M&T Bank Corporation Announces Second Quarter Results

BUFFALO, N.Y., July 20, 2016 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended June 30, 2016.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the second quarter of 2016 were $1.98, equal to the year-earlier period and up from $1.73 recorded in the first quarter of 2016.  GAAP-basis net income in the recently completed quarter totaled $336 million, up 17% from $287 million in the second quarter of 2015 and 13% from $299 million in the initial 2016 quarter.  GAAP-basis net income for the second quarter of 2016 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.09% and 8.38%, respectively, compared with 1.18% and 9.37%, respectively, in the year-earlier quarter and .97% and 7.44%, respectively, in the first quarter of 2016.

Commenting on the recent quarter's performance, Darren J. King, Executive Vice President and Chief Financial Officer, noted, "M&T's second quarter performance reflects impressive loan growth in our commercial portfolios, continued strong credit quality and further improved operating efficiency, contributing to an 11% rise in diluted net operating earnings per share.  Average balances of loans to commercial customers grew an annualized 11% from the first quarter, while levels of net charge-offs and nonperforming loans improved.  During the quarter we received a non-objection from the Federal Reserve to our 2016 capital plan and proposed capital actions that include a common stock repurchase program and an increase in the common stock dividend." 

For the six-month period ended June 30, 2016, diluted earnings per common share were $3.71, improved 2% from $3.63 in the year-earlier period.  GAAP-basis net income for the first half of 2016 totaled $635 million, 20% higher than $528 million in the corresponding 2015 period.  Expressed as an annualized rate of return on average assets and average common shareholders' equity, GAAP-basis net income in the six-month period ended June 30, 2016 was 1.03% and 7.91%, respectively, compared with 1.10% and 8.69%, respectively, in the similar 2015 period.

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" expense 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 $2.07 in the recent quarter, up from $2.01 and $1.87 in the year-earlier quarter and the first quarter of 2016, respectively. Net operating income rose to $351 million in the second quarter of 2016, 21% above $290 million in the second quarter of 2015 and 10% higher than $320 million in the initial 2016 quarter.  Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.18% and 12.68%, respectively, in the second quarter of 2016, 1.24% and 13.76%, respectively, in the second quarter of 2015 and 1.09% and 11.62%, respectively, in the first quarter of 2016.

Diluted net operating earnings per common share in the first six months of 2016 were $3.94, up 7% from $3.69 in the first half of 2015.  Net operating income during the six-month period ended June 30, 2016 was $671 million, 25% higher than $536 million in the corresponding 2015 period.  Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was 1.14% and 12.15%, respectively, in the first half of 2016, compared with 1.16% and 12.85%, respectively, in the first six months of 2015.

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis totaled $870 million in the recent quarter, up 26% from $689 million in the second quarter of 2015.  That improvement resulted predominantly from a 28% rise in average earning assets, which grew to $111.9 billion in the second quarter of 2016 from $87.3 billion in the year-earlier quarter.  The growth in average earning assets reflects the November 2015 acquisition of Hudson City Bancorp, Inc. ("Hudson City") that added approximately $17.2 billion in average loans in the recent quarter.  The net interest margin in the second quarter of 2016 was 3.13%, compared with 3.17% in the year-earlier quarter.  Taxable-equivalent net interest income and the net interest margin in the initial 2016 quarter were $878 million and 3.18%, respectively.   

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $32 million in the second quarter of 2016, compared with $30 million in the year-earlier quarter and $49 million in the initial 2016 quarter.  Net charge-offs of loans were $24 million during the recent quarter, compared with $21 million in the second quarter of 2015 and $42 million in the first quarter of 2016.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .11% and .13% in the second quarters of 2016 and 2015, respectively, and .19% in the first quarter of 2016.

Loans classified as nonaccrual totaled $849 million, or .96% of total loans outstanding at June 30, 2016, compared with $797 million or 1.17% a year earlier and $877 million or 1.00% at March 31, 2016.  The higher level of nonaccrual loans at the two most recent quarter-ends as compared with June 30, 2015 reflects the normal migration of previously performing loans obtained in the acquisition of Hudson City that became over 90 days past due during the first half of 2016 and, as such, were not identifiable as purchased impaired as of the acquisition date.  Assets taken in foreclosure of defaulted loans were $172 million at June 30, 2016, compared with $64 million at June 30, 2015 and $188 million at March 31, 2016.  The higher level of such assets at the two most recent quarter-ends resulted from residential real estate properties associated with 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 $970 million at June 30, 2016 and $963 million at March 31, 2016, representing 1.10% of loans outstanding at each of those dates.  The allowance was $930 million or 1.36% of loans at June 30, 2015.  The decline in those ratios at the two most recent quarter-ends as compared with June 30, 2015 reflects the impact of residential mortgage loans obtained in the Hudson City acquisition.   

Noninterest Income and Expense.  Noninterest income totaled $448 million in the second quarter of 2016, compared with $497 million in the year-earlier quarter and $421 million in the first quarter of 2016.  Reflected in noninterest income in the second quarter of 2015 was a $45 million pre-tax gain realized from the April 2015 sale of the trade processing business within the retirement services division.  After considering the impact of that gain, total noninterest income in the recent quarter was little changed from the second quarter of 2015.  As compared with the first quarter of 2016, the recent quarter's 6% rise in noninterest income was largely due to higher trust income and mortgage banking revenues.

Noninterest expense in the second quarter of 2016 totaled $750 million, compared with $697 million in the year-earlier quarter and $776 million in the first quarter of 2016.  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 $726 million in the recent quarter, compared with $691 million in the second quarter of 2015 and $741 million in 2016's initial quarter.  The most significant factor for the higher level of operating expenses in the recent quarter as compared with the second quarter of 2015 was the impact of operations obtained in the Hudson City acquisition, which was partially offset by a $40 million cash contribution made to The M&T Charitable Foundation in the second 2015 quarter.  As compared with the first quarter of 2016, 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 2016 period. 

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 improved to 55.1% in the recent quarter from 58.2% in the second quarter of 2015 and 57.0% in the first quarter of 2016. 

Balance Sheet.  M&T had total assets of $123.8 billion at June 30, 2016 and $124.6 billion at March 31, 2016, up from $97.1 billion at June 30, 2015. Loans and leases, net of unearned discount, totaled $88.5 billion at the recent quarter-end, up $20.4 billion or 30% from $68.1 billion at June 30, 2015 and up an annualized 3% from $87.9 billion at March 31, 2016.  During 2016's second quarter, loans to commercial customers grew $1.2 billion, while residential real estate loans, largely comprised of mortgage loans obtained in the Hudson City acquisition, declined $769 million.  As loans grew in the recent quarter, investment securities declined to $15.0 billion at June 30, 2016 from $15.5 billion at March 31, 2016.  Investment securities totaled $14.8 billion at June 30, 2015.  Total deposits rose to $94.7 billion at June 30, 2016 from $72.6 billion a year earlier and $94.2 billion at March 31, 2016.

Reflecting $3.1 billion of common equity issued in the acquisition of Hudson City, total shareholders' equity rose $3.8 billion or 30% to $16.5 billion at June 30, 2016 from $12.7 billion a year earlier, representing 13.30% and 13.05%, respectively, of total assets.  Common shareholders' equity was $15.2 billion, or $96.49 per share, at June 30, 2016, up from $11.4 billion, or $85.90 per share, at June 30, 2015 and $15.1 billion, or $95.00 per share, at March 31, 2016.  Tangible equity per common share rose 13% to $66.95 at the recent quarter-end from $59.39 a year earlier and was up 2% from $65.65 at March 31, 2016.  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 11.01% as of June 30, 2016. 

In accordance with its 2015 capital plan, M&T repurchased 1,319,487 shares of common stock during the recent quarter at an average cost per share of $116.71, for a total cost of $154 million.  In the aggregate, during the first six months of 2016, M&T repurchased 2,268,032 shares of common stock under that plan at an average cost per share of $111.99, for a total cost of $254 million.

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# 38736794. 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 Saturday, July 23, 2016 by calling (800)585-8367, or (404)537-3406 for international participants, and by making reference to ID# 38736794.  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.