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TitleAt M&I, we live our mission on a daily basis by - Bank of Montreal
LanguageEnglish
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Page 1

At M&I, we live our mission on a

daily basis by aspiring to excellence

in everything we do . . . for our

customers, our employees, our

shareholders, and the community.

M A R S H A L L & I L S L E Y C O R P O R A T I O N

2 0 0 2 C o r p o r a t e R e p o r t

Page 2

M A R S H A L L & I L S L E Y C O R P O R A T I O N ®

2 0 0 2 F i n a n c i a l H i g h l i g h t s

($000’s except share data) 2002 2001 2000

OPERATING INCOME $484,549 $420,976 $376,332
NET INCOME 480,327 337,485 315,123

PER SHARE

Diluted – Operating Income $2.18 $1.93 $1.73

Diluted – Net Income 2.16 1.55 1.45

Dividends Declared 0.625 0.568 0.518

Shareholders’ Equity 13.51 11.65 10.60

FINANCIAL CONDITION – AVERAGE

Assets $29,202,650 $26,370,309 $25,041,777

Loans 21,028,444 18,201,142 17,117,909

Deposits 18,642,987 17,190,591 17,497,783

Shareholders’ Equity 2,766,690 2,429,559 2,148,074

OTHER SIGNIF ICANT DATA

Return on Average Shareholders’ Equity

Operating Income 17.51% 17.33% 17.52%

Net Income 17.36 13.89 14.67

Return on Average Assets

Operating Income 1.66 1.60 1.50

Net Income 1.64 1.28 1.26

Net Loan and Lease Charge-Offs to

Average Loans and Leases 0.21 0.22 0.12

Allowance for Loan and Lease Losses to

End of Period Loans and Leases 1.42 1.39 1.34

See Appendix for Reconciliation of Operating Income to Net Income

The summary financial and other information contained herein is not complete and should be read in conjunction

with Marshall & Ilsley Corporation’s Annual Report on Form 10-K for the year ending December 31, 2002.

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Other noninterest income amounted to $142.0 million in 2002 compared to $120.5 million in 2001, an
increase of $21.5 million or 17.8%. Increased fee income associated with acquisitions accounted for
approximately $8.9 million of the increase and revenue associated with the monthly securitization of auto loans
accounted for another $6.3 million of the increase. Excluding the impact of acquisitions, card related fee income
(credit, debit and ATM) increased $4.6 million and letters of credit fees increased $1.6 million.

Total other income amounted to $1,001.3 million in 2001 compared to $931.6 million in 2000, an increase
of $69.7 million or 7.5%.

Total data processing services revenue amounted to $559.8 million in 2001 compared to $546.0 million in
2000, an increase of $13.8 million or 2.5%. Excluding one large buyout fee recognized in the third quarter of 2000,
total data processing services revenue increased $27.5 million or 5.2%. e-Finance revenue increased $29.2 million
or 32.1%, excluding the 2000 buyout fee, which reflects the impact of acquisitions as well as growth in electronic
bill presentment and payment and electronic banking products for businesses and consumers. Financial technology
solutions, the traditional outsourcing business, increased $10.1 million or 2.4% primarily due to buyout fees.

Item processing revenue decreased $3.8 million. During the latter part of 2001, the Corporation sold certain
item processing relationships and also sold four Midwest item-processing centers.

Fees from trust services were $120.8 million in 2001 compared to $117.7 million in 2000, an increase of
$3.1 million or 2.7%. New sales and the impact of the National City acquisition resulted in an increase in assets
under management of 7.1% which served to stabilize this source of revenue in 2001.

Service charges on deposits increased $12.1 million or 16.4% and amounted to $86.0 million in 2001
compared to $73.9 million in 2000. Service charges on commercial demand accounts were the primary driver of
the increase and reflect the Corporation’s focus on deposit growth, the impact of acquisitions and the lower
interest rate environment.

Mortgage banking revenue was $46.2 million in 2001 compared with $18.9 million in 2000, an increase of
$27.3 million. Gains from sales of mortgages to the secondary market and mortgage-related fees accounted for
the increase. Mortgage loans originated and sold in 2001 were $2.4 billion in 2001 compared to $0.6 billion in
2000, or four times the volume originated and sold in 2000.

Net investment securities losses amounted to $6.8 million in 2001 compared to $30.0 million in 2000. As
previously discussed, during 2001, Metavante wrote-off three equity investments with a carrying value of
approximately $16.1 million. Net gains associated with investments held by the Corporation’s Capital Markets
Group amounted to $10.4 million in 2001. Net securities losses in 2001 by the banking segment amounted to
$1.1 million. As part of its announced balance sheet restructuring in 2000, the Corporation realigned its available
for sale investment securities portfolio through the sale of approximately $1.6 billion of lower yield U.S.
Government Agency securities and purchased similar securities with a higher yield. The loss from the sale
amounted to $50.6 million. Net gains associated with investments held by the Corporation’s Capital Markets
Group amounted to $19.5 million in 2000. During 2000, the banking segment sold certain equity securities and
realized a gain of $1.1 million.

Other noninterest income amounted to $120.5 million in 2001 compared to $125.5 million in 2000, a
decrease of $5.0 million. Revenue associated with the monthly securitization of auto loans increased $9.9
million. Gains from the sale of branches and other assets sales were $14.5 million less in 2001 compared to the
prior year.

Other Expense

Total other expense amounted to $1,296.0 million in 2002, an increase of $7.1 million or 0.6% from
$1,288.9 million in 2001. Total other expense amounted to $1,288.9 million in 2001 compared to $1,103.9

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million in 2000, an increase of $185.0 million or 16.8%. As previously discussed, the Corporation incurred
certain charges and expenses resulting from transactions and events that management considers to be unique or
infrequent and which are considered to have a direct affect on the year-to-year comparability of operating results
for the years ended December 31, 2002, 2001 and 2000. These transactions as previously presented and discussed
generally have their greatest impact on the Corporation’s operating expenses and impact the individual line items
in the Consolidated Statements of Income to varying degrees of magnitude.

The following tables depict how these transactions, in the aggregate, affect the individual line items of
expense in the Consolidated Statements of Income for the periods presented. It is intended that this table,
together with the information that was previously presented and discussed, will provide users of the
Corporation’s financial information with an understanding of how these transactions and events affected the
Corporation’s reported operating expenses.

Operating Expenses Year Ended December 31, ($ millions)

2002 2001

Operating
Expenses

Infrequent
and

Unusual
Items

Operating
Expenses
Excluding
Infrequent

and
Unusual
Items

Operating
Expenses

Infrequent
and

Unusual
Items

Operating
Expenses
Excluding
Infrequent

and
Unusual
Items

2002 vs 2001
Operating Expenses
Excluding Infrequent
and Unusual Items

Amount Pct

Other Expense:
Salaries and employee

benefits . . . . . . . . . . . . . . $ 745.5 $ 4.1 $ 741.4 $ 695.4 $ 16.9 $ 678.5 $ 62.9 9.3%
Net occupancy . . . . . . . . . . 74.7 1.7 73.0 71.3 7.5 63.8 9.2 14.4
Equipment . . . . . . . . . . . . . 116.8 0.5 116.3 118.2 1.5 116.7 (0.4) (0.3)
Software expenses . . . . . . . 44.2 0.1 44.1 39.8 — 39.8 4.3 10.8
Processing charges . . . . . . . 39.3 — 39.3 40.1 2.1 38.0 1.3 3.4
Supplies and printing . . . . . 20.1 — 20.1 21.3 0.7 20.6 (0.5) (2.4)
Professional services . . . . . 38.5 0.3 38.2 34.2 3.4 30.8 7.4 24.0
Shipping and handling . . . . 45.7 — 45.7 44.8 0.2 44.6 1.1 2.5
Amortization of

intangibles . . . . . . . . . . . 25.1 — 25.1 36.9 18.8 18.1 7.0 38.7
Other . . . . . . . . . . . . . . . . . 146.1 0.4 145.7 186.9 59.4 127.5 18.2 14.3

Total Other Expense . . . . . . $1,296.0 $ 7.1 $1,288.9 $1,288.9 $110.5 $1,178.4 $110.5 9.4%

Operating Expenses Year Ended December 31, ($ millions)

2001 2000

Operating
Expenses

Infrequent
and

Unusual
Items

Operating
Expenses
Excluding
Infrequent

and
Unusual
Items

Operating
Expenses

Infrequent
and

Unusual
Items

Operating
Expenses
Excluding
Infrequent

and
Unusual
Items

2001 vs 2000
Operating Expenses
Excluding Infrequent
and Unusual Items

Amount Pct

Other Expense:
Salaries and employee

benefits . . . . . . . . . . . . . . $ 695.4 $ 16.9 $ 678.5 $ 628.2 $ 0.8 $ 627.4 $ 51.1 8.1%
Net occupancy . . . . . . . . . . 71.3 7.5 63.8 54.9 0.1 54.8 9.0 16.4
Equipment . . . . . . . . . . . . . 118.2 1.5 116.7 114.0 — 114.0 2.7 2.4
Software expenses . . . . . . . 39.8 — 39.8 30.0 — 30.0 9.8 32.7
Processing charges . . . . . . . 40.1 2.1 38.0 32.1 — 32.1 5.9 18.4
Supplies and printing . . . . . 21.3 0.7 20.6 20.8 0.9 19.9 0.7 3.5
Professional services . . . . . 34.2 3.4 30.8 41.0 7.0 34.0 (3.2) (9.4)
Shipping and handling . . . . 44.8 0.2 44.6 42.0 — 42.0 2.6 6.2
Amortization of

intangibles . . . . . . . . . . . 36.9 18.8 18.1 30.9 16.4 14.5 3.6 24.8
Other . . . . . . . . . . . . . . . . . 186.9 59.4 127.5 110.0 7.8 102.2 25.3 24.8

Total Other Expense . . . . . . $1,288.9 $110.5 $1,178.4 $1,103.9 $33.0 $1,070.9 $107.5 10.0%

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Exhibit 12

Marshall & Ilsley Corporation

Computation of Ratio of Earnings to Fixed Charges
($000’s)

Years Ended December 31,

2002 2001 2000 1999 1998

Earnings:
Earnings before income taxes and

cumulative effect of changes in
accounting principles . . . . . . . . . . . . . . . . . $ 718,592 $ 501,045 $ 470,350 $ 527,939 $ 465,285

Fixed charges, excluding interest on deposits 301,518 321,059 321,812 222,172 206,546

Earnings including fixed charges but
excluding interest on deposits . . . . . . . . . . 1,020,110 822,104 792,162 750,111 671,831

Interest on deposits . . . . . . . . . . . . . . . . . . . . 283,385 566,899 772,016 585,864 564,540

Earnings including fixed charges and
interest on deposits . . . . . . . . . . . . . . . . . . $1,303,495 $1,389,003 $1,564,178 $1,335,975 $1,236,371

Fixed Charges:
Interest Expense:

Short-term borrowings . . . . . . . . . . . . . $ 150,310 $ 188,587 $ 224,187 $ 142,294 $ 126,624
Long-term borrowings . . . . . . . . . . . . . . 127,343 110,842 78,773 63,145 66,810
One-third of rental expense for all

operating leases (the amount deemed
representative of the interest factor) . 23,865 21,630 18,852 16,733 13,112

Fixed charges excluding interest on deposits 301,518 321,059 321,812 222,172 206,546
Interest on deposits . . . . . . . . . . . . . . . . . . . . 283,385 566,899 772,016 585,864 564,540

Fixed charges including interest on deposits $ 584,903 $ 887,958 $1,093,828 $ 808,036 $ 771,086

Ratio of Earnings to Fixed Charges:
Excluding interest on deposits . . . . . . . . . . . 3.38x 2.56x 2.46x 3.38x 3.25x
Including interest on deposits . . . . . . . . . . . . 2.23x 1.56x 1.43x 1.65x 1.60x

Page 150

770 North Water Street, Milwaukee, WI 53202
(414) 765-7801 www.micorp.com

CR2002 – 02

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