Featuring news on National City Corp., M&I Corp., Northern Trust, Bank Mutual and Associated Bank.
Beleaguered National City seeks capital infusion
National City Corp.’s stock dipped more than 25 percent Monday after the Cleveland, Ohio-based banking company announced its plan to attempt to raise $7 billion of additional equity capital. With the deal, National City would raise $985 million of private equity capital from Corsair Capital, a private equity firm that invests in the financial services field, and from one other private equity investor. The balance, or just over $6 billion, of equity capital would be purchased by other investors, including several of National City’s largest current institutional stockholders.
National City plans to issue 126.2 million shares of common stock at a purchase price of $5 a share and a total of 63,690 shares of Contingent Convertible Perpetual Non-cumulative Preferred Stock, Series G, at a purchase price and liquidation preference of $100,000 per share, according to Crain’s Cleveland Business. The amount of stock that National City ultimately could issue under the plan would total 1.4 billion shares of common stock. National City currently has about 633 million shares of common stock outstanding.
National City reported a first-quarter net loss of $171 million, or 27 cents per share. The company has been staggering because of its massive investments in the subprime mortgage market. National City entered the Milwaukee market last year, when it acquired MAF Bancorp Inc., the parent company of MidAmerica Bank that had acquired St. Francis Capital Corp., the former parent company of St. Francis Bank, in 2003. MidAmerica Bank operated 24 branches with $1.3 billion in deposits in the Milwaukee area.
"This strategic raising of equity capital provides National City with the financial flexibility to continue investing in and growing our core businesses, which are delivering solid results, while addressing the asset quality challenges posed by the disruptions in the credit and housing markets," said National City chairman, president and chief executive officer Peter Raskind. "In addition, while we fully recognize that the dividend is an important element of return for our stockholders, the dividend reduction is consistent."
Law firm investigates M&I retirement plan
A Pittsburgh law firm recently announced that it is investigating conduct related to the Marshall & Ilsley (M&I) Retirement Program, the Milwaukee company’s 401(k) plan, which the law firm is alleging has contributed to losses to its participants’ accounts. Under the Employee Retirement Income Security Act of 1974 (ERISA), M&I had a fiduciary duty to manage the retirement plan solely in the interest of the participants, according to the law firm of Stember Feinstein Doyle & Payne LLC.
The law firm said it is investigating whether M&I violated its fiduciary duties to the plan by maintaining investment offerings in certain Marshall mutual funds, which are owned by M&I, even though many of those funds under-performed their peers. The investigation will include determining the amount of fees that M&I generated by investments of its own employees in the Marshall Funds within the 401(k) plan and whether the fees were a factor in the company’s decision to offer the "poor-performing" Marshall Funds instead of other independent mutual funds with historically higher returns.
Ellen Doyle of Stember Feinstein Doyle & Payne has been appointed class counsel to represent numerous classes of ERISA plan participants and has served as lead or co-lead counsel in actions recovering more than $100 million for pension plans and their participants.An M&I spokesperson said the company would have no comment on the statements issued by Feinstein Doyle & Payne. The spokesperson also said the bank’s retirement plans have been administered "in complete conformity with applicable fiduciary duties."
Soft real estate market continues to drag on M&I Bank
Marshall & Ilsley Corp. continues to take a pounding from its real estate investments, announcing recently that its first quarter net income dropped 32.5 percent to $146.2 million from $216.8 million in the same period a year ago. The Milwaukee-based parent company of M&I Bank reported quarterly per share net income of 56 cents, down from 83 cents a year earlier. "The continued stress on M&I’s construction and development portfolio led to further elevated charge-offs and provisions. M&I posted first quarter net charge-offs of $131 million and a loan loss provision of $146 million," the company said in a statement.
Speaking to a conference call with analysts, Greg Smith, chief financial officer, said the company’s quarterly results reflect the "challenging" environment faced by the banking industry today. He said the company expects to continue to see "nonperforming loans" escalate in the commercial and residential real estate markets. M&I is incurring real estate losses in its Arizona and Florida markets, where the company has been expanding in recent years. Those markets also were among the most distressed in the bursting housing bubble.
M&I’s reductions in net income would have been worse had they not been buttressed by two "unusual events which contributed to M&I’s financial results for the quarter," the company said. M&I recognized pre-tax income of $39 million due to the redemption of 39 percent of the corporation’s Visa Inc. stock shares and a related litigation reserve adjustment. M&I also recorded a $20 million tax benefit related to positive developments in the U.S. tax court. M&I’s wealth management business produced total revenue of $71.9 million for the quarter, an increase of $11.2 million or 18 percent, over the first quarter of 2007.
Northern Trust reports record quarter
Northern Trust Corp. continues to cruise above the fray of the icy housing market, reporting today record first quarter net income of $385.2 million, or $1.71 per share, up from $186.7 million, or 84 cents per share, in the same period a year ago. The Chicago-based company, which operates a significant office in downtown Milwaukee, said its earnings included a pre-tax benefit of $244.0 million realized in connection with the March initial public offering of Visa Inc. common stock.
Northern Trust’s net operating earnings were up 24 percent to $231.7 million from $186.7 million in the first quarter of last year. Frederick Waddell, president and chief executive officer, said, "We are pleased to report record earnings for the quarter. The strong results were achieved in a very difficult economic environment for financial institutions and demonstrate the continued success of our focused business strategy. Record operating earnings for the quarter were driven by excellent growth in trust, investment and other servicing fees, foreign exchange trading income, and net interest income." Northern Trust’s first quarter consolidated revenues reached $1.15 billion, up 39 percent from last year’s first quarter.
Bank Mutual reports increased Q1 earnings
Bank Mutual Corporation’s first quarter income grew to $5.1 million, or 10 cents diluted earnings per share for the period ending March 31, 2008, compared to its earnings of $4.7 million or 8 cents per share during the same period in 2007. Net income increased for the quarter primarily as a result of gains totaling $1.5 million on the sale of investments, partially offset by the non-recurrence in 2008 of a significant 2007 recovery of specific allowance for loan loss in the first quarter of 2007 and a small reduction in net interest income.
The bank reported a 25 percent increase in diluted earnings per share for the quarter ended, compared to the comparable period in 2007. Net income for the quarter ended March 31, 2008 increased 7.5 percent as compared to the same period in 2007.
"Although financial institutions are currently facing a difficult operating environment, we are pleased to report improved quarterly earnings," said Michael T. Crowley, Jr., chairman, president and CEO. "By avoiding risky lending, carefully managing liquidity, controlling expenses and maintaining a strong capital position, the company is well positioned to take advantage of opportunities as they present themselves. While some companies are cutting their dividends we take pride in rewarding our shareholders with total returns that exceed the averages for our sector."
Associated posts lower ’08 Q1 earnings
Associated Bank-Corp. recently reported lower first quarter 2008 earnings of $66.5 million or 52 cents per share, compared with $73.4 million or 57 cents per share for the first quarter of 2007. The bank’s net interest income was $165 million for the first quarter, compared to $159 million in the first quarter of 2007. Its noninterest income included a $5 million gain related to Visa Inc.’s initial public offering and a $3 million loss related to equity securities. Associated Bank’s first quarter results also included a $23 million provision for loan losses, $7 million higher than net charge-offs.
"We are pleased with our revenue dynamics as we continue to generate loan growth, coupled with improved deposit flows," said Paul S. Beideman, the bank’s chairman and CEO. "This has contributed to the improvement in our tangible capital ratio to 6.75 percent from 6.59 percent."