MILWAUKEE, Oct. 16 /PRNewswire-FirstCall/ -- Marshall & Ilsley
Corporation (NYSE:MI) today reported 2006 third quarter core
operating income of $210.9 million, or $0.81 per diluted share, as
compared to $179.7 million, or $0.75 per diluted share, in the
third quarter of 2005. The Corporation reported 2006 third quarter
net income of $238.9 million, or $0.92 per diluted share. The $0.11
per diluted share difference between core operating income and net
income as reported reflects an adjustment in the accounting
treatment of derivatives used to manage interest rate risk as
described in more detail below. Third quarter core operating income
increased 17.4 percent over the same period in 2005. Core operating
income for the nine months ended September 30, 2006 was $601.4
million, or $2.38 per diluted share, compared to $528.7 million, or
$2.25 per diluted share, in the nine months ended September 30,
2005. Net income for the nine months ended September 30, 2006 was
$602.5 million, or $2.38 per diluted share. Return on average
assets based on core operating income for the third quarter was
1.53 percent, as compared to 1.62 percent for the same period in
2005. Return on average equity based on core operating income was
14.22 percent this quarter as compared to 15.85 percent for the
third quarter of 2005. The Corporation's provision for loan and
lease losses was $10.3 million in the third quarter of 2006, versus
$9.9 million in the same period last year. Net charge-offs for the
period were $8.1 million, or 0.08 percent of total average loans
and leases outstanding this quarter, and $7.8 million a year ago or
0.10 percent of total average loans and leases. At September 30,
2006, the allowance for loan and lease losses was 1.01 percent of
total loans and leases, compared to 1.09 percent a year earlier.
Nonperforming loans and leases were 0.53 percent of total loans and
leases at September 30, 2006, and 0.44 percent at September 30,
2005. Assets at September 30, 2006 were $55.5 billion, compared to
$45.0 billion at September 30, 2005. Book value per share was
$23.51 at September 30, 2006, compared to $19.81 for the same date
a year ago. Total loans and leases were $41.3 billion, compared to
$33.1 billion at September 30, 2005. Accounting Adjustment for
Derivatives The Corporation has elected early application of Staff
Accounting Bulletin 108, and, as a result, has adjusted its opening
financial position for 2006 and the financial results for the first
two quarters of 2006 to reflect a change in its hedge accounting
under Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities. The
Corporation utilizes interest rate swaps to hedge its risk in
connection with certain financial instruments, and the Corporation
had applied hedge accounting under SFAS 133 to these transactions
from inception. Due to the recent expansion of certain highly
technical interpretations of SFAS 133, specifically hedge
designation under the "matched-term" method, certain of the
derivative transactions entered into by the Corporation do not
qualify for hedge accounting. As a result, any fluctuation in the
market value of the derivatives should have been recorded through
the income statement with no corresponding offset to the hedged
items, or accumulated other comprehensive income. This adjustment
results in Shareholders' Equity at January 1, 2006 being reduced by
$18.0 million, and earnings per diluted share for the first and
second quarters of 2006 being reduced by $0.06 and $0.05,
respectively. The Corporation is taking various actions, including
terminating existing swaps that no longer qualify for hedge
accounting, such that the Corporation believes its financial
results going forward will not be materially impacted by
fluctuations in the market value of derivatives used to hedge
interest rate risk. The Corporation expects that these actions will
result in fourth quarter 2006 charges of approximately $0.03 per
diluted share. "Our issue relates strictly to the evolving
accounting interpretations related to hedge accounting. It is
important to understand that this adjustment does not impact our
growth trends, our underlying credit quality, or our key
performance ratios in any significant manner," said Greg Smith, the
Corporation's chief financial officer. Marshall & Ilsley
Corporation (NYSE:MI) is a diversified financial services
corporation headquartered in Milwaukee, Wis., with $55.5 billion in
assets. Founded in 1847, M&I Marshall & Ilsley Bank is the
largest Wisconsin- based bank. M&I Bank has 195 offices
throughout the state. In addition, M&I has 42 locations
throughout Arizona; 17 offices in Kansas City and nearby
communities; 17 offices on Florida's west coast; 16 offices in
metropolitan Minneapolis/St. Paul, and one in Duluth, Minn.; three
offices in Tulsa, Okla.; and one office in Las Vegas, Nev.
M&I's Southwest Bank subsidiary has 15 offices in the greater
St. Louis area. Metavante Corporation, Marshall & Ilsley
Corporation's wholly owned technology subsidiary, provides
virtually all of the technology an organization needs to offer
financial services. M&I also provides trust and investment
management, equipment leasing, mortgage banking, asset-based
lending, financial planning, investments, and insurance services
from offices throughout the country and on the Internet
(http://www.mibank.com/ or http://www.micorp.com/). M&I's
customer-based approach, internal growth, and strategic
acquisitions have made M&I a nationally recognized leader in
the financial services industry. This press release contains
non-GAAP financial measures. For a reconciliation of the non-GAAP
financial measures to the comparable financial measures calculated
in accordance with GAAP, please see the reconciliation table
included in the attachment to this press release. This press
release contains forward-looking statements concerning M&I's
future operations and financial results. Such statements are
subject to important factors that could cause M&I's actual
results to differ materially from those anticipated by the
forward-looking statements. These factors include (i) the Risk
Factors identified in Item 1A of M&I's Annual Report on Form
10-K for the year ended December 31, 2005, which factors are
incorporated herein by reference, and (ii) such other factors as
may be described from time to time in M&I's SEC filings. Note:
Marshall & Ilsley Corporation will hold a conference call at
11:00 a.m. Central Daylight Time Monday, October 16, regarding
third quarter earnings. For those interested in listening, please
call 1-800-946-0720 and ask for M&I's quarterly earnings
release conference call. If you are unable to join us at this time,
a replay of the call will run through October 23, 5:00 p.m. Central
Daylight Time by calling 1-888-203-1112 and entering pass code 652
55 74 to listen. Supplemental financial information referenced in
the conference call can be found at http://www.micorp.com/,
Investor Relations, after 8:00 a.m. on October 16. Marshall &
Ilsley Corporation Financial Information (unaudited) Three Months
Ended Nine Months Ended September September Percent September
September Percent 30, 2006 30, 2005 Change 30, 2006 30, 2005 Change
PER SHARE DATA Diluted: Net Income $0.92 $0.75 22.7% $2.38 $2.25
5.8% Core Operating Income $0.81 $0.75 8.0% $2.38 $2.25 5.8% Basic:
Net Income 0.94 0.77 22.1 2.44 2.30 6.1 Core Operating Income 0.83
0.77 7.8 2.43 2.30 5.7 Dividend Declared 0.27 0.24 12.5 0.78 0.69
13.0 Book Value 23.51 19.81 18.7 23.51 19.81 18.7 Shares
Outstanding (millions): Average - Diluted 259.7 238.2 9.0 252.8
234.8 7.7 End of Period 254.8 234.4 8.7 254.8 234.4 8.7 INCOME
STATEMENT ($millions) Net Interest Income (FTE) $400.5 $330.3 21.3%
$1,118.1 $958.7 16.6% Provision for Loan and Lease Losses 10.3 9.9
4.0 32.3 31.8 1.6 Data Processing Services 339.5 296.0 14.7 1,027.5
861.3 19.3 Wealth Management 54.6 48.3 13.0 163.7 143.5 14.1
Service Charge on Deposits 25.7 23.6 8.9 73.3 70.7 3.7 Mortgage
Banking 13.4 15.8 -15.2 38.1 35.1 8.5 Net Investment Securities
Gains (Losses) 4.5 7.4 -39.2 6.6 42.6 -84.5 Mark to Market
Adjustments 43.8 - n.m. 1.8 - n.m. All Other 39.6 39.0 1.5 122.0
113.7 7.3 Total Non-Interest Revenues 521.1 430.1 21.2 1,433.0
1,266.9 13.1 Salaries and Employee Benefits 314.3 278.0 13.1 898.8
792.1 13.5 Occupancy and Equipment 61.8 54.6 13.2 183.5 158.8 15.6
Intangible Amortization 12.1 6.1 98.4 33.0 22.3 48.0 Other 158.4
131.8 20.2 480.7 400.2 20.1 Total Non-Interest Expenses 546.6 470.5
16.2 1,596.0 1,373.4 16.2 Tax Equivalent Adjustment 7.3 8.5 -14.1
23.0 25.1 -8.4 Pre-Tax Earnings 357.4 271.5 31.6 899.8 795.3 13.1
Income Taxes 118.5 91.8 29.1 297.3 266.6 11.5 Net Income $238.9
$179.7 32.9% $602.5 $528.7 14.0% Core Operating Income $210.9
$179.7 17.4% $601.4 $528.7 13.8% KEY RATIOS Net Interest Margin
(FTE) / Avg. Earning Assets 3.29% 3.36% 3.27% 3.41% Interest Spread
(FTE) 2.67 2.87 2.67 2.97 Efficiency Ratio 59.6 62.5 62.7 62.1
Efficiency Ratio without Metavante 48.5 50.8 50.8 50.4 Return on
Assets 1.74 1.62 1.56 1.66 Return on Equity 16.17 15.85 14.78 16.63
Equity / Assets (End of Period) 10.73 10.25 10.73 10.25
Reconciliation of Core Operating Income to Net Income Three Months
Ended Nine Months Ended September 30, 2006 September 30, 2006
Amount Per Amount Per ($ in millions) Diluted Share ($ in millions)
Diluted Share Net Income $238.9 $0.92 $602.5 $2.38 Mark to Market
Adjustments (after-tax) (28.0) (0.11) (1.1) 0.00 Core Operating
Income $210.9 $0.81 $601.4 $2.38 Average Shareholders' Equity
$5,860 $5,450 Cumulative Mark to Market Adjustments (after-tax) 23
23 Adjusted Average Shareholders' Equity $5,883 $5,473 Based on
Core Operating Income Return on Assets 1.53% 1.56% Return on Equity
14.22 14.69 Efficiency Ratio 62.6 62.8 Efficiency Ratio without
Metavante 52.4 50.9 Marshall & Ilsley Corporation Financial
Information (unaudited) As of September 30, September 30, Percent
ASSETS ($millions) 2006 2005 Change Cash & Due From Banks
$1,250 $1,080 15.7% Trading Securities 45 28 60.7 Short - Term
Investments 254 306 -17.0 Investment Securities 7,349 6,330 16.1
Loans and Leases: Commercial Loans & Leases 12,327 9,721 26.8
Commercial Real Estate 14,284 10,259 39.2 Residential Real Estate
8,611 6,491 32.7 Home Equity Loans & Lines 4,416 4,916 -10.2
Personal Loans and Leases 1,627 1,719 -5.4 Total Loans and Leases
41,265 33,106 24.6 Reserve for Loan & Leases Losses (417) (362)
15.2 Premises and Equipment, net 568 469 21.1 Goodwill and
Intangibles 3,221 2,388 34.9 Other Assets 1,948 1,650 18.1 Total
Assets $55,483 $44,995 23.3% LIABILITIES & SHAREHOLDERS' EQUITY
($millions) Deposits: Noninterest Bearing $5,566 $5,224 6.5% Bank
Issued Interest Bearing Activity 12,141 10,075 20.5 Bank Issued
Time 8,007 4,790 67.2 Total Bank Issued Deposits 25,714 20,089 28.0
Wholesale Deposits 7,746 6,902 12.2 Total Deposits 33,460 26,991
24.0 Short - Term Borrowings 7,006 5,497 27.5 Long - Term
Borrowings 7,489 6,375 17.5 Other Liabilities 1,572 1,520 3.4
Shareholders' Equity 5,956 4,612 29.1 Total Liabilities &
Shareholders' Equity $55,483 $44,995 23.3% Three Months Ended Nine
Months Ended September September Percent September September
Percent 30, 2006 30, 2005 Change 30, 2006 30, 2005 Change AVERAGE
ASSETS ($millions) Cash & Due From Banks $1,039 $993 4.6%
$1,017 $950 7.1% Trading Securities 54 26 107.7 46 25 84.0 Short -
Term Investments 302 273 10.6 331 244 35.7 Investment Securities
7,167 6,209 15.4 6,877 6,158 11.7 Loans and Leases: Commercial
Loans & Leases 12,088 9,588 26.1 11,474 9,270 23.8 Commercial
Real Estate 14,065 10,145 38.6 12,755 9,846 29.5 Residential Real
Estate 8,395 6,170 36.1 7,890 5,427 45.4 Home Equity Loans and
Lines 4,474 4,905 -8.8 4,591 5,044 -9.0 Personal Loans and Leases
1,586 1,671 -5.1 1,640 1,642 -0.1 Total Loans and Leases 40,608
32,479 25.0 38,350 31,229 22.8 Reserve for Loan & Leases Losses
(420) (364) 15.4 (402) (362) 11.0 Premises and Equipment, net 570
459 24.2 544 452 20.4 Goodwill and Intangibles 3,169 2,317 36.8
2,937 2,205 33.2 Other Assets 2,095 1,743 20.2 1,990 1,720 15.7
Total Assets $54,584 $44,135 23.7% $51,690 $42,621 21.3% Memo:
Average Earning Assets $48,131 $38,987 $45,604 $37,656 Average
Earning Assets Excluding Investment Securities Unrealized
Gains/Losses $48,250 $38,979 $45,699 $37,636 AVG LIABILITIES &
SHAREHOLDERS' EQUITY ($millions) Deposits: Noninterest Bearing
$5,462 $5,049 8.2% $5,271 $4,858 8.5% Bank Issued Interest Bearing
Activity 12,027 10,028 19.9 11,383 9,919 14.8 Bank Issued Time
7,980 4,516 76.7 7,066 4,192 68.6 Total Bank Issued Deposits 25,469
19,593 30.0 23,720 18,969 25.0 Wholesale Deposits 7,452 6,759 10.3
7,347 6,720 9.3 Total Deposits 32,921 26,352 24.9 31,067 25,689
20.9 Short - Term Borrowings 3,664 2,859 28.2 3,485 3,048 14.3 Long
- Term Borrowings 10,366 8,686 19.3 9,944 7,943 25.2 Other
Liabilities 1,773 1,740 1.9 1,744 1,691 3.1 Shareholders' Equity
5,860 4,498 30.3 5,450 4,250 28.2 Total Liabilities &
Shareholders' Equity $54,584 $44,135 23.7% $51,690 $42,621 21.3%
Memo: Average Interest Bearing Liabilities $41,489 $32,848 $39,225
$31,822 Marshall & Ilsley Corporation Financial Information
(unaudited) Three Months Ended Nine Months Ended September
September Percent September September Percent 30, 2006 30, 2005
Change 30, 2006 30, 2005 Change CREDIT QUALITY (a) Net Charge-Offs
($millions) $8.1 $7.8 3.8% $24.0 $27.7 -13.4% Net Charge-Offs /
Average Loans & Leases 0.08% 0.10% 0.08% 0.12% Loan and Lease
Loss Reserve ($millions) $417.4 $362.3 15.2% $417.4 $362.3 15.2%
Loan and Lease Loss Reserve / Period-End Loans & Leases 1.01%
1.09% 1.01% 1.09% Non-Performing Loans & Leases (NPL)
($millions) $219.2 $147.3 48.8% $219.2 $147.3 48.8% NPL's /
Period-End Loans & Leases 0.53% 0.44% 0.53% 0.44% Loan and
Lease Loss Reserve / Non-Performing Loans & Leases 190% 246%
190% 246% MARGIN ANALYSIS (b) Loans and Leases: Commercial Loans
& Leases 7.62% 6.17% 7.31% 5.86% Commercial Real Estate 7.63
6.33 7.34 6.14 Residential Real Estate 7.12 6.18 7.00 5.99 Home
Equity Loans and Lines 7.49 6.32 7.22 6.16 Personal Loans and
Leases 7.40 6.21 7.11 5.91 Total Loans and Leases 7.49 6.25 7.24
6.02 Investment Securities 5.20 4.99 5.19 5.01 Short - Term
Investments 5.12 3.60 4.78 3.21 Interest Income (FTE) / Avg.
Interest Earning Assets 7.13% 6.03% 6.90% 5.84% Interest Bearing
Deposits: Bank Issued Interest Bearing Activity 3.47% 2.06% 3.22%
1.72% Bank Issued Time 4.55 3.29 4.27 3.03 Total Bank Issued
Deposits 3.90 2.44 3.62 2.11 Wholesale Deposits 5.00 3.29 4.74 2.97
Total Interest Bearing Deposits 4.20 2.71 3.94 2.39 Short - Term
Borrowings 5.39 3.88 5.07 3.43 Long - Term Borrowings 4.84 4.04
4.69 3.94 Interest Expense / Avg. Interest Bearing Liabilities
4.46% 3.16% 4.23% 2.87% Net Interest Margin(FTE) / Avg. Earning
Assets 3.29% 3.36% 3.27% 3.41% Interest Spread (FTE) 2.67% 2.87%
2.67% 2.97% Notes: (a) Includes Loans past due 90 days or more. (b)
Based on average balances excluding fair value adjustments for
available for sale securities. DATASOURCE: Marshall & Ilsley
Corporation CONTACT: Greg Smith, senior vice president, chief
financial officer, +1-414-765-7727, or Dave Urban, vice president,
director of investor relations, +1-414-765-7853, both of Marshall
& Ilsley Corporation Web site: http://www.micorp.com/
http://www.mibank.com/
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