01—Abstract
Summary
Summary of the 10-K filed February 21, 2008. Cited figures are marked; the original filing is the authoritative source.
M&T Bank Corporation reported net income of $654 milliona, or $5.95 per diluted share, for 2007, down 22% from $839 million ($7.37 per diluted share) in 2006.
The decline was driven largely by a $127 millionb pre-tax other-than-temporary impairment charge on collateralized debt obligations backed by residential mortgage securities, a $23 million charge related to Visa covered litigation, and a sharply higher provision for credit losses of $192 million versus $80 million in 2006. Net operating income, which excludes intangible amortization and merger-related expenses, was $704 million, or $6.40 per diluted share. Total assets grew to $64.9 billion at year-end 2007, aided by the acquisitions of Partners Trust Financial Group and 13 First Horizon branches in late 2007.
Credit quality weakened during the year. Nonperforming loans rose to $447 millionc, or .93% of loans and leases, from $224 million, or .52%, at year-end 2006, with Alt-A residential mortgages and loans to residential builders and developers the main contributors. Net charge-offs were $114 million, and management changed its charge-off timing for residential real estate loans.
Net interest margin narrowed to 3.60% from 3.70%. Stockholders' equity was $6.5 billiond, or $58.99 per share, and the company remained well capitalized at both the holding company and bank subsidiary levels.
Allied Irish Banks held approximately 24.3% of common shares at year-end, with board representation and governance protections tied to that stake. The company also repurchased 4,514,800 shares in 2007 at a cost of $509 million and increased its dividend to $.70 per quarter in the third quarter, bringing 2007 dividends declared to $2.60 per share, up from $2.25 in 2006.
02—Key points
Key Highlights
- Net income fell 22% to $654 million ($5.95 diluted EPS) from $839 million ($7.37) in 2006, reflecting the $127 million CDO impairment charge and higher credit costs.
- Provision for credit losses more than doubled to $192 million from $80 million; net charge-offs rose to $114 million from $68 million.
- Nonperforming loans increased to $447 million, or .93% of loans and leases, versus $224 million, or .52%, a year earlier, driven by Alt-A residential mortgages and residential builder loans.
- Net operating income was $704 million ($6.40 diluted net operating EPS), excluding intangible amortization and merger-related expenses.
- Acquisitions in late 2007 included Partners Trust Financial Group (about $559 million purchase price, $3.5 billion of assets) and First Horizon's Mid-Atlantic branches; goodwill rose to $3.2 billion.
- Net interest margin narrowed to 3.60% from 3.70%, and efficiency ratio rose to 52.8% from 51.5%.
- Dividends per share rose to $2.60 from $2.25, and the company repurchased 4,514,800 shares for $509 million during 2007.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 21, 2008Financial Statements
| Interest Expense | $1.69B |
| Net Income | $654.26M |
| EPS (Basic) | $6.05 |
| EPS (Diluted) | $5.95 |
05—Questions
Frequently Asked Questions
Why did M&T's 2007 earnings decline so sharply?
Earnings were pressured by a $127 million pre-tax other-than-temporary impairment charge on collateralized debt obligations backed by residential mortgage securities, a $23 million Visa litigation accrual, and a provision for credit losses that rose to $192 million from $80 million as residential real estate credit deteriorated. Net income was $654 million versus $839 million in 2006.
How is M&T's credit quality trending?
Credit quality weakened in 2007. Nonperforming loans were $447 million, or .93% of loans and leases, up from .52% a year earlier. Alt-A residential loans held for investment totaled $1.2 billion, and nonperforming Alt-A loans reached $90 million. The allowance for credit losses was $759 million, or 1.58% of loans and leases.
What acquisitions did M&T complete in 2007?
M&T acquired Partners Trust Financial Group on November 30, 2007, paying $282 million in cash and issuing 3,096,861 shares, for a purchase price of about $559 million. On December 7, 2007, M&T Bank acquired 13 Mid-Atlantic branches from First Horizon Bank. M&T also invested $300 million in Bayview Lending Group LLC in February 2007.
What is the role of Allied Irish Banks in M&T?
AIB held approximately 24.3% of M&T's outstanding common stock at December 31, 2007. Under the Reorganization Agreement, AIB may designate four directors to the M&T and M&T Bank boards while it holds at least 15% of shares, and it has consent rights over certain actions such as bylaw changes and acquisitions.
Is M&T adequately capitalized?
Yes. M&T, M&T Bank and M&T Bank, N.A. were all categorized as well capitalized at year-end 2007. Consolidated total risk-based capital was 11.18% and Tier 1 risk-based capital was 6.84%. Stockholders' equity was $6.5 billion, or $58.99 per share, and tangible equity per share was $27.98.
06—Continue