01—Abstract
Summary
Summary of the 10-K filed February 25, 2005. Cited figures are marked; the original filing is the authoritative source.
M&T Bank Corporation, a New York bank holding company headquartered in Buffalo, reported that as of December 31, 2004 it had consolidated total assets of $52.9 billiona, deposits of $35.4 billion and stockholders' equity of $5.7 billion.
Net income rose to $723 millionb, or $6.00 per diluted share, up 26% and 21% respectively from $574 million or $4.95 per diluted share in 2003. The increase was driven largely by the full-year impact of the April 1, 2003 acquisition of Allfirst Financial Inc. from Allied Irish Banks, p.l.c. (AIB), which AIB partly paid for with 26,700,000 M&T shares and $886 million in cash.
Excluding amortization of intangibles, net operating income rose 16% to $769 millionc. The filing shows margin pressure alongside growth. Net interest margin declined 21 basis points to 3.88% in 2004 from 4.09% in 2003, as yields on loans and securities fell and short-term funding repriced faster after the Federal Reserve's rate increases.
Credit quality improved, with the provision for credit losses falling to $95 milliond from $131 million, net charge-offs declining to $82 million, and nonperforming loans falling to $172 million, or .45% of loans. Noninterest expense rose 5% to $1.52 billion, including a $25 million contribution to The M&T Charitable Foundation. Capital management was active.
M&T repurchased 6,520,800 shares in 2004 at an average cost of $93.59, for $610 million, and paid $1.60 per share in dividends, up from $1.20. AIB held approximately 23.2% of M&T common stock at year-end 2004 and retains board representation and governance protections under the Reorganization Agreement. The company and both of its bank subsidiaries were classified as well capitalized.
02—Key points
Key Highlights
- Net income of $722.5 million in 2004, up 26% from $573.9 million in 2003; diluted EPS of $6.00 versus $4.95
- Net operating income of $768.6 million, up 16%; diluted net operating EPS of $6.38 versus $5.70
- Net interest margin fell to 3.88% from 4.09%, and net interest income rose 8% to $1.75 billion on taxable-equivalent basis, driven by 14% growth in average earning assets to $45.2 billion
- Provision for credit losses declined to $95 million from $131 million; nonperforming loans were $172 million, or .45% of loans and leases
- Total noninterest expense rose 5% to $1.52 billion, including $75 million of intangible amortization and a $25 million charitable contribution
- Repurchased 6,520,800 shares for $610 million in 2004; dividends declared rose to $1.60 per share from $1.20
- AIB owned approximately 23.2% of M&T common stock at December 31, 2004, with board representation and bylaw protections tied to its ownership level
03—Questions
Frequently Asked Questions
How did M&T's profitability change in 2004?
Net income rose 26% to $722.5 million, and diluted EPS rose to $6.00 from $4.95. The filing attributes much of the increase to a full year of results from Allfirst, which was acquired April 1, 2003. Return on average assets was 1.40%, compared with 1.27% in 2003.
What pressures did M&T face on its net interest margin?
The net interest margin declined to 3.88% from 4.09%, mainly due to lower yields on loans and investment securities. The filing notes that the Federal Reserve raised its benchmark rate five times from June 30 through December 31, 2004, and that short-term liabilities repriced faster than many variable-rate assets, compressing the net interest spread to 3.60% from 3.81%.
How did credit quality trend?
Credit quality improved. The provision for credit losses fell to $95 million from $131 million, and net charge-offs fell to $82 million, or .22% of average loans, from $97 million in 2003. Nonperforming loans declined to $172 million from $240 million. Management noted continued economic uncertainty in upstate New York and central Pennsylvania.
What is AIB's relationship with M&T?
AIB acquired approximately 22.5% of M&T's shares in the Allfirst transaction and held about 23.2% at December 31, 2004. Under the Reorganization Agreement, AIB may designate four directors to the M&T and M&T Bank boards while it holds at least 15%. Certain actions, such as reducing the dividend payout below a 15% cash dividend-to-net-income ratio or adopting a shareholder rights plan, require approval through an Executive Committee that includes an AIB designee.
How did M&T return capital to shareholders?
M&T repurchased 6,520,800 shares in 2004 at an average cost of $93.59, totaling $610 million, and declared common dividends of $187.7 million, or $1.60 per share. Stockholders' equity was $5.7 billion, or $49.68 per share at year-end, and the company remained well capitalized under regulatory guidelines.
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