M&T Bank Corporation Announces Third Quarter Results

BUFFALO, N.Y., Oct. 18, 2017 /PRNewswire/ -- M&T Bank Corporation ("M&T")(NYSE: MTB) today reported its results of operations for the quarter ended September 30, 2017.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the third quarter of 2017 were $2.21, up 5% from $2.10 in the year-earlier period. GAAP-basis net income in the recently completed quarter totaled $356 million, 2% above $350 million in the third quarter of 2016. Diluted earnings per common share and GAAP-basis net income for the second quarter of 2017 were $2.35 and $381 million, respectively. GAAP-basis net income for the third quarter of 2017 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.18% and 8.89%, respectively, compared with 1.12% and 8.68%, respectively, in the year-earlier quarter and 1.27% and 9.67%, respectively, in the second quarter of 2017.

On October 9, 2017, Wilmington Trust Corporation, a wholly owned subsidiary of M&T, reached an agreement with the U.S. Attorney's Office for the District of Delaware related to alleged conduct that took place between 2009 and 2010 prior to the acquisition of Wilmington Trust Corporation by M&T. Under terms of the agreement, Wilmington Trust Corporation was required to pay $60 million and settled the government's claims. The settlement amount included $16 million previously payed to the U.S. Securities and Exchange Commission in a related action. The result was a payment of $44 million that is not deductible for income tax purposes. Wilmington Trust did not admit any liability.

Commenting on M&T's financial results for the recent quarter, Darren J. King, Executive Vice President and Chief Financial Officer, stated, "Once again, M&T has delivered very strong financial results through its core businesses producing solid returns for shareholders. Performance in the third quarter benefited from a widening of the net interest margin, lower credit costs and continued strong fee income and well-controlled expenses. We believe the recently announced agreement between Wilmington Trust Corporation and the U.S. Attorney's Office for the District of Delaware is in the Company's best interest and we are pleased to have that legal proceeding behind us."

For the nine-month period ended September 30, 2017, diluted earnings per common share were $6.69, up 15% from $5.80 in the corresponding 2016 period.  GAAP-basis net income for the first nine months of 2017 totaled $1.09 billion, 10% higher than $985 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 in the nine-month period ended September 30, 2017 was 1.20% and 9.15%, respectively, compared with 1.06% and 8.17%, respectively, in the similar 2016 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 $2.24 in the recent quarter, compared with $2.13 and $2.38 in 2016's third quarter and the second quarter of 2017, respectively. Net operating income was $361 million in the third quarter of 2017, compared with $356 million in the corresponding quarter of 2016 and $386 million in the second quarter of 2017. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.25% and 13.03%, respectively, in the third quarter of 2017, compared with 1.18% and 12.77%, respectively, in the year-earlier quarter and 1.33% and 14.18%, respectively, in the second quarter of 2017.

Diluted net operating earnings per common share in the first nine months of 2017 increased 12% to $6.78 from $6.07 in the year-earlier period. Net operating income during the nine-month period ended September 30, 2017 was $1.10 billion, up 7% from $1.03 billion in the like-2016 period.  Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was 1.26% and 13.42%, respectively, in the first nine months of 2017, compared with 1.15% and 12.36%, respectively, in the nine-month period ended September 30, 2016.

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis totaled $966 million in the third quarter of 2017, an increase of $101 million, or 12%, from $865 million in the year-earlier quarter.  That improvement resulted predominantly from a widening of the net interest margin to 3.53% in the recent quarter from 3.05% in the third quarter of 2016. Taxable-equivalent net interest income in the recent quarter rose 2% from $947 million in the second quarter of 2017.  That growth was primarily due to an 8 basis point widening of the net interest margin from 3.45% in the second quarter of 2017.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $30 million in the third quarter of 2017, compared with $47 million in 2016's third quarter and $52 million in the second quarter of 2017.  Net charge-offs of loans were $25 million during the recent quarter, compared with $41 million in the third quarter of 2016 and $45 million in the second quarter of 2017.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .11% and .19% in the third quarter of 2017 and 2016, respectively, and .20% in the second 2017 quarter.

Loans classified as nonaccrual totaled $869 million, or .99% of total loans outstanding at September 30, 2017, compared with $872 million or .98% at June 30, 2017 and $837 million or .93% at September 30, 2016. The higher levels of nonaccrual loans at the two most recent quarter-ends as compared with September 30, 2016 reflect the migration of previously performing loans obtained in the acquisition of Hudson City Bancorp, Inc. ("Hudson City") that became over 90 days past due after September 30, 2016.  Nonaccrual Hudson City-related residential real estate loans totaled $211 million at each of September 30, 2017 and June 30, 2017, compared with $149 million at September 30, 2016. Assets taken in foreclosure of defaulted loans were $111 million at September 30, 2017, compared with $160 million at September 30, 2016 and $105 million at June 30, 2017.

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 $1.01 billion at each of September 30, 2017 and June 30, 2017, compared with $976 million at September 30, 2016.  The allowance expressed as a percentage of outstanding loans was 1.15% at September 30, 2017, compared with 1.09% at September 30, 2016 and 1.13% at June 30, 2017. 

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Noninterest Income and Expense.  Noninterest income aggregated $459 million in the recent quarter, compared with $491 million in the third quarter of 2016 and $461 million in the second quarter of 2017. The decline in noninterest income in the recent quarter as compared with the corresponding quarter of 2016 was predominantly the result of $28 million of gains on investment securities recognized during that 2016 quarter. Higher trust income in the third quarter of 2017 was offset by lower mortgage banking revenues as compared with the year-earlier period. As compared with 2017's second quarter, a 12% rise in mortgage banking revenues during the recent quarter was offset by a decline in credit-related fees.

Noninterest expense in the third quarter of 2017 totaled $806 million, compared with $752 million in the year-earlier quarter and $751 million in the second 2017 quarter.  Excluding expenses considered to be nonoperating in nature, such as amortization of core deposit and other intangible assets and merger-related expenses, noninterest operating expenses were $798 million in the recent quarter, compared with $743 million in each of the third quarter of 2016 and the second quarter of 2017. As of September 30, 2017, M&T increased its reserve for legal matters by $50 million. Higher professional services costs also contributed to the rise in operating expenses in the recent quarter as compared with the noted earlier quarters.

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 56.0%, 55.9% and 52.7% in the quarters ended September 30, 2017, September 30, 2016 and June 30, 2017, respectively.

Balance Sheet.  M&T had total assets of $120.4 billion at September 30, 2017, compared with $126.8 billion at September 30, 2016 and $120.9 billion at June 30, 2017. Loans and leases, net of unearned discount, totaled $87.9 billion at the recent quarter-end, compared with $89.6 billion at September 30, 2016 and $89.1 billion at June 30, 2017.  Investment securities were $15.1 billion, $14.7 billion and $15.8 billion at September 30, 2017, September 30, 2016, and June 30, 2017, respectively.  Total deposits were $93.5 billion at each of September 30, 2017 and June 30, 2017, compared with $98.1 billion at September 30, 2016.

Total shareholders' equity at each of September 30, 2017, September 30, 2016 and June 30, 2017 was $16.3 billion, representing 13.55%, 12.88% and 13.47% of total assets, respectively. Common shareholders' equity was $15.1 billion at each of those dates, or $99.70 per share at September 30, 2017, $97.47 per share at September 30, 2016 and $98.66 per share at June 30, 2017.  Tangible equity per common share rose to $69.02 at the recent quarter-end from $67.42 a year earlier and $68.20 at June 30, 2017.  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 10.98% as of September 30, 2017. 

In accordance with its 2017 capital plan, M&T repurchased 1,382,746 shares of common stock during the recent quarter at an average cost per share of $162.52, for a total cost of $225 million.  In the aggregate, during the first nine months of 2017, M&T repurchased 6,025,749 shares of common stock under the 2017 and 2016 capital plans at a total cost of $982 million.

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# 87313424. 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 Wednesday, October 25, 2017 by calling (800) 585-8367, or (404) 537-3406 for international participants, and by making reference to ID# 87313424.  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.

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