M&T BANK CORPORATION ANNOUNCES THIRD QUARTER RESULTS

BUFFALO, N.Y., Oct. 19, 2022 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended September 30, 2022.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") were $3.53 in the third quarter of 2022, compared with $3.69 in the year-earlier quarter and $1.08 in the second quarter of 2022. GAAP-basis net income was $647 million in the recent quarter, $495 million in the third quarter of 2021 and $218 million in the second 2022 quarter. GAAP-basis net income expressed as an annualized rate of return on average assets was 1.28% in each of the third quarters of 2022 and 2021, and .42% in the second quarter of 2022. That net income produced a return on average common shareholders' equity of 10.43% in the recent quarter, 12.16% in the similar 2021 period and 3.21% in the second quarter of 2022. The results reflect non-operating merger-related expenses associated with the acquisition of People's United Financial, Inc. ("People's United") of $53 million ($39 million after-tax effect, or $0.22 of diluted earnings per common share) in the recent quarter, compared with $9 million ($7 million after-tax effect, or $.05 of diluted earnings per common share) in the year-earlier quarter and $465 million ($346 million after-tax effect, or $1.94 of diluted earnings per share) in the second quarter of 2022.

Darren J. King, Chief Financial Officer, commenting on M&T's results noted, "We are pleased with the recent quarter gains in net operating income which are up 21% from the second quarter and 39% year over year. That improvement reflects increases in taxable-equivalent net interest income of 19% and 74%, coupled with low credit losses and well-controlled expenses. We are excited to continue our integration work to build a preeminent commercial bank across the eastern United States and we are committed to the success of the consumers, small businesses and communities across our expanded footprint."

For the first nine months of 2022, diluted earnings per common share were $7.14, compared with $10.43 in the year-earlier period. GAAP-basis net income was $1.23 billion and $1.40 billion in the first three quarters of 2022 and 2021, respectively. 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, 2022 was .87% and 7.24%, respectively, compared with 1.24% and 11.76%, respectively, in the similar 2021 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 and core deposit and other intangible asset balances, net of applicable deferred tax amounts) and expenses associated with merging acquired operations into M&T (when incurred), since such items are considered by management to be "nonoperating" in nature. The amounts of such "nonoperating" expenses are presented in the tables that accompany this release.

Merger-related expenses generally consist of professional services and other temporary help fees associated with actual or planned conversions of systems and/or integration of operations, costs related to terminations of existing contractual arrangements to purchase various services, severance and travel costs. Reflected in merger-related expenses in the second quarter of 2022 was a provision for credit losses of $242 million. GAAP requires that acquired loans be recorded at estimated fair value, which includes the use of interest rate and expected credit loss assumptions to forecast estimated cash flows. GAAP also provides that an allowance for credit losses on loans acquired, but not classified as purchased credit deteriorated ("PCD") also be recognized. Accordingly, M&T recorded a $242 million provision related to such loans obtained in the People's United acquisition. Given the requirement to recognize such losses above and beyond the impact of forecasted losses used in determining the fair value of acquired loans, M&T considers that provision to be a merger-related expense. 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 $3.83 in the third quarter of 2022, compared with $3.76 in the year-earlier quarter and $3.10 in the second quarter of 2022. Net operating income aggregated $700 million in the recent quarter, $504 million in the third quarter of 2021 and $578 million in 2022's second quarter. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income in the third quarter of 2022 was 1.44% and 17.89%, respectively, 1.34% and 17.54%, respectively, in the similar quarter of 2021 and 1.16% and 14.41%, respectively, in the second quarter of 2022.

Diluted net operating earnings per common share in the first nine months of 2022 totaled $9.78, compared with $10.61 in the similar 2021 period. Net operating income during the first nine months of 2022 was $1.65 billion, up from $1.42 billion in the nine-month period ended September 30, 2021. Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was 1.23% and 15.13%, respectively, in the initial nine months of 2022, compared with 1.30% and 17.10%, respectively, in the similar 2021 period.

Taxable-equivalent Net Interest Income.   Taxable-equivalent net interest income totaled $1.69 billion in the recent quarter, up from $971 million in the third quarter of 2021 and $1.42 billion in the second quarter of 2022. The increase compared with the earlier quarters reflects a higher net interest margin and, additionally, when compared with the year-earlier quarter, the impact of earning assets obtained in the acquisition of People's United. Average earning assets totaled $182.4 billion in the recent quarter, compared with $140.4 billion in the third quarter of 2021 and $189.8 billion in the second quarter of 2022. Average loans outstanding were $127.5 billion in the third quarter of 2022, compared with $95.3 billion in the year earlier quarter and $127.6 billion in the second quarter of 2022. The higher average balances of both earnings assets and loans outstanding in the second and third quarters of 2022 compared with the third quarter of 2021 reflect the impact of additional earning assets obtained in the acquisition of People's United. Reflecting the impact of rising interest rates, the net interest margin increased to 3.68% in the third quarter of 2022, up from 2.74% in the corresponding quarter of 2021 and 3.01% in the second quarter of 2022.

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $115 million in the third quarter of 2022 and $302 million in the second quarter of 2022, compared with a $20 million recapture of provision in the third quarter of 2021. Included in the second quarter of 2022 was a $242 million provision, recorded in accordance with GAAP, related to loans obtained in the People's United acquisition that were considered non-PCD. GAAP provides that an allowance for credit losses on such loans be recorded beyond the recognition of the fair value of the loans at the acquisition date. In addition to that merger-related provision, M&T recorded a provision for credit losses of $60 million in the second quarter of 2022. Net loan charge-offs were $63 million in the third quarter of 2022, $40 million in the third quarter of 2021 and $50 million in 2022's second quarter. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .20% and .17% in the third quarters of 2022 and 2021, respectively, and .16% in the second quarter of 2022.

Loans classified as nonaccrual totaled $2.43 billion at September 30, 2022, compared with $2.24 billion at September 30, 2021 and $2.63 billion at June 30, 2022. The balance of nonaccrual loans at the end of the two most recent quarters as compared with September 30, 2021 reflects loans obtained in the acquisition of People's United. Nonaccrual loans as a percentage of total loans were 1.89% at September 30, 2022, improved from 2.40% a year earlier and 2.05% at June 30, 2022. Assets taken in foreclosure of defaulted loans were $37 million at September 30, 2022, $25 million a year earlier and $29 million at June 30, 2022.

Allowance for Credit Losses.  M&T regularly performs comprehensive analyses of its loan portfolios and assesses forecasted economic conditions for purposes of determining the adequacy of the allowance for credit losses. As a result of those procedures, the allowance for credit losses totaled $1.88 billion or 1.46% of loans outstanding at September 30, 2022 compared with $1.52 billion or 1.62% of loans outstanding at September 30, 2021 and $1.82 billion or 1.42% at June 30, 2022. The acquisition of People's United loans and leases resulted in a $341 million increase in the allowance for credit losses as of April 1, 2022, including $99 million related to PCD loans and $242 million related to non-PCD loans. Including the impact of the acquisition, M&T's allowance for credit losses was $1.81 billion on April 1, 2022, or 1.42% of then outstanding loans. The higher allowance for credit losses as a percentage of outstanding loans at the recent quarter end as compared with June 30, 2022 reflects a modestly less optimistic macroeconomic forecast.

Noninterest Income and Expense.  Noninterest income totaled $563 million in the third quarter of 2022, compared with $569 million in the year-earlier quarter. Trust income, service charges on deposit accounts and credit-related fees included in other revenues from operations all increased reflecting the acquisition of People's United, but were offset by a decline in mortgage banking revenues resulting from M&T's decision to retain recently originated mortgage loans in portfolio rather than sell such loans. Noninterest income was $571 million in this year's second quarter. The comparative decline in the recent quarter was predominantly the result of lower service charges on deposit accounts and trust income, offset by higher credit-related fees.

Noninterest expense totaled $1.28 billion in the third quarter of 2022, compared with $899 million in the similar quarter of 2021 and $1.40 billion in the second quarter of 2022. 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 $1.21 billion in the recent quarter, $888 million in the third quarter of 2021 and $1.16 billion in 2022's second quarter. The most significant factor for the higher level of operating expenses in the recent quarter as compared with the year-earlier quarter was the impact of operations obtained in the People's United acquisition. Compared with the second quarter of 2022, the $46 million increase in operating expenses in 2022's third quarter predominantly resulted from a $32 million rise in salaries and benefits expenses attributable to an additional pay day in the third quarter and M&T's continued investment in its talent base through salaries and incentive compensation.

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 53.6% in the third quarter of 2022, 57.7% in the year-earlier quarter and 58.3% in the second quarter of 2022.

Balance Sheet.  M&T had total assets of $198.0 billion at September 30, 2022, compared with $151.9 billion and $204.0 billion at September 30, 2021 and June 30, 2022, respectively. Loans and leases, net of unearned discount, were $128.2 billion at September 30, 2022, compared with $93.6 billion at September 30, 2021 and $128.5 billion at June 30, 2022. The higher level of loans and leases at the recent quarter-end and June 30, 2022 as compared with September 30, 2021 is largely a reflection of balances associated with the acquisition of People's United. Also reflective of that acquisition, total deposits were $163.8 billion at the recent quarter-end and $170.4 billion at June 30, 2022, compared with $128.7 billion at September 30, 2021.

Total shareholders' equity was $25.3 billion or 12.76% of total assets at September 30, 2022, $17.5 billion or 11.54% at September 30, 2021 and $25.8 billion or 12.64% at June 30, 2022. Common shareholders' equity was $23.2 billion, or $134.45 per share, at September 30, 2022, compared with $15.8 billion, or $122.60 per share, a year-earlier and $23.8 billion, or $135.16 per share, at June 30, 2022. Tangible equity per common share was $84.28 at September 30, 2022, $86.88 at September 30, 2021 and $85.78 at June 30, 2022. 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 10.7% at September 30, 2022, compared with 10.9% three months earlier and 11.1% at September 30, 2021.

In accordance with its capital plan, M&T repurchased 3,282,449 shares of its common stock during the recent quarter at an average cost per share of $182.79 resulting in a total cost of $600 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 (800) 225-9448. International participants, using any applicable international calling codes, may dial (203) 518-9708. Callers should reference M&T Bank Corporation or the conference ID #MTBQ322. The conference call will be webcast live through M&T's website at https://ir.mtb.com/events-presentations. A replay of the call will be available through Wednesday October 26, 2022 by calling (800) 688-7339, or (402) 220-1347 for international participants. No conference ID is required. The event will also be archived and available by 3:00 p.m. today on M&T's website at https://ir.mtb.com/events-presentations.

About M&T. M&T is a financial holding company headquartered in Buffalo, New York. M&T's principal banking subsidiary, M&T Bank, provides banking products and services in 12 states across the eastern U.S. from Maine to Virginia and Washington, D.C. Trust-related services are provided in select markets in the U.S. and abroad by M&T's Wilmington Trust-affiliated companies and by M&T Bank. For more information on M&T Bank, visit www.mtb.com.

Forward-Looking Statements.  This news release and related conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the rules and regulations of the SEC. Any statement that does not describe historical or current facts is a forward-looking statement, including statements based on current expectations, estimates and projections about M&T's business, and management's beliefs and assumptions.

Statements regarding the potential effects of events or factors specific to the Company and/or the financial industry as a whole, as well as national and global events generally, on the Company's business, financial condition, liquidity and results of operations may constitute forward-looking statements. Such statements are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company's control. As described further below, statements regarding M&T's expectations or predictions regarding the acquisition of People's United are also forward-looking statements, including statements regarding the expected financial results, prospects, targets, goals and outlook.

Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," "intend," "target," "estimate," "continue," or "potential," by future conditional verbs such as "will," "would," "should," "could," or "may," or by variations of such words or by similar expressions. These statements are not guarantees of future performance and involve 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.

Examples of future factors include: the impact of the People's United acquisition (as described in the next paragraph); economic conditions including inflation and supply chain issues; the impact of international conflicts or other events; the impact of the COVID-19 pandemic; 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 and/or regulations affecting the financial services industry or M&T and its subsidiaries individually or collectively, including tax policy; regulatory supervision and oversight, including monetary policy and capital requirements; governmental and public policy changes; the outcome of pending and future litigation and governmental proceedings, including tax-related examinations and other matters; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board, regulatory agencies or legislation; increasing price, product and 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 and services; containing costs and expenses; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; 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.

In addition, future factors related to the acquisition of People's United include, among others: the outcome of any legal proceedings that may be instituted against M&T or its subsidiaries; the possibility that the anticipated benefits of the transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company does business; diversion of management's attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships; the Company's success in executing its business plans and strategies and managing the risks involved in the foregoing; the business, economic and political conditions in the markets in which the Company operates; and other factors that may affect future results of the Company.

Future factors related to the acquisition also include risks, such as, among others: that there could be an adverse effect on the Company's ability to retain customers and retain or hire key personnel and maintain relationships with customers; that integration efforts may be more difficult or time-consuming than anticipated, including in areas such as sales force, cost containment, asset realization, systems integration and other key strategies; that profitability following the combination may be lower than expected including for possible reasons such as lower than expected revenues or higher or unexpected costs, charges or expenses resulting from the transaction; unforeseen risks that may exist; and other factors that may affect future results of the Company.

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.

M&T provides further detail regarding these risks and uncertainties in its Form 10-K for the year ended December 31, 2021, including in the Risk Factors section of such report, as well as in other SEC filings. Forward-looking statements speak only as of the date made, and M&T does not assume any duty and does not undertake to update forward-looking statements.