01—Abstract
Summary
Summary of the 10-K filed February 23, 2009. Cited figures are marked; the original filing is the authoritative source.
M&T Bank Corporation (MTB), a New York bank holding company headquartered in Buffalo, reported net income of $555.9 milliona for 2008, or $5.01 per diluted common share, down from $654.3 million ($5.95) in 2007.
Total assets were $65.8 billionb, deposits $42.6 billion and stockholders' equity $6.8 billion at December 31, 2008. The decline was driven mainly by a provision for credit losses of $412 million (up from $192 million), net charge-offs of $383 million, and $182 million of other-than-temporary impairment charges on investment securities, including a $153 million charge on Fannie Mae and Freddie Mac preferred stock. Net interest margin fell to 3.38% from 3.60%.
The company issued $600 millionc of Series A Preferred Stock and warrants to the U.S. Treasury under the Capital Purchase Program in December 2008, and agreed to a pending acquisition of Provident Bankshares Corporation in a stock-for-stock transaction, expected to close in the second quarter of 2009. The filing also notes that AIB holds approximately 24.2% of M&T common stock, with governance rights tied to that stake. Management reports that all three regulated entities met the well-capitalized standard at year-end 2008.
The filing flags rising risks for 2009: FDIC assessment rates were raised, which the company expects to more than double its first-quarter 2009 assessment and to weigh on results, and nonaccrual loans rose to $755 milliond, or 1.54% of loans, from $431 million a year earlier. Total stock price performance over 2008 fell to 66 on the five-year cumulative return index, versus 131 a year earlier.
02—Key points
Key Highlights
- Net income of $555.9 million for 2008, down 15% from $654.3 million in 2007; diluted EPS of $5.01 versus $5.95.
- Provision for credit losses rose to $412 million from $192 million, and net charge-offs rose to $383 million from $114 million, driven largely by residential real estate and residential builder and developer loans.
- Other-than-temporary impairment charges on investment securities totaled $182 million in 2008, including $153 million on Fannie Mae and Freddie Mac preferred stock.
- Net interest margin declined to 3.38% from 3.60%, and net interest income on a taxable-equivalent basis rose 5% to $1.96 billion.
- Issued $600 million of Series A Preferred Stock and warrants to the U.S. Treasury on December 23, 2008 under the Capital Purchase Program.
- Agreed to acquire Provident Bankshares Corporation (Provident) in a stock-for-stock deal, with Provident's $6.6 billion in assets and 143 branches expected to join in the second quarter of 2009.
- Nonaccrual loans reached $755 million, or 1.54% of loans and leases, up from $431 million, or 0.90%, at year-end 2007.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 23, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Interest Expense | $1.34B$1.69B | −21.1% |
| Net Income | $555.89M$654.26M | −15.0% |
| EPS (Basic) | $5.04$6.05 | −16.7% |
| EPS (Diluted) | $5.01$5.95 | −15.8% |
| Shares Outstanding (Basic) | 110.21M— | — |
| Shares Outstanding (Diluted) | 110.90M— | — |
05—Questions
Frequently Asked Questions
Why did M&T's earnings decline in 2008?
The filing attributes the decline mainly to a sharply higher provision for credit losses ($412 million versus $192 million), larger net charge-offs concentrated in residential real estate and builder/developer loans, and $182 million of other-than-temporary impairment charges on investment securities. A lower net interest margin also reduced net interest income growth.
Is M&T's capital position considered strong?
M&T, Bank and M&T Bank, N.A. all met the 'well capitalized' classification at December 31, 2008. Total stockholders' equity was $6.8 billion, or 10.31% of total assets, including $600 million of Series A Preferred Stock issued to the U.S. Treasury. Tangible common equity per share fell to $25.94 from $27.98.
What is the status of the Provident Bankshares acquisition?
M&T agreed on December 18, 2008 to acquire Provident Bankshares Corporation in a stock-for-stock transaction, with Provident common shareholders receiving 0.171625 shares of M&T common stock per share. The merger requires regulatory and Provident shareholder approvals and is expected to close in the second quarter of 2009.
How does Allied Irish Banks affect M&T's governance?
AIB owned approximately 24.2% of M&T common stock at December 31, 2008 and has the right to designate four directors to the M&T and M&T Bank boards while it holds at least 15%. Reorganization Agreement provisions also give AIB consent rights over certain corporate actions, such as amending the bylaws, adopting shareholder rights plans, and certain acquisitions and dispositions.
What regulatory cost pressures does M&T expect in 2009?
The FDIC raised deposit assessment rates uniformly by 7 basis points annually for the first quarter of 2009 and expects further changes. The company said the increase will more than double its expected first-quarter 2009 assessment and that assessment rates after the first quarter will remain significantly higher than in 2008, which it expects to adversely affect 2009 results.
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