M&T Bank Corporation Announces First Quarter Profits

BUFFALO, N.Y., April 18, 2011 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended March 31, 2011.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the first quarter of 2011 rose 38% to $1.59 from $1.15 in the year-earlier quarter and were equal to the fourth quarter of 2010. GAAP-basis net income in the recent quarter was $206 million, compared with $151 million in the first quarter of 2010 and $204 million in 2010's final quarter.  GAAP-basis net income for the initial 2011 quarter expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.23% and 10.16%, respectively, improved from .89% and 7.86%, respectively, in the first quarter of 2010 and from 1.18% and 10.03%, respectively, in the fourth quarter of 2010.

The recent quarter's earnings as compared with the first quarter of 2010 reflect higher net interest income, resulting from a widening of the net interest margin, lower credit costs and significantly higher noninterest income.  Contributing to the rise in noninterest income were gains from the sale of investment securities, predominantly residential mortgage-backed securities guaranteed by Fannie Mae, which increased 2011's net income by $24 million, or $.20 of diluted earnings per common share.  Realized securities gains were not significant in the first and fourth quarters of 2010.  However, net income during 2010's fourth quarter reflected an after-tax gain of $17 million, or $.14 of diluted earnings per common share, related to the FDIC-assisted acquisition of certain assets and liabilities of K Bank.

Reflecting on the recent quarter's performance, Rene F. Jones, Executive Vice President and Chief Financial Officer, commented, "M&T experienced a positive start to 2011 by recording solid financial results in the first quarter.  Exclusive of net securities gains and losses, revenue showed noticeable improvement from last year's first quarter, even more impressive when considering the negative impact regulatory changes had on fee income from deposit service charges.  We are also encouraged by continuing improved credit quality, which resulted in lower credit costs in the recent quarter.  Although nonperforming assets remain at historically high levels, we have seen some encouraging signs of improving economic conditions within M&T's footprint.  In addition, the generation of capital continued at a healthy rate this quarter, as evidenced by a rise in our tangible common capital ratio to 6.44% at March 31, 2011 from 6.19% at the 2010 year-end."

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.  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 $1.67 in the recent quarter, up from $1.23 and $1.52 in the first and fourth quarters of 2010, respectively.  Net operating income for the quarter ended March 31, 2011 rose to $216 million, improved from $161 million and $196 million in the quarters ended March 31, 2010 and December 31, 2010, respectively.  Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.36% and 20.16%, respectively, in the initial quarter of 2011, up from 1.00% and 17.34% in the first quarter of 2010 and 1.20% and 18.43% in the final 2010 quarter.

Taxable-equivalent Net Interest Income.  Taxable-equivalent net interest income increased 2% to $575 million in the first quarter of 2011 from $562 million in the year-earlier quarter.  That improvement reflects a 14 basis point widening of the net interest margin, partially offset by a lower level of average earning assets, which declined $900 million or 1% to $59.4 billion from $60.3 billion in the first quarter of 2010.  The net interest margin was 3.92% in the recent quarter, compared with 3.78% in the year-earlier quarter.  The most significant factors for the higher net interest margin were lower interest rates paid on deposits.  Taxable-equivalent net interest income totaled $580 million in the fourth quarter of 2010.  Despite an $830 million increase in average loans outstanding and a seven basis point widening of the net interest margin, the 1% decline in such income in the recent quarter as compared with 2010's fourth quarter largely reflects the fewer number of days in the first quarter of 2011.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $75 million in the first quarter of 2011, compared with $105 million and $85 million in the first and fourth quarters of 2010, respectively.  Net charge-offs of loans during the recent quarter were $74 million, down from $95 million in the first quarter of 2010 and $77 million in the final 2010 quarter.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .58% and .74% in the initial quarters of 2011 and 2010, respectively, and .60% in the last quarter of 2010.  

Loans classified as nonaccrual totaled $1.21 billion, or 2.32% of total loans at March 31, 2011, improved from $1.24 billion or 2.38% at December 31, 2010 and $1.34 billion or 2.60% at March 31, 2010.  The ratio of nonperforming assets to total loans plus real estate and other foreclosed assets was 2.73% at March 31, 2011, improved from 2.79% and 2.78% at December 31, 2010 and March 31, 2010, respectively.

Loans past due 90 days or more and accruing interest totaled $264 million at the end of the recently completed quarter, including loans guaranteed by government-related entities of $215 million.  Such past due loans were $270 million and $203 million at December 31, 2010 and March 31, 2010, respectively, including $214 million and $195 million of government guaranteed loans at those respective dates.

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.  Reflecting those analyses, the allowance totaled $904 million at March 31, 2011, compared with $903 million at December 31, 2010 and $891 million at March 31, 2010.  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 carryover of the acquired entity's allowance for credit losses.  Excluding the impact of loans obtained in 2009 and 2010 acquisition transactions, the allowance-to-legacy loan ratio was 1.81% at March 31, 2011, compared with 1.82% and 1.86% at December 31, 2010 and March 31, 2010, respectively.  

Noninterest Income and Expense. Noninterest income totaled $314 million in the first quarter of 2011, compared with $258 million and $287 million in the first and fourth quarters of 2010, respectively.  Reflected in those amounts were net gains on investment securities of $23 million in the initial 2011 quarter, compared with net losses from investment securities of $26 million and $27 million in the first and fourth quarters of 2010, respectively.  The net securities gains in the recent quarter resulted from $39 million of gains realized on the sale of investment securities available for sale having an amortized cost of approximately $484 million.  In response to strong growth in average loans and in anticipation of the impending acquisition of Wilmington Trust Corporation, M&T sold the securities in order to manage its forecasted balance sheet size and resultant capital ratios.  Partially offsetting those securities gains were $16 million of other-than-temporary impairment charges related to certain of M&T's holdings of privately issued collateralized mortgage obligations.  The net losses on investment securities during the first and fourth quarters of 2010 were predominantly due to other-than-temporary impairment charges, also related to certain of M&T's privately issued collateralized mortgage obligations.  Also reflected in noninterest income in the fourth quarter of 2010 was a $28 million gain realized on the FDIC-assisted acquisition of select assets and liabilities of K Bank.

Excluding gains and losses from investment securities in all periods and the gain recorded in 2010's final quarter related to the K Bank transaction, noninterest income of $291 million in the recently completed quarter was improved from $284 million in the first quarter of 2010 and $286 million in the final 2010 quarter.  Contributing to the rise from the year-earlier quarter were higher commercial mortgage banking revenues, letter of credit and other credit-related fees, trading account and foreign exchange gains, and other operating revenues, partially offset by lower service charges on consumer deposit accounts.  The improvement in such income during the recent quarter as compared with the final 2010 quarter was largely due to higher residential mortgage banking revenues, partially offset by a decline in trading account and foreign exchange gains.  Residential mortgage banking revenues in the fourth quarter of 2010 were negatively impacted by increased settlements related to M&T's obligation to repurchase previously sold loans.  Charges associated with the obligation to repurchase previously sold loans were not significant in the recent quarter.  Also contributing to the improved revenues in 2011 were higher gains on residential real estate loans and commitments to originate loans to be sold as compared with the immediately preceding quarter.  Those higher gains reflect M&T's decision in the recent quarter to resume selling the majority of its originated residential real estate loans.

Noninterest expense in the first quarter of 2011 totaled $500 million, compared with $489 million and $469 million in the first and fourth quarters of 2010, respectively.  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 $483 million in the recently completed quarter, $473 million in the first quarter of 2010 and $455 million in the final 2010 quarter.  The higher level of operating expenses in the recent quarter as compared with the year-earlier quarter was due largely to increased costs for advertising, processing and other professional services.  The increase in expenses from the fourth quarter of 2010 was largely the result of seasonally higher costs for stock-based compensation, payroll-related taxes and employer contributions for retirement savings plan benefits related to incentive compensation payments.

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 55.8% in the first quarter of 2011, compared with 55.9% in the year-earlier quarter and 52.5% in the fourth quarter of 2010.

Balance Sheet.  M&T had total assets of $67.9 billion at March 31, 2011, compared with $68.4 billion a year earlier.  Loans and leases, net of unearned discount, were $52.1 billion at the recent quarter-end, up $675 million from $51.4 billion at March 31, 2010 and $128 million higher than $52.0 billion at December 31, 2010.  Total deposits rose 6% to $50.5 billion at March 31, 2011 from $47.5 billion a year earlier and were up 1% from $49.8 billion at December 31, 2010.

Total shareholders' equity increased 7% to $8.5 billion at March 31, 2011 from $7.9 billion at March 31, 2010, representing 12.53% and 11.57%, respectively, of total assets.  Common shareholders' equity was $7.8 billion, or $64.43 per share at March 31, 2011, up from $7.2 billion, or $60.40 per share, a year earlier.  Tangible equity per common share rose to $34.38 at March 31, 2011 from $29.59 a year earlier.  Common shareholders' equity per share and tangible equity per common share were $63.54 and $33.26, respectively, at December 31, 2010. 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 6.44% at March 31, 2011, compared with 5.43% and 6.19% at March 31, 2010 and December 31, 2010, respectively.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss first quarter financial results today at 1:30 p.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 #59879931.  The conference call will be webcast live through M&T's website at http://ir.mandtbank.com/conference.cfm.  A replay of the call will be available until Tuesday, April 19, 2011 by calling (800)642-1687, or (706)645-9291 for international participants, and by making reference to the ID #59879931.  The event will also be archived and available by 7:00 p.m. today on M&T's website at http://ir.mandtbank.com/conference.cfm.

M&T is a financial holding company headquartered in Buffalo, New York.  M&T's banking subsidiaries, M&T Bank and M&T Bank, National Association, operate retail and commercial bank branches in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware, New Jersey, the District of Columbia and Ontario, Canada.

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; 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.

INVESTOR CONTACT: Donald J. MacLeod  
(716) 842-5138

MEDIA CONTACT: C. Michael Zabel  
(716) 842-5385

SOURCE M&T Bank Corporation