M&T Bank Corporation Announces 2020 Fourth Quarter And Full-Year Results

BUFFALO, N.Y., Jan. 21, 2021 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for 2020.

GAAP Results of Operations. Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") were $3.52 in the fourth quarter of 2020, compared with $3.60 in the year-earlier quarter and $2.75 in the third quarter of 2020. GAAP-basis net income was $471 million in the recent quarter, $493 million in the final quarter of 2019 and $372 million in the third 2020 quarter. GAAP-basis net income in the fourth quarter of 2020 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.30% and 12.07%, respectively, compared with 1.60% and 12.95%, respectively, in the corresponding 2019 period and 1.06% and 9.53%, respectively, in the third quarter of 2020. 

Darren J. King, M&T's Executive Vice President and Chief Financial Officer, commented, "In what has been an extremely challenging year, M&T responded quickly and effectively to take on those challenges while continuing to meet the needs of our customers through the extraordinary efforts of our employees.  Although the effects of the pandemic and the low interest rate environment impacted M&T's financial results in 2020, we were pleased with the growth experienced in the mortgage banking and trust businesses, as well as the role we played in providing our customers the opportunity to participate in the Paycheck Protection Program."

For the years ended December 31, 2020 and 2019, diluted earnings per common share were $9.94 and $13.75, respectively. GAAP-basis net income in 2020 totaled $1.35 billion, compared with $1.93 billion in 2019. Expressed as a rate of return on average assets and average common shareholders' equity, GAAP-basis net income in 2020 was 1.00% and 8.72%, respectively, and 1.61% and 12.87%, respectively, in 2019.

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 and core deposit and other intangible asset balances, net of applicable deferred tax amounts) and expenses associated with merging acquired operations into M&T (when incurred), 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.  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 $3.54 in the final quarter of 2020, compared with $3.62 in the fourth quarter of 2019 and $2.77 in the third quarter of 2020.  Net operating income aggregated $473 million in the recent quarter, $496 million in the fourth quarter of 2019 and $375 million in 2020's third quarter.  Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income in the fourth quarter of 2020 was 1.35% and 17.53%, respectively, 1.67% and 19.08%, respectively, in the similar quarter of 2019 and 1.10% and 13.94%, respectively, in the third quarter of 2020.

Diluted net operating earnings per common share for the years ended December 31, 2020 and 2019 were $10.02 and $13.86, respectively.  Net operating income in 2020 was $1.36 billion, compared with $1.94 billion in 2019.  Net operating income expressed as a rate of return on average tangible assets and average tangible common shareholders' equity was 1.04% and 12.79%, respectively, in 2020 and 1.69% and 19.08%, respectively, in 2019.

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis totaled $993 million in the recent quarter, compared with $1.01 billion in the fourth quarter of 2019. That decline resulted from a 64 basis point narrowing of the net interest margin, to 3.00% in the fourth quarter of 2020 from 3.64% in the year-earlier quarter, that was partially offset by the impact of a $21.3 billion or 19% increase in average earning assets to $131.9 billion in the recent quarter from $110.6 billion in the final quarter of 2019.   In the third quarter of 2020, taxable-equivalent net interest income was $947 million, the net interest margin was 2.95% and average earning assets were $127.7 billion.  During the recent quarter, $29 million of interest income was recognized from the accelerated amortization of deferred fees related to payments received on Paycheck Protection Program ("PPP") loans originated by M&T during 2020.  At December 31, 2020 and September 30, 2020, outstanding balances of PPP loans totaled $5.4 billion and $6.5 billion, respectively.  As compared with the final quarter of 2019, the recent quarter's narrowing of the net interest margin resulted largely from lower yields on loans and deposits held at the Federal Reserve Bank of New York, while the rise in average earning assets reflected higher balances of those same asset types. The improvement in the net interest margin in the recent quarter as compared with 2020's third quarter reflects a five basis point decline in average rates paid to customers on deposits, while the impacts of accelerated amortization of deferred PPP fees and increased levels of low-yielding balances held at the Federal Reserve Bank of New York were largely offsetting.  Taxable-equivalent net interest income for the full year of 2020 was $3.88 billion and in 2019 was $4.15 billion. The net interest margin was 3.16% in 2020 and 3.84% in 2019.

Provision for Credit Losses/Asset Quality.  The provision for credit losses totaled $75 million in the fourth quarter of 2020, compared with $54 million in the year-earlier quarter and $150 million in 2020's third quarter. The provision was $800 million for the year ended December 31, 2020, compared with $176 million in 2019.  The significantly higher level of the provision in 2020 reflected projections of expected credit losses under the provisions of new accounting guidance that became effective on January 1, 2020. Those projections included estimates of the economic impact of the COVID-19 pandemic. Prior to 2020, the provision for credit losses reflected incurred losses only.  Net loan charge-offs were $97 million during the recent quarter, compared with $41 million in the final quarter of 2019 and $30 million in the third quarter of 2020. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .39% and .18% in the final quarters of 2020 and 2019, respectively, and .12% in the third quarter of 2020. Net loan charge-offs during 2020 and 2019 aggregated $247 million and $144 million, respectively, representing .26% and .16%, respectively, of average loans outstanding.

Loans classified as nonaccrual rose to $1.89 billion or 1.92% of total loans outstanding at December 31, 2020 from $1.24 billion or 1.26% of total loans at September 30, 2020.  That significant increase reflected the continuing impact of the pandemic on borrowers' ability to make contractual payments on their loans, particularly loans collateralized by hotels.  Of the $653 million rise in nonaccrual loans during the fourth quarter of 2020, $530 million were associated with hotels.  Nonaccrual loans outstanding at December 31, 2019 were $963 million or 1.06% of total loans. The adoption of the new accounting guidance previously mentioned resulted in an increase in nonaccrual loans on January 1, 2020 of $171 million.  Assets taken in foreclosure of defaulted loans were $35 million at December 31, 2020, $86 million at December 31, 2019 and $50 million at  September 30, 2020.

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 $1.74 billion or 1.76% of loans outstanding at December 31, 2020, compared with $1.05 billion or 1.16% at December 31, 2019, $1.76 billion or 1.79% at September 30, 2020 and $1.18 billion or 1.30% as of January 1, 2020 following adoption of the current expected credit loss accounting rules. The adoption of the amended accounting guidance resulted in an increase to the allowance of $132 million on January 1, 2020. The allowance at December 31, 2020 and September 30, 2020 represented 1.86% and 1.91%, respectively, of total loans on those dates, excluding outstanding balances of PPP loans.

Noninterest Income and Expense.  Noninterest income was $551 million in the fourth quarter of 2020 and $521 million in each of the year-earlier quarter and the third quarter of 2020. The improvement when compared with the final 2019 quarter resulted largely from a $30 million distribution from Bayview Lending Group LLC and  higher mortgage banking revenues. Partially offsetting those factors were declines in service charges on deposit accounts, loan syndication fees and trading account and foreign exchange gains. The higher income in the recent quarter as compared with the third quarter of 2020 predominantly reflects the distribution from Bayview Lending Group LLC and increased commercial mortgage banking revenues, partially offset by a decline in residential mortgage banking revenues.

Noninterest income improved to $2.09 billion in 2020 from $2.06 billion in 2019. A 24% rise in mortgage banking revenues, higher trust income and increased income from Bayview Lending Group LLC were partially offset by declines in service charges on deposit accounts, trading account and foreign exchange gains and loan syndication fees.

Noninterest expense totaled $845 million in the final quarter of 2020, compared with $824 million in the corresponding quarter of 2019 and $827 million in the third quarter of 2020.  Excluding expenses considered to be nonoperating in nature, such as amortization of core deposit and other intangible assets, noninterest operating expenses were $842 million in the recent quarter, $819 million in the fourth quarter of 2019 and $823 million in 2020's third quarter. Significant factors contributing to the higher level of noninterest expenses in the recent quarter as compared with the year-earlier quarter were higher costs for salaries and employee benefits, changes  in the valuation allowance for capitalized residential mortgage servicing rights and $14 million of expenses related to the planned transition of the support for M&T's retail brokerage and advisory business to the platform of LPL Financial, partially offset by lower costs for professional and outside services, advertising and marketing, and travel and entertainment. The valuation allowance for capitalized residential mortgage servicing rights was increased by $3 million in the fourth quarter of 2020, compared with a reduction in the allowance of $16 million in the final 2019 quarter.  When compared with the third quarter of 2020, the recent quarter increase in noninterest expenses largely reflected expenses for the retail brokerage and advisory business support transition and higher costs for advertising and marketing.

For the year ended December 31, 2020, noninterest expense aggregated $3.39 billion, compared with $3.47 billion in 2019. Noninterest operating expenses were $3.37 billion and $3.45 billion in 2020 and 2019, respectively. Contributing to the lower level of such expenses in 2020 were decreased costs for professional and outside services, legal-related matters, advertising and marketing, travel and entertainment, and a $48 million charge in the second quarter of 2019 associated with the sale of an equity investment in an asset manager. Those factors were partially offset by higher costs for salaries and employee benefits, outside data processing and software, increases to the valuation allowance for capitalized residential mortgage servicing rights and the transition expenses noted earlier.

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 54.6% in the fourth quarter of 2020, 53.1% in the year-earlier quarter and 56.2% in the third quarter of 2020. The efficiency ratio for the full year 2020 was 56.3%, compared with 55.7% in 2019.

Balance Sheet.  M&T had total assets of $142.6 billion at December 31, 2020, compared with $119.9 billion and $138.6 billion at December 31, 2019 and September 30, 2020, respectively. Loans and leases, net of unearned discount, were $98.5 billion at December 31, 2020, up from $90.9 billion at December 31, 2019 and $98.4 billion at September 30, 2020. The increase in total loans and leases at the recent quarter-end as compared with the fourth quarter of 2019 was driven largely by growth in commercial loans of $3.7 billion and commercial real estate loans of $2.1 billion. The commercial loan growth reflects loans originated as part of the PPP, which totaled $5.4 billion at December 31, 2020. Total deposits rose to $119.8 billion at the recent quarter-end, compared with $94.8 billion at December 31, 2019 and $115.2 billion at September 30, 2020. The higher levels of deposits at the two most recent quarter-ends as compared with December 31, 2019 reflect increased commercial and consumer deposits, as well as higher deposits associated with residential mortgage servicing activities.

Total shareholders' equity was $16.2 billion, or 11.35% of total assets at December 31, 2020, $15.7 billion, or 13.11% at December 31, 2019 and $16.1 billion, or 11.61% at September 30, 2020. Common shareholders' equity was $14.9 billion, or $116.39 per share, at December 31, 2020, compared with $14.5 billion, or $110.78 per share, a year-earlier and $14.9 billion, or $115.75 per share, at September 30, 2020. Tangible equity per common share was $80.52 at December 31, 2020, $75.44 at December 31, 2019 and $79.85 at September 30, 2020. 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 regulatory capital rules was approximately 10.0% at December 31, 2020, up from 9.81% three months earlier and 9.73% at December 31, 2019.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss fourth quarter 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 #1884289.  The conference call will be webcast live through M&T's website at https://ir.mtb.com/events-presentations. A replay of the call will be available through Thursday, January 28, 2021 by calling (800) 585-8367, or (404) 537-3406 for international participants, and by making reference to the ID #1884289.  The event will also be archived and available by 3:00 p.m. today on M&T's website at https://ir.mtb.com/events-presentations.

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 and related conference call may contain 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.  Any statement that does not describe historical or current facts is a forward-looking statement, including statements regarding the potential effects of the Coronavirus Disease 2019 ("COVID-19") pandemic on M&T's business, financial condition, liquidity and results of operations. 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; risks and uncertainties relating to the impact of the COVID-19 pandemic; 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 or regulation; 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, regulatory agencies or legislation; 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.

Further, statements about the potential effects of the COVID-19 pandemic on M&T's business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond M&T's control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on customers, clients, third parties and M&T.

M&T provides further detail regarding these risks and uncertainties in its 2019 Form 10-K and subsequent Form 10-Qs, including in the respective Risk Factors sections of such reports, as well as in subsequent SEC filings. Forward-looking statements speak only as of the date made, and M&T does not assume any duty and does not undertake to update forward-looking statements.    

SOURCE M&T Bank Corporation

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