M&T Bank Corporation (NYSE:MTB) announces third quarter 2023 results

BUFFALO, N.Y., Oct. 18, 2023 /PRNewswire/ -- M&T Bank Corporation ("M&T" or "the Company") reports net income of $690 million or $3.98 of diluted earnings per common share.

Financial Highlights

• Capital position remains strong with the CET1 capital ratio increasing 35 basis points to an estimated 10.94% at September 30, 2023, compared with 10.59% at June 30, 2023.
• Net interest margin of 3.79% in the recent quarter narrowed from 3.91% in the second quarter of 2023 as increases to the rates paid on interest-bearing deposits outpaced the rise in yields on interest-earning assets.
• Average loans and leases in the third quarter of 2023 decreased 1% from the previous 2023 quarter reflecting a $714 million decline in average commercial real estate loan balances.
• The level of nonaccrual loans improved to 1.77% of loans outstanding at September 30, 2023, compared with 1.83% at June 30, 2023.
• Recent quarter net charge-offs of $96 million, or 29 basis points, were below the Company's long-term average net charge-off rate.
• Average deposits increased 2% from the second quarter of 2023 reflecting a higher demand for interest-bearing products.

Chief Financial Officer Commentary

"The third quarter results reflect the stability of M&T's diverse banking franchise and the ability to consistently generate capital for our shareholders while continuing to invest in the systems and resources needed to best serve our customers. Our customer deposit balances increased in the recent quarter as we continue to build upon our strong liquidity position. Our credit metrics reflect a decline in nonaccrual loans and net charge-offs that remain below M&T's long-term average. The comparative strength of our financial position in the industry will continue to enable us to improve the communities in which we serve and the lives of our customers. Thank you to our employees for their commitment to delivering for our customers each and every day."

- Daryl N. Bible, M&T's Chief Financial Officer

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.

Merger-related expenses associated with the People's United Financial, Inc. ("People's United") acquisition in 2022 generally consisted of:

• Professional services, temporary help fees and other costs associated with actual or planned conversions of systems and/or integration of operations and the introduction of M&T to its new customers.
• Costs related to terminations of existing contractual arrangements to purchase various services, severance and travel costs.
• An initial provision for credit losses of $242 million in the second quarter of 2022 on loans not deemed to be purchased credit deteriorated ("PCD") on the April 1, 2022 acquisition date of People's United.

The amounts of merger-related expenses in 2022 are presented in the tables that accompany this release. No merger-related expenses were incurred in the nine months ended September 30, 2023.

Taxable-equivalent net interest income decreased $23 million, or 1%, from the second quarter of 2023.

• Average interest-bearing deposits increased $5.6 billion and the rates paid on such deposits rose 52 basis points.
• Average short-term borrowings declined $2.2 billion.
• The yield on average outstanding loans and leases increased 17 basis points.
• Average interest-bearing deposits at banks increased $3.0 billion.

Taxable-equivalent net interest income increased $99 million, or 6%, compared with the year-earlier quarter.

• Yields earned on average loans and leases and interest-bearing deposits at banks increased 164 basis points and 317 basis points, respectively.
• Average loans and leases increased $5.1 billion.
• Rates paid on interest-bearing deposits increased 225 basis points.
• Average borrowings increased $8.4 billion.

M&T recorded a provision for credit losses of $150 million in each of the third and second quarters of 2023 compared with $115 million in the third quarter of 2022. The comparatively higher provisions for credit losses in the most recent two quarters compared with the third quarter of 2022 reflect a softening of commercial real estate values. Net charge-offs totaled $96 million in 2023's third quarter, compared with $127 million in 2023's second quarter and $63 million in the year-earlier quarter reflective of variability in the timing and amount of commercial real estate charge-offs.

Nonaccrual loans were $2.34 billion at September 30, 2023, $94 million lower than June 30, 2023 and $87 million lower than September 30, 2022. Those declines are reflective of lower levels of hospitality-related commercial real estate nonaccrual loans.

Noninterest income in the third quarter of 2023 decreased $244 million, or 30%, as compared with 2023's second quarter.

• Other revenues from operations decreased $219 million reflecting a $225 million gain on sale of the Company's Collective Investment Trust ("CIT") business in the second quarter of 2023.
• Trust income declined $17 million, predominantly reflective of one month of revenues associated with the CIT business recognized prior to its sale in the second quarter of 2023.
• Trading account and non-hedging derivative gains decreased $7 million from the second quarter due to a decline in customer interest rate swap revenues and market conditions.

Noninterest income decreased $3 million, or less than 1%, as compared with the year-earlier third quarter.

• Trust income decreased $31 million reflecting lower revenues associated with the CIT business as a result of its sale in April 2023.
• Other revenues from operations declined $11 million due to lower insurance income reflecting the sale of M&T Insurance Agency in December 2022.
• Mortgage banking revenues increased $21 million due to higher servicing income related to the bulk purchase of residential mortgage loan servicing rights in the first quarter of 2023 and higher gains on sales of residential mortgage loans. The Company returned to originating for sale the majority of its newly originated residential mortgage loans in the first quarter of 2023.

Noninterest expense aggregated $1.28 billion in the recent quarter, down from $1.29 billion in the second quarter of 2023. Excluding the amortization of core deposit and other intangible assets considered to be nonoperating in nature, noninterest operating expenses decreased $15 million, or 1%, to $1.26 billion in the recent quarter from $1.28 billion in the immediately preceding quarter.

• Salaries and employee benefits expense decreased $11 million reflecting lower average headcount and lower expenses for contracted resources and overtime.
• Other costs of operations decreased $6 million reflecting lower sub-advisory fees as a result of the sale of the CIT business in April 2023 and a decline in legal-related expenses, partially offset by losses associated with certain retail banking activities.

Noninterest expense decreased $2 million from the third quarter of 2022. Noninterest operating expenses aggregated $1.21 billion in the third quarter of 2022 after excluding $53 million of merger-related expenses associated with the People's United acquisition and $18 million of amortization of core deposit and other intangible assets. Noninterest operating expenses increased $55 million, or 5%, from the prior year third quarter inclusive of the following:

• Other costs of operations increased $23 million resulting from the amortization of the bulk purchase of residential mortgage loan servicing rights purchased in March 2023 and losses associated with certain retail banking activities, partially offset by lower professional and other outside services expenses reflecting lower sub-advisory fees as a result of the sale of the CIT business.
• Outside data processing and software costs increased $18 million, or 19%, primarily due to higher software maintenance costs, offshore processing and data processing fees.

Average earning assets increased $1.5 billion, or 1%, from the second quarter of 2023.

• Average interest-bearing deposits at banks increased $3.0 billion due to increased liquidity from a rise in average deposits and a decline in average loan and investment securities balances.
• Average loans and leases decreased $928 million primarily reflective of a $714 million decline in average balances of commercial real estate loans.
• Average investment securities declined $630 million primarily due to pay downs of fixed rate mortgage-backed securities.

Average earning assets increased $5.0 billion, or 3%, from the year-earlier third quarter.

• Average loans and leases increased $5.1 billion predominantly due to higher average outstanding balances of commercial and industrial loans and leases reflecting lending activities to financial and insurance industry customers and motor vehicle and recreational finance dealers, partially offset by a $2.1 billion decline in average commercial real estate loans.
• Average investment securities increased $4.0 billion due to the purchases of additional investment securities in the fourth quarter of 2022 and the first quarter of 2023.
• Average interest-bearing deposits at banks decreased $4.1 billion reflecting lower deposits, incremental loan balances and purchases of investment securities, partially offset by higher borrowings.

Average interest-bearing liabilities increased $3.1 billion, or 3%, from the second quarter of 2023.

• Average interest-bearing deposits increased $5.6 billion, including a $3.3 billion increase in average non-brokered deposits.
• Average borrowings decreased $2.5 billion predominantly due to lower levels of short-term borrowings from the Federal Home Loan Bank ("FHLB") of New York.

Average interest-bearing liabilities increased $22.8 billion, or 23%, from the third quarter of 2022.

• Average interest-bearing deposits increased $14.4 billion, including a $5.3 billion increase in average non-brokered deposits.
• Average borrowings increased $8.4 billion predominantly due to issuances of long-term senior notes totaling $3.5 billion in the first quarter of 2023 and increases in short-term borrowings from the FHLB of New York.

M&T's capital ratios remained well above the minimum set forth by regulatory requirements. Cash dividends declared on M&T's common and preferred stock totaled $217 million and $25 million, respectively, for the quarter ended September 30, 2023. M&T did not repurchase any shares of its common stock in the third quarter of 2023.

The CET1 capital ratio for M&T was estimated at 10.94% as of September 30, 2023. M&T's total risk-weighted assets at September 30, 2023 are estimated to be $152 billion.

Capital regulations require buffers in addition to the minimum risk-based capital ratios noted above. M&T is subject to a stress capital buffer requirement that is determined through the Federal Reserve's supervisory stress tests and M&T's bank subsidiaries are subject to a 2.5% capital conservation buffer requirement. The buffer requirement must be composed entirely of CET1. In June 2023, the Federal Reserve released the results of its most recent supervisory stress tests. Based on those results, on October 1, 2023, M&T's stress capital buffer of 4.0% became effective.

M&T repurchased 3,282,449 shares of its common stock at an average cost per share of $182.79 resulting in a total cost of $600 million in 2022's third quarter. There were no share repurchases in the second or third quarters of 2023.

Conference Call

Investors will have an opportunity to listen to M&T's conference call to discuss third quarter financial results today at 10:00 a.m. Eastern Time. Those wishing to participate in the call may dial (800) 347-7315. International participants, using any applicable international calling codes, may dial (785) 424-1755. Callers should reference M&T Bank Corporation or the conference ID #MTBQ323. 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 25, 2023 by calling (800) 839-5631, or (402) 220-2558 for international participants. No conference ID or passcode 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 M&T and/or the financial industry as a whole, as well as national and global events generally, including economic conditions, on M&T'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 M&T's control.

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 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.

Examples of Future Factors include: the impact of M&T's acquisition of People's United (as described in the next paragraph); events and developments in the financial services industry, including legislation, regulations and other governmental actions as well as business conditions affecting the industry and/or M&T and its subsidiaries, individually or collectively; economic conditions, including inflation and market volatility; 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; regulatory supervision and oversight, including monetary policy and capital requirements; domestic or international political developments and other geopolitical events, including international conflicts; governmental and public policy changes, including tax policy; 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, divestment 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 possibility that the anticipated benefits of the transaction will not be realized when expected or at all; potential adverse reactions or changes to business, customer or employee relationships; M&T's success in executing its business plans and strategies and managing the risks involved in the foregoing; the results and costs of integration efforts; the business, economic and political conditions in the markets in which M&T and its subsidiaries operate; the outcome of any legal proceedings that may be instituted against M&T or its subsidiaries; and other factors related to the acquisition that may affect future results of M&T.

These are representative of the Future Factors that could affect the outcome of the forward-looking statements. In addition, as noted, 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, 2022, 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.