M&T Bank Corporation Announces Third Quarter Profits

BUFFALO, N.Y., Oct. 19, 2011 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended September 30, 2011.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the third quarter of 2011 were $1.32, compared with $1.48 in the year-earlier quarter.  GAAP-basis net income in the recent quarter aggregated $183 million, compared with $192 million in the third quarter of 2010.  GAAP-basis net income for the third quarter of 2011 expressed as an annualized rate of return on average assets and average common shareholders' equity was .94% and 7.84%, respectively, compared with 1.12% and 9.56%, respectively, in the year-earlier quarter.

As compared with the third quarter of 2010, the recent quarter's performance reflected higher net interest income, a lower provision for credit losses and significantly higher trust income.  Those positive factors were muted by higher noninterest expenses and lower residential mortgage banking revenues.  The increased net interest income, trust income and noninterest expenses were each predominantly related to the acquisition of Wilmington Trust Corporation ("Wilmington Trust") on May 16, 2011.  Included in noninterest expenses in the recent quarter were merger-related expenses associated with the Wilmington Trust acquisition of $16 million, after applicable tax effect, or $.13 of diluted earnings per common share.  Such expenses were related to systems conversions and other costs of integrating operations and introducing Wilmington Trust's former customers to M&T's products and services.  There were no merger-related expenses in the year-earlier quarter.  

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 and gains associated with merging acquired operations into M&T, since such amounts 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 $1.53 in the recent quarter, down 1% from $1.55 in the third quarter of 2010.  Net operating income during the third quarter of 2011 was $210 million, up 5% from $200 million in the year-earlier quarter.  Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.14% and 16.26%, respectively, in the recent quarter, compared with 1.24% and 19.58% in the third quarter of 2010.

Commenting on M&T's financial results in the third quarter of 2011, Rene F. Jones, Executive Vice President and Chief Financial Officer, said, "The recent quarter's results reflect the impact of M&T's acquisition of Wilmington Trust.  Notably, in late-August the major loan and deposit systems of Wilmington Trust were successfully converted to those of M&T, culminating a significant resource commitment.  Now that the conversions are behind us, we are well positioned to turn our attention towards achieving the economic benefits from combining the organizations."  

Further commenting on recent quarter highlights, Mr. Jones noted, "Despite the continued challenging economic environment and turbulent markets, which dampened our fee income relative to the second quarter, we experienced a number of positive trends.  We were pleased with the credit performance for the period.  Specifically, net charge-offs declined for the fourth consecutive quarter.  We also continued to experience solid growth in customer deposits."

Taxable-equivalent Net Interest Income.  Taxable-equivalent net interest income totaled $623 million in the third quarter of 2011, up from $576 million in the year-earlier period and $593 million in the second quarter of 2011.  The improvement in such income from the prior periods resulted from higher average earning assets, partially offset by a narrowing of the net interest margin.  The net interest margin was 3.68% in the recent quarter, compared with 3.87% in the third quarter of 2010 and 3.75 percent in the second quarter of 2011.  The higher levels of average earning assets in the two most recent quarters as compared with the third quarter of 2010 were predominantly due to the impact of the Wilmington Trust acquisition, which added approximately $9.6 billion of earning assets on the May 16, 2011 acquisition date.  The narrowing of the net interest margin in the recent quarter as compared with the year-earlier quarter and the second 2011 quarter also reflected the impact of the Wilmington Trust transaction, including significantly higher earning balances on deposit with the Federal Reserve.  

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $58 million in the recent quarter, improved from $93 million in the third quarter of 2010 and $63 million in 2011's second quarter.  Net charge-offs of loans totaled $57 million during the third quarter of 2011, compared with $93 million and $59 million in the quarters ended September 30, 2010 and June 30, 2011, respectively.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .39% and .73% in the third quarter of 2011 and 2010, respectively, and .43% in the second quarter of 2011.

Effective September 30, 2011, M&T has begun to separately report "other acquired impaired loans."  M&T defines other acquired impaired loans as loans that ceased performing in accordance with their contractual terms and became impaired subsequent to the acquisition date.  Nevertheless, in accordance with GAAP, such loans are included in accounting pools which continue to accrue interest.  Other acquired impaired loans, which had previously been aggregated with nonaccrual loans, totaled $218 million or .37% of total loans at September 30, 2011, compared with $141 million or .24% at June 30, 2011 and $98 million or .19% at September 30, 2010.  The increase in such loans from June 30, 2011 was due to loans obtained in the acquisition of Wilmington Trust.

Nonaccrual loans, which exclude other acquired impaired loans, were little changed from June 30, 2011.  Such loans totaled $1.11 billion and $1.12 billion at September 30 and June 30, 2011, respectively, or 1.91% of total loans at each of those dates, compared with $1.00 billion or 1.97% at September 30, 2010.  

Assets taken in foreclosure of defaulted loans were $150 million at September 30, 2011, down from $193 million at September 30, 2010 and $159 million at June 30, 2011.  The decrease in such assets at the two most recent quarter-ends as compared with September 30, 2010 resulted from the sale during 2011's second quarter 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 September 30 and June 30, 2011 were $51 million and $57 million, respectively, of assets related to the Wilmington Trust acquisition.  

Loans past due 90 days or more and accruing interest totaled $310 million at September 30, 2011, down from $373 million at June 30, 2011.  Included in such past due but accruing loans at the two most recent quarter-ends were $64 million and $130 million, respectively, of loans obtained in the Wilmington Trust acquisition.  At September 30, 2010, loans past due 90 days or more and accruing interest were $215 million.  Included in this category were $212 million, $207 million and $194 million of loans guaranteed by government-related entities at September 30, 2011, June 30, 2011 and September 30, 2010, respectively.

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 was $909 million at September 30, 2011, compared with $895 million at September 30, 2010 and $908 million at June 30, 2011.  Beginning in 2009, GAAP requires that expected credit losses associated with loans obtained in an acquisition be reflected in the estimation of loan fair value as of each respective acquisition date and prohibits any carry-over of the acquired entity's allowance for credit losses.  Excluding amounts related to loans obtained in acquisition transactions subsequent to 2008, the allowance-to-legacy loan ratio was 1.79% at September 30, 2011, compared with 1.86% at September 30, 2010 and 1.80% at June 30, 2011.

Noninterest Income and Expense.  Noninterest income totaled $368 million in the recent quarter, compared with $290 million and $502 million in the third quarter of 2010 and the second quarter of 2011, respectively.  Reflected in such income were net pre-tax losses from investment securities of $10 million and $8 million in the recent quarter and the third quarter of 2010, respectively, and net pre-tax gains from investment securities of $84 million in the second quarter of 2011.  

Excluding gains and losses from investment securities in all periods and the non-taxable gain of $65 million recorded in the second quarter of 2011 related to the Wilmington Trust acquisition, noninterest income in the third quarter of 2011 aggregated $378 million, up from $298 million in the third quarter of 2010 and $353 million in 2011's second quarter.  Contributing to those increases were significantly higher trust income, predominantly due to the Wilmington Trust transaction, partially offset by a decline in residential mortgage banking revenues.  That decline reflected M&T's decision to retain the majority of residential mortgage loan originations in the recent quarter rather than selling them.  

Noninterest expense in the third quarter of 2011 aggregated $662 million, compared with $480 million in the year-earlier quarter and $577 million in the second quarter of 2011.  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 $619 million in the recent quarter, compared with $467 million in the third quarter of 2010 and $525 million in 2011's second quarter.  The most significant factor for the higher levels of operating expenses in the two most recent quarters as compared with the third quarter of 2010 was the impact of the operations obtained in the Wilmington Trust acquisition mid-way through 2011's second quarter.  

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 61.8% in the recent quarter, compared with 53.4% and 55.6% in the year-earlier quarter and the second quarter of 2011, respectively.  The higher ratio in the recent quarter reflects expenses associated with the operations obtained in the Wilmington Trust acquisition.  M&T should begin to realize certain cost savings related to that acquisition transaction during the final quarter of 2011, but expects that the full realization of operating efficiencies will not happen until 2012.

Balance Sheet.  M&T had total assets of $77.9 billion at September 30, 2011, compared with $68.2 billion at September 30, 2010.  Loans and leases, net of unearned discount, were $58.4 billion at September 30, 2011, compared with $50.8 billion a year earlier.  Total deposits aggregated $59.5 billion at the recent quarter-end, up 22% from $48.7 billion at September 30, 2010.  

Total shareholders' equity rose 14% to $9.4 billion at September 30, 2011 from $8.2 billion a year earlier, representing 12.04% and 12.06%, respectively, of total assets.  Common shareholders' equity was $8.5 billion, or $67.70 per share, at September 30, 2011, compared with $7.5 billion, or $62.69 per share, at September 30, 2010.  Tangible equity per common share rose 18% to $38.11 at September 30, 2011 from $32.23 at September 30, 2010.  Common shareholders' equity per share and tangible equity per common share were $66.71 and $37.00, respectively, at June 30, 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 6.46% at September 30, 2011, compared with 5.96% and 6.28% at September 30, 2010 and June 30, 2011, respectively.  M&T's estimated Tier 1 common ratio rose to 6.89% at September 30, 2011, improved from 6.42% and 6.67% at September 30, 2010 and June 30, 2011, respectively.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss third 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 #18665770.  The conference call will be webcast live on M&T's website at http://ir.mandtbank.com/events.cfm.  A replay of the call will be available until Friday, October 21, 2011 by calling (800)585-8367, or (404)537-3406 for international participants, and by making reference to ID #18665770.  The event will also be archived and available by 5:00 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 retail and commercial bank branches in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware, New Jersey, the District of Columbia and Ontario, Canada. 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