01—Abstract
Summary
Summary of the 10-K filed February 22, 2018. Cited figures are marked; the original filing is the authoritative source.
M&T Bank Corporation (MTB) reported net income of $1.41 billiona, or $8.70 per diluted common share, for 2017, up 7% in dollar terms and 12% per share from $1.32 billion, or $7.78, in 2016.
Results were shaped by a $85 millionb incremental income tax expense from the Tax Cuts and Jobs Act, which the filing says represented $.56 of diluted earnings per share, and a $44 million non-deductible payment related to a Wilmington Trust Corporation settlement with the U.S. Attorney's Office for the District of Delaware. Net operating income, a non-GAAP measure the company uses, was $1.43 billion, or $8.82 per diluted share. Taxable-equivalent net interest income rose 9% to $3.82 billion, driven by a net interest margin that widened to 3.47% from 3.11%, while average earning assets declined 2% to $110.0 billion.
The efficiency ratio improved to 55.1% from 56.1%. At December 31, 2017, the company had consolidated total assets of $118.6 billionc, deposits of $92.4 billion, and shareholders' equity of $16.3 billion. Asset quality remained steady, with net charge-offs at .16% of average loans and leases, the provision for credit losses falling 12% to $168 million, and nonaccrual loans at 1.00% of total loans and leases.
Capital actions were significant: the company repurchased 7,369,105 common shares for $1.21 billiond during 2017, the Federal Reserve did not object to its 2017 capital plan, and on February 21, 2018, the Board approved an additional $745 million repurchase program through June 30, 2018. The company also reported the termination of a 2013 written agreement with the Federal Reserve Bank of New York related to its Bank Secrecy Act and anti-money laundering procedures, effective July 27, 2017. Other income was $1.85 billion, while other expense rose 3% to $3.14 billion, reflecting higher legal-related and professional services costs, including $64 million of additions to the reserve for legal matters.
02—Key points
Key Highlights
- Net income of $1.41 billion, or $8.70 per diluted common share, up 7% and 12% respectively from 2016.
- Taxable-equivalent net interest income increased 9% to $3.82 billion, with net interest margin widening to 3.47% from 3.11%.
- Tax Act enactment reduced 2017 earnings by $85 million, or $.56 per diluted share, through a reduction in net deferred tax assets.
- Repurchased 7,369,105 common shares for $1.21 billion in 2017; an additional $745 million repurchase program was approved February 21, 2018.
- Nonaccrual loans were $883 million, or 1.00% of total loans and leases, and net charge-offs were .16% of average loans and leases.
- Efficiency ratio improved to 55.1% in 2017 from 56.1% in 2016.
- Total assets of $118.6 billion, deposits of $92.4 billion, and shareholders' equity of $16.3 billion at December 31, 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 22, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $5.63B$5.30B | +6.4% |
| Interest Expense | $386.75M$425.98M | −9.2% |
| Net Income | $1.41B$1.32B | +7.1% |
| EPS (Basic) | $8.72$7.80 | +11.8% |
| EPS (Diluted) | $8.70$7.78 | +11.8% |
| Shares Outstanding (Basic) | 152.16M156.78M | −2.9% |
| Shares Outstanding (Diluted) | 152.55M157.30M | −3.0% |
05—Questions
Frequently Asked Questions
How did the Tax Cuts and Jobs Act affect M&T's 2017 earnings?
The Tax Act reduced the corporate federal income tax rate from 35% to 21% effective January 1, 2018. GAAP required the impact be recognized in 2017, resulting in an incremental income tax expense of $85 million, or $.56 of diluted earnings per common share, largely due to the reduction in the carrying value of net deferred tax assets. The company's effective tax rate was 39.4% in 2017, compared with 36.1% in 2016.
What drove the improvement in net interest income in 2017?
Taxable-equivalent net interest income rose 9% to $3.82 billion, reflecting a widening of the net interest margin to 3.47% from 3.11%. The filing attributes this mainly to higher yields on loans from the higher interest rate environment in 2017, partly offset by a 2% decline in average earning assets to $110.0 billion.
What was the Wilmington Trust settlement, and how did it affect results?
On October 9, 2017, Wilmington Trust Corporation, a wholly owned subsidiary, reached an agreement with the U.S. Attorney's Office for the District of Delaware related to alleged conduct from 2009 to 2010, before M&T acquired it. It agreed to pay $60 million, including $16 million previously paid to the SEC, and did not admit liability. The $44 million payment is not tax deductible, and with a $50 million increase to the legal reserve, reduced 2017 net income by $48 million, or $.31 per diluted share.
How much capital did M&T return to shareholders?
Common dividends declared totaled $457 million in 2017, or $3.00 per share, and the company repurchased 7,369,105 common shares for $1.21 billion during the year. The Federal Reserve did not object to the 2017 capital plan, which included up to $900 million in repurchases and an increase in the quarterly dividend to $.75 per share in the first quarter of 2017. On February 21, 2018, the Board approved an additional $745 million repurchase program through June 30, 2018.
How did credit quality trend in 2017?
The provision for credit losses decreased 12% to $168 million from $190 million in 2016. Net charge-offs were $140 million, or .16% of average loans and leases, compared with .18% in 2016. Nonaccrual loans totaled $883 million, or 1.00% of total loans and leases, versus $920 million, or 1.01%, at year-end 2016. The allowance for credit losses was $1.0 billion, or 1.16% of total loans and leases.
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