How did First Empire's profitability change in 1995?

Net income rose 12% to $131.0 million, or $18.79 per primary common share, compared with $117.3 million, or $16.35, in 1994. Fully diluted EPS was $17.78 versus $15.71. Return on average assets was 1.14% and return on average common equity was 17.16%.

What pressures on net interest income did management identify?

Net interest margin declined to 4.43% from 4.89% because rates paid on interest-bearing liabilities rose faster than yields on earning assets. The net interest spread fell in each quarter of 1995, reaching 3.67% in the fourth quarter. Management said further rate changes or spread reductions could adversely affect net interest income, and that a sustained decrease in rates would likely hurt net interest income in later years.

How is the company's credit quality trending?

Credit quality was described as stable. The provision fell to $40.4 million from $60.5 million and net charge-offs were $21.3 million. Nonperforming loans rose to $93.1 million, or .97% of loans outstanding, from $77.5 million, and the allowance of $262.3 million covered 282% of nonperforming loans.

What is the outlook for FDIC insurance costs?

The BIF assessment was substantially eliminated effective January 1, 1996. However, the company's SAIF-insured Oakar deposits, about $1.4 billion, remain subject to FDIC assessments at not less than the required rate. Management believes a special SAIF assessment is likely, but said its amount cannot be precisely predicted.

What acquisitions and growth initiatives did the company pursue in 1995?

M&T Mortgage acquired Statewide Funding Corporation in March 1995 and the servicing rights and origination franchise of Exchange Mortgage Corporation in October 1995. M&T Bank acquired four banking offices from Chase Manhattan Bank in July 1995. M&T Bank, N.A. began operations on October 2, 1995. Management said it is actively reviewing opportunities, including possible major acquisitions.

M&T Bank 10-K FY1995 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 15, 1996. 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 consolidated total assets of $12.0 billion^a, deposits of $9.5 billion and stockholders' equity of $846 million at December 31, 1995.

Net income rose 12% to $131.0 million^b, or $18.79 per common share (primary), from $117.3 million, or $16.35, in 1994. Fully diluted EPS was $17.78. Growth was driven mainly by a 15% increase in average earning assets to $11.1 billion, largely loans, and by higher mortgage banking revenues, which rose to $37.1 million from $16.0 million.

Net interest margin, however, compressed to 4.43% from 4.89%, and the fourth-quarter net interest spread of 3.67% was the lowest of the year, with management stating that further rate changes or spread reductions could adversely affect net interest income. Credit quality was stable. The provision for possible credit losses fell to $40.4 million^c from $60.5 million, net charge-offs were $21.3 million, and nonperforming loans rose to $93.1 million, or .97% of loans, from $77.5 million.

The allowance covered 282%^d of nonperforming loans. Capital remained above regulatory minimums, with a Tier 1 risk-based ratio of 8.53% and a total capital ratio of 11.62% for the consolidated company. The filing also notes that the FDIC's BIF assessment was substantially eliminated effective January 1, 1996, while SAIF-insured deposits remained subject to a likely special assessment that management could not precisely quantify.

During 1995 the company expanded through acquisitions, including Statewide Funding and Exchange Mortgage in mortgage banking and four Chase Manhattan branches. It also formed M&T Real Estate and launched M&T Bank, N.A., which began operations on October 2, 1995.

Management also said the company is actively reviewing major acquisition opportunities. The company's common stock trades on the American Stock Exchange under the symbol FES.

02—Key points

Key Highlights

Net income increased 12% to $131.0 million ($18.79 per primary common share) in 1995, up from $117.3 million ($16.35) in 1994.
Average earning assets rose 15% to $11.1 billion, driven mainly by loan growth; average loans grew 19% to $8.9 billion.
Net interest margin fell 46 basis points to 4.43% in 1995 from 4.89%, as the cost of interest-bearing liabilities rose 125 basis points to 4.65%.
Provision for possible credit losses dropped to $40.4 million from $60.5 million, while net charge-offs were $21.3 million, or .24% of average loans.
Nonperforming loans increased to $93.1 million (.97% of loans) from $77.5 million, and the allowance for possible credit losses was $262.3 million, or 2.75% of net loans.
Mortgage banking revenues more than doubled to $37.1 million, supported by the Statewide and Exchange Mortgage acquisitions and servicing portfolio growth to $5.7 billion.
Consolidated stockholders' equity reached $846.3 million, with Tier 1 and total risk-based capital ratios of 8.53% and 11.62%, and all subsidiary banks rated well capitalized.

03—Questions

Frequently Asked Questions

How did First Empire's profitability change in 1995?
Net income rose 12% to $131.0 million, or $18.79 per primary common share, compared with $117.3 million, or $16.35, in 1994. Fully diluted EPS was $17.78 versus $15.71. Return on average assets was 1.14% and return on average common equity was 17.16%.
What pressures on net interest income did management identify?
Net interest margin declined to 4.43% from 4.89% because rates paid on interest-bearing liabilities rose faster than yields on earning assets. The net interest spread fell in each quarter of 1995, reaching 3.67% in the fourth quarter. Management said further rate changes or spread reductions could adversely affect net interest income, and that a sustained decrease in rates would likely hurt net interest income in later years.
How is the company's credit quality trending?
Credit quality was described as stable. The provision fell to $40.4 million from $60.5 million and net charge-offs were $21.3 million. Nonperforming loans rose to $93.1 million, or .97% of loans outstanding, from $77.5 million, and the allowance of $262.3 million covered 282% of nonperforming loans.
What is the outlook for FDIC insurance costs?
The BIF assessment was substantially eliminated effective January 1, 1996. However, the company's SAIF-insured Oakar deposits, about $1.4 billion, remain subject to FDIC assessments at not less than the required rate. Management believes a special SAIF assessment is likely, but said its amount cannot be precisely predicted.
What acquisitions and growth initiatives did the company pursue in 1995?
M&T Mortgage acquired Statewide Funding Corporation in March 1995 and the servicing rights and origination franchise of Exchange Mortgage Corporation in October 1995. M&T Bank acquired four banking offices from Chase Manhattan Bank in July 1995. M&T Bank, N.A. began operations on October 2, 1995. Management said it is actively reviewing opportunities, including possible major acquisitions.

04—Continue

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