##### 





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  ANNUAL REPORT UNDER
    SECTION 13 or 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
 For the fiscal year ended December 31, 2007
  Commission file number 1-13805
 Harris Preferred Capital
    Corporation
 (Exact name of registrant as
    specified in its charter)
  Maryland(State or other
    jurisdiction
    of incorporation or organization)

#36-4183096(I.R.S. Employer
    Identification No.)111 West Monroe Street, Chicago, Illinois(Address of principal
    executive offices)

60603(Zip Code)   Registrants telephone number, including area code:
 (312) 461-2121
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which Registered73/8%
    Noncumulative Exchangeable
    Preferred Stock, Series A, par value
    $1.00 per share

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  Note
  þ o
  Regulation S-K Form 10-K Form 10-K. o
    Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ

Smaller reporting
    company o(Do not check if a smaller reporting
    company)   Rule 12b-2 o þ




---



##### 





Harris
    Preferred Capital Corporation
  TABLE OF
    CONTENTS
  Part IItem 1.


Business


2Item 1A.


Risk Factors


7Item 1B.


Unresolved Staff Comments


12Item 2.


Properties


12Item 3.


Legal Proceedings


12Item 4.


Submission of Matters to a Vote of Security Holders


12Part IIItem 5.


Market for the Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities


12Item 6.


Selected Financial Data


13Item 7.


Managements Discussion and Analysis of Financial Condition
    and Results of Operations


14Item 7A.


Quantitative and Qualitative Disclosures About Market Risk


18Item 8.


Financial Statements and Supplementary Data


18Item 9.


Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure


18Item 9A.


Controls and Procedures


18Item 9B.


Other Information


19Part IIIItem 10.


Directors, Executive Officers and Corporate Governance


19Item 11.


Executive Compensation


22Item 12.


Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters


22Item 13.


Certain Relationships and Related Transactions, and Director
    Independence


22Item 14.


Principal Accounting Fees and Services


23Part IVItem 15


Exhibits, Financial Statement Schedules


23(a) Exhibits31.1 Certification of Pamela C. Piarowski pursuant to
    Rule 13a - 14(a)31.2 Certification of Paul R. Skubic pursuant to
    Rule 13a-
    14(a)32.1 Certification pursuant to 18 U.S.C. Section 1350(b) Reports on
    Form 8-KNoneSignatures


26  1




---



##### 



PART I  Forward-Looking
    Information
  Form 10-K
  ITEM 1.
    BUSINESS  General
    3 8 3 8
   2




---



##### 



pari passu
        Business
     3




---



##### 



and/or
   4




---



##### 



day-to-day
     5




---



##### 



Employees
    Environmental
    Matters
  clean-up, clean-up clean-up.
  Qualification
    as a REIT
    Year Ended December 31, 2007Price














Amount inper Share


# of Shares


Declared Date


Record Date


Paid Date


ThousandsPreferred Dividends

$
.46094



10,000,000



3/2/2007



3/15/2007



3/30/2007


$
4,609.46094



10,000,000



5/31/2007



6/15/2007



7/2/2007



4,609.46094



10,000,000



8/29/2007



9/15/2007



10/1/2007



4,609.46094



10,000,000



11/29/2007



12/15/2007



12/31/2007



4,611$
18,438Common Stock Dividends

$
511



1,000



8/29/2007



9/1/2007



9/12/2007


$
5113,000



1,000



12/21/2007



12/28/2007



1/4/2008



3,000$
3,511   6




---



##### 



Year Ended December 31, 2006Price














Amount inper Share


# of Shares


Declared Date


Record Date


Paid Date


ThousandsPreferred Dividends

$
.46094



10,000,000



3/2/2006



3/15/2006



3/30/2006


$
4,609.46094



10,000,000



5/31/2006



6/15/2006



6/30/2006



4,609.46094



10,000,000



8/30/2006



9/15/2006



9/30/2006



4,609.46094



10,000,000



11/30/2006



12/15/2006



1/2/2007



4,611$
18,438Common Stock Dividends

$
581



1,000



8/30/2006



9/1/2006



11/14/2006


$
5812,000



1,000



12/15/2006



12/15/2006



12/29/2006



2,000$
2,581   ITEM 1A.
    RISK
    FACTORS  No. 333-40257)),
  Declining
    interest rates will reduce earnings of the Company
      Dividends
    may not be authorized quarterly and dividends not authorized
    will not be paid
    Automatic
    exchange for Bank Preferred Shares could occur when value of
    Bank Preferred Shares is impaired
   7




---



##### 



Bank
    Preferred Shares will not be listed on any exchange and markets
    may not be liquid
    Dividends
    and operations of the Company restricted by
    regulation
        Adverse
    consequences of failure to qualify as a REIT
   8




---



##### 



REIT
    requirements with respect to stockholder
    distributions
    Redemption
    upon occurrence of a Tax Event
    Recent
    Illinois Tax Law Change
    Automatic
    exchange upon occurrence of the Exchange Event
  one-for-one
 9




---



##### 



Relationship
    with the Bank and its affiliates; conflicts of
    interest
  day-to-day and/or and/or
  and/or and/or
  Risk
    of future revisions in policies and strategies by Board of
    Directors
    Possible
    leverage
    Additional
    issuances of preferred stock could have dilutive
    effect
   10




---



##### 



RISK
    FACTORS RELATING TO THE BANK
    Possible
    adverse effects of economic conditions
    Increase
    in interest rates may adversely affect operating
    results
    Competition
   11




---



##### 



Government
    regulation
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES     12




---



##### 



ITEM 6.
    SELECTED
    FINANCIAL DATA    For the Years Ended December 312007


2006


2005


2004


2003(In thousands, except per share data)Statement of Operations Data:Interest income

$
22,524


$
21,442


$
19,458


$
16,998


$
17,678Non-interest income














1,062



4,158Operating expenses:Loan servicing fees


18



23



31



44



70Advisory fees


119



127



122



124



56General and administrative


300



342



287



362



362Total operating expenses

$
437


$
492


$
440


$
530


$
488Net income


22,087



20,950



19,018



17,530



21,348Preferred stock dividends


18,438



18,438



18,438



18,438



18,438Net income available (loss allocated) to common stockholder

$
3,649


$
2,512


$
580


$
(908
)

$
2,910Basic and diluted earnings (loss) per common share

$
3,649


$
2,512


$
580


$
(908
)

$
2,910Distributions per preferred share

$
1.8438


$
1.8438


$
1.8438


$
1.8438


$
1.8438Balance Sheet Data (end of period):Total assets

$
492,923


$
487,340


$
479,875


$
489,022


$
494,318Total liabilities

$
3,129


$
4,731


$
129


$
134


$
84Total stockholders equity

$
489,794


$
482,609


$
479,746


$
488,888


$
494,234Cash Flows Data:Net cash provided by operating activities

$
22,235


$
20,760


$
19,152


$
15,997


$
18,046Net Cash (used in) provided by investing activities

$
(3,603
)

$
232


$
(421
)

$
2,826


$
3,120Net cash used in financing activities

$
(23,560
)

$
(16,408
)

$
(18,438
)

$
(19,342
)

$
(20,968
)  13




---



##### 



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS    Summary
  Year
    Ended December 31, 2007 Compared to December 31,
    2006
          Year Ended December 31, 2007Price














Amount inper Share


# of Shares


Declared Date


Record Date


Paid Date


ThousandsPreferred Dividends

$
.46094



10,000,000



3/2/2007



3/15/2007



3/30/2007


$
4,609.46094



10,000,000



5/31/2007



6/15/2007



7/2/2007



4,609.46094



10,000,000



8/29/2007



9/15/2007



10/1/2007



4,609.46094



10,000,000



11/29/2007



12/15/2007



12/31/2007



4,611$
18,438Common Stock Dividends

$
511



1,000



8/29/2007



9/1/2007



9/12/2007


$
5113,000



1,000



12/21/2007



12/28/2007



1/4/2008



3,000$
3,511   14




---



##### 



Year Ended December 31, 2006Price














Amount inper Share


# of Shares


Declared Date


Record Date


Paid Date


ThousandsPreferred Dividends

$
.46094



10,000,000



3/2/2006



3/15/2006



3/30/2006


$
4,609.46094



10,000,000



5/31/2006



6/15/2006



6/30/2006



4,609.46094



10,000,000



8/30/2006



9/15/2006



9/30/2006



4,609.46094



10,000,000



11/30/2006



12/15/2006



1/2/2007



4,611$
18,438Common Stock Dividends

$
581



1,000



8/30/2006



9/1/2006



11/14/2006


$
5812,000



1,000



12/15/2006



12/15/2006



12/29/2006



2,000$
2,581       Year
    Ended December 31, 2006 Compared to December 31,
    2005
         15




---



##### 



Quarter
    Ended December 31, 2007 Compared to Quarter Ended
    December 31, 2006
          Allowance
    for Loan Losses
    Concentrations
    of Credit Risk
    Interest
    Rate Risk
    Competition
   16




---



##### 



Liquidity
    Risk Management
            Accounting
    Pronouncements
         17




---



##### 



Other
    Matters
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15d-15(e))
 18




---



##### 



Managements
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f).
        Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  and/or
 19




---



##### 



Name

Age

Position and Offices HeldPaul R. Skubic


59



Chairman of the Board, PresidentPamela C. Piarowski


48



Chief Financial OfficerFrank M. Novosel


61



Treasurer, DirectorTeresa L. Patton


60



Vice President of OperationsMargaret M. Sulkin


49



Assistant TreasurerDelbert J. Wacker


76



DirectorDavid J. Blockowicz


65



DirectorForrest M. Schneider


60



Director                    20




---



##### 



Independent
    Directors
      Audit
    Committee
    Compensation
    of Directors
    Non-QualifiedNon-Equity


DeferredStock


Option


Incentive Plan


Compensation


All OtherFees Earned or


Awards


Awards


Compensation


Earnings


CompensationName

Paid in Cash


($)


($)


($)


($)


($)


TotalDelbert J. Wacker

$
21,000






















$
21,000David J. Blockowicz


19,000























19,000Forrest M. Schneider


21,000























21,000$
61,000






















$
61,000     Section 16(a)
    Beneficial Ownership Reporting Compliance
   21




---



##### 



ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  (a)
    Security
    ownership of certain beneficial owners  3 8
  (b)
    Security
    Ownership of Management  3 8
  Name of

Amount of


PercentTitle of Class

Beneficial Owner

Beneficial Ownership


of ClassPreferred Stock

Paul R. Skubic


3,000 Shares



.03
%Preferred Stock

Forrest Schneider


6,525 Shares



.065
%Preferred Stock

David J. Blockowicz


1,000 Shares



.01
%Preferred Stock

Frank M. Novosel


1,000 Shares



.01
%   ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  (a)
    Transactions
    with Related Persons  -
        (b)
    Review,
    Approval or Ratification of Transactions with Related
    Persons   22




---



##### 



(c)
    Director
    Independence    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES  Audit
    Fees
  Form 10-Q Form 10-Q
  Audit-Related
    Fees
    Tax
    Fees
    All Other
    Fees
    Pre-Approval
    Policies and Procedures
   PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES        Form 10-K
    *3(a)(I)

Articles of Incorporation of the Company*3(a)(ii)

Form of Articles of Amendment and Restatement of the Company
    establishing the Series A Preferred Shares**3(b)

Bylaws of the Company*4

Specimen of certificate representing Series A Preferred
    Shares*10(a)

Form of Servicing Agreement between the Company and the Bank*10(b)

Form of Advisory Agreement between the Company and the Bank 23




---



##### 



*10(c)

Form of Bank Loan Agreement between the Company and the Bank*10(d)

Form of Mortgage Loan Assignment Agreement between the Company
    and the Bank14

Code of Ethics for Senior Officers (Incorporated by reference to
    Exhibit 14 to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2003)24

Power of attorney31.1

Certification of Pamela C. Piarowski pursuant to
    Rule 13a  14(a)31.2

Certification of Paul R. Skubic pursuant to
    Rule 13a  14(a)32.1

Certification pursuant to 18 U.S.C. Section 1350     *
    
    Incorporated by reference to the exhibit of the same number
    filed with the Companys Registration Statement on
    Form S-11
    (Securities and Exchange Commission file number
    333-40257)**
    
    Incorporated by reference to Exhibit 3.1 filed with the
    Companys
    Form 8-K
    dated August 29, 2007. 24




---



##### 



Index to
    Consolidated Financial Statements
  Form 10-K:
  Harris Preferred Capital CorporationConsolidated Financial StatementsReport of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of Income and Comprehensive IncomeConsolidated Statements of Changes in Stockholders EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial StatementsHarris N.A.Financial ReviewConsolidated Financial StatementsReport of Independent Registered Public Accounting FirmConsolidated Statements of ConditionConsolidated Statements of IncomeConsolidated Statements of Comprehensive IncomeConsolidated Statements of Changes in Stockholders EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statements    25




---



##### 



SIGNATURES
    PAUL
    R. SKUBIC
     PAMELA
    C. PIAROWSKI
       David J. Blockowicz

Forrest M. SchneiderFrank M. Novosel

Delbert J. WackerPaul R. SkubicAttorney-In-Fact      26




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           
    27




---



##### 



Harris
    Preferred Capital Corporation



Consolidated
    Balance Sheets  December 312007


2006(In thousands, except share data)ASSETSCash on deposit with Harris N.A.

$
356


$
5,284Securities purchased from Harris N.A. under agreement to resell


16,509



9,854Notes receivable from Harris N.A.


5,335



6,512Securities
    available-for-sale:Mortgage-backed


369,244



404,075U.S. Treasury


99,950



59,948Other assets


1,529



1,667Total assets

$
492,923


$
487,340LIABILITIES AND STOCKHOLDERS EQUITYAccrued expenses

$
129


$
120Dividends payable


3,000



4,611Total liabilities

$
3,129


$
4,731Commitments and contingencies






Stockholders Equity73/8%
    Noncumulative Exchangeable Preferred Stock, Series A
    ($1 par value);liquidation value of $250,000; 20,000,000 shares
    authorized, 10,000,000 sharesissued and outstanding

$
250,000


$
250,000Common stock ($1 par value); 1,000 shares authorized,
    issued and outstanding


1



1Additional paid-in capital


240,733



240,733Earnings in excess of (less than) distributions


67



(71
)Accumulated other comprehensive loss  net unrealized
    losses on
    available-for-sale
    securities


(1,007
)


(8,054
)Total stockholders equity

$
489,794


$
482,609Total liabilities and stockholders equity

$
492,923


$
487,340    28




---



##### 



Harris
    Preferred Capital Corporation



Consolidated
    Statements of Income

and
    Comprehensive Income  For the Years Ended December 312007


2006


2005(In thousands)Interest income:Securities purchased from Harris N.A. under agreement to resell

$
3,950


$
4,132


$
1,618Notes receivable from Harris N.A.


364



466



655Securities
    available-for-sale:Mortgage-backed


17,929



16,475



17,097U.S. Treasury


281



369



88Total interest income

$
22,524


$
21,442


$
19,458Operating expenses:Loan servicing fees paid to Harris N.A.


18



23



31Advisory fees paid to Harris N.A.


119



127



122General and administrative


300



342



287Total operating expenses

$
437


$
492


$
440Net income

$
22,087


$
20,950


$
19,018Preferred stock dividends


18,438



18,438



18,438Net income available to common stockholder

$
3,649


$
2,512


$
580Basic and diluted earnings per common share

$
3,649


$
2,512


$
580Net income

$
22,087


$
20,950


$
19,018Other comprehensive income (loss)  net unrealized
    gains (losses) on
    available-for-sale
    securities


7,047



2,932



(9,722
)Comprehensive income

$
29,134


$
23,882


$
9,296    29




---



##### 



Harris
    Preferred Capital Corporation



Consolidated
    Statements of Changes in Stockholders Equity

For the
    Years Ended December 31, 2007, 2006 and 2005  (Distributions inExcess of


AccumulatedAdditional


Earnings) Earnings


Other


TotalPreferred


Common


Paid-in


in Excess of


Comprehensive


StockholdersStock


Stock


Capital


Distributions


Income (Loss)


Equity(In thousands except per share data)Balance at December 31, 2004

$
250,000


$
1


$
240,733


$
(582
)

$
(1,264
)

$
488,888Net income

$



$



$



$
19,018


$



$
19,018Other comprehensive loss


















(9,722
)


(9,722
)Dividends declared on preferred stock ($1.8438 per share)














(18,438
)






(18,438
)Balance at December 31, 2005

$
250,000


$
1


$
240,733


$
(2
)

$
(10,986
)

$
479,746Net income

$



$



$



$
20,950


$



$
20,950Other comprehensive income


















2,932



2,932Dividends declared on common stock ($2,581 per share)














(2,581
)






(2,581
)Dividends declared on preferred stock ($1.8438 per share)














(18,438
)






(18,438
)Balance at December 31, 2006

$
250,000


$
1


$
240,733


$
(71
)

$
(8,054
)

$
482,609Net income

$



$



$



$
22,087


$



$
22,087Other comprehensive income


















7,047



7,047Dividends declared on common stock ($3,511 per share)














(3,511
)






(3,511
)Dividends declared on preferred stock ($1.8438 per share)














(18,438
)






(18,438
)Balance at December 31, 2007

$
250,000


$
1


$
240,733


$
67


$
(1,007
)

$
489,794    30




---



##### 



Harris
    Preferred Capital Corporation



Consolidated
    Statements of Cash Flows  For the Years Ended December 312007


2006


2005(In thousands)Operating Activities:Net income

$
22,087


$
20,950


$
19,018Adjustments to reconcile net income to net cash provided by
    operating activities:Net decrease (increase) in other assets


139



(181
)


139Net increase (decrease) in accrued expenses


9



(9
)


(5
)Net cash provided by operating activities

$
22,235


$
20,760


$
19,152Investing Activities:Repayments of notes receivable from Harris N.A.

$
1,177


$
2,172


$
3,445Decrease in securing mortgage collections due from Harris N.A.










53Purchases of securities
    available-for-sale


(358,745
)


(418,311
)


(248,441
)Proceeds from maturities/redemptions of securities
    available-for-sale


360,620



405,725



254,522Net cash provided (used in) by investing activities

$
3,052


$
(10,414
)

$
9,579Financing Activities:Cash dividends paid on preferred stock

$
(23,049
)

$
(13,827
)

$
(18,438
)Cash dividends paid on common stock


(511
)


(2,581
)


Net cash used in financing activities

$
(23,560
)

$
(16,408
)

$
(18,438
)Net increase (decrease) in cash and cash equivalents

$
1,727


$
(6,062
)

$
10,293Cash and cash equivalents at beginning of year


15,138



21,200



10,907Cash and cash equivalents at end of year

$
16,865


$
15,138


$
21,200    31




---



##### 



Harris
    Preferred Capital Corporation



Notes
    to consolidated Financial Statements  1.  Organization
    and Basis of Presentation
  Sections 856-860. 3 8
    2.
    Summary
    of Significant Accounting Policies  Cash
    and Cash Equivalents
      Allowance
    for Probable Loan Losses
    Income
    Taxes
   32




---



##### 



Harris
    Preferred Capital Corporation
  Notes
    to consolidated Financial
    Statements  (Continued)
  Sections 856-860
    Securities
  available-for-sale, Available-for-sale
      available-for-sale
  other-than-temporary
  New
    Accounting Pronouncements
  available-for-sale
 33




---



##### 



Harris
    Preferred Capital Corporation
  Notes
    to consolidated Financial
    Statements  (Continued)
          Managements
    Estimates
    3.
    Notes
    Receivable from the Bank       34




---



##### 



Harris
    Preferred Capital Corporation
  Notes
    to consolidated Financial
    Statements  (Continued)
          4.
    Securities  available-for-sale
  December 31, 2007


December 31, 2006Amortized


Unrealized


Unrealized


Fair


Amortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value


Cost


Gains


Losses


Value(In thousands)Available-for-Sale
    SecuritiesMortgage-backed

$
370,251


$
2,054


$
3,061


$
369,244


$
412,128


$
643


$
8,696


$
404,075U.S. Treasury Bills


99,950











99,950



59,949







1



59,948Total Securities

$
470,201


$
2,054


$
3,061


$
469,194


$
472,077


$
643


$
8,697


$
464,023   other-than-temporarily
  December 31,
    2007
  Length of Continuous Unrealized Loss PositionLess Than 12 Months


12 Months or Longer


TotalUnrealized





Unrealized





UnrealizedFair Value


Loss


Fair Value


Losses


Fair Value


Losses(In thousands)U.S. Treasury bills

$
99,950


$



$



$



$
99,950


$
Mortgage-backed










260,363



3,061



260,363



3,061Total

$
99,950


$



$
260,363


$
3,061


$
360,313


$
3,061  35




---



##### 



Harris
    Preferred Capital Corporation
  Notes
    to consolidated Financial
    Statements  (Continued)
  December 31,
    2006
  Length of Continuous Unrealized Loss PositionLess Than 12 Months


12 Months or Longer


TotalUnrealized





Unrealized





UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


Losses(In thousands)U.S. Treasury bills

$
59,948


$
1


$



$



$
59,948


$
1Mortgage-backed










309,534



8,696



309,534



8,696Total

$
59,948


$
1


$
309,534


$
8,696


$
369,482


$
8,697   available-for-sale
  December 31, 2007Amortized


FairCost


ValueMaturities:Within 1 year

$
105,866


$
105,8471 to 5 years


106,918



105,7545 to 10 years


66,261



65,719Over 10 years


191,156



191,874Total Securities

$
470,201


$
469,194   5.
    Common
    and Preferred Stock  Form S-11.
  3 8
   36




---



##### 



Harris
    Preferred Capital Corporation
  Notes
    to consolidated Financial
    Statements  (Continued)
    6.
    Transactions
    with Affiliates  day-to-day
        7.
    Operating
    Segment    8.
    Commitments
    and Contingencies   37




---



##### 



Harris
    Preferred Capital Corporation
  Notes
    to consolidated Financial
    Statements  (Continued)
  9.
    Quarterly
    Financial Information (unaudited)    Year Ended December 31, 2007


Year Ended December 31, 2006First


Second


Third


Fourth


First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter(In thousands except per share data)Total interest income

$
5,618


$
5,699


$
5,715


$
5,492


$
5,137


$
5,276


$
5,423


$
5,606Total operating expenses


116



87



95



139



123



114



96



159Net income

$
5,502


$
5,612


$
5,620


$
5,353


$
5,014


$
5,162


$
5,327


$
5,447Preferred dividends


4,609



4,609



4,609



4,611



4,609



4,609



4,609



4,611Net income available to common stockholder

$
893


$
1,003


$
1,011


$
742


$
405


$
553


$
718


$
836Basic and diluted earnings per common share

$
893


$
1,003


$
1,011


$
742


$
405


$
553


$
718


$
836   Financial Statements of Harris N.A.
      pooling-of-interests
 38




---



##### 



MANAGEMENTS
    DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  2007
    Compared to 2006
  Summary
               39




---



##### 



2006
    Compared to 2005
  Summary
                 40




---



##### 



INDEPENDENT
    AUDITORS REPORT           
    41




---



##### 



Harris
    N.A. and Subsidiaries



Consolidated
    Statements of Condition  December 312007


2006(In thousands except share data)AssetsCash and demand balances due from banks

$
1,179,134


$
1,084,959Money market assets:Interest-bearing deposits at banks


949,803



944,116Federal funds sold and securities purchased under agreement to
    resell


1,520,183



672,760Total cash and cash equivalents

$
3,649,120


$
2,701,835Securities available-for-sale at fair value (amortized cost of
    $9.3 billion and $10.7 billion at December 31,
    2007 and December 31, 2006, respectively)


9,288,595



10,713,910Trading account assets


288,785



220,716Loans


25,534,487



25,402,554Allowance for loan losses


(367,525
)


(322,742
)Net loans

$
25,166,962


$
25,079,812Loans held for sale


62,695



34,451Premises and equipment


485,510



474,073Bank-owned insurance


1,246,156



1,155,925Goodwill and other intangible assets


544,525



395,140Other assets


747,935



989,965Total assets

$
41,480,283


$
41,765,827LiabilitiesDeposits in domestic offices  noninterest-bearing

$
6,478,464


$
6,232,744 interest-bearing


21,905,547



22,855,715Deposits in foreign offices   interest-bearing


1,149,167



1,030,838Total deposits

$
29,533,178


$
30,119,297Federal funds purchased


182,625



476,000Securities sold under agreement to repurchase


1,613,529



3,475,839Short-term borrowings


707,540



1,261,679Short-term senior notes


80,000



100,000Accrued interest, taxes and other expenses


257,415



205,942Accrued pension and post-retirement


88,415



170,853Other liabilities


589,989



1,070,554Minority interest  preferred stock of subsidiary


250,000



250,000Long-term notes  senior


2,096,500



996,500Long-term notes  subordinated


292,750



292,750Long-term notes  secured


2,000,000



Total liabilities

$
37,691,941


$
38,419,414Stockholders EquityCommon stock ($10 par value); authorized
    40,000,000 shares; issued and outstanding 15,514,761 and
    14,303,361 shares at December 31, 2007 and
    December 31, 2006, respectively

$
155,148


$
143,034Surplus


1,780,609



1,489,521Retained earnings


1,879,907



1,811,497Accumulated other comprehensive loss


(27,322
)


(97,639
)Total stockholders equity

$
3,788,342


$
3,346,413Total liabilities and stockholders equity

$
41,480,283


$
41,765,827    42




---



##### 



Harris
    N.A. and Subsidiaries



Consolidated
    Statements of Income  For The Years Ended December 312007


2006


2005(In thousands)Interest IncomeLoans

$
1,627,545


$
1,572,148


$
1,268,435Money market assets:Deposits at banks


21,839



14,497



10,680Federal funds sold


41,554



36,362



8,608Trading account assets


8,473



10,085



5,203Securities available-for-sale:U.S. Treasury and federal agency


447,558



297,007



174,305State and municipal


37,162



23,651



20,299Other


25,837



22,060



16,945Total interest income

$
2,209,968


$
1,975,810


$
1,504,475Interest ExpenseDeposits

$
978,470


$
741,873


$
458,114Short-term borrowings


238,924



307,646



159,114Short-term senior notes


21,251



17,106



14,555Minority interest  dividends on preferred stock of
    subsidiary


18,438



18,437



18,437Long-term notes  senior


86,400



36,662



5,123Long-term notes  subordinated


17,154



16,063



10,758Long-term notes  secured


13,825







Total interest expense

$
1,374,462


$
1,137,787


$
666,101Net Interest Income

$
835,506


$
838,023


$
838,374Provision for loan losses


90,000



21,698



19,522Net Interest Income after Provision for Loan Losses

$
745,506


$
816,325


$
818,852Noninterest IncomeTrust and investment management fees

$
92,827


$
79,445


$
95,600Money market and bond trading


10,422



14,204



8,026Foreign exchange


3,750



4,600



5,635Service charges and fees


167,657



136,029



129,946Securities gains (losses), net


1,271



30,817



(415
)Bank-owned insurance


53,808



44,938



42,754Letter of credit fees


18,682



19,035



20,230Fixed asset gains, net


970







Syndication fees


1,405



16,044



10,375Other


61,402



72,459



100,164Total noninterest income

$
412,194


$
417,571


$
412,315Noninterest ExpensesSalaries and other compensation

$
364,110


$
362,140


$
369,925Pension, profit sharing and other employee benefits


110,490



110,760



112,496Net occupancy


86,304



80,071



75,456Equipment


64,525



63,688



57,864Marketing


37,915



42,951



38,504Communication and delivery


27,648



25,306



24,108Expert services


30,923



32,212



27,883Contract programming


28,024



31,219



33,406Outside information processing


27,006



18,756



18,949Intercompany services, net


39,672



57,847



42,977Restructuring charge


18,760







Visa indemnification charge


34,000







Other


97,447



94,288



96,334Amortization of intangibles


25,627



21,521



21,547Total noninterest expenses

$
992,451


$
940,759


$
919,449Income before income taxes

$
165,249


$
293,137


$
311,718Applicable income taxes


22,024



85,188



96,839Net Income

$
143,225


$
207,949


$
214,879    43




---



##### 



Harris
    N.A. and Subsidiaries



Consolidated
    Statements of Comprehensive Income  For The Years Ended December 312007


2006


2005(In thousands)Net income

$
143,225


$
207,949


$
214,879Other comprehensive income (loss):Cash flow hedges:Net unrealized loss on derivative instruments, net of tax
    benefit $11,936 in 2007, $2,715 in 2006 and $10,757 in 2005


(22,170
)


(6,137
)


(18,316
)Less reclassification adjustment for losses included in net
    income, net of tax benefit of $4,787 in 2007, $4,129 in 2006 and
    $2,636 in 2005


8,889



7,030



4,488Pension and postretirement medical benefit plans:Net gain and net prior service cost, net of tax expense of
    $26,774 in 2007, $0 in 2006 and $877 in 2005


49,724







2,337Less reclassification adjustment for amortization included in
    net income, net of tax expense of $2,865 in 2007, $0 in 2006 and
    $0 in 2005


5,320







Unrealized losses on available-for-sale securities:Unrealized holding gains (losses) arising during the period, net
    of tax (expense) benefit of ($15,814) in 2007, ($19,498) in 2006
    and $7,828 in 2005


29,380



32,647



(14,317
)Less reclassification adjustment for realized (gains) losses
    included in net income, net of tax (expense) benefit of ($445)
    in 2007, ($12,019) in 2006 and $162 in 2005


(826
)


(18,798
)


253Other comprehensive income (loss)

$
70,317


$
14,742


$
(25,555
)Comprehensive income

$
213,542


$
222,691


$
189,324    44




---



##### 



Harris
    N.A. and Subsidiaries



Statements
    of Changes in Stockholders Equity  AccumulatedOther


TotalCommon





Retained


Comprehensive


StockholdersStock


Surplus


Earnings


Loss


Equity(In thousands except per share data)Balance at December 31, 2004

$
139,551


$
1,274,938


$
1,532,052


$
(44,432
)

$
2,902,109Stock option exercise






3,004











3,004Tax benefit from stock option exercise






6,882











6,882Issuance of common stock and contribution to capital surplus


613



43,004



18,679







62,296Net income










214,879







214,879Dividends  ($6.67 per common share)










(90,000
)






(90,000
)Dividends  ($0.025 per preferred share)










(62
)






(62
)Other comprehensive loss














(25,555
)


(25,555
)Balance at December 31, 2005

$
140,164


$
1,327,828


$
1,675,548


$
(69,987
)

$
3,073,553Stock option exercise






2,743











2,743Tax benefit from stock option exercise






11,820











11,820Net income










207,949







207,949Dividends  ($5.17 per common share)










(72,000
)






(72,000
)Issuance of common stock and contribution to capital surplus


2,870



147,130











150,000Other comprehensive income














14,742



14,742Adoption to initially apply SFAS No. 158, net of tax
    of $22,446














(42,394
)


(42,394
)Balance at December 31, 2006

$
143,034


$
1,489,521


$
1,811,497


$
(97,639
)

$
3,346,413Stock option exercise






1,601











1,601Tax benefit from stock option exercise






7,464











7,464Net income










143,225







143,225Dividends  ($4.84 per common share)










(75,000
)






(75,000
)Other comprehensive income














70,317



70,317Issuance of common stock and contribution to capital surplus


12,114



280,286











292,400Adoption to initially apply FIN 48






1,737



185







1,922Balance at December 31, 2007

$
155,148


$
1,780,609


$
1,879,907


$
(27,322
)

$
3,788,342    45




---



##### 



Harris
    N.A. and Subsidiaries



Consolidated
    Statements of Cash Flows  For The Years Ended December 312007


2006


2005(In thousands)Operating Activities:Net Income

$
143,225


$
207,949


$
214,879Adjustments to reconcile net income to net cash (used in)
    provided by operating activities:Provision for loan losses


90,000



21,698



19,522Depreciation and amortization, including intangibles


43,818



61,173



99,882Deferred tax (benefit) expense


(47,618
)


24,698



(4,792
)Tax benefit from stock options exercise


9,201



11,820



6,882Net securities (gains) losses


(1,271
)


(30,817
)


415Increase in bank-owned insurance


(43,937
)


(40,753
)


(42,666
)Trading account net cash (purchases) sales


(308,213
)


486,822



(52,948
)Decrease (increase) in accrued interest receivable


36,873



(52,694
)


(33,085
)Increase in accrued interest payable


60,888



28,488



26,803(Decrease) increase in other accrued expenses


(34,388
)


19,907



(31,759
)Origination of loans held for sale


(366,363
)


(271,446
)


(440,026
)Proceeds from sale of loans held for sale


341,808



271,193



453,856Net gains on loans held for sale


(3,689
)


(1,834
)


(2,771
)Net (gains) losses on sale of premises and equipment


(970
)






Recoveries on charged-off loans


32,039



26,171



27,813Net change in due from parent


3,909



90,072



(33,671
)Net change in pension and post retirement benefits


6,790



8,437



(4,247
)Visa indemnification charge


34,000







Other, net


(43,469
)


62,291



(106,306
)Net cash (used in) provided by operating activities

$
(47,367
)

$
923,175


$
97,781Investing Activities:Proceeds from sales of securities available-for-sale

$
11,051,799


$
3,357,587


$
216,318Proceeds from maturities of securities available-for-sale


19,668,971



11,943,422



5,553,039Purchases of securities available-for-sale


(28,908,032
)


(19,365,471
)


(4,865,064
)Net decrease (increase) in loans


651,383



(1,111,523
)


(2,717,021
)Purchases of premises and equipment


(77,849
)


(127,048
)


(62,886
)Sales of premises and equipment


27,308



42,395



107,859Acquisition, net of cash acquired


(222,852
)






Net cash provided by (used in) investing activities

$
2,190,728


$
(5,260,638
)

$
(1,767,755
)Financing Activities:Net (decrease) increase in deposits

$
(1,539,038
)

$
4,485,763


$
1,106,327Net (decrease) increase in Federal funds sold and securities
    purchased under agreement to repurchase


(2,371,213
)


535,356



(1,079,589
)Net (decrease) increase in other short-term borrowings


(554,139
)


(776,091
)


1,756,556Net (decrease) increase in short-term senior notes


(20,000
)


(700,000
)


600,000Proceeds from issuance long-term notes  senior


1,100,000



746,500



250,000Proceeds from issuance long-term notes  secured


2,000,000







Net proceeds from stock options exercise


1,601



2,743



3,004Excess tax (expense) benefit from stock options exercise


(7,638
)


1,030



Capital contributions for acquisitions


292,400



150,000



Cash disbursed in contribution of parents banking assets










(5,935
)Cash dividends paid on common stock


(75,000
)


(72,000
)


(90,000
)Cash dividends paid on preferred stock


(23,049
)






(62
)Retirement of preferred stock










(5,000
)Net cash (used in) provided by financing activities

$
(1,196,076
)

$
4,373,301


$
2,535,301Net increase in cash and cash equivalents

$
947,285


$
35,838


$
865,327Cash and cash equivalents at January 1


2,701,835



2,665,997



1,800,670Cash and cash equivalents at December 31

$
3,649,120


$
2,701,835


$
2,665,997Supplemental Disclosures of Cash Flow Information:Cash paid during the year for:Interest

$
1,350,610


$
1,109,299


$
639,298Income taxes

$
99,710


$
116,617


$
56,807Financing activity affecting assets and liabilities but not
    resulting in cash flows:Net increase in assets and liabilities due to contribution of
    parents banking assets

$
222,852


$



$
68,231Business Combination:In 2007, the fair values of noncash assets acquired and
    liabilities assumed in the acquisition of First National Bank
    and Trust were $1.4 billion and $1.2 billion,
    respectively.    46




---



##### 



HARRIS
    N.A AND SUBSIDIARIES



Notes
    to Consolidated Financial Statements  1.
    Summary
    of Significant Accounting Policies  Principles
    of consolidation and nature of operations
      not-for-profit
  Basis
    of accounting
    Minority
    interest in subsidiary preferred stock
    Foreign
    currency and foreign exchange contracts
    Derivative
    financial instruments
     47




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
             48




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  Securities
  available-for-sale. available-for-sale,
  Available-for-sale
  other-than-temporary
  Loans,
    loan fees and commitment fees
       49




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
          03-3,
  Allowance
    for loan losses/Losses on commitments
     50




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    Premises
    and equipment
    Bank-owned
    insurance
    Goodwill
    and other intangible assets
      Other
    assets
    Retirement
    and other postemployment benefits
     51




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
      Cash
    flows
      Income
    taxes
      Managements
    estimates
    Impact
    of new accounting standards
   52




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
      No. 06-04,
         53




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  2.
    Securities    December 31, 2007


December 31, 2006Amortized


Unrealized


Unrealized


Fair


Amortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value


Cost


Gains


Losses


Value(In thousands)


(In thousands)U.S. Treasury

$
529,201


$
12,032


$
24


$
541,209


$
946,950


$



$
7,172


$
939,778Federal agency


5,395,190



9,094



2,523



5,401,761



6,322,086



1,414



11,436



6,312,064U.S. government sponsored mortgage-backed


1,443,120



16,008



3,890



1,455,238



2,143,824



5,353



13,964



2,135,213State and municipal


1,267,617



6,660



2,318



1,271,959



749,852



6,006



2,063



753,795Non-mortgage asset backed


409,462



234



198



409,498



413,906



61



112



413,855Other


208,926



4







208,930



159,218







13



159,205Total securities

$
9,253,516


$
44,032


$
8,953


$
9,288,595


$
10,735,836


$
12,834


$
34,760


$
10,713,910     Length of Continuous Unrealized Loss PositionLess Than 12 Months


12 Months or Longer


TotalUnrealized





Unrealized


Number of





UnrealizedFair Value


Losses


Fair Value


Losses


Securities


Fair Value


Losses(Dollars in thousands)December 31, 2007U.S. Treasury

$
15,005


$
24


$



$







$
15,005


$
24Federal agency


771,404



1,851



100,158



672



21



871,562



2,523U.S. government sponsored mortgage-backed


57,819



454



278,248



3,436



48



336,067



3,890State and municipal


111,127



983



140,051



1,335



471



251,178



2,318Non-mortgage asset backed


169,486



198















169,486



198Temporarily impaired securities  available-for-sale

$
1,124,841


$
3,510


$
518,457


$
5,443



540


$
1,643,298


$
8,953December 31, 2006U.S. Treasury

$
622,793


$
5,010


$
316,986


$
2,162



19


$
939,779


$
7,172Federal agency


1,389,329



2,318



1,487,098



9,118



103



2,876,427



11,436U.S. government sponsored mortgage-backed


1,018,101



4,681



348,283



9,283



53



1,366,384



13,964State and municipal


210,473



585



157,558



1,478



672



368,031



2,063Non-mortgage asset backed


236,846



86



5,551



26



3



242,397



112Other


159,205



13















159,205



13Temporarily impaired securities  available-for-sale

$
3,636,747


$
12,693


$
2,315,476


$
22,067



850


$
5,952,223


$
34,760  54




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
      December 31, 2007Amortized


FairCost


Value(In thousands)Maturities:Within 1 year

$
5,466,253


$
5,473,8121 to 5 years


1,533,240



1,539,9095 to 10 years


360,326



368,169Over 10 years


236,091



236,978Mortgage-backed


1,443,120



1,455,238Other securities without stated maturity


214,486



214,489Total securities

$
9,253,516


$
9,288,595      55




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  3.
    Loans    December 312007


2006(In thousands)Domestic loans:Commercial, financial, agricultural, brokers and dealers

$
4,926,890


$
6,371,261Real estate construction


1,485,189



1,406,848Real estate mortgages


14,042,546



12,445,143Installment


4,849,602



4,874,845Direct lease financing (unearned discount of $0.2 million
    and $0.3 million at December 31, 2007 and
    December 31, 2006, respectively)


23,932



28,725Foreign loans:Other, primarily commercial and industrial


206,605



276,200Total loans

$
25,534,764


$
25,403,022Less unearned income


(277
)


(468
)Loans, net of unearned income

$
25,534,487


$
25,402,554Less allowance for loan losses


(367,525
)


(322,742
)Loans, net of allowance for loan losses

$
25,166,962


$
25,079,812     Years Ended December 312007


2006(In thousands)Nonaccrual loans

$
290,149


$
153,916Restructured loans


2,182



4,979Total nonperforming loans

$
292,331


$
158,895Other assets received in satisfaction of debt


11,919



4,943Total nonperforming assets

$
304,250


$
163,838Gross amount of interest income that would have been recorded if
    year-end nonperforming loans had been accruing interest at their
    original terms

$
17,408


$
11,641Interest income actually recognized


10,982



9,805Interest shortfall

$
6,426


$
1,83690-day past
    due loans, still accruing interest (all domestic)

$
71,767


$
38,156     03-3,
 56




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
      December 312007


2006(In thousands)Contractual outstanding balance

$
1,377


$
476Carrying amount


1,199



414     2007


2006(In thousands)Contractually required payments receivable at acquisition

$
8,987


$
Cash flows expected to be collected at acquisition


7,372



Fair value at acquisition


7,372



     2007


2006(In thousands)Loans at acquisition date

$
7,372


$
Loans at end of year


1,199



414     2007


2006(In thousands)Balance at beginning of year

$



$
37Additions






9Accretion






(40
)Disposals






(6
)Reclassification from/(to) nonaccretable difference






Balance at end of year

$



$
    57




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  4.
    Allowance
    for Loan Losses    Years Ended December 312007


2006(In thousands)Balance, beginning of year

$
322,742


$
331,838Charge-offs


(81,588
)


(56,965
)Recoveries


32,039



26,171Net charge-offs

$
(49,549
)

$
(30,794
)Provisions charged to expense


90,000



21,698Reclassification to liability for off-balance sheet credit losses


(4,592
)


Acquired reserve from acquisition


8,924



Balance, end of year

$
367,525


$
322,742     Impaired Loans


Impaired Loansfor Which There


for Which There


Totalis a Related


is No Related


ImpairedAllowance


Allowance


Loans(In thousands)December 31, 2007Balance

$
143,476


$
148,855


$
292,331Related allowance


57,751







57,751Balance, net of allowance

$
85,725


$
148,855


$
234,580December 31, 2006Balance

$
78,308


$
80,587


$
158,895Related allowance


38,056







38,056Balance, net of allowance

$
40,252


$
80,587


$
120,839   Years Ended December 312007


2006(In thousands)Average impaired loans

$
215,784


$
141,376Total interest income on impaired loans recorded on a cash basis

$
10,982


$
9,805    58




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  5.
    Premises
    and Equipment    December 312007


2006(In thousands)Land

$
94,950


$
88,420Premises


275,240



255,497Equipment


543,124



522,423Leasehold improvements


84,724



73,005Total

$
998,038


$
939,345Accumulated depreciation and amortization


512,528



465,272Premises and equipment

$
485,510


$
474,073           6.
    Goodwill
    and Other Intangible Assets       59




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    2007


2006(In thousands)Goodwill at beginning of year

$
305,284


$
305,121Acquisitions during the year


143,813



Other(1)






163Goodwill at end of year

$
449,097


$
305,284     (1)
    
    Includes the effect of purchase accounting adjustments related
    to non-current year acquisitions.      December 31December 31, 2007


2007


2006Gross Carrying


Accumulated


Net Carrying


Net CarryingAmount


Amortization


Value


Value(In thousands)Branch network

$
145,000


$
(111,167
)

$
33,833


$
43,500Core deposits


102,202



(40,920
)


61,282



45,739Other


1,310



(997
)


313



617Total finite life intangibles

$
248,512


$
(153,084
)

$
95,428


$
89,856       Mortgage
    servicing rights
   60




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    2007


2006(In thousands)MSR carrying amount at beginning of year

$
17,263


$
18,817Originations


3,616



2,253Acquired in acquisitions


605



Disposals






Amortization


(3,671
)


(3,170
)Other-than-temporary impairment






(637
)MSR carrying amount at end of year

$
17,813


$
17,263Fair value at beginning of year

$
21,496


$
22,678Fair value at end of year


22,721



21,496   7.
    Deposits    December 312007


2006(In thousands)Demand deposits

$
6,478,464


$
6,232,744Interest-bearing checking deposits


238,884



181,979Money market accounts


9,028,573



9,388,250Statement savings accounts


2,731,544



3,420,541Savings certificates


5,943,138



5,682,702Time deposits


3,963,408



4,182,243Deposits in foreign offices


1,149,167



1,030,838Total deposits

$
29,533,178


$
30,119,297     Year

Amount2008

$
9,243,6212009


1,688,6362010


63,5602011


28,2332012


29,3622013


574Thereafter


1,727Total

$
11,055,713    61




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  8.  Securities
    Purchased Under Agreement to Resell, Securities Sold Under
    Agreement to Repurchase and Federal Funds
        Securities
    sold under agreement to resell
  2007


2006(Dollars in thousands)Amount outstanding at end of year

$
159,000


$
Highest amount outstanding as of any month-end during the year


1,400,000



1,028,438Daily average amount outstanding during the year


87,815



134,726Daily average annualized rate of interest


4.43
%


4.87
%   Securities
    sold under agreement to repurchase
  2007


2006(Dollars in thousands)Amount outstanding at end of year

$
1,613,529


$
3,475,839Highest amount outstanding as of any month-end during the year


4,068,896



5,030,467Daily average amount outstanding during the year


3,240,378



3,661,317Daily average annualized rate of interest


4.96
%


4.91
%   Federal
    funds sold
  2007


2006(Dollars in thousands)Amount outstanding at end of year

$
1,361,183


$
672,760Highest amount outstanding as of any month-end during the year


2,779,415



985,483Daily average amount outstanding during the year


773,468



632,977Daily average annualized rate of interest


4.73
%


4.61
%  62




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  Federal
    funds purchased
  2007


2006(Dollars in thousands)Amount outstanding at end of year

$
182,625


$
476,000Highest amount outstanding as of any month-end during the year


669,730



813,821Daily average amount outstanding during the year


378,146



557,846Daily average annualized rate of interest


5.08
%


4.96
%   9.
    Senior
    Notes and Long-Term Notes    December 312007


2006


Rate

Reprice(In thousands)Floating rate subordinated note to Bankcorp due
    December 23, 2012

$
28,500


$
28,500


50bps + 90 day LIBOR

QuarterlyFloating rate subordinated note to Bankcorp due May 30, 2013


34,000



34,000


50bps + 90 day LIBOR

QuarterlyFloating rate subordinated note to Bankcorp due
    November 26, 2013


24,000



24,000


50bps + 90 day LIBOR

QuarterlyFloating rate subordinated note to Bankcorp due
    February 26, 2014


6,250



6,250


50bps + 90 day LIBOR

QuarterlyFloating rate subordinated note to Bankcorp due May 31, 2014


100,000



100,000


35bps + 90 day LIBOR

QuarterlyFloating rate subordinated note to Bankcorp due May 31, 2016


100,000



100,000


38bps + 90 day LIBOR

QuarterlyTotal subordinated notes

$
292,750


$
292,750Floating rate senior note to BMO subsidiary due June 15,
    2010

$
250,000


$
250,000


12bps + 90 day LIBOR

QuarterlyFloating rate senior note to BMO subsidiary due June 13,
    2011


746,500



746,500


14bps + 90 day LIBOR

QuarterlyFloating rate senior note to BMO subsidiary due August 14,
    2012


1,100,000






14bps + 90 day LIBOR

QuarterlyTotal senior notes

$
2,096,500


$
996,500Floating rate secured note to FHLB due October 30, 2017

$
1,000,000


$



30 dayLIBOR

MonthlyFloating rate secured note to FHLB due November 13, 2017


500,000






30 day LIBOR

MonthlyFloating rate secured note to FHLB due November 28, 2017


500,000






30 day LIBOR

MonthlyTotal secured notes

$
2,000,000


$
Total subordinated, senior, and secured notes

$
4,389,250


$
1,289,250    63




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
        10.
    Fair
    Value of Financial Instruments  item-by-item
       64




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
                December 312007


2006Carrying


Fair


Carrying


FairValue


Value


Value


Value(In thousands)AssetsCash and demand balances due from banks

$
1,179,134


$
1,179,134


$
1,084,959


$
1,084,959Money market assets:Interest-bearing deposits at banks


949,803



949,803



944,116



944,116Federal funds sold and securities purchased under agreement to
    resell


1,520,183



1,520,183



672,760



672,760Securities available-for-sale


9,288,595



9,288,595



10,713,910



10,713,910Trading account assets / derivative instruments


288,785



288,785



220,716



220,716Loans, net of unearned income and allowance for loan losses


25,166,962



25,108,646



25,079,812



24,982,752Loans held for sale


62,695



64,143



34,451



35,016Accrued interest receivable


187,847



187,847



216,479



216,479Total on-balance-sheet financial assets

$
38,644,004


$
38,587,136


$
38,967,203


$
38,870,708 65




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  December 312007


2006Carrying


Fair


Carrying


FairValue


Value


Value


Value(In thousands)LiabilitiesDeposits:Demand deposits

$
18,453,540


$
18,453,540


$
19,200,318


$
19,200,318Time deposits


11,079,638



11,139,982



10,918,979



10,951,437Federal funds purchased


182,625



182,625



476,000



476,000Securities sold under agreement to repurchase


1,613,529



1,613,529



3,475,839



3,475,839Short-term borrowings


707,540



707,540



1,261,679



1,261,679Short-term senior notes


80,000



80,000



100,000



100,000Derivative instruments


186,105



186,105



137,956



137,956Accrued interest payable


113,297



113,297



89,445



89,445Long-term notes  senior


2,096,500



2,096,500



996,500



996,500Long-term notes  subordinated


292,750



292,750



292,750



292,750Long-term notes  subordinated


2,000,000



2,000,000







Total on-balance-sheet financial liabilities

$
36,805,524


$
36,865,868


$
36,949,466


$
36,981,924Off-Balance-Sheet Credit Facilities (positive
    positions/(obligations))Loan commitments

$
40,440


$
40,440


$
22,044


$
22,044Standby letters of credit


(1,606
)


(1,606
)


(1,486
)


(1,486
)Total off-balance-sheet credit facilities

$
38,834


$
38,834


$
20,558


$
20,558   11.
    Financial
    Instruments with Off-Balance-Sheet Risk    Credit
    facilities
       66




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    case-by-case
        Financial
    Guarantees
         67




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  Securities
    activities
        Commitments
    to Invest in Equity Securities
    12.
    Derivative
    Financial Instruments          Dealer
    and trading activity
  Interest
    rate contracts
   68




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    value-at-risk
  Value-at-risk
          Foreign
    exchange contracts
   69




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
        Equity
    contracts
    Commodity
    contracts
    Credit
    Derivatives
    Embedded
    Derivatives
    Risk
    management activity
   70




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
          Fair
    value hedges
      Cash flow
    hedges
     71




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
          13.
    Concentrations
    of Credit Risk in Financial Instruments    Midwestern
    Geographic Area
      14.
    Employee
    Benefit Plans     72




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
      ®
      No. 106-2,
 73




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    Pension Benefits


Postretirement Medical Benefits2007**


2006**


2005**


2007**


2006**


2005**(In thousands)Change in benefit obligation*Benefit obligation at beginning of year

$
446,204


$
443,553


$
399,900


$
78,881


$
64,687


$
57,598Service cost


21,800



21,706



19,934



3,392



2,638



2,231Interest cost


24,996



24,115



24,445



4,182



3,563



3,198Transfer adjustment


(10,350
)


2,859















Plan amendments














(6,441
)






Benefits paid (net of participant contributions)


(41,407
)


(37,991
)


(29,851
)


(2,624
)


(2,624
)


(2,624
)Medicare drug legislation














1,035



6,222



(7,491
)Actuarial (gain) or loss


(10,352
)


(8,038
)


29,125



(17,437
)


4,395



11,775Benefit obligation at end of year

$
430,891


$
446,204


$
443,553


$
60,988


$
78,881


$
64,687Change in plan assetsFair value of plan assets at beginning of year

$
322,341


$
293,836


$
247,480


$
46,607


$
50,314


$
43,208Actual return on plan assets


81,284



34,201



41,435



9,674



(3,707
)


7,106Transfer adjustment


(6,590
)


5,264







8,698







Employer contribution


24,666



27,031



34,772











Benefits paid


(41,407
)


(37,991
)


(29,851
)










Fair value of plan assets at end of year***

$
380,294


$
322,341


$
293,836


$
64,979


$
46,607


$
50,314Funded Status

$
(50,597
)

$
(123,862
)

$
(149,717
)

$
3,991


$
(32,275
)

$
(14,372
)Contributions made between measurement date (September
    30) and end of year










6,041











Unrecognized actuarial (gain) or loss






106,521



133,361







12,990



(5,092
)Unrecognized transition (asset) or obligation


















10,036



11,787Unrecognized prior service cost






3,296



3,395







488



657Net amount

$
(50,597
)

$
(14,045
)

$
(6,920
)

$
3,991


$
(8,761
)

$
(7,020
)Assets (liabilities) recognized in the Statement of Condition
    consist of:Other assets

$
24,906


$
24,906


$



$
4,587


$
4,587


$
Accrued pension and post-retirement liability


(75,503
)


(121,488
)


(45,203
)


(596
)


(25,007
)


(7,166
)Intangible asset










3,392











Net asset (liabilities) recognized

$
(50,597
)

$
(96,687
)

$
(41,811
)

$
3,991


$
(20,420
)

$
(7,166
) 74




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  Pension Benefits


Postretirement Medical Benefits2007**


2006**


2005**


2007**


2006**


2005**(In thousands)Amounts recognized in Accumulated Other Comprehensive Income
    consist of:Net (gain) or loss

$
27,563


$



$



$
(18,022
)

$



$
Prior service cost (credit)


2,835



















Transition (asset) or obligation














2,585







Additional minimum liability






82,642



35,054







11,743



Components of net periodic benefit costService cost

$
21,800


$
21,706


$
19,934


$
3,392


$
2,638


$
2,232Interest cost


24,996



24,115



24,446



4,182



3,563



3,198Expected return on plan assets


(22,436
)


(20,922
)


(15,302
)


(4,406
)


(4,025
)


(2,913
)Amortization of prior service cost


461



98



(279
)


169



169



169Amortization of transition (asset) or obligation














1,743



1,751



1,751Amortization of actuarial (gain) or loss


5,998



9,322



8,747







(81
)


Net periodic benefit cost

$
30,819


$
34,319


$
37,546


$
5,080


$
4,015


$
4,437     *
    
    Benefit obligation is projected for Pension Benefits and
    accumulated for Postretirement Medical Benefits.**
    
    Plan assets and obligation measured as of September 30.***
    
    The actual allocation of plan assets by category are as follows:  2007


2006


2005Pension:Equity securities


73
%


73
%


68
%Fixed income securities


27
%


27
%


30
%Cash Equivalents










2
%Postretirement Medical:Equity securities


73
%


73
%


68
%Fixed income securities


27
%


27
%


30
%Cash Equivalents










2
%       Equity securities


65
%Fixed income securities


35
%  75




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    Pension Benefits


Postretirement Medical Benefits2007


2006


2005


2007


2006


2005Weighted-average assumptions used to determine benefit
    obligations as of December 31Discount rate


6.00
%


5.75
%


5.50
%


6.00
%


5.75
%


5.50
%Rate of compensation increase


3.80
%


3.80
%


3.80
%


N/A



N/A



N/AWeighted-average assumptions used to determine net benefit
    cost for years ended December 31Discount rate


5.75
%


5.50
%


6.00
%


5.75
%


5.50
%


6.00
%Expected return on plan assets


8.00
%


8.00
%


8.00
%


8.00
%


8.00
%


8.00
%Rate of compensation increase


3.80
%


3.80
%


3.80
%


N/A



N/A



N/A       1-Percentage

1-PercentagePoint Increase

Point Decrease(In thousands)Effect on total of service and interest cost components

$
700


$
(593
)Effect on postretirement benefit obligation

$
7,723


$
(6,491
)     Supplemental Unfunded Retirement Benefits2007


2006


2005(In thousands)Change in benefit obligationBenefit obligation at beginning of year

$
18,969


$
16,941


$
17,063Service cost


1,560



1,620



1,364Interest cost


911



785



916Benefits paid (net of participant contributions)


(3,073
)


(1,840
)


(2,367
)Actuarial (gain) or loss


(5,586
)


1,464



(35
)Benefit obligation at end of year

$
12,781


$
18,970


$
16,941 76




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  Supplemental Unfunded Retirement Benefits2007


2006


2005(In thousands)Change in plan assetsFair value of plan assets at beginning of year

$



$



$
Actual return on plan assets










Employer contribution


3,073



1,840



2,367Benefits paid


(3,073
)


(1,840
)


(2,367
)Fair value of plan assets at end of year

$



$



$
Funded Status at end of year

$
(12,781
)

$
(18,970
)

$
(16,941
)Contributions made between measurement date (September
    30) and end of year

$
465


$
623


$
575Unrecognized actuarial loss






6,864



5,510Unrecognized prior service cost






(2,341
)


(2,671
)Net amount

$
(12,816
)

$
(13,824
)

$
(13,527
)Liabilities recognized in the Statement of Condition consist
    of:Accrued pension and post retirement liability

$
(12,316
)

$
(19,713
)

$
(13,527
)Net liabilities recognized

$
(12,316
)


(19,713
)


(13,527
)Amounts recognized in Accumulated Other Comprehensive Income
    consist of:Net (gain) or loss


1,181







Prior service cost (credit)


(2,011
)






Additional minimum liability






5,889



Components of net periodic benefit costService cost

$
1,560


$
1,620


$
1,364Interest cost


911



785



916Expected return on plan assets










Amortization of prior service cost


(330
)


(330
)


(330
)Amortization of transition (asset) or obligation










Amortization of actuarial (gain) or loss


102



98



122Net periodic benefit cost

$
2,243


$
2,173


$
2,072   77




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  Supplemental UnfundedRetirement Benefits2007


2006Weighted-average assumptions used to determine benefit
    obligation as of December 31Discount rate


5.25
%


5.00
%Rate of compensation increase


3.80
%


3.80
%Weighted-average assumptions used to determine net benefit
    cost for years ended December 31Discount rate


5.00
%


4.75
%Rate of compensation increase


3.80
%


3.80
%     Postretirement


Supplemental UnfundedYear

Pension Benefits


Medical Benefits


Retirement Benefits(In thousands)2008

$
25,143


$
3,237


$
1,2032009


26,592



3,452



1,2482010


28,368



3,615



1,2092011


31,598



3,795



1,5982012


35,551



3,922



1,9852013-2017


198,341



22,052



7,675     15.
    Stock-Based
    Compensation Plans      Stock
    Option Program
     78




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
            Year Ended December 31, 2007Wtd. Avg.Wtd. Avg.


Aggregate Intrinsic


RemainingOptions

Shares


Exercise Price


Value (in millions)


Contractual LifeOutstanding at beginning of year


3,202,246



34.76


$
221.0



5.00 yearsGranted


198,156



60.64Exercised


(710,621
)


36.78Forfeited, cancelled


(9,727
)


61.55Transferred(1)


71,884



39.94Outstanding at December 31, 2007


2,751,938



43.57


$
155.0



4.75Options exercisable at December 31, 2007


2,086,021


$
38.08


$
117.5



3.66     (1)
    
    Transferred shares represent employees moving between BMO and
    the Bank.  79




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  Year Ended December 31, 2006Wtd. Avg.Wtd. Avg.


Aggregate Intrinsic


RemainingOptions

Shares


Exercise Price


Value (in millions)


Contractual LifeOutstanding at beginning of year


3,967,370


$
32.67Granted


104,300



59.19Exercised


(837,507
)


28.03Forfeited, cancelled


(23,017
)


40.49Expired


(8,900
)


17.09Outstanding at December 31, 2006


3,202,246



34.76


$
221.0



5.00 yearsOptions exercisable at December 31, 2006


2,679,264


$
31.43


$
184.9



4.34     Wtd. Avg.Grant DateFair ValueOptions

Shares


per ShareNonvested at beginning of year


440,892


$
8.27Granted


198,156



8.33Vested


(175,755
)


8.47Forfeited, cancelled


(9,301
)


8.32Transferred(1)


9,400



8.02Nonvested at December 31, 2007


463,392


$
8.23     (1)
    
    Transferred shares represent employees moving between BMO and
    the Bank.    Wtd. Avg.Grant DateFair ValueOptions

Shares


per ShareNonvested at beginning of year


575,972


$
8.13Granted


104,300



6.85Vested


(228,554
)


8.73Forfeited, cancelled


(10,826
)


9.10Nonvested at December 31, 2006


440,892


$
8.27     2007


2006


2005Risk-free interest rate


4.11
%


3.98
%


4.00
%Expected life, in years


7.3



7.1



7.1Expected volatility


19.24
%


15.22
%


20.12
%Expected dividend yield


4.20
%


3.40
%


3.40
%  80




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  Mid-Term
    Incentive Plans
            Employee
    Share Purchase Plan
    16.
    Lease
    Expense and Obligations   81




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    (In thousands)2008

$
32,3742009


31,6982010


30,7412011


29,9142012


25,9492013 and thereafter


305,423Total minimum future rentals

$
456,099     17.
    Income
    Taxes    Federal


State


Total(In thousands)2007:Current

$
71,549


$
(1,907
)

$
69,642Deferred


(41,123
)


(6,495
)


(47,618
)Total

$
30,426


$
(8,402
)

$
22,0242006:Current

$
56,894


$
3,596


$
60,490Deferred


24,912



(214
)


24,698Total

$
81,806


$
3,382


$
85,1882005:Current

$
91,123


$
10,508


$
101,631Deferred


(2,380
)


(2,412
)


(4,792
)Total

$
88,743


$
8,096


$
96,839  82




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    December 312007


2006


2005(In thousands)Deferred tax assets:Allowance for loan losses

$
153,868


$
133,881


$
133,933Deferred expense and prepaid income


34,812



15,409



28,193Deferred employee compensation


24,811



23,644



22,436Pension and medical trust


15,597



14,644



10,901Amortizable intangibles


3,951



8,639



12,837Other assets


14







Gross deferred tax assets

$
233,053


$
196,217


$
208,300Deferred tax liabilities:Depreciable assets

$
(60,836
)

$
(72,288
)

$
(58,702
)Other liabilities


(1,262
)


(1,980
)


(2,435
)Gross deferred tax liabilities

$
(62,098
)

$
(74,268
)

$
(61,137
)Deferred tax assets

$
170,955


$
121,949


$
147,163Tax effect of fair value adjustments on available-for-sale
    securities and pension liabilities recorded directly to
    stockholders equity


14,716



52,575



38,589Net deferred tax assets

$
185,671


$
174,524


$
185,752    83




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    Years Ended December 312007


2006


2005Percent of





Percent of





Percent ofPretax





Pretax





PretaxAmount


Income


Amount


Income


Amount


Income(Dollars in thousands)Computed tax expense

$
57,837



35.0
%

$
102,598



35.0
%

$
109,101



35.0
%Increase (reduction) in income tax expense due to:Tax-exempt income from loans and investments net of municipal
    interest expense disallowance


(12,575
)


(7.6
)


(8,820
)


(3.0
)


(8,278
)


(2.6
)Bank-owned insurance


(18,787
)


(11.4
)


(15,697
)


(5.4
)


(14,964
)


(4.8
)State income taxes


(5,461
)


(3.3
)


2,199



0.8



5,411



1.7Other, net


1,010



0.6



4,908



1.7



5,569



1.8Actual tax expense

$
22,024



13.3
%

$
85,188



29.1
%

$
96,839



31.1
%     2007(In thousands)Gross unrecognized tax benefits at beginning of year

$
3,902Additions based on tax positions related to current year


280Additions for tax positions of prior years


1,961Reductions for tax positions of prior years


(520
)Settlements


(347
)Gross unrecognized tax benefits at end of year

$
5,276Less: Federal tax benefit


(566
)Net unrecognized tax benefits at end of year

$
4,710        84




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
      18.
    Regulatory
    Capital              3 8
 85




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    To Be Well CapitalizedFor Capital


Under Prompt CorrectiveActual


Adequacy Purposes


Action ProvisionsCapital


Capital


Capital


Capital


Capital


CapitalAmount


Ratio


Amount


Ratio


Amount


Ratio(In thousands)As of December 31, 2007Total Capital to Risk-Weighted Assets

$
4,208,758



12.66
%

3
    $
2,659,563



3
    8.00
%

3 $
3,324,453



3 10.00
%Tier 1 Capital to Risk-Weighted Assets

$
3,543,889



10.66
%

3
    $
1,329,789



3
    4.00
%

3$
1,994,684



36.00
%Tier 1 Capital to Average Assets

$
3,543,889



8.41
%

3
    $
1,685,560



3
    4.00
%

3$
2,106,949



35.00
%As of December 31, 2006Total Capital to Risk-Weighted Assets

$
3,913,455



11.49
%

3
    $
2,724,773



3
    8.00
%

3$
3,405,966



310.00
%Tier 1 Capital to Risk-Weighted Assets

$
3,297,963



9.69
%

3
    $
1,361,388



3
    4.00
%

3$
2,042,082



36.00
%Tier 1 Capital to Average Assets

$
3,297,963



8.06
%

3
    $
1,636,706



3
    4.00
%

3$
2,045,883



35.00
%   19.
    Investments
    in Subsidiaries and Statutory Restrictions        20.
    Contingent
    Liabilities   86




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  21.
    Accumulated
    Other Comprehensive Loss    Unrealized


Unrealized


Unrealized(Loss) gain on


Loss on Pension


Loss on


AccumulatedAvailable-for-


and Postretirement


Hedge


OtherSale Securities


Medical Plans


Activity


Comprehensive Loss(In thousands)Balance at December 31, 2007

$
14,301


$
(10,135
)

$
(31,488
)

$
(27,322
)Balance at December 31, 2006

$
(14,253
)

$
(65,179
)

$
(18,207
)

$
(97,639
)Balance at December 31, 2005

$
(28,100
)

$
(22,785
)

$
(19,102
)

$
(69,987
)   22.
    Foreign
    Activities (by Domicile of Customer)    Foreign


Domestic


Consolidated(In thousands)2007Total operating income

$
38,631


$
2,585,974


$
2,622,162Total expenses


156,493



2,300,420



2,456,913(Loss) income before taxes

$
(117,862
)

$
285,554


$
165,249Applicable income taxes


(46,844
)


69,839



22,024Net (loss) income

$
(71,018
)

$
215,715


$
143,225Identifiable assets at year-end

$
1,133,241


$
40,347,042


$
41,480,2832006Total operating income

$
28,031


$
2,265,350


$
2,393,381Total expenses


126,604



1,973,640



2,100,244(Loss) income before taxes

$
(98,573
)

$
391,710


$
293,137Applicable income taxes


(38,802
)


123,990



85,188Net (loss) income

$
(58,825
)

$
266,774


$
207,949Identifiable assets at year-end

$
1,221,055


$
40,544,772


$
41,765,8272005Total operating income

$
19,846


$
1,896,944


$
1,916,790Total expenses


78,420



1,526,652



1,605,072(Loss) income before taxes

$
(58,574
)

$
370,292


$
311,718Applicable income taxes


(23,280
)


120,119



96,839Net (loss) income

$
(35,294
)

$
250,173


$
214,879Identifiable assets at year-end

$
1,274,658


$
34,984,368


$
36,259,026    87




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    23.
    Business
    Combinations      FirstNational(In thousands)Cash and cash equivalents

$
68,514Securities


295,021Loans, net


856,270Premises and equipment


25,327Goodwill


143,813Core deposit premium


31,200Other


44,691Total assets

$
1,464,836Deposits

$
952,919Other liabilities


220,551Total liabilities

$
1,173,470Purchase price

$
291,366      88




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  24.
    Related
    Party Transactions           89




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
    Interest Expense


Loan BalanceYear Ended December 31


December 312007


2006


2007


2006


Rate

Reprice(In thousands)Long-term notes  seniorFloating rate senior note to BMO subsidiary due June 15,
    2010

$
13,856


$
13,558


$
250,000


$
250,000


12bps + 90 day LIBOR


QuarterlyFloating rate senior note to BMO subsidiary due June 13,
    2011


41,074



23,104



746,500



746,500


14bps + 90 day LIBOR


QuarterlyFloating rate senior note to BMO subsidiary due August 14,
    2012


31,470







1,100,000






14bps + 90 day LIBOR


QuarterlyTotal long-term notes  senior

$
86,400


$
36,662


$
2,096,500


$
996,500Long-term notes  subordinateFloating rate subordinated note to Bankcorp due
    December 23, 2012

$
1,682


$
1,652


$
28,500


$
28,500


50bps + 90 day LIBOR


QuarterlyFloating rate subordinated note to Bankcorp due May 30, 2013


2,025



1,876



34,000



34,000


50bps + 90 day LIBOR


QuarterlyFloating rate subordinated note to Bankcorp due
    November 26, 2013


1,427



1,351



24,000



24,000


50bps + 90 day LIBOR


QuarterlyFloating rate subordinated note to Bankcorp due
    February 26, 2014


371



352



6,250



6,250


50bps + 90 day LIBOR


QuarterlyFloating rate subordinated note to Bankcorp due May 31, 2014


5,812



5,366



100,000



100,000


35bps + 90 day LIBOR


QuarterlyFloating rate subordinated note to Bankcorp due May 31, 2016


5,837



5,466



100,000



100,000


38bps + 90 day LIBOR


QuarterlyTotal long-term notes  subordinate

$
17,154


$
16,063


$
292,750


$
292,750Total long-term notes

$
103,554


$
52,726


$
2,389,250


$
1,289,250   Interest Expense


Certificate of Deposit BalanceYear Ended December 31


December 312007


2006


2007


2006(In thousands)Certificate of depositCertificate of deposit to BMO subsidiary due on June 30,
    2008

$
28,833


$
28,833


$
1,000,000


$
1,000,000


2.84%


FixedCertificate of deposit to BMO subsidiary due on March 31,
    2009


18,662



18,662



427,655



427,655


4.30%


FixedCertificate of deposit to BMO subsidiary due on
    September 24, 2007


13,820



18,964







570,000


3.28%


FixedCertificate of deposit to BMO subsidiary due on March 18,
    2008


27,586



25,690



500,000



500,000


8bps + 90 day LIBOR


QuarterlyCertificate of deposit to BMO subsidiary due on
    September 28, 2009


54,506



14,614



1,000,000



1,000,000


6bps + 90 day LIBOR


QuarterlyTotal certificates of deposit

$
143,407


$
106,763


$
2,927,655


$
3,497,655  90




---



##### 



HARRIS
    N.A AND SUBSIDIARIES
  Notes
    to Consolidated Financial
    Statements  (Continued)
  25.
    Restructuring
    Charge            Severance-related


Premises-relatedcharges


charges


Total(In thousands)Balance at December 31, 2006

$



$



$
Restructuring charge during the year, net of reversals


16,564



2,196



18,760Paid during the year


(9,514
)


(2,196
)


(11,710
)Balance at December 31, 2007

$
7,050


$



$
7,050   26.
    Visa
    Indemnification Charge         91