M&T Bank Corporation Announces First Quarter Results

BUFFALO, N.Y., April 15, 2019 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended March 31, 2019.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") were $3.35 in the initial 2019 quarter, 50% higher than $2.23 in the year-earlier quarter.  GAAP-basis net income in the recent quarter was $483 million, up from $353 million in the first quarter of 2018. Diluted earnings per share and GAAP-basis net income were $3.76 and $546 million, respectively, in the fourth quarter of 2018. GAAP-basis net income for the first quarter of 2019 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.68% and 13.14%, respectively, compared with 1.22% and 9.15%, respectively, in the corresponding 2018 period and 1.84% and 14.80%, respectively, in the fourth quarter of 2018.

Darren J. King, Executive Vice President and Chief Financial Officer of M&T, commented on the recent quarter's results, "M&T's performance during the first three months of 2019 was strong. We were particularly pleased with the growth experienced in our commercial loan portfolios, which rose 3% from the fourth quarter. During the recent quarter, M&T purchased servicing rights for over $13 billion of residential real estate loans, boosting mortgage banking revenues by $8 million. Credit results continued to be solid, with net charge-offs representing an annualized .10% of average loans. Overall, it was a good start to 2019."

During the first quarter of 2019, M&T increased its reserve for legal matters by $50 million in conjunction with matters associated with a subsidiary's role as trustee of Employee Stock Ownership Plans in its Institutional Client Services business. That increase, on an after-tax basis, reduced net income in the recent quarter by $37 million, or $.27 of diluted earnings per common share. Litigation-related accruals in last year's first quarter reduced net income by $102 million, or $.68 of diluted earnings per common share. Also during the recent quarter, M&T realized $37 million of distributed income from Bayview Lending Group LLC ("BLG"), increasing net income in the quarter by $28 million, or $.20 of diluted earnings per common share. Similar income in the year-earlier quarter increased M&T's net income in that period by $17 million, or $.11 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 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.  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 $3.38 in the first quarter of 2019, compared with $2.26 in the first quarter of 2018 and $3.79 in the fourth quarter of 2018.  Net operating income for the recent quarter was $486 million, compared with $357 million in the year-earlier period and $550 million in 2018's fourth quarter. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income in the recent quarter was 1.76% and 19.56%, respectively, compared with 1.28% and 13.51%, respectively, in the similar 2018 quarter and 1.93% and 22.16%, respectively, in the final quarter of 2018.

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis totaled $1.06 billion in the initial 2019 quarter, up 8% from $980 million in the first quarter of 2018, due to a widening of the net interest margin in the recent quarter to 4.04% from 3.71% in the first three months of 2018. The favorable impact from that widening was partially offset by a decline in average earning assets in the recent quarter to $106.1 billion from $107.2 billion in the year-earlier period, reflecting reduced holdings of mortgage-backed securities and residential mortgage loans. Taxable-equivalent net interest income in the first quarter of 2019 was down one percent from the fourth quarter of 2018. A 12 basis point widening of the net interest margin from 3.92% in the final 2018 quarter was offset by a $2.8 billion decrease in average interest-bearing deposit balances held at the Federal Reserve Bank of New York.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $22 million in the first quarter of 2019, compared with $43 million in the year-earlier quarter and $38 million in 2018's final quarter. Net loan charge-offs were $22 million during the recent quarter, improved from $41 million in the first quarter of 2018 and $38 million in the fourth quarter of 2018. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .10% and .19% in the first three months of 2019 and 2018, respectively, and .17% in the fourth quarter of 2018.

Loans classified as nonaccrual totaled $882 million or .99% of total loans outstanding at March 31, 2019, compared with $865 million or .99% a year earlier and $894 million or 1.01% at December 31, 2018. Assets taken in foreclosure of defaulted loans were $81 million at March 31, 2019, compared with $101 million at March 31, 2018 and $78 million at December 31, 2018.

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 $1.02 billion at each of March 31, 2019, March 31, 2018 and December 31, 2018. As a percentage of loans outstanding, the allowance was 1.15% at each of March 31, 2019 and December 31, 2018 and 1.16% at March 31, 2018.

Noninterest Income and Expense. Noninterest income totaled $501 million in the recent quarter, up 9% from $459 million in the year-earlier quarter and 4% higher than $481 million in the fourth quarter of 2018. The increases are reflective of higher mortgage banking revenues, valuation gains on equity securities and distributions from BLG.

Noninterest expense aggregated $894 million in the first quarter of 2019, $933 million in the year-earlier quarter and $802 million in the fourth quarter of 2018.  Excluding expenses considered to be nonoperating in nature, such as amortization of core deposit and other intangible assets, noninterest operating expenses were $889 million in the recent quarter, $927 million in the first quarter of 2018 and $797 million in the final 2018 quarter. The decrease in noninterest expense from the first quarter of 2018 was largely attributable to lower accruals for legal matters and FDIC assessments offset, in part, by higher costs for salaries and employee benefits. The higher noninterest expenses in the recent quarter as compared with the fourth quarter of 2018 reflected seasonally higher stock-based compensation and employee benefits expenses and the addition to the reserve for legal matters that were partially offset by lower charitable contributions.

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 57.6% in the first quarter of 2019, 64.0% in the year-earlier quarter and 51.7% in the final three months of 2018.

Balance Sheet.  M&T had total assets of $120.0 billion at March 31, 2019, compared with $118.6 billion and $120.1 billion at March 31, 2018 and December 31, 2018, respectively. Loans and leases, net of unearned discount, were $88.6 billion at March 31, 2019, $87.7 billion at March 31, 2018 and $88.5 billion at December 31, 2018. Total deposits were $90.5 billion at the recent quarter-end, compared with $90.9 billion at March 31, 2018 and $90.2 billion at December 31, 2018.

Total shareholders' equity was $15.6 billion at March 31, 2019 and $15.7 billion a year earlier, representing 12.99% and 13.24%, respectively, of total assets. Total shareholders' equity was $15.5 billion, or 12.87% of total assets at December 31, 2018. Common shareholders' equity was $14.4 billion, or $105.04 per share, at March 31, 2019, compared with $14.5 billion, or $98.60 per share, a year-earlier and $14.2 billion, or $102.69 per share, at December 31, 2018.  Tangible equity per common share was $71.19 at March 31, 2019, compared with $66.99 at March 31, 2018 and $69.28 at December 31, 2018. 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 10.05% at March 31, 2019.

In accordance with its capital plan, M&T repurchased 2,150,000 shares of its common stock during the recent quarter at an average cost per share of $170.06, for a total cost of $366 million.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss first 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 #2869493.  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 Monday, April 22, 2019 by calling (800) 585-8367, or (404) 537-3406 for international participants, and by making reference to ID #2869493.  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 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.

SOURCE M&T Bank Corporation