M&T Bank Corporation Announces Third Quarter Results

BUFFALO, N.Y., Oct. 19, 2015 /PRNewswire/ -- M&T Bank Corporation ("M&T")(NYSE: MTB) today reported its results of operations for the quarter ended September 30, 2015.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the third quarter of 2015 were $1.93, up from $1.91 in the year-earlier quarter.  GAAP-basis net income in the recent quarter aggregated $280 million, improved from $275 million in the third quarter of 2014.  Diluted earnings per common share and GAAP-basis net income were $1.98 and $287 million, respectively, in 2015's second quarter. GAAP-basis net income for the third quarter of 2015 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.13% and 8.93%, respectively, compared with 1.17% and 9.18%, respectively, in the year-earlier quarter and 1.18% and 9.37%, respectively, in 2015's second quarter. 

Commenting on M&T's financial performance for the recent quarter, Rene F. Jones, Vice Chairman and Chief Financial Officer, noted, "Financial results for the third quarter reflected growth in net interest income and several core noninterest income categories as compared with the second quarter dampened by a slowdown in mortgage loan origination activities that depressed both residential and commercial mortgage banking revenues. Significantly, year over year revenues were up and expenses were down, and our credit quality remained strong.  We have quickly resumed working on our merger with Hudson City, and will soon be positioned with our new colleagues to bring the full array of M&T's banking products and services to the communities across New Jersey."

For the first nine months of 2015, diluted earnings per common share were $5.56, improved from $5.50 in the similar period of 2014. GAAP-basis net income for the nine-month period ended September 30, 2015 aggregated $809 million, 3% higher than $789 million in the year-earlier period.  Expressed as an annualized rate of return on average assets and average common shareholders' equity, GAAP-basis net income for the first nine months of 2015 was 1.11% and 8.77%, respectively, compared with 1.17% and 9.07%, respectively, in the corresponding 2014 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 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 $1.95 in the third quarter of 2015, compared with $1.94 in the year-earlier quarter and $2.01 in the second quarter of 2015.  Net operating income during the recent quarter was $283 million, compared with $280 million in the third quarter of 2014 and $290 million in 2015's second 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 12.98%, respectively, in the recent quarter, 1.24% and 13.80%, respectively, in the third quarter of 2014 and 1.24% and 13.76%, respectively, in the second quarter of 2015. 

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis totaled $699 million in the third quarter of 2015, up 4% from $675 million in the third quarter of 2014. Contributing to that improvement was a $5.7 billion increase in average earning assets, partially offset by a 9 basis point narrowing of the net interest margin.  The growth in earning assets included a $3.1 billion rise in average loans and leases and a $1.7 billion increase in average investment securities.  Taxable-equivalent net interest income in the recent quarter was up an annualized 6% from $689 million in the second 2015 quarter. That improvement reflects a $179 million increase in average loans outstanding, tempered by a 3 basis point narrowing of the net interest margin.  In each quarterly comparison, the decline in the net interest margin includes the effect of increased lower-yielding balances of investment securities and deposits held at the Federal Reserve Bank of New York.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $44 million in the recent quarter, compared with $29 million in the third quarter of 2014 and $30 million in 2015's second quarter. Net charge-offs of loans were $40 million during the third quarter of 2015, compared with $28 million and $21 million in the third quarter of 2014 and second quarter of 2015, respectively.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .24% and .17% in the third quarter of 2015 and 2014, respectively, and .13% in the second quarter of 2015.

Loans classified as nonaccrual declined to $787 million, or 1.15% of total loans outstanding at September 30, 2015, improved from $848 million or 1.29% at September 30, 2014 and $797 million or 1.17% at June 30, 2015.  Assets taken in foreclosure of defaulted loans totaled $66 million at September 30, 2015, compared with $68 million a year earlier and $64 million at June 30, 2015.

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 $934 million and $930 million at September 30 and June 30, 2015, respectively, or 1.36% of loans outstanding at each of those dates, compared with $919 million or 1.40% at September 30, 2014. 

Noninterest Income and Expense.  Noninterest income totaled $440 million in the recent quarter, compared with $451 million in the third quarter of 2014 and $497 million in the second quarter of 2015.  The decline from the second 2015 quarter was largely due to a $45 million gain in the second quarter of 2015 from the sale of M&T's trade processing business within its retirement services division and to lower mortgage banking revenues.  As compared with 2014's third quarter, the recent quarter decline reflects lower mortgage banking revenues and trust income.  The lower trust income resulted largely from the trade processing business divestiture in 2015.  

Noninterest expense in the third quarter of 2015 totaled $654 million, improved from $665 million in the year-earlier quarter and $697 million in the second quarter of 2015.  Included in such amounts are expenses considered to be nonoperating in nature consisting of amortization of core deposit and other intangible assets.  Exclusive of those expenses, noninterest operating expenses were $650 million in the recent quarter, down from $658 million in the third quarter of 2014 and $691 million in the second quarter of 2015. The decline in operating expenses in the recent quarter as compared with the year-earlier period was predominantly attributable to lower costs for professional services, partially offset by higher salaries and employee benefit expenses.  The lower level of operating expenses as compared with the immediately preceding quarter resulted from $40 million of cash contributions made to The M&T Charitable Foundation during the second quarter of 2015. 

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 57.1% in the recent quarter, 58.4% in the year-earlier quarter and 58.2% in the second quarter of 2015.

Balance Sheet.  M&T had total assets of $97.8 billion at September 30, 2015, up from $97.2 billion a year earlier.  Investment securities were $14.5 billion at the recent quarter-end, up $1.1 billion or 9% from September 30, 2014.  Loans and leases, net of unearned discount, totaled $68.5 billion at September 30, 2015, $3.0 billion or 5% above $65.6 billion a year earlier.  Total deposits declined $1.4 billion or 2% to $72.9 billion at the recent quarter-end from $74.3 billion at September 30, 2014, largely due to lower trust-related deposits. 

Total shareholders' equity rose 5% to $12.9 billion at September 30, 2015 from $12.3 billion a year earlier, representing 13.21% and 12.68%, respectively, of total assets.  Common shareholders' equity was $11.7 billion, or $87.67 per share, at September 30, 2015, compared with $11.1 billion, or $83.99 per share, at September 30, 2014.  Tangible equity per common share rose 7% to $61.22 at September 30, 2015 from $57.10 at September 30, 2014.  Common shareholders' equity per share and tangible equity per common share were $85.90 and $59.39, respectively, at June 30, 2015.  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 the transitional capital rules that became effective for M&T on January 1, 2015 was approximately 10.08%. M&T's estimated Tier 1 common ratio under previously effective regulatory capital rules would have been 10.28% as of September 30, 2015.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss third quarter financial results today at 9:30 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 #57486342.  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 Thursday, October 22, 2015 by calling (800)585-8367, or (404)537-3406 for international participants, and by making reference to ID #57486342.  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 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.