01—Abstract
Summary
Summary of the 10-K filed February 22, 2017. Cited figures are marked; the original filing is the authoritative source.
M&T Bank Corporation (MTB), a New York financial holding company headquartered in Buffalo, reported consolidated total assets of $123.4 billiona, deposits of $95.5 billion and shareholders' equity of $16.5 billion at December 31, 2016.
Net income for 2016 was $1.32 billionb, or $7.78 per diluted common share, up 22% and 8% respectively from 2015, driven largely by the full-year impact of the November 2015 Hudson City Bancorp acquisition. Net operating income, a non-GAAP measure excluding merger-related expenses and intangible amortization, was $1.36 billion, or $8.08 per diluted share. Taxable-equivalent net interest income rose 22% to $3.50 billion, although the net interest margin narrowed three basis points to 3.11%.
The efficiency ratio improved to 56.1% from 58.0%. Credit quality metrics were stable. The provision for credit losses rose to $190 millionc from $170 million, net charge-offs were $157 million (.18% of average loans), and nonaccrual loans increased to $920 million, or 1.01% of total loans, largely reflecting migration of Hudson City residential mortgages.
The allowance for credit losses was $989 milliond, or 1.09% of total loans. Management reported that the company's common equity Tier 1 ratio was 10.70% at year-end after a February 2017 revision that lowered it by 26 basis points. The board's Federal Reserve capital plan permits up to $1.15 billion of share repurchases and raises the quarterly common dividend to $.75 per share in the first quarter of 2017.
The filing also highlights ongoing legal and regulatory matters. Wilmington Trust Corporation, a former subsidiary acquired by M&T, was indicted in January 2016 relating to pre-acquisition conduct, with trial scheduled for October 2, 2017. A related securities class action is scheduled for trial on June 18, 2018.
Reasonably possible losses beyond recorded liabilities were estimated between $0 and $40 million. M&T also remains under a 2013 written agreement with the Federal Reserve Bank of New York concerning its BSA/AML program.
02—Key points
Key Highlights
- Net income rose 22% to $1.32 billion in 2016, and diluted EPS rose 8% to $7.78; net operating income was $1.36 billion, or $8.08 per diluted share.
- Taxable-equivalent net interest income increased 22% to $3.50 billion, driven by average earning assets up $21.4 billion (23%), mainly from the Hudson City acquisition; the net interest margin narrowed to 3.11% from 3.14%.
- The efficiency ratio improved to 56.1% from 58.0%, and other expense rose 8% to $3.05 billion.
- Provision for credit losses increased to $190 million; net charge-offs were $157 million (.18% of average loans), and nonaccrual loans rose to $920 million (1.01% of total loans).
- Shareholders' equity was $16.5 billion (13.35% of total assets); common equity Tier 1 ratio was 10.70% at year-end after a 26 basis point downward revision in February 2017.
- Federal Reserve did not object to the 2016 capital plan, allowing up to $1.15 billion in share repurchases and a quarterly common dividend increase to $.75 per share in Q1 2017.
- Wilmington Trust Corporation faces a criminal indictment with trial set for October 2, 2017, and a securities class action with trial set for June 18, 2018; reasonably possible losses beyond accruals are estimated at $0 to $40 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 22, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $5.30B$4.67B | +13.5% |
| Interest Expense | $425.98M$328.26M | +29.8% |
| Net Income | $1.32B$1.08B | +21.8% |
| EPS (Basic) | $7.80$7.22 | +8.0% |
| EPS (Diluted) | $7.78$7.18 | +8.4% |
| Shares Outstanding (Basic) | 156.78M136.80M | +14.6% |
| Shares Outstanding (Diluted) | 157.30M137.53M | +14.4% |
05—Questions
Frequently Asked Questions
How did the Hudson City acquisition affect M&T's 2016 results?
The Hudson City acquisition, completed November 1, 2015, contributed a full year of results in 2016. Average earning assets increased $21.4 billion, or 23%, mainly through higher average loans and leases of $17.8 billion. Taxable-equivalent net interest income rose to $3.50 billion from $2.87 billion, and the company recorded $36 million of pre-tax merger-related expenses in 2016 compared with $97 million in 2015 (including the related provision).
What is the status of the Wilmington Trust legal matters?
Wilmington Trust Corporation, acquired by M&T in May 2011, was indicted on January 6, 2016 by the U.S. Attorney for the District of Delaware for alleged pre-acquisition conduct. M&T states it strongly believes the action is unjustified and that Wilmington Trust will vigorously defend itself; trial is scheduled for October 2, 2017. A separate putative securities class action has been set for trial on June 18, 2018. The filing states that it is difficult to estimate when these matters will be resolved.
How much capital can M&T return to shareholders?
The Federal Reserve did not object to M&T's revised 2016 Capital Plan, which permits repurchases of up to $1.15 billion of common shares over the four quarters starting July 1, 2016 and an increase in the quarterly common dividend in Q1 2017 of up to $.05 per share, to $.75. During 2016 M&T repurchased 5,607,595 shares for $641 million, and $763 million remained under the 2016 plan at year-end. Dividends remain subject to declaration by the Board of Directors.
Why did nonaccrual loans increase in 2016?
Nonaccrual loans rose to $920 million at December 31, 2016 from $799 million a year earlier, or 1.01% of total loans versus .91%. The filing attributes the increase to the normal migration of previously performing residential real estate loans obtained in the Hudson City acquisition that became more than 90 days past due in 2016; those loans totaled $190 million at year-end.
What were the key changes to capital ratios in 2016?
M&T's common equity Tier 1 ratio was 10.70% at December 31, 2016 (consolidated), after a February 2017 revision to risk weights on certain commercial real estate construction loans that increased risk-weighted assets by 2% and lowered the CET1 ratio by 26 basis points from a previously disclosed estimate. Shareholders' equity was $16.5 billion, or $97.64 per common share, and tangible common equity per share was $67.85.
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