M&T Bank Corporation Announces 2011 Fourth Quarter and Full-Year Profits

BUFFALO, N.Y., Jan. 17, 2012 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for 2011.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the fourth quarter of 2011 were $1.04.  On the same basis, net income in the recent quarter totaled $148 million.  Expressed as an annualized rate of return on average assets and average common shareholders' equity, GAAP-basis net income for the fourth quarter of 2011 was .75% and 6.12%, respectively.

Several noteworthy items are reflected in M&T's results for the recently completed quarter.  A $79 million other-than-temporary impairment charge was recorded during the quarter related to M&T's 20% investment in Bayview Lending Group LLC ("BLG").  While the small balance commercial real estate securitization market that BLG previously operated in continues to be stagnant, Bayview's asset management operations continue to grow and its business of managing capital in the distressed real estate market is performing well.  Nevertheless, management increased its estimate of the timeframe over which M&T could reasonably anticipate recovery of the previously recorded investment amount and, as a result, concluded that the investment was other-than-temporarily impaired.  That investment was written-down to its estimated fair value of $115 million.  The impairment charge was recorded in "other costs of operations."  During December 2011, M&T received $55 million in cash resulting from the full settlement of a lawsuit initiated by M&T in 2008 against Deutsche Bank Securities, Inc. and several other parties.  M&T sought damages arising from a 2007 investment in collateralized debt obligations and alleged that the quality of the investment was not as represented.  Subsequently, M&T made a $30 million tax-deductible cash contribution to The M&T Charitable Foundation, a private charitable foundation that has supported thousands of not-for-profit organizations to improve the quality of life throughout the communities M&T serves.  Finally, an other-than-temporary impairment charge was recorded during the recent quarter on certain mortgage-backed investment securities, which totaled $25 million.  The net impact of those four noteworthy items reduced M&T's fourth quarter 2011 net income and diluted earnings per common share by $48 million and $.38, respectively.

Diluted earnings per common share were $1.59 and $1.32 in the fourth quarter of 2010 and the third quarter of 2011, respectively.  Net income for those respective quarters was $204 million and $183 million.  Net income expressed as an annualized rate of return on average assets and average common shareholders' equity for the final 2010 quarter was 1.18% and 10.03%, respectively, compared with .94% and 7.84%, respectively, in the third quarter of 2011.

For the year ended December 31, 2011, diluted earnings per common share were $6.35, up 12% from $5.69 for the year ended December 31, 2010.  Net income for 2011 and 2010 was $859 million and $736 million, respectively.  Expressed as a rate of return on average assets and average common shareholders' equity, net income was 1.16% and 9.67%, respectively, in 2011, compared with 1.08% and 9.30%, respectively, in 2010. 

Commenting on M&T's performance in 2011, Rene F. Jones, Executive Vice President and Chief Financial Officer, noted, "We were quite pleased with our operating performance during the quarter, most notably the significant loan growth we experienced in our commercial portfolios.  In total, average loans were up an annualized 6% from the third quarter, while period-end loans jumped $1.7 billion or an annualized 12% from September 30 to December 31.  The past year was highlighted by many meaningful accomplishments.  The successful consummation of the acquisition of Wilmington Trust and the conversion of the major loan and deposit systems was significant, and we started to see our projected cost savings materialize during the fourth quarter.  The full-year 12% growth in earnings per share in 2011 was impressive given the economic headwinds and the changing regulatory environment for banks."

Mr. Jones further commented, "With the favorable outcome of our CDO litigation, we were very pleased to make a significant contribution to The M&T Charitable Foundation that will allow it to continue supporting the communities where M&T does business.  We believe that the strength of our bank is directly linked to the health of the communities we serve."

Supplemental Reporting of Non-GAAP Results of Operations.  M&T consistently provides supplemental reporting of its results on a "net operating" or "tangible" basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and expenses and gains associated with merging acquired operations into M&T, since such amounts are considered by management to be "nonoperating" in nature.  Although "net operating income" as defined by M&T is not a GAAP measure, M&T's management believes that this information helps investors understand the effect of acquisition activity in reported results.  Reconciliations of GAAP to non-GAAP measures are provided in the financial tables included herein.

Diluted net operating earnings per common share, which exclude the impact of amortization of core deposit and other intangible assets and merger-related gains and expenses, were $1.20 in the recent quarter, compared with $1.52 in the corresponding 2010 period and $1.53 in the third quarter of 2011.  Net operating income for the fourth quarters of 2011 and 2010 was $168 million and $196 million, respectively, compared with $210 million in the third quarter of 2011.  For the three months ended December 31, 2011, net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was .89% and 12.36%, respectively, compared with 1.20% and 18.43% in the similar period of 2010 and 1.14% and 16.07%, respectively, in the third quarter of 2011.

Diluted net operating earnings per common share rose 12% to $6.55 in 2011 from $5.84 in 2010.  Net operating income for 2011 and 2010 aggregated $884 million and $755 million, respectively. Net operating income in 2011 expressed as a rate of return on average tangible assets and average tangible common shareholders' equity was 1.26% and 17.96%, respectively, compared with 1.17% and 18.95%, respectively, in 2010.

Taxable-equivalent Net Interest Income.  Taxable-equivalent net interest income aggregated $625 million in the fourth quarter of 2011, up from $580 million in the year-earlier quarter and $623 million in the third quarter of 2011.  The growth in such income in the recent quarter as compared with the year-earlier quarter resulted from higher average earning assets, partially offset by a narrowing of the net interest margin.  Earning assets rose 15% to $68.8 billion in the recent quarter from $59.7 billion in the fourth quarter of 2010, predominantly due to the impact of the May 16, 2011 acquisition of Wilmington Trust Corporation ("Wilmington Trust").  That transaction added approximately $9.6 billion of earning assets on the acquisition date.  The net interest margin was 3.60% in the recent quarter, compared with 3.85% in the last quarter of 2010.  The narrowing of the net interest margin in the recent quarter as compared with the year-earlier quarter reflected the impact of the Wilmington Trust transaction, including significantly higher earning balances on deposit at the Federal Reserve.  Growth in average earning assets of $1.6 billion from the third to the fourth quarter of 2011 was largely offset by an 8 basis point narrowing of the net interest margin.  Net interest income on a taxable-equivalent basis totaled $2.42 billion for the full-year of 2011, 5% higher than $2.29 billion in 2010.  That improvement resulted from a $5.0 billion increase in average earning assets, partially offset by a narrowing of the net interest margin to 3.73% in 2011 from 3.84% in 2010.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $74 million during the recently completed quarter, compared with $85 million in the corresponding 2010 quarter and $58 million in the third quarter of 2011.  Net charge-offs of loans were $74 million in the fourth quarter of 2011, representing an annualized .50% of average loans outstanding, compared with $77 million or .60% in the year-earlier quarter and $57 million or .39% in 2011's third quarter.  The provision for credit losses declined 27% to $270 million for the year ended December 31, 2011 from $368 million in 2010.  Net loan charge-offs in 2011 totaled $265 million, or .47% of average loans outstanding, compared with $346 million, or .67% of average loans in 2010.

Loans classified as nonaccrual totaled $1.10 billion, or 1.83% of total loans at December 31, 2011, improved from $1.14 billion or 2.19% a year earlier and $1.11 billion or 1.91% at September 30, 2011.

Assets taken in foreclosure of defaulted loans were $157 million at December 31, 2011, compared with $220 million and $150 million at December 31, 2010 and September 30, 2011, respectively.  The decline in such assets at the two most recent quarter-ends as compared with December 31, 2010 resulted from the sale during the second quarter of 2011 of a commercial real estate property in New York City with a carrying value of $99 million.  Reflected in assets taken in foreclosure of defaulted loans at December 31 and September 30, 2011 were $48 million and $51 million, respectively, of assets related to the Wilmington Trust acquisition.

Allowance for Credit Losses.  M&T regularly performs detailed analyses of individual borrowers and portfolios for purposes of assessing the adequacy of the allowance for credit losses.  As a result of those analyses, the allowance for credit losses was $908 million at December 31, 2011, compared with $903 million a year earlier and $909 million at September 30, 2011.  The allowance expressed as a percentage of outstanding loans was 1.51% at the recent quarter-end, compared with 1.74% at December 31, 2010 and 1.56% at September 30, 2011.  The decline from December 31, 2010 reflects the impact of loans obtained in the Wilmington Trust acquisition for which GAAP requires that expected credit losses be reflected in the estimation of loan fair value as of the acquisition date and prohibits any carry-over of an allowance for credit losses.  The remaining portion of that fair valuation adjustment to the Wilmington Trust loans which is not part of the allowance for credit losses was $485 million at December 31, 2011.

Noninterest Income and Expense.  Noninterest income totaled $398 million in the recent quarter, compared with $287 million and $368 million in the fourth quarter of 2010 and the third quarter of 2011, respectively.  Reflected in those amounts were net losses from investment securities of $25 million, $27 million and $10 million, each predominantly due to other-than-temporary impairment charges.  Also included in noninterest income in the recent quarter was the $55 million litigation settlement related to M&T's 2007 investment in certain collateralized debt obligations, as previously noted.  Noninterest income in 2010's final quarter reflected a $28 million gain realized on M&T's FDIC-assisted acquisition of select assets and liabilities of K Bank.

Excluding the specific items referred to in the preceding paragraph, noninterest income was $368 million in the fourth quarter of 2011, compared with $286 million in the year-earlier quarter and $378 million in the third quarter of 2011.  The improvement in the recent quarter as compared with the fourth quarter of 2010 was predominantly attributable to the Wilmington Trust transaction, while the decline from the third quarter of 2011 was due to lower fees for providing consumer deposit services resulting from the Durbin amendment, which limits debit card interchange fees.

Noninterest income aggregated $1.58 billion and $1.11 billion during the years ended December 31, 2011 and 2010, respectively.  The predominant contributor to the rise in noninterest income in 2011 as compared with 2010 was higher trust income resulting from the acquisition of Wilmington Trust. Net gains from investment securities, the previously noted litigation settlement and merger-related gains also contributed to the year-over-year improvement.  

Noninterest expense in the fourth quarter of 2011 totaled $740 million, compared with $469 million in the year-earlier quarter and $662 million in 2011's third quarter.  Included in such amounts are expenses considered to be nonoperating in nature consisting of amortization of core deposit and other intangible assets and merger-related expenses.  Exclusive of those expenses, noninterest operating expenses were $706 million in the fourth quarter of 2011, compared with $455 million and $619 million in the fourth quarter of 2010 and the third quarter of 2011, respectively.  The most significant factors for the higher level of operating expenses in the recent quarter as compared with the fourth quarter of 2010 were the impact of the operations obtained in the Wilmington Trust acquisition in May 2011, the aforementioned $79 million impairment charge related to BLG, the $30 million charitable contribution and a 52% increase in FDIC assessments that was largely attributable to a regulatory mandated change in the assessment methodology.  Noninterest operating expenses in the recent quarter as compared with the immediately preceding quarter also reflected the realization of significant cost savings due to the August conversion of the banking operations of Wilmington Trust.  Specifically, salaries and employee benefits declined $13 million from 2011's third quarter.

For the year ended December 31, 2011, noninterest expense aggregated $2.48 billion, compared with $1.91 billion in 2010.  Excluding those previously noted expenses considered to be nonoperating in nature, noninterest operating expenses were $2.33 billion in 2011 and $1.86 billion in 2010.  The increase in such expenses was largely attributable to the impact of the operations obtained in the Wilmington Trust acquisition, the impairment charge related to BLG, the charitable contribution and a 26% increase in FDIC assessments.

The efficiency ratio, or noninterest operating expenses divided by the sum of taxable-equivalent net interest income and noninterest income (exclusive of gains and losses from bank investment securities and merger-related gains), measures the relationship of operating expenses to revenues.  M&T's efficiency ratio was 67.4% in the fourth quarter of 2011, compared with 52.5% in the year-earlier quarter and 61.8% in the third quarter of 2011.  M&T's efficiency ratio for the years ended December 31, 2011 and 2010 was 60.4% and 53.7%, respectively.  Excluding the $79 million impairment charge related to M&T's investment in BLG, the $55 million litigation settlement and the $30 million charitable contribution in the fourth quarter of 2011, the efficiency ratio for the three months and twelve months ended December 31, 2011 would have been 60.1% and 58.4%, respectively.

Balance Sheet.  M&T had total assets of $77.9 billion at December 31, 2011, compared with $68.0 billion a year earlier.  Loans and leases, net of unearned discount, totaled $60.1 billion at the 2011 year-end, up from $52.0 billion at December 31, 2010.  Outstanding loans and leases at the end of 2011 grew $1.7 billion from $58.4 billion at September 30, 2011.  That growth reflects increases in commercial loans, commercial real estate loans and residential real estate loans.  Total deposits were $59.4 billion at December 31, 2011, 19% higher than $49.8 billion at the end of 2010. 

Total shareholders' equity rose 11% to $9.3 billion at December 31, 2011 from $8.4 billion a year earlier, representing 11.90% and 12.29% respectively, of total assets.  Common shareholders' equity was $8.4 billion, or $66.82 per share at December 31, 2011, compared with $7.6 billion, or $63.54 per share, a year earlier.  Tangible equity per common share rose 14% to $37.79 at December 31, 2011 from $33.26 a year earlier.  In the calculation of tangible equity per common share, common shareholders' equity is reduced by the carrying values of goodwill and core deposit and other intangible assets, net of applicable deferred tax balances.  M&T's tangible common equity to tangible assets ratio was 6.40% at December 31, 2011, compared with 6.19% and 6.53% at December 31, 2010 and September 30, 2011, respectively. M&T's estimated Tier 1 common ratio was 6.86% at December 31, 2011, compared with 6.51% and 6.87% at December 31, 2010 and September 30, 2011, respectively.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss fourth quarter and full-year financial results today at 11:00 a.m. Eastern Time.  Those wishing to participate in the call may dial (877)780-2276.  International participants, using any applicable international calling codes, may dial (973)582-2700.  Callers should reference M&T Bank Corporation or the conference ID #41414631.  The conference call will be webcast live on M&T's website at http://ir.mandtbank.com/events.cfm.  A replay of the call will be available until January 19, 2012 by calling (800)585-8367, or (404)537-3406 for international participants, and by making reference to ID #41414631.  The event will also be archived and available by 5:00 p.m. today on M&T's website at http://ir.mandtbank.com/events.cfm.

M&T is a financial holding company headquartered in Buffalo, New York.  M&T's principal banking subsidiary, M&T Bank, operates bank branches in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware and the District of Columbia. Trust-related services are provided by M&T's Wilmington Trust-affiliated companies and by M&T Bank.

Forward-Looking Statements.  This news release contains forward-looking statements that are based on current expectations, estimates and projections about M&T's business, management's beliefs and assumptions made by management.  These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

Future Factors include changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations, credit losses and market values on loans, collateral securing loans, and other assets; sources of liquidity; common shares outstanding; common stock price volatility; fair value of and number of stock-based compensation awards to be issued in future periods; the impact of changes in market values on trust-related revenues; legislation affecting the financial services industry as a whole, and M&T and its subsidiaries individually or collectively, including tax legislation; regulatory supervision and oversight, including monetary policy and capital requirements; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of pending and future litigation and governmental proceedings, including tax-related examinations and other matters; continued availability of financing; financial resources in the amounts, at the times and on the terms required to support M&T and its subsidiaries' future businesses; and material differences in the actual financial results of merger, acquisition and investment activities compared with M&T's initial expectations, including the full realization of anticipated cost savings and revenue enhancements.

These are representative of the Future Factors that could affect the outcome of the forward-looking statements.  In addition, such statements could be affected by general industry and market conditions and growth rates, general economic and political conditions, either nationally or in the states in which M&T and its subsidiaries do business, including interest rate and currency exchange rate fluctuations, changes and trends in the securities markets, and other Future Factors.

SOURCE M&T Bank Corporation