the Company may from time to time reasonably request and as may be appropriate in view of the services formerly performed by the Consultant in his capacity as an employee of the Company and its subsidiaries. It is anticipated that such services shall include, without limitation, answering questions and providing information to assist in the transition to Consultant's successor, the continued service of the trust business and relations with customers of such entities, responding to inquiries concerning the trust business of the Company and its subsidiaries by telephone and by mail as appropriate, the making of on-site visits to the premises of the Company's headquarters in Wisconsin and trust offices in Florida and Arizona or other locations acceptable to Consultant to answer questions and provide information concerning the trust business, and the preparation of memoranda and summaries as appropriate of information relevant to the trust business and customers and strategic planning thereof. In addition, upon the request of the Company, Consultant agrees to serve as a director of the Company's trust operations in Arizona without additional compensation. Consultant's consulting services shall be performed at such times as shall be mutually agreed by Consultant and the Company. It is understood that the Company shall not be entitled to the Consultant's services on a full-time basis, that the Consultant shall not be required without his consent to devote in excess of seven days per month to the performance of such services and that it shall not be necessary for Consultant to follow any established work schedule or to work for any particular number of hours. The Company will not exercise supervision over the Consultant in the performance of his consulting and advisory services nor will it require his compliance with detailed orders or instructions. During the Consulting Period, the Consultant may engage in other activities, subject to the restrictions set forth in Article II hereof. 1.2. Consulting and Noncompetition Fees. In consideration of the consulting services to be performed by Consultant pursuant hereto, and the noncompetition agreement and other obligations of Consultant set forth herein, the Company shall pay to Consultant a fee of Thirty-two Thousand Dollars ($32,000.00) per month, which shall be paid by check and mailed to Consultant on or before the 5th day of each month during the Consulting Period commencing with the month of December, 1993. Such amount shall be paid to Consultant regardless of whether or to what extent the Company requests Consultant to provide consulting services hereunder, provided that Consultant performs the services required of him and adheres to the obligations imposed upon him hereunder. In view of Consultant's commitment to refrain from competing against the Company for the period described herein, payments due Consultant hereunder shall continue to Consultant or his estate, as the case may be, notwithstanding Consultant's death or disability, provided that Consultant was not in default of the terms of this Agreement at the time of his death or disability. 1.3. Reimbursement for Expenses. Within thirty (30) days after receipt of Consultant's invoice or accounting therefor, the Company shall reimburse Consultant for any out-of-pocket expenses incurred by him in the course of performing consulting services requested by the Company hereunder, provided such expenses were either approved in advance by the Company or were within the parameters approved by the Company from time to time for Consultant's reimbursable expenses. In addition, for so long as Consultant is providing the consulting services requested of him hereunder, the Company shall pay the dues incurred by Consultant at the Milwaukee Country Club, the Phoenix Country Club, and the University Club, and shall continue to provide Consultant with the automobile provided to Consultant immediately prior to his termination of employment (along with the reimbursement of expenses consistent with the policy for repairs, maintenance, insurance, etc. then in effect). Consultant shall keep accurate records and receipts of such expenditures and shall submit such accounts and proof thereof as may from time to time be required in accordance with such expense account or reimbursement policies as the Company may establish. ARTICLE II Noncompetition Agreement 2.1. Covenant Not to Compete. Consultant agrees that he shall not at any time for a period of twenty-five (25) months after the date hereof (the "Noncompetition Period"), either directly or indirectly, whether as agent, stockholder (except as the holder of not more than 5% of the stock of a publicly held company provided that Consultant does not render advice or assistance to such Company), employee, employer, officer, director, consultant, representative, trustee, partner, proprietor or otherwise: (a) Acquire an ownership interest in, engage in or render advice or assistance to any business which provides trust services or manages investments or portfolios for individuals, businesses or other persons within the continental United States (any such business being hereafter called a "Competing Business"), without first obtaining permission from the Company; (b) Divert, or attempt to divert, any business whatsoever from the trust departments of the Company and its subsidiaries or solicit or entice, or attempt to solicit or entice, any of the customers or suppliers of the trust departments of the Company and its subsidiaries so as to cause any such customers or suppliers not to do business with such businesses; or (c) Contact or solicit for employment any person now or hereafter employed by the trust departments of the Company and its subsidiaries or solicit or entice, or attempt to solicit or entice, any such person to leave such employment unless such person shall have ceased to be an employee thereof not less than six (6) months prior to any such contact, solicitation or enticement. ARTICLE III Confidential Information 3.1. Definition of Confidential Information. Consultant acknowledges that in the course of performing services for the Company and its subsidiaries and in the course of performing consulting services hereunder he has had and will have access to valuable nonpublic proprietary information relating to the Company and its subsidiaries, their customers and services regarded by such entities as confidential (hereinafter "Confidential Information"). Notwithstanding the foregoing, no information shall be considered to be Confidential Information and no obligation of nondisclosure set forth in this Agreement shall apply to any information that (i) is or becomes publicly known through no fault of Consultant, (ii) can be demonstrated by Consultant to have been known by him prior to its disclosure by the Company or its subsidiaries and not obtained in the course of providing services for such entities, or (iii) is rightfully acquired by Consultant from sources independent of the Company and its subsidiaries without violation by such source of any obligation to the Company and its subsidiaries. 3.2. Nondisclosure of Confidential Information. In consideration of the agreements of the Company set forth herein, Consultant agrees that he shall not at any time during the Consulting Period and for a period of one (1) year thereafter, or for a period of three years after disclosure thereof to Consultant, whichever is the last to expire, without the written consent of the Chairman or President of the Company, use any Confidential Information in any manner or disclose any Confidential Information to anyone other than employees of the Company and its subsidiaries to whom such disclosure is reasonably required in connection with the business of the Company and its subsidiaries. Consultant further agrees that he will at any time upon request of the Company surrender and deliver to the Company any correspondence, files, customer lists, compute disks and all other documents, records or electronic media of any kind which contain any Confidential Information which are then in his possession or under his control. ARTICLE IV Miscellaneous 4.1. Withholding. The amounts payable to Consultant pursuant to this Agreement are stated before any deductions required to be made by the Company under applicable law. The Company shall have the right to rely upon an opinion of its regular accountants or other tax advisors if any question should arise as to any such deductions. 4.2. Notices. Any notice required or permitted to be given or made by either party to the other hereunder shall be sufficient if hand delivered, mailed postage prepaid, sent by prepaid express or courier service or sent by facsimile transmission and actually received to the parties at their respective addresses set forth opposite the signatures hereto or to such changed address as either party shall designate by proper notice to the other. 4.3. Enforcement. Consultant recognizes that irreparable injury may result to the Company in the event of a breach by him of the restrictions imposed by Articles II and III, above, and that his acceptance of such restrictions was a material factor in the Company's decision to enter into this Agreement. Accordingly, Consultant agrees that if he shall engage in any act in violation of any such restrictions the Company shall be entitled, in addition to any other remedies and damages as may be available to it, to an injunction prohibiting him from engaging in any such acts. 4.4. Governing Law. This Agreement and all questions of its interpretation, performance, enforceability and the rights and remedies of the parties hereto shall be governed and construed in accordance with the laws of Wisconsin. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Address for Notice: MARSHALL & ILSLEY CORPORATION 770 North Water St. Milwaukee, WI 53202 Attn: President By: /s/ J.B. Wigdale __________________________ /s/ Michael J. Revane _______________________________ /s/ Gary D. Strelow Michael J. Revane ________________________ EX-11 8 EXHIBIT 11/EARNINGS PER SHARE/10K - 12/31/93 Exhibit 11 MARSHALL & ILSLEY CORPORATION COMPUTATION OF NET INCOME PER COMMON SHARE (dollars in thousands, except per share data)
1991 1992 1993 Primary: Weighted average common shares outstanding during each year 63,063,834 63,859,455 63,537,534 Incremental shares relating to: Conversion of preferred stock 1,962,900 1,962,900 1,962,900 Dilutive stock options outstanding at end of each year (1) 1,098,849 1,629,162 1,434,896 Dilutive stock options exercised during each year (1) 36,822 71,427 111,490 __________ __________ __________ Average number of common and common equivalent shares for primary net income per share 66,162,405 67,522,944 67,046,820 ========== ========== ========== Fully diluted: Weighted average common shares outstanding during each year 63,063,834 63,859,455 63,537,534 Incremental shares relating to: Conversion of preferred stock 1,962,900 1,962,900 1,962,900 Dilutive stock options outstanding at end of each year (2) 1,669,710 1,625,172 1,310,558 Dilutive stock options exercised during each year (3) 146,535 278,649 326,712 Conversion of convertible notes 6,118,548 5,946,846 5,819,973 __________ __________ __________ Average number of common and common equivalent shares for fully diluted net income per share 72,961,527 73,673,022 72,957,677 ========== ========== ========== Primary: Income before cumulative effect of changes in accounting principles $99,347 $116,622 $125,491 Cumulative effect of changes in accounting principles, net of income taxes -- (7,387) -- __________ __________ __________ Net income applicable to common shares $99,347 $109,235 $125,491 ========== ========== ========== Fully diluted: Income before cumulative effect of changes in accounting principles $99,347 $116,622 $125,491 Add: interest expenses, less income tax effect on convertible notes 2,938 2,884 2,795 __________ __________ __________ 102,285 119,506 128,286 Cumulative effect of changes in accounting principles, net of income taxes -- (7,387) -- __________ __________ __________ Net income applicable to common shares $102,285 $112,119 $128,286 ========== ========== ==========
Exhibit 11 MARSHALL & ILSLEY CORPORATION COMPUTATION OF NET INCOME PER COMMON SHARE (continued)
1991 1992 1993 Per common share amounts: Primary: Income before cumulative effect of changes in accounting principles $1.50 $1.73 $1.87 Cumulative effect of changes in accounting principles -- (0.11) -- ______ ______ ______ Net income $1.50 $1.62 $1.87 Fully diluted: ====== ====== ====== Income before cumulative effect of changes in accounting principles $1.40 $1.62 $1.76 Cumulative effect of changes in accounting principles -- (0.10) -- ______ ______ ______ Net income $1.40 $1.52 $1.76 ====== ====== ======
(1) Based on treasury stock method using average market price. (2) Based on treasury stock method using year-end market price, if higher than average market price. (3) Based on treasury stock method using market price at date of exercise. Note: 1991 and 1992 have been restated for the 3 for 1 stock split effected in the form of a 200% stock dividend which was distributed to shareholders in May 1993. EX-12 9 EXHIBIT 12/RATIO EARNINGS/FIXED CHARGES/10K - 12/31/93 Exhibit 12 MARSHALL & ILSLEY CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar amounts in thousands)
Years Ended December 31, _____________________________________________________ Earnings: 1989 1990 1991 1992 1993 _______ _______ _______ _______ ______ Earnings before income taxes and cumulative effect of changes in accounting principles $123,184 $104,255 $146,482 $174,457 $196,563 Fixed charges, excluding interest on deposits 88,759 73,497 52,515 38,709 37,710 _______ _______ _______ _______ ______ Earnings including fixed charges but excluding interest on deposits 211,943 177,752 198,997 213,166 234,273 Interest on deposits 273,546 297,063 271,454 190,582 145,717 _______ _______ _______ _______ ______ Earnings including fixed charges and interest on deposits $485,489 $474,815 $470,451 $403,748 $379,990 Fixed Charges: Interest Expense: Short-term borrowings $ 66,866 $ 50,763 $ 27,288 $14,600 $16,714 Long-term borrowings 18,004 18,540 20,146 19,085 15,927 One-third of rental expense for all operating leases (the amount deemed representative of the interest factor) 3,889 4,194 5,081 5,024 5,069 _______ _______ _______ _______ ______ Fixed charges excluding interest on deposits 88,759 73,497 52,515 38,709 37,710 Interest on deposits 273,546 297,063 271,454 190,582 145,717 _______ _______ _______ _______ ______ Fixed charges including interest on deposits $362,305 $370,560 $323,969 $229,291 $183,427 Ratio of Earnings to Fixed Charges: Excluding interest on deposits 2.39 x 2.42 x 3.79 x 5.51 x 6.21 x Including interest on deposits 1.34 x 1.28 x 1.45 x 1.76 x 2.07 x
EX-21 10 EXHIBIT 21/SUBSIDIARIES/10K - 12/31/93 Exhibit 21 MARSHALL & ILSLEY CORPORATION SUBSIDIARIES February 28, 1994 M&I Bank of Antigo M&I Bank of Beloit M&I Bank of Cambridge M&I Bank of Dodgeville M&I Bank of Eagle River M&I Bank of Mayville M&I Bank of Menomonee Falls M&I Bank of Mosinee M&I Bank of Oconomowoc M&I Bank of Onalaska M&I Bank of Racine M&I Bank of Watertown M&I Central Bank & Trust M&I Central State Bank M&I Citizens American Bank M&I Community State Bank M&I First American National Bank M&I First National Bank M&I First National Bank of Superior M&I Fox Heights Bank M&I Greater Milwaukee Bank M&I Greater Waukesha Bank M&I Lake Country National Bank M&I Lancaster State Bank M&I Madison Bank M&I Marshall & Ilsley Bank M&I Merchants Bank M&I Mid-State Bank, N.A. M&I National Bank of Ashland M&I National Bank of Neillsville M&I New Holstein Bank M&I Northern Bank M&I South Shore Bank M&I Thunderbird Bank M&I Wauwatosa State Bank M&I Western State Bank M&I Capital Markets Group, Inc. M&I Data Services, Inc. M&I Financial Corp. M&I First National Leasing Corp. M&I Insurance Company of Arizona, Inc. M&I Investment Management Corp. M&I Marshall & Ilsley Trust Company of Arizona M&I Mortgage Corp. M&I Servicing Corp. Marshall & Ilsley Trust Company Marshall & Ilsley Trust Company of Florida Richter-Schroeder Company, Inc. (Each subsidiary was incorporated in Wisconsin, except the M&I Marshall & Ilsley Trust Company of Arizona, M&I Insurance Company of Arizona, Inc. and M&I Thunderbird Bank, incorporated in Arizona; the Marshall & Ilsley Trust Company of Florida, incorporated in Florida; M&I Servicing Corp., incorporated in Nevada; M&I First National Bank, M&I First National Bank of Superior, M&I First American National Bank, M&I Mid-State Bank, N.A., M&I National Bank of Ashland, M&I National Bank of Neillsville and M&I Lake Country National Bank organized as national banking associations.) EX-23 11 EXHIBIT 23/CONSENT OF ACCOUNTANTS/10K - 12/31/93 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated January 28, 1994 in this Annual Report on Form 10-K for the year ended December 31, 1993 of Marshall & Ilsley Corporation. We also consent to the incorporation by reference of such report in the following Registration Statements of Marshall & Ilsley Corporation: Registration Statement No. 33-3415 (Form S-8) pertaining to the Marshall & Ilsley Corporation Retirement Growth Plan; Registration Statement No. 33- 33153 (Form S-8) pertaining to the Marshall & Ilsley Corporation 1989 Executive Stock Option and Restricted Stock Plan; Registration Statement No. 33-33090 (Form S-8) pertaining to the Marshall & Ilsley Corporation 1988 Restricted Stock Plan; Registration Statement No. 33-2642 (Form S-8) pertaining to the Marshall & Ilsley Corporation 1985 Executive Stock Option and Restricted Stock Plan; Registration Statement No. 2-89605 (Form S-8) pertaining to the Marshall & Ilsley Corporation 1983 Executive Stock Option and Restricted Stock Plan; Registration Statement No. 2-80293 (Form S-3) pertaining to shares of Marshall & Ilsley Corporation held by those persons named in such Registration Statement; and Registration Statement No. 33-64054 (Form S-3) pertaining to the issuance by Marshall & Ilsley Corporation of Debt Securities. /s/ ARTHUR ANDERSEN & CO. Milwaukee, Wisconsin, March 24, 1994. EX-24 12 EXHIBIT 24/POWERS OF ATTORNEY/10K - 12/31/93 DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 28th day of March, 1994. /s/ J.P. Bolduc _________________________ J.P. Bolduc DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 15th day of March, 1994. /s/ Wendell F. Bueche _________________________ Wendell F. Bueche DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 28th day of March, 1994. /s/ Jon F. Chait _________________________ Jon F. Chait DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 14th day of March, 1994. /s/ Glenn A. Francke _________________________ Glenn A. Francke DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 28th day of March, 1994. /s/ G.H. Gunnlaugsson _________________________ G.H. Gunnlaugsson DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 14th day of March, 1994. /s/ Burleigh E. Jacobs _________________________ Burleigh E. Jacobs DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 17th day of March, 1994. /s/ Jack F. Kellner _________________________ Jack F. Kellner DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 28th day of March, 1994. /s/ D.J. Kuester _________________________ D.J. Kuester DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 16th day of March, 1994. /s/ Don R. O'Hare _________________________ Don R. O'Hare DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 14th day of March, 1994. /s/ J.A. Puelicher _________________________ J.A. Puelicher DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 14th day of March, 1994. /s/ James O. Wright _________________________ James O. Wright DIRECTOR'S POWER OF ATTORNEY The undersigned director of Marshall & Ilsley Corporation, a Wisconsin corporation, hereby constitutes and designates each of J. B. Wigdale and M. A. Hatfield, with the power of substitution, the true and lawful attorney-in-fact of the undersigned to sign for him in his name, the Form 10-K of Marshall & Ilsley Corporation for its fiscal year ended December 31, 1993 and any and all amendments and/or supplements to said Form 10-K, generally to do all such things in his name and behalf in his capacity as a director to enable Marshall & Ilsley Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, and hereby ratifying and confirming his signature as it may be signed by said attorney to said Form 10-K and any and all amendments and/or supplements thereto. Dated this 28th day of March, 1994. /s/ J.B. Wigdale _________________________ J.B. Wigdale -----END PRIVACY-ENHANCED MESSAGE-----