M&T Bank Corporation Announces 2015 Fourth Quarter And Full-Year Profits

BUFFALO, N.Y., Jan. 19, 2016 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for 2015.

GAAP Results of Operations.  Reflecting the impact of merger-related expenses associated with its recent acquisition, M&T's diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the fourth quarter of 2015 were $1.65, compared with $1.92 in the year-earlier quarter and $1.93 in the third quarter of 2015.  GAAP-basis net income in the recent quarter was $271 million, compared with $278 million in the final quarter of 2014 and $280 million in 2015's third quarter.  Expressed as an annualized rate of return on average assets and average common shareholders' equity, GAAP-basis net income for the recent quarter was .93% and 7.22%, respectively, compared with 1.12% and 9.10%, respectively, in the year-earlier quarter and 1.13% and 8.93%, respectively, in the third quarter of 2015.

Commenting on M&T's performance in 2015, René F. Jones, Vice Chairman and Chief Financial Officer, noted, "M&T posted strong financial performance in the fourth quarter, reflecting our recent merger, growth in revenues, controlled expenses and continued solid credit quality, resulting in a 7% increase in diluted net operating earnings per common share from the year-earlier quarter.  We are pleased with all that was accomplished in the quarter.  On November 1, we welcomed our Hudson City colleagues and valued customers into the M&T family.  The full integration of Hudson City's operations will be completed in February after the conversion of the deposit system and branch network.  The merger with Hudson City brings exceptional opportunities for M&T, and we are excited to offer our broad array of products and services to both existing and new customers.  While financial results for the fourth quarter reflect only two months of the operations associated with Hudson City, the acquisition has already had a positive impact on M&T's operating results and capital position, contributing to a 13% rise in tangible book value per share from the 2014 year end."

M&T's fourth quarter results reflect its acquisition of Hudson City Bancorp, Inc. ("Hudson City"), effective November 1, 2015, including the payment of cash consideration of $2.1 billion and the issuance of 25,953,950 common shares.  Results of the operations acquired from Hudson City have been reflected in M&T's results since the acquisition date.  Assets acquired in the transaction totaled approximately $34.6 billion, including $19.0 billion of loans and $7.9 billion of investment securities, while liabilities assumed were $31.5 billion, including $17.9 billion of deposits and $13.2 billion of borrowings.  In early November, M&T restructured its balance sheet by selling $5.8 billion of investment securities obtained in the acquisition and repaying $10.6 billion of borrowings assumed in the transaction.  Merger-related expenses incurred during the final 2015 quarter aggregated $61 million after-tax effect, or $.40 of diluted earnings per common share.

For the full year of 2015, diluted earnings per common share were $7.18, compared with $7.42 for 2014.  Net income totaled $1.08 billion in 2015, up from $1.07 billion in 2014.  Expressed as a rate of return on average assets and average common shareholders' equity, net income in 2015 was 1.06% and 8.32%, respectively, compared with 1.16% and 9.08%, respectively, in 2014. 

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 gains and expenses associated with merging acquired operations into M&T, since such items are considered by management to be "nonoperating" in nature.  The amounts of such "nonoperating" expenses are presented in the tables that accompany this release.  Reflected in merger-related expenses in the fourth quarter of 2015 was a provision for credit losses of $21 million.  GAAP requires that acquired loans be recorded at estimated fair value, which includes the use of interest rate and credit loss assumptions to project estimated cash flows.  GAAP also provides that an allowance for credit losses associated with probable incurred losses on loans acquired at a premium also be recognized.  Accordingly, M&T recorded a $21 million provision related to such loans obtained in the Hudson City acquisition.  Given the requirement to recognize such losses above and beyond the impact of forecasted losses used in determining the fair value of acquired loans, M&T considers that provision to be a merger-related expense.  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. 

Diluted net operating earnings per common share were $2.09 in the fourth quarter of 2015, improved from $1.95 in each of the year-earlier period and the third quarter of 2015.  Net operating income for 2015's final quarter rose to $338 million, up 20% and 19% from $282 million and $283 million in the fourth quarter of 2014 and the third quarter of 2015, respectively.  For the quarter ended December 31, 2015, net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was 1.21% and 13.26%, respectively, compared with 1.18% and 13.55%, respectively, in the similar 2014 period and 1.18% and 12.98%, respectively, in the third quarter of 2015.

For the year ended December 31, 2015, diluted net operating earnings per common share were $7.74, up 2% from $7.57 in 2014.  Net operating income in 2015 rose 6% to $1.16 billion from $1.09 billion in 2014.  Net operating income in 2015 expressed as a  rate of return on average tangible assets and average tangible common shareholders' equity was 1.18% and 13.00%, respectively, compared with 1.23% and 13.76%, respectively, in 2014.

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis aggregated $813 million in the fourth quarter of 2015, up 18% from $688 million earned in the year-earlier period and 16% higher than $699 million recorded in the third quarter of 2015.  The growth in such income in the recent quarter resulted from higher earning assets.  Average earning assets rose to $103.6 billion in the recent quarter, 18% above $88.0 billion in the fourth quarter of 2014 and 17% higher than $88.4 billion in 2015's third quarter.  Those increases were predominantly the result of the Hudson City acquisition that added approximately $14.6 billion to average earning assets in the recent quarter.  Also reflective of the Hudson City acquisition, the net interest margin was 3.12% in 2015's fourth quarter, compared with 3.10% in the final quarter of 2014 and 3.14% in the third quarter of 2015.  Net interest income on a taxable-equivalent basis totaled $2.87 billion for the full-year 2015, 6% higher than $2.70 billion in 2014.  That improvement resulted from a $9.5 billion increase in average earning assets, partially offset by a narrowing of the net interest margin to 3.14% in 2015 from 3.31% in 2014.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $58 million during the fourth quarter of 2015, compared with $33 million in the year-earlier quarter and $44 million in the third quarter of 2015.  Net charge-offs of loans were $36 million during the recent quarter, compared with $32 million in the final quarter of 2014 and $40 million in the third quarter of 2015.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .18% and .19% in the fourth quarter of 2015 and 2014, respectively, and .24% in 2015's third quarter.  The provision for credit losses was $170 million for the year ended December 31, 2015, compared with $124 million in 2014.  Net loan charge-offs during 2015 and 2014 totaled $134 million and $121 million, respectively, or .19% of average loans outstanding in each of those years.  As already noted, a $21 million provision was recorded in the fourth quarter of 2015, in accordance with GAAP, related to loans obtained in the Hudson City acquisition that had a fair value in excess of outstanding principal.  GAAP provides that an allowance for credit losses on such loans be recorded beyond the recognition of the fair value of the loans at the acquisition date. 

Loans classified as nonaccrual were $799 million, or .91% of total loans outstanding at December 31, 2015, compared with $799 million or 1.20% a year earlier and $787 million or 1.15% at September 30, 2015.  Assets taken in foreclosure of defaulted loans were $195 million at the end of 2015, compared with $64 million and $66 million at December 31, 2014 and September 30, 2015, respectively.  The higher level of such assets at the 2015 year-end resulted from residential real estate properties obtained in the Hudson City 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 totaled $956 million at December 31, 2015, compared with $920 million a year earlier and $934 million at September 30, 2015.  The allowance expressed as a percentage of outstanding loans was 1.09% at the end of 2015, compared with 1.38% at December 31, 2014 and 1.36% at September 30, 2015.  The decline in that ratio from September 30, 2015 and December 31, 2014 reflects the impact of residential mortgage loans obtained in the Hudson City acquisition. 

Noninterest Income and Expense.  Noninterest income totaled $448 million in the recently completed quarter, compared with $452 million in the fourth quarter of 2014 and $440 million in the third quarter of 2015.  The modest decline as compared with the final 2014 quarter resulted from lower trust income and residential mortgage banking revenues associated with loan servicing activities, partially offset by higher credit-related fees.  The decline in trust income was predominantly the result of the second quarter 2015 sale of M&T's trade processing business within its retirement services division.  Contributing to the recent quarter's increase in noninterest income as compared with the immediately preceding quarter were higher commercial mortgage banking revenues and credit-related fees.    

Noninterest income aggregated $1.83 billion and $1.78 billion during the years ended December 31, 2015 and 2014, respectively.  Reflected in that improvement were higher commercial mortgage banking revenues and a $45 million gain from the sale of M&T's trade processing business that was partially offset by lower trust income associated with that divested business.

Noninterest expense in the final quarter of 2015 totaled $786 million, compared with $666 million in the year-earlier quarter and $654 million in the third quarter of 2015.  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 $701 million in  the fourth quarter of 2015, compared with $659 million in the year-earlier quarter and $650 million in the third quarter of 2015.  The most significant factor for the higher level of operating expenses in the recent quarter was the impact of the operations obtained in the Hudson City acquisition. 

For the year ended December 31, 2015, noninterest expenses totaled $2.82 billion, compared with $2.69 billion in the previous year.  Noninterest operating expenses were $2.72 billion in 2015 and $2.66 billion in 2014.  That increase reflects noninterest operating expenses associated with Hudson City.

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), measures the relationship of operating expenses to revenues.  M&T's efficiency ratio was 55.5% in the recent quarter, compared with 57.8% in the year-earlier quarter and 57.1% in the third quarter of 2015.  The efficiency ratio for the full year 2015 was 58.0%, compared with 59.3% in 2014.  

Balance Sheet.  M&T had total assets of $122.8 billion at December 31, 2015, up 27% from $96.7 billion a year earlier.  Investment securities were $15.7 billion at the recent year-end, up $2.7 billion or 20% from December 31, 2014.  Loans and leases, net of unearned discount, rose 31% to $87.5 billion at the 2015 year-end from $66.7 billion at December 31, 2014.     

Total deposits were $92.0 billion at the recent year-end, up 25% or $18.4 billion from $73.6 billion at December 31, 2014. 

Total shareholders' equity rose $3.8 billion or 31% to $16.2 billion at December 31, 2015 from $12.3 billion a year earlier, representing 13.17% and 12.76%, respectively, of total assets.  Common shareholders' equity was $14.9 billion, or $93.60 per share, at December 31, 2015, compared with $11.1 billion, or $83.88 per share, at December 31, 2014.  Tangible equity per common share rose 13% to $64.28 at December 31, 2015 from $57.06 a year earlier.  Common shareholders' equity per share and tangible equity per common share were $87.67 and $61.22, respectively, at September 30, 2015.  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 estimates that the ratio of Common Equity Tier 1 to risk-weighted assets under the transitional capital rules that became effective for M&T on January 1, 2015 was approximately 11.06% at the 2015 year-end. 

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 #25536663.  The conference call will be webcast live through M&T's website at http://ir.mandtbank.com/events.cfm.  A replay of the call will be available through January 22, 2016 by calling (800)585-8367, or (404)537-3406 for international participants, and by making reference to ID #25536663.  The event will also be archived and available by 7:00 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 banking offices in New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia 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 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.