-----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, Ysb39i7FEWg1/Khipw0pUiDXyq0LsoVeOKtYI0AFRiVsek/0rN1Emyoxms8w8LNA M/0KwZ4zkguocPT3US8Q4g== 0000062741-95-000025.txt : 19950516 0000062741-95-000025.hdr.sgml : 19950516 ACCESSION NUMBER: 0000062741-95-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARSHALL & ILSLEY CORP/WI/ CENTRAL INDEX KEY: 0000062741 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 390968604 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01220 FILM NUMBER: 95538570 BUSINESS ADDRESS: STREET 1: 770 N WATER ST CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4147657801 10-Q 1 FIRST QUARTER 10-Q elinl FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 --------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _____________ Commission file number 0 - 1220 -------------------------------- MARSHALL & ILSLEY CORPORATION ----------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0968604 --------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 770 North Water Street Milwaukee, Wisconsin 53202 -------------------- ----- (Address of principal executive offices) (Zip Code) (414) 765 - 7801 ---------------- (Registrant's telephone number, including area code) None ---- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class April 30, 1995 ----- ---------------- Common Stock, $1.00 Par Value 93,384,779 PART 1 - FINANCIAL INFORMATION MARSHALL & ILSLEY CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) ($000's except share data) March 31 December 31 March 31 Assets 1995 1994 1994 - ------ ------------ ------------ ------------ Cash and cash equivalents: Cash and due from banks $570,748 $685,919 $586,395 Federal funds sold and security resale agreements 208,250 205,248 151,699 Money market funds 115,765 76,724 70,843 ------------ ------------ ------------ Total cash and cash equivalents 894,763 967,891 808,937 Trading securities 4,554 20,361 6,490 Other short-term investments 28,509 43,519 45,426 Investment securities held to maturity, market value $417,615 ($419,521 December 31, and $328,264 March 31, 1994) 421,301 429,456 326,423 Investment securities available for sale at market value 1,860,232 1,865,147 2,181,015 ------------ ------------ ------------ Total investment securities 2,281,533 2,294,603 2,507,438 Loans 8,967,409 8,792,492 8,624,404 Less: Allowance for loan losses 157,689 153,961 137,174 ------------ ------------ ------------ Net loans 8,809,720 8,638,531 8,487,230 Premises and equipment, net 294,786 286,435 298,744 Accrued interest and other assets 346,766 361,609 295,246 ------------ ------------ ------------ Total Assets $12,660,631 $12,612,949 $12,449,511 ============ ============ ============ Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $1,966,315 $2,199,016 $2,059,855 Interest bearing 7,468,690 7,300,064 7,707,750 ------------ ------------ ------------ Total deposits 9,435,005 9,499,080 9,767,605 Funds purchased and security repurchase agreements 918,878 944,843 939,410 Other short-term borrowings 122,353 166,299 176,653 Long-term borrowings 765,375 653,777 227,770 Accrued expenses and other liabilities 290,731 287,654 223,240 ------------ ------------ ------------ Total liabilities 11,532,342 11,551,653 11,334,678 Shareholders' equity: Series A convertible preferred stock, $1.00 par value; 348,944 shares issued (348,944 December 31 and 185,314 March 31, 1994) 349 349 185 Common stock, $1.00 par value; 99,494,335 shares issued (99,494,335 December 31, and 102,120,704 March 31, 1994) 99,494 99,494 102,121 Additional paid-in capital 189,743 194,697 237,683 Retained earnings 976,882 945,469 921,925 Less: Treasury common stock, at cost; 5,896,692 shares (6,964,920 December 31, and 6,550,461 March 31, 1994) 121,983 143,438 136,379 Deferred compensation 1,281 1,203 1,690 Net unrealized losses on securities available for sale, net of related taxes 14,915 34,072 9,012 ------------ ------------ ------------ Total shareholders' equity 1,128,289 1,061,296 1,114,833 ------------ ------------ ------------ Total Liabilities and Shareholders' Equity $12,660,631 $12,612,949 $12,449,511 ============ ============ ============ See notes to financial statements. MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ($000's except per share data) Three Months Ended March 31, ----------------------------- 1995 1994 Interest income: ------------ ------------ Loans $185,663 $160,071 Investment securities: Taxable 28,271 26,453 Exempt from Federal income taxes 4,066 4,114 Trading securities 125 44 Short-term investments 3,558 1,282 ------------ ------------ Total interest income 221,683 191,964 Interest expense: Deposits 73,498 61,596 Short-term borrowings 14,807 6,853 Long-term borrowings 12,434 5,980 ------------ ------------ Total interest expense 100,739 74,429 ------------ ------------ Net interest income 120,944 117,535 Provision for loan losses 3,983 3,952 ------------ ------------ Net interest income after provision for loan losses 116,961 113,583 Other income: Data processing services 47,849 37,599 Trust services 15,207 15,570 Other customer services 27,598 30,100 Net securities gains 18 817 Other 7,031 8,998 ------------ ------------ Total other income 97,703 93,084 Other expense: Salaries and employee benefits 80,864 84,152 Net occupancy 8,939 10,103 Equipment 14,847 15,869 Payments to regulatory agencies 5,482 5,934 Processing charges 4,493 4,874 Supplies and printing 3,429 3,362 Professional services 3,651 2,062 Other 20,980 20,300 ------------ ------------ Total other expense 142,685 146,656 ------------ ------------ Income before income taxes 71,979 60,011 Provision for income taxes 25,844 21,498 ------------ ------------ Net income $46,135 $38,513 ============ ============ Net income per common share: Primary $0.47 $0.39 Fully Diluted $0.46 $0.37 Dividends paid per common share $0.15 $0.14 Weighted average common shares outstanding: Primary 98,492 99,682 Fully diluted 102,407 105,398 See notes to financial statements MARSHALL & ILSLEY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ($000's) Three Months Ended March 31, ----------------------------- 1995 1994 ------------ ------------ Net Cash Provided by Operating Activities $86,813 $113,381 Cash Flows From Investing Activities: Net decrease in securities with maturities of three months or less 15,270 4,750 Proceeds from sales of securities available for sale 211 1,997 Proceeds from maturities of longer term securities 167,214 384,265 Purchases of longer term securities (81,970) (339,781) Net increase in loans (62,901) (95,238) Purchases of assets to be leased (30,206) (15,747) Principal payments on lease receivables 31,282 28,270 Fixed asset purchases, net (10,138) (10,438) Cash of banks acquired, net 11,408 - Other 4,078 (506) ------------ ------------ Net cash provided by (used in) investing activities 44,248 (42,428) ------------ ------------ Cash Flows From Financing Activities: Net decrease in deposits (212,959) (404,031) Proceeds from issuance of commercial paper 201,403 267,746 Payments for maturity of commercial paper (218,090) (291,548) Net increase (decrease) in other short-term borrowings (57,370) 410,625 Proceeds from issuance of long-term debt 179,185 7,774 Payments of long-term debt (70,099) (7,643) Dividends paid (14,710) (13,700) Purchases of treasury stock (14,415) (19,886) Other 2,866 4,013 ------------ ------------ Net cash used in financing activities (204,189) (46,650) ------------ ------------ Net increase (decrease) in cash and cash equivalents (73,128) 24,303 Cash and cash equivalents, beginning of year 967,891 784,634 ------------ ------------ Cash and cash equivalents, end of period $894,763 $808,937 ============ ============ Supplemental cash flow information: Cash paid during the period for: Interest $93,195 $72,092 Income taxes 11,616 9,300 See notes to financial statements MARSHALL & ILSLEY CORPORATION Notes to Financial Statements March 31, 1995 & 1994 (Unaudited) 1. The accompanying unaudited consolidated financial statements should be read in conjunction with Marshall & Ilsley Corporation's ("Corporation") 1994 Annual Report on Form 10-K. The unaudited financial information included in this report reflects all adjustments (consisting only of normal recurring accruals) which are necessary for a fair statement of the financial position and results of operations as of and for the three months ended March 31, 1995 and 1994. The results of operations for the three months ended March 31, 1995 and 1994 are not necessarily indicative of results to be expected for the entire year. 2. The Corporation has 5,000,000 shares of preferred stock authorized, of which, the Board of Directors has designated 3,000,000 shares as Series A convertible, with a $100 value per share for conversion and liquidation purposes. The Corporation has 160,000,000 shares of its $1.00 par value common stock authorized. 3. The Corporation's loan portfolio consists of the following ($000's): March 31 December 31 March 31 1995 1994 1994 ------------ ------------ ------------ Commercial financial & agricultural $2,761,004 $2,696,724 $2,684,538 Real estate: Construction 358,390 378,316 319,958 Residential Mortgage 2,332,221 2,240,287 2,131,133 Commercial Mortgage 2,095,285 2,062,022 2,023,181 ------------ ------------ ------------ Total real estate 4,785,896 4,680,625 4,474,272 Personal 1,158,305 1,178,453 1,214,295 Lease financing 262,204 256,690 251,299 ------------ ------------ ------------ $8,967,409 $8,812,492 $8,624,404 ============ ============ ============ 4. Effective January 1, 1994, the Corporation adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Accordingly, investment securites classified as available for sale are carried at fair value with fair value adjustments, net of their related income tax effects, reported as a component of shareholders' equity. Investment securities, by type, held by the Corporation are as follows ($000's): March 31 December 31 March 31 1995 1994 1994 ------------ ------------ ------------ Investment securities held to maturity: U.S. treasury and government agencies $134,207 $134,080 - State and political subdivisions 282,234 290,483 $322,051 Other 4,860 4,893 4,372 ------------ ------------ ------------ Investment securities held to maturity 421,301 429,456 326,423 ------------ ------------ ------------ Investment securities available for sale: U.S. treasury and government agencies 1,767,147 1,836,476 2,080,659 Other 93,085 81,640 100,356 ------------ ------------ ------------ Investment securities available for sale 1,860,232 1,918,116 2,181,015 ------------ ------------ ------------ Total Investment Securities $2,281,533 $2,347,572 $2,507,438 ============ ============ ============ MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Continued March 31, 1995 & 1994 (Unaudited) 5. On May 31, 1994, Valley Bancorporation merged with and into the Corporation in a tax-free reorganization accounted for as a pooling of interests. Accordingly, prior year financial statements have been restated to give effect to this transaction. A reconciliation of net interest income and net income of the Corporation as previously reported to the amounts reported for the three months ended March 31, 1994 as restated for the pooling of interests is as follows ($ in thousands): Three Months Ended Mar.31, 1994 Net Interest Income: ------------ Corporation, as previously reported $74,296 Valley Bancorporation 43,239 ------------ Combined Net Interest Income $117,535 ============ Net Income: Corporation, as previously reported $28,174 Valley Bancorporation 10,339 ------------ Combined Net Income $38,513 ============ On February 1, 1995, the Corporation acquired the Bank of Burlington ("Burlington") in a tax-free reorganization accounted for as a purchase. Approximately 1.5 million of the Corporation's treasury common shares with an aggregate estimated market value of $29.1 million were exchanged for the outstanding common shares of Burlington. The results of operations for Burlington are included from the date of acquisition and are not material to the Corporation. The following table presents the preliminary fair values of the assets acquired and liabilities assumed and net cash received for the purchase of Burlington ($ in thousands). Preliminary estimated fair value of assets acquired $179,927 ============ Preliminary estimated fair value of liabilities assumed $150,689 ============ Cash received in acquisition $11,560 ============ Net cash received in acquisition $11,408 ============ 6. Effective January 1, 1995, the Corporation adopted Statements of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" and No. 118, " Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures" (collectively SFAS 114). SFAS 114 requires that certain impaired loans be measured based on the present value of expected future cash flows discounted at the loans effective interest rate. As a practical matter, impairment may be measured based on the loan's observable market price or the fair value of the collateral for loans which are collateral dependent. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance. Prior to 1995, the allowance for loan losses attributable to impaired loans was based on undiscounted cash flows without considering interest or the fair value of the collateral for collateral dependent loans. As a result of these new standards, no additional allowance for loan losses was required as of January 1, 1995. MARSHALL & ILSLEY CORPORATION Notes to Financial Statements - Concluded March 31, 1995 & 1994 (Unaudited) At March 31, 1995 the Corporation's recorded investment in impaired loans and the related valuation allowance are as follows ($ in thousands): Recorded Valuation Investment Allowance ------------ ------------ Total Impaired Loans and Leases (Nonaccrual and Renegotiated) $48,036 Loans and Leases Excluded from Evaluation under SFAS 114 (19,944) ------------ Impaired Loans Evaluated $28,092 ============ Valuation Allowance Required $3,474 $1,441 No Valuation Allowance Required 24,618 ------------ ------------ Impaired Loans Evaluated $28,092 $1,441 ============ ============ The recorded investment in impaired loans for which no allowance is required is net of previous direct writedowns and applications of cash interest payments against the loan balance outstanding. The required valuation allowance is included in the allowance for loan losses in the consolidated balance sheet at March 31, 1995. The average recorded investment in total impaired loans and leases for the three months ended March 31, 1995 was $49,129. Interest payments received on impaired loans and leases are recorded as interest income unless collection of the remaining recorded investment is doubtful at which time payments received are recorded as reductions of principal. For the three months ended March 31, 1995 interest income recognized on total impaired loans amounted to $346. The gross income that would have been recognized had such loans and leases been performing in accordance with their original terms would have been $1,234 for the same period. The activity in the allowance for loan losses for the three months ended March 31, 1995 and 1994 is presented below ($ in thousands): 1995 1994 ------------ ------------ Balance at beginning of year $153,961 $133,600 Allowance of Bank Acquired 1,747 - Provision for Loan Losses 3,983 3,952 Charge-offs (3,598) (2,287) Recoveries 1,596 1,909 ------------ ------------ Balance at March 31, $157,689 $137,174 ============ ============ MARSHALL & ILSLEY CORPORATION CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited) ($000's) Three Months Ended March 31, ----------------------------- 1995 1994 ------------ ------------ Assets - ------ Cash and due from banks $579,909 $632,653 Short-term investments 238,508 155,182 Trading securities 10,731 3,919 Investment securities: Taxable 1,975,106 2,213,208 Tax-exempt 322,093 360,802 ------------ ------------ Total investment securities 2,297,199 2,574,010 Loans: Commercial 2,696,722 2,616,248 Real estate 4,731,465 4,494,145 Personal 1,165,967 1,203,754 Lease financing 258,687 254,512 ------------ ------------ 8,852,841 8,568,659 Less: Allowance for loan losses 156,104 135,798 ------------ ------------ Total loans 8,696,737 8,432,861 Premises and equipment, net 290,486 299,349 Accrued interest and other assets 343,648 272,263 ------------ ------------ Total Assets $12,457,218 $12,370,237 ============ ============ Liabilities and Shareholders' Equity - ------------------------------------ Deposits: Noninterest bearing $1,908,010 $2,041,067 Interest bearing 7,372,538 7,769,283 ------------ ------------ Total deposits 9,280,548 9,810,350 Funds purchased and security repurchase agreements 948,142 800,960 Other short-term borrowings 91,965 113,337 Long-term borrowings 742,231 294,111 Accrued expenses and other liabilities 287,664 215,713 ------------ ------------ Total liabilities 11,350,550 11,234,471 Shareholders' equity 1,106,668 1,135,766 ------------ ------------ Total Liabilities and Shareholders' Equity $12,457,218 $12,370,237 ============ ============ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1995 AND 1994 __________________________________________ Net income for the first quarter of 1995 was $46.1 million compared to $38.5 million for the same period one year ago. Fully diluted earnings per share for the first quarter of 1995 amounted to $.46 compared to $.37 for the same quarter last year. The Corporation's return on average assets and return on average shareholders' equity were 1.50% and 16.91% for the three months ended March 31, 1995 and 1.26% and 13.75% for the three months ended March 31, 1994, respectively. The increase in net income of $7.6 million or 19.8% is attributable to an increase in net interest income, growth in fee revenue and lower operating expenses due to cost savings achieved since the merger with Valley Bancorporation (Valley) in May, 1994. PROVISION FOR LOAN LOSSES AND CREDIT QUALITY ____________________________________________ The provision for loan losses amounted to $4.0 million in the first quarter of 1995 relatively unchanged from the first quarter of 1994. The 1995 provision level reflects the continued current favorable trends in nonperforming assets and net charge-offs in relation to the allowance for loan losses. At March 31, 1995, nonperforming assets were $68.9 million, the lowest level reported over the past five quarters. Nonaccrual loans, the largest component of nonperforming assets, decreased $0.4 million when compared to the same period last year and declined $0.6 million since the fourth quarter of 1994. Total nonaccrual commercial loans and leases reflected an increase for the first quarter of 1995 compared to the same period last year and increased $3.2 million since December 31, 1994. Total nonaccrual real estate loans decreased $1.0 million in the first quarter of 1995 compared to the first quarter of last year and $3.7 million compared to the fourth quarter of 1994. A decline in nonaccrual commercial real estate loans was the primary reason for the decrease. Nonaccrual residential real estate loans, which increased to $11.5 million at December 31, 1994 from $9.5 million at March 31, 1994 remained relatively unchanged at March 31, 1995. The change in nonaccrual personal loans was insignificant. Net charge-offs in the first quarter of 1995 amounted to $2.0 million or .09% of average loans annualized. The first quarter 1995 net charge-offs were $1.6 million higher than the same period last year, however they were $0.8 million less than the fourth quarter of 1994. The allowance for loan losses was $157.7 million or 1.76% of total loans at March 31, 1995 compared to $154.0 million or 1.75% of total loans at December 31, 1994 and $137.2 million or 1.59% of total loans at March 31, 1994. The coverage ratio of the allowance for loan losses to nonperforming loans increased from 265% at year-end 1994 to 273% at the end of the current quarter. At March 31, 1994, the coverage ratio was 242%. The increase in the allowance for loan losses and corresponding coverage ratios at December 31, 1994 and March 31, 1995 was positively impacted by the special loan loss provision of $8,950 recorded in June, 1994 to conform Valley's loan valuation policies with those of the Corporation. The following tables present certain credit quality information and statistics at March 31, 1995 as well as for the previous four quarters. CONSOLIDATED CREDIT QUALITY INFORMATION ($000's) 1995 1994 _____________________________________________ First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter _____________________________________________ NONPERFORMING ASSETS Nonaccrual $ 44,210 $ 44,766 $ 53,987 $ 49,384 $ 44,571 Renegotiated 3,826 4,172 4,748 4,328 4,019 Past Due 90 Days or More 9,653 9,093 8,551 7,613 8,028 _____________________________________________ Total Nonperforming Loans $ 57,689 $ 58,031 $ 67,286 $ 61,325 $ 56,618 Other Real Estate Owned 11,209 12,114 9,697 8,494 12,813 _____________________________________________ Total Nonperforming Assets $ 68,898 $ 70,145 $ 76,983 $ 69,819 $ 69,431 ============================================== ALLOWANCE FOR LOAN LOSSES $157,689 $153,961 $152,470 $149,371 $137,174 ============================================== NONACCRUAL LOANS BY TYPE Commercial Commercial, Financial & Agricultural $ 11,134 $ 8,372 $ 11,944 $ 11,410 $ 9,856 Lease Financing Receivables 2,086 1,601 2,883 2,106 2,756 ______________________________________________ Total Commercial 13,220 9,973 14,827 13,516 12,612 Real Estate Construction and Land Development 731 902 3,862 3,135 493 Commercial Mortgage 16,227 19,706 21,769 20,188 19,357 Residential Mortgage 11,378 11,453 10,725 10,062 9,492 _____________________________________________ Total Real Estate 28,336 32,061 36,356 33,385 29,342 Personal 2,654 2,732 2,804 2,483 2,617 _____________________________________________ Total Nonaccrual Loans $ 44,210 $ 44,766 $ 53,987 $ 49,384 $ 44,571 ============================================== 1995 1994 _____________________________________________ First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter _____________________________________________ RECONCILIATION OF CONSOLIDATED ALLOWANCE FOR LOAN LOSSES Beginning Balance $153,961 $152,470 $149,371 $137,174 $133,600 Provision for Loan Losses 3,983 4,299 3,655 13,001 3,952 Allowance of Bank Acquired 1,747 --- --- --- --- Loans Charged-off Commercial 809 1,192 653 974 482 Real Estate 1,328 1,501 383 1,191 903 Personal 1,328 1,636 877 1,089 773 Leases 133 409 80 289 129 ______________________________________________ Total Charge-offs 3,598 4,738 1,993 3,543 2,287 Recoveries on Loans Commercial 890 1,062 381 1,683 549 Real Estate 225 386 681 538 869 Personal 479 448 347 504 490 Leases 2 34 28 14 1 ______________________________________________ Total Recoveries 1,596 1,930 1,437 2,739 1,909 ______________________________________________ Net Loans Charged-off 2,002 2,808 556 804 378 ______________________________________________ Ending Balance $157,689 $153,961 $152,470 $149,371 $137,174 ============================================== CONSOLIDATED STATISTICS Net Charge-offs to Average Loans Annualized 0.09% 0.13% 0.02% 0.04% 0.02% Total Nonperforming Loans to Total Loans 0.64 0.66 0.76 0.70 0.66 Total Nonperforming Assets to Total Loans and Other Real Estate Owned 0.77 0.80 0.86 0.80 0.80 Allowance for Loan Losses to Total Loans 1.76 1.75 1.71 1.71 1.59 Allowance for Loan Losses to Nonperforming Loans 273 265 227 244 242 As more fully discussed in Note 6 to the consolidated financial statements, the Corporation adopted the new accounting standards on loan impairment effective January 1, 1995. No additional allowance for loan losses was required as a result of adopting these pronouncements. INCOME STATEMENT COMPONENTS AS A PERCENT OF AVERAGE TOTAL ASSETS ________________________________________________________________ The following table presents a summarized view of each of the major elements of the consolidated income statement for the last five quarters. Each of the elements is stated as a percent of the average total assets for the respective quarter and, where appropriate, is converted to a fully taxable basis. The results for 1994 exclude the after-tax merger related charges of $76.1 million in the second quarter and the merger related gains of $1.1 million and $11.0 million in the third and fourth quarters, respectively. 1995 1994 __________________________________________ First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter __________________________________________ Interest Income 7.29% 6.99% 6.74% 6.48% 6.38% Interest Expense (3.28) (2.86) (2.67) (2.51) (2.44) ______ ______ ______ ______ ______ Net Interest Income 4.01 4.13 4.07 3.97 3.94 Provision for Loan Losses (0.13) (0.14) (0.12) (0.13) (0.13) Net Securities Gains (Losses) 0.00 0.02 0.01 (0.01) 0.03 Other Income 3.18 2.96 2.89 2.94 3.02 Other Expense (4.64) (4.51) (4.52) (4.71) (4.81) ______ ______ ______ ______ ______ Income Before Income Taxes 2.42 2.46 2.33 2.06 2.05 Income Taxes (0.92) (0.94) (0.91) (0.80) (0.79) ______ ______ ______ ______ ______ Return on Assets 1.50% 1.52% 1.42% 1.26% 1.26% ====== ====== ====== ====== ====== NET INTEREST INCOME ___________________ Net interest income for the first quarter of 1995 was $120.9 million compared to $117.5 million for the same period one year ago, an increase of $3.4 million or 2.9%. The benefit of the increase in rates earned and a slight increase in the average volume of earning assets, primarily loans, offset the effects of the increase in the rates paid on interest bearing liabilities and the negative impact of the change in liability mix. Average earning assets increased $97.5 million or 0.9% in the first quarter of 1995 compared to the same period one year ago. Average loan growth of $284.2 million or 3.3% was offset, in part, by a decline in average total investment securities of $276.8 million. Total average interest bearing liabilities increased $177.2 million or 2.0% in the first quarter of 1995 compared to the same period last year. The composition of average interest bearing liabilities reflects the liability mix change that was seen throughout 1994. Interest bearing deposits declined $396.7 million and the lack of noninterest bearing deposit growth resulted in short- term borrowings increasing $125.8 million in the first quarter of 1995 compared to the same period a year ago. Long-term borrowings also increased $448.1 million from $294.1 for the first quarter of 1994 to $742.2 million for the current quarter. Noninterest bearing deposit accounts declined $133.1 million. As part of the 1994 acquisition of Valley, the Corporation completed certain required branch divestitures along with a number of other branch sales. The total amount of deposits sold was approximately $300 million and total loan sales were approximately $200 million. The effect of these divestitures was somewhat offset by the February 1, 1995 acquisition of the Bank of Burlington, which was accounted for as a purchase. This bank had total loans of $113 million and total deposits of $149 million at the date of acquisition. The growth and composition of the Corporation's quarterly average loan portfolio for the current quarter and previous four quarters are reflected below (amounts in millions): 1995 1994 ________________________________________________ Annual First Fourth Third Second First Growth Quarter Quarter Quarter Quarter Quarter PCT ________________________________________________ Commercial Loans $2,697 $ 2,643 $ 2,740 $ 2,715 $2,616 3.1% Real Estate Loans Construction 367 385 343 321 331 10.9 Commercial Mortgages 2,072 2,058 2,066 2,031 2,016 2.8 Residential Mortgages 2,292 2,227 2,219 2,149 2,147 6.7 _________________________________________________ Total Real Estate Loans 4,731 4,670 4,628 4,501 4,494 5.3 Personal Loans Personal Loans 872 901 946 952 948 (8.1) Student Loans 294 278 265 259 256 15.3 _________________________________________________ Total Personal Loans 1,166 1,179 1,211 1,211 1,204 (3.1) Lease Financing Receivables 259 257 258 257 255 1.6 _________________________________________________ Total Consolidated Average Loans $8,853 $ 8,749 $ 8,837 $ 8,684 $8,569 3.3% =================================================== The composition of the Corporation's quarterly average deposits for the current quarter and prior year's quarters are as follows (amounts in millions): 1995 1994 ________________________________________________ Annual First Fourth Third Second First Growth Quarter Quarter Quarter Quarter Quarter PCT ________________________________________________ Noninterest Bearing Commercial $1,248 $ 1,363 $ 1,298 $ 1,271 $1,270 (1.7)% Personal 400 413 432 444 426 (6.0) Other 260 318 305 322 345 (24.8) __________________________________________________ Total Noninterest Bearing Deposits 1,908 2,094 2,035 2,037 2,041 (6.5) Interest Bearing Savings & NOW 2,084 2,290 2,484 2,477 2,455 (15.1) Money Market 1,767 1,606 1,495 1,481 1,523 16.0 Other CDs & Time Deposits 3,037 3,135 3,227 3,233 3,313 (8.3) CDs Greater than $100 485 350 444 481 478 1.4 _________________________________________________ Total Interest Bearing Deposits 7,373 7,381 7,650 7,672 7,769 (5.1) _________________________________________________ Total Consolidated Average Deposits $9,281 $ 9,475 $ 9,685 $ 9,709 $9,810 (5.4%) ================================================= The yield on average earning assets increased 99 basis points while the cost of interest-bearing deposits increased 82 basis points in the first quarter of 1995 compared to the same period last year. During the third quarter of 1994, the Corporation began offering a money market index account to attract new deposits. For the first quarter of 1995, the average money market index account amounted to approximately $610 million. This new product resulted in approximately $300 million of new deposit growth. The remaining balances were the result of disintermediation from other M&I deposit accounts. The average rate paid on this index account amounted to 5.4% compared to 3.7% for the tier equivalent nonindexed money market account for the three months ended March 31, 1995. The increase in short-term borrowing costs of 273 basis points also impacted net interest income. The average cost of long-term borrowings decreased 146 basis points due, in part, to the conversion of $16.4 million of 8.5% convertible debt and refinancing of $53 million of Valley Senior debt (with an average cost of approximately 9.9%) during the second and third quarters of 1994, respectively. As previously stated, the average volume of long-term borrowings increased. During the second quarter of 1994, the Corporation's banking subsidiaries began offering Bank Notes. The Bank Notes provide an additional funding source along with those traditionally available to our banking affiliates. For the first quarter of 1995 average Bank Notes amounted to $357.6 million. These notes were issued for a two-year term and have floating interest rates. The possible continuing lack of deposit and earning asset growth, and shift of deposit mix into the higher cost categories, may continue to put pressure on the margins. At the present time, the Corporation is not involved in derivatives, other than normal foreign exchange trading. Yield & Cost Analysis 1995 1994 ($000's) _________________________________________________________ Average Average Average Yield or Average Yield or Balance Interest Cost Balance Interest Cost _________________________________________________________ Loans $ 8,852,841 $186,193 8.53% $ 8,568,659 $160,696 7.61% Investment Securities: Taxable 1,975,106 28,271 5.80 2,213,208 26,453 4.85 Tax Exempt 322,093 5,798 7.30 360,802 6,075 6.83 Other Short-term Investments 249,239 3,688 6.00 159,101 1,330 3.39 _________________________________________________________ Total Interest Earning Assets $11,399,279 $223,950 7.97% $11,301,770 $194,554 6.98% ========================================================= Money Market Savings $ 1,766,662 $ 17,124 3.93% $ 1,523,127 $ 8,865 2.36% Regular Savings & NOW 2,083,717 11,322 2.20 2,454,542 11,817 1.95 Other CDs & Time Deposits 3,036,848 38,491 5.14 3,313,169 36,280 4.44 CD's Greater than $100 485,311 6,561 5.48 478,445 4,634 3.93 _________________________________________________________ Total Interest Bearing Deposits 7,372,538 73,498 4.04 7,769,283 61,596 3.22 Short-term Borrowings 1,040,107 14,807 5.77 914,297 6,853 3.04 Long-term Borrowings 742,231 12,434 6.79 294,111 5,980 8.25 ________________________________________________________ Total Interest Bearing Liabilities $ 9,154,876 $100,739 4.46% $ 8,977,691 $ 74,429 3.36% ======================================================== Net Interest Margin (FTE) as a Percent of Average Earning Assets $123,211 4.38% $120,125 4.31% ======== ===== ======== ===== OTHER INCOME ____________ Total other income was $97.7 million for the first quarter of 1995, an increase of $4.6 million or 5.0% when compared to $93.1 million earned in the first quarter of 1994. Fees from data processing services grew $10.3 million or 27.3% and amounted to $47.8 million this quarter compared to $37.6 million for the same period last year. This increase was due primarily to processing and software sales revenue. Lower security gains realized in the first quarter of 1995 compared to the same period last year resulted in a decline of $.8 million. Trust fees declined $.4 million or 2.3%. While total trust fees were lower for the first quarter of 1995 when compared to the same quarter last year, it increased when compared to the last three quarters of 1994. Fees from other customer services declined 8.3% or $2.5 million. A $1.1 million decrease in service charges on deposit accounts and a decline of $1.4 million in other commissions and fees accounted for the change. Other income decreased $2.0 million or 27.0% this quarter compared to the same quarter last year. This decline resulted primarily from the sales of the Corporation's insurance agencies in the later part of 1994. OTHER EXPENSE _____________ Total other expense for the first quarter of 1995 declined $4.0 million or 2.7%, from the same period a year ago. A majority of the expense categories reflected a decrease or a modest increase when compared to the first quarter of 1994. As noted in our 1994 Annual Report to shareholders, a restructuring/merger charge related to the Valley merger was recorded in the second quarter of 1994. This $76.6 million charge reflected the costs associated with a reduction in work force, the write-off of duplicate computer and software costs, and other one- time costs. The decline in salaries and benefits expense, occupancy, and equipment expense reflects the cost savings achieved through the merger. The decrease in payments to regulatory agencies was primarily due to lower deposit insurance costs due to the sale of deposit accounts in 1994 and a decline in insured deposit accounts overall. Supplies expense were not significantly affected by the merger. Professional services expense amounted to $3.7 million for the first quarter of 1995 compared to $2.1 million for the same period last year. Approximately $.8 million of the increase was due to costs incurred for technological assistance in software development. The other miscellaneous expense category is affected by the capitalization of costs, net of amortization, associated with software development and data processing conversions. Despite the professional services expense increase of $.8 million, the amount of cost capitalized, net of amortization in the first quarter of 1995, was less than the amount recorded in the first quarter of 1994 by approximately $0.5 million. As noted in prior discussions, M&I Data Services, the Corporation's data processing division (DSI) has been a large contributor to the Corporation's overall expense growth. As part of the Valley merger, Valley's data processing and operations subsidiary, which performed data processing and operational functions for their affiliated companies only, was merged into DSI. While DSI continues to grow and expand, the merger efficiencies have resulted in DSI's expense growth declining to 11.6% for the first quarter of 1995 when compared to the same period one year ago. Excluding DSI's growth in total other expenses, our other affiliates realized an overall expense decline of approximately $9.8 million when comparing the first quarter of 1995 to the same period last year. INCOME TAXES ____________ The income tax provision for the three months ended March 31, 1995 amounted to $25.8 million compared to $21.5 million for the three months ended March 31, 1994. The effective tax rate remained relatively unchanged. MERGER/RESTRUCTURING - UPDATE _____________________________ As noted above, the merger/restructuring charge of $76.6 million recorded in June, 1994, was the result of the acquisition of Valley and reflected the costs associated with executive contracts and the reduction in workforce, the write- off of duplicate computer and software costs, system conversion costs, professional fees, and other net costs associated with the merger. As part of the merger/restructuring process the Corporation in 1994 merged 15 bank charters and four financial service affiliates into other M&I affiliates which were providing similar services. The Corporation also closed 49 branch locations which included 19 required branch divestitures. These activities resulted in a reduction of approximately 1,000 employees. During 1995 it is anticipated that seven additional bank charters will be merged. Since June 30, 1994 approximately 89% of the liability has been utilized either through cash payments, contractual commitments, or asset writedowns. At the present time, the Corporation anticipates that the June 30, 1994 merger/restructuring charge will be adequate to absorb all related costs. CAPITAL RESOURCES _________________ At March 31, 1995 Shareholders' equity amounted to $1.13 billion or 8.9% of total consolidated assets compared with $1.06 billion or 8.4% at December 31, 1994 and $1.11 billion or 9.0% at March 31, 1995. During the first quarter of 1995 the net unrealized loss on securities available for sale decreased $19.2 million. The Corporation continued to acquire common shares in accordance with the Stock Repurchase Program approved by the Corporation's Board of Directors. During the first quarter of 1995, 0.7 million shares were acquired at an aggregate cost of $15.9 million. Cumulatively 10.6 million shares have been acquired with an aggregate cost of $232.4 million since inception of the program in April 1993. The corporation continues to have a strong capital base and its regulatory capital ratios remain significantly above the defined minimum regulatory ratios as shown in the following tables as of March 31, 1995. RISK-BASED CAPITAL RATIOS ($ in thousands) Amount Ratio __________ ______ Tier 1 capital $1,082,740 11.51% Tier 1 capital minimum requirement 376,124 4.00 __________ ______ Excess $ 706,616 7.51% ========== ====== Total capital $1,314,203 13.98% Total capital minimum requirement 752,248 8.00 __________ ______ Excess $ 561,955 5.98% ========== ====== Risk-adjusted assets $9,403,094 LEVERAGE RATIO ($ in millions) Amount Ratio ___________________ ____________ Tier 1 capital to adjusted total assets $ 1,082,740 8.72% Minimum leverage requirement (1) 372,667 - 621,112 3.00 - 5.00 ___________________ ____________ Excess $ 710,073 - 461,628 5.72 - 3.72% =================== ============ Adjusted average total assets $12,422,247 (1) The 3% Ratio Shown is effective for banking organizations which have received the top bank rating from their principal federal banking regulator. Organizations receiving lower ratings are required to meet a higher minimum Leverage Ratio of between 4% and 5%. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K _________________________________________ A. Exhibits: Exhibit 10 - Employment Agreement dated March 15, 1992 and amended April 3, 1995, between Marshall & Ilsley Corporation and Mr. Donald W. Layden, Jr. Exhibit 11 - Statement - Computation of Earnings Per Share Exhibit 12 - Marshall & Ilsley Corporation Computation of Ratio of Earnings to Fixed Charges Exhibit 27 - Financial Data Schedule B. Reports on Form 8-K: None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MARSHALL & ILSLEY CORPORATION (Registrant) /s/ P.R. Justiliano _________________________________ P.R. Justiliano Senior Vice President and Corporate Controller (Chief Accounting Officer) /s/ J.E. Sandy _________________________________ J.E. Sandy Vice President May 12, 1995 EX-10 2 FIRST QUARTER 10-Q/EXHIBIT 10 EMPLOYMENT AGREEMENT THIS AGREEMENT, entered into as of the 16th day of March, 1992, by and between MARSHALL & ILSLEY CORPORATION (the "Company"), and Donald W. Layden, Jr. (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 automatically 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 beneficial 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 Vice President 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 Disability, 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 to 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 performance 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 compliance 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. 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: ___________________________________ Title: ATTEST: _______________________________ Secretary EXECUTIVE: ______________________________________ Address: ______________________________ ______________________________ AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of the 3rd day of April, 1995, by and between MARSHALL & ILSLEY CORPORATION (the "Company") and DONALD W. LAYDEN, JR (the "Executive") (herein collectively referred to as "the parties") W I T N E S S E T H: WHEREAS, the Company and the Executive have entered into an Employment Agreement dated as of the 16th day of March, 1992 (the "Employment Agreement"); and WHEREAS, the parties wish to amend the Employment Agreement. NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. The following Section 22 is hereby added to the Employment Agreement. "22. Limitation on Payments. (a) Notwithstanding anything contained herein to the contrary, prior to the payment of any amounts pursuant to Section 6(a) hereof, an independent national accounting firm designated by the Company (the "Accounting Firm") shall compute whether there would be any "excess parachute payments" payable to the Executive, within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), taking into account the total "parachute payments," within the meaning of Section 280G of the Code, payable to the Executive by the Company or any successor thereto under this Agreement and any other plan, agreement or otherwise. If there would be any excess parachute payments, the Accounting Firm will compute the net after-tax proceeds to the Executive, taking into account the excise tax imposed by Section 4999 of the Code, if (i) the payments hereunder were reduced, but not below zero, such that the total parachute payments payable to the Executive would not exceed three (3) times the "base amount" as defined in Section 280G of the Code, less One Dollar ($1.00), or (ii) the payments hereunder were not reduced. If reducing the payments hereunder would result in a greater after-tax amount to the Executive, such lesser amount shall be paid to the Executive. If not reducing the payments hereunder would result in a greater after-tax amount to the Executive, such payments shall not be reduced. The determination by the Accounting Firm shall be binding upon the Company and the Executive subject to the application of Section 22(b) hereof. (b) As a result of the uncertainty in the application of Sections 280G of the Code, it is possible that excess parachute payments will be paid when such payment would result in a lesser after-tax amount to the Executive; this is not the intent hereof. In such cases, the payment of any excess parachute payments will be void ab initio as regards any such excess. Any excess will be treated as a loan by the Company to the Executive. The Executive will return the excess to the Company, within fifteen (15) business days of any determination by the Accounting Firm that excess parachute payments have been paid when not so intended, with interest at an annual rate equal to the rate provided in Section 1274(d) of the Code (or 120% of such rate if the Accounting Firm determines that such rate is necessary to avoid an excise tax under Section 4999 of the Code) from the date the Executive received the excess until it is repaid to the Company. (c) All fees, costs and expenses (including, but not limited to, the cost of retaining experts) of the Accounting Firm shall be borne by the Company and the Company shall pay such fees, costs and expenses as they become due. In performing the computations required hereunder, the Accounting Firm shall assume that taxes will be paid for state and federal purposes at the highest possible marginal tax rates which could be applicable to the Executive in the year of receipt of the payments, unless the Executive agrees otherwise." 2. The Employment Agreement, as amended hereby, shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this Amendment to Employment Agreement to be executed by its duly authorized officer and the Executive has executed this Amendment as of the day and year first above written. MARSHALL & ILSLEY CORPORATION: ATTEST: By: /s/ G.D. Strelow ___________________________ G.D. Strelow, Senior Vice President /s/ M.A. Hatfield _________________________ M.A. Hatfield, Secretary EXECUTIVE: /s/ Donald W. Layden, Jr. ______________________________ Donald W. Layden, Jr. Address: 6324 Washington Circle Wauwatosa, WI 53213 RJE-M&I Employment Agreement ea-layden.rje 5/5/95 EX-11 3 FIRST QUARTER 10-Q/EXHIBIT 11 MARSHALL & ILSLEY CORPORATION EXHIBIT 11 CALCULATION OF EARNINGS PER SHARE ($000's except per share data) Three Months Ended March 31, ----------------------------- PRIMARY 1995 1994 - ------- ------------ ------------ Earnings: Net income $46,135 $38,513 ============ ============ Shares: Weighted average number of common shares outstanding 93,542 96,063 Additional shares relating to: Convertible preferred stock 3,833 1,963 Stock options outstanding at end of each period and exercised during each period (a) 1,117 1,656 ------------ ------------ Total average primary shares outstanding 98,492 99,682 ============ ============ PRIMARY EARNINGS PER SHARE $0.47 $0.39 ============ ============ FULLY DILUTED - ------------- Earnings: Net income $46,135 $38,513 Add: Interest on convertible notes, net of income tax effect 465 691 ------------ ------------ Total earnings as adjusted $46,600 $39,204 ============ ============ Shares: Weighted average number of common shares outstanding 93,542 96,063 Additional shares relating to: Convertible preferred stock 3,833 1,963 Stock options outstanding at end of each period and exercised during each period (b) 1,188 1,658 Assumed conversion of convertible notes 3,844 5,714 ------------ ------------ Total average fully diluted shares outstanding 102,407 105,398 ============ ============ FULLY DILUTED EARNINGS PER SHARE $0.46 $0.37 ============ ============ Notes: - ------ (a) Based on the treasury stock method using average market price. (b) Based on the treasury stock method using period-end market price, if higher than average market price for options outstanding at end of each period and market price at date of exercise for options exercised during each period. EX-12 4 FIRST QUARTER 10-Q/EXHIBIT 12 Exhibit 12 MARSHALL & ILSLEY CORPORATION Computation of Ratio of Earnings to Fixed Charges ($ in thousands)
3 Months Ended Years Ended December 31, March 31 ----------------------------------------------------------- Earnings: 1995 1994 1993 1992 1991 1990 ----------- ----------- ----------- ----------- ----------- ----------- Earnings before income taxes, extraordinary items and cumulative effect of changes in accounting principles $71,979 $167,803 $264,584 $231,792 $186,738 $143,192 Fixed charges, excluding interest on deposits 28,955 77,074 47,905 50,687 66,641 85,234 ----------- ----------- ----------- ----------- ----------- ----------- Earnings including fixed charges but excluding interest on deposits 100,934 244,877 312,489 282,479 253,379 228,426 Interest on deposits 73,498 255,861 272,100 334,443 448,757 466,537 ----------- ----------- ----------- ----------- ----------- ----------- Earnings including fixed charges and interest on deposits $174,432 $500,738 $584,589 $616,922 $702,136 $694,963 =========== =========== =========== =========== =========== =========== Fixed Charges: Interest Expense: Short-term borrowings $14,807 $39,681 $18,010 $17,606 $32,065 $56,849 Long-term borrowings 12,434 30,537 23,088 26,439 27,770 22,524 One-third of rental expense for all operating leases (the amount deemed representative of the interest factor) 1,714 6,856 6,807 6,642 6,806 5,861 ----------- ----------- ----------- ----------- ----------- ----------- Fixed charges excluding interest on deposits 28,955 77,074 47,905 50,687 66,641 85,234 Interest on deposits 73,498 255,861 272,100 334,443 448,757 466,537 ----------- ----------- ----------- ----------- ----------- ----------- Fixed charges including interest on deposits $102,453 $332,935 $320,005 $385,130 $515,398 $551,771 =========== =========== =========== =========== =========== =========== Ratio of Earnings to Fixed Charges: Excluding interest on deposits 3.49 x 3.18 x 6.52 x 5.57 x 3.80 x 2.68 x Including interest on deposits 1.70 x 1.50 x 1.83 x 1.60 x 1.36 x 1.26 x
EX-27 5 FIRST QUARTER 10-Q/EXHIBIT 27
9 1,000 YEAR DEC-31-1995 MAR-31-1995 570,748 7,468,690 208,250 4,554 1,860,232 421,301 417,615 8,967,409 157,689 12,660,631 9,435,005 1,041,231 290,731 765,375 0 349 99,494 1,028,446 12,660,631 185,663 32,337 3,683 221,683 73,498 27,241 120,944 3,983 18 142,685 71,979 71,979 0 0 46,135 0.47 0.46 4.38 44,210 9,653 3,826 57,689 153,961 3,598 1,596 157,689 157,689 0 0
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