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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

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[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended December 31, 2001

OR

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

Commission File No. 1-15403

MARSHALL & ILSLEY CORPORATION
(Exact name of registrant as specified in its charter)



Wisconsin 39-0968604

(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

770 North Water Street
Milwaukee, Wisconsin 53202
(Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code: (414) 765-7801

Securities registered pursuant to Section 12(b) of the Act:



Name of Each Exchange
Title of Each Class: on Which Registered:
-------------------- -----------------------

Common Stock--$1.00 par value New York Stock Exchange



Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X__ No______

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the voting stock held by nonaffiliates of the
registrant is approximately $6,089,554,000 as of February 28, 2002. The number
of shares of common stock outstanding as of February 28, 2002 is 103,913,315.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the Proxy Statement for
the registrant's Annual Meeting of Shareholders to be held on April 23, 2002.



PART I

ITEM 1. BUSINESS

General

Marshall & Ilsley Corporation ("M&I" or the "Corporation"), incorporated in
Wisconsin in 1959, is a registered bank holding company under the Bank Holding
Company Act of 1956 (the "BHCA"). As of December 31, 2001, M&I had consolidated
total assets of approximately $27.3 billion and consolidated total deposits of
approximately $16.5 billion, making M&I the largest bank holding company
headquartered in Wisconsin. The executive offices of M&I are located at 770
North Water Street, Milwaukee, Wisconsin 53202 (telephone number (414)
765-7801).

M&I's principal assets are the stock of its bank and nonbank subsidiaries,
which, as of December 31, 2001, included Metavante Corporation ("Metavante")
(formerly its M&I Data Services Division), two commercial banks, one federal
savings bank and a number of companies engaged in businesses that the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") has
determined to be closely-related or incidental to the business of banking. M&I
provides its subsidiaries with financial and managerial assistance in such
areas as budgeting, tax planning, compliance assistance, asset and liability
management, investment administration and portfolio planning, business
development, advertising and human resources management.

M&I's bank and savings association subsidiaries provide a full range of
banking services to individuals, businesses and governments throughout
Wisconsin, and in the Phoenix and Tucson, Arizona metropolitan areas, Las
Vegas, Nevada, Naples, Florida and the Minneapolis, Minnesota metropolitan
area. These subsidiaries offer retail, institutional, international, business
and correspondent banking, investment and trust services through the operation
of 215 banking offices in Wisconsin, 25 offices in Arizona, one office in
Florida, one office in Nevada and two offices in Minnesota. The M&I bank and
saving association subsidiaries hold a significant portion of their mortgage
loan and investment portfolios indirectly through their ownership interests in
direct and indirect subsidiaries. M&I Marshall & Ilsley Bank ("M&I Bank") is
M&I's largest bank subsidiary, with consolidated assets as of December 31, 2001
of approximately $25.8 billion.

Metavante is a major supplier of financial and data processing services and
software to banking, financial and related organizations. Metavante provides
integrated products and services to financial services providers that enable
them to initiate and process a broad range of financial transactions
electronically, including through the Internet. Metavante's integrated
financial transaction processing, outsourcing, software and consulting products
and services provide virtually all of the technology that a financial services
provider needs to run its operations. As of December 31, 2001, Metavante had
over 3,500 clients in the United States and abroad, including large banks,
mid-tier and community banks and other financial services providers. In 2001,
Metavante's products and services were used to originate and/or process nearly
7.8 billion transactions for consumer and business customer bank accounts.

M&I's other nonbank subsidiaries operate a variety of bank-related
businesses, including those providing investment management services, insurance
services, trust services, equipment lease financing, commercial and residential
mortgage banking, home equity financing, venture capital, brokerage services
and financial advisory services. M&I Investment Management Corp. offers a full
range of asset management services to Marshall & Ilsley Trust Company N.A., the
Marshall Funds and other individual, business and institutional customers.
Marshall & Ilsley Trust Company N.A., provides trust and employee benefit plan
services to customers throughout the United States with offices in Wisconsin,
Arizona, Minnesota, Florida, Nevada, North Carolina and Illinois. Diversified
Business Credit, Inc. provides working capital loans to commercial borrowers
secured by accounts receivable, inventory and other marketable assets. M&I
Brokerage Services, Inc., a broker-dealer registered with the National
Association of Securities Dealers and the Securities and Exchange Commission,
provides brokerage and other investment related services to a variety of retail
and commercial customers. M&I

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Capital Markets Group L.L.C. and M&I Ventures L.L.C. provide venture capital,
financial advisory and strategic planning services to customers, including
assistance in connection with the private placement of securities, raising
funds for expansion, leveraged buy-outs, divestitures, mergers and acquisitions
and small business investment company transactions. M&I Community Development
Corporation makes investments designed primarily to promote the public welfare
in markets and communities served by affiliates and subsidiaries of M&I. M&I
Dealer Finance, Inc. provides retail vehicle lease and installment sale
financing. M&I First National Leasing Corp. leases a variety of equipment and
machinery to large and small businesses. M&I Insurance Services, Inc. provides
life, long-term care and disability income insurance products and annuities to
retail clients and business owners. M&I Mortgage Corp. originates, purchases,
sells and services residential mortgage loans. M&I Mortgage Reinsurance
Corporation acts as a reinsurer of private mortgage insurance written in
connection with residential mortgage loans originated in the M&I system. The
Richter-Schroeder Company, Inc. originates and services long-term commercial
real estate loans for institutional investors. M&I Support Services Corp.
provides bank operation support for loan and deposit account processing and
maintenance, item processing and other banking services.

In recent years, M&I has consolidated many operational activities as part of
a continuing process to strengthen its business lines, its products and
customer service. In 2001, M&I substantially reduced the number of banking
charters under which it operates. Certain subsidiaries of M&I that primarily
hold, manage and service investment and mortgage portfolios were also
consolidated. M&I expects to continue to consolidate its banking charters to
the extent new banks are acquired.

Acquisitions

M&I has recently expanded its operations into the Minneapolis/St. Paul,
Minnesota metropolitan area through a series of acquisitions. On August 1,
2001, M&I acquired National City Bancorporation ("National City"), a bank
holding company based in Minneapolis, Minnesota. National City's subsidiaries
included National City Bank of Minneapolis, a commercial bank that was
subsequently merged into M&I Bank, and Diversified Business Credit, Inc. a
commercial finance company. As of June 30, 2001, National City had consolidated
total assets of $1.2 billion and consolidated total deposits of $590.2 million.

On March 1, 2002, M&I completed a merger with Richfield State Agency, Inc.
("Richfield State Agency"), a bank holding company with offices located in the
Minneapolis/St. Paul, Minnesota metropolitan area. Richfield State Agency is
the holding company of Richfield Bank and Trust Co. As of December 31, 2001,
Richfield State Agency had consolidated total assets of $735.5 million and
consolidated total deposits of $547.8 million.

Also on March 1, 2002, M&I completed a merger with Century Bancshares, Inc.
("Century Bancshares"), the holding company for Century Bank, National
Association, located in the Minneapolis, Minnesota metropolitan area. As of
December 31, 2001, Century Bancshares had consolidated total assets of $326.2
million and consolidated total deposits of $280.4 million. Following the
acquisitions of National City, Richfield State Agency and Century Bancshares,
the number of M&I's banking offices in Minnesota totals twelve.

M&I also significantly added to its banking presence in Arizona during 2001
through the purchase of twelve branch offices. These branch acquisitions added
approximately $455 million of deposits and $345 million of loans to M&I Bank's
Arizona banking operations.

During 2001, Metavante strengthened its electronic banking, electronic bill
presentment and payment and wealth management businesses through acquisitions.
On June 1, 2001, Metavante acquired Derivion Corporation, a provider of
electronic bill presentment and payment technology and services. On June 20,
2001, Metavante acquired substantially all of the assets of CyberBills, Inc., a
provider of electronic bill presentment and payment technology and services. On
September 19, 2001, Metavante acquired substantially all of the assets of the
North American Internet banking unit of Brokat Technologies AG, a provider of
financial software and services. On

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December 20, 2001, Metavante acquired 401kservices.com, inc., a third-party
administrator of employee benefit plans.

M&I continues to evaluate opportunities to acquire banking institutions and
other financial service providers and frequently conducts due diligence
activities in connection with possible transactions. As a result, M&I may
engage in discussions, and in some cases, negotiations with prospective targets
and may make future acquisitions for cash, equity or debt securities. The
issuance of additional shares of M&I common stock would dilute a shareholder's
ownership interest in M&I. In addition, M&I's acquisitions may involve the
payment of a premium over book value, and therefore, some dilution of book
value may occur with any future acquisition. Generally, it is M&I's policy not
to comment on such discussions or possible acquisitions until a definitive
agreement has been signed. M&I's strategy for growth includes strengthening its
presence in core markets, expanding into contiguous markets and broadening its
product offerings.

Principal Sources of Revenue

The table below shows the amount and percentages of M&I's total consolidated
revenues resulting from interest on loans and leases, interest on investment
securities and fees for data processing services for each of the last three
years ($ in thousands):



Interest on Interest on Fees for Data
Loans and Leases Investment Securities Processing Services
-------------------- --------------------- -------------------
Percent Percent Percent
of Total of Total of Total Total
Year Ended Operating Operating Operating Operating
December 31 Amount Revenues Amount Revenues Amount Revenues Revenues
- ----------- ---------- --------- -------- --------- -------- --------- ----------

2001.... $1,358,802 50.1% $349,421 12.9% $559,816 20.6% $2,711,919
2000.... 1,391,651 51.9 354,823 13.2 546,041 20.4 2,681,138
1999.... 1,156,775 48.6 337,945 14.2 494,816 20.8 2,379,660


M&I business segment information is contained in Note 22 of the Notes to the
Consolidated Financial Statements contained in Item 8, Consolidated Financial
Statements and Supplementary Data.

Competition

M&I and its subsidiaries face substantial competition from hundreds of
competitors in the markets they serve, some of which are larger and have
greater resources than M&I. M&I's bank subsidiaries compete for deposits and
other sources of funds and for credit relationships with other banks, savings
associations, credit unions, finance companies, mutual funds, life insurance
companies (and other long-term lenders) and other financial and non-financial
companies located both within and outside M&I's primary market area, many of
which offer products functionally equivalent to bank products. M&I's nonbank
operations compete with numerous banks, finance companies, data servicing
companies, leasing companies, mortgage bankers, brokerage firms, financial
advisors, trust companies, mutual funds and investment bankers in Wisconsin and
throughout the United States.

The markets for the financial products and services offered by Metavante are
intensely competitive. Metavante competes with a variety of companies in
various segments of the financial services industry, and its competitors vary
in size and in the scope and breadth of products and services they offer.
Certain segments of the financial services industry tend to be highly
fragmented with numerous companies competing for market share. Highly
fragmented segments currently include online banking, financial account
processing, customer relationship management solutions and electronic funds
transfer and card solutions. Other segments of the financial services industry
are relatively new with limited competition, including private label banking and

4



wealth management solutions. Metavante faces a number of competitors in the
electronic bill presentment and payment market. Metavante also faces
competition from in-house technology departments of existing and potential
clients who may develop their own product offerings.

Employees

As of December 31, 2001, M&I and its subsidiaries employed in the aggregate
11,657 employees. M&I considers employee relations to be excellent. None of the
employees of M&I or its subsidiaries are represented by a collective bargaining
group.

Supervision and Regulation

As a registered bank holding company, M&I is subject to regulation and
examination by the Federal Reserve Board under the BHCA. M&I's two Wisconsin
state bank subsidiaries are subject to regulation and examination by the
Wisconsin Department of Financial Institutions, as well as by the Federal
Reserve Board. M&I's Minnesota state bank subsidiary is subject to regulation
and examination by the Minnesota Department of Commerce, as well as by the
Federal Deposit Insurance Corporation (the "FDIC"). M&I's federal savings bank
subsidiary is subject to regulation and examination by the Office of Thrift
Supervision. M&I's national bank and trust company subsidiaries are subject to
regulation and examination by the Office of the Comptroller of the Currency. In
addition, all of M&I's bank subsidiaries are subject to examination by the FDIC.

Under Federal Reserve Board policy, M&I is expected to act as a source of
financial strength to each of its bank subsidiaries and to commit resources to
support each bank subsidiary in circumstances when it might not do so absent
such requirements. In addition, there are numerous federal and state laws and
regulations which regulate the activities of M&I and its bank subsidiaries,
including requirements and limitations relating to capital and reserve
requirements, permissible investments and lines of business, transactions with
affiliates, loan limits, consumer protection laws, privacy of financial
information, predatory lending, fair lending, mergers and acquisitions,
issuances of securities, dividend payments, inter-affiliate liabilities,
extensions of credit and branch banking. Information regarding capital
requirements for bank holding companies and tables reflecting M&I's regulatory
capital position at December 31, 2001 can be found in Note 14 of the Notes to
the Consolidated Financial Statements contained in Item 8, Consolidated
Financial Statements and Supplementary Data.

The federal regulatory agencies have broad power to take prompt corrective
action if a depository institution fails to maintain certain capital levels. In
addition, a bank holding company's controlled insured depository institutions
are liable for any loss incurred by the FDIC in connection with the default of,
or any FDIC-assisted transaction involving, an affiliated insured bank or
savings association. Current federal law provides that adequately capitalized
and managed bank holding companies from any state may acquire banks and bank
holding companies located in any other state, subject to certain conditions.
Banks are permitted to create interstate branching networks in states that do
not "opt out" of interstate branching.

The laws and regulations to which M&I is subject are constantly under review
by Congress, regulatory agencies and state legislatures. In 1999, Congress
enacted the Gramm-Leach-Bliley Act (the "Act"), which eliminated certain
barriers to and restrictions on affiliations between banks and securities
firms, insurance companies and other financial services organizations. Among
other things, the Act repealed certain Glass- Steagall Act restrictions on
affiliations between banks and securities firms, and amended the BHCA to permit
bank holding companies that qualify as "financial holding companies" to engage
in a broad list of "financial activities," and any non-financial activity that
the Federal Reserve Board, in consultation with the Secretary of the Treasury,
determines is "complementary" to a financial activity and poses no substantial
risk to the safety and soundness of depository institutions or the financial
system. The Act treats various lending, insurance underwriting, insurance
company portfolio investment, financial advisory, securities underwriting,
dealing and market-making, and merchant banking activities as financial in
nature for this purpose.

5



Under the Act, a bank holding company may become certified as a financial
holding company by filing a notice with the Federal Reserve Board, together
with a certification that the bank holding company meets certain criteria,
including capital, management, and Community Reinvestment Act requirements. M&I
has determined not to become certified as a financial holding company at this
time. M&I may reconsider this determination in the future.

The earnings and business of M&I and its bank subsidiaries also are affected
by the general economic and political conditions in the United States and
abroad and by the monetary and fiscal policies of various federal agencies. The
Federal Reserve Board impacts the competitive conditions under which M&I
operates by determining the cost of funds obtained from money market sources
for lending and investing and by exerting influence on interest rates and
credit conditions. In addition, legislative and economic factors can be
expected to have an ongoing impact on the competitive environment within the
financial services industry. The impact of fluctuating economic conditions and
federal regulatory policies on the future profitability of M&I and its
subsidiaries cannot be predicted with certainty.

Selected Statistical Information

Statistical information relating to M&I and its subsidiaries on a
consolidated basis is set forth as follows:

(1) Average Balance Sheets and Analysis of Net Interest Income for each
of the last three years is included in Item 7, Management's Discussion and
Analysis of Financial Position and Results of Operations.

(2) Analysis of Changes in Interest Income and Interest Expense for each
of the last two years is included in Item 7, Management's Discussion and
Analysis of Financial Position and Results of Operations.

(3) Nonaccrual, Past Due and Restructured Loans and Leases for each of
the last five years is included in Item 7, Management's Discussion and
Analysis of Financial Position and Results of Operations.

(4) Summary of Loan and Lease Loss Experience for each of the last five
years (including the narrative discussion) is included in Item 7,
Management's Discussion and Analysis of Financial Position and Results of
Operations.

(5) Return on Average Shareholders' Equity, Return on Average Assets and
other statistical ratios for each of the last five years can be found in
Item 6, Selected Financial Data.

The following tables set forth certain statistical information relating to
M&I and its subsidiaries on a consolidated basis.

Investment Securities

The amortized cost of M&I's consolidated investment securities, other than
trading and other short-term investments, at December 31 of each year are ($ in
thousands):



2001 2000 1999
---------- ---------- ----------

U.S. Treasury and government agencies....... $2,268,681 $3,303,366 $3,924,192
States and political subdivisions........... 1,198,685 1,251,359 1,277,638
Other....................................... 850,980 1,235,156 377,289
---------- ---------- ----------
$4,318,346 $5,789,881 $5,579,119
========== ========== ==========


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The maturities, at amortized cost, and weighted average yields (for
tax-exempt obligations on a fully taxable basis assuming a 35% tax rate) of
investment securities at December 31, 2001 are ($ in thousands):



After Five but
After One but Within Ten
Within One Year Within Five Years Years After Ten Years Total
---------------- ----------------- -------------- --------------- ----------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
---------- ----- ---------- ----- -------- ----- -------- ----- ---------- -----

U.S. Treasury and
government agencies.... $ 711,100 6.82% $1,349,328 6.80% $202,473 6.93% $ 5,780 6.93% $2,268,681 6.82%
States and political
subdivisions........... 70,093 6.76 354,576 6.97 236,214 7.30 537,802 7.45 1,198,685 7.24
Other................... 414,121 7.55 247,654 7.29 59,268 5.87 129,937 3.11 850,980 6.68
---------- ---- ---------- ---- -------- ---- -------- ---- ---------- ----
$1,195,314 7.07% $1,951,558 6.89% $497,955 6.98% $673,519 6.61% $4,318,346 6.91%
========== ==== ========== ==== ======== ==== ======== ==== ========== ====


Types of Loans and Leases

M&I's consolidated loans and leases, classified by type, at December 31 of
each year are ($ in thousands):



2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------

Commercial, financial
and agricultural.................. $ 5,656,384 $ 5,230,795 $ 4,691,996 $ 4,025,663 $ 3,346,101
Industrial development
revenue bonds..................... 71,892 58,742 62,861 52,174 49,126
Real estate:
Construction....................... 730,864 619,281 494,558 425,442 458,670
Mortgage:
Residential...................... 5,563,975 5,049,557 4,941,450 4,045,022 4,146,416
Commercial....................... 5,099,093 4,359,812 4,034,771 3,667,924 3,450,897
----------- ----------- ----------- ----------- -----------
Total mortgage............... 10,663,068 9,409,369 8,976,221 7,712,946 7,597,313
Personal............................ 1,210,808 1,174,248 1,299,416 1,166,541 1,161,608
Lease financing..................... 962,356 1,094,652 810,009 613,400 489,094
----------- ----------- ----------- ----------- -----------
19,295,372 17,587,087 16,335,061 13,996,166 13,101,912
Less:
Allowance for loan and lease losses 268,198 235,115 225,862 226,052 208,651
----------- ----------- ----------- ----------- -----------
Net loans and leases................ $19,027,174 $17,351,972 $16,109,199 $13,770,114 $12,893,261
=========== =========== =========== =========== ===========


7



Loan and Lease Balances and Maturities

The analysis of selected loan and lease maturities at December 31, 2001 and
the rate structure for the categories indicated are ($ in thousands):



Rate Structure of Loans and Leases
Maturity Due After One Year
-------------------------------------------- ----------------------------------
Over One With Pre- With
One Year Year Through Over Five determined Floating
Or Less Five Years Years Total Rate Rate Total
---------- ------------ --------- ---------- ---------- ---------- ----------

Commercial, financial
and agricultural...... $3,654,314 $1,816,766 $185,304 $5,656,384 $1,249,732 $ 752,338 $2,002,070
Industrial development
revenue bonds......... 2,609 12,907 56,376 71,892 48,694 20,589 69,283
Real estate-construction 274,626 456,238 -- 730,864 187,697 268,541 456,238
Lease financing......... 222,273 659,789 80,294 962,356 740,083 -- 740,083
---------- ---------- -------- ---------- ---------- ---------- ----------
$4,153,822 $2,945,700 $321,974 $7,421,496 $2,226,206 $1,041,468 $3,267,674
========== ========== ======== ========== ========== ========== ==========


Notes:

(1) Scheduled repayments are reported in the maturity category in which the
payments are due based on the terms of the loan agreements. Demand loans,
loans having no stated schedule of repayments and no stated maturity, and
over-drafts are reported as due in one year or less.

(2) Amounts shown for the rate structure of loans and leases due after one year
include the estimated effect arising from the use of interest rate swaps.

Nonaccrual, Past Due and Restructured Loans and Leases

Generally, a loan is placed on nonaccrual if payment of interest is more
than 60 days delinquent and the loan has been determined by management to be a
"problem" loan. In addition, loans which are past due 90 days or more as to
interest or principal are also placed on nonaccrual. Exceptions to these rules
are generally only for loans fully collateralized by readily marketable
securities or other relatively risk free collateral.

Potential Problem Loans and Leases

At December 31, 2001 the Corporation had $67.1 million of loans for which
payments are presently current, but the borrowers are experiencing financial
problems. These loans are subject to constant management attention and their
classification is reviewed on a quarterly basis.

Deposits

The average amount of and the average rate paid on selected deposit
categories for each of the years ended December 31 is as follows ($ in
thousands):



2001 2000 1999
---------------- ---------------- ----------------
Amount Rate Amount Rate Amount Rate
----------- ---- ----------- ---- ----------- ----

Noninterest bearing demand deposits $ 2,895,083 $ 2,648,419 $ 2,663,609
Interest bearing demand deposits... 1,088,186 1.21% 1,069,958 1.66% 1,116,919 1.54%
Savings deposits................... 6,419,204 3.21 6,017,730 4.82 5,740,898 3.86
Time deposits...................... 6,788,118 5.12 7,761,676 5.98 6,635,476 5.23
----------- ----------- -----------
Total deposits..................... $17,190,591 $17,497,783 $16,156,902
=========== =========== ===========


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The maturity distribution of time deposits (CDs $100,000 and over and other
time) issued in amounts of $100,000 and over and outstanding at December 31,
2001 ($ in thousands) is:



Three months or less.................................. $ 450,453
Over three and through six months..................... 274,020
Over six and through twelve months.................... 250,439
Over twelve months.................................... 351,224
----------
$1,326,136
==========


At December 31, 2001, time deposits issued by foreign offices totaled $0.8
billion.

Short-Term Borrowings

Information related to M&I's funds purchased and security repurchase
agreements for the last three years is as follows ($ in thousands):



2001 2000 1999
---------- ---------- ----------

Amount outstanding at year end................ $1,090,150 $1,092,723 $1,402,077
Average amount outstanding during the year.... 2,076,787 2,211,537 2,276,978
Maximum amount outstanding at any month's end. 2,760,183 2,767,114 2,609,501
Weighted average interest rate at year end.... 1.20% 5.91% 3.95%
Weighted average interest rate during the year 3.93 6.28 5.00


Information relating to the Corporation's other short-term borrowings is
included in Note 12 to the Consolidated Financial Statements in Item 8.

Forward-Looking Statements

This report contains statements that may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, such as statements other than historical facts contained or
incorporated by reference in this report. These statements speak of M&I's
plans, goals, beliefs or expectations, refer to estimates or use similar terms.
Future filings by M&I with the Securities and Exchange Commission, and
statements other than historical facts contained in written material, press
releases and oral statements issued by, or on behalf of, M&I may also
constitute forward-looking statements.

Forward-looking statements are subject to significant risks and
uncertainties, and M&I's actual results may differ materially from the results
discussed in such forward-looking statements. Factors that might cause actual
results to differ from the results discussed in forward-looking statements
include, but are not limited to the following:

M&I's earnings are significantly affected by general business and economic
conditions.

M&I's business and earnings are sensitive to general business and economic
conditions in the United States and, in particular, the states where it has
significant operations, including Wisconsin, Minnesota and Arizona. These
conditions include short-term and long-term interest rates, inflation, monetary
supply, fluctuations in both debt and equity capital markets, the strength of
the U.S. and local economies and consumer spending, borrowing and saving
habits. For example, an economic downturn or higher interest rates could
decrease the demand for loans and other products and services and/or result in
a deterioration in credit quality and/or loan performance

9



and collectability. Higher interest rates also could increase M&I's cost to
borrow funds and increase the rate M&I pays on deposits.

The long-term economic and political effects of recent terrorist attacks on the
United States and an economic slowdown could negatively affect M&I's financial
condition.

On September 11, 2001, New York City and Washington, D.C. suffered serious
terrorist attacks. The long-term economic and political impact of these acts
has yet to be determined, and the ultimate cost associated with these attacks
and related incidents may place significant burdens on the United States
economy as a whole. The potential for future terrorist attacks, the national
and international responses to terrorist attacks and other acts of war or
hostility have created many economic and political uncertainties. These events
could adversely affect M&I's business and operating results in other ways that
presently cannot be predicted. In addition, an overall economic slowdown could
negatively impact the purchasing and decision making activities of Metavante's
financial institution customers. If these prior acts or additional terrorist
attacks or other factors cause an overall economic decline, the financial
condition and operating results of M&I could be materially adversely affected.

M&I earnings also are significantly affected by the fiscal and monetary
policies of the federal government and its agencies.

The policies of the Federal Reserve Board impact M&I significantly. The
Federal Reserve Board regulates the supply of money and credit in the United
States. Its policies directly and indirectly influence the rate of interest
paid on interest-bearing deposits and can also affect the value of financial
instruments M&I holds. Those policies determine to a significant extent M&I's
cost of funds for lending and investing. Changes in those policies are beyond
M&I's control and are difficult to predict. Federal Reserve Board policies can
affect M&I's borrowers, potentially increasing the risk that they may fail to
repay their loans. For example, a tightening of the money supply by the Federal
Reserve Board could reduce the demand for a borrower's products and services.
This could adversely affect the borrower's earnings and ability to repay its
loan.

The banking and financial services industry is highly competitive.

M&I operates in a highly competitive environment in the products and
services M&I offers and the markets in which M&I operates. The competition
among financial services providers to attract and retain customers is intense.
Customer loyalty can be easily influenced by a competitor's new products,
especially offerings that provide cost savings to the customer. Some of M&I's
competitors may be better able to provide a wider range of products and
services over a greater geographic area.

M&I believes the banking and financial services industry will become even
more competitive as a result of legislative, regulatory and technological
changes and the continued consolidation of the industry. Technology has lowered
barriers to entry and made it possible for non-banks to offer products and
services traditionally provided by banks, such as automatic transfer and
automatic payment systems. Also, investment banks and insurance companies are
competing in more banking businesses such as syndicated lending and consumer
banking. Many of M&I's competitors are subject to fewer regulatory constraints
and have lower costs structures. M&I expects the consolidation of the banking
and financial services industry to result in larger, better-capitalized
companies offering a wide array of financial services and products.

The Gramm-Leach-Bliley Act permits banks, securities firms and insurance
companies to merge by creating a new type of financial services company called
a financial holding company. Financial holding companies can offer virtually
any type of financial service, including banking, securities underwriting,
insurance (both agency and underwriting) and merchant banking. Under the Act,
securities firms and insurance companies that elect to become a financial
holding company can acquire banks and other financial institutions. The Act may
significantly change M&I's competitive environment.

10



M&I is heavily regulated by federal and state agencies.

The holding company, its subsidiary banks and many of its non-bank
subsidiaries are heavily regulated at the federal and state levels. This
regulation is designed primarily to protect consumers, depositors and the
banking system as a whole, not stockholders. Congress and state legislatures
and federal and state regulatory agencies continually review banking laws,
regulations and policies for possible changes. Changes to statutes, regulations
or regulatory policies, including changes in interpretation or implementation
of statutes, regulations or policies, could affect M&I in substantial and
unpredictable ways including limiting the types of financial services and
products M&I may offer, increasing the ability of non-banks to offer competing
financial services and products and/or increasing M&I's cost structures. Also,
M&I's failure to comply with laws, regulations or policies could result in
sanctions by regulatory agencies and damage to its reputation.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial
transactions that historically have involved banks at one or both ends of the
transaction. For example, consumers can now pay bills and transfer funds
directly without banks. The process of eliminating banks as intermediaries,
known as disintermediation, could result in the loss of fee income, as well as
the loss of customer deposits and income generated from those deposits.

Maintaining or increasing M&I's market share depends on market acceptance and
regulatory approval of new products and services and other factors.

M&I's success depends in part on its ability to adapt its products and
services to evolving industry standards and to control expenses. There is
increasing pressure on financial services companies to provide products and
services at lower prices. This can reduce M&I's net interest margin and
revenues from its fee-based products and services. In addition, M&I's success
depends in part on its ability to generate significant levels of new business
in its existing markets and in identifying and penetrating markets. Further,
the widespread adoption of new technologies, including Internet-based services,
could require M&I to make substantial expenditures to modify or adapt its
existing products and services. M&I may not successfully introduce new products
and services, achieve market acceptance of its products and services, develop
and maintain loyal customers and/or break into targeted markets.

The holding company relies on dividends from its subsidiaries for most of its
revenue, and the banking subsidiaries hold a significant portion of their
assets indirectly.

The holding company is a separate and distinct legal entity from its
subsidiaries. It receives substantially all of its revenue from dividends from
its subsidiaries. These dividends are the principal source of funds to pay
dividends on the holding company's common stock and interest on its debt. The
payment of dividends by a subsidiary is subject to federal law restrictions as
well as to the laws of the subsidiary's state of incorporation. Also, a parent
company's right to participate in a distribution of assets upon a subsidiary's
liquidation or reorganization is subject to the prior claims of the
subsidiary's creditors. In addition, the M&I bank and savings association
subsidiaries hold a significant portion of their mortgage loan and investment
portfolios indirectly through their ownership interests in direct and indirect
subsidiaries.

M&I has an active acquisition program.

M&I regularly explores opportunities to acquire banking institutions and
other financial services providers. M&I cannot predict the number, size or
timing of future acquisitions. M&I typically does not publicly comment on a
possible acquisition or business combination until it has signed a definitive
agreement for the transaction.

Difficulty in integrating an acquired company many cause M&I not to realize
expected revenue increases, cost savings, increases in geographic or product
presence, and/or other projected benefits from the acquisition.

11



Specifically, the integration process could result in higher than expected
deposit attrition (run-off), loss of key employees, the disruption of M&I's
business or the business of the acquired company, or otherwise adversely affect
M&I's ability to maintain existing relationships with clients, employees and
suppliers or to enter into new business relationships. These factors could
contribute to M&I not achieving the anticipated benefits of the acquisition
within the desired time frames, if at all.

Future acquisitions could require M&I to use substantial cash or liquid
assets or to incur debt. In such cases, M&I could become more susceptible to
economic downturns and competitive pressures.

M&I is dependent on senior management.

M&I's continued success depends to a significant extent upon the continued
services of its senior management. The loss of services of any of M&I's senior
executive officers could cause M&I's business to suffer. In addition, M&I's
success depends in part upon senior management's ability to implement M&I's
business strategy.

M&I's stock price can be volatile.

M&I's stock price can fluctuate widely in response to a variety of factors
including:

. actual or anticipated variations in M&I's quarterly operating results;

. new technology or services by M&I's competitors;

. significant acquisitions or business combinations, strategic partnerships,
joint ventures or capital commitments by or involving M&I or its
competitors;

. changes in accounting policies or practices;

. failure to integrate M&I's acquisitions or realize anticipated benefits
from M&I's acquisitions; or

. changes in government regulations.

General market fluctuations, industry factors and general economic and
political conditions, such as economic slowdowns or recessions, interest rate
changes, credit loss trends or currency fluctuations, also could cause M&I's
stock price to decrease regardless of its operating results.

M&I may be a defendant in a variety of litigation and other actions, which may
have a material adverse effect on its business, operating results and financial
condition.

M&I and its subsidiaries may be involved from time to time in a variety of
litigation arising out of M&I's business. M&I's insurance may not cover all
claims that may be asserted against it, and any claims asserted against M&I,
regardless of merit or eventual outcome, may harm M&I's reputation. Should the
ultimate judgements or settlements in any litigation exceed M&I's insurance
coverage, they could have a material effect on M&I's business, operating
results and financial condition. In addition, M&I may not be able to obtain
appropriate types or levels of insurance in the future, nor may M&I be able to
obtain adequate replacement policies with acceptable terms, if at all.

In addition to the factors discussed above, the following factors concerning
Metavante's business may cause M&I's results to differ from the results
discussed in forward-looking statements:

Metavante relies on the continued functioning of its data centers and the
integrity of the data it processes.

Metavante's data centers are an integral part of its business. Damage to
Metavante's data centers, particularly its Wisconsin data centers, due to fire,
power loss, telecommunications failure and other disasters

12



could have a material adverse effect on Metavante's business, operating results
and financial condition. In addition, because Metavante relies on the integrity
of the data it processes, if this data is incorrect or somehow tainted, client
relations and confidence in Metavante's services could be impaired, which would
harm Metavante's business.

Network operational difficulties or security problems could damage Metavante's
reputation and business.

Metavante depends on the reliable operation of network connections from its
clients and its clients' end users to its systems. Any operational problems or
outages in these systems would cause Metavante to be unable to process
transactions for its clients and its clients' end users, resulting in decreased
revenues. In addition, any system delays, failures or loss of data, whatever
the cause, could reduce client satisfaction with Metavante's products and
services and harm Metavante's financial results.

Metavante also depends on the security of its systems. Metavante's networks
may be vulnerable to unauthorized access, computer viruses and other disruptive
problems. Metavante transmits confidential financial information in providing
its services. A material security problem affecting Metavante could damage its
reputation, deter financial services providers from purchasing its products,
deter their customers from using its products or result in liability to
Metavante. Any material security problem affecting Metavante's competitors
could affect the marketplace's perception of Internet banking and electronic
commerce service in general and have the same effects.

Metavante may not be able to protect its intellectual property, and Metavante
may be subject to infringement claims.

Metavante relies on a combination of contractual rights and copyright,
trademark, patent and trade secret laws to establish and protect its
proprietary technology. Despite Metavante's efforts to protect its intellectual
property, third parties may infringe or misappropriate Metavante's intellectual
property or may develop software or technology competitive to Metavante's.
Metavante's competitors may independently develop similar technology, duplicate
its products or services or design around Metavante's intellectual property
rights. Metavante may have to litigate to enforce and protect its intellectual
property rights, trade secrets and know-how or to determine their scope,
validity or enforceability, which is expensive, could cause a diversion of
resources and may not prove successful. The loss of intellectual property
protection or the inability to secure or enforce intellectual property
protection could harm Metavante's business and ability to compete.

Metavante also may be subject to costly litigation in the event its products
or technology infringe upon another party's proprietary rights. Third parties
may have, or may eventually be issued, patents that would be infringed by
Metavante's products or technology. Any of these third parties could make a
claim of infringement against Metavante with respect to its products or
technology. Any such claims and any resulting litigation could subject
Metavante to significant liability for damages. An adverse determination in any
litigation of this type could require Metavante to design around a third
party's patent or to license alternative technology from another party. In
addition, litigation is time consuming and expensive to defend and could result
in the diversion of Metavante's time and attention. Any claims from third
parties may also result in limitations on Metavante's ability to use the
intellectual property subject to these claims.

Metavante's business could suffer if it fails to attract and retain key
technical people.

Metavante's success depends in large part upon Metavante's ability to
attract and retain highly skilled technical, management and sales and marketing
personnel. Because the development of Metavante's products and services
requires knowledge of computer hardware, operating system software, system
management software and application software, key technical personnel must be
proficient in a number of disciplines. Competition for the best people--in
particular individuals with technology experience--is intense. Metavante may
not be able to hire key people or pay them enough to keep them.

13



All forward-looking statements contained in this report or which may be
contained in future statements made for or on behalf of M&I are based upon
information available at the time the statement is made and M&I assumes no
obligation to update any forward-looking statement.

ITEM 2. PROPERTIES

M&I and M&I Marshall & Ilsley Bank ("M&I Bank") occupy offices on all or
portions of 15 floors of a 21-story building located at 770 North Water Street,
Milwaukee, Wisconsin. M&I Bank owns the building and its adjacent 10-story
parking lot and leases the remaining floors to a professional tenant. In
addition, various subsidiaries of M&I lease commercial office space in downtown
Milwaukee office buildings near the 770 North Water Street facility. M&I Bank
also owns or leases various branch offices throughout Wisconsin, 25 offices in
the Phoenix and Tucson, Arizona metropolitan areas and two offices in the
Minneapolis, Minnesota metropolitan area. M&I Bank of Mayville, a special
limited purpose subsidiary of M&I located in Mayville, Wisconsin, and M&I Bank
FSB, a federal savings bank subsidiary of M&I located in Las Vegas, Nevada with
branches in Naples, Florida and Milwaukee, Wisconsin, occupy modern facilities
which are leased. Metavante owns a data processing facility located in Brown
Deer, a suburb of Milwaukee, from which Metavante conducts data processing
activities and a facility in Milwaukee that houses its software development
teams. Properties leased by Metavante also include commercial office space in
Brown Deer and Milwaukee, a data processing site in Oak Creek, Wisconsin, and
processing centers and sales offices in various cities throughout the United
States. The foregoing paragraph describes M&I's properties as of December 31,
2001.

ITEM 3. LEGAL PROCEEDINGS

M&I is not currently involved in any material pending legal proceedings
other than litigation of a routine nature and various legal matters which are
being defended and handled in the ordinary course of business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

Executive Officers of the Registrant



Name of Officer Office
--------------- ------

James B. Wigdale Chairman of the Board since December 1992, Chief Executive Officer from October
Age 65 1992 to December 2001, Director since December 1988, Vice Chairman of the Board,
December 1988 to December 1992, Marshall & Ilsley Corporation; Chairman of the
Board from January 1989 to October 2001, Chief Executive Officer from 1987 to
October 2001, Director since 1981, M&I Marshall & Ilsley Bank; Director and
President, M&I Ventures L.L.C. and M&I Capital Markets Group L.L.C.; Director,
Metavante Corporation, M&I Brokerage Services, Inc., Marshall & Ilsley Trust
Company N.A., M&I Investment Management Corp. and M&I Insurance Services, Inc.

Dennis J. Kuester Chief Executive Officer since January 2002, President since 1987, Director since
Age 60 February 1994, Marshall & Ilsley Corporation; Chairman and Chief Executive Officer
since October 2001, President from January 1989 to October 2001, Director since
January 1989, M&I Marshall & Ilsley Bank; Chairman of the Board and Director,
Metavante Corporation; Director, M&I Support Services Corp., Marshall & Ilsley Trust
Company N.A. and M&I Investment Management Corp.; Director and President, M&I
Insurance Company of Arizona, Inc.; Director and Treasurer, M&I Ventures L.L.C. and
M&I Capital Markets Group L.L.C.


14





Name of Officer Office
--------------- ------

Thomas M. Bolger Executive Vice President since October 2001, Senior Vice President and Chief Credit
Age 51 Officer from 1994 to October 2001, Marshall & Ilsley Corporation; President and
Director since October 2001, Executive Vice President from 1997 to October 2001,
M&I Marshall & Ilsley Bank; Director, M&I First National Leasing Corp., M&I
Support Services Corp., Metavante Corporation, Marshall & Ilsley Trust Company
N.A., M&I Bank of Mayville, Diversified Business Credit, Inc. and M&I Investment
Management Corp.

Joseph L. Delgadillo Senior Vice President of Marshall & Ilsley Corporation since 1993; Chief Executive
Age 49 Officer since January 1998 and Director of Metavante Corporation since 1994;
President and Chief Operating Officer of Metavante Corporation since 1993; Senior
Vice President of Metavante Corporation from 1989 to 1993; Director and Executive
Vice President, Metavante International, Inc. since 1996; Director, Metavante
401kservices, Inc. and Customers Forever, LLC.

Mark F. Furlong Executive Vice President, Chief Financial Officer and Secretary of Marshall & Ilsley
Age 44 Corporation since 2001; Director, Marshall & Ilsley Trust Company N.A., Metavante
Corporation and M&I Investment Management Corp.; Executive Vice President and
Chief Financial Officer of Old Kent Financial Corporation from 1998 to 2001; First
Vice President/Director of Corporate Development/Commercial Banking of H.F.
Ahmanson & Co. from 1992 to 1998.

Mark R. Hogan Senior Vice President and Chief Credit Officer since October 2001, Marshall & Ilsley
Age 47 Corporation; Senior Vice President and Chief Credit Officer since November 1995,
M&I Marshall & Ilsley Bank; Director, M&I First National Leasing Corp. and
Diversified Business Credit, Inc.

Patricia R. Justiliano Senior Vice President since 1994 and Corporate Controller since April 1989, Vice
Age 51 President from 1986 to 1994, Marshall & Ilsley Corporation; Controller, M&I Marshall
& Ilsley Bank, since September 1998; Director and Treasurer, M&I Insurance Company
of Arizona, Inc. and M&I Mortgage Reinsurance Corporation; Director, M&I Bank
FSB, M&I Mortgage Corp. and M&I Bank of Mayville.

Thomas J. O'Neill Senior Vice President since April 1997, Marshall & Ilsley Corporation; Executive Vice
Age 41 President since 2000, Senior Vice President since 1997, Vice President since 1990, M&I
Marshall & Ilsley Bank; President and Director, M&I Mortgage Corp., M&I Bank FSB,
M&I Dealer Finance, Inc. and M&I Mortgage Reinsurance Corporation; Director, M&I
Support Services Corp., M&I Brokerage Services, Inc., M&I Insurance Services, Inc.,
M&I Bank of Mayville and M&I Community Development Corporation.

Paul J. Renard Senior Vice President, Director of Human Resources since 2000, Vice President and
Age 41 Manager since 1994, Marshall & Ilsley Corporation.

John L. Roberts Senior Vice President, Marshall & Ilsley Corporation since 1994; Senior Vice President
Age 49 since 1994, Vice President and Controller from 1986 to 1995, M&I Marshall & Ilsley
Bank; President and Director, M&I Support Services Corp. since 1995; Director, M&I
Bank FSB and M&I Mortgage Corp,; President and Director, M&I Bank of Mayville.

Thomas A. Root Senior Vice President since 1998, Audit Director since May 1996, Vice President from
Age 45 1991 to 1998, Marshall & Ilsley Corporation; Vice President and Auditor since 1993,
M&I Marshall & Ilsley Bank.

Leigh I. Sherman Senior Vice President, Director of Marketing since 1996, Marshall & Ilsley
Age 53 Corporation.


15





Name of Officer Office
--------------- ------


Jeffrey V. Williams Senior Vice President since December 1997, Marshall & Ilsley Corporation; Executive
Age 57 Vice President and Chief Operating Officer since January 1999, Marshall & Ilsley Trust
Company N.A.; Chief Executive Officer and Director since January 1996, M&I
Insurance Services, Inc.; Senior Vice President since 1994, M&I Marshall & Ilsley
Bank; Chief Executive Officer and Director, M&I Brokerage Services, Inc.; Executive
Vice President, Chief Operating Officer and Director, Marshall & Ilsley Trust Company
N.A.; Director, M&I Capital Markets Group L.L.C., M&I Portfolio Services, Inc., M&I
Investment Management Corp., M&I Ventures L.L.C. and M&I Insurance Services, Inc.

Donald H. Wilson Senior Vice President and Treasurer since December 1996, Vice President and
Age 42 Treasurer since 1995, Marshall & Ilsley Corporation; Director, M&I Custody of
Nevada, Inc., M&I Bank FSB, M&I Community Development Corporation and M&I
Mortgage Corp.


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Stock Listing

M&I's common stock is traded under the symbol "MI" on the New York Stock
Exchange. Common dividends declared and the price range for M&I's common stock
for each of the last five years can be found in Item 8, Consolidated Financial
Statements, Quarterly Financial Information.

A discussion of the regulatory restrictions on the payment of dividends can
be found under Item 7, Management's Discussion and Analysis of Financial
Position and Results of Operations, and in Note 14 in Item 8, Consolidated
Financial Statements.

Holders of Common Equity

At December 31, 2001 M&I had approximately 19,311 record holders of its
common stock.

16



ITEM 6. SELECTED FINANCIAL DATA

Consolidated Summary of Operating Earnings
Years Ended December 31 ($000's except share data)



2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------

Interest Income:
Loans and Leases........................ $1,358,798 $1,391,651 $1,156,775 $1,085,829 $ 921,161
Investment Securities
Taxable.............................. 270,336 272,536 269,668 280,377 240,238
Tax Exempt........................... 62,273 65,429 58,820 52,969 45,420
Other Short-term Investments............ 17,696 18,366 11,321 14,869 13,514
---------- ---------- ---------- ---------- ----------
Total Interest Income................ 1,709,103 1,747,982 1,496,584 1,434,044 1,220,333
Interest Expense:
Deposits................................ 566,899 772,016 585,864 564,540 460,418
Short-term Borrowings................... 188,587 224,187 142,294 126,624 111,193
Long-term Borrowings.................... 110,814 78,773 63,145 66,810 54,175
---------- ---------- ---------- ---------- ----------
Total Interest Expense............... 866,300 1,074,976 791,303 757,974 625,786
---------- ---------- ---------- ---------- ----------
Net Interest Income......................... 842,803 673,006 705,281 676,070 594,547
Provision for Loan and Lease Losses......... 54,115 30,352 25,419 27,090 17,633
---------- ---------- ---------- ---------- ----------
Net Interest Income After Provision for Loan
and Lease Losses.......................... 788,688 642,654 679,862 648,980 576,914
Other Income:
Data Processing Services.................. 559,816 546,041 494,816 421,945 344,362
Trust Services............................ 120,827 117,680 100,963 88,496 78,595
Net Securities Gains (Losses)............. (1,113) 1,051 (4,083) 7,145 (2,578)
Other..................................... 339,339 318,950 291,380 276,914 213,732
---------- ---------- ---------- ---------- ----------
Total Other Income................... 1,018,869 983,722 883,076 794,500 634,111
Other Expense:
Salaries and Benefits..................... 678,493 627,394 587,711 523,606 460,164
Other..................................... 518,934 461,388 447,288 431,216 362,689
---------- ---------- ---------- ---------- ----------
Total Other Expense.................. 1,197,427 1,088,782 1,034,999 954,822 822,853
---------- ---------- ---------- ---------- ----------
Income Before Income Taxes.................. 610,130 537,594 527,939 488,658 388,172
Provision for Income Taxes.................. 204,509 175,958 173,428 171,067 131,487
---------- ---------- ---------- ---------- ----------
Operating Income............................ $ 405,621 $ 361,636 $ 354,511 $ 317,591 $ 256,685
========== ========== ========== ========== ==========
Accounting Changes & Special Charges........ (68,136) (46,513) -- (16,268) --
---------- ---------- ---------- ---------- ----------
Net Income.................................. $ 337,485 $ 315,123 $ 354,511 $ 301,323 $ 256,685
========== ========== ========== ========== ==========
Per Share:
Basic Operating Income.................... $ 3.85 $ 3.44 $ 3.32 $ 2.94 $ 2.62
Basic Net Income.......................... 3.20 2.99 3.32 2.79 2.62
Diluted Operating Income.................. 3.72 3.32 3.14 2.76 2.43
Diluted Net Income........................ 3.09 2.89 3.14 2.61 2.43
Common Dividends Declared................. 1.135 1.035 0.940 0.860 0.785
Other Significant Data:
Year-End Common Stock Price............... $ 63.28 $ 50.83 $ 62.81 $ 58.44 $ 62.13
Return on Average Shareholders' Equity*... 16.70% 16.84% 16.32% 14.89% 16.49%
Return on Average Assets*................. 1.54 1.44 1.56 1.53 1.51
Dividend Payout Ratio..................... 36.73 35.81 29.94 32.95 32.30
Average Equity to Average Assets Ratio.... 9.21 8.58 9.57 10.26 9.15
Ratio of Earnings to Fixed Charges**
Excluding Interest on Deposits.......... 2.56x 2.46x 3.38x 3.25x 3.21x
Including Interest on Deposits.......... 1.56x 1.43x 1.65x 1.60x 1.61x

- --------
* Based on Operating Income
** See Exhibit 12 for detailed computation of these ratios.

17



Consolidated Average Balance Sheets
Years ended December 31 ($000's except share data)



2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ -----------

Assets:
Cash and Due from Banks.................. $ 651,367 $ 615,015 $ 638,399 $ 652,988 $ 614,824
Short-term Investments................... 503,857 265,487 186,106 247,049 206,295
Trading Securities....................... 21,284 30,926 37,276 43,404 40,822
Investment Securities:...................
Taxable............................... 3,926,737 4,063,774 4,208,498 4,317,668 3,570,225
Tax Exempt............................ 1,269,175 1,327,159 1,217,847 1,078,333 913,130
Loans and Leases:
Commercial............................ 5,478,342 4,975,482 4,359,880 3,749,518 3,128,568
Real Estate........................... 10,514,536 9,958,164 8,639,360 7,967,626 6,309,818
Personal.............................. 1,182,049 1,245,738 1,204,931 1,154,110 1,147,203
Lease Financing....................... 1,026,215 938,525 705,054 532,043 394,024
------------ ------------ ------------ ------------ -----------
Total Loans and Leases................... 18,201,142 17,117,909 14,909,225 13,403,297 10,979,613
Allowance for Loan and Lease Losses...... 253,089 233,466 228,500 216,456 174,525
------------ ------------ ------------ ------------ -----------
Net Loans and Leases..................... 17,948,053 16,884,443 14,680,725 13,186,841 10,805,088
Other Assets............................. 2,049,836 1,854,973 1,732,112 1,263,890 851,030
------------ ------------ ------------ ------------ -----------
Total Assets....................... $ 26,370,309 $ 25,041,777 $ 22,700,963 $ 20,790,173 $17,001,414
============ ============ ============ ============ ===========
Liabilities and Shareholders' Equity:
Noninterest Bearing Deposits............. $ 2,895,083 $ 2,648,419 $ 2,663,609 $ 2,545,724 $ 2,301,097
Interest Bearing Deposits:
Savings and NOW accounts.............. 1,775,596 1,845,916 2,027,658 2,140,380 1,915,888
Money Market Savings.................. 5,731,794 5,241,772 4,830,159 4,135,143 3,022,944
CDs of $100 or more................... 2,237,243 2,303,442 1,694,301 1,547,816 1,334,532
Other................................. 4,550,875 5,458,234 4,941,175 4,388,152 3,665,334
------------ ------------ ------------ ------------ -----------
Total Deposits........................... 17,190,591 17,497,783 16,156,902 14,757,215 12,239,795
Short-term Borrowings.................... 3,944,160 3,538,846 2,803,834 2,357,161 2,017,829
Long-term Borrowings..................... 1,962,801 1,178,805 1,009,132 1,046,321 787,819
Accrued Expenses and Other Liabilities... 843,198 678,269 558,978 496,439 399,605
Shareholders' Equity..................... 2,429,559 2,148,074 2,172,117 2,133,037 1,556,366
------------ ------------ ------------ ------------ -----------
Total Liabilities and
Shareholders' Equity.............. $ 26,370,309 $ 25,041,777 $ 22,700,963 $ 20,790,173 $17,001,414
============ ============ ============ ============ ===========
Other Significant Data:
Book Value Per Share at Year End......... $ 23.30 $ 21.19 $ 19.47 $ 19.88 $ 17.94
Average Common Shares Outstanding........ 104,293,908 104,100,652 104,940,787 105,918,139 95,831,283
Employees at Year End*................... 11,657 11,753 11,433 10,756 10,227
Historically Reported Credit Quality Ratios:*
Net Loan and Lease Charge-offs to
Average Loans and Leases................ 0.22% 0.12% 0.17% 0.07% 0.13%
Total Nonperforming Loans and
Leases** & OREO to End of Period
Loans and Leases & OREO................. 0.94 0.76 0.75 0.85 0.70
Allowance for Loan and Lease Losses to
End of Period Loans and Leases.......... 1.39 1.34 1.38 1.62 1.62
Allowance for Loan and Lease Losses to
Total Nonperforming Loans and
Leases**................................ 154 182 193 206 275

- --------
* Not restated for acquisitions accounted for as pooling of interests.
** Loans and leases nonaccrual, restructured, and past due 90 days or more.

18



Yield & Cost Analysis
Years ended December 31 (Tax equivalent basis)



2001 2000 1999 1998 1997
----- ----- ----- ----- -----

Average Rates Earned:
Loans........................................................ 7.48% 8.14% 7.77% 8.12% 8.41%
Investment Securities--Taxable............................... 7.05 6.62 6.42 6.52 6.79
Investment Securities--Tax Exempt............................ 7.26 7.16 7.13 7.44 7.40
Trading Securities........................................... 4.21 4.92 5.08 5.13 5.01
Short-term Investments....................................... 3.34 6.35 5.08 5.13 5.57
Average Rates Paid:
Interest Bearing Deposits.................................... 3.97% 5.20% 4.34% 4.62% 4.63%
Short-term Borrowings........................................ 4.78 6.34 5.07 5.37 5.51
Long-term Borrowings......................................... 5.65 6.68 6.26 6.39 6.88
M&I Marshall & Ilsley Bank Average Prime Rate................ 6.91 9.24 8.02 8.35 8.44
Summary Yield and Cost Analysis:
(As a % of Average Assets)
Average Yield................................................ 6.60% 7.10% 6.72% 7.02% 7.31%
Average Cost................................................. 3.29 4.29 3.49 3.64 3.68
----- ----- ----- ----- -----
Net Interest Income.......................................... 3.31 2.81 3.23 3.38 3.63
Provision for Loan and Lease Losses.......................... 0.21 0.12 0.11 0.13 0.10
----- ----- ----- ----- -----
Net Interest Income After Provision for Loan and Lease Losses 3.10 2.69 3.12 3.25 3.53
Net Securities Gains (Losses)................................ -- -- (0.02) 0.03 (0.02)
Other Income................................................. 3.87 3.93 3.91 3.79 3.75
Other Expense................................................ 4.54 4.35 4.56 4.59 4.84
----- ----- ----- ----- -----
Income Before Income Taxes................................... 2.43 2.27 2.45 2.48 2.42
Provision for Income Taxes................................... 0.89 0.83 0.89 0.95 0.91
----- ----- ----- ----- -----
Operating Income............................................. 1.54% 1.44% 1.56% 1.53% 1.51%
===== ===== ===== ===== =====
Accounting Changes & Special Charges......................... (0.26) (0.18) -- (0.08) --
----- ----- ----- ----- -----
Net Income................................................. 1.28% 1.26% 1.56% 1.45% 1.51%
===== ===== ===== ===== =====


19



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
OF OPERATIONS

Net income in 2001 amounted to $337.5 million or $3.09 per share on a
diluted basis. The return on average assets and return on average equity were
1.28% and 13.89%, respectively. By comparison, 2000 net income was $315.1
million, diluted earnings per share was $2.89, the return on average assets was
1.26% and the return on average equity was 14.67%. For the year ended December
31, 1999, net income was $354.5 million or $3.14 per share diluted and the
returns on average assets and average equity were 1.56% and 16.32%,
respectively.

The results of operations and financial position for the periods presented
include the effects of the six acquisitions by the Metavante subsidiary of the
Corporation as well as the two banking related acquisitions from the dates of
merger. All transactions were accounted for as purchases.

Net income for the year ended December 31, 2001 includes certain losses and
expenses incurred in connection with the previously announced structural
changes and acquisitions at the Corporation's Metavante subsidiary, auto lease
residual value write-downs, the cumulative effect of the change in accounting
for derivatives and hedging activities and the final charges for the banking
charter consolidation completed during the second quarter. Net income for the
year ended December 31, 2000 includes the cumulative effect of the change in
accounting for certain conversion services provided by Metavante, securities
losses and losses from the sale of ARM loans, single charter expenses and
expenses incurred for the withdrawn IPO of Metavante.

The following is a summary of the unusual items reported in 2001 and 2000
and the comparative operating income, earnings per share and return on average
equity based on operating income for 2001, 2000, and 1999.



Pre-tax effect 2001 2000 1999
-------------- ------ ------ ------
($ in millions, except per share data)

Income as reported........................ $337.5 $315.1 $354.5
Nonoperating losses and expenses:
Metavante:
Reduction in force and realignment... $11.0
Investment losses.................... 16.0
Acquisition related.................. 45.0
IPO expenses--2000................... 4.5
----- ------ ------ ------
Total Metavante........................ 76.5 43.4 3.1 --
Balance Sheet Management:
Investment losses.................... 50.6 32.9
Losses from sale of ARM loans........ 3.1 2.0
Auto lease residual value write-downs.. 25.0 15.8
Charter Consolidation:
2001................................. 12.0 8.5
2000................................. 9.1 6.2
Change in accounting:
Derivative and hedging activities.... 0.7 0.4
Conversion services--Metavante....... 3.8 2.3
------ ------ ------
Total nonoperating losses and expenses... 68.1 46.5 --
------ ------ ------
Operating income.......................... $405.6 $361.6 $354.5
====== ====== ======
Operating income per share:
Basic.................................... $ 3.85 $ 3.44 $ 3.32
Diluted.................................. 3.72 3.32 3.14
Operating income to average equity........ 16.70% 16.84% 16.32%


20



The following reconciles operating income to operating income before
amortization of intangibles ("tangible operating income"). Amortization
includes amortization of goodwill and core deposit premiums and is net of
negative goodwill accretion and the income tax benefit or expense, if any,
related to each component. These calculations were specifically formulated by
the Corporation and may not be comparable to similarly titled measures reported
by other companies. As more fully discussed in Note 1 to the Consolidated
Financial Statements in Item 8, beginning January 1, 2002, intangibles with
indefinite lives including certain goodwill will no longer be amortized in
accordance with SFAS 142. The effect of SFAS 142 is depicted as pro forma
operating income in the following table:

Summary Consolidated Tangible Operating Income and Financial Statistics
($ in millions, except per share data)



2001 2000 1999
------ ------ ------

Operating income................... $405.6 $361.6 $354.5
SFAS142 amortization, net of tax... 15.4 14.7 18.1
------ ------ ------
Pro forma operating income......... 421.0 376.3 372.6
Other amortization, net of tax..... 5.6 4.5 5.7
------ ------ ------
Tangible operating income.......... $426.6 $380.8 $378.3
====== ====== ======
Tangible operating income per share
Basic........................... $ 4.05 $ 3.62 $ 3.55
Diluted......................... 3.91 3.50 3.35
Return on average tangible assets.. 1.64% 1.54% 1.69%
Return on average tangible equity.. 20.90 20.78 20.49


Operating Income Statement Components as a Percent of Average Total Assets

The following table presents a summary of the major elements of the
consolidated operating income statements for the years ended December 31, 2001,
2000 and 1999. Each of the elements is stated as a percent of consolidated
average total assets outstanding for the respective year and, where
appropriate, is converted to a fully taxable equivalent basis (FTE). The
results exclude the special charges in 2001 and 2000 as previously discussed.



2001 2000 1999
----- ----- -----

Interest income.................... 6.60% 7.10% 6.72%
Interest expense................... (3.29) (4.29) (3.49)
----- ----- -----
Net interest income................ 3.31 2.81 3.23
Provision for loan and lease losses (0.21) (0.12) (0.11)
Net securities losses.............. -- -- (0.02)
Other income....................... 3.87 3.93 3.91
Other expense...................... (4.54) (4.35) (4.56)
----- ----- -----
Income before income taxes......... 2.43 2.27 2.45
Income taxes....................... (0.89) (0.83) (0.89)
----- ----- -----
Operating income to average assets. 1.54% 1.44% 1.56%
===== ===== =====


21



Net Interest Income

Net interest income in 2001 amounted to $842.8 million compared with net
interest income of $673.0 million in 2000, an increase of $169.8 million or
25.2%.

Average earning assets in 2001 amounted to $23.9 billion compared to $22.8
billion in 2000, an increase of $1.1 billion or 4.9%. Average loans and leases
accounted for all of the growth in earning assets. During the latter part of
the third quarter of 2000, the Corporation realigned its available for sale
investment securities portfolio through the sale and purchase of approximately
$1.6 billion of U.S. Government Agency securities.

Average interest bearing liabilities increased $0.6 billion or 3.2% in 2001
compared to 2000. Average interest bearing deposits decreased $0.6 billion.
Average short-term borrowings increased $405 million while average long-term
borrowings increased $784 million. Average noninterest bearing deposits
increased $247 million or 9.3% compared to the prior year.

The growth and composition of the Corporation's average loan and lease
portfolio for the current year and prior two years are reflected in the
following table ($ in millions):



Percent
Growth
------------
2001 2000
vs vs
2001 2000 1999 2000 1999
--------- --------- --------- ----- -----

Commercial:
Commercial.............................. $ 5,478.3 $ 4,975.5 $ 4,359.9 10.1% 14.1%
Commercial real estate:
Commercial mortgages.................. 4,740.7 4,182.6 3,845.3 13.3 8.8
Construction.......................... 521.9 433.3 329.8 20.4 31.4
--------- --------- --------- ----- -----
Total commercial real estate............ 5,262.6 4,615.9 4,175.1 14.0 10.6
Commercial lease financing.............. 390.3 353.2 335.0 10.5 5.4
--------- --------- --------- ----- -----
Total commercial.......................... 11,131.2 9,944.6 8,870.0 11.9 12.1
Personal:
Residential real estate:
Residential mortgages................. 2,384.9 2,945.2 2,461.6 (19.0) 19.6
Construction.......................... 127.6 114.5 100.2 11.4 14.2
--------- --------- --------- ----- -----
Total residential real estate........... 2,512.5 3,059.7 2,561.8 (17.9) 19.4
Consumer loans:
Student............................... 116.0 185.2 257.9 (37.3) (28.2)
Credit card........................... 177.5 165.6 139.2 7.2 19.0
Home equity loans and lines........... 2,739.4 2,282.6 1,902.4 20.0 20.0
Other................................. 888.6 894.9 807.9 (0.7) 10.8
--------- --------- --------- ----- -----
Total consumer loans.................... 3,921.5 3,528.3 3,107.4 11.1 13.5
Personal lease financing................ 635.9 585.3 370.0 8.7 58.2
--------- --------- --------- ----- -----
Total personal............................ 7,069.9 7,173.3 6,039.2 (1.4) 18.8
--------- --------- --------- ----- -----
Total consolidated average loans and leases $18,201.1 $17,117.9 $14,909.2 6.3% 14.8%
========= ========= ========= ===== =====


Compared to 2000, average loans and leases increased $1.1 billion or 6.3%.
Approximately 44% or $0.5 billion of average loan growth was due to the
acquisitions of National City Bancorporation in Minnesota and branch
acquisitions in Arizona, which were all accounted for using the purchase method
of accounting. At the time of purchase, over $1 billion in loans were acquired.
Excluding the acquisitions, total commercial loan

22



growth amounted to $0.8 billion and was driven by commercial real estate loan
and commercial real estate construction loan growth of $0.6 billion. Average
personal loans declined $0.2 billion, excluding acquisitions, largely due to
accelerated prepayments combined with the strategy to sell new production of
residential mortgages. For the second year in a row, home equity loans and
lines exhibited double digit growth fueled in part by the acquisition of home
equity loans and lines in support of its private-label banking services in the
fourth quarter of 2000.

Generally, the Corporation sells residential real estate loan production in
the secondary market. Residential real estate loans originated and sold to
investors amounted to $2.4 billion in 2001 compared to $0.6 billion in 2000. At
December 31, 2001, the Corporation had approximately $0.3 billion of mortgage
loans held for sale. During the third quarter of 2000, the Corporation began
securitizing its monthly production of indirect automobile loans. Auto loans
securitized and sold in 2001 amounted to $382 million. Approximately $46
million and $150 million of student loans were sold in 2001 and 2000,
respectively. The Corporation anticipates that it will continue to divest of
lower yielding assets through sale or securitization in future periods.

The growth and composition of the Corporation's consolidated average
deposits for the current year and prior two years are reflected below ($ in
millions):



Percent
Growth
------------
2001 2000
vs vs
2001 2000 1999 2000 1999
--------- --------- --------- ----- ----

Bank issued deposits:
Noninterest bearing:
Commercial...................... $ 1,909.3 $ 1,693.5 $ 1,720.3 12.7% (1.6)%
Personal........................ 606.8 580.2 558.7 4.6 3.8
Other........................... 379.0 374.7 384.6 1.1 (2.6)
--------- --------- --------- ----- ----
Total noninterest bearing......... 2,895.1 2,648.4 2,663.6 9.3 (0.6)
Interest bearing:
Activity accounts:
Savings & NOW................. 1,775.6 1,845.9 2,027.6 (3.8) (9.0)
Money market.................. 5,468.9 4,575.5 4,232.8 19.5 8.1
Foreign activity.............. 588.6 414.8 334.6 41.9 24.0
--------- --------- --------- ----- ----
Total activity accounts......... 7,833.1 6,836.2 6,595.0 14.6 3.7
Time deposits:
Other CDs & time.............. 3,213.9 3,415.2 3,433.9 (5.9) (0.5)
CDs greater than $100......... 761.4 875.8 821.0 (13.1) 6.7
--------- --------- --------- ----- ----
Total time deposits............. 3,975.3 4,291.0 4,254.9 (7.4) 0.8
--------- --------- --------- ----- ----
Total interest bearing............ 11,808.4 11,127.2 10,849.9 6.1 2.6
--------- --------- --------- ----- ----
Total bank issued deposits......... 14,703.5 13,775.6 13,513.5 6.7 1.9
Wholesale deposits:
Money market...................... 262.9 666.4 597.3 (60.5) 11.6
Brokered CDs...................... 1,478.4 1,430.6 876.5 3.3 63.2
Foreign time...................... 745.8 1,625.2 1,169.6 (54.1) 39.0
--------- --------- --------- ----- ----
Total wholesale deposits........... 2,487.1 3,722.2 2,643.4 (33.2) 40.8
--------- --------- --------- ----- ----
Total consolidated average deposits $17,190.6 $17,497.8 $16,156.9 (1.8)% 8.3%
========= ========= ========= ===== ====


Average bank issued deposits increased $0.9 billion or 6.7% in 2001 compared
with 2000. Approximately $0.4 billion or 38% of the growth was attributable to
acquisitions. Excluding the impact of acquisitions, average

23



noninterest bearing deposits increased $0.2 billion and interest bearing
activity accounts increased $0.4 billion. Money market savings, especially
money market index accounts exhibited the greatest growth in bank issued
deposits in 2001 compared to 2000. Average bank issued money market index
savings increased $1.0 billion or 23.3% excluding acquisitions while other
interest bearing activity accounts declined $0.1 billion. Average bank issued
time deposits declined $0.5 billion. M&I's markets have experienced some
irrational pricing on single service time deposit relationships to the extent
of pricing time deposits above comparable wholesale levels which the
Corporation elected not to pursue.

During 2000, M&I disposed of three branches. Deposits and loans aggregating
approximately $111 million and $8 million, respectively were divested in 2000.
As part of its private-label banking services, the Corporation acquired $354
million of deposits late in 2000.

The growth in bank issued deposits and shift in deposit mix provided a
benefit to the net interest margin in 2001. Both commercial and retail banking
contributed to the success experienced in growing bank issued deposits. The
Corporation believes additional deposit growth can be achieved by continuing to
focus on developing deeper relationships through the sale of treasury
management products and services, continued use of customer and prospect lists
modeled for successful cross selling, successfully implementing newly developed
retention strategies and continuing to provide incentive plans focused on
growing deposits and deepening relationships.

Average wholesale deposits declined $1.3 billion or 34%, excluding
acquisitions. The decline reflects, in part, the Corporation's greater use of
borrowings which is a part of its overall strategy to reduce interest rate risk
as well as not renewing a contractual institutional relationship that would
have re-priced to levels above comparable funding alternatives.

During 2001, the Corporation's banking segment issued $547 million of debt
under its bank note program consisting of $250 million of senior bank
notes--Extendible Liquidity Securities ("EXLs") and $297 million of
subordinated debt. See Note 12, Short-term Borrowings and Note 13, Long-term
Borrowings in Notes to Consolidated Financial Statements contained in Item 8
herein for further discussion regarding bank notes. At December 31, 2001, bank
notes, which are included in short-term borrowings and long-term borrowings,
amounted to $1.8 billion. In addition, the banking segment increased its
borrowings from the Federal Home Loan Bank in 2001 by obtaining $685 million of
floating and fixed rate advances. During 2001, the Corporation issued $250
million of Series E medium-term notes. Approximately $68.0 million of the
Corporation's other series medium-term notes matured in 2001.

The net interest margin (FTE) as a percent of average earning assets was
3.67% in 2001 compared to 3.08% in 2000, an increase of 59 basis points. The
yield on earning assets decreased 48 basis points from 7.79% in 2000 to 7.31%
in 2001 while the cost of interest bearing liabilities decreased 120 basis
points from 5.49% in 2000 to 4.29% in 2001. Less reliance on higher-cost
funding sources, growth in lower-cost bank issued deposits, improved loan
spreads and the liability sensitive repricing characteristics of the
Corporation's balance sheet in the declining rate environment experienced in
2001 all contributed to the margin improvement. Offsetting this improvement was
the impact of the common stock acquired in conjunction with the Corporation's
treasury buyback program.

The yield on loans and leases was 7.48% in 2001 compared to 8.14% in 2000, a
decrease of 66 basis points. Despite the loan growth and wider spreads
previously discussed, interest income on a FTE basis declined $32.7 million in
2001 compared to 2000.

The increase in the yield on the investment security portfolio reflects the
realignment of the portfolio previously discussed, however, balance run-off in
the portfolio, which reflects in part increased prepayment activity, resulted
in a decline in interest income on a FTE basis of $5.4 million.

24



The decrease in the rates paid on interest bearing liabilities contributed
approximately $252.0 million of the decrease in interest expense while the
increase in volume offset the benefit by approximately $43.3 million in 2001
compared to the prior year.

On January 1, 2001, the Corporation adopted the new accounting standard for
accounting for derivative financial instruments and hedging activities as
explained in Notes 2 and 20 in Notes to Consolidated Financial Statements
contained in Item 8 herein. The new standard requires that those derivative
instruments be recognized in the Corporation's Consolidated Balance Sheets as
assets or liabilities at their fair value. For 2001, the effect on net interest
income resulting from the derivative financial instruments designated as hedges
was a positive $2.7 million compared with a negative $3.5 million in 2000.

The Corporation anticipates that the net interest margin will continue to
expand into the first quarter of 2002, however, the rate of growth is expected
to slow as the Corporation continues to manage its balance sheet interest rate
sensitivity. In addition, the amount of growth is dependent on loan and deposit
growth, spreads and the general interest rate environment.

Net interest income in 2000 amounted to $673.0 million compared with net
interest income of $705.3 million in 1999, a decrease of $32.3 million.

Average earning assets in 2000 amounted to $22.8 billion compared to $20.6
billion in 1999, an increase of $2.2 billion or 10.9%. Average loans and leases
increased $2.2 billion or 14.8% . The remainder of the increase was distributed
evenly between investment securities and short-term investments. During the
latter part of the third quarter of 2000, the Corporation realigned its
available for sale investment securities portfolio through the sale and
purchase of approximately $1.6 billion of U.S. Government Agency securities.
The benefit of these transactions was realized beginning in the fourth quarter
of 2000.

Average interest bearing liabilities increased $2.3 billion or 13.1% in 2000
compared to 1999. Average interest bearing deposits increased $1.4 billion or
10.0%. Average short-term borrowings increased $735 million while average
long-term borrowings increased $170 million. The increase in borrowings
reflects, in part, greater use of senior and subordinated notes by the banking
affiliates. Average noninterest bearing deposits were relatively unchanged
compared to the prior year. The increase in average interest bearing
liabilities in 2000 reflects funding of earning asset growth along with the
effect of treasury share repurchases.

Compared to 1999, average loans and leases increased $2.2 billion or 14.8%.
Total commercial loan growth amounted to $1.1 billion or 12.1% and was driven
by commercial loan growth of $616 million and commercial real estate loan and
commercial real estate construction growth of $441 million. Average personal
loan growth amounted to $1.1 billion or 18.8%. Home equity loans and lines
accounted for $380 million, residential mortgages accounted for $484 million
and lease financing receivables accounted for $215 million of the growth in
retail loans.

Generally, the Corporation sells fixed rate residential real estate loans
and in 2000 began selling a portion of ARM loan production in the secondary
market. Residential real estate loans originated and sold to investors amounted
to $0.6 billion in 2000 compared to $1.1 billion in 1999. As part of its
announced balance sheet management restructuring, the Corporation sold $300.8
million of portfolio ARM loans. ARM loans securitized and recorded as available
for sale securities late in 2000 amounted to $511 million. Auto loans
securitized and sold in 2000 amounted to $223 million.

Due to strong earning asset growth, particularly loan growth, the
Corporation made greater uses of wholesale deposits in 2000 compared to the
prior year. Wholesale deposits increased $1.1 billion or 40.8%, of which,
foreign time deposits accounted for $0.5 billion of the increase while brokered
CDs increased $0.6 billion.

Money market savings, especially money market index accounts, exhibited the
greatest growth in bank issued deposits in 2000 compared to 1999. Average bank
issued money market savings increased $343 million or

25



8.1%. Average bank issued Eurodollar activity and bank issued time deposits
increased $80 million and $36 million, respectively, while average savings and
NOW decreased $182 million in 2000 compared to the prior year. As previously
discussed, noninterest-bearing deposits were relatively unchanged year over
year.

During 1999, the Corporation's banking affiliates began issuing bank notes.
At December 31, 2000, bank notes, which are included in short-term borrowings
and long-term borrowings, amounted to $1.4 billion. During 2000, the
Corporation filed a registration statement to issue up to $500 million of
medium-term Series E notes. Approximately $21.2 million of the Corporation's
other series medium-term notes matured in 2000.

The net interest margin (FTE) as a percent of average earning assets was
3.08% in 2000 compared to 3.58% in 1999, a decrease of 50 basis points. The
yield on earning assets increased 36 basis points from 7.43% in 1999 to 7.79%
in 2000 while the cost of interest bearing liabilities increased 92 basis
points from 4.57% in 1999 to 5.49% in 2000. The continued reliance on
higher-cost funding sources and lower loan spreads resulted in the margin
decline.

The yield on loans and leases was 8.14% in 2000 compared to 7.77% in 1999,
an increase of 37 basis points. The increase in yield and the strong loan
growth previously discussed contributed over 90% of the increase in interest
income on an FTE basis.

The remaining increase in interest on earning assets was primarily
attributable to investment securities. The total yield on the taxable
investment security portfolio increased by approximately 20 basis points in
2000 compared to 1999.

The increase in the rates paid on interest bearing liabilities contributed
approximately $161.5 million and the increase in volume accounted for
approximately $122.2 million of the increase in interest paid on interest
bearing liabilities in 2000 compared to the prior year. In addition to the use
of higher-cost funds for earning asset growth, interest expense was adversely
affected by the repurchase of treasury shares.

For 2000, the effect on net interest income resulting from the derivative
financial instruments designated as hedges was a negative $3.5 million compared
with a positive $7.0 million in 1999.

26



Average Balance Sheets and Analysis of Net Interest Income

The Corporation's consolidated average balance sheets, interest earned and
interest paid, and the average interest rates earned and paid for each of the
last three years are presented in the following table ($ in thousands):



2001 2000 1999
------------------------------- ------------------------------- ---------------------------------
Interest Average Interest Average Interest Average
Average Earned/ Yield or Average Earned/ Yield or Average Earned/ Yield or
Balance Paid Cost (3) Balance Paid Cost (3) Balance Paid Cost (3)
----------- ---------- -------- ----------- ---------- -------- ----------- ---------- --------

Loans and leases (1,2).......... $18,201,142 $1,361,048 7.48% $17,117,909 $1,393,723 8.14% $14,909,225 $1,158,746 7.77%
Investment securities:
Taxable....................... 3,926,737 270,336 7.05 4,063,773 272,536 6.62 4,208,498 269,668 6.42
Tax exempt (1)................ 1,269,175 91,206 7.26 1,327,159 94,371 7.16 1,217,847 85,552 7.13
Interest bearing deposits in
other banks.................... 35,535 1,614 4.54 24,850 2,066 8.31 21,566 1,184 5.49
Funds sold and security
resale agreements.............. 52,401 2,529 4.83 99,126 6,429 6.49 68,764 3,758 5.47
Trading securities (1).......... 21,284 896 4.21 30,926 1,523 4.92 37,277 1,894 5.08
Other short-term
investments.................... 415,921 12,669 3.05 141,511 8,363 5.91 95,775 4,515 4.71
----------- ---------- ---- ----------- ---------- ---- ----------- ---------- ----
Total interest
earning assets........... 23,922,195 1,740,298 7.31% 22,805,254 1,779,011 7.79% 20,558,952 1,525,317 7.43%
Cash and demand deposits
due from banks................. 651,367 615,015 638,399
Premises and equipment, net..... 391,633 376,286 360,624
Other assets.................... 1,658,203 1,478,688 1,371,488
Allowance for loan and
lease losses................... (253,089) (233,466) (228,500)
----------- ----------- -----------
Total assets.............. $26,370,309 $25,041,777 $22,700,963
=========== =========== ===========
Money market savings
deposits....................... $ 5,731,794 $ 198,341 3.46% $ 5,241,772 $ 277,813 5.30% $ 4,830,159 $ 205,148 4.25%
Savings and interest bearing
demand deposits................ 1,775,596 20,733 1.17 1,845,916 29,812 1.62 2,027,658 33,525 1.65
Other time deposits............. 5,023,701 244,345 4.86 5,458,234 318,229 5.83 4,941,175 254,965 5.16
CDs greater than $100,
brokered and callable
CDs............................ 1,764,417 103,480 5.86 2,303,442 146,162 6.35 1,694,301 92,226 5.44
----------- ---------- ---- ----------- ---------- ---- ----------- ---------- ----
Total interest
bearing deposits............... 14,295,508 566,899 3.97 14,849,364 772,016 5.20 13,493,293 585,864 4.34
Short-term borrowings........... 3,944,160 188,587 4.78 3,538,846 224,187 6.34 2,803,834 142,294 5.07
Long-term borrowings............ 1,962,801 110,842 5.65 1,178,805 78,773 6.68 1,009,132 63,145 6.26
----------- ---------- ---- ----------- ---------- ---- ----------- ---------- ----
Total interest
bearing
liabilities.............. 20,202,469 866,328 4.29% 19,567,015 1,074,976 5.49% 17,306,259 791,303 4.57%
Noninterest bearing deposits.... 2,895,083 2,648,419 2,663,609
Other liabilities............... 843,198 678,269 558,978
Shareholders' equity............ 2,429,559 2,148,074 2,172,117
----------- ----------- -----------
Total liabilities and
shareholders'
equity................... $26,370,309 $25,041,777 $22,700,963
=========== =========== ===========
Net interest income....... $ 873,970 $ 704,035 $ 734,014
========== ========== ==========
Net yield on interest
earning assets........... 3.67% 3.08% 3.58%
==== ==== ====


- --------

Notes:

(1) Fully taxable equivalent basis, assuming a Federal income tax rate of 35%
for all years presented, and excluding disallowed interest expense.
(2) Loans and leases on nonaccrual status have been included in the computation
of average balances.
(3) Based on average balances excluding fair value adjustments for available
for sale securities.

27



Analysis of Changes in Interest Income and Interest Expense

The effect on interest income and interest expense due to volume and rate
changes in 2001 and 2000 are outlined in the following table. Changes not due
solely to either volume or rate are allocated to rate ($ in thousands):



2001 versus 2000 2000 versus 1999
------------------------------- ------------------------------
Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in
-------------------- -------------------
Average Average Increase Average Average Increase
Volume (2) Rate (Decrease) Volume (2) Rate (Decrease)
---------- --------- ---------- ---------- -------- ----------

Interest on earning assets:
Loans and leases (1)..................... $ 88,175 $(120,850) $ (32,675) $171,615 $ 63,362 $234,977
Investment securities:
Taxable............................... (18,563) 16,363 (2,200) (5,238) 8,106 2,868
Tax-exempt (1)........................ (4,511) 1,346 (3,165) 8,421 398 8,819
Interest bearing deposits in other banks. 888 (1,340) (452) 180 702 882
Funds sold and security resale
agreements............................. (3,032) (868) (3,900) 1,661 1,010 2,671
Trading securities (1)................... (474) (153) (627) (323) (48) (371)
Other short-term investments............. 16,218 (11,912) 4,306 2,154 1,694 3,848
-------- --------- --------- -------- -------- --------
Total interest income change...... $ 78,701 $(117,414) $ (38,713) $178,470 $ 75,224 $253,694
======== ========= ========= ======== ======== ========
Expense on interest bearing liabilities:
Money market savings deposits......... $ 25,971 $(105,443) $ (79,472) $ 17,494 $ 55,171 $ 72,665
Savings and interest bearing
demand deposits..................... (1,139) (7,940) (9,079) (2,999) (714) (3,713)
Other time deposits................... (25,333) (48,551) (73,884) 26,680 36,584 63,264
CDs greater than $100, brokered
and callable CDs.................... (34,228) (8,454) (42,682) 33,137 20,799 53,936
-------- --------- --------- -------- -------- --------
Total interest bearing deposits.......... (34,729) (170,388) (205,117) 74,312 111,840 186,152
Short-term borrowings.................... 25,697 (61,297) (35,600) 37,265 44,629 81,894
Long-term borrowings..................... 52,371 (20,302) 32,069 10,622 5,005 15,627
-------- --------- --------- -------- -------- --------
Total interest expense change..... $ 43,339 $(251,987) $(208,648) $122,199 $161,474 $283,673
======== ========= ========= ======== ======== ========

- --------
Notes:
(1) Fully taxable equivalent basis, assuming a Federal income tax rate of 35%
for all years presented, and excluding disallowed interest expense.
(2) Based on average balances excluding fair value adjustments for available
for sale securities.

28



Summary of Loan and Lease Loss Experience and Credit Quality

The following tables present comparative credit quality information as of
and for the year ended December 31, 2001, as well as selected comparative years:

Consolidated Credit Quality Information
December 31, ($000's)



2001 2000 1999 1998 1997
-------- -------- -------- -------- --------

Nonperforming Assets by Type
Loans and Leases:
Nonaccrual..................................... $166,434 $121,425 $106,387 $101,346 $ 66,945
Renegotiated................................... 378 614 708 978 1,338
Past Due 90 Days or More....................... 6,982 7,371 9,975 7,631 8,238
-------- -------- -------- -------- --------
Total Nonperforming Loans and Leases........... 173,794 129,410 117,070 109,955 76,521
Other Real Estate Owned........................... 6,796 3,797 6,230 8,751 15,573
-------- -------- -------- -------- --------
Total Nonperforming Assets................. $180,590 $133,207 $123,300 $118,706 $ 92,094
======== ======== ======== ======== ========
Allowance for Loan and Lease Losses............... $268,198 $235,115 $225,862 $226,052 $208,651
======== ======== ======== ======== ========

Consolidated Statistics
Net Charge-offs to Average Loans and Leases....... 0.22% 0.12% 0.17% 0.07% 0.12%
Total Nonperforming Loans and Leases to Total
Loans and Leases................................ 0.90 0.74 0.72 0.79 0.58
Total Nonperforming Assets to Total Loans and
Leases and Other Real Estate Owned.............. 0.94 0.76 0.75 0.85 0.70
Allowance for Loan and Lease Losses to Total Loans
and Leases...................................... 1.39 1.34 1.38 1.62 1.59
Allowance for Loan and Lease Losses to
Nonperforming Loans and Leases.................. 154 182 193 206 273


Major Categories of Nonaccrual Loans and Leases ($000's)



December 31, 2001 December 31, 2000
------------------------------- -------------------------------
% of % of % of % of
Nonaccrual Loan Type Nonaccrual Nonaccrual Loan Type Nonaccrual
---------- --------- ---------- ---------- --------- ----------

Commercial and Lease Financing... $ 82,297 1.3% 49.4% $ 51,886 0.9% 42.7%
Real Estate
Construction and Land Development 720 0.1 0.4 2,896 0.5 2.4
Commercial Real Estate........... 34,546 0.7 20.8 35,011 0.7 28.9
Residential Real Estate.......... 47,783 0.9 28.7 29,895 0.7 24.6
-------- --- ----- -------- --- -----
Total Real Estate............. 83,049 0.7 49.9 67,802 0.7 55.9
Personal and Lease Financing..... 1,088 0.1 0.7 1,737 0.1 1.4
-------- --- ----- -------- --- -----
Total......................... $166,434 0.9% 100.0% $121,425 0.7% 100.0%
======== === ===== ======== === =====


29



Reconciliation of Consolidated Allowance for Loan and Lease Losses ($000's)



2001 2000 1999 1998 1997
-------- -------- -------- -------- --------

Allowance for Loan and Lease Losses At Beginning
of Year......................................... $235,115 $225,862 $226,052 $208,651 $161,659
Provision for Loan and Lease Losses............... 54,115 30,352 25,419 27,090 17,633
Allowance of Banks and Loans Acquired............. 19,151 1,270 -- -- 42,773
Allowance Transfer for Loan Securitizations....... -- (1,022) -- -- --
Loans and Leases Charged-off:
Commercial..................................... 22,773 10,623 17,275 6,401 8,474
Real Estate--Construction...................... 186 4 157 352 87
Real Estate--Mortgage.......................... 11,795 9,848 5,719 5,115 3,907
Personal....................................... 10,965 8,216 7,121 7,886 7,868
Leases......................................... 2,890 1,327 2,285 1,191 1,166
-------- -------- -------- -------- --------
Total Charge-offs................................. 48,609 30,018 32,557 20,945 21,502
Recoveries on Loans and Leases:
Commercial..................................... 4,135 4,696 2,696 6,708 4,176
Real Estate--Construction...................... 43 57 6 164 53
Real Estate--Mortgage.......................... 1,419 1,458 1,413 1,369 1,097
Personal....................................... 2,567 2,199 2,244 2,690 2,501
Leases......................................... 262 261 589 325 261
-------- -------- -------- -------- --------
Total Recoveries.................................. 8,426 8,671 6,948 11,256 8,088
-------- -------- -------- -------- --------
Net Loans and Leases Charged-off.................. 40,183 21,347 25,609 9,689 13,414
-------- -------- -------- -------- --------
Allowance for Loan and Lease Losses at End of Year $268,198 $235,115 $225,862 $226,052 $208,651
======== ======== ======== ======== ========


Nonperforming assets consist of nonperforming loans and leases and other
real estate owned ("OREO").

OREO is comprised of commercial and residential properties acquired in
partial or total satisfaction of problem loans and branch premises held for
sale. OREO acquired in satisfaction of debts amounted to $6.5 million, $2.7
million and $5.1 million at December 31, 2001, 2000 and 1999, respectively.
Branch premises held for sale amounted to $0.3 million, $1.1 million and $1.1
million at the end of 2001, 2000 and 1999, respectively.

Nonperforming loans and leases consist of nonaccrual, renegotiated or
restructured loans, and loans and leases that are delinquent 90 days or more
and still accruing interest. The balance of nonperforming loans and leases can
fluctuate widely based on the timing of cash collections, renegotiations and
renewals.

Maintaining nonperforming assets at an acceptable level is important to the
ongoing success of a financial services institution. The Corporation's
comprehensive credit review and approval process is critical to ensuring that
the amount of nonperforming assets on a long-term basis is minimized within the
overall framework of acceptable levels of credit risk. In addition to the
negative impact on net interest income and credit losses, nonperforming assets
also increase operating costs due to the expense associated with collection
efforts.

At December 31, 2001, nonperforming loans and leases amounted to $173.8
million or 0.90% of consolidated loans and leases compared to $129.4 million or
0.74% at December 31, 2000 and $117.1 million or 0.72% at December 31, 1999.
Acquisitions increased nonperforming loans by $26.5 million at the time the
acquisitions were completed, which was in the third quarter of 2001. Excluding
acquisitions, nonperforming loans were relatively unchanged during the second
half of the current year. Nonaccrual loans increased $45.0 million at year end
2001 compared to year end 2000. Nonaccrual commercial loans and leases
accounted for $30.4 million of the increase and nonaccrual residential real
estate loans accounted for $17.9 million of the

30



increase. Nonaccrual commercial mortgages were relatively unchanged while
nonaccrual construction and land development and personal loans declined $2.2
million and $0.6 million, respectively.

Net charge-offs amounted to $40.2 million or 0.22% of average loans and
leases in 2001 compared with $21.3 million or 0.12% of average loans and leases
in 2000 and $25.6 million or 0.17% of average loans and leases in 1999.

The allowance for loan and lease losses is determined using a methodology
which reserves currently for those loans and leases in which it is determined
that a loss is probable based on characteristics of the individual loan,
historical loss patterns of similar, "homogeneous" loans and environmental
factors unique to each measurement date. This reserving methodology has the
following components:

Specific reserve. The amount of specific reserves is determined through
a loan-by-loan analysis of problem loans over a minimum size that considers
expected future cash flows, the value of collateral and other factors that
may impact the borrower's ability to make payments when due. Included in
this group are those nonaccrual or renegotiated loans which meet the
criteria as being "impaired" under the definition in SFAS 114. A loan is
impaired when, based on current information and events, it is probable that
a creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Problem loans also include those
credits that have been internally classified as credits requiring
management's attention due to underlying problems in the borrower's business
or collateral concerns. Ranges of loss are determined based on best- and
worst- case scenarios for each loan.

Reserves for homogeneous loan pools. The Corporation makes a significant
number of loans and leases which, due to their underlying similar
characteristics, are assessed for loss as "homogeneous" pools. Included in
the homogeneous pools are loans and leases from the retail sector and
commercial loans under a certain size, which have been excluded from the
specific reserve allocation previously discussed. The Corporation segments
the pools by type of loan or lease and using historical loss information
estimates a loss reserve for each pool.

Special reserve. The Corporation's senior lending management also
allocates reserves for special situations, which are unique to the
measurement period. These include environmental factors, such as economic
conditions in certain geographical or industry segments of the portfolio,
economic trends in the retail lending sector and peer-group loss history.
Reserves allocated are based on estimates of loss that senior lending
management has isolated based on these economic trends or conditions. At
December 31, 2001, special reserves have been established for exposures to
the airline and travel industries due to the significant uncertainties
brought about by the terrorism of this past September and reduction in
business travel in response to the slower economy. The Corporation, given
its geographic marketplace, also has exposure to the manufacturing, paper
and allied products and dairy sectors, all of which have been impacted more
significantly by the economic slowdown than other sectors and for which the
Corporations has allocated additional reserves. While most loans in these
categories are still performing, the current economic slowdown has resulted
in deteriorating operating results and reduced collateral values that could
adversely impact recoveries in the event the loans or leases were liquidated.

Based on the above loss estimates, senior lending and financial management
determine their best estimate of the required reserve. Management's evaluation
of the factors described above resulted in an allowance for loan and lease
losses of $268.2 million at December 31, 2001 compared to $235.1 million at
December 31, 2000 and $225.9 million at December 31, 1999. The resulting
provisions for loan and lease losses are the amounts required to establish the
allowance for loan and lease losses to the required level after taking into
consideration charge-offs and recoveries. Management recognizes there are
significant estimates in the process and the ultimate losses could be
significantly different from those currently estimated.

Charge-offs for 2002 will continue to be affected by the factors previously
discussed. The Corporation anticipates nonperforming loans will increase and
charge-off levels will continue to be at the upper end of recent

31



historical levels for at least six months, and possibly longer depending on the
economy, but below the level experienced in the fourth quarter of 2001 (0.35%).
However, negative economic events, adverse developments in industry segments
within the portfolio or deterioration of a large loan or loans could have
significant adverse impacts on the actual loss levels. There are no other known
specific issues or industry of concern or material loans believed to be in
imminent danger of deteriorating or defaulting which would give rise to a large
near-term charge-off.

Other Income

Total other income amounted to $1,002.8 million in 2001 compared to $933.2
million in 2000.

Other income in 2001 includes approximately $16.0 million of investment
securities losses associated with equity investments held by Metavante relating
to the mortgage origination business as well as an equity investment whose
technology was replaced by Metavante's acquisitions of Derivion and CyberBills.

Other income in 2000 includes $50.6 million of investment securities losses
resulting from the realignment of the Corporation's investment security
portfolio as previously discussed.

Excluding these nonoperating items, total other income in 2001 amounted to
$1,018.9 million compared to $983.7 million in 2000, an increase of $35.2
million or 3.6%.

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. This
largest source of data processing services revenue is not expected to grow much
faster in the near term due to continued bank consolidation and the weaker
economy. Other data processing revenue declined primarily due to lower
professional services revenue.

Item processing revenue decreased $3.8 million. During 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%. Trust revenues have
continued to remain flat throughout each quarter this year due to the impact of
volatile equity markets and continued movement of funds from high fee equity
funds to lower fee fixed income and money market funds. 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 as well as the impact from
acquisitions. The Corporation has implemented initiatives to produce higher
absolute levels of service charge fee income, but believes it is unlikely that
the growth will be at levels comparable to the year-over-year growth reflected
in 2001.

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. As
previously discussed, mortgage loans originated and sold in 2001 were four
times the volume originated and sold in 2000.

Capital markets revenue decreased $9.4 million in 2001 compared to the prior
year. Net gains from the sale of investments, which vary from period to period,
accounted for the decline.

32



In addition to the increase in net realizable value, life insurance revenue
in 2000 includes death benefit gains of $0.6 million.

Net securities losses in 2001, excluding the effect of the losses previously
discussed, amounted to $1.1 million and principally represent losses by the
banking segment.

Other noninterest income amounted to $121.8 million in 2001 compared to
$126.7 million in 2000, a decrease of $4.9 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.

Total other income amounted to $933.2 million in 2000 compared to $883.1
million in 1999. Excluding securities losses of $50.6 million associated with
the realignment of investment securities previously discussed, total other
income in 2000 amounted to $983.8 million or an increase of $100.7 million or
11.4%.

Total data processing services revenue amounted to $546.0 million in 2000
compared to $494.8 million in 1999, an increase of $51.2 million or 10.4%.
e-Finance fees increased $40.3 million or 62.5% and reflect a full year of
revenue from the electronic banking services acquisitions in 1999 as well as
growth in electronic bill payment services. e-Finance fees also include a $13.7
million buyout fee due to one large fee recognized in the third quarter of
2000. Financial technology solutions increased $14.6 million or 3.5% and
reflect a full year of revenue from the plastic card personalization and
procurement services acquisition in 1999 as well as revenue associated with
increased volumes in electronic funds distribution. Other revenues decreased
$3.6 million due to a decrease in professional services.

Item processing revenue increased $11.2 million due to the addition of a
large customer that converted its item processing in the fourth quarter of 1999.

Fees from trust services were $117.7 million in 2000 compared to $101.0
million in 1999, an increase of $16.7 million or 16.6%. All product lines
reflected revenue growth. At December 31, 2000, total trust assets were $1.2
billion higher than the previous year. Assets under management increased $1.0
billion or 9% and proprietary mutual fund balances increased $0.5 billion or
11%.

Mortgage banking revenue was $18.9 million in 2000 compared with $29.1
million in 1999, a decrease of $10.2 million. Gains from sales of mortgages to
the secondary market and mortgage related fees declined $9.2 million and
loan-servicing fees decreased $1.0 million.

Capital markets revenue increased $7.6 million in 2000 compared to the prior
year. Net gains from the sale of investments, which vary from period to period,
accounted for $7.8 million of the increase.

Net securities gains in 2000, excluding the effect of the losses incurred
from the investment security portfolio re-alignment previously discussed,
amounted to $1.1 million and principally represents gains from the sale of
certain equity securities by the banking segment.

Other noninterest income amounted to $126.7 million in 2000 compared to
$114.2 million in 1999, an increase of $12.5 million. Revenue associated with
auto securitizations which began in 2000 amounted to $3.9 million. Gains from
the sale of branches and other assets sales were $7.2 million greater in 2000
compared to 1999. Other increases in commissions and fees in 2000 offset the
death benefit gain on life insurance policies of $6.0 million recognized in
1999.

33



Other Expense

Total other expense amounted to $1,290.4 million in 2001, an increase of
$184.9 million or 16.7% from $1,105.5 million in 2000. Both 2001 and 2000
contain certain nonoperating charges which consisted of the following:

2001 Charges

$12.0 million was spent to complete the single charter initiative. Such
costs consisted of programming changes required to support operations and
processes to achieve the scale required in the single charter environment,
consulting fees and other professional fees, costs incurred to eliminate
duplicate loan and deposit customer accounts and other affiliate shareholder
matters and costs associated with employee relocation, retention and severance.
This initiative was completed in the second quarter of 2001. The total cost
incurred for this initiative, which began in the third quarter of 2000, was
approximately $21.1 million which was approximately $3.0 million less than
originally estimated.

A special $25.0 million charge was taken to write-down residual values
associated with the Corporation's indirect auto lease portfolio. Although there
are no guarantees that there will not be further residual value write-downs,
the Corporation believes it has taken the necessary steps to reduce the
likelihood of material future write-downs.

$11.0 million of charges were taken for Metavante's reduction in force and
realignment which consisted of the closing of selected regional offices in
Idaho, Maryland, Virginia and Green Bay, Wisconsin, and a general reduction in
force across all classes of employees in the Milwaukee metropolitan area.
Approximately 400 positions were eliminated. Total costs consisted primarily of
severance of $9.6 million, lease termination and other occupancy exit costs of
$0.7 million and professional fees including outplacement services of $0.4
million. Approximately $10.5 million of the costs were paid in 2001.

$9.8 million in charges were taken in conjunction with the acquisitions of
Derivion and CyberBills by Metavante. $2.8 million of prepaid maintenance fees
and capitalized software costs associated with other technologies that were
replaced by the new and enhanced bill presentment and payment technology
obtained in the acquisitions were written-off in the second quarter of 2001.
Transition costs associated with the integration totaled approximately $7.0
million and were recognized as incurred in the third and fourth quarters of
2001.

$34.5 million in charges were taken in conjunction with Metavante's
acquisition of Brokat's North American Internet banking operations. Four
locations and five technology platforms were consolidated resulting in
severance of $3.8 million and facility closure charges of approximately $10.2
million. Write-offs of existing technology and software which will be replaced
by Brokat's software amounted to $20.5 million.

The remaining loss recognized was primarily due to the disposal of a
subsidiary of Metavante.

2000 Charges

$3.1 million loss resulted from the sale of portfolio ARM loans.

$4.5 million of Metavante IPO expenses. Such expenses included registration
costs and professional fees incurred in preparation of an initial registration
statement as well as professional fees for tax and benefit plan consulting,
market assessments, other strategic consulting and name change. Such expenses
also included costs that normally would be netted against the IPO proceeds had
it proceeded as originally planned.

$9.1 million of single charter expenses as previously discussed.

34



The following table shows other expense as reported in the Consolidated
Statements of Income contained in Item 8 and operating expenses for the years
ended December 31, 2001 and 2000. Operating expenses exclude the nonoperating
items previously discussed.



Operating
Expense Growth
Year Ended December 31, 2001 Year Ended December 31, 2000 2001 vs 2000
---------------------------- ---------------------------- -------------
Non- Non-
As operating Operating As operating Operating
Reported Items Expenses Reported Items Expenses Amount Pct
-------- --------- --------- -------- --------- --------- ------ ----
($ in millions) ($ in millions)

Other Expense:
Salaries and employee benefits. $ 694.1 $15.6 $ 678.5 $ 627.4 $ -- $ 627.4 $ 51.1 8.1%
Net occupancy.................. 71.3 7.5 63.8 54.8 -- 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 32.6
Processing charges............. 40.0 2.0 38.0 32.1 -- 32.1 5.9 18.5
Supplies and printing.......... 20.6 -- 20.6 19.9 -- 19.9 0.7 3.3
Professional services.......... 31.6 0.8 30.8 34.0 -- 34.0 (3.2) (9.4)
Shipping and handling.......... 44.8 0.2 44.6 41.9 -- 41.9 2.7 6.4
Amortization of intangibles.... 38.5 1.3 37.2 32.5 -- 32.5 4.7 14.5
Other.......................... 191.5 64.1 127.4 118.9 16.7 102.2 25.2 24.7
-------- ----- -------- -------- ----- -------- ------ ----
Total Other Expense.............. $1,290.4 $93.0 $1,197.4 $1,105.5 $16.7 $1,088.8 $108.6 10.0%
======== ===== ======== ======== ===== ======== ====== ====


Excluding the above, operating expenses amounted to $1,197.4 million in 2001
compared to $1,088.8 million in 2000, an increase of $108.6 million or 10.0%.

Expense control is sometimes measured in the financial services industry by
the efficiency ratio statistic. The efficiency ratio is calculated by taking
total other expense (excluding special charges) divided by the sum of total
other income (excluding securities gains or losses other than Capital Markets
revenue) and net interest income on a fully taxable equivalent basis. The
Corporation's efficiency ratios for the years ended December 31, 2001, 2000,
and 1999 were:



Efficiency Ratios 2001 2000 1999
----------------- ---- ---- ----

Consolidated Corporation........................... 63.2% 64.6% 63.8%
Consolidated Corporation Excluding Metavante:
Including Intangible Amortization........ 53.3% 55.0% 53.7%
Excluding Intangible Amortization........ 51.1% 53.3% 51.3%


Operating salaries and benefits expense amounted to $678.5 million for 2001
compared to $627.4 million in 2000, an increase of $51.1 million or 8.1%. The
expense for providing healthcare benefits to employees and retirees increased
34.6% in 2001 compared to the prior year and accounted for $13.2 million of the
growth in salaries and benefits. Incentive commissions and compensation
increased $11.8 million or 19.4% due to increased loan production, deposit
growth and compensation based on other performance measures including the
Corporation's common stock performance. Excluding these items, salary and
benefit expense increased 4.9% in the current year and was driven by the
banking segment which reflects, in part, the impact of the National City
acquisition in August. The increase due to acquisitions was offset by the
reduction in force and realignment announced in June and as a result,
Metavante's year over year salaries and benefits expense was relatively
unchanged.

Metavante's operating expense growth, driven in part by acquisitions,
accounted for $19.9 million or approximately 71% of the corporate-wide
operating expense growth in net occupancy, equipment, software, processing and
supplies and printing.

The decline in professional services operating expense was also driven by
Metavante. This area was specifically identified for cost-savings as part of
Metavante's reduction in force and realignment implemented during the second
quarter of 2001 and reflects the focus on acquisitions and in-house resources
for technology development.

35



Amortization of intangibles excluding nonoperating items, increased $4.7
million. Amortization of loan servicing rights, especially mortgage servicing
rights which are sensitive to the increased prepayment and refinancing activity
experienced during 2001, accounted for $4.1 million of the increase. The
remainder was attributable to acquisitions. See Note 1 to the Consolidated
Financial Statements contained in Item 8 for a discussion of the new accounting
standard on goodwill and intangibles that went into effect on January 1, 2002.

Other operating expenses amounted to $127.4 million in 2001 compared to
$102.2 million in the prior year, an increase of $25.2 million or 24.7%.

Other expense is affected by the capitalization of costs, net of
amortization, associated with software development and data processing
conversions. A lower amount of capitalized software development costs and
capitalized conversion costs net of their respective amortization resulted in
an increase in other operating expense and accounted for approximately $18.6
million of the total increase in other operating expense. Advertising and
customer related expense in the banking segment increased $6.8 million which
reflects the impact of acquisitions as well as programs to enhance deposit and
loan growth.

Total other expense amounted to $1,105.5 million in 2000, an increase of
$70.5 million or 6.8% from $1,035.0 million in 1999. Other expense in 2000
includes $16.7 million of nonoperating items as previously discussed. Excluding
those items, operating expenses amounted to $1,088.8 million in 2000 compared
to $1,035.0 million in 1999, an increase of $53.8 million or 5.2%.

The increase in expenses is primarily attributable to the Corporation's
nonbanking businesses, particularly its data processing business segment
Metavante. Metavante's expense growth of approximately $30.3 million or 6.4% in
2000 compared to 1999 represents over half of the Corporation's total operating
expense growth.

Total salaries and benefits expense amounted to $627.4 million for 2000
compared to $587.7 million in 1999, an increase of $39.7 million or 6.8%.
Metavante contributed approximately $40.5 million to the increase. Compared to
1999, Metavante had over 500 more full-time equivalent employees and contract
programmers in 2000 in response to the continued growth in the electronic
banking and electronic payment services businesses. Salaries and benefits of
the Corporation's banking segment increased $10.3 million or 4.4%. Incentive
compensation based on the Corporation's common stock performance decreased
$11.3 million.

Metavante's expense growth, driven in part by continued investment in
infrastructure, accounted for $16.5 million or all of the corporate-wide
expense growth in net occupancy, equipment, software, processing, supplies and
printing and professional services.

The increase in shipping and handling reflects the increase in item
processing revenue especially from a large new customer as previously discussed.

Amortization of intangibles decreased $5.6 million. Amortization of core
deposit premiums decreased $2.9 million. A decrease in goodwill and other
amortization associated with acquisitions by Metavante was offset by increases
in amortization of mortgage loan and auto loan servicing rights.

Other operating expenses amounted to $102.2 million in 2000 compared to
$105.4 million in the prior year, a decrease of $3.2 million or 3.1%. Auto
lease residual impairment and off-lease inventory write-downs amounted to $8.6
million.

Other expense is affected by the capitalization of costs, net of
amortization, associated with software development and data processing
conversions. The amount of capitalized software development costs and
capitalized conversion costs net of their respective amortization increased
resulting in a decrease in other operating expenses of $13.0 million in 2000
compared to 1999.

36



Income Tax Provision

The provision for income taxes was $163.1 million in 2001, $152.9 million in
2000 and $173.4 million in 1999. The effective tax rate in 2001 was 32.6%
compared to 32.5% in 2000 and 32.9% in 1999 and was relatively unchanged.

Liquidity & Capital Resources

M&I manages its liquidity to ensure that funds are available to each of its
banks to satisfy the cash flow requirements of depositors and borrowers and to
ensure the Corporation's own cash requirements are met. M&I maintains liquidity
by obtaining funds from several sources.

The Corporation's most readily available source of liquidity is its
investment portfolio. Investment securities available for sale, which totaled
$3.4 billion at December 31, 2001, represent a highly accessible source of
liquidity. The Corporation's portfolio of held-to-maturity investment
securities, which totaled $1.0 billion at December 31, 2001, provides liquidity
from maturities and amortization payments. The Corporation's mortgages
held-for-sale provide additional liquidity. These loans, which aggregated $0.3
billion at December 31, 2001, represent recently funded home mortgage loans
that are prepared for delivery to investors, which generally occurs within
thirty to ninety days after the loan has been funded.

Depositors within M&I's defined markets are another source of liquidity.
Core deposits (demand, savings, money market and consumer time deposits)
averaged $13.9 billion in 2001. The Corporation's banking affiliates may also
access the federal funds markets or utilize collateralized borrowings such as
treasury demand notes or FHLB advances. Additionally, the banking affiliates
may use brokered deposits.

As discussed in Note 9 to the Consolidated Financial Statements contained in
Item 8, the Corporation's banking affiliates make limited use of off-balance
sheet structures as an alternate source of liquidity.

The Corporation's lead bank ("Bank") has implemented a bank note program
which permits it to issue up to $5.0 billion of short-term and medium-term
notes which are offered and sold only to institutional investors. This program
is intended to enhance liquidity by enabling the Bank to sell its debt
instruments in private markets in the future without the delays which would
otherwise be incurred. As shown and discussed in Notes 12 and 13 in the Notes
to the Consolidated Financial Statements contained in Item 8, short-term and
longer-term bank notes outstanding at December 31, 2001, amounted to $1.8
billion.

The national capital markets represent a further source of liquidity to M&I.
M&I has filed a shelf registration which is intended to permit M&I to raise
funds through sales of Corporate medium-term notes with a relatively short lead
time. Under the shelf registration, the Corporation may issue up to $0.5
billion of medium-term Series E notes with maturities ranging from 9 months to
30 years and at fixed or floating rates. At December 31, 2001, Series E notes
outstanding amounted to $0.3 billion. Additionally, the Corporation has a
commercial paper program. At December 31, 2001, commercial paper outstanding
amounted to $0.3 billion.

Short-term borrowings represent contractual debt obligations with maturities
of one year or less and amounted to $5.9 billion at December 31, 2001. Other
obligations include maturities of longer-term borrowings as described in Note
13, future minimum lease payments on facilities and equipment as described in
Note 10 and commitments to extend credit and letters of credit as described in
Note 18 of the Notes to Consolidated Financial Statements contained in Item 8,
respectively. Since many commitments to extend credit expire without being
drawn upon and letters of credit are contingent commitments, the amounts
outstanding at any time do not necessarily represent future cash requirements.
Under Federal Reserve Board policy, the Corporation is expected to act as a
source of financial strength to each subsidiary bank in circumstances when it
might not do so absent such policy.

37



Shareholders' equity was $2.49 billion or 9.1% of total consolidated assets
at December 31, 2001, compared to $2.24 billion or 8.6% of total consolidated
assets at December 31, 2000. The increase associated with earnings, net of
dividends paid, and the increase due to common stock issued in the National
City acquisition was offset by the effect of treasury share repurchases.

The Corporation and its affiliates continue to have a strong capital base
and the Corporation's regulatory capital ratios continue to be significantly
above the defined minimum regulatory ratios. See Note 14 to the Consolidated
Financial Statements contained in Item 8 herein for the Corporation's
comparative capital ratios and the capital ratios of its significant
subsidiaries.

Federal and state banking laws place certain restrictions on the amount of
dividends and loans which a bank may make to its parent company. Such
restrictions have not had, and are not expected to have, any material effect on
the Corporation's ability to meet its cash obligations.

The Corporation has a Stock Repurchase Program under which up to 6 million
shares can be repurchased annually. During 2001 and 2000, the Corporation
repurchased 4.7 million and 3.2 million shares at an aggregate cost of $273.3
million and $156.3 million, respectively.

During 1999, the holder of the Corporation's Series A convertible preferred
stock converted 348,944 shares of Series A into 3,832,957 shares of common
stock which were issued from the Corporation's treasury stock.

The Corporation has generally financed its growth through the retention of
earnings and the issuance of long-term debt. It is expected that future growth
can be financed through internal earnings retention, additional long-term debt
offerings, or the issuance of additional common or preferred stock or other
capital instruments.

Metavante IPO

In July 2000, the Corporation announced that it had filed a registration
statement with the Securities and Exchange Commission for the IPO of its
Metavante subsidiary. In November 2000, the Corporation withdrew the IPO due to
adverse market conditions and the near term slow down in financial account
processing markets.

Year 2000

Year 2000 (Y2K) was the term used to describe the fact that many existing
computer programs used only two digits to identify a year in a date field.
These programs were designed and developed without considering the impact of
the upcoming change in the century. If not corrected, many computer
applications could have failed or created erroneous results by or at the year
2000. The term also refers to devices with imbedded technology that are time
sensitive and may fail to recognize year 2000 correctly. This issue affected
virtually all companies and organizations. The transition to Year 2000 was
successful and there were no material adverse consequences to its systems or
customers during the transition.

The majority of Metvante's contracts did not provide for additional
reimbursement over and above the previously contracted maintenance amounts. The
Corporation estimates that the total net direct cost for the year 2000 effort
was approximately $37.4 million with Metavante representing approximately 94%
of that amount. Approximately $12.1 million was expensed in 1999.

38



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk arises from exposure to changes in interest rates, exchange
rates, commodity prices, and other relevant market rate or price risk. The
Corporation faces market risk through trading and other than trading
activities. While market risk that arises from trading activities in the form
of foreign exchange and interest rate risk is immaterial to the Corporation,
market risk from other than trading activities in the form of interest rate
risk is measured and managed through a number of methods. For additional
information on the Corporation's derivative financial instruments and foreign
exchange position, see Notes 19 and 20 to the Consolidated Financial Statements
contained in Item 8 herein.

Interest Rate Risk

The Corporation uses financial modeling techniques to identify potential
changes in income under a variety of possible interest rate scenarios.
Financial institutions, by their nature, bear interest rate and liquidity risk
as a necessary part of the business of managing financial assets and
liabilities. The Corporation has designed strategies to confine these risks
within prudent parameters and identify appropriate risk/reward tradeoffs in the
financial structure of the balance sheet.

The financial models identify the specific cash flows, repricing timing and
embedded option characteristics across the array of assets and liabilities held
by the Corporation. Policies are in place to assure that neither earnings nor
fair value at risk exceed appropriate limits. The use of a limited array of
derivative financial instruments has allowed the Corporation to achieve the
desired balance sheet repricing structure while simultaneously meeting the
desired objectives of both its borrowing and depositing customers.

The models used include measures of the expected repricing characteristics
of administered rate (NOW, savings and money market accounts) and non-rate
related products (demand deposit accounts, other assets and other liabilities).
These measures recognize the relative insensitivity of these accounts to
changes in market interest rates, as demonstrated through current and
historical experiences. In addition to information about contractual payment
information for most other assets and liabilities, the models also include
estimates of expected prepayment characteristics for those items that are
likely to materially change their payment structures in different rate
environments, including residential mortgage products, certain commercial and
commercial real estate loans and certain mortgage-related securities. Estimates
for these sensitivities are based on industry assessments and are substantially
driven by the differential between the contractual coupon of the item and
current market rates for similar products.

This information is incorporated into a model that allows the projection of
future income levels in several different interest rate environments. Earnings
at risk are calculated by modeling income in an environment where rates remain
constant, and comparing this result to income in a different rate environment,
and then dividing this result into the Corporation's budgeted pre-tax income
for the calendar year. Since future interest rate moves are difficult to
predict, the following table presents two potential scenarios--a gradual
increase of 100bp across the entire yield curve over the course of the year
(+25bp per quarter), and a gradual decrease of 100bp across the entire yield
curve over the course of the year (-25bp per quarter) for the balance sheet as
of December 31, 2001:



Impact to 2002
Hypothetical Change in Interest Rates Pretax Income
------------------------------------- --------------

100 basis point gradual rise in rates........... (3.9%)
100 basis point gradual decline in rates........ 3.1%


These results are based solely on the modeled parallel changes in market
rates, and do not reflect the earnings sensitivity that may arise from other
factors such as changes in the shape of the yield curve, the changes in spread
between key market rates, or accounting recognition for impairment of certain
intangibles. These results are also considered to be conservative estimates due
to the fact that they do not include any management action to mitigate
potential income variances within the simulation process. Such action could
potentially include, but would not be limited to, adjustments to the repricing
characteristics of any on- or off-balance sheet item with regard to short-term
rate projections and current market value assessments.

39



Actual results will differ from simulated results due to timing, magnitude,
and frequency of interest rate changes as well as changes in market conditions
and management strategies.

Another component of interest rate risk is measuring the fair value at risk
for a given change in market interest rates. The Corporation also uses computer
modeling techniques to determine the present value of all asset and liability
cash flows (both on- and off-balance sheet), adjusted for prepayment
expectations, using a market discount rate. The net change in the present value
of the assets and liability cash flows in different market rate environments is
the amount of fair value at risk from those rate movements. As of December 31,
2001 the fair value of equity at risk for a gradual 100bp shift in rates was
less than 6.0% of the market value of the Corporation.

Equity Risk

In addition to interest rate risk, the Corporation incurs market risk in the
form of equity risk. M&I's Capital Markets Group invests in private,
medium-sized companies to help establish new businesses or recapitalize
existing ones and, to a lessor extent, invests in publicly traded equity
securities. Exposure to the change in equity values for the nonpublic companies
that are held in their portfolio exists, but due to the nature of the
investments, cannot be quantified within acceptable levels of precision.

M&I Trust Services administers over $57 billion in assets and directly
manages a portfolio of almost $13 billion. Exposure exists to changes in equity
values due to the fact that fee income is partially based on equity balances.
While this exposure is present, quantification remains difficult due to the
number of other variables affecting fee income. Interest rate changes can also
have an effect on fee income for the above stated reasons.


40



ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FOR YEARS
ENDED DECEMBER 31, 2001, 2000, AND 1999

Consolidated Balance Sheets
December 31 ($000's except share data)



2001 2000
----------- -----------

Assets
Cash and Cash Equivalents:
Cash and Due from Banks................................................. $ 617,183 $ 760,103
Federal Funds Sold and Security Resale Agreements....................... 119,561 54,443
Money Market Funds...................................................... 827,021 50,147
----------- -----------
Total Cash and Cash Equivalents..................................... 1,563,765 864,693
Investment Securities:
Trading Securities, at Market Value..................................... 6,119 15,317
Interest Bearing Deposits at Other Banks................................ 41,668 43,528
Available for Sale, at Market Value..................................... 3,383,632 4,735,722
Held to Maturity, Market Value $1,049,952 ($1,124,756 in 2000).......... 1,032,093 1,112,545
----------- -----------
Total Investment Securities......................................... 4,463,512 5,907,112
Loans and Leases, Net of Unearned Income of $178,734 ($215,125 in 2000).... 19,295,372 17,587,087
Less: Allowance for Loan and Lease Losses.................................. 268,198 235,115
----------- -----------
Net Loans and Leases................................................ 19,027,174 17,351,972
Premises and Equipment..................................................... 393,030 392,995
Goodwill and Core Deposit Intangibles...................................... 555,189 310,930
Other Intangibles.......................................................... 32,896 34,354
Accrued Interest and Other Assets.......................................... 1,218,168 1,215,683
----------- -----------
Total Assets........................................................ $27,253,734 $26,077,739
=========== ===========
Liabilities and Shareholders' Equity
Deposits:
Noninterest Bearing..................................................... $ 3,558,571 $ 3,129,834
Interest Bearing........................................................ 12,934,476 16,118,793
----------- -----------
Total Deposits...................................................... 16,493,047 19,248,627
Short-term Borrowings...................................................... 5,857,242 2,814,731
Accrued Expenses and Other Liabilities..................................... 850,300 850,916
Long-term Borrowings....................................................... 1,560,177 921,276
----------- -----------
Total Liabilities................................................... 24,760,766 23,835,550
Shareholders' Equity:
Series A Convertible Preferred Stock, $1.00 par value, 2,000,000 Shares
Authorized; 336,370 Shares Issued; Liquidation Preference $33,637..... 336 336
Common Stock, $1.00 par value, 320,000,000 Shares Authorized;
117,301,755 Shares Issued (112,757,546 in 2000)....................... 117,302 112,757
Additional Paid-in Capital.............................................. 698,289 452,212
Retained Earnings....................................................... 2,331,776 2,117,759
Accumulated Other Comprehensive Income, Net of Related Taxes............ 40,600 38,127
Less: Treasury Stock, at Cost, 13,352,817 Shares (9,910,839 in 2000).... 673,494 458,472
Deferred Compensation............................................. 21,841 20,530
----------- -----------
Total Shareholders' Equity........................................ 2,492,968 2,242,189
----------- -----------
Total Liabilities and Shareholders' Equity........................ $27,253,734 $26,077,739
=========== ===========


The accompanying notes are an integral part of the Consolidated Financial
Statements.

41



Consolidated Statements of Income
Years ended December 31 ($000's except share data)



2001 2000 1999
---------- ---------- ----------

Interest Income
Loans and Leases.......................................................... $1,358,802 $1,391,651 $1,156,775
Investment Securities:
Taxable................................................................ 270,336 272,536 269,668
Exempt from Federal Income Taxes....................................... 62,273 65,429 58,820
Trading Securities........................................................ 884 1,508 1,864
Short-term Investments.................................................... 16,812 16,858 9,457
---------- ---------- ----------
Total Interest Income............................................... 1,709,107 1,747,982 1,496,584

Interest Expense
Deposits.................................................................. 566,899 772,016 585,864
Short-term Borrowings..................................................... 188,587 224,187 142,294
Long-term Borrowings...................................................... 110,842 78,773 63,145
---------- ---------- ----------
Total Interest Expense.............................................. 866,328 1,074,976 791,303
---------- ---------- ----------
Net Interest Income....................................................... 842,779 673,006 705,281
Provision for Loan and Lease Losses....................................... 54,115 30,352 25,419
---------- ---------- ----------
Net Interest Income After Provision for Loan and Lease Losses............. 788,664 642,654 679,862

Other Income
Data Processing Services:
e-Finance Solutions.................................................... 120,147 104,681 64,404
Financial Technology Solutions......................................... 435,700 425,589 411,029
Other Revenues......................................................... 3,969 15,771 19,383
---------- ---------- ----------
Total Data Processing Services...................................... 559,816 546,041 494,816
Item Processing........................................................... 47,638 51,409 40,169
Trust Services............................................................ 120,827 117,680 100,963
Service Charges on Deposits............................................... 85,980 73,872 69,699
Mortgage Banking.......................................................... 46,188 18,946 29,117
Capital Markets Revenue................................................... 10,642 20,022 12,470
Net Investment Securities Losses.......................................... (17,170) (49,515) (4,083)
Life Insurance Revenue.................................................... 27,053 27,993 25,767
Other..................................................................... 121,838 126,708 114,158
---------- ---------- ----------
Total Other Income.................................................. 1,002,812 933,156 883,076

Other Expense
Salaries and Employee Benefits............................................ 694,089 627,394 587,711
Net Occupancy............................................................. 71,322 54,788 48,965
Equipment................................................................. 118,199 113,962 107,786
Software Expenses......................................................... 39,790 30,013 26,974
Processing Charges........................................................ 40,058 32,104 30,365
Supplies and Printing..................................................... 20,591 19,932 19,387
Professional Services..................................................... 31,583 33,974 35,143
Shipping and Handling..................................................... 44,792 41,965 35,181
Amortization of Intangibles............................................... 38,466 32,478 38,046
Other..................................................................... 191,541 118,850 105,441
---------- ---------- ----------
Total Other Expense................................................. 1,290,431 1,105,460 1,034,999
---------- ---------- ----------
Income Before Income Taxes and Cumulative Effect of Changes in Accounting
Principles............................................................... 501,045 470,350 527,939
Provision for Income Taxes................................................ 163,124 152,948 173,428
---------- ---------- ----------
Income Before Cumulative Effect of Changes in Accounting Principles....... 337,921 317,402 354,511
Cumulative Effect of Changes in Accounting Principles, Net of Income Taxes (436) (2,279) --
---------- ---------- ----------
Net Income................................................................ $ 337,485 $ 315,123 $ 354,511
========== ========== ==========

Net Income Per Common Share
Basic:
Income Before Cumulative Effect of Changes in Accounting Principles.... $ 3.20 $ 3.01 $ 3.32
Cumulative Effect of Changes in Accounting Principles.................. -- (0.02) --
---------- ---------- ----------
Net Income............................................................. $ 3.20 $ 2.99 $ 3.32
========== ========== ==========
Diluted:
Income Before Cumulative Effect of Changes in Accounting Principles.... $ 3.09 $ 2.91 $ 3.14
Cumulative Effect of Changes in Accounting Principles.................. -- (0.02) --
---------- ---------- ----------
Net Income............................................................. $ 3.09 $ 2.89 $ 3.14
========== ========== ==========


The accompanying notes are an integral part of the Consolidated Financial
Statements.

42



Consolidated Statements of Cash Flows
Years ended December 31 ($000's)



2001 2000 1999
----------- ----------- -----------

Cash Flows From Operating Activities:
Net Income...................................................... $ 337,485 $ 315,123 $ 354,511
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization................................ 61,894 69,197 86,156
Provision for Loan and Lease Losses.......................... 54,115 30,352 25,419
(Gains) Losses on Sales of Assets............................ (23,292) 7,047 (42,522)
Proceeds from Sales of Trading Securities and Loans Held for
Resale..................................................... 5,412,432 4,529,322 4,766,956
Purchases of Trading Securities and Loans Held for Resale.... (5,549,128) (3,952,604) (4,606,316)
Other........................................................ (57,823) 30 40,011
----------- ----------- -----------
Total Adjustments........................................ (101,802) 683,344 269,704
----------- ----------- -----------
Net Cash Provided by Operating Activities....................... 235,683 998,467 624,215

Cash Flows From Investing Activities:
Net Decrease in Shorter Term Securities......................... -- -- 21,400
Proceeds from Sales of Securities Available for Sale............ 196,664 1,538,995 116,823
Proceeds from Maturities of Securities Available for Sale....... 1,818,294 677,075 954,959
Proceeds from Maturities of Securities Held to Maturity......... 79,040 58,675 72,008
Purchases of Securities Available for Sale...................... (282,481) (2,030,511) (1,381,481)
Purchases of Securities Held to Maturity........................ (55) (249) (299,556)
Decrease in Loans Due to Divestitures........................... 3,186 8,352 30,817
Net Increase in Loans........................................... (698,316) (1,721,384) (2,342,319)
Purchases of Assets to be Leased................................ (576,150) (573,833) (429,345)
Principal Payments on Lease Receivables......................... 761,164 360,992 294,891
Purchases of Premises and Equipment, Net........................ (44,620) (78,817) (66,899)
Acquisitions Accounted for as Purchases, Net of Cash Equivalents
Acquired and Investments...................................... (64,752) (265) (84,408)
Other........................................................... 16,664 18,428 12,751
----------- ----------- -----------
Net Cash Provided by (Used in) Investing Activities............. 1,208,638 (1,742,542) (3,100,359)

Cash Flows From Financing Activities:
Decrease in Deposits Due to Divestitures........................ (10,059) (100,791) (84,191)
Net (Decrease) Increase in Deposits............................. (3,788,763) 2,565,584 607,243
Proceeds from Issuance of Commercial Paper...................... 3,472,573 3,190,712 1,926,791
Principal Payments on Commercial Paper.......................... (3,499,459) (3,115,064) (1,740,439)
Net Increase (Decrease) in Other Short-term Borrowings.......... 2,280,201 (1,717,077) 2,226,463
Proceeds from Issuance of Long-term Debt........................ 1,487,373 536,587 288,526
Payment of Long-term Debt....................................... (319,839) (368,469) (371,832)
Dividends Paid.................................................. (122,777) (111,379) (104,490)
Purchase of Common Stock........................................ (267,438) (156,319) (317,149)
Proceeds from the Issuance of Common Stock...................... 23,630 5,241 18,359
Other........................................................... (691) (113) (19)
----------- ----------- -----------
Net Cash (Used in) Provided by Financing Activities............. (745,249) 728,912 2,449,262
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents............ 699,072 (15,163) (26,882)
Cash and Cash Equivalents, Beginning of Year.................... 864,693 879,856 906,738
----------- ----------- -----------
Cash and Cash Equivalents, End of Year.......................... $ 1,563,765 $ 864,693 $ 879,856
=========== =========== ===========
Supplemental Cash Flow Information:
Cash Paid During the Year for:
Interest..................................................... $ 972,354 $ 984,883 $ 775,065
Income Taxes................................................. 148,864 116,363 125,841


The accompanying notes are an integral part of the Consolidated Financial
Statements.

43



Consolidated Statements of Shareholders' Equity
($000's except share data)



Accum-
ulated
Other
Compre- Additional Treasury Deferred Compre-
hensive Preferred Common Paid-in Retained Common Compen- hensive
Income Stock Stock Capital Earnings Stock sation Income
-------- --------- -------- ---------- ---------- --------- -------- --------

Balance, December 31, 1998.......... $ 685 $112,757 $ 621,795 $1,664,123 $(194,046) $(19,637) $ 58,102
Comprehensive Income:
Net Income...................... $354,511 -- -- -- 354,511 -- -- --
Unrealized Gains/(Losses) on
Securities:
Unrealized Securities
Losses Net of Taxes of
$51,914..................... (91,851) -- -- -- -- -- -- --
Reclassification
Adjustment for Gains
Included in Net Income
Net of Taxes of $538........ 1,000 -- -- -- -- -- -- --
--------
Total Unrealized
Losses on
Securities............... (90,851) -- -- -- -- -- -- (90,851)
--------
Comprehensive Income................ $263,660 -- -- -- -- -- -- --
========
Issuance of 3,832,957 Treasury
Common Shares on Conversion
of 348,944 Shares of Preferred
Stock.............................. (349) -- (160,635) -- 160,984 -- --
Issuance of 988,557 Treasury
Common Shares Under Stock
Option and Restricted Stock
Plans.............................. -- -- (16,806) -- 36,503 (1,332) --
Acquisition of 5,109,028 Common
Shares............................. -- -- (82) -- (317,954) 198 --
Dividends Declared on Preferred
Stock--$10.58 Per Share............ -- -- -- (6,297) -- -- --
Dividends Declared on Common
Stock--$0.94 Per Share............. -- -- -- (98,193) -- -- --
Net Change in Deferred
Compensation....................... -- -- -- -- -- 641 --
Income Tax Benefit for
Compensation Expense for Tax
Purposes in Excess of Amounts
Recognized for Financial
Reporting Purposes................. -- -- 12,764 -- -- -- --
Other............................... -- -- 61 (16) -- -- --

----- -------- --------- ---------- --------- -------- --------
Balance, December 31, 1999.......... $ 336 $112,757 $ 457,097 $1,914,128 $(314,513) $(20,130) $(32,749)
===== ======== ========= ========== ========= ======== ========


The accompanying notes are an integral part of the Consolidated Financial
Statements.

44



Consolidated Statements of Shareholders' Equity
($000's except share data)



Accumulated
Additional Treasury Deferred Other
Comprehensive Preferred Common Paid-in Retained Common Compen- Comprehensive
Income Stock Stock Capital Earnings Stock sation Income
------------- --------- -------- ---------- ---------- --------- -------- -------------

Balance, December 31, 1999......... $336 $112,757 $457,097 $1,914,128 $(314,513) $(20,130) $(32,749)
Comprehensive Income:
Net Income..................... $315,123 -- -- -- 315,123 -- -- --
Unrealized Gains/(Losses)
on Securities:
Unrealized Securities
Gains Net of Taxes of
$56,790...................... 104,469 -- -- -- -- -- -- --
Reclassification
Adjustment For
(Losses) Included in
Net Income Net of
Taxes of $18,091............. (33,593) -- -- -- -- -- -- --
--------
Total Unrealized Gains
on Securities.............. 70,876 -- -- -- -- -- -- 70,876
--------
Comprehensive Income............... $385,999 -- -- -- -- -- -- --
========
Issuance of 270,531 Treasury
Common Shares Under Stock
Option and Restricted Stock
Plans............................. -- -- (6,897) -- 12,496 (355) --
Acquisition of 3,239,686
Common Shares..................... -- -- (67) -- (156,455) 156 --
Dividends Declared on Preferred
Stock--$11.83 Per Share........... -- -- -- (3,979) -- -- --
Dividends Declared on Common
Stock--$1.035 Per Share........... -- -- -- (107,400) -- -- --
Net Change in Deferred
Compensation...................... -- -- -- -- -- (201) --
Income Tax Benefit for
Compensation Expense for
Tax Purposes in Excess of
Amounts Recognized for
Financial Reporting Purposes...... -- -- 2,486 -- -- -- --
Other.............................. -- -- (407) (113) -- -- --
---- -------- -------- ---------- --------- -------- --------
Balance, December 31, 2000......... $336 $112,757 $452,212 $2,117,759 $(458,472) $(20,530) $ 38,127
==== ======== ======== ========== ========= ======== ========


The accompanying notes are an integral part of the Consolidated Financial
Statements.

45



Consolidated Statements of Shareholders' Equity
($000's except share data)



Accumulated
Other
Additional Treasury Deferred Compre-
Comprehensive Preferred Common Paid-in Retained Common Compen- hensive
Income Stock Stock Capital Earnings Stock sation Income
------------- --------- -------- ---------- ---------- --------- -------- -----------

Balance, December 31, 2000...... $336 $112,757 $452,212 $2,117,759 $(458,472) $(20,530) $ 38,127
Comprehensive Income:
Net Income................... $337,485 -- -- -- 337,485 -- -- --
Unrealized Gains
(Losses) on Securities:
Arising During the
Period Net of Taxes
of $18,646............... 34,004 -- -- -- -- -- -- --
Reclassification for
Securities Transactions
Included in Net Income
Net of Taxes of $4,781...... (8,878) -- -- -- -- -- -- --
--------
Unrealized Gains (Losses).... 25,126 -- -- -- -- -- -- 25,126
--------
Net Gains (Losses) on
Derivatives Hedging
Variability of Cash Flows:
Transition
Adjustment Net of
Taxes of $5,483.......... (10,182)
Arising During the
Period Net of Taxes
of $10,940............... (20,317) -- -- -- -- -- -- --
Reclassification
Adjustments For
Hedging Activities
Included in Net
Income Net of Taxes
of $4,225................. 7,846 -- -- -- -- -- -- --
--------
Net Gains (Losses)........... (22,653) -- -- -- -- -- -- (22,653)
--------
Other Comprehensive
Income...................... 2,473 -- -- -- -- -- -- --
--------
Comprehensive Income............ $339,958 -- -- -- -- -- -- --
========
Issuance of 4,544,209
Common Shares in the 2001
Business Combination........... -- 4,545 263,110 -- -- -- --
Issuance of 1,335,284 Treasury
Common Shares Under Stock
Option and Restricted Stock
Plans.......................... -- -- (27,683) -- 62,975 (2,206) --
Acquisition of 4,777,262
Common Shares.................. -- -- (52) -- (277,997) 160 --
Dividends Declared on Preferred
Stock--$12.97 Per Share........ -- -- -- (4,363) -- -- --
Dividends Declared on Common
Stock--$1.135 Per Share........ -- -- -- (118,414) -- -- --
Net Change in Deferred
Compensation................... -- -- -- -- -- 735 --
Income Tax Benefit for
Compensation Expense for
Tax Purposes in Excess of
Amounts Recognized for
Financial Reporting Purposes... -- -- 13,334 -- -- -- --
Other........................... -- -- (2,632) (691) -- -- --
---- -------- -------- ---------- --------- -------- --------
Balance, December 31, 2001...... $336 $117,302 $698,289 $2,331,776 $(673,494) $(21,841) $ 40,600
==== ======== ======== ========== ========= ======== ========


The accompanying notes are an integral part of the Consolidated Financial
Statements.

46



Notes to Consolidated Financial Statements

December 31, 2001, 2000, and 1999 ($000 except share data)


Marshall & Ilsley Corporation ("M&I" or the "Corporation") is a bank holding
company that provides diversified financial services to a wide variety of
corporate, institutional, government and individual customers. M&I's largest
affiliates and principal operations are in Wisconsin; however, it has
activities in other markets, particularly in certain neighboring Midwestern
states, and in Arizona, Nevada and Florida. The Corporation's principal
activities consist of banking and data processing services. Banking services,
lending and accepting deposits from retail and commercial customers are
provided through its lead bank M&I Marshall & Ilsley Bank which is
headquartered in Wisconsin and one federally chartered thrift headquartered in
Nevada. In addition to branches located throughout Wisconsin and Las Vegas,
Nevada, banking services are provided in branches located throughout Arizona,
the Minneapolis/St. Paul, Minnesota metropolitan area, and Naples, Florida, as
well as on the Internet. Financial and data processing services and software
sales are provided through the Corporation's subsidiary Metavante Corporation
("Metavante") and its nonbank subsidiaries. Other financial services provided
by M&I include personal property lease financing; investment management and
advisory services; commercial and residential mortgage banking; venture capital
and financial advisory services; trust services to residents of Wisconsin,
Arizona, Minnesota, Florida, North Carolina, Illinois and Nevada; and brokerage
and insurance services.

1. Summary of Significant Accounting Policies

Estimates--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reported periods. Actual results could differ from
those estimates.

Consolidation principles--The Consolidated Financial Statements include the
accounts of Marshall & Ilsley Corporation and all subsidiaries. All significant
intercompany balances and transactions are eliminated in consolidation. Certain
amounts in the 2000 and 1999 Consolidated Financial Statements have been
reclassified to conform to the 2001 presentation.

Cash and cash equivalents--For purposes of the Consolidated Financial
Statements, the Corporation defines cash equivalents as short-term investments
which have an original maturity of three months or less and are readily
convertible into cash.

Securities--Securities, when purchased, are designated as Trading,
Investment Securities Held to Maturity, or Investment Securities Available for
Sale and remain in that category until they are sold or mature. The specific
identification method is used in determining the cost of securities sold.

Investment Securities Held to Maturity are carried at cost, adjusted for
amortization of premiums and accretion of discounts. The Corporation designates
investment securities as held to maturity only when it has the positive intent
and ability to hold them to maturity. Investment Securities Available for Sale
are carried at fair value with fair value adjustments net of the related income
tax effects reported as a separate component of shareholders' equity. Trading
Securities are carried at fair value, with adjustments to the carrying value
reflected in the Consolidated Statements of Income.

Loans and leases--Interest on loans, other than direct financing leases, is
recognized as income based on the loan principal outstanding during the period.
Unearned income on financing leases is recognized over the lease term on a
basis that results in an approximate level rate of return on the lease
investment. Loans are generally placed on nonaccrual status when they are past
due 90 days as to either interest or principal. When a loan is

47



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

placed on nonaccrual status, previously accrued and uncollected interest is
charged to interest income on loans. A nonaccrual loan may be restored to an
accrual basis when interest and principal payments are brought current and
collectibility of future payments is not in doubt.

The Corporation defers and amortizes fees and certain incremental direct
costs, primarily salary and employee benefit expenses, over the contractual
term of the loan or lease as an adjustment to the yield. The unamortized net
fees and costs are reported as part of the loan or lease balance outstanding.

The Corporation periodically reviews the residual values associated with its
leasing portfolio. Declines in residual values that are judged to be other than
temporary are recognized as a loss resulting in a reduction in the net
investment in the lease. During 2001 and 2000, the Corporation determined that
declines in residual values associated with its direct financing consumer
automobile leases were other than temporary. Total residual value losses
recognized amounted to $35,132 in 2001 and $12,143 in 2000.

Allowance for loan and lease losses--The allowance for loan and lease losses
is maintained at a level believed adequate by management to absorb estimated
probable losses in the loan and lease portfolio. Management's determination of
the adequacy of the allowance is based on a continual review of the loan and
lease portfolio, loan and lease loss experience, economic conditions, growth
and composition of the portfolio, and other relevant factors. As a result of
management's continual review, the allowance is adjusted through provisions for
loan and lease losses charged against income.

Asset sales--The Corporation sells assets to unconsolidated entities that
securitize the assets. The Corporation retains interests in the securitized
assets in the form of servicing rights, interest-only strips, interest rate
swaps and a cash reserve account. Gain or loss on sale of the assets depends in
part on the carrying amount assigned to the assets sold and the retained
interests. The value of the retained interests is based on the present value of
future expected cash flows. Future expected cash flows represent management's
best estimates of the key assumptions--credit losses, prepayment speeds,
forward yield curves and discount rates--commensurate with the risks involved.

Premises and equipment--Land is recorded at cost. Premises and equipment are
recorded at cost and depreciated principally on the straight-line method with
annual rates varying from 10 to 50 years for buildings and 3 to 10 years for
equipment. Long-lived assets, which are considered impaired, are carried at
fair value and long-lived assets to be disposed of are carried at the lower of
the carrying amount or fair value less cost to sell. Maintenance and repairs
are charged to expense and betterments are capitalized.

Other real estate owned--Other real estate owned includes assets that have
been acquired in satisfaction of debts and bank branch premises held for sale.
Other real estate acquired in satisfaction of debts is recorded at fair value,
less estimated selling costs, and bank branch premises are recorded at the
lower of cost or fair value, less estimated selling costs, at the date of
transfer. Valuation adjustments required at the date of transfer for assets
acquired in satisfaction of debts are charged to the allowance for loan and
lease losses, whereas any valuation adjustments on premises are reported in
other expense. Subsequent to transfer, other real estate owned is carried at
the lower of cost or fair value, less estimated selling costs, based upon
periodic evaluations. Rental income from properties and gains on sales are
included in other income, and property expenses, which include carrying costs,
required valuation adjustments and losses on sales, are recorded in other
expense. At December 31, 2001 and 2000, other real estate amounted to $6,796
and $3,797, respectively.

Mortgage servicing--Fees related to the servicing of mortgage loans are
recorded as income when payments are received from mortgagors. Mortgage loans
held for sale to investors are carried at the lower of cost or market,

48



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

determined on an aggregate basis, based on outstanding firm commitments
received for such loans or on current market prices. Mortgage loans held for
sale amounted to $289,667 at December 31, 2001 and $38,762 at December 31, 2000.

Data processing services--Data processing and related revenues are
recognized as services are performed based on amounts billable under the
contracts. Processing services performed that have not been billed to customers
are accrued. Revenue includes shipping and handling costs associated with such
income producing activities.

Revenues attributable to the licensing of software are generally recognized
upon delivery and performance of certain contractual obligations, provided that
no significant vendor obligations remain and collection of the resulting
receivable is deemed probable. Service revenues from customer maintenance fees
for ongoing customer support and product updates are recognized ratably over
the term of the maintenance period. Service revenues from training and
consulting are recognized when the services are performed. Conversion revenues
associated with the conversion of customers' processing systems to Metavante's
processing systems are deferred and amortized over the period of the related
processing contract, generally five years. See Note 2 regarding the change in
accounting for conversion revenues.

Direct costs associated with the production of computer software which will
be marketed or used in data processing operations are capitalized and amortized
on the straight-line method over the estimated economic life of the product,
generally four years. Such capitalized costs are periodically evaluated for
impairment and adjusted to net realizable value when impairment is indicated.
Direct costs associated with customer system conversions to the data services
operations are capitalized and amortized on the straight-line method over the
terms of the related servicing contract. Routine maintenance of software
products, design costs and development costs incurred prior to establishment of
a product's technological feasibility for software to be sold, are expensed as
incurred.

Net unamortized costs at December 31 were:



2001 2000
-------- --------

Software............................ $110,791 $ 98,666
Conversions......................... 43,477 56,142
-------- --------
Total............................... $154,268 $154,808
======== ========


See Note 2 for the effect on conversion costs due to the change in
accounting.

Amortization expense was $57,397, $40,731 and $23,836, for 2001, 2000 and
1999, respectively.

Intangibles--The Corporation recognizes as separate assets rights to service
loans when the loans are purchased or originated and sold with servicing
retained. Servicing rights are amortized over the periods during which the
corresponding loan servicing revenues are anticipated to be generated. The
Corporation evaluates and measures impairment of its capitalized mortgage
servicing rights using stratifications based on the risk characteristics of the
underlying loans. A valuation allowance is established through a charge to
income to the extent that the fair value of any stratum of its loan servicing
rights are less than its carrying value. The fair value of the Corporation's
loan servicing rights is determined based on quoted market prices for
comparable transactions, if available, or a valuation model that calculates the
present value of expected future cash flows. Loan servicing rights amounted to
$12,932 and $15,265 at December 31, 2001 and 2000, respectively. Amortization
expense amounted to $6,678, $2,598 and $1,431 in 2001, 2000 and 1999.


49



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

Identifiable intangibles resulting from acquisitions primarily consist of
core deposit premiums and other identifiable intangibles arising from purchase
acquisitions by the Corporation's Metavante subsidiary, such as purchased data
processing contract rights or customer lists. Purchased data processing
contract rights represent the costs to acquire the rights to data processing
and software distribution. Such costs are generally amortized over the average
contract lives. These identifiable intangibles amounted to $19,964 and $19,089
at December 31, 2001 and 2000, respectively. Amortization expense amounted to
$3,935 in 2001, $5,112 in 2000 and $4,394 in 1999. Core deposit premiums are
amortized in proportion to acquired deposit run-off which generally results in
an accelerated basis over periods ranging up to 15 years. Core deposit premiums
amounted to $30,441 and $15,146 at December 31, 2001 and 2000, respectively.
Amortization expense amounted to $6,541, $6,487 and $9,407 in 2001, 2000 and
1999, respectively.

Goodwill arising from business combinations consummated prior to June 30,
2001 is amortized on the straight-line basis over periods ranging from 10 to 25
years. Goodwill arising from business combinations consummated after June 30,
2001 is not amortized. Goodwill arising from certain banking acquisitions, in
which the fair value of the liabilities assumed exceed the fair value of the
assets acquired, is amortized in proportion to the run-off of the acquired
longer-term earning assets. Goodwill amounted to $524,748 at December 31, 2001
and $295,784 at December 31, 2000.

The Corporation continually evaluates whether later events and circumstances
have occurred to indicate that the carrying value of intangibles should be
reduced for possible impairment and utilizes estimates of undiscounted net
income over the remaining life to measure recoverability.

The Corporation also has negative goodwill included in other liabilities.
Negative goodwill amounted to $1,247 and $2,809 at December 31, 2001 and 2000,
respectively. The negative goodwill was accreted on a straight-line basis over
a period of 10 years and amounted to $1,562 in 2001, 2000, and 1999,
respectively.

Long-term borrowings--The guaranteed preferred beneficial interest of the
Corporation's special purpose finance subsidiary, which holds as its sole asset
junior subordinated deferrable interest debentures issued by the Corporation,
is classified as long-term borrowings and shown net of its related discount.
The distributions, including the related accretion of discount, are classified
as interest expense for purposes of the Consolidated Financial Statements.

Derivative financial instruments--Derivative financial instruments,
including certain derivative instruments embedded in other contracts, are
carried in the Consolidated Balance Sheet as either an asset or liability
measured at its fair value. The fair value of the Corporation's derivative
financial instruments is determined based on quoted market prices for
comparable transactions, if available, or a valuation model that calculates the
present value of expected future cash flows.

Changes in the fair value of derivative financial instruments are recognized
currently in earnings unless specific hedge accounting criteria are met. For
derivative financial instruments designated as hedging the exposure to changes
in the fair value of a recognized asset or liability (fair value hedge), the
gain or loss is recognized in earnings in the period of change together with
the offsetting loss or gain on the hedged item attributable to the risk being
hedged. For derivative financial instruments designated as hedging the exposure
to variable cash flows of a forecasted transaction (cash flow hedge), the
effective portion of the derivative financial instrument's gain or loss is
initially reported as a component of other comprehensive income and is
subsequently reclassified into earnings when the forecasted transaction affects
earnings. The ineffective portion of the gain or loss is reported in earnings
immediately.


50



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

At inception of a hedge, the Corporation formally documents the hedging
relationship as well as the Corporation's risk management objective and
strategy for undertaking the hedge, including identification of the hedging
instrument, the hedged transaction, the nature of the risk being hedged, and
how the hedging instrument's effectiveness in hedging the exposure will be
assessed.

The adjustment of the carrying amount of an interest bearing hedged asset or
liability in a fair value hedge is amortized into earnings when the hedged item
ceases to be adjusted for changes in its fair value attributable to the risk
being hedged.

If a cash flow hedge is discontinued because it is probable that the
original forecasted transaction will not occur, the net gain or loss in
accumulated other comprehensive income is immediately reclassified into
earnings.

Cash flows from derivative financial instruments are reported in the
Consolidated Statements of Cash Flows as operating activities.

Foreign exchange contracts--Foreign exchange contracts include such
commitments as foreign currency spot, forward, future and option contracts.
Foreign exchange contracts and the premiums on options written or sold are
carried at market value with changes in market value included in other income.

Treasury Stock--Treasury stock acquired is recorded at cost and is carried
as a reduction of shareholders' equity in the Consolidated Balance Sheets.
Treasury stock issued is valued based on average cost. The difference between
the consideration received upon issuance and the average cost is charged or
credited to additional paid-in capital.

New accounting pronouncements--

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations. SFAS 141 replaces Accounting Principles Board ("APB") Opinion No.
16, Business Combinations, and SFAS 38, Accounting for Preacquisition
Contingencies of Purchased Enterprises. All business combinations in the scope
of this statement are to be accounted for using the purchase method. This
statement carries forward without reconsideration portions of APB Opinion No.
16 that provide guidance related to the application of the purchase accounting
method. The provisions of this statement apply to all business combinations
initiated after June 30, 2001, and all business combinations accounted for by
the purchase method for which the date of acquisition is July 1, 2001, or later.

In June 2001, the FASB also issued SFAS No. 142, Goodwill and Other
Intangible Assets. This statement addresses financial accounting and reporting
for acquired goodwill and other intangible assets and supercedes APB Opinion
No. 17, Intangible Assets. SFAS 142 prescribes the accounting and reporting for
intangible assets that are acquired individually or with a group of other
assets (but not those acquired in a business combination) upon their
acquisition. SFAS 142 also prescribes how goodwill and other intangible assets
should be accounted for after they have been initially recognized in the
financial statements.

SFAS 142 adopts an aggregate view of goodwill and bases the accounting for
goodwill on the units of the combined entity into which an acquired entity is
integrated (those units are referred to as Reporting Units). A Reporting Unit
is an operating segment as defined in SFAS 131 or one level below an operating
segment.

Goodwill and intangible assets that have indefinite useful lives will not be
amortized under the new standard but rather will be tested annually for
impairment. Intangible assets with finite lives will continue to be amortized
over their useful lives, but without the constraint of the prescribed ceilings
required under APB Opinion 17.


51



Notes to Consolidated Financial Statements--(Continued)
December 31, 2001, 2000, and 1999 ($000 except share data)

SFAS 142 provides specific guidance for testing goodwill and intangible
assets that will not be amortized for impairment. Goodwill will be tested for
impairment at least annually using a two-step process that begins with an
estimation of the fair value of a Reporting Unit. The first step is a screen
for potential impairment and the second step measures the amount of impairment,
if any. Intangible assets that will not be amortized will be tested annually by
comparing the fair values of the assets with their recorded amounts.

This standard also increases disclosures about goodwill and intangible
assets and requires information about the changes in the carrying amount of
goodwill from period to period (in the aggregate and by reportable segment),
the carrying amount of intangible assets by major intangible asset class for
those assets subject to amortization and for those not subject to amortization,
and the estimated intangible amortization expense for the next five years.

The provisions of SFAS 142 are required to be applied by the Corporation
starting January 1, 2002 except goodwill and intangible assets acquired after
June 30, 2001, which were subject immediately to the nonamortization and
amortization provisions of the statement. In addition, the Corporation has six
months from the date it initially applies this standard to complete the first
step of the transitional goodwill impairment test; however, the amounts used in
the transitional goodwill impairment test shall be measured as of January 1,
2002. Impairment losses for goodwill and indefinite-lived intangible assets
that arise due to initial application of this standard (resulting from a
transitional impairment test) are to be reported as a change in accounting
principle.

Pro forma income before cumulative effect of changes in accounting
principles and related earnings per share after giving effect to the
nonamortization provision of SFAS 142 are as follows:



Year Ended December 31,
----------------------------
($000's)
2001 2000 1999
-------- -------- --------

Income before cumulative effect of changes in accounting principles. $337,921 $317,402 $354,511
Adjustments:
Goodwill amortization, net of taxes................................ 16,917 16,258 19,612
Negative goodwill amortization..................................... (1,562) (1,562) (1,562)
-------- -------- --------
Total adjustments................................................... 15,355 14,696 18,050
-------- -------- --------
Pro forma income before cumulative effect of changes in accounting
principles........................................................ $353,276 $332,098 $372,561
======== ======== ========
Pro forma earnings per share:
Income before cumulative effect of changes in accounting principles:
Basic.............................................................. $ 3.35 $ 3.15 $ 3.49
Diluted............................................................ 3.24 3.05 3.30


The amount of goodwill that will continue to be amortized is $3,385 at
December 31, 2001.

The Corporation has not yet completed its determination of how the
impairment provisions of the standard applied to the five identified Reporting
Units with recorded goodwill will affect its financial statements.

2. Change in Method of Accounting

On January 1, 2001, the Corporation adopted SFAS 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS 133 established accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance

52



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the derivatives fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. The effects of
adopting SFAS 133 are as follows:



Other
Consolidated Comprehensive
Income Income
Statement (Equity)
------------ -------------

Fair value hedges................................... $(628) $ --
Cash flow hedges.................................... (43) (15,665)
----- --------
(671) (15,665)
Income tax benefit.................................. 235 5,483
----- --------
Cumulative effect of change in accounting principles $(436) $(10,182)
===== ========


See Note 20 for additional information regarding the Corporation's use of
derivative financial instruments.

During 2000, the Corporation adopted the Securities and Exchange
Commission's Staff Accounting Bulletin No. 101--Revenue Recognition in
Financial Statements ("SAB 101"). SAB 101 provides guidance on a variety of
revenue recognition matters. Under SAB 101, certain conversion services
provided by Metavante did not qualify as discrete earnings events. As a result,
the revenue and the cost of providing those services should be deferred and
recognized on a straight-line basis over the term of the total processing
contract. The cumulative change in accounting represents the impact of applying
the guidance to services provided in previous years and resulted in the
following:



Conversion revenue deferred......................... $ 46,224
Conversion cost deferred............................ (42,413)
--------
Net revenue deferred................................ 3,811
Income tax benefit.................................. 1,532
--------
Cumulative effect of change in accounting principles $ 2,279
========


3. Earnings Per Share

A reconciliation of the numerators and denominators of the basic and diluted
per share computations are as follows (dollars and shares in thousands, except
per share data):



Year Ended December 31, 2001
--------------------------------
Average Per
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------

Net income.......................................................... $337,485
Convertible preferred dividends..................................... (4,363)
--------
Basic earnings per share
Income available to common shareholders.......................... 333,122 104,206 $3.20
=====
Effect of dilutive securities
Convertible preferred stock...................................... 4,363 3,844
Stock option, restricted stock and performance plans............. -- 1,082
-------- -------
Diluted earnings per share
Income available to common shareholders plus assumed conversions. $337,485 109,132 $3.09
=====


53



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)




Year Ended December 31, 2000
--------------------------------
Average Per
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------

Net income.......................................................... $315,123
Convertible preferred dividends..................................... (3,979)
--------
Basic earnings per share
Income available to common shareholders.......................... 311,144 104,027 $2.99
=====
Effect of dilutive securities
Convertible preferred stock...................................... 3,979 3,844
Stock option, restricted stock and performance plans............. -- 1,012
-------- -------
Diluted earnings per share
Income available to common shareholders plus assumed conversions. $315,123 108,883 $2.89
=====




Year Ended December 31, 1999
--------------------------------
Average Per
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------

Net income.......................................................... $354,511
Convertible preferred dividends..................................... (6,297)
--------
Basic earnings per share
Income available to common shareholders.......................... 348,214 104,859 $3.32
=====
Effect of dilutive securities
Convertible preferred stock...................................... 6,297 6,543
Stock option, restricted stock and performance plans............. -- 1,603
-------- -------
Diluted earnings per share
Income available to common shareholders plus assumed conversions. $354,511 113,005 $3.14
=====


Options to purchase shares of common stock not included in the computation
of diluted net income per share because the options' exercise price was greater
than the average market price of the common shares for the years ended December
31, are as follows:



Years Ended December 31, Price Range Shares
------------------------ ---------------- ---------

2001.......................... $ 55.313-$70.063 4,134,543
2000.......................... 48.125- 70.063 3,657,113
1999.......................... 67.000- 70.063 66,000


4. Business Combinations

On December 20, 2001, the Corporation's Metavante subsidiary acquired all of
the outstanding common stock of 401kservices.com, inc., in a transaction
accounted for using the purchase method of accounting. 401kservices.com, inc.
is a third-party administrator of 401(k), pension and profit-sharing plans for
companies located throughout the United States. The Company is headquartered in
Appleton, Wisconsin with offices in Arizona and California. Metavante acquired
the common stock of the Company for $17.9 million in cash subject to additional
payments contingent upon certain 2002 incremental revenues. The cumulative
maximum purchase price is $30.0 million. Contingency payments, if made, will be
charged to goodwill. There was no in-process research and development acquired
in this transaction. Initial goodwill, subject to the completion of appraisals
and valuations of the assets acquired and liabilities assumed, amounted to
$14.1 million.

54



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

On September 19, 2001, the Corporation's Metavante subsidiary acquired
substantially all of the assets and assumed certain liabilities of the North
American Internet banking unit of Brokat Technologies AG ("Brokat"), in a
transaction accounted for as a purchase. The Brokat transaction added
technology for consumer, business and corporate e-Banking applications. Total
purchase price was approximately $18.5 million in cash. There was no in-process
research and development acquired in this transaction. Initial goodwill,
subject to the completion of appraisals and valuations of the assets acquired
and liabilities assumed, amounted to $19.7 million.

In conjunction with this acquisition, Metavante began consolidating a number
of its electronic banking products onto a single technology platform. Also,
certain data operations centers will be consolidated over time into one data
operations center. The costs, recorded in the third quarter of 2001, associated
with the consolidation of five technology platforms and consolidation of four
data centers amounted to $34.5 million and consisted of severance of $3.8
million, facility closure charges of $10.2 million and write-offs of existing
technology and software, which were replaced by the Brokat technology and
software, of $20.5 million.

On August 1, 2001, the Corporation acquired the common stock of National
City Bancorporation, ("National City"), a Minneapolis, Minnesota-based bank
holding company. National City, and its significant subsidiaries National City
Bank of Minneapolis, with branches in Minneapolis and Edina, Minnesota, and
Diversified Business Credit, Inc., had consolidated total assets of
approximately $1.1 billion at completion of the merger. The Corporation issued
4.5 million shares of its common stock in exchange for the outstanding common
stock of National City in a tax-free reorganization using the purchase method
of accounting. The core deposit intangible recorded in this transaction
amounted to $14.5 million. Initial goodwill, subject to the completion of
appraisals and valuations of the assets acquired and liabilities assumed,
amounted to $114.1 million. Exit liabilities recorded in this transaction
amounted to $5.0 million, consisting of $2.3 million for severance of
duplicative positions and $2.7 million of costs to convert National City's
systems to the Corporation's systems.

Also during the third quarter of 2001, the Corporation acquired for cash
twelve branches located in Arizona which had total assets of $538 million,
loans of approximately $345 million and deposits of approximately $455 million
at the time of acquisition. These transactions were accounted for under the
purchase method of accounting. The core deposit intangible recorded in these
transactions amounted to $7.4 million. Total goodwill amounted to $53.1 million.

On June 20, 2001, the Corporation's Metavante subsidiary acquired certain
assets and assumed certain liabilities of CyberBills, Inc. for approximately
$14.6 million in cash in a transaction accounted for under the purchase method
of accounting. CyberBills, Inc. was an electronic bill and presentment
application service provider, offering comprehensive bill management services
that allow consumers and businesses to view, pay, manage and automate all of
their bills-paper or electronic-online. There was no in-process research and
development acquired in this transaction. Initial goodwill, subject to the
completion of appraisals and valuations of the assets acquired and liabilities
assumed, amounted to $25.3 million.

On June 1, 2001, the Corporation's Metavante subsidiary acquired all of the
outstanding common and preferred stock of Derivion Corporation ("Derivion") for
approximately $12.8 million in cash in a transaction accounted for under the
purchase method of accounting. Through three core electronic billing
applications, Derivion enables billers of all sizes to automate and streamline
bill delivery, payment and customer-care processes. There was no in-process
research and development acquired in this transaction. Initial goodwill,
subject to the completion of appraisals and valuations of the assets acquired
and liabilities assumed, amounted to $25.7 million.

In conjunction with the CyberBills and Derivion transactions, Metavante
incurred approximately $7.2 million in charges to write-off other technologies
and investments replaced by these acquisitions in the second quarter of 2001.
In addition, approximately $3.5 million of transition related charges were
incurred in each of the third and fourth quarters of 2001, respectively.

55



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


On October 1, 1999, the Corporation, through its Metavante subsidiary,
acquired certain assets of Cardpro Services, Inc., a provider of plastic card
personalization and procurement services located in Illinois. The assets were
acquired for cash in a transaction accounted for using the purchase method of
accounting. Goodwill amounted to $2.9 million. Additional payments, contingent
upon earnings, may be made through 2005. The total cumulative maximum payout
over the contingency period is $2.16 million. Contingency payments, if made,
will be charged to goodwill. There was no in-process research and development
acquired in this transaction.

On April 1, 1999, the Corporation, through its Metavante subsidiary,
completed the acquisition of the assets, operational processes and customer
relationships of the Electronic Banking Services business unit of ADP in a cash
transaction using the purchase method of accounting. The acquired software
products and outsourcing solutions are designed to provide businesses with
access to their banking information and transactions through a spectrum of
delivery methods. Goodwill amounted to $44.0 million. There was no in-process
research and development acquired in this transaction.

Pending Acquisitions as of December 31, 2001

On December 4, 2001, the Corporation entered into a definitive agreement to
acquire Century Bancshares, Inc., of Eden Prairie, Minnesota, the privately
held holding company for Century Bank, N.A. for $66 million payable in a
combination of cash and shares of M&I common stock. Century Bank, N.A. has
approximately $325 million in assets and has three branches in the Minneapolis
area: Eden Prairie, Coon Rapids and St. Louis Park. The transaction is expected
to close in the first quarter of 2002, subject to regulatory and shareholder
approvals.

On November 19, 2001, the Corporation entered into a definitive agreement to
acquire Richfield State Agency, Inc., of Richfield, Minnesota, the privately
held holding company for Richfield Bank & Trust Co. for approximately $157
million payable in a combination of cash and shares of M&I common stock.
Richfield Bank & Trust Co. has approximately $695 million in assets and has
seven branches throughout the Minneapolis/St. Paul metropolitan area, including
Richfield, Minneapolis, St. Paul, Bloomington, Burnsville, Edina and
Chanhassen. This transaction is also expected to close in the first quarter of
2002, subject to regulatory and shareholder approvals.

5. Cash and Due from Banks

At December 31, 2001, $10,052 of cash and due from banks was restricted,
primarily due to requirements of the Federal Reserve System to maintain certain
reserve balances.

6. Securities

The book and market values of securities at December 31 were:



2001 2000
--------------------- ---------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------

Investment Securities Available for Sale:
U.S. Treasury and government agencies. $2,268,681 $2,346,566 $3,303,366 $3,342,952
States and political subdivisions..... 170,130 176,167 143,883 151,041
Mortgage backed securities............ 172,139 175,471 342,385 342,171
Other................................. 675,303 685,428 887,702 899,558
---------- ---------- ---------- ----------
Total............................... $3,286,253 $3,383,632 $4,677,336 $4,735,722
========== ========== ========== ==========
Investment Securities Held to Maturity:
States and political subdivisions..... $1,028,555 $1,046,414 $1,107,476 $1,119,687
Other................................. 3,538 3,538 5,069 5,069
---------- ---------- ---------- ----------
Total............................... $1,032,093 $1,049,952 $1,112,545 $1,124,756
========== ========== ========== ==========


56



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


The unrealized gains and losses of securities at December 31 were:



2001 2000
--------------------- ---------------------
Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses
---------- ---------- ---------- ----------

Investment Securities Available for Sale:
U.S. Treasury and government agencies. $78,089 $ 204 $42,371 $2,785
States and political subdivisions..... 6,093 56 7,158 --
Mortgage backed securities............ 3,332 -- 786 1,000
Other................................. 10,185 60 11,940 84
------- ------ ------- ------
Total............................... $97,699 $ 320 $62,255 $3,869
======= ====== ======= ======
Investment Securities Held to Maturity:
States and political subdivisions..... $24,740 $6,881 $17,850 $5,639
Other................................. -- -- -- --
------- ------ ------- ------
Total............................... $24,740 $6,881 $17,850 $5,639
======= ====== ======= ======


The book value and market value of securities by contractual maturity at
December 31, 2001 were:



Investment Securities Investment Securities
Available for Sale Held to Maturity
--------------------- ---------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------

Within one year............ $ 796,619 $ 805,892 $ 70,135 $ 71,040
From one through five years 1,969,332 2,041,935 353,242 366,011
From five through ten years 249,257 258,025 204,002 210,212
After ten years............ 271,045 277,780 404,714 402,689
---------- ---------- ---------- ----------
Total................... $3,286,253 $3,383,632 $1,032,093 $1,049,952
========== ========== ========== ==========


The gross realized gains and losses amounted to $30,117 and $36,876 in 2001,
$22,876 and $52,861 in 2000, and $12,074 and $4,382 in 1999, respectively. Net
securities gains of $10,411, $19,530 and $11,775 in 2001, 2000 and 1999,
respectively, are included in the line Capital Markets Revenue in the
Consolidated Statements of Income.

At December 31, 2001, securities with a value of approximately $701,226 were
pledged to secure public deposits, short-term borrowings, and for other
purposes required by law.

Approximately $511 million of adjustable rate mortgage loans ("ARMs") were
securitized, resulting in the balances being transferred to investment
securities available for sale during 2000. The Corporation has agreed to
guarantee the first 4% of the loan pools securitized through government
agencies against potential loss for transfers occurring prior to 2000. These
are noncash transactions for purposes of the Consolidated Statements of Cash
Flows.

57



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

7. Loans and Leases

Loans and Leases at December 31 were:



2001 2000
----------- -----------

Commercial, financial and agricultural..... $ 5,716,061 $ 5,289,537
Real estate:
Construction............................ 730,864 619,281
Residential mortgage.................... 5,563,975 5,049,557
Commercial mortgage..................... 5,099,093 4,359,812
Personal................................... 1,210,808 1,174,248
Lease financing............................ 962,356 1,094,652
Cash flow hedging instruments at fair value 12,215 --
----------- -----------
Total loans and leases.............. $19,295,372 $17,587,087
=========== ===========


The Corporation's lending activities are concentrated primarily in the
Midwest. Approximately 6% of its portfolio consists of loans granted to
customers located in Arizona. The Corporation had $1.1 million in foreign
credits at December 31, 2001. The Corporation's loan portfolio consists of
business loans extending across many industry types, as well as loans to
individuals. As of December 31, 2001, total loans to any group of customers
engaged in similar activities and having similar economic characteristics, as
defined by standard industrial classifications, did not exceed 10% of total
loans.

The Corporation evaluates the credit risk of each customer on an individual
basis and, where deemed appropriate, collateral is obtained. Collateral varies
by individual loan customer but may include accounts receivable, inventory,
real estate, equipment, deposits, personal and government guaranties, and
general security agreements. Access to collateral is dependent upon the type of
collateral obtained. On an on-going basis, the Corporation monitors its
collateral and the collateral value related to the loan balance outstanding.

An analysis of loans outstanding to directors and officers, including their
related interests, of the Corporation and its significant subsidiaries for 2001
is presented in the following table. All of these loans were made in the
ordinary course of business with normal credit terms, including interest rates
and collateral. The beginning balance has been adjusted to reflect the activity
of newly-appointed directors and executive officers.

Loans to directors and executive officers:



Balance, beginning of year....................... $ 105,444
New loans........................................ 184,236
Repayments....................................... (195,350)
---------
Balance, end of year............................. $ 94,330
=========


8. Allowance for Loan and Lease Losses

An analysis of the allowance for loan and lease losses follows:



2001 2000 1999
-------- -------- --------

Balance, beginning of year................ $235,115 $225,862 $226,052
Allowance of banks and loans acquired..... 19,151 1,270 --
Allowance transfer for loan securitization -- (1,022) --
Provision charged to expense.............. 54,115 30,352 25,419
Charge-offs............................... (48,609) (30,018) (32,557)
Recoveries................................ 8,426 8,671 6,948
-------- -------- --------
Balance, end of year...................... $268,198 $235,115 $225,862
======== ======== ========


58



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

The allowance for loan and lease losses acquired in branch and bank
acquisitions is consistent with the estimate of probable losses as determined
by the seller financial institution.

As of December 31, 2001 and 2000, nonaccrual loans and leases totaled
$166,434 and $121,425, respectively.

At December 31, 2001 and 2000, the Corporation's recorded investment in
impaired loans and leases and the related valuation allowance are as follows:



2001 2000
-------------------- --------------------
Recorded Valuation Recorded Valuation
Investment Allowance Investment Allowance
---------- --------- ---------- ---------

Total impaired loans and leases
(Nonaccrual and renegotiated)..................... $166,812 $122,039
Loans and leases excluded from individual evaluation (61,290) (34,167)
-------- --------
Impaired loans evaluated............................ $105,522 $ 87,872
======== ========
Valuation allowance required........................ $ 40,980 $18,268 $ 5,727 $2,137
No valuation allowance required..................... 64,542 -- 82,145 --
-------- ------- -------- ------
Impaired loans evaluated............................ $105,522 $18,268 $ 87,872 $2,137
======== ======= ======== ======


The recorded investment in impaired loans for which no allowance is required
is net of applications of cash interest payments and net of previous direct
writedowns of $25,052 in 2001 and $21,332 in 2000 against the loan balance
outstanding. The required valuation allowance is included in the allowance for
loan and lease losses in the Consolidated Balance Sheets.

The average recorded investment in total impaired loans and leases for the
years ended December 31, 2001 and 2000 amounted to $148,520 and $118,832,
respectively.

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. Interest income recognized on total impaired loans and leases
amounted to $10,295 in 2001, $6,410 in 2000, and $6,253 in 1999. The gross
income that would have been recognized had such loans and leases been
performing in accordance with their original terms would have been $12,846 in
2001, $11,415 in 2000, and $9,980 in 1999.

9. Asset Sales

The Corporation regularly sells assets, primarily indirect automobile loans
to an unconsolidated multi-seller asset backed commercial paper conduit, in
securitization transactions in accordance with SFAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
Servicing responsibilities and subordinated interests were retained. The
Corporation receives annual servicing fees based on the loan balances
outstanding and rights to future cash flows arising after investors in the
securitization trust have received their contractual return and after certain
administrative costs of operating the trust. The investors and the
securitization trust have no recourse to the Corporation's other assets for
failure of debtors to pay when due. The Corporation's retained interests are
subordinate to investor's interests. Their value is subject to credit,
prepayment and interest rate risks on the transferred financial assets.

59



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


During 2001 and 2000, the Corporation recognized gains and trading income of
$11,034 and $3,155, respectively, on the securitization of loans. There was no
such activity in 1999.

Key economic assumptions used in measuring the retained interests at the
date of securitization resulting from securitizations completed during the year
were as follows (rate per annum):



2001 2000
---- ----

Prepayment speed (CPR)........... 25.0% 25.0%
Weighted average life (in months) 20.8 20.5
Expected credit losses........... 0.12% 0.10%
Expected total credit losses..... 0.19 0.16
Residual cash flow discount rate. 12.0 12.0
Variable returns to transferees.. Forward one month LIBOR yield curve


At December 31, 2001, key economic assumptions and the sensitivity of the
current fair value of residual cash flows to immediate 10 percent and 20
percent adverse changes in those assumptions are as follows ($ in millions):



Adverse Change
in Assumptions
----------------
10% 20%
---- ---

Carrying amount retained interests--automobile loans $32.9
Weighted average life (in months)................... 18.6
Prepayment speed (per annum)........................ 25.0%
Impact on fair value of adverse change............ $0.6 $1.3
Expected credit losses (annual rate)................ 0.12%
Impact on fair value of adverse change............ 0.1 0.2
Residual cash flows discount rate (annual).......... 12.0%
Impact on fair value of adverse change............ 0.3 0.5
Interest rate returns to transferees................ Forward one month LIBOR yield curve
Impact on fair value of adverse change............ 0.7 1.3


These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10 percent adverse variation
in assumptions generally can not be extrapolated because the relationship of
the change in assumption to the change in fair value may not be linear. Also,
the effect of an adverse variation in a particular assumption on the fair value
of the retained interest is calculated without changing any other assumption.
Realistically, changes in one factor may result in changes in another (for
example, increases in market interest rates may result in lower prepayments and
increased credit losses), which might magnify or counteract the sensitivities.

Actual and projected credit losses represented 0.23% of total loans
securitized as of December 31, 2001.

The following table summarizes certain cash flows received from and paid to
the securitization trust for the year ended December 31, 2001:



2001 2000
-------- --------

Proceeds from new securitizations................... $389,794 $223,098
Servicing fees received............................. 2,610 533
Net charge-offs..................................... (491) (31)
Cash collateral account transfers, net.............. (1,771) (5,071)
Other cash flows received on retained interests, net 4,747 600


60



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

At December 31, 2001, securitized automobile loans and other automobile
loans managed together with them along with delinquency and credit loss
information consisted of the following:



Total
Securitized Portfolio Managed
----------- --------- --------

Loan balances...................................... $433,304 $224,083 $657,387
Principal amounts of loans 60 days or more past due 513 706 1,219
Net credit losses.................................. 556 1,220 1,776


The Corporation also sells, from time to time, available for sale investment
securities that are highly rated and/or short-term commercial loans to an
unconsolidated bankruptcy remote qualifying special purpose entity whose
activities are limited to issuing highly rated asset-backed commercial paper
with maturities up to 180 days which is used to finance the purchase of the
investment securities and /or loans. The initial program limit is $2.0 billion.
The Corporation's lead bank ("Bank") provides liquidity back-up in the form of
Liquidity Purchase Agreements and credit enhancement for the loans sold in the
form of a letter of credit. Under certain circumstances, these facilities would
require the Bank to purchase sufficient investment securities or loans from the
entity to accommodate maturing commercial paper, which could result in a loss
to the Bank. However, based on the quality of the assets that were sold at no
gain or loss, the Corporation believes that the probability of a purchase and
recognition of loss is remote and if such a purchase would have been required
at December 31, 2001, no gain or loss would have been recognized. In addition,
the Bank acts as counterparty to interest rate swaps that enable the special
purpose entity to hedge its interest rate risk. Such swaps are designated as
trading in the Corporation's Consolidated Balance Sheet. At December 31, 2001,
highly rated investment securities in the amount of $264.8 million and
short-term commercial loans in the amount of $60.7 million were outstanding in
the special purpose entity to support the outstanding commercial paper.

10. Premises and Equipment

The composition of premises and equipment at December 31 was:



2001 2000
-------- --------

Land......................................... $ 51,243 $ 47,893
Buildings and leasehold improvements......... 368,936 347,566
Furniture and equipment...................... 466,819 458,242
-------- --------
886,998 853,701
Less accumulated depreciation................ 493,968 460,706
-------- --------
Total premises and equipment.............. $393,030 $392,995
======== ========


Depreciation expense was $68,331 in 2001, $63,580 in 2000, and $62,845 in
1999.

The Corporation leases certain of its facilities and equipment. Rent expense
under such operating leases was $64,889 in 2001, $56,555 in 2000, and $50,200
in 1999, respectively.

The future minimum lease payments under operating leases that have initial
or remaining noncancellable lease terms in excess of one year for 2002 through
2006 are $30,155, $26,844, $20,902, $17,646, and $12,041, respectively.


61



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

11. Deposits

The composition of deposits at December 31 was:



2001 2000
----------- -----------

Noninterest bearing demand........................ $ 3,558,571 $ 3,129,834
Savings and NOW................................... 7,867,106 7,486,094
CDs $100,000 and over............................. 1,321,746 2,663,050
Other time deposits............................... 2,962,724 3,532,310
Foreign deposits.................................. 782,900 2,437,339
----------- -----------
Total deposits.................................. $16,493,047 $19,248,627
=========== ===========


At December 31, 2001 and 2000, brokered deposits amounted to $774.2 million
and $2,566.4 million, respectively.

At December 31, 2001, the scheduled maturities for CDs $100,000 and over,
other time deposits, and foreign deposits were:



2002 ......................................................... $4,281,608
2003.......................................................... 422,246
2004.......................................................... 190,913
2005.......................................................... 68,951
2006 and thereafter........................................... 103,652
----------
$5,067,370
==========

12. Short-term Borrowings

Short-term borrowings at December 31 were:



2001 2000
---------- ----------

Funds purchased and security repurchase agreements $1,090,150 $1,092,723
Cash flow hedge--Fed funds........................ 21,262 --
U.S. Treasury demand notes........................ 315,644 81,930
U.S. Treasury demand notes--special direct........ 2,290,606 --
Senior bank notes--Puttable Reset Securities...... 1,001,961 1,008,060
Senior bank notes................................. -- 99,988
Commercial paper.................................. 314,989 322,161
Cash flow hedge--Commercial paper................. 20,353 --
Current maturities of long-term borrowings........ 800,772 209,355
Other............................................. 1,505 514
---------- ----------
Total short-term borrowings.................... $5,857,242 $2,814,731
========== ==========


U.S. Treasury demand notes--special direct represent secured borrowings of
the lead banking subsidiary with a maximum term of 21 days.

62



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


Bank notes may be senior or subordinated in ranking and have maturities
ranging from 7 days to 30 years at a fixed or floating rate up to a maximum of
$5.0 billion aggregate principal amount outstanding at any time. The bank notes
are offered through certain designated agents and are offered and sold only to
institutional investors. The bank notes are sole obligations of the issuing
bank and are not obligations of or guaranteed by the Corporation.

The senior bank notes--Puttable Reset Securities ("PRS")--will mature on
December 1, 2007. In certain circumstances, the notes will be put back to the
issuing bank at par prior to final maturity by the noteholders and the notes
are subject to exercise of a call option by a certain broker-dealer. Beginning
December 3, 2001 and each December 1 thereafter until and including December 1,
2006, the broker-dealer has the right to purchase all of the outstanding notes
from the noteholders at a price equal to 100% of the principal amount of the
notes and then remarket the notes at an interest rate that was previously
agreed upon. However, if the broker-dealer does not purchase the notes on the
aforementioned date(s), each holder of outstanding notes will be deemed to have
put all of the holder's notes to the issuing bank at a price equal to 100% of
the principal amount of the notes and the notes will be completely retired. The
initial interest rate was 6.75% and, to the extent the notes are purchased and
remarketed, the interest rate will reset each date the notes are remarketed at
6% plus an applicable credit spread as defined in the offering circular. On
December 3, 2001, the interest rate reset to 6.15%. If the PRS are not resold
due to a failed remarketing or a market disruption event, the Corporation would
be obligated to pay the broker-dealer the fair market value of the call option.
The call and put are considered clearly and closely related for purposes of
recognition and measurement under SFAS 133.

The amount of other senior bank notes outstanding at December 31, 2000,
represents the borrowing of one banking subsidiary at a fixed rate of 6.81%
that matured in March of 2001.

Unused lines of credit, primarily to support commercial paper borrowings,
were $75.0 million at December 31, 2001 and 2000, respectively.

13. Long-term Borrowings

Long-term borrowings at December 31 were:



2001 2000
---------- ----------

Corporation:
6.375% subordinated notes due in 2003.................................. $ 99,871 $ 99,794
Medium-term Series C, D and E notes.................................... 312,950 130,900
7.65% cumulative company-obligated mandatorily redeemable capital trust
pass-through securities.............................................. 199,193 199,160
Subsidiaries:
Borrowings from Federal Home Loan Bank (FHLB):
Floating rate advances.............................................. 310,000 100,000
Fixed rate advances................................................. 554,372 260,151
Cash flow hedge..................................................... 3,602 --
Senior bank notes...................................................... 199,929 199,628
Senior bank notes-EXLs................................................. 249,608 --
Subordinated bank note................................................. 395,977 98,854
Nonrecourse notes...................................................... 23,693 29,008
9.75% obligation under capital lease due through 2006.................. 2,655 3,083
Other.................................................................. 9,099 10,053
---------- ----------
2,360,949 1,130,631
Less current maturities................................................ 800,772 209,355
---------- ----------
Total long-term borrowings...................................... $1,560,177 $ 921,276
========== ==========


63



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


The 6.375% subordinated notes are not redeemable prior to maturity and
qualify as "Tier 2" or supplementary capital for regulatory capital purposes.
Interest is payable semiannually.

At December 31, 2001, there were $14,000 of medium-term Series C notes
outstanding. The medium-term Series C notes have fixed interest rates of 6.48%
to 6.75% and mature at various amounts and times through 2002. No additional
borrowings may occur under the Series C notes. At December 31, 2001,
medium-term Series D notes outstanding amounted to $24,250 with fixed interest
rates of 6.31% to 7.20% and $23,700 at three month LIBOR plus 26 basis points.
Series D notes mature at various times and amounts through 2004. No additional
borrowings may occur under the Series D notes. In May 2000, the Corporation
filed a registration statement with the Securities and Exchange Commission to
issue up to $500 million of medium-term Series E notes. These issues may have
maturities ranging from 9 months to 30 years and may be at fixed or floating
rates. At December 31, 2001, series E notes outstanding amounted to $251,000
with fixed rates of 5.75% to 7.19%. Series E notes outstanding mature in 2002
through 2006.

In December 1996, the Corporation formed M&I Capital Trust A (the "Trust")
and issued $200 million in liquidation or principal amount of cumulative
preferred capital securities. Holders of the capital securities are entitled to
receive cumulative cash distributions at an annual rate of 7.65% payable
semiannually.

Concurrently with the issuance of the capital securities, the Trust invested
the proceeds, together with the consideration paid by the Corporation for the
common interest in the Trust, in junior subordinated deferrable interest
debentures ("subordinated debt") issued by the Corporation. The subordinated
debt, which represents the sole asset of the Trust, bears interest at an annual
rate of 7.65% payable semiannually and matures on December 1, 2026.

The subordinated debt is junior in right of payment to all present and
future senior indebtedness of the Corporation. The Corporation may redeem the
subordinated debt in whole or in part at any time on or after December 1, 2006
at specified call premiums, and at par on or after December 1, 2016. In
addition, in certain circumstances the subordinated debt may be redeemed at par
upon the occurrence of certain events. The Corporation's right to redeem the
subordinated debt is subject to regulatory approval.

The Corporation has the right, subject to certain conditions, to defer
payments of interest on the subordinated debt for extension periods, each
period not exceeding ten consecutive semiannual periods. As a consequence of
the Corporation's extension of the interest payment period, distributions on
the capital securities would be deferred. In the event the Corporation
exercises its right to extend an interest payment period, the Corporation is
prohibited from making dividend or any other equity distributions during such
extension period.

The payment of distributions, liquidation of the Trust or payment upon the
redemption of the capital securities are guaranteed by the Corporation.

The Corporation, as owner of the common interest in the Trust, has the right
at any time to terminate the Trust, subject to certain conditions. In
circumstances other than maturity or redemption of the subordinated debt, the
subordinated debt would be distributed to the holders of the Trust securities
on a pro rata basis in liquidation of the holders' interests in the Trust.

The capital securities qualify as "Tier 1" capital for regulatory capital
purposes.

Fixed rate FHLB advances have interest rates, which range from 4.51% to
8.47% and mature at various times in 2002 through 2012. A portion of the
advances are subject to periodic principal payments. $28.5 million may be
repaid without penalty at six month intervals. All other advances are subject
to a prepayment penalty if they are repaid prior to maturity.

The floating rate advances mature in 2006. The interest rate is reset
monthly based on the London Interbank Offered Rate ("LIBOR").


64



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

The Corporation is required to maintain unencumbered first mortgage loans
and mortgage-related securities such that the outstanding balance of FHLB
advances does not exceed 60% of the book value of this collateral. In addition,
a portion of these advances are collaterized by FHLB stock.

The senior bank notes have a fixed interest rate of 7.25% and pay interest
semi-annually. The notes mature in 2002.

The senior bank notes--EXLs are indexed to one month LIBOR plus a stated
spread and mature in 2002. However, EXL noteholders have the ability to extend
the maturity date through 2006. The stated spread increases annually through
2005.

The subordinated bank note has a fixed rate of 7.875% and matures in 2010.
Interest is paid semi-annually. The subordinated bank note qualifies as "Tier
2" or supplementary capital for regulatory capital purposes.

The nonrecourse notes are reported net of prepaid interest and represent
borrowings by the commercial leasing subsidiary from banks and other financial
institutions. These notes have a weighted average interest rate of 8.40% at
December 31, 2001 and are due in installments over varying periods through
2011. Lease financing receivables at least equal to the amount of the notes are
pledged as collateral.

Scheduled maturities of long-term borrowings are: $356,579, $5,803, $4,230,
and $565,240 for 2003 through 2006, respectively.

14. Shareholders' Equity

The Corporation has 5,000,000 shares of preferred stock authorized, of which
the Board of Directors has designated 2,000,000 shares as Series A convertible,
with a $100 value per share for conversion purposes. Series A is nonvoting
preferred stock. The same cash dividends will be paid on Series A as would have
been paid on the common stock exchanged for Series A. Except under limited
circumstances, the holder may not sell, transfer or otherwise dispose of stock
acquired by conversion, and then, only under prescribed conditions and subject
to the Corporation's right of first refusal.

The holder has the option to convert Series A into common stock at the same
ratio that the common stock was exchanged for Series A. During 1999, the holder
of Series A converted 348,944 shares of Series A into 3,832,957 shares of
common stock which were issued out of the Corporation's treasury common stock.
This is a noncash transaction for purposes of the Consolidated Statements of
Cash Flows. At December 31, 2001 and 2000, there were 336,370 shares of Series
A outstanding which are convertible into 3,844,228 shares of common stock.

The preferred stock is treated as a common stock equivalent in all
applicable per share calculations.

The Corporation sponsors a deferred compensation plan for its non-employee
directors and the non-employee directors of its affiliates. Participants may
elect to have their deferred fees used to purchase M&I common stock with
dividend reinvestment. Such shares will be distributed to plan participants in
accordance with the plan provisions. At December 31, 2001 and 2000, 301,693 and
288,858 shares of M&I common stock, respectively, were held in a grantor trust.
The aggregate cost of such shares is included in Deferred Compensation as a
reduction of shareholders' equity in the Consolidated Balance Sheets and
amounted to $15,605 at December 31, 2001 and $14,940 at December 31, 2000.

In conjunction with previous acquisitions, the Corporation assumed certain
deferred compensation and nonqualified retirement plans for former directors
and executive officers of acquired companies. At December 31, 2001 and 2000,
81,987 and 93,552 common shares of M&I stock, respectively, were maintained in
a grantor trust with such shares to be distributed to plan participants in
accordance with the provisions of the plans. The aggregate cost of such shares
of $3,264 and $3,731 at December 31, 2001 and 2000, respectively, is included
in Deferred Compensation as a reduction of shareholders' equity in the
Consolidated Balance Sheets.

65



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


The Corporation issues treasury common stock in conjunction with exercises
of stock options and restricted stock, acquisitions, and conversions of
convertible securities. Treasury shares are acquired from restricted stock
forfeitures, shares tendered to cover tax withholding associated with stock
option exercises and vesting of key restricted stock, mature shares tendered
for stock option exercises in lieu of cash and open market purchases in
accordance with approved share repurchase programs. The Corporation is
currently authorized to repurchase up to 6.0 million shares per year. During
2001 and 2000, shares repurchased in accordance with the approved plan amounted
to 4.7 million shares with an aggregate cost of $273.3 million in 2001 and 3.2
million shares with an aggregate cost of $156.3 million in 2000.

Federal banking regulatory agencies have established capital adequacy rules
which take into account risk attributable to balance sheet assets and
off-balance sheet activities. All banks and bank holding companies must meet a
minimum total risk-based capital ratio of 8%. Of the 8% required, at least half
must be comprised of core capital elements defined as "Tier 1" capital. The
federal banking agencies also have adopted leverage capital guidelines which
banking organizations must meet. Under these guidelines, the most highly rated
banking organizations must meet a minimum leverage ratio of at least 3% "Tier
1" capital to total assets, while lower rated banking organizations must
maintain a ratio of at least 4% to 5%. Failure to meet minimum capital
requirements can initiate certain mandatory--and possibly additional
discretionary--actions by regulators that, if undertaken, could have a direct
material effect on the Consolidated Financial Statements.

At December 31, 2001 and 2000, the most recent notification from the Federal
Reserve Board categorized the Corporation as well capitalized under the
regulatory framework for prompt corrective action. There are no conditions or
events since that notification that management believes have changed the
Corporation's category.

To be well capitalized under the regulatory framework, the "Tier 1" capital
ratio must meet or exceed 6%, the total capital ratio must meet or exceed 10%
and the leverage ratio must meet or exceed 5%.

The Corporation's risk-based capital and leverage ratios are as follows ($
in millions):



Risk-Based Capital Ratios
---------------------------------------------------
As of December 31, 2001 As of December 31, 2000
------------------------- ------------------------
Amount Ratio Amount Ratio
--------------- --------- -------------- ---------

Tier 1 capital............................. $ 2,091.5 9.70% $ 2,070.8 10.20%
Tier 1 capital adequacy minimum requirement 862.2 4.00 811.7 4.00
--------------- --------- -------------- ---------
Excess..................................... $ 1,229.3 5.70% $ 1,259.1 6.20%
=============== ========= ============== =========
Total capital.............................. $ 2,775.6 12.88% $ 2,444.6 12.05%
Total capital adequacy minimum requirement. 1,724.3 8.00 1,623.5 8.00
--------------- --------- -------------- ---------
Excess..................................... $ 1,051.3 4.88% $ 821.1 4.05%
=============== ========= ============== =========
Risk-adjusted assets....................... $ 21,554.5 $ 20,293.6
=============== ==============
Leverage Ratio
---------------------------------------------------
As of December 31, 2001 As of December 31, 2000
------------------------- ------------------------
Amount Ratio Amount Ratio
--------------- --------- -------------- ---------
Tier 1 capital to adjusted total assets.... $ 2,091.5 7.93% $ 2,070.8 8.25%
Minimum leverage adequacy requirement...... 791.2-1,318.6 3.00-5.00 752.9-1,254.8 3.00-5.00
--------------- --------- -------------- ---------
Excess..................................... $1,300.3 -772.9 4.93-2.93% $1,317.9-816.0 5.25-3.25%
=============== ========= ============== =========
Adjusted average total assets.............. $ 26,371.4 $ 25,096.4
=============== ==============



66



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

All of the Corporation's banking subsidiaries' risk-based capital and
leverage ratios meet or exceed the defined minimum requirements, and have been
deemed well capitalized as of December 31, 2001 and 2000. The following table
presents the risk-based capital ratios for the Corporation's lead banking
subsidiary:



Subsidiary Tier 1 Total Leverage
- ---------- ------ ----- --------

M&I Marshall & Ilsley Bank
December 31, 2001............................................ 9.07% 12.30% 7.26%
December 31, 2000............................................ 8.46 10.42 7.12


M&I Marshall & Ilsley Bank's risk-based capital ratios at December 31, 2000,
have not been restated for the charter consolidations that occurred in the
first and second quarters of 2001.

Banking subsidiaries are restricted by banking regulations from making
dividend distributions above prescribed amounts and are limited in making loans
and advances to the Corporation. At December 31, 2001, the retained earnings of
subsidiaries available for distribution as dividends without regulatory
approval was approximately $286.3 million.

15. Income Taxes

Total income tax expense for the years ended December 31, 2001, 2000, and
1999 was allocated as follows:



2001 2000 1999
-------- -------- --------

Income before income taxes and cumulative effect of changes in
accounting principles....................................... $163,124 $152,948 $173,428
Cumulative effect of changes in accounting principles........ (235) (1,532) --
Shareholders' Equity:
Compensation expense for tax purposes in excess of
amounts recognized for financial reporting purposes...... (13,334) (2,486) (12,764)
Unrealized (losses) / gains on accumulated other
comprehensive income..................................... 1,667 38,699 (51,376)
-------- -------- --------
$151,222 $187,629 $109,288
======== ======== ========


The current and deferred portions of the provision for income taxes were:



2001 2000 1999
-------- -------- --------

Current:
Federal............................ $161,622 $115,789 $126,358
State.............................. 14,140 22,652 7,059
-------- -------- --------
175,762 138,441 133,417
Deferred:
Federal............................ (8,039) 20,618 31,860
State.............................. (4,599) (6,111) 8,151
-------- -------- --------
(12,638) 14,507 40,011
-------- -------- --------
Total provision for income taxes. $163,124 $152,948 $173,428
======== ======== ========



67



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

The following is a reconciliation between the amount of the provision for
income taxes and the amount of tax computed by applying the statutory Federal
income tax rate (35%):



2001 2000 1999
-------- -------- --------

Tax computed at statutory rates................ $175,366 $164,623 $184,779
Increase (decrease) in taxes resulting from:
Federal tax-exempt income..................... (19,855) (19,428) (18,145)
State income taxes, net of Federal tax benefit 6,202 10,824 10,050
Bank owned life insurance..................... (9,469) (9,837) (9,018)
Other......................................... 10,880 6,766 5,762
-------- -------- --------
Total provision for income taxes............ $163,124 $152,948 $173,428
======== ======== ========


The tax effects of temporary differences that give rise to significant
elements of the deferred tax assets and deferred tax liabilities at December
31, are as follows:



2001 2000
-------- --------

Deferred tax assets:
Deferred compensation........................................ $ 34,091 $ 29,356
Allowance for loan and lease losses.......................... 108,535 93,507
Accrued postretirement benefits.............................. 29,647 27,430
Conversion revenue deferred.................................. 16,233 19,414
State NOLs................................................... 61,561 48,926
Other........................................................ 71,598 41,385
-------- --------
Total deferred tax assets before valuation allowance..... 321,665 260,018
Valuation allowance.......................................... (47,709) (40,653)
-------- --------
Net deferred tax assets.................................. 273,956 219,365
Deferred tax liabilities:
Lease revenue reporting...................................... 166,675 134,373
Deferred expense, net of unearned income..................... 59,826 61,647
Premises and equipment, principally due to depreciation...... 9,880 12,216
Purchase accounting adjustments.............................. 14,419 8,750
Accumulated other comprehensive income....................... 21,926 20,259
Other.......................................................... 40,569 38,859
-------- --------
Total deferred tax liabilities........................... 313,295 276,104
-------- --------
Net deferred tax liability............................... $ 39,339 $ 56,739
======== ========


The valuation allowance has been provided to reduce certain state deferred
tax assets to the amount of tax benefit management believes it will more likely
than not realize. At December 31, 2001 and 2000, the Corporation recognized
$6,922 and $14,942, respectively of deferred tax assets related to state net
operating losses that may be offset against future taxable income through 2016
and 2015, respectively. At December 31, 2001, the Corporation believes there is
a greater than 50% chance that the carryforward may expire unused. However, as
time passes the Corporation will be able to better assess the amount of tax
benefit it will realize from using the carryforward. Accordingly, the tax
benefit of the carryforward has been offset by a valuation allowance.

The amount of income tax (benefit)/expense related to net securities gains
or losses amounted to $(3,201), $(9,512), and $3,292, in 2001, 2000, and 1999,
respectively.


68



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

16. Stock Option and Restricted Stock Plans

The Corporation has Executive Stock Option and Restricted Stock Plans which
provide for the grant of nonqualified and incentive stock options, stock
appreciation rights and rights to purchase restricted shares to key employees
at prices ranging from not less than the par value of the common shares to the
market value of the shares at the date of grant.

The nonqualified and incentive stock option plans generally provide for the
grant of options to purchase shares of the Corporation's common stock for a
period of ten years from the date of grant. Options granted generally become
exercisable over a period of two or three years from the date of grant,
however, options granted to directors of the Corporation vest immediately and
options granted after 1996 provide accelerated or immediate vesting for grants
to individuals who meet certain age and years of service criteria at the date
of grant.

Activity relating to nonqualified and incentive stock options was:



Number of Option Price Weighted Average
Shares Per Share Exercise Price
---------- ------------ ----------------

Shares under option at December 31, 1998 6,249,935 $ 7.67-57.63 $33.38
Options granted......................... 1,606,725 57.09-70.06 61.72
Options lapsed or surrendered........... (81,789) 10.92-62.25 52.15
Options exercised....................... (967,557) 7.67-57.63 19.01
---------- ------------ ------
Shares under option at December 31, 1999 6,807,314 $ 7.68-70.06 $41.88
Options granted......................... 1,756,350 41.52-62.19 44.26
Options lapsed or surrendered........... (185,613) 13.38-67.00 48.72
Options exercised....................... (262,531) 7.68-57.00 19.95
---------- ------------ ------
Shares under option at December 31, 2000 8,115,520 $11.56-70.06 $42.95
Options granted......................... 1,970,550 49.46-63.90 62.78
Options lapsed or surrendered........... (218,151) 13.38-67.00 54.24
Options exercised....................... (1,116,787) 11.56-61.50 23.48
---------- ------------ ------
Shares under option at December 31, 2001 8,751,132 $12.40-70.06 $49.62
========== ============ ======


The range of options outstanding at December 31, 2001 were:






Weighted-Average Weighted-Average
Number of Shares Exercise Price Remaining
----------------------- ----------------------- Contractual Life
Price Range Outstanding Exercisable Outstanding Exercisable (In Years)
----------- ----------- ----------- ----------- ----------- ----------------

$12-25... 857,025 857,025 $20.20 $20.20 2.2
26-39... 899,103 899,103 29.58 29.58 4.5
40-52... 2,841,061 1,899,099 47.29 48.68 8.1
53-57... 822,263 800,363 56.92 57.00 6.0
58-62... 1,470,330 1,089,710 61.25 61.26 7.9
Over $62.. 1,861,350 436,866 63.99 64.35 9.8
--------- --------- ------ ------ ---
8,751,132 5,982,166 $49.62 $46.28 7.3
========= ========= ====== ====== ===


Options exercisable at December 31, 2000 and 1999 were 5,986,582 and
5,031,588, respectively. The weighted average exercise price for options
exercisable was $40.35 at December 31, 2000 and $35.96 at December 31, 1999.


69



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," establishes financial accounting and
reporting standards for stock based employee compensation plans.

SFAS 123 defines a fair value based method of accounting for employee stock
option or similar equity instruments. Under the fair value based method,
compensation cost is measured at the grant date based on the fair value of the
award using an option-pricing model that takes into account the stock price at
the grant date, the exercise price, the expected life of the option, the
volatility of the underlying stock, expected dividends and the risk-free
interest rate over the expected life of the option. The resulting compensation
cost is recognized over the service period, which is usually the vesting period.

Compensation cost can also be measured and accounted for using the intrinsic
value based method of accounting prescribed in Accounting Principles Board
Opinion No. 25 ("APBO 25"), "Accounting for Stock Issued to Employees." Under
the intrinsic value based method, compensation cost is the excess, if any, of
the quoted market price of the stock at grant date or other measurement date
over the amount paid to acquire the stock.

The largest difference between SFAS 123 and APBO 25 as it relates to the
Corporation is the amount of compensation cost attributable to the
Corporation's fixed stock option plans. Under APBO 25 no compensation cost is
recognized for fixed stock option plans because the exercise price is equal to
the quoted market price at the date of grant and therefore there is no
intrinsic value. SFAS 123 compensation cost would equal the calculated fair
value of the options granted.

As permitted by SFAS 123, the Corporation continues to measure compensation
cost for such plans using the accounting method prescribed by APBO 25.

Had compensation cost for the Corporation's options granted after January 1,
1995 been determined consistent with SFAS 123, the Corporation's net income and
earnings per share would have been reduced to the following pro forma amounts:



2001 2000 1999
-------- -------- --------

Net income:
As reported............. $337,485 $315,123 $354,511
Pro forma............... 322,537 300,793 341,355
Basic earnings per share:
As reported............. $ 3.20 $ 2.99 $ 3.32
Pro forma............... 3.05 2.85 3.20
Diluted earnings per share:
As reported............. $ 3.09 $ 2.89 $ 3.14
Pro forma............... 2.97 2.78 3.03


The fair value of each option grant was estimated as of the date of grant
using the Black-Scholes option pricing model. The resulting compensation cost
was amortized over the vesting period

The grant date fair values and assumptions used to determine such value are
as follows:



2001 2000 1999
----------- ----------- -----------

Weighted-average grant date fair value $20.17 $13.82 $19.54
Assumptions:
Risk-free interest rates........... 3.92-5.30% 5.14-6.79% 4.75-6.45%
Expected volatility................ 31.09-31.33% 24.36-31.33% 22.00-24.62%
Expected term (in years)........... 6.0 6.0 6.0
Expected dividend yield............ 2.13% 2.11% 1.56%



70



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

Activity relating to the Corporation's Restricted Purchase Rights was:



December 31
---------------------------
2001 2000 1999
-------- ------- --------

Restricted stock purchase rights outstanding--Beginning of
Year.................................................... -- -- --
Restricted stock purchase rights granted.................. 40,000 8,000 21,000
Restricted stock purchase rights exercised................ (40,000) (8,000) (21,000)
-------- ------- --------
Restricted stock purchase rights outstanding--End of Year. -- -- --
Weighted-average grant date market value.................. $ 55.94 $ 45.35 $ 64.41
Aggregate compensation expense............................ $ 934 $ 726 $ 534
Unamortized deferred compensation......................... $ 2,972 $ 1,859 $ 2,387


Restrictions on stock issued pursuant to the exercise of stock purchase
rights generally lapse within a seven year period. Accordingly, the
compensation related to issuance of the rights is deferred and amortized over
the vesting period. Unamortized deferred compensation is reflected as a
reduction of shareholders' equity.

Shares reserved for the granting of options and stock purchase rights at
December 31, 2001 were 3,414,414.

The Corporation also has a Long-term Incentive Plan. Under the plan,
performance units may be awarded from time to time. Once awarded, additional
performance units will be credited to each participant based on dividends paid
by the Corporation on its common stock. At the end of a designated vesting
period, participants will receive an amount equal to some percent (0%-275%) of
the initial performance units credited plus those additional units credited as
dividends based on the established performance criteria. Units awarded to
certain executives of the Corporation were 58,100 in 2001, 46,850 in 2000, and
50,000 in 1999. The vesting period is three years from the date the performance
units were awarded. At December 31, 2001, based on the performance criteria,
approximately $3,820 would be due to the participants under the 1999 and 2000
awards. In addition, the amount payable to participants under the 1998 award,
which was fully vested, was $9,340 at December 31, 2001.

17. Employee Retirement and Health Plans

The Corporation has a defined contribution retirement plan and an incentive
savings plan for substantially all employees. The retirement plan provides for
a guaranteed contribution to eligible participants equal to 2% of compensation.
At the Corporation's option, a profit sharing amount may also be contributed
and may vary from year to year up to a maximum of 6% of eligible compensation.
Under the incentive savings plan, employee contributions up to 6% of eligible
compensation are matched up to 50% by the Corporation based on the
Corporation's return on equity as defined by the plan. Total expense relating
to these plans was $39,942, $40,016, and $37,378 in 2001, 2000, and 1999,
respectively.

The Corporation also has supplemental retirement plans to provide retirement
benefits to certain of its key executives. Total expense relating to these
plans amounted to $2,394 in 2001, $1,174 in 2000, and $174 in 1999.

The Corporation sponsors a defined benefit health plan that provides health
care benefits to eligible current and retired employees. Eligibility for
retiree benefits is dependent upon age, years of service, and participation in
the health plan during active service. The plan is contributory and in 1997 the
plan was amended. Employees hired or retained from mergers after September 1,
1997 will be granted access to the Corporation's plan upon retirement however,
such retirees must pay 100% of the cost of health care benefits. The plan
continues to contain other cost-sharing features such as deductibles and
coinsurance. The plan is not funded.


71



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

The changes during the year of the accumulated postretirement benefit
obligation ("APBO") for retiree health benefits are as follows:



2001 2000
-------- -------

APBO, beginning of year................................ $ 60,250 $46,867
Service cost........................................... 2,843 2,593
Interest cost on APBO.................................. 4,726 3,601
Actuarial losses....................................... 24,008 9,042
Change due to acquisitions/divestitures................ 356 --
Benefits paid.......................................... (2,564) (1,853)
-------- -------
APBO, end of year...................................... 89,619 60,250
Unrecognized net (loss)/gain........................... (21,575) 2,432
Unrecognized prior service cost........................ 1,380 1,584
-------- -------
Accrued postretirement benefit cost.................... $ 69,424 $64,266
======== =======
Weighted average discount rate used in determining APBO 7.50% 8.00%
======== =======


The assumed health care cost trend for 2002 was 6.00%. The rate was assumed
to decrease gradually to 5.00% in 2006 and remain at that level thereafter.

Net periodic postretirement benefit cost for the years ended December 31,
2001, 2000, and 1999 includes the following components:



2001 2000 1999
------ ------ ------

Service cost......................................... $2,843 $2,593 $3,044
Interest on APBO..................................... 4,726 3,601 3,381
Net amortization and deferral........................ 152 (944) (157)
------ ------ ------
$7,721 $5,250 $6,268
====== ====== ======


The assumed health care cost trend rate has a significant effect on the
amounts reported for the health care plans. A one percentage point change on
assumed health care cost trend rates would have the following effects:



One One
Percentage Percentage
Point Point
Increase Decrease
---------- ----------

Effect on total of service and interest cost components $ 1,311 $ (1,058)
Effect on postretirement benefit obligation............ 13,267 (11,133)


18. Financial Instruments with Off-Balance Sheet Risk

Financial instruments with off-balance sheet risk at December 31 were:



2001 2000
---------- ----------

Financial instruments whose amounts represent credit risk:
Commitments to extend credit:
To commercial customers............................ $7,322,698 $6,397,068
To individuals..................................... 2,007,197 1,778,514
Standby letters of credit, net of participations....... 976,438 606,539
Commercial letters of credit........................... 57,605 38,090
Mortgage loans sold with recourse...................... 1,105 1,613


72



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates and may require payment of a fee. The
majority of the Corporation's commitments to extend credit generally provide
for the interest rate to be determined at the time the commitment is utilized.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements.

The Corporation evaluates each customer's credit worthiness on an individual
basis. Collateral obtained, if any, upon extension of credit, is based upon
management's credit evaluation of the customer. Collateral requirements and the
ability to access collateral is generally similar to that required on loans
outstanding as discussed in Note 7.

Standby and commercial letters of credit are contingent commitments issued
by the Corporation to support the financial obligations of a customer to a
third party. Standby letters of credit are issued to support public and private
financing, and other financial or performance obligations of customers.
Commercial letters of credit are issued to support payment obligations of a
customer as buyer in a commercial contract for the purchase of goods. Letters
of credit have maturities which generally reflect the maturities of the
underlying obligations. The credit risk involved in issuing letters of credit
is the same as that involved in extending loans to customers. If deemed
necessary, the Corporation holds various forms of collateral to support letters
of credit.

Certain mortgage loans sold to government agencies have limited recourse
provisions.

19. Foreign Exchange Contracts

Foreign exchange contracts are commitments to purchase or deliver foreign
currency at a specified exchange rate. The Corporation enters into foreign
exchange contracts primarily in connection with trading activities to enable
customers involved in international trade to hedge their exposure to foreign
currency fluctuations and to minimize the Corporation's own exposure to foreign
currency fluctuations resulting from the above. Foreign exchange contracts
include such commitments as foreign currency spot, forward, future and, to a
much lesser extent, option contracts. The risks in these transactions arise
from the ability of the counterparties to perform under the terms of the
contracts and the risk of trading in a volatile commodity. The Corporation
actively monitors all transactions and positions against predetermined limits
established on traders and types of currency to ensure reasonable risk taking.

The Corporation's market risk from unfavorable movements in currency
exchange rates is minimized by essentially matching commitments to deliver
foreign currencies with commitments to purchase foreign currencies.

73



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

At December 31, 2001, the Corporation's foreign currency position resulting
from foreign exchange contracts by major currency was as follows ($000's US):



Commitments Commitments
To Deliver To Purchase
Foreign Foreign
Exchange Exchange
----------- -----------

Currency
Euros........................................................... $180,895 $180,721
English Pound Sterling.......................................... 80,183 79,894
Japanese Yen.................................................... 71,895 71,788
Swiss Franc..................................................... 30,188 30,159
Canadian Dollars................................................ 10,847 10,755
Norwegian Kroner................................................ 7,077 7,083
New Zealand Dollars............................................. 4,399 4,389
Swedish Kronor.................................................. 3,351 3,323
Australian Dollars.............................................. 1,220 1,207
All Other....................................................... 354 385
-------- --------
Total........................................................ $390,409 $389,704
======== ========
Average amount of contracts to deliver/purchase foreign exchange $514,913 $514,172
======== ========


These amounts do not represent the actual credit or market exposure.

20. Derivative Financial Instruments and Hedging Activities

Interest rate risk, the exposure of the Corporation's net interest income
and net fair value of its assets and liabilities, to adverse movements in
interest rates, is a significant market risk exposure that can have a material
effect on the Corporation's financial position, results of operations and cash
flows. The Corporation has policies to ensure that neither earnings nor fair
value at risk exceed established guidelines and assesses these risks by
continually identifying and monitoring changes in interest rates that may
adversely impact expected future earnings and fair values.

The Corporation has designed strategies to confine these risks within the
established limits and indentify appropriate risk/reward trade-offs in the
financial structure of its balance sheet. These strategies include the use of
derivative financial instruments to help achieve the desired balance sheet
repricing structure while meeting the desired objectives of its customers.

Trading Instruments

The Corporation enters into interest rate swaps as part of its trading
activities which enable its customers to manage their exposures to interest
rate risk. The Corporation's market risk from unfavorable movements in interest
rates is generally minimized by concurrently entering into offsetting positions
with nearly identical notional values, terms and indices.

At December 31, 2001, interest rate swaps designated as trading consisted of
$436.4 million in notional amount of receive-fixed/pay-floating with an
aggregate positive fair value of $2.7 million and $422.1 million in notional
amount of pay fixed/receive floating with an aggregate negative fair value of
$2.9 million.

74



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

Interest rate swaps designated as trading are recorded at fair value. Gains
and losses arising from changes in fair value are recorded in other income.

Fair Value Hedges

The Corporation has fixed rate callable CDs and fixed rate long-term debt
which expose the Corporation to variability in fair values due to changes in
market interest rates.

To limit the Corporation's exposure to changes in fair value due to changes
in interest rates, the Corporation has entered into receive-fixed/pay-floating
interest rate swaps with identical call features, thereby creating the effect
of floating rate deposits and floating rate long-term debt. The Corporation has
determined that the hedges on the long-term debt qualify for the special
short-cut accounting prescribed by SFAS 133, resulting in no ineffectiveness.

The Corporation also has Agency collateralized mortgage backed investment
securities designated as available for sale. The embedded prepayment options in
the underlying mortgages expose the Corporation to variability in fair value in
a changing interest rate environment. To limit its exposure to changes in fair
value, the Corporation had designated purchased interest rate floors as a hedge
against changes in fair value attributable to the embedded prepayment option.

During 2001, the Corporation sold the floors. The adjustment to the carrying
amount of the hedged investment securities of $5.7 million is being accreted
into earnings over the remaining life of the security using the interest method.

The following table presents additional information with respect to the
Corporation's fair value hedges.



Fair Value Hedges
December 31, 2001
Weighted
Average
Notional Amount Fair Value Remaining
Hedged Item Hedging Instrument ($ in millions) ($ in millions) Term (Years)
- ----------- ------------------ --------------- --------------- ------------

Callable CDs........... Receive Fixed Swap $ 65.0 $(0.1) 7.3
Medium Term Notes...... Receive Fixed Swap 190.0 1.4 4.7
Long-term Borrowings... Receive Fixed Swap 200.0 17.2 24.9


The impact from fair value hedges to total net interest income for the year
ended December 31, 2001 was a positive $14.8 million, of which $0.1 million was
a result of ineffectiveness.

Cash Flow Hedges

The Corporation has variable rate loans and variable rate short-term
borrowings which expose the Corporation to variability in interest payments due
to changes in interest rates. The Corporation believes it is prudent to limit
the variability of a portion of its interest receipts and payments. To meet
this objective, the Corporation enters into various types of derivative
financial instruments to manage fluctuations in cash flows


75



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


resulting from interest rate risk. At December 31, 2001, these instruments
consisted of interest rate swaps. During 2001, the Corporation also employed an
interest rate floor which expired at the end of the year.

The interest rate swaps change the variable-rate cash flow exposure on the
loans and short-term borrowings to fixed-rate cash flows through the interest
rate swaps.

The purchased interest rate floor protected the Corporation from decreases
in interest rates that would result in decreased cash interest receipts from
the variable rate loans. Under the agreement, the Corporation had the right to
receive cash if interest rates decreased below a specified level.

Ineffectiveness arising from differences between the critical terms of the
hedging instrument and hedged item are recorded in interest income or expense
based on the transaction that gave rise to the ineffectiveness.

Changes in the fair value of the interest rate swaps or floor designated as
cash flow hedges are reported in accumulated other comprehensive income. These
amounts are subsequently reclassified to interest income or interest expense as
a yield adjustment in the same period in which the related interest on the
variable rate loans and short-term borrowings affects earnings.

The following table summarizes the Corporation's cash flow hedges at
December 31, 2001.



Weighted
Cash Flow Hedges Average
December 31, 2001 Remaining
Notional Amount Fair Value Term
Hedged Item Hedging Instrument ($ in millions) ($ in millions) (Years)
- ----------- ------------------ --------------- --------------- ---------

Variable Rate Loans Receive Fixed Swap $454.4 $ 12.2 1.4
Commercial Paper... Pay Fixed Swap 200.0 (20.4) 4.9
Fed Funds Purchased Pay Fixed Swap 650.0 (21.3) 3.0
FHLB Advances...... Pay Fixed Swap 310.0 (3.6) 4.6


The impact from cash flow hedges to total net interest income for the year
ended December 31, 2001 was $12.1 million, of which $0.5 million was a result
of ineffectiveness. The estimated reclass from accumulated other comprehensive
income in the next twelve months is $27.6 million.

Credit risk arises from the potential failure of counterparties to perform
in accordance with the terms of the contracts. The Corporation maintains risk
management policies that define parameters of acceptable market risk within the
framework of its overall asset/liability management strategies and monitor and
limit exposure to credit risk. The Corporation believes its credit and
settlement procedures serve to minimize its exposure to credit risk. Credit
exposure resulting from derivative financial instruments is represented by
their fair value amounts, increased by an estimate of potential adverse
position exposure arising from changes over time in interest rates, maturities
and other relevant factors. At December 31, 2001 the estimated credit exposure
arising from derivative financial instruments was approximately $14.5 million.

For the years ended December 31, 2000 and 1999, the effect on net interest
income resulting from derivative financial instruments was a negative $3.5
million and a positive $7.0 million, respectively.

76



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


21. Fair Value of Financial Instruments

The book values and estimated fair values for on and off-balance sheet
financial instruments as of December 31, 2001 and 2000 are reflected below:

Balance Sheet Financial Instruments ($ in millions)



2001 2000
--------------------- ---------------------
Book Value Fair Value Book Value Fair Value
---------- ---------- ---------- ----------

Financial Assets:
Cash and short-term investments.......... $ 1,605.4 $ 1,605.4 $ 908.2 $ 908.2
Trading securities....................... 6.1 6.1 15.3 15.3
Investment securities available for sale. 3,383.6 3,383.6 4,735.7 4,735.7
Investment securities held to maturity... 1,032.1 1,050.0 1,112.5 1,124.8
Net loans and leases..................... 19,027.2 19,754.7 17,352.0 17,877.1
Interest receivable...................... 137.8 137.8 211.1 211.1
Financial Liabilities:
Deposits................................. 16,493.0 16,624.3 19,248.6 19,496.3
Short-term borrowings.................... 5,056.5 5,056.5 2,605.4 2,605.4
Long-term borrowings..................... 2,360.9 2,680.8 1,130.6 1,252.8
Interest payable......................... 97.5 97.5 203.5 203.5


Where readily available, quoted market prices are utilized by the
Corporation. If quoted market prices are not available, fair values are based
on estimates using present value or other valuation techniques. These
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. The calculated fair value
estimates, therefore, cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized upon immediate settlement of
the instrument. SFAS 107 excludes certain financial instruments and all
nonfinancial assets and liabilities from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the entire Corporation.

The following methods and assumptions are used in estimating the fair value
for financial instruments.

Cash and Short-term Investments

The carrying amounts reported for cash and short-term investments
approximates the fair values for those assets.

Trading and Investment Securities

Fair value is based on quoted market prices or dealer quotes where
available. See Note 6, Securities, for additional information. Estimated fair
values for residual interests in the form of interest-only strips from
automobile loan securitizations are based on discounted cash analysis as
described in Note 9.

Loans

Loans that reprice or mature within three months of December 31 were
assigned fair values based on their book value. Market values were used on
performing loans where available. Most remaining loan balances were assigned
fair values based on a discounted cash flow analysis. The discount rate was
based on the treasury yield curve, with rate adjustments for credit quality,
cost and profit factors.

77



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


Deposits

The fair value for demand deposits or any interest bearing deposits with no
fixed maturity date was considered to be equal to the carrying value. Time
deposits with defined maturity dates were considered to have a fair value equal
to the book value if the maturity date was within three months of December 31.
The remaining time deposits were assigned fair values based on a discounted
cash flow analysis using discount rates which approximate interest rates
currently being offered on time deposits with comparable maturities.

Borrowings

Short-term borrowings are carried at cost which approximates fair value.
Long-term debt was generally valued using a discounted cash flow analysis with
a discount rate based on current incremental borrowing rates for similar types
of arrangements or, if not readily available, based on a build up approach
similar to that used for loans and deposits. Long-term borrowings include their
related current maturities.

Off-Balance Sheet Financial Instruments ($ in millions)

Fair values of loan commitments and letters of credit have been estimated
based on the equivalent fees, net of expenses, that would be charged for
similar contracts and customers at December 31.



2001 2000
---- ----

Loan commitments.................... $5.6 $6.8
Letters of credit................... 6.2 4.8


See Note 18 for additional information on off-balance sheet financial
instruments.

22. Business Segments

Generally, the Corporation organizes its segments based on legal entities.
Each entity offers a variety of products and services to meet the needs of its
customers and the particular market served. Each entity has its own president
and is separately managed subject to adherence to corporate policies. Discrete
financial information is reviewed by senior management to assess performance on
a monthly basis. Certain segments are combined and consolidated for purposes of
assessing financial performance.

The Metavante Corporation ("Metavante") subsidiary, formerly the Data
Services Division of the Corporation, was created on July 1, 2000. Certain
assets and liabilities of the Data Services Division which represent the
payment services or item processing line of business, were transferred to the
Banking segment. Current year information and all prior periods presented have
been restated for the transfer for the Banking segment and the Data Services
Segment.

The Corporation evaluates the profit or loss performance of its segments
based on operating income. Operating income is after-tax income excluding
nonrecurring charges and charges for services from the holding company. The
accounting policies of the Corporation's segments are the same as those
described in Note 1. Intersegment revenues may be based on cost, current market
prices or negotiated prices between the providers and receivers of services.

Based on the way the Corporation organizes its segments, the Corporation has
determined that it has two reportable segments.

78



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


Banking

Banking represents the aggregation of two separately chartered banks
headquartered in Wisconsin, one federally chartered thrift headquartered in
Nevada, an asset-based lending subsidiary headquartered in Minnesota and an
operational support subsidiary which includes item processing as previously
discussed. Banking consists of accepting deposits, making loans and providing
other services such as cash management, foreign exchange and correspondent
banking to a variety of commercial and retail customers. Products and services
are provided through a variety of delivery channels including traditional
branches, supermarket branches, telephone centers, ATMs and the Internet.

The following tables present revenue and operating income by line of
business for Banking. This information is based on the Corporation's product
profitability measurement system and is an aggregation of the revenues and
expenses associated with the products and services within each line of
business. Net interest income is derived from the Corporation's internal funds
transfer pricing system, expenses are allocated based on available transaction
volumes and the provision for loan and lease losses is allocated based on
credit risk. Equity is assigned to products and services on a basis that
considers market, operational and reputation risk. ($ in millions)



Commercial Retail Investments Total
2001 Banking Banking and Other Banking
---- ---------- ------- ----------- --------

Revenue:
Net interest income......... $398.6 $353.2 $ 91.0 $ 842.8
Other revenue............... 82.0 96.3 143.1 321.4
------ ------ ------ --------
Total revenues........... $480.6 $449.5 $234.1 $1,164.2
====== ====== ====== ========
Percent of total................ 41.3% 38.6% 20.1% 100.0%
====== ====== ====== ========
Operating income................ $207.5 $ 86.5 $ 81.1 $ 375.1
====== ====== ====== ========
Percent of total............ 55.3% 23.1% 21.6% 100.0%
====== ====== ====== ========
Return on tangible equity... 24.05% 15.54% 20.52%
====== ====== ========
2000
----
Revenue:
Net interest income......... $352.8 $344.6 $(18.2) $ 679.2
Other revenue............... 56.2 71.4 156.5 284.1
------ ------ ------ --------
Total revenues........... $409.0 $416.0 $138.3 $ 963.3
====== ====== ====== ========
Percent of total................ 42.5% 43.2% 14.3% 100.0%
====== ====== ====== ========
Operating income................ $159.5 $ 98.5 $ 45.2 $ 303.2
====== ====== ====== ========
Percent of total................ 52.6% 32.5% 14.9% 100.0%
====== ====== ====== ========
Return on tangible equity....... 20.76% 19.08% 18.44%
====== ====== ========
1999
----
Revenue:
Net interest income......... $337.0 $323.2 $ 40.6 $ 700.8
Other revenue............... 54.5 60.0 130.1 244.6
------ ------ ------ --------
Total revenues........... $391.5 $383.2 $170.7 $ 945.4
====== ====== ====== ========
Percent of total................ 41.4% 40.5% 18.1% 100.0%
====== ====== ====== ========
Operating income................ $157.4 $ 94.1 $ 55.5 $ 307.0
====== ====== ====== ========
Percent of total................ 51.3% 30.6% 18.1% 100.0%
====== ====== ====== ========
Return on tangible equity....... 23.29% 20.29% 20.05%
====== ====== ========


79



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


Data Services--Metavante

Data Services includes Metavante as well as its nonbank subsidiaries.
Metavante provides data processing services, develops and sells software and
provides consulting services to M&I affiliates as well as banks, thrifts,
credit unions, trust companies and other financial services companies
throughout the world although its activities are primarily domestic. In
addition, Data Services derives revenue from the Corporation's credit card
merchant operations. The majority of Data Services revenue is derived from
internal and external processing.

All Others

M&I's primary other operating segments include Trust Services, Mortgage
Banking (residential and commercial), Capital Markets Group, Brokerage and
Insurance Services and Commercial Leasing. Trust Services provides investment
management and advisory services as well as personal, commercial and corporate
trust services in Wisconsin, Florida, Arizona, North Carolina, Minnesota,
Nevada, and Illinois and Capital Markets Group provides venture capital and
advisory services.

Total Revenues by type in All Others consist of the following ($ in
millions):



2001 2000 1999
------ ------ ------

Trust Services............................. $121.1 $120.1 $103.6
Residential Mortgage Banking............... 43.5 26.6 33.5
Capital Markets............................ 13.1 22.7 16.8
Brokerage and Insurance.................... 21.4 22.1 20.2
Commercial Leasing......................... 13.2 10.3 10.9
Commercial Mortgage Banking................ 3.1 2.2 1.6
Others..................................... 5.7 6.6 6.4
------ ------ ------
Total............................... $221.1 $210.6 $193.0
====== ====== ======


80



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)

The following represents the Corporation's operating segments as of and for
the years ended December 31, 2001, 2000 and 1999. Intrasegment revenues,
expenses and assets have been eliminated.



Year Ended December 31, 2001 ($ in millions)
----------------------------------------------------------------------------------
Consolidated
Reclass- Consol- Income
ifications idated Non- Before
Corporate Elim- Operating Operating Accounting
Banking Metavante Others Overhead inations Income Charges Change
--------- --------- ------ --------- ---------- --------- --------- ------------

Net Interest Income.......... $ 842.8 $ (3.7) $ 27.4 $ (23.7) $ -- $ 842.8 $ -- $ 842.8
Fees-unaffiliated customers.. 287.9 557.6 171.7 2.7 (1.0) 1,018.9 (16.1) 1,002.8
Fees-affiliated customers.... 33.5 61.4 22.0 -- (116.9) -- -- --
--------- ------ ------ ------- ------- --------- ------- ---------
Total revenue................ 1,164.2 615.3 221.1 (21.0) (117.9) 1,861.7 (16.1) 1,845.6
Expenses-unaffiliated
customers................... 481.1 518.1 111.8 87.2 (0.7) 1,197.5 93.0 1,290.5
Expenses-affiliated customers 75.5 17.0 29.8 (5.1) (117.2) -- -- --
--------- ------ ------ ------- ------- --------- ------- ---------
Total expenses............... 556.6 535.1 141.6 82.1 (117.9) 1,197.5 93.0 1,290.5
Provision for loan and lease
losses...................... 51.9 -- 2.2 -- -- 54.1 -- 54.1
--------- ------ ------ ------- ------- --------- ------- ---------
Operating income before
taxes....................... 555.7 80.2 77.3 (103.1) -- 610.1 (109.1) 501.0
Income tax expense........... 180.6 33.1 29.3 (38.5) -- 204.5 (41.4) 163.1
--------- ------ ------ ------- ------- --------- ------- ---------
Operating income............. $ 375.1 $ 47.1 $ 48.0 $ (64.6) $ -- $ 405.6 $ (67.7) $ 337.9
========= ====== ====== ======= ======= ========= ======= =========
Identifiable assets.......... $26,256.7 $754.6 $832.1 $ 359.4 $(949.1) $27,253.7 $ -- $27,253.7
========= ====== ====== ======= ======= ========= ======= =========
Depreciation and
amortization................ $ (15.7) $ 92.7 $(19.5) $ 4.4 $ -- $ 61.9 $ -- $ 61.9
========= ====== ====== ======= ======= ========= ======= =========
Purchase of premises and
equipment, net.............. $ 21.1 $ 18.3 $ 1.5 $ 3.7 $ -- $ 44.6 $ -- $ 44.6
========= ====== ====== ======= ======= ========= ======= =========
Return on Average Tangible
Equity...................... 20.52% 23.76% 19.08% 20.90% 17.58%
========= ====== ====== ========= =========
Return on Average Equity..... 17.25% 16.39% 18.93% 16.70% 13.91%
========= ====== ====== ========= =========


81



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)




Year Ended December 31, 2000 ($ in millions)
----------------------------------------------------------------------------------
Consolidated
Reclass- Consol- Income
ifications idated Non- Before
Corporate Elim- Operating Operating Accounting
Banking Metavante Others Overhead inations Income Charges Change
--------- --------- ------ --------- ---------- --------- --------- ------------

Net Interest Income.......... $ 679.2 $ (2.8) $ 21.4 $(24.8) $ -- $ 673.0 $ -- $ 673.0
Fees-unaffiliated
customers................... 262.2 542.5 175.0 3.9 0.1 983.7 (50.5) 933.2
Fees-affiliated customers.... 21.9 64.0 14.2 0.1 (100.2) -- -- --
--------- ------ ------ ------ ------- --------- ------ ---------
Total revenue................ 963.3 603.7 210.6 (20.8) (100.1) 1,656.7 (50.5) 1,606.2
Expenses-unaffiliated
customers................... 431.7 499.6 105.5 55.1 (3.2) 1,088.7 16.7 1,105.4
Expenses-affiliated customers 61.9 8.6 28.3 (1.9) (96.9) -- -- --
--------- ------ ------ ------ ------- --------- ------ ---------
Total expenses............... 493.6 508.2 133.8 53.2 (100.1) 1,088.7 16.7 1,105.4
Provision for loan and lease
losses...................... 29.9 -- 0.5 -- -- 30.4 -- 30.4
--------- ------ ------ ------ ------- --------- ------ ---------
Operating income before
taxes....................... 439.8 95.5 76.3 (74.0) -- 537.6 (67.2) 470.4
Income tax expense........... 136.6 39.6 30.4 (30.6) -- 176.0 (23.0) 153.0
--------- ------ ------ ------ ------- --------- ------ ---------
Operating income............. $ 303.2 $ 55.9 $ 45.9 $(43.4) $ -- $ 361.6 $(44.2) $ 317.4
========= ====== ====== ====== ======= ========= ====== =========
Identifiable assets.......... $24,874.9 $636.3 $634.4 $241.7 $(309.6) $26,077.7 $ -- $26,077.7
========= ====== ====== ====== ======= ========= ====== =========
Depreciation and amortization $ (3.0) $ 86.6 $(18.6) $ 4.2 $ -- $ 69.2 $ -- $ 69.2
========= ====== ====== ====== ======= ========= ====== =========
Purchase of premises and
equipment, net.............. $ 28.9 $ 45.9 $ 2.8 $ 1.2 $ -- $ 78.8 $ -- $ 78.8
========= ====== ====== ====== ======= ========= ====== =========
Return on Average
Tangible Equity............. 18.44% 29.00% 20.62% 20.78% 18.37%
========= ====== ====== ========= =========
Return on Average Equity..... 15.33% 21.52% 20.45% 16.84% 14.78%
========= ====== ====== ========= =========


82



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)




Year Ended December 31, 1999 ($ in millions)
----------------------------------------------------------------------------------
Consolidated
Reclass- Consol- Income
ifications idated Non- Before
Corporate Elim- Operating Operating Accounting
Banking Metavante Others Overhead inations Income Charges Change
--------- --------- ------ --------- ---------- --------- --------- ------------

Net Interest Income.. $ 700.8 $ (4.1) $ 22.8 $(14.2) $ -- $ 705.3 $ -- $ 705.3
Fees-unaffiliated
customers........... 228.1 492.7 152.4 9.8 -- 883.0 -- 883.0
Fees-affiliated
customers........... 16.5 56.1 17.8 0.1 (90.5) -- -- --
--------- ------ ------ ------ ------ --------- ---- ---------
Total revenue........ 945.4 544.7 193.0 (4.3) (90.5) 1,588.3 -- 1,588.3
Expenses-unaffiliated
customers........... 403.4 469.4 101.6 62.4 (1.8) 1,035.0 -- 1,035.0
Expenses-affiliated
customers........... 61.4 3.5 26.2 (2.4) (88.7) -- -- --
--------- ------ ------ ------ ------ --------- ---- ---------
Total expenses....... 464.8 472.9 127.8 60.0 (90.5) 1,035.0 -- 1,035.0
Provision for loan
and lease losses.... 25.0 -- 0.4 -- -- 25.4 -- 25.4
--------- ------ ------ ------ ------ --------- ---- ---------
Operating income
before taxes........ 455.6 71.8 64.8 (64.3) -- 527.9 -- 527.9
Income tax expense... 148.6 31.5 25.6 (32.3) -- 173.4 -- 173.4
--------- ------ ------ ------ ------ --------- ---- ---------
Operating income..... $ 307.0 $ 40.3 $ 39.2 $(32.0) $ -- $ 354.5 $ -- $ 354.5
========= ====== ====== ====== ====== ========= ==== =========
Identifiable assets.. $23,128.0 $475.1 $651.6 $174.6 $(59.6) $24,369.7 $ -- $24,369.7
========= ====== ====== ====== ====== ========= ==== =========
Depreciation and
amortization........ $ 26.9 $ 73.8 $(18.2) $ 3.7 $ -- $ 86.2 $ -- $ 86.2
========= ====== ====== ====== ====== ========= ==== =========
Purchase of premises
and equipment, net.. $ 28.3 $ 35.2 $ 2.3 $ 1.1 $ -- $ 66.9 $ -- $ 66.9
========= ====== ====== ====== ====== ========= ==== =========
Return on Average
Tangible Equity..... 20.05% 21.93% 18.88% 20.49% 20.49%
========= ====== ====== ========= =========
Return on Average
Equity.............. 16.30% 15.52% 18.71% 16.32% 16.32%
========= ====== ====== ========= =========


Nonrecurring charges in 2001 reflect one-time charges related to changes and
acquisitions at the Corporation's Metavante subsidiary, auto lease residual
write-downs and charges associated with completing the consolidation of M&I's
banking charters.

Nonrecurring charges in 2000 reflect one-time charges related to the
Corporation's Metavante subsidiary IPO, losses from the sale of available for
sale investment securities and loans as part of the Corporation's balance sheet
management and charges associated with the consolidation of banking charters.

23. Condensed Financial Information--Parent Corporation Only

On July 1, 2000, the Corporation contributed certain assets and liabilities
of its Data Services division as well as its investment in two related nonbank
subsidiaries into a new subsidiary, Metavante, and contributed the remainder of
the division's assets and liabilities (consisting of the payment services or
item processing business) to its banking support subsidiary. These are noncash
transactions for purposes of the Condensed Statements of Cash Flows. The
Condensed Statements of Income reflect the operating activity of the Data
Services division through the six months ended June 30, 2000.

83



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


Condensed Balance Sheets
December 31



2001 2000
---------- ----------

Assets
Cash and cash equivalents.......................................... $ 258,671 $ 145,480
Indebtedness of nonbank affiliates................................. 396,834 249,408
Investments in affiliates:
Banks........................................................... 2,249,278 2,062,316
Nonbanks........................................................ 586,655 558,278
Premises and equipment, net........................................ 8,447 7,281
Other assets....................................................... 120,640 115,222
---------- ----------
Total assets................................................ $3,620,525 $3,137,985
========== ==========

Liabilities and Shareholders' Equity
Commercial paper issued............................................ $ 335,342 $ 322,161
Other liabilities.................................................. 174,015 137,595
Long-term borrowings:
7.65% Junior Subordinated Deferrable Interest Debentures due to
M&I Capital Trust A........................................... 205,379 205,346
Other........................................................... 412,821 230,694
---------- ----------
Total long-term borrowings.................................. 618,200 436,040
---------- ----------
Total liabilities........................................... 1,127,557 895,796
Shareholders' equity............................................... 2,492,968 2,242,189
---------- ----------
Total liabilities and shareholders' equity.................. $3,620,525 $3,137,985
========== ==========


Scheduled maturities of long-term borrowings are $48,450 in 2002, $113,000
in 2003, $1,000 in 2004, $500 in 2005, and $250,000 in 2006. See Note 13 for a
description of the junior subordinated debt due to M&I Capital Trust A.

84



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


Condensed Statements of Income
Years Ended December 31



2001 2000 1999
-------- -------- --------

Income
Cash dividends:
Bank affiliates........................................................ $345,900 $117,812 $172,920
Nonbank affiliates..................................................... 75,713 22,961 49,729
Interest from affiliates.................................................. 19,978 30,320 22,530
Data processing income.................................................... -- 304,365 568,269
Service fees and other.................................................... 57,632 67,794 70,197
-------- -------- --------
Total income....................................................... 499,223 543,252 883,645

Expense
Interest.................................................................. 43,758 57,409 41,143
Salaries and employee benefits............................................ 46,018 186,075 322,399
Administrative and general................................................ 36,411 128,653 215,039
Single Charter............................................................ 4,695 2,960 --
-------- -------- --------
Total expense...................................................... 130,882 375,097 578,581
Income before income taxes, cumulative effect of changes in accounting
principles and equity in undistributed net income of affiliates......... 368,341 168,155 305,064
Provision (benefit) for income taxes...................................... (17,800) 10,893 27,904
-------- -------- --------
Income before cumulative effect of changes in accounting principles and
equity in undistributed net income of affiliates........................ 386,141 157,262 277,160
Cumulative effect of changes in accounting principles, net of income taxes -- (2,279) --
-------- -------- --------
Income before equity in undistributed net income of affiliates............ 386,141 154,983 277,160
Equity in undistributed net income of affiliates, net of dividends paid:
Banks.................................................................. (16,724) 113,368 103,114
Nonbanks............................................................... (31,932) 46,772 (25,763)
-------- -------- --------
Net income......................................................... $337,485 $315,123 $354,511
======== ======== ========


85



Notes to Consolidated Financial Statements--(Continued)

December 31, 2001, 2000, and 1999 ($000 except share data)


Condensed Statements of Cash Flows
Years Ended December 31



2001 2000 1999
----------- ----------- -----------

Cash Flows From Operating Activities
Net income.......................................................... $ 337,485 $ 315,123 $ 354,511
Noncash items included in income:
Equity in undistributed net loss (income) of affiliates.......... 48,656 (160,140) (77,351)
Depreciation and amortization.................................... 4,691 35,526 72,343
Other............................................................ 20,399 (26,682) (32,605)
----------- ----------- -----------
Net cash provided by operating activities........................... 411,231 163,827 316,898

Cash Flows From Investing Activities
Increases in indebtedness of affiliates.......................... (3,207,948) (1,906,477) (1,356,937)
Decreases in indebtedness of affiliates.......................... 3,114,987 2,125,433 1,294,864
Increases in investments in affiliates........................... (24,600) (36,177) (399)
Net capital expenditures......................................... (3,376) (19,500) (36,739)
Acquisitions accounted for as purchases, net of cash equivalents
acquired and investments....................................... 35,018 -- (84,408)
Other............................................................ (9) (5,993) 1,135
----------- ----------- -----------
Net cash (used in) provided by investing activities................. (85,928) 157,286 (182,484)

Cash Flows From Financing Activities
Dividends paid................................................... (122,777) (111,379) (104,490)
Proceeds from issuance of commercial paper....................... 3,472,573 3,190,712 1,926,791
Principal payments on commercial paper........................... (3,499,459) (3,115,064) (1,740,439)
Proceeds from issuance of long-term debt......................... 250,000 1,000 75,200
Payments on long-term debt....................................... (67,950) (23,561) (35,857)
Purchase of common stock......................................... (267,438) (156,319) (317,149)
Proceeds from exercise of stock options.......................... 23,630 5,241 18,359
Other............................................................ (691) (113) (19)
----------- ----------- -----------
Net cash used in financing activities............................... (212,112) (209,483) (177,604)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents................ 113,191 111,630 (43,190)
Cash and cash equivalents, beginning of year........................ 145,480 33,850 77,040
----------- ----------- -----------
Cash and cash equivalents, end of year.............................. $ 258,671 $ 145,480 $ 33,850
=========== =========== ===========


86



Quarterly Financial Information (Unaudited)

Following is unaudited financial information for each of the calendar
quarters during the years ended December 31, 2001 and 2000.



Quarter Ended
-----------------------------------
Dec. 31 Sept. 30 June 30 March 31
-------- -------- -------- --------

2001
Total Interest Income.............................. $401,974 $423,252 $431,447 $452,434
Net Interest Income................................ 237,288 218,478 201,234 185,779
Provision for Loan and Lease Losses................ 20,109 12,206 10,737 11,063
Income before Income Taxes and Change in Accounting 162,168 122,158 85,818 130,901
Income before Change in Accounting................. 108,321 83,315 59,683 86,602
Change in Accounting, Net of Income Taxes.......... -- -- -- (436)
Net Income......................................... 108,321 83,315 59,683 86,166
Net Income Per Share:*
Basic Before Change in Accounting............... $ 1.02 $ 0.78 $ 0.57 $ 0.83
Basic........................................... 1.02 0.78 0.57 0.83
Diluted Before Change in Accounting............. 0.98 0.75 0.55 0.80
Diluted......................................... 0.98 0.75 0.55 0.80

2000
Total Interest Income.............................. $457,503 $443,265 $432,589 $414,625
Net Interest Income................................ 174,765 164,065 165,055 169,121
Provision for Loan and Lease Losses................ 8,979 5,938 9,616 5,819
Income before Income Taxes and Change in Accounting 125,104 74,634 133,882 136,730
Income before Change in Accounting................. 84,330 51,610 90,747 90,715
Change in Accounting, Net of Income Taxes.......... -- -- -- (2,279)
Net Income......................................... 84,330 51,610 90,747 88,436
Net Income Per Share:*
Basic Before Change in Accounting............... $ 0.80 $ 0.49 $ 0.86 $ 0.86
Basic........................................... 0.80 0.49 0.86 0.84
Diluted Before Change in Accounting............. 0.78 0.47 0.83 0.83
Diluted......................................... 0.78 0.47 0.83 0.81
- --------
*May not add due to rounding





2001 2000 1999 1998 1997
------ ------ ------ ------ ------

Common Dividends Declared
First Quarter..................................... $0.265 $0.240 $0.220 $0.200 $0.185
Second Quarter.................................... 0.290 0.265 0.240 0.220 0.200
Third Quarter..................................... 0.290 0.265 0.240 0.220 0.200
Fourth Quarter.................................... 0.290 0.265 0.240 0.220 0.200
------ ------ ------ ------ ------
$1.135 $1.035 $0.940 $0.860 $0.785
====== ====== ====== ====== ======


87



Price Range of Stock
(Low and High Close)



2001 2000 1999 1998 1997
------ ------ ------ ------ ------

First Quarter
Low............................. $48.04 $43.88 $55.38 $53.25 $32.75
High............................ 55.20 60.44 59.25 59.50 40.25
Second Quarter
Low............................. 48.91 41.52 54.75 50.44 35.06
High............................ 54.35 55.31 71.94 61.63 42.50
Third Quarter
Low............................. 50.99 43.56 55.88 44.00 40.88
High............................ 59.56 51.63 69.75 59.00 52.63
Fourth Quarter
Low............................. 52.66 38.63 57.81 40.50 50.06
High............................ 64.12 51.49 69.31 58.44 62.13


88



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and the Board of Directors of Marshall & Ilsley Corporation:

We have audited the accompanying consolidated balance sheets of Marshall &
Ilsley Corporation (a Wisconsin corporation) and subsidiaries as of December
31, 2001 and 2000, and the related consolidated statements of income,
shareholders' equity and cash flows for the years ended December 31, 2001, 2000
and 1999. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Marshall &
Ilsley Corporation and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for the years ended December
31, 2001, 2000 and 1999, in conformity with accounting principles generally
accepted in the United States.

As discussed in Note 2 to the Consolidated Financial Statements, effective
January 1, 2001, the Corporation changed its method of accounting for
derivative instruments.

As discussed in Note 2 to the Consolidated Financial Statements, effective
January 1, 2000, the Corporation changed its method of accounting for certain
conversion services.

/s/ ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin,
January 17, 2002

89



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated herein by reference to M&I's definitive proxy statement for the
Annual Meeting of Shareholders to be held on April 23, 2002, except for
information as to executive officers which is set forth in Part I of this
report.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated herein by reference to M&I's definitive proxy statement for the
Annual Meeting of Shareholders to be held on April 23, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated herein by reference to M&I's definitive proxy statement for the
Annual Meeting of Shareholders to be held on April 23, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated herein by reference to M&I's definitive proxy statement for the
Annual Meeting of Shareholders to be held on April 23, 2002.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

Consolidated Financial Statements:
Balance Sheets--December 31, 2001 and 2000
Statements of Income--years ended December 31, 2001, 2000 and 1999
Statements of Cash Flows--years ended December 31, 2001, 2000 and 1999
Statements of Shareholders' Equity--years ended December 31, 2001,
2000 and 1999
Notes to Consolidated Financial Statements
Quarterly Financial Information (Unaudited)
Report of Independent Public Accountants

2. Financial Statement Schedules

All schedules are omitted because they are not required, not
applicable or the required information is contained elsewhere.

3. Exhibits

See Index to Exhibits of this Form 10-K which is incorporated herein
by reference.

(b) Reports on Form 8-K

Not applicable.

90



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

MARSHALL & ILSLEY CORPORATION

By: /s/ DENNIS J. KUESTER
-----------------------------------
Dennis J. Kuester
Chief Executive Officer, President
and a Director

Date: March 6, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

/s/ MARK F. FURLONG
- ---------------------------------------
Mark F. Furlong
Executive Vice President, Chief
Financial Officer and Secretary
(Principal Financial Officer) Date: March 6, 2002

/s/ PATRICIA R. JUSTILIANO
- ---------------------------------------
Patricia R. Justiliano
Senior Vice President and
Corporate Controller
(Principal Accounting Officer) Date: March 6, 2002

Directors: Richard A. Abdoo, David L. Andreas, Oscar C. Boldt, Wendell F.
Bueche, Jon F. Chait, Timothy E. Hoeksema, Bruce E. Jacobs, Burleigh
E. Jacobs, Donald R. Johnson, Ted D. Kellner, James A. Kress, Dennis
J. Kuester, Katharine C. Lyall, Edward L. Meyer, Jr., San W. Orr,
Jr., Peter M. Platten, III, Robert A. Schaefer, John S. Shiely,
James A. Urdan, George E. Wardeberg and James B. Wigdale.


By /s/ MARK F. FURLONG Date: March 6, 2002
---------------------------
Mark F. Furlong
As Attorney-In-Fact*
- --------
* Pursuant to authority granted by powers of attorney, copies of which are
filed herewith.

91



MARSHALL & ILSLEY CORPORATION

INDEX TO EXHIBITS
(Item 14(a)3)

ITEM
----
(3) (a) Restated Articles of Incorporation, as amended, incorporated by
reference to M&I's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000, SEC File No. 1-15403

(b) By-laws, as amended, incorporated by reference to M&I's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000, SEC File No.
1-15403

(4) (a) Indenture between M&I and Chemical Bank (as successor to Manufacturers
Hanover Trust Company) dated as of November 15, 1985 ("Senior
Indenture"), incorporated by reference to M&I's Registration Statement
on Form S-3 (Registration No. 33-21377), as supplemented by the First
Supplemental Indenture to the Senior Indenture dated as of May 31,
1990, incorporated by reference to M&I's Current Report on Form 8-K
dated May 31, 1990, and as supplemented by the Second Supplemental
Indenture to the Senior Indenture dated as of July 15, 1993,
incorporated by reference to M&I's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993, SEC File No. 1-15403

(b) Form of Medium Term Notes, Series C, Series D and Series E issued
pursuant to the Senior Indenture, included in Exhibit 4(a)

(c) Indenture between M&I and Chemical Bank dated as of July 15, 1993
("Subordinated Indenture"), incorporated by reference to M&I's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, SEC
File No. 1-15403

(d) Form of Subordinated Note issued pursuant to the Subordinated
Indenture, included in Exhibit 4(c)

(e) Designation of Rights and Preferences of holders of Series A Preferred
Stock, incorporated by reference to M&I's Current Report on Form 8-K
dated May 20, 1985, SEC File No. 1-15403

(f) Amended and Restated Declaration of Trust dated as of December 9, 1996
among Marshall & Ilsley Corporation, as Sponsor, The Chase Manhattan
Bank, as Institutional Trustee, Chase Manhattan Bank Delaware, as
Delaware Trustee, the Regular Trustees identified thereon, and the
holders from time to time of undivided interests in the assets of the
Trust, incorporated by reference to M&I's Registration Statement on
Form S-4 dated January 15, 1997, SEC Reg. No. 333-19809

(g) Indenture, dated as of December 9, 1996, between Marshall & Ilsley
Corporation and The Chase Manhattan Bank, as Indenture Trustee,
incorporated by reference to M&I's Registration Statement on Form S-4
dated January 15, 1997, SEC Reg. No. 333-19809

(h) First Supplemental Indenture, dated as of December 9, 1996, between
Marshall & Ilsley Corporation and The Chase Manhattan Bank, as
Indenture Trustee, incorporated by reference to M&I's Registration
Statement on Form S-4 dated January 15, 1997, SEC Reg. No. 333-19809

(i) Form of Capital Security Certificate for M&I Capital Trust A, included
as Exhibit A-2 to Exhibit 4(h)


(j) Capital Securities Guarantee Agreement, dated as of December 9, 1996,
between Marshall & Ilsley Corporation and The Chase Manhattan Bank, as
Guarantee Trustee, incorporated by reference to M&I's Registration
Statement on Form S-4 dated January 15, 1997, SEC Reg. No. 333-19809

(k) Registration Rights Agreement dated December 2, 1996, by and among
Marshall & Ilsley Corporation, M&I Capital Trust A and Salomon
Brothers Inc, as Representative of the Initial Purchasers,
incorporated by reference to M&I's Registration Statement on Form S-4
dated January 15, 1997, SEC Reg. No. 333-19809

(l) Form of Subordinated Debt Security, included as part of Exhibit 4(j)

92



(m) Issuing and Paying Agency Agreement, dated as of September 17, 1999,
between M&I Marshall & Ilsley Bank, M&I Bank of Southern Wisconsin,
M&I Bank Northeast, M&I Bank Fox Valley, M&I Thunderbird Bank, M&I
Bank South, M&I Mid-State Bank and M&I Community State Bank and The
Chase Manhattan Bank, incorporated by reference to M&I's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000, SEC File No.
1-15403

(10) (a) 1983 Executive Stock Option and Restricted Stock Plan, as amended,
incorporated by reference to M&I's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987, SEC File No. 1-15403*

(b) 1985 Executive Stock Option and Restricted Stock Plan, as amended,
incorporated by reference to M&I's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987, SEC File No. 1-15403*

(c) M&I Marshall & Ilsley Bank Supplementary Retirement Benefits Plan,
incorporated by reference to M&I's Annual Report on Form 10-K for the
fiscal year ended December 31, 1983, SEC File No. 1-15403*

(d) Deferred Compensation Trust between Marshall & Ilsley Corporation and
Bessemer Trust Company dated April 28, 1987, as amended, incorporated
by reference to M&I's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, SEC File No. 1-15403*

(e) 1989 Executive Stock Option and Restricted Stock Plan, incorporated by
reference to M&I's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, as amended by M&I's Annual Report on Form
10-K for the fiscal year ended December 31, 1990, SEC File No. 1-15403*

(f) Marshall & Ilsley Corporation Supplemental Retirement Benefits Plan,
incorporated by reference to M&I's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, SEC File No. 1-15403*

(g) Marshall & Ilsley Trust Company Supplemental Retirement Benefits Plan,
incorporated by reference to M&I's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, SEC File No. 1-15403*

(h) Marshall & Ilsley Corporation 1993 Executive Stock Option Plan, as
amended, incorporated by reference to M&I's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, SEC File No. 1-15403.*

(i) Marshall & Ilsley Corporation 1995 Directors Stock Option Plan,
incorporated by reference to M&I's Proxy Statement for the 1995 Annual
Meeting of Shareholders, SEC File No. 1-15403*

(j) Marshall & Ilsley Corporation Assumption Agreement dated May 31, 1994
assuming rights, obligations and interests of Valley Bancorporation
under various stock option plans, incorporated by reference to M&I's
Registration Statement on Form S-8 (Reg. No. 33-53897)*

(k) Valley Bancorporation 1992 Outside Directors' Stock Option Plan,
incorporated by reference to the Valley 1992 Proxy Statement*

(l) Employment agreement between M&I and Mr. Peter M. Platten, III,
incorporated by reference to M&I's Registration Statement on Form S-4
(Reg. No. 33-51753)*

(m) Letter agreement dated January 25, 1994 between Valley Bancorporation
and Mr. Peter M. Platten, III incorporated by reference to M&I's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994, SEC File No. 1-15403*

(n) Marshall & Ilsley Corporation 1997 Executive Stock Option and
Restricted Stock Plan, incorporated by reference to M&I's Proxy
Statement for the 1997 Annual Meeting of Shareholders*

93



(o) Marshall & Ilsley Corporation Executive Deferred Compensation Plan,
incorporated by reference to M&I's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, SEC File No. 1-15403*

(p) Deferred Compensation Trust II between Marshall & Ilsley Corporation
and Marshall & Ilsley Trust Company, incorporated by reference to
M&I's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, SEC File No. 1-15403*

(q) Marshall & Ilsley Corporation Annual Executive Incentive Compensation
Plan, incorporated by reference to M&I's Proxy Statement for the 1997
Annual Meeting of Shareholders*

(r) Marshall & Ilsley Corporation Amended and Restated Supplementary
Retirement Benefits Plan, incorporated by reference to M&I's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, SEC
File No. 1-15403*

(s) Security Capital Corporation 1993 Incentive Stock Option Plan,
incorporated by reference to M&I's Registration Statement on Form S-8
(Reg. No. 333-36909)*

(t) Security Bank S.S.B. Deferred Compensation Plans for Key Executive
Officers and Directors, incorporated by reference to Security Capital
Corporation's Registration Statement on Form S-1 (Reg. No. 33-68982)*

(u) Security Bank S.S.B. Supplemental Pension Plan, incorporated by
reference to Security Capital Corporation's Registration Statement on
Form S-1 (Reg. No. 33-68982)*

(v) Directors Deferred Compensation Plan, incorporated by reference to
M&I's Proxy Statement for the 1998 Annual Meeting of Shareholders*

(w) Marshall & Ilsley Corporation 1994 Long-Term Incentive Plan for
Executives, as amended, incorporated by reference to M&I's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, SEC
File No. 1-15403*

(x) Marshall & Ilsley Corporation Amended and Restated Executive Deferred
Compensation Plan, incorporated by reference to M&I's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1999, SEC
File No. 1-15403*

(y) Marshall & Ilsley Corporation Amended and Restated 1997 Executive
Stock Option and Restricted Stock Plan, incorporated by reference to
M&I's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1999, SEC File No. 1-15403*

(z) Marshall & Ilsley Corporation Amended and Restated 1994 Long-Term
Incentive Plan for Executives, incorporated by reference to M&I's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1999, SEC File No. 1-15403*

(aa) Marshall & Ilsley Corporation Amended and Restated Annual Executive
Incentive Compensation Plan, incorporated by reference to M&I's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1999, SEC File No. 1-15403*

(bb) Marshall & Ilsley Corporation 2000 Executive Stock Option and
Restricted Stock Plan, incorporated by reference to M&I's Proxy
Statement for the 2000 Annual Meeting of Shareholders*

(cc) Early Retirement and Consulting Agreements dated as of September 18,
2000 between Marshall & Ilsley Corporation and G.H. Gunnlaugsson,
incorporated by reference to M&I's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000, SEC File No. 1-15403*

(dd) Form of Change of Control Agreements between M&I and Messrs. Wigdale,
Kuester, Bolger and Delgadillo, incorporated by reference to M&I's
Annual Report on Form 10-K for the fiscal year ended December 31,
2000, SEC File No. 1-15403*

(ee) Form of Change of Control Agreements between M&I and Ms. Justiliano
and Messrs. O'Neill, Renard, Roberts, Root, Sherman, Williams and
Wilson, incorporated by reference to M&I's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000, SEC File No. 1-15403*

94



(ff) Amended and Restated Marshall & Ilsley Corporation Nonqualified
Retirement Benefit Plan, incorporated by reference to M&I's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000, SEC
File No. 1-15403*

(gg) Change of Control Agreement, dated April 16, 2001, between M&I and Mr.
Furlong, incorporated by reference to M&I's Quarterly Report on Form
10-Q for the quarter ended March 31, 2001, SEC File No. 1-15403*

(hh) Letter Agreement and Consulting and Noncompetition Agreement, dated
October 18, 2001, between M&I and Mr. Andreas*


(ii) Change of Control Agreement, dated January 10, 2001, between M&I and
Mr. Hogan*

(11) Computation of Net Income Per Common Share, incorporated by reference to
Note 3 of Notes to Consolidated Financial Statements included in Item 8,
Consolidated Financial Statements

(12) Computation of Ratio of Earnings to Fixed Charges

(21) Subsidiaries

(23) Consent of Arthur Andersen LLP

(24) Powers of Attorney

M&I will provide a copy of any instrument defining the rights of holders of
long-term debt to the Commission upon request.
- --------
* Management contract or compensatory plan or arrangement.

95