M&T Bank Corporation Announces Second Quarter Results

BUFFALO, N.Y., July 17, 2014 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended June 30, 2014.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the second quarter of 2014 were $1.98, up 23% from $1.61 in the first quarter of 2014.  GAAP-basis net income in the recent quarter totaled $284 million, compared with $229 million in the initial 2014 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 1.27% and 9.79%, respectively, compared with 1.07% and 8.22%, respectively, in the first quarter of 2014.

The recent quarter's results reflect two noteworthy, but largely offsetting, items. The resolution with tax authorities of previously uncertain tax positions required M&T to reduce its accrual for income taxes and increase net income by $8 million, while an increase to M&T's litigation reserves of $12 million reduced net income by $7 million after applicable tax effect. Both accrual items were associated with pre-acquisition activities of M&T's Wilmington Trust entities.

Diluted earnings per common share and net income in last year's second quarter were $2.55 and $348 million, respectively.  Those results include after-tax gains from the sale of investment securities of $34 million and the effect of the reversal of an accrual for a contingent compensation obligation assumed in the May 2011 acquisition of Wilmington Trust that resulted in a reduction of expenses having an after-tax impact of $15 million. Those items increased diluted earnings per common share by $.38 in 2013's second quarter.

Reflecting on the recent quarter's performance, Rene F. Jones,  Vice Chairman and Chief Financial Officer, noted, "Results for the second quarter reflected an improvement in revenue from the first quarter in the areas of mortgage banking, trust and deposit services.  M&T's credit quality measures were strong during the quarter.  While operating expense levels continue to be elevated, significant progress has been made on several key initiatives related to BSA/AML activities, Compliance, Risk Management and Capital Planning." 

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.    

Diluted net operating earnings per common share were $2.02 in the recent quarter, compared with $1.66 and $2.65 in the initial quarter of 2014 and last year's second quarter, respectively.  Net operating income during the second quarter of 2014 was $290 million, compared with $235 million in the first quarter of 2014 and $361 million in the second quarter of 2013.  Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.35% and 14.92%, respectively, in the second quarter of 2014.  The comparable returns were 1.15% and 12.76% in the first quarter of 2014 and 1.81% and 22.72% in the second quarter of 2013.

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis aggregated $675 million in the second quarter of 2014, down slightly from $684 million in the year-earlier period. The effect of growth in average earning assets, predominantly due to a $5.7 billion rise in average investment securities, was offset by a 31 basis point narrowing of the net interest margin to 3.40% in the recent quarter from 3.71% in the second quarter of 2013.  The significant increase in investment securities reflects M&T's continued efforts to meet proposed regulatory liquidity requirements.  Taxable-equivalent net interest income in the recent quarter was up 2% from $662 million in the first quarter of 2014.  That improvement reflects a $3.3 billion increase in average earning assets, including a $1.7 billion or 18% rise in average investment securities resulting from continued purchases of mortgage-backed securities, partially offset by a 12 basis point decline in the net interest margin.  The narrowing of the recent quarter's net interest margin as compared with the second quarter of 2013 and the initial 2014 quarter reflects continuing downward pressure on loan yields, increased balances of investment securities and higher levels of deposits held at the Federal Reserve Bank of New York.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $30 million in the second quarter of 2014, compared with $57 million and $32 million in the year-earlier quarter and the first quarter of 2014, respectively.  Net charge-offs of loans were $29 million during the recent quarter, improved from $57 million in the second quarter of 2013 and $32 million in the first quarter of 2014.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .18% and .35% in the second quarters of 2014 and 2013, respectively, and .20% in the first quarter of 2014.

Loans classified as nonaccrual declined to $880 million, or 1.36% of total loans outstanding at June 30, 2014, compared with $965 million or 1.46% a year earlier and $891 million or 1.39% at March 31, 2014.  Assets taken in foreclosure of defaulted loans were $60 million at June 30, 2014, improved from $82 million at June 30, 2013 and comparable to $59 million at March 31, 2014.

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 totaled $918 million or 1.42% of loans outstanding at June 30, 2014, compared with $927 million or 1.41% of loans at June 30, 2013 and $917 million or 1.43% of loans at March 31, 2014. 

Noninterest Income and Expense.  Noninterest income aggregated $456 million in the second quarter of 2014, compared with $509 million in the year-earlier quarter and $420 million in the first quarter of 2014.  Reflected in the second quarter of 2013 were net pre-tax gains of $56 million from the noted sales of investment securities.  Excluding those gains, noninterest income in the second quarter of 2014 was up from $452 million in the year-earlier quarter and was 9% higher than the $420 million in the initial quarter of 2014.  Higher mortgage banking revenues and trust income in the recent quarter contributed to those improvements.

Noninterest expense in the second quarter of 2014 totaled $681 million, up from $599 million in the year-earlier quarter, but down from $702 million in the first quarter of 2014.  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 $672 million in the recent quarter, compared with $578 million in the second quarter of 2013 and $692 million in 2014's initial quarter.  The higher level of operating expenses in the recent quarter as compared with the year-earlier period was predominantly the result of costs for professional services and salaries associated with BSA/AML activities, compliance, capital planning and stress testing, risk management, and other operational initiatives.  As compared with the first quarter of 2014, the recent quarter's lower level of operating expenses was due, in large part, to a decline in salaries and employee benefits, including stock-based compensation, which were seasonally higher in the initial 2014 period, partially offset by the noted increase in litigation reserves. 

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 59.4% in the second quarter of 2014, compared with 50.9% in the year-earlier quarter and 63.9% in the first quarter of 2014. 

Balance Sheet.  M&T had total assets of $90.8 billion at June 30, 2014, up 9% from $83.2 billion a year earlier.  Investment securities were $12.1 billion at June 30, 2014, up $6.9 billion or 133% from June 30, 2013.  M&T has added investment securities during 2013 and 2014 through purchase and loan securitization transactions in order to enhance its liquidity position in response to proposed regulatory requirements.  Loans and leases, net of unearned discount, totaled $64.7 billion at the recent quarter-end, compared with $66.0 billion at June 30, 2013.  Total deposits rose 6% to $69.8 billion at June 30, 2014 from $65.7 billion a year earlier.

Total shareholders' equity rose 14% to $12.2 billion at June 30, 2014 from $10.7 billion a year earlier, representing 13.40% and 12.88%, respectively, of total assets.  Common shareholders' equity was $10.9 billion, or $82.86 per share, at June 30, 2014, up from $9.8 billion, or $75.98 per share, at June 30, 2013.  Tangible equity per common share rose 16% to $55.89 at the recent quarter-end from $48.26 a year earlier.  Common shareholders' equity per share and tangible equity per common share were $81.05 and $53.92, respectively, at March 31, 2014.  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 estimated Tier 1 common ratio, a regulatory capital measure, was 9.62% at June 30, 2014, compared with 8.55% and 9.45% at June 30, 2013 and March 31, 2014, respectively.  M&T estimates that the ratio of Common Equity Tier 1 to risk-weighted assets under the capital rules approved in July 2013 on a fully phased-in basis was approximately 9.35% as of June 30, 2014.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss second 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# 66984191. 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 Sunday, July 20, 2014 by calling (800)585-8367, or (404)537-3406 for international participants, and by making reference to ID# 66984191.  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