01—Abstract
Summary
Summary of the 10-K filed March 24, 1995. Cited figures are marked; the original filing is the authoritative source.
First Empire State Corporation, a New York bank holding company headquartered in Buffalo, reported net income of $117.3 milliona for 1994, up 15% from $102.0 million in 1993, with primary earnings per common share of $16.35 (up 18% from $13.87) and fully diluted earnings per share of $15.71.
Consolidated total assets were $10.5 billionb at December 31, 1994, deposits were $8.2 billion, and stockholders' equity was $721 million. The company operates through two wholly owned banks: Manufacturers and Traders Trust Company (M&T Bank, $8.8 billion in assets) and The East New York Savings Bank ($1.8 billion in assets). Commercial and retail banking is described as the sole significant line of business.
Credit quality improved during 1994. Net charge-offs fell to $16.6 millionc from $35.8 million in 1993, the provision for possible credit losses declined to $60.5 million from $80.0 million, and nonperforming loans decreased to $77.5 million from $82.3 million. The allowance for possible credit losses equaled 2.96% of net loans and leases at year-end.
Return on average assets was 1.17% and return on average common stockholders' equity was 16.64%. Net interest margin widened 13 basis points to 4.89%, although management said further rate changes or spread reductions could adversely affect net interest income, and a fourth-quarter 1994 net interest spread of 4.15% was the lowest of the year. The company expanded through acquisitions in December 1994, including Ithaca Bancorp, Inc. (about $44.2 milliond in cash) and deposits and branches purchased from Chemical Bank.
It also agreed in early 1995 to acquire Statewide Funding Corporation, a mortgage banker with a servicing portfolio of about $1.0 billion, and to buy four Chase Manhattan branches. Stockholders' equity was reduced by $50.6 million of unrealized losses on available-for-sale securities, and the company repurchased treasury stock during the year, with repurchases resumed in early 1995. The filing states that management expects available liquidity to be more than adequate to meet anticipated funding needs.
02—Key points
Key Highlights
- Net income rose 15% to $117.3 million in 1994, and primary earnings per common share rose 18% to $16.35.
- Total assets were $10.5 billion, deposits were $8.2 billion, and stockholders' equity was $721 million at December 31, 1994.
- Provision for possible credit losses fell to $60.5 million from $80.0 million, and net charge-offs fell to $16.6 million from $35.8 million.
- Net interest margin improved 13 basis points to 4.89%, though average earning assets declined by $316 million to $9.7 billion.
- Return on average assets was 1.17% and return on average common stockholders' equity was 16.64%.
- The December 1994 Ithaca Bancorp acquisition and Chemical Bank branch purchase added to the franchise, and Statewide Funding was agreed for acquisition in early 1995.
- All regulatory capital ratios exceeded minimums, and M&T Bank and East New York were classified as well capitalized; the consolidated Tier 1 risk-based ratio was 8.91%.
03—Questions
Frequently Asked Questions
How did First Empire State Corporation perform financially in 1994?
Net income increased 15% to $117.3 million from $102.0 million in 1993. Primary earnings per common share rose 18% to $16.35, and fully diluted earnings per share were $15.71. Dividends declared per common share increased to $2.20 from $1.90.
Did asset quality improve in 1994?
Yes. Net charge-offs decreased to $16.6 million from $35.8 million in 1993, and nonperforming loans declined to $77.5 million from $82.3 million. The provision for possible credit losses was reduced to $60.5 million. The allowance for possible credit losses was $243.3 million, or 2.96% of net loans and leases at year-end.
What acquisitions did the company complete or agree to in this period?
In December 1994 the company acquired Ithaca Bancorp, Inc. for about $44.2 million in cash and bought approximately $146 million of deposits and seven branches from Chemical Bank. In early 1995 M&T Mortgage agreed to acquire Statewide Funding Corporation, which has a mortgage servicing portfolio of about $1.0 billion, and M&T Bank agreed to acquire four Chase Manhattan branches with about $90 million in deposits.
What risks did management identify for future earnings?
Management said further changes in the interest rate environment or reductions in spreads could adversely affect the net interest margin and net interest income. Rising rates had slowed residential mortgage prepayments, extending asset lives. The fourth-quarter 1994 net interest spread of 4.15% was the lowest of any quarter that year. Management also stated that a sustained rise in interest rates would likely reduce net interest income in the coming year.
How strong is the company's capital position?
Total stockholders' equity was $721 million, or 6.85% of total assets, at December 31, 1994. The consolidated Tier 1 risk-based capital ratio was 8.91%, the total capital ratio was 11.07%, and the leverage ratio was 7.31%. Both M&T Bank and East New York were classified as well capitalized. Stockholders' equity included a $50.6 million reduction for unrealized losses on securities available for sale.
04—Continue