MI Marshall & Ilsley Corp

MILWAUKEE, Jan. 16 /PRNewswire-FirstCall/ -- Marshall & Ilsley Corporation (NYSE:MI) today reported 2006 fourth quarter core operating income of $218.4 million, or $0.84 per share, as compared to $177.5 million, or $0.74 per share, in the fourth quarter of 2005, an increase of 23.1%, or 13.5% on a per share basis. The Corporation reported 2006 fourth quarter net income of $205.4 million, or $0.79 per share. The $0.05 per share difference between core operating income and net income as reported reflects the charge for the termination of certain interest rate swaps due to a change in the interpretation of certain accounting rules as announced in October. Core operating income for the year ended December 31, 2006, was $819.8 million, or $3.22 per share, as compared to $706.2 million, or $2.99 per share in 2005, which included a net increase of $.08 per share related to realized gains on venture capital investments. Without these items, earnings per share would have been $2.91 for the year ended December 31, 2005, representing an increase in 2006 of 10.7%. Net income for the year ended December 31, 2006, was $807.8 million, or $3.17 per share. Return on average assets based on core operating income for the fourth quarter and full year of 2006 was 1.56 percent, respectively. By comparison, the return on average assets based on net income for the fourth quarter and full year of 2005 was 1.56 and 1.63 percent, respectively. Return on equity based on core operating income was 14.27 percent this quarter, as compared to 15.06 percent for the fourth quarter of 2005. The Corporation's provision for loan losses was $18.3 million in the fourth quarter of 2006, versus $13.0 million in the same period last year. Net charge-offs for the period were $15.0 million, or 0.14 percent of total average loans outstanding this quarter, and $11.5 million a year ago, or 0.14 percent of total average loans. At December 31, 2006, the allowance for loan losses was 1.00 percent of total loans, compared to 1.06 percent a year earlier. Nonperforming loans were 0.64 percent of total loans at December 31, 2006, and 0.41 percent at December 31, 2005. Assets at year-end were $56.2 billion, compared to $46.2 billion at the end of 2005. Book value per share was $24.24 at December 31, 2006, compared to $20.27 for the same date a year ago. Total loans were $41.9 billion, compared to $34.2 billion at December 31, 2005. All "per share" references in this press release are references to diluted earnings per share. Marshall & Ilsley Corporation (NYSE:MI) is a diversified financial services corporation headquartered in Milwaukee, Wis., with $56.2 billion in assets. Founded in 1847, M&I Marshall & Ilsley Bank is the largest Wisconsin- based bank with 195 offices throughout the state. In addition, M&I has 46 locations throughout Arizona; 17 offices in Kansas City and nearby communities; 17 offices on Florida's west coast; 17 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, a wholly owned subsidiary, provides a full array of technology products and services for the financial services industry. 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 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 factors identified in M&I's Annual Report on Form 10-K for the year ended December 31, 2005 under the heading "Forward-Looking Statements" 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. This press release contains non-GAAP financial measures for the three months and year ended December 31, 2006 and for the year ended December 31, 2005, as a supplement to the Corporation's GAAP financial results. The Corporation believes that these non-GAAP financial measures are useful because they allow investors to assess, on a consistent basis, the Corporation's core operating performance, exclusive of items which management believes are not indicative of the operations of the Corporation such as the change in the accounting for derivatives. Management uses such non-GAAP financial measures to evaluate financial results and to establish operational goals. These non- GAAP financial measures should be considered a supplement to, and not as a substitute for, financial measures prepared in accordance with GAAP. For a reconciliation of 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. Note: Marshall & Ilsley Corporation will hold a conference call at 11:00 a.m. Central Standard Time Tuesday, January 16, regarding fourth quarter earnings. For those interested in listening, please call 1-800-967-7185 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 will be available beginning at 2:30 p.m. on January 16 and will run through 5:00 p.m. January 23, by calling 1-888-203-1112 and entering pass code 487 53 06. Supplemental financial information referenced in the conference call can be found at http://www.micorp.com/ , Investor Relations, after 8:30 a.m. on January 16. Marshall & Ilsley Corporation Financial Information (unaudited) Three Months Ended Twelve Months Ended December December December December 31, 31, Percent 31, 31, Percent 2006 2005 Change 2006 2005 Change PER SHARE DATA Diluted: Core Operating Income $0.84 $0.74 13.5% $3.22 $2.99 7.7% Net Income 0.79 0.74 6.8 3.17 2.99 6.0 Basic: Core Operating Income 0.86 0.76 13.2 3.29 3.06 7.5 Net Income 0.81 0.76 6.6 3.24 3.06 5.9 Dividend Declared 0.27 0.24 12.5 1.05 0.93 12.9 Book Value 24.24 20.27 19.6 24.24 20.27 19.6 Shares Outstanding (millions): Average - Diluted 260.5 239.6 8.7 254.6 236.0 7.9 End of Period 255.5 235.4 8.5 255.5 235.4 8.5 INCOME STATEMENT ($millions) Net Interest Income (FTE) $402.3 $339.8 18.4% $1,520.4 $1,298.6 17.1% Provision for Loan and Lease Losses 18.3 13.0 40.8 50.6 44.8 12.9 Data Processing Services 355.2 323.8 9.7 1,382.7 1,185.1 16.7 Wealth Management 57.9 48.2 20.1 221.6 191.7 15.6 Service Charge on Deposits 26.3 23.3 12.9 99.6 94.0 6.0 Mortgage Banking 12.1 14.6 -17.1 52.4 50.5 3.8 Net Investment Securities Gains 3.1 2.9 6.9 9.7 45.5 -78.7 All Other 48.1 36.5 31.8 167.9 149.5 12.3 Total Non-Interest Revenues (Core Operating 2006) 502.7 449.3 11.9 1,933.9 1,716.3 12.7 Salaries and Employee Benefits 311.3 282.7 10.1 1,210.1 1,074.7 12.6 Occupancy and Equipment 60.6 56.8 6.7 244.0 215.6 13.2 Intangible Amortization 12.3 8.8 39.8 45.4 31.1 46.0 Other 179.3 157.3 14.0 660.0 557.7 18.3 Total Non-Interest Expenses 563.5 505.6 11.5 2,159.5 1,879.1 14.9 Tax Equivalent Adjustment 7.1 8.2 -13.4 30.1 33.3 -9.6 Pre-Tax Core Operating Earnings 316.1 262.3 20.5 1,214.1 1,057.7 14.8 Income Taxes (Core Operating Income 2006) 97.7 84.8 15.2 394.3 351.5 12.2 Core Operating Income $218.4 $177.5 23.1% $819.8 $706.2 16.1% Derivative Loss - Discontinued Hedges, net of tax (13.0) 0.0 n.m. (12.0) 0.0 n.m. Net Income $205.4 $177.5 15.7% $807.8 $706.2 14.4% KEY RATIOS Net Interest Margin (FTE) / Avg. Earning Assets 3.25% 3.38% 3.27% 3.40% Interest Spread (FTE) 2.61 2.82 2.66 2.93 Based on Core Operating Activities (2006) Efficiency Ratio 62.2 64.1 62.6 62.6 Efficiency Ratio without Metavante 50.6 51.5 50.8 50.7 Return on Assets 1.56 1.56 1.56 1.63 Return on Equity 14.27 15.06 14.58 16.21 Equity / Assets (End of Period) 10.94 10.25 10.94 10.25 Marshall & Ilsley Corporation Financial Information (unaudited) As of December December 31, 31, Percent 2006 2005 Change ASSETS ($millions) Cash & Due From Banks $1,248 $1,155 8.1% Trading Securities 36 30 20.0 Short - Term Investments 256 300 -14.7 Investment Securities 7,473 6,320 18.2 Loans and Leases: Commercial Loans & Leases 12,587 10,066 25.0 Commercial Real Estate 14,351 10,421 37.7 Residential Real Estate 9,032 7,096 27.3 Home Equity Loans & Lines 4,342 4,834 -10.2 Personal Loans and Leases 1,623 1,750 -7.3 Total Loans and Leases 41,935 34,167 22.7 Reserve for Loan & Leases Losses (421) (364) 15.7 Premises and Equipment, net 572 491 16.5 Goodwill and Intangibles 3,212 2,461 30.5 Other Assets 1,919 1,653 16.1 Total Assets $56,230 $46,213 21.7% LIABILITIES & SHAREHOLDERS' EQUITY ($millions) Deposits: Noninterest Bearing $6,113 $5,525 10.6% Bank Issued Interest Bearing Activity 12,924 10,530 22.7 Bank Issued Time 8,108 5,279 53.6 Total Bank Issued Deposits 27,145 21,334 27.2 Wholesale Deposits 6,939 6,340 9.4 Total Deposits 34,084 27,674 23.2 Short - Term Borrowings 6,425 5,627 14.2 Long - Term Borrowings 8,026 6,669 20.3 Other Liabilities 1,544 1,508 2.4 Shareholders' Equity 6,151 4,735 29.9 Total Liabilities & Shareholders' Equity $56,230 $46,213 21.7% Three Months Ended Twelve Months Ended December December December December 31, 31, Percent 31, 31, Percent 2006 2005 Change 2006 2005 Change AVERAGE ASSETS ($millions) Cash & Due From Banks $1,045 $1,012 3.3% $1,024 $966 6.0% Trading Securities 44 33 33.3 46 27 70.4 Short - Term Investments 223 216 3.2 303 237 27.8 Investment Securities 7,333 6,256 17.2 6,992 6,183 13.1 Loans and Leases: Commercial Loans & Leases 12,338 9,761 26.4 11,691 9,394 24.5 Commercial Real Estate 14,278 10,414 37.1 13,139 9,989 31.5 Residential Real Estate 8,844 6,717 31.7 8,130 5,752 41.3 Home Equity Loans and Lines 4,387 4,822 -9.0 4,540 4,988 -9.0 Personal Loans and Leases 1,591 1,688 -5.7 1,628 1,653 -1.5 Total Loans and Leases 41,438 33,402 24.1 39,128 31,776 23.1 Reserve for Loan & Leases Losses (420) (365) 15.1 (406) (363) 11.8 Premises and Equipment, net 570 478 19.2 551 458 20.3 Goodwill and Intangibles 3,216 2,425 32.6 3,008 2,261 33.0 Other Assets 2,053 1,792 14.6 2,005 1,739 15.3 Total Assets $55,502 $45,249 22.7% $52,651 $43,284 21.6% Memo: Average Earning Assets $49,038 $39,907 $46,469 $38,223 Average Earning Assets Excluding Investment Securities Unrealized Gains/Losses $49,094 $39,945 $46,555 $38,218 AVG LIABILITIES & SHAREHOLDERS' EQUITY ($millions) Deposits: Noninterest Bearing $5,526 $5,195 6.4% $5,336 $4,943 8.0% Bank Issued Interest Bearing Activity 12,516 10,349 20.9 11,668 10,027 16.4 Bank Issued Time 8,111 5,057 60.4 7,329 4,410 66.2 Total Bank Issued Deposits 26,153 20,601 26.9 24,333 19,380 25.6 Wholesale Deposits 6,984 6,723 3.9 7,256 6,721 8.0 Total Deposits 33,137 27,324 21.3 31,589 26,101 21.0 Short - Term Borrowings 4,091 2,563 59.6 3,638 2,926 24.3 Long - Term Borrowings 10,452 8,936 17.0 10,072 8,193 22.9 Other Liabilities 1,772 1,751 1.2 1,751 1,707 2.6 Shareholders' Equity 6,050 4,675 29.4 5,601 4,357 28.6 Total Liabilities & Shareholders' Equity $55,502 $45,249 22.7% $52,651 $43,284 21.6% Memo: Average Interest Bearing Liabilities $42,154 $33,628 $39,963 $32,277 Marshall & Ilsley Corporation Financial Information (unaudited) Three Months Ended Twelve Months Ended December December December December 31, 31, Percent 31, 31, Percent 2006 2005 Change 2006 2005 Change CREDIT QUALITY (a) Net Charge-Offs ($millions) $15.0 $11.5 30.4% $39.0 $39.1 -0.3% Net Charge-Offs / Average Loans & Leases 0.14% 0.14% 0.10% 0.12% Loan and Lease Loss Reserve ($millions) $420.6 $363.8 15.6% $420.6 $363.8 15.6% Loan and Lease Loss Reserve / Period-End Loans & Leases 1.00% 1.06% 1.00% 1.06% Non-Performing Loans & Leases (NPL) ($millions) $268.0 $140.6 90.6% $268.0 $140.6 90.6% NPL's / Period-End Loans & Leases 0.64% 0.41% 0.64% 0.41% Loan and Lease Loss Reserve / Non-Performing Loans & Leases 157% 259% 157% 259% MARGIN ANALYSIS (b) Loans and Leases: Commercial Loans & Leases 7.58% 6.62% 7.38% 6.06% Commercial Real Estate 7.60 6.65 7.41 6.27 Residential Real Estate 7.19 6.47 7.05 6.13 Home Equity Loans and Lines 7.47 6.64 7.28 6.28 Personal Loans and Leases 7.57 6.44 7.22 6.05 Total Loans and Leases 7.49 6.59 7.30 6.17 Investment Securities 5.21 5.00 5.20 5.01 Short - Term Investments 4.95 3.89 4.81 3.38 Interest Income (FTE) / Avg. Interest Earning Assets 7.13% 6.33% 6.97% 5.97% Interest Bearing Deposits: Bank Issued Interest Bearing Activity 3.55% 2.49% 3.31% 1.92% Bank Issued Time 4.72 3.65 4.40 3.21 Total Bank Issued Deposits 4.01 2.87 3.73 2.31 Wholesale Deposits 5.07 3.64 4.82 3.14 Total Interest Bearing Deposits 4.28 3.10 4.03 2.58 Short - Term Borrowings 5.30 4.34 5.14 3.63 Long - Term Borrowings 4.86 4.26 4.73 4.03 Interest Expense / Avg. Interest Bearing Liabilities 4.52% 3.51% 4.31% 3.04% Net Interest Margin (FTE) / Avg. Earning Assets 3.25% 3.38% 3.27% 3.40% Interest Spread (FTE) 2.61% 2.82% 2.66% 2.93% Notes: (a) Includes Loans past due 90 days or more. (b) Based on average balances excluding fair value adjustments for available for sale securities. Reconciliation of Core Operating Income to Net Income Three Months Ended Twelve Months Ended December 31, 2006 December 31, 2006 Per Per Amount Diluted Amount Diluted ($ in millions) Share ($ in millions) Share Total Non-Interest Revenues (Core Operating) $502.7 $1,933.9 Derivative Loss - Discontinued Hedges (20.2) (18.5) Total Non-Interest Revenues (GAAP) $482.5 $1,915.4 Pre-Tax Core Operating Earnings $316.1 $1,214.1 Derivative Loss - Discontinued Hedges (20.2) (18.5) Pre-Tax Earnings (GAAP) $295.9 $1,195.6 Income Taxes - Core Operating Income $97.7 $394.3 Tax Benefit on Derivative Loss - Discontinued Hedges (7.2) (6.5) Income Taxes (GAAP) $90.5 $387.8 Core Operating Income $218.4 $0.84 $819.8 $3.22 Derivative Loss - Discontinued Hedges, net of tax (13.0) (0.05) (12.0) (0.05) Net Income (GAAP) $205.4 $0.79 $807.8 $3.17 Average Shareholders' Equity Core Operating Activities $6,074 $5,624 Cumulative Derivative Adjustments - Discontinued Hedges, net of tax (24) (23) Average Shareholders' Equity (GAAP) $6,050 $5,601 Based on GAAP Efficiency Ratio 63.6% 62.9% Efficiency Ratio without Metavante 52.5 51.3 Return on Assets 1.47 1.53 Return on Equity 13.47 14.42 Reconciliation of Net Income to Income as Adjusted Twelve Months Ended December 31, 2005 Per Amount Diluted ($ in millions) Share Net Income $706.2 $2.99 Adjustments (Net of Tax) Realized Gain Venture Capital Investments 18.2 0.07 Cash Tender - Equity Investment 3.9 0.02 Related Compensation Expense (1.7) (0.01) Total Adjustments 20.4 0.08 Income as Adjusted $685.8 $2.91 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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