M&T Bank Corporation Announces First Quarter Profits

BUFFALO, N.Y., April 16, 2012 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended March 31, 2012.

GAAP Results of Operations. Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the first quarter of 2012 were $1.50, compared with $1.59 in the year-earlier quarter. GAAP-basis net income in each of the initial quarters of 2012 and 2011 was $206 million. GAAP-basis net income for the first three months of 2012 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.06% and 9.04%, respectively, compared with 1.23% and 10.16%, respectively, in the similar 2011 period.

The recent quarter's earnings as compared with the first quarter of 2011 reflect higher net interest income, lower credit costs, and higher trust income and residential mortgage banking revenues. While not significant in the recent quarter, last year's earnings were lifted by $39 million of realized gains from the sale of investment securities ($24 million after-tax effect, or $.20 of diluted earnings per common share), as M&T repositioned its balance sheet in anticipation of the acquisition of Wilmington Trust Corporation ("Wilmington Trust").

Commenting on the recent quarter's performance, Rene F. Jones, Executive Vice President and Chief Financial Officer, said, "M&T's first quarter results reflect our continued progress with the integration of Wilmington Trust, lower credit costs and improvement in several revenue categories, including net interest income, mortgage banking revenues, trust income and fees for providing deposit services. Additionally, average loans grew an impressive 10% on an annualized basis as compared with the fourth quarter of 2011. The Tier 1 common ratio increased 18 basis points from the 2011 year-end to 7.04% at the end of the first quarter. Our strong first quarter positions us well for 2012."

Diluted earnings per common share and GAAP-basis net income in last year's fourth quarter were $1.04 and $148 million, respectively. GAAP-basis net income in that quarter expressed as an annualized rate of return on average assets and average common shareholders' equity was .75% and 6.12%, respectively. Results for the final 2011 quarter reflected several noteworthy items, including: a $79 million (pre-tax effect) other-than-temporary impairment charge related to M&T's 20% investment in Bayview Lending Group LLC ("BLG"); $55 million of income in full settlement of a lawsuit arising from a 2007 investment in collateralized debt obligations; and a $30 million tax-deductible cash contribution to The M&T Charitable Foundation. The after-tax impact of those three items reduced net income in the fourth quarter of 2011 by $33 million, or $.26 of diluted earnings per common share.

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. 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 $1.59 in the recent quarter, compared with $1.67 and $1.20 in the first and fourth quarters of 2011, respectively. Net operating income for the first three months of 2012 totaled $218 million, compared with $216 million and $168 million in the quarters ended March 31, 2011 and December 31, 2011, respectively. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.18% and 16.79%, respectively, in the first quarter of 2012, compared with 1.36% and 20.16% in the year-earlier quarter and .89% and 12.36% in the final 2011 quarter.

Taxable-equivalent Net Interest Income. Taxable-equivalent net interest income increased an annualized 2% to $627 million in the recent quarter from $625 million in the fourth quarter of 2011. That improvement reflects a nine basis point (hundredths of one percent) widening of the net interest margin to 3.69% from 3.60% in the immediately preceding quarter. The wider net interest margin reflects the impact of a $1.41 billion increase in average loans outstanding in 2012's initial quarter, which largely offset a decline in lower yielding balances held at the Federal Reserve Bank of New York. Taxable-equivalent net interest income increased 9% in the first quarter of 2012 from $575 million in the year-earlier quarter. The improvement in such income resulted from an $8.96 billion increase in average earning assets, partially offset by a 23 basis point narrowing of the net interest margin, both of which were attributable to the impact of the Wilmington Trust acquisition on May 16, 2011.

Provision for Credit Losses/Asset Quality. The provision for credit losses was $49 million in the first quarter of 2012, improved from $75 million and $74 million in the first and fourth quarters of 2011, respectively. Net charge-offs of loans during the recent quarter were $48 million, down from $74 million in each of the first and fourth quarters of 2011. Net charge-offs expressed as an annualized percentage of average loans outstanding improved significantly to .32% in the first three months of 2012 from .58% and .50% in the first and fourth quarters of 2011, respectively.

Loans classified as nonaccrual totaled $1.07 billion, or 1.75% of total loans outstanding at March 31, 2012, improved from $1.08 billion or 2.08% a year earlier and $1.10 billion or 1.83% at December 31, 2011.

Assets taken in foreclosure of defaulted loans were $140 million at March 31, 2012, down from $218 million and $157 million at March 31, 2011 and December 31, 2011, respectively. The decline in such assets at the two most recent quarter-ends as compared with March 31, 2011 resulted predominantly 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 March 31, 2012 and December 31, 2011 were $40 million and $48 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 determining the allowance for credit losses. As a result of those analyses, the allowance totaled $909 million at March 31, 2012, compared with $904 million at March 31, 2011 and $908 million at December 31, 2011. The allowance expressed as a percentage of outstanding loans was 1.49% at March 31, 2012, compared with 1.73% and 1.51% at March 31, 2011 and December 31, 2011, respectively.

Noninterest Income and Expense. Noninterest income totaled $377 million in the first quarter of 2012, compared with $314 million and $398 million in the first and fourth quarters of 2011, respectively. Reflected in those amounts were net losses on investment securities of $11 million in the initial 2012 quarter, compared with net gains of $23 million in the first quarter of 2011 and net losses of $25 million in the fourth quarter of 2011. The net losses on investment securities during the recent quarter and the fourth quarter of 2011 were predominantly due to other-than-temporary impairment charges related to certain of M&T's privately issued collateralized mortgage obligations. Partially offsetting the previously noted realized securities gains in the initial 2011 quarter, which totaled $39 million, were $16 million of other-than-temporary impairment charges related to certain of M&T's holdings of privately issued collateralized mortgage obligations.

Excluding gains and losses from investment securities in all periods and the $55 million of income resulting from the litigation settlement in 2011's final quarter, noninterest income totaled $388 million in the recently completed quarter, up from $291 million in the first quarter of 2011 and $368 million in the final 2011 quarter. Contributing to the rise from the year-earlier quarter were higher trust income, predominantly related to the Wilmington Trust acquisition, and mortgage banking revenues. The improvement in such noninterest income as compared with the final 2011 quarter was largely due to higher residential mortgage banking revenues. Contributing to those improved revenues were higher gains on residential real estate loans and commitments to originate loans to be sold. M&T continued its program of retaining residential real estate loans on its balance sheet, effectively reducing mortgage banking revenues by approximately $21 million that would have been recognized had the loans been held for sale. That compares with approximately $11 million of similar impact in last year's final quarter.

Noninterest expense in the first quarter of 2012 totaled $640 million, compared with $500 million and $740 million in the first and fourth quarters of 2011, respectively. 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 $620 million in the recently completed quarter, $483 million in the first quarter of 2011 and $706 million in the final 2011 quarter. The most significant factor for the higher level of operating expenses in the recent quarter as compared with the year-earlier quarter was the impact of the operations obtained in the Wilmington Trust acquisition. The decrease in expenses from the fourth quarter of 2011 was largely the result of the previously noted fourth quarter charges related to the other-than-temporary impairment of M&T's investment in BLG and the $30 million charitable contribution, partially offset by recent quarter seasonally higher costs for stock-based compensation, unemployment insurance, and payroll-related taxes and employer contributions for retirement savings plan benefits related to incentive compensation payments.

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 61.1% in the first quarter of 2012, compared with 55.8% in the year-earlier quarter and 67.4% in the fourth quarter of 2011.

Balance Sheet. M&T had total assets of $79.2 billion at March 31, 2012, up 17% from $67.9 billion a year earlier. Loans and leases, net of unearned discount, increased $8.8 billion or 17% to $60.9 billion at the recent quarter-end from $52.1 billion at March 31, 2011, and were $826 million higher than $60.1 billion at December 31, 2011. Total deposits rose 21% to $60.9 billion at March 31, 2012 from $50.5 billion a year earlier.

Total shareholders' equity increased 11% to $9.4 billion at March 31, 2012 from $8.5 billion at March 31, 2011, representing 11.91% and 12.53%, respectively, of total assets. Common shareholders' equity was $8.6 billion, or $67.64 per share at March 31, 2012, up from $7.8 billion, or $64.43 per share, a year earlier. Tangible equity per common share rose 13% to $38.89 at March 31, 2012 from $34.38 a year earlier. Common shareholders' equity per share and tangible equity per common share were $66.82 and $37.79, respectively, at December 31, 2011. 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 6.51% at March 31, 2012, improved from 6.44% and 6.40% at March 31, 2011 and December 31, 2011, respectively. M&T's estimated Tier 1 common ratio was 7.04% at March 31, 2012 compared with 6.78% and 6.86% at March 31, 2011 and December 31, 2011, respectively.

Conference Call. Investors will have an opportunity to listen to M&T's conference call to discuss first quarter financial results today at 10:30 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 #70075727. 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 until Wednesday, April 18, 2012 by calling (800)585-8367, or (404)537-3406 for international participants, and by making reference to the ID #70075727. 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, 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