M&T Bank Corporation Announces Third Quarter Profits

BUFFALO, N.Y., Oct. 20 /PRNewswire-FirstCall/ -- M&T Bank Corporation ("M&T")(NYSE: MTB) today reported its results of operations for the quarter ended September 30, 2010.

GAAP Results of Operations.  Diluted  earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the third quarter of 2010 rose 53% to $1.48 from $.97 in the year-earlier quarter and were 1% above the $1.46 earned in the second quarter of 2010.  GAAP-basis net income in the recent quarter aggregated $192 million, up from $128 million and $189 million in the third quarter of 2009 and the second 2010 quarter, respectively.  GAAP-basis net income for the third quarter of 2010 expressed as an annualized rate of return on average assets and average common stockholders' equity was 1.12% and 9.56%, respectively, compared with .73% and 6.72%, respectively, in the year-earlier quarter and 1.11% and 9.67%, respectively, in the second quarter of 2010.

Commenting on M&T's financial results in the recent quarter, Rene F. Jones, Executive Vice President and Chief Financial Officer, noted, "Revenues and net income held up nicely this quarter and were each improved from a year-earlier, despite lower fee income from deposit service charges resulting from the recently adopted changes in regulation.  Once again, credit costs remained well-controlled.  Customer loan balances charged off during the recent quarter declined by $49 million, or 34%, from last year's third quarter.  This represents a welcome sign of the improvement in economic conditions relative to a year ago."

The recent quarter's earnings as compared with the third quarter of 2009 reflect higher net interest income, resulting from a widening of the net interest margin, and a lower provision for credit losses.  Also contributing to the improved performance as compared with the year-earlier quarter were lower other-than-temporary impairment charges on certain available-for-sale investment securities, which after applicable tax effect totaled $6 million and $29 million during the quarters ended September 30, 2010 and 2009, respectively.  Reflected in the results for the third quarter of 2009 were net merger-related gains of $9 million (after-tax), or $.08 of diluted earnings per common share, related to 2009 acquisitions.  As compared with the second quarter of 2010, a recent quarter rise in mortgage banking revenues and lower other-than-temporary impairment charges on available-for-sale investment securities were partially offset by a decline in service charges on deposit accounts.

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, rose for the sixth consecutive quarter, totaling $1.55 in the recent quarter, improved from $.98 in the third quarter of 2009 and $1.53 in the second quarter of 2010.  Net operating income during the third quarter of 2010 was $200 million, up from $129 million and $198 million in the third quarter of 2009 and the second quarter of 2010, respectively.  Expressed as an annualized rate of return on average tangible assets and average tangible common stockholders' equity, net operating income was 1.24% and 19.58%, respectively, in the recent quarter, compared with .78% and 14.87% in the year-earlier quarter and 1.23% and 20.36% in the second quarter of 2010.

Taxable-equivalent Net Interest Income.  Taxable-equivalent net interest income totaled $576 million in the third quarter of 2010, up from $553 million in the year-earlier period and $573 million in the second quarter of 2010.  The improvement in such income from the third quarter of 2009 reflects a 26 basis point widening of the net interest margin, which rose to 3.87% from 3.61%.  As compared with the second quarter of 2010, a 3 basis point improvement in the recent quarter's net interest margin was partly offset by a 1% decline in average earning assets.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $93 million in the recent quarter, compared with $154 million in the third quarter of 2009 and $85 million in 2010's second quarter.  Net charge-offs of loans totaled $93 million during the third quarter of 2010, compared with $141 million and $82 million in the quarters ended September 30, 2009 and June 30, 2010, respectively.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .73% and 1.07% in the third quarter of 2010 and 2009, respectively, and .64% in the second quarter of 2010.

Loans classified as nonaccrual totaled $1.10 billion, or 2.16% of total loans at September 30, 2010, compared with $1.23 billion or 2.35% a year earlier and $1.09 billion or 2.13% at June 30, 2010.  Assets taken in foreclosure of defaulted loans were $193 million at each of June 30 and September 30, 2010, up from $85 million at September 30, 2009.  The higher level of such assets at the two most recent quarter-ends resulted from the second quarter 2010 transfer of $98 million of collateral related to a single commercial real estate loan.  The ratio of nonperforming assets to total loans plus real estate and other foreclosed assets was 2.53% at September 30, 2010, compared with 2.51% and 2.50% at September 30, 2009 and June 30, 2010, respectively.

Loans past due 90 days or more and accruing interest totaled $215 million at the end of the recent quarter, including loans guaranteed by government-related entities of $194 million.  Such past due loans were $183 million and $203 million at September 30, 2009 and June 30, 2010, respectively, including $173 million and $188 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 for credit losses was $895 million at each of June 30 and September 30, 2010, compared with $868 million at September 30, 2009.  That allowance expressed as a percentage of outstanding loans was 1.76% at the recent quarter-end, compared with 1.66% at September 30, 2009 and 1.75% at June 30, 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 carry-over of the acquired entity's allowance for credit losses.  Excluding amounts related to loans obtained in 2009 acquisition transactions, the allowance-to-legacy loan ratio was 1.86% at the two most recent quarter-ends, compared with 1.81% at September 30, 2009.

Noninterest Income and Expense.  Noninterest income totaled $290 million in the recent quarter, compared with $278 million and $274 million in the third quarter of 2009 and the second quarter of 2010, respectively.  Reflected in those amounts were net losses from investment securities of $8 million, $47 million and $22 million, each predominantly due to other-than-temporary impairment charges.  During each of those quarters, such charges reflected write-downs of certain of M&T's holdings of privately issued collateralized mortgage obligations and collateralized debt obligations backed by pooled trust preferred securities.  In addition, during 2010's second quarter, other-than-temporary impairment charges included a $12 million write-down of American Depositary Shares of Allied Irish Banks, p.l.c., which were obtained in M&T's acquisition of Allfirst Financial Inc. in 2003.  Excluding gains and losses from investment securities and a pre-tax merger-related gain of $29 million in the third quarter of 2009, noninterest income in the third quarter of 2010 aggregated $298 million, up from $296 million in each of the third quarter of 2009 and the second 2010 quarter.  The higher level of noninterest income in the recent quarter resulted largely from higher mortgage banking revenues that were largely offset by declines in service charges on deposit accounts.  The lower level of deposit service charge revenues was attributable to new regulations that went into effect July 1, 2010 for new customers and August 15, 2010 for pre-existing customers.  Such regulations require depositors to elect to be subject to fees for certain deposit account services.

Noninterest expense in the third quarter of 2010 aggregated $480 million, compared with $500 million in the year-earlier quarter and $476 million in the second quarter of 2010.  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 $467 million in the recent quarter, compared with $469 million in the third quarter of 2009 and $461 million in 2010'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 expenses and gains), measures the relationship of operating expenses to revenues.  M&T's efficiency ratio was 53.4% in the recent quarter, compared with 55.2% and 53.1% in the year-earlier quarter and the second quarter of 2010, respectively.  

Balance Sheet.  M&T had total assets of $68.2 billion at September 30, 2010, compared with $69.0 billion at September 30, 2009.  Loans and leases, net of unearned discount, were $50.8 billion at September 30, 2010, down 3% from $52.2 billion a year earlier.  Total deposits aggregated $48.7 billion at the recent quarter-end, up 4% from $46.9 billion at September 30, 2009.  Reflecting a $1.9 billion or 15% increase in noninterest-bearing deposits, deposits at domestic offices rose $2.5 billion, or 5%, to $48.0 billion at the recent quarter-end from $45.5 billion at September 30, 2009.  

Total stockholders' equity rose 8% to $8.2 billion at September 30, 2010 from $7.6 billion a year earlier, representing 12.06% and 11.03%, respectively, of total assets.  Common stockholders' equity was $7.5 billion, or $62.69 per share, at September 30, 2010, compared with $6.9 billion, or $58.22 per share, at September 30, 2009.  Tangible equity per common share rose to $32.23 at September 30, 2010 from $27.03 at September 30, 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.  M&T's tangible common equity to tangible assets ratio was 5.96% at September 30, 2010, compared with 4.89% and 5.75% at September 30, 2009 and June 30, 2010, respectively.

Allied Irish Banks, p.l.c. initiated steps in early October to divest its holdings of M&T common shares. In a public offering, 26.7 million of Contingent Mandatorily Exchangeable Notes, each note exchangeable for one share of M&T common stock, were sold in a single day.  The notes were distributed directly to one hundred twenty-three institutional investors as well as through retail delivery channels.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss third quarter financial results today at 10:30 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 #17941643.  The conference call will be webcast live on M&T's website at http://ir.mandtbank.com/conference.cfm.  A replay of the call will be available until Friday, October 22, 2010 by calling (800)642-1687, or (706)645-9291 for international participants, and by making reference to ID #17941643.  The event will also be archived and available by 6:00 p.m. today on M&T's website at http://ir.mandtbank.com/conference.cfm.

M&T is a bank 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.

SOURCE M&T Bank Corporation