M&T Bank Corporation Announces First Quarter Profits

BUFFALO, N.Y., April 19 /PRNewswire-FirstCall/ -- M&T Bank Corporation ("M&T")(NYSE: MTB) today reported its results of operations for the quarter ended March 31, 2010.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the first quarter of 2010 rose to $1.15, up 135% from $.49 in the first quarter of 2009 and 11% higher than $1.04 in the final 2009 quarter.  GAAP-basis net income in the recently completed quarter totaled $151 million, compared with $64 million in the year-earlier quarter and $137 million in the fourth quarter of 2009.  GAAP-basis net income for the initial quarter of 2010 expressed as an annualized rate of return on average assets and average common stockholders' equity was .89% and 7.86%, respectively, improved from .40% and 3.61%, respectively, in the initial quarter of 2009 and from .79% and 7.09%, respectively, in the fourth quarter of 2009.

Commenting on the recent quarter's performance, René F. Jones, Executive Vice President and Chief Financial Officer, noted, "M&T posted strong financial results in the first quarter, led by lower credit costs and further widening of our net interest margin.  Average core deposits were up again for this period, rising an annualized 6% from the fourth quarter of last year.  Our tangible common equity ratio rose significantly from the 2009 year-end, up 30 basis points to 5.43%.  The results illustrate how our fundamental business philosophy of offering banking services to consumers and businesses in our local communities, of prudent underwriting based on local knowledge and of making acquisitions only when and where they make sense has never been more relevant."

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 expenses 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 herein.

Diluted net operating earnings per common share, which exclude the impact of amortization of core deposit and other intangible assets and merger-related expenses, increased for the fourth consecutive quarter, aggregating $1.23 in the recent quarter, up from $.59 and $1.16 in the first and fourth quarters of 2009, respectively.  Net operating income for the quarter ended March 31, 2010 rose to $161 million, improved from $75 million and $151 million in the quarters ended March 31, 2009 and December 31, 2009, respectively.  Expressed as an annualized rate of return on average tangible assets and average tangible common stockholders' equity, net operating income was 1.00% and 17.34%, respectively, in the first quarter of 2010, up from .50% and 9.36% in the initial quarter of 2009 and .92% and 16.73% in the final 2009 quarter.

Taxable-equivalent Net Interest Income.  Taxable-equivalent net interest income totaled $562 million in the first quarter of 2010, compared with $453 million in the year-earlier quarter and $565 million in the final quarter of 2009.  The significant improvement from 2009's initial quarter reflects a 59 basis point widening of the net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, and a higher level of average earning assets, which rose $2.8 billion or 5% to $60.3 billion from $57.5 billion in the first quarter of 2009.  The net interest margin was 3.78% in the recent quarter, compared with 3.19% in the first 2009 quarter.  The most significant factors for the higher net interest margin were lower interest rates paid on deposits and long-term borrowings.  The higher earning asset level in the recent quarter resulted from the impact of assets obtained in the 2009 acquisitions related to Provident Bankshares Corporation ("Provident") and Bradford Bank ("Bradford"), which totaled approximately $5.5 billion at the respective acquisition dates.  Net interest margin in the recent quarter improved 7 basis points from 3.71% in last year's fourth quarter.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $105 million in the first quarter of 2010, down from $158 million and $145 million in the year-earlier quarter and in the fourth quarter of 2009, respectively.  Net charge-offs of loans during the recent quarter were $95 million, down from $100 million in the initial quarter of 2009 and $135 million in the final 2009 quarter.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .74% and .83% in the first quarters of 2010 and 2009, respectively, and 1.03% in 2009's final quarter.  

Reflecting the impact of the poor economic environment on businesses and consumers, loans classified as nonaccrual totaled $1.34 billion, or 2.60% of total loans at March 31, 2010, compared with $1.33 billion or 2.56% at December 31, 2009 and $1.00 billion or 2.05% at March 31, 2009.  During the recent quarter, an increase in loans obtained in the Provident and Bradford transactions classified as nonaccrual was largely offset by a decline in nonaccrual loans associated with the legacy M&T portfolio.  Assets taken in foreclosure of defaulted loans were $95 million at each of March 31, 2010 and December 31, 2009, compared with $100 million at March 31, 2009.  

Loans past due 90 days or more and accruing interest totaled $203 million at the end of the recently completed quarter, including loans guaranteed by government-related entities of $195 million.  Such past due loans were $143 million and $208 million at March 31, 2009 and December 31, 2009, respectively, including $127 million and $193 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 $891 million at March 31, 2010, increased from $846 million a year earlier and $878 million at December 31, 2009.  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 loans obtained in the Provident and Bradford acquisition transactions, the allowance-to-legacy loan ratio increased to 1.86% at March 31, 2010 from 1.73% at March 31, 2009.  That same ratio was 1.83% at December 31, 2009.

Noninterest Income and Expense.  Noninterest income aggregated $258 million in the first quarter of 2010, compared with $232 million and $266 million in the first and fourth quarters of 2009, respectively.  Reflected in those amounts were losses from investment securities of $26 million, $32 million and $34 million, respectively, each predominantly due to other-than-temporary impairment charges related to certain of M&T's privately issued collateralized mortgage obligations held in the available-for-sale investment securities portfolio.  Because those investment securities were previously reflected at fair value on the consolidated balance sheet, the impairment charges did not reduce stockholders' equity.  

Excluding gains and losses from investment securities, noninterest income of $284 million in the recently completed quarter was up 8% from $264 million in the initial quarter of 2009.  Contributing to that rise were service charges on acquisition-related deposit accounts and higher credit-related fees, partially offset by lower mortgage banking revenues.  Noninterest income in the fourth quarter of 2009, also excluding gains and losses from investment securities, totaled $300 million.  The decline in such income during the recent quarter as compared with the final 2009 quarter was due, in part, to lower service charges on deposit accounts and mortgage banking revenues.

Noninterest expense in the first quarter of 2010 aggregated $489 million, compared with $438 million and $478 million in the first and fourth quarters of 2009, 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 these expenses, noninterest operating expenses were $473 million in the recently completed quarter, $421 million in the first quarter of 2009 and $455 million in the final 2009 quarter.  The higher level of operating expenses in the recent quarter as compared with the year-earlier quarter was due largely to the operations obtained in the 2009 acquisitions and higher FDIC assessments.  The rise in expenses from the fourth quarter of 2009 was largely the result of seasonally higher costs for stock-based compensation, payroll-related taxes and the Company's 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 gains on merger transactions), measures the relationship of operating expenses to revenues.  M&T's efficiency ratio was 55.9% in the first quarter of 2010, compared with 58.7% in the year-earlier period and 52.7% in the fourth quarter of 2009.

Balance Sheet.  M&T had total assets of $68.4 billion at March 31, 2010, up from $64.9 billion a year earlier.  Loans and leases, net of unearned discount, were $51.4 billion at the recent quarter-end, up 5% from $48.9 billion at March 31, 2009.  Total deposits rose 12% to $47.5 billion at March 31, 2010 from $42.5 billion a year earlier.  Deposits at domestic offices increased $6.4 billion, or 16%, to $46.7 billion at the most recent quarter-end from $40.3 billion at March 31, 2009.  

Total stockholders' equity increased 15% to $7.9 billion at March 31, 2010 from $6.9 billion at March 31, 2009, representing 11.57% of total assets at the recent quarter-end and 10.64% a year earlier.  Common stockholders' equity was $7.2 billion, or $60.40 per share at March 31, 2010, up from $6.3 billion, or $56.95 per share, a year earlier.  Tangible equity per common share rose to $29.59 at March 31, 2010 from $26.90 a year earlier.  Common stockholders' equity per share and tangible equity per common share were $59.31 and $28.27, respectively, at December 31, 2009.  In the calculation of tangible equity per common share, common stockholders' equity is reduced by the carrying values of goodwill and core deposit and other intangible assets, net of applicable deferred tax balances, which aggregated $3.7 billion and $3.3 billion at March 31, 2010 and 2009, respectively.  M&T's tangible common equity to tangible assets ratio was 5.43% at March 31, 2010, compared with 4.86% and 5.13% at March 31, 2009 and December 31, 2009, respectively.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss first 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 #68684577.  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 Wednesday, April 21, 2010 by calling (800)642-1687, or (706)645-9291 for international participants, and by making reference to the ID #68684577.  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 bank holding company whose banking subsidiaries, M&T Bank and M&T Bank, National Association, operate branch offices in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware, New Jersey and the District of Columbia.

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 required capital levels; 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