M&I’s dismal fourth quarter and subsequent layoffs; Bank Mutual posts fourth quarter gain
M&I posts 4Q loss, eliminates 830 jobs
Marshall & Ilsley Corp., Wisconsin’s largest bank, has reported a 2008 fourth quarter net loss of $403.9 million, or $1.55 per share, and announced it will eliminate 830 jobs, or 8 percent of its workforce.
For the full fiscal year, the parent company of M&I Bank reported a net loss of $568.3 million, or $2.19 per share.
The reductions in force include positions already eliminated in 2008, the elimination of open positions, staff reductions and attrition. Approximately 80 percent of the staff reductions are complete. The remaining 20 percent are related to operational efficiencies and are expected to be achieved by year-end 2009.
"Our fourth quarter and year-end results reflect the extent to which the current recession has had an impact on our economy," said Mark Furlong, president and chief executive officer of Marshall & Ilsley. "Although these are disappointing results, our excess capital and strong levels of reserves will keep us ahead of the industry’s challenges."
To address its fiscal crisis, the company also announced the following actions:
- The corporation recorded a pre-tax charge of approximately $9 million in the fourth quarter of 2008 in connection with the costs related to the reduction in force.
- The company is cutting other expenses of about $30 million.
- The company slashed its quarterly cash dividend to shareholders to 1 cent per share.
- Proxy officers and all other executive officers will receive no bonuses for 2008.
- Total 2008 annual cash compensation for proxy officers as a group will decline approximately 26 percent from 2007, and a total of 56 percent for the two-year period since 2006.
- Proxy officer and all executive officer salaries will be frozen in 2009 and a broad salary freeze has been instituted for other senior officers.
- The board of directors has reduced the annual cash retainer for directors by 25 percent.
- The corporation also has decreased awards and benefits under a variety of other programs for employees.
"We believe the dividend reduction, the aggressive steps to address credit quality, and the expense initiatives will allow us to maintain a strong capital base as we move through what is looking to be the most severe economic downturn since the Great Depression," Furlong said. "The dividend and staff reductions are particularly painful and difficult decisions to make. However, these actions will help us maintain a strong capital base, which combined with a high level of reserves for loan losses, is essential for M&I to serve its customers, shareholders, employees, and communities. We expect that in the long run the difficult decisions we are announcing today will lay the foundation for a strong and profitable future for M&I."
The net loss available to common shareholders was $1.55 per share for fourth quarter.
M&I has received $1.3 billion in new credit from the federal Troubled Asset Relief Program (TARP) and has initiated a 90-day mortgage foreclosure moratorium for its customers.
M&I’s construction and development portfolio continued to experience deterioration in the estimated collateral values and repayment abilities of some of the corporation’s customers, particularly among small and mid-sized local residential developers.
In a conference call with analysts this morning, Furlong acknowledged that two-thirds of the company’s "non-performing" loans are in the Arizona and the western coast of Florida.
After this morning’s announcement, Standard & Poor’s Ratings Services lowered its long-term counterparty credit rating of Marshall & Ilsley to "BBB+" from "A-."
"The downgrade was triggered by the company’s announcement of another massive loan-loss provision and outsize net loss for fourth-quarter 2008, as asset quality continues to deteriorate," said Charles Rauch, an S&P credit analyst, according to MarketWatch.com.
Moody’s also lowered its outlook for Marshall & Ilsley to "negative," noting the company’s loan deterioration has been fueled by its sizable exposures to residential construction and land development loans.
Bank Mutual rises above financial industry meltdown
Bank Mutual Corp. reported net income in the fourth quarter of $6.2 million, 13 cents per share, up from $4.1 million, 8 cents per share, in the same period a year ago.
For the full year, the Milwaukee-based company’s net income was $17.2 million, or 35 cents per share, up from $17.1 million, 31 cents per share, in 2007.
Michael Crowley Jr., chairman, president, and chief executive officer of Bank Mutual, said, "We are extremely pleased with our company’s performance in 2008 in light of the tremendous upheaval in financial markets and the banking industry in general. Although our earnings for the full year are comparable to last year, our core results showed more improvement, led by a 6% rise in net interest income."
Crowley added, "Our performance in 2008 validates our company’s long-standing commitment to conservative lending and investing, capital strength, and liquidity, which will enable us to continue to meet whatever challenges our industry may face in the near term."
The company’s gains came despite a $6.9 million impairment loss on a mutual fund that invests in mortgage-related securities; a $1.4 million impairment loss related to Federal Home Loan Mortgage Corp. common stock; a $1.3 million loss provision on a loan secured by a completed condominium development project; and an $822,000 valuation allowance for impairment of mortgage servicing rights.
These developments were substantially offset by $7.2 million in gains on the sale of certain mortgage-related securities during the year.