M&T Bank Corporation Announces First Quarter Earnings
Taxable-equivalent net interest income rose 10% to $305 million in the recently completed quarter from $276 million in 2001's first quarter. The improvement reflects higher average loans outstanding and a widening of M&T's net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets. Average loans and leases outstanding during the initial 2002 quarter were $25.1 billion, up 7% from $23.4 billion in the corresponding 2001 quarter. Net interest margin improved 21 basis points (hundredths of one percent) to 4.37% in the first quarter of 2002 from 4.16% in the year-earlier quarter.
The provision for credit losses was $24 million in the recent quarter, up from $19 million in the initial 2001 quarter. Net charge-offs of loans totaled $16 million during both the first quarter of 2002 and 2001. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .26% in the recent quarter, compared with .28% in the corresponding quarter of 2001. Nonperforming loans totaled $182 million or .73% of total loans at March 31, 2002, compared with $161 million or .67% a year earlier. Loans past due 90 days or more and accruing interest were $148 million at the recent quarter-end, compared with $141 million a year earlier. Included in these loans at March 31, 2002 and 2001 were $109 million and $105 million, respectively, of one-to-four family residential mortgage loans serviced by M&T and repurchased from the Government National Mortgage Association. The outstanding principal balances of these loans, which were repurchased to reduce servicing costs, are fully guaranteed by government agencies. In general, the remaining portion of accruing loans past due 90 days or more are either also guaranteed by government agencies or well-secured by collateral.
M&T's allowance for credit losses totaled $433 million, or 1.72% of total loans at March 31, 2002, compared with $399 million, or 1.65% a year earlier. The ratio of the allowance for credit losses to nonperforming loans was 238% at the recent quarter-end, compared with 248% at March 31, 2001. Assets taken in foreclosure of defaulted loans were $22 million at March 31, 2002, compared with $13 million a year earlier.
Noninterest income in the recent quarter totaled $124 million, up 11% from $112 million in the first quarter of 2001. Higher revenues from deposit account and mortgage banking services contributed to the year-over-year increase. Noninterest operating expenses, which exclude amortization of intangible assets and nonrecurring expenses associated with merging acquired operations into M&T, were $210 million in the first quarter of 2002, compared with $197 million in the corresponding 2001 period. Contributing to the rise in operating expenses were higher costs for salaries, including commissions and incentive compensation, and employee benefits. The efficiency ratio, or noninterest operating expenses divided by the sum of taxable-equivalent net interest income and noninterest income, measures the relationship of operating expenses to revenues. M&T's cash-basis efficiency ratio, calculated using the operating expense totals noted above and excluding gains from sales of bank investment securities from noninterest income, was 48.9% in the first quarter of 2002, improved from 50.8% a year earlier.
M&T adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," as of January 1, 2002. SFAS No. 142 revised the accounting for purchased intangible assets and requires that goodwill no longer be amortized, but rather that it be tested periodically for impairment. Other intangible assets with finite lives, such as core deposit intangibles, are required to be amortized over their estimated useful economic lives and to be reviewed for impairment. Effective January 1, 2002, M&T ceased amortization of all of its goodwill associated with corporate acquisitions. Amortization of such goodwill during the first quarter of 2001, none of which was tax deductible, totaled $15 million ($.15 per diluted share). Charges for amortization of core deposit and other intangible assets totaled $14 million ($9 million after tax effect, or $.09 per diluted share) during the first quarter of 2002, compared with $15 million ($9 million after tax effect, or $.09 per diluted share) during the year-earlier quarter. To comply with the requirements of SFAS No. 142, M&T has assigned all of its recorded goodwill to the reporting units originally intended to benefit from past business combinations and has also completed the required transitional goodwill impairment test. As a result, M&T has determined that pursuant to the provisions of SFAS No. 142, impairment of goodwill was not permitted or required at the recent quarter-end or as of January 1, 2002. At March 31, 2002 and 2001, M&T had goodwill of $1.1 billion and $1.2 billion, respectively, recorded as assets.
Net income measured in accordance with generally accepted accounting principles ("GAAP") includes the impact of non-cash charges for the amortization of intangible assets, as well as nonrecurring merger-related expenses. GAAP-basis diluted earnings per share for the first quarter of 2002 were $1.25, up 47% from $.85 in the year-earlier period. On the same basis, net income for the recent quarter rose 44% to $121 million from $84 million in the first quarter of 2001. As stated earlier, the after-tax impact of amortization of goodwill in the first quarter of 2001 was $15 million, or $.15 per diluted share. As a result, pro forma GAAP-basis diluted earnings per share and net income for last year's first quarter, computed as if SFAS No. 142 became effective on January 1, 2001, were $1.00 and $98 million, respectively. GAAP-basis net income for the first quarter of 2002 expressed as an annualized rate of return on average assets and average common stockholders' equity was 1.56% and 16.63%, respectively, compared with 1.14% and 11.84%, respectively, in the year-earlier quarter. Pro forma GAAP-basis annualized returns on average assets and average common stockholders' equity for the first quarter of 2001 were 1.34% and 13.92%, respectively, after excluding the impact of goodwill amortization. The after-tax impact of merger-related expenses incurred in the first quarter of 2001 was $5 million ($8 million pre-tax) or $.05 per diluted share. There were no similar charges in the recently completed quarter.
Michael P. Pinto, Executive Vice President and Chief Financial Officer of M&T, noted, "We are pleased with the 18% growth in cash earnings per share achieved in the first quarter of 2002, particularly considering the challenging economic environment in which we are operating. Despite these difficult conditions, we remain comfortable with the current consensus of analysts' estimates for GAAP-basis diluted earnings per share in 2002 of $4.95."
At March 31, 2002, M&T had total assets of $31.3 billion, compared with $30.9 billion a year earlier. Loans and leases, net of unearned discount, rose 4% to $25.1 billion from $24.2 billion at March 31, 2001. Deposits were $21.6 billion at the recent quarter-end, compared with $21.0 billion a year earlier. Total stockholders' equity was $2.9 billion at March 31, 2002, representing 9.42% of total assets, compared with $3.0 billion or 9.68% at March 31, 2001. Common stockholders' equity per share was $31.67 at the recent quarter-end, up from $30.84 at March 31, 2001. Tangible equity per common share was $18.68 and $17.33 at March 31, 2002 and 2001, respectively.
In November 2001, M&T announced that it had been authorized by its Board of Directors to repurchase up to 5,000,000 shares of its common stock. Through March 31, 2002, M&T had repurchased 1,931,013 shares of common stock pursuant to the repurchase program at an average cost of $74.62 per share.
Investors will have an opportunity to listen to M&T's conference call to discuss first quarter financial results at 9:00 a.m. Eastern Standard Time ("EST") today, April 16, 2002. Those wishing to participate in the call may dial 800-374-0162. The conference call will also be webcast live at http://ir.mandtbank.com/calendar.cfm. A replay of the call will be available until April 17, 2002 by calling 800-642-1687, code 3483082. The event will also be archived and available by noon (EST), April 17, 2002 on M&T's web site at http://ir.mandtbank.com/conference.cfm.
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. M&T undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Future Factors include changes in interest rates, spreads on
earning assets and interest-bearing liabilities, and interest rate
sensitivity; credit losses; sources of liquidity; legislation
affecting the financial services industry as a whole, and M&T and its
subsidiaries individually or collectively; regulatory supervision and
oversight, including required capital levels; 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, including
environmental regulations; 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; 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 and
acquisition activities compared to 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 conditions,
including interest rate and currency exchange rate fluctuations, and
other Future Factors.
M&T BANK CORPORATION
Financial Highlights
Three months ended
Amounts in thousands, March 31
except per share 2002 2001 Change
----- ----- ------
Performance
-----------
Net income $ 120,564 83,666 44 %
Per common share:
Basic earnings $ 1.29 .88 47 %
Diluted earnings 1.25 .85 47
Cash dividends $ .25 .25 --
Common shares outstanding:
Average - diluted (1) 96,494 98,605 -2 %
Period end (2) 93,071 97,013 -4
Return on (annualized):
Average total assets 1.56% 1.14%
Average common
stockholders' equity 16.63% 11.84%
Taxable-equivalent
net interest income $ 304,659 276,368 10 %
Net charge-offs to
average total
net loans (annualized) .26% .28%
Cash operating
results (3)
---------------
Cash net income $ 129,357 107,547 20 %
Cash net income, excluding
acquisition-related
expenses 129,357 112,391 15
Diluted cash earnings
per common share 1.34 1.09 23
Diluted cash earnings
per common share,
excluding
acquisition-related
expenses 1.34 1.14 18
Return on (annualized):
Average tangible assets 1.75% 1.52%
Average tangible assets,
excluding
acquisition-related
expenses 1.75% 1.59%
Average tangible common
equity 30.38% 26.73%
Average tangible common
equity, excluding
acquisition-related
expenses 30.38% 27.93%
Efficiency ratio, excluding
acquisition-related
expenses 48.91% 50.77%
At March 31
2002 2001 Change
Loan quality ------ ------ ------
-------------
Nonaccrual loans $173,197 151,927 14 %
Renegotiated loans 9,057 8,864 2
----------- -----------
Total nonperforming loans $182,254 160,791 13
=========== ===========
Accruing loans past
due 90 days or more $148,038 141,355 5 %
Nonperforming loans to
total net loans .73% .67%
Allowance for credit
losses to total net loans 1.72% 1.65%
(1) Includes common stock equivalents
(2) Includes common stock issuable under deferred compensation plans
(3) Excludes amortization and balances related to goodwill and core
deposit intangible which, except in the calculation of the
efficiency ratio, are net of applicable income tax effects
M&T BANK CORPORATION
Condensed Consolidated Statement of Income
Three months ended
March 31
Dollars in thousands 2002 2001 Change
------- ------- -------
Interest income $461,187 548,578 -16 %
Interest expense 160,127 276,597 -42
----------- -----------
Net interest income 301,060 271,981 11
Provision for credit
losses 24,000 18,500 30
----------- -----------
Net interest income
after provision for
credit losses 277,060 253,481 9
Other income
Mortgage banking revenues 27,912 25,660 9
Service charges on deposit
accounts 39,525 32,534 21
Trust income 15,805 15,827 --
Brokerage services income 10,919 10,010 9
Trading account and foreign
exchange gains 1,043 802 30
Gain on sales of bank
investment securities 171 79 --
Other revenues from operations 28,853 26,815 8
----------- -----------
Total other income 124,228 111,727 11
Other expense
Salaries and employee benefits 113,403 105,887 7
Equipment and net occupancy 27,204 28,158 -3
Printing, postage and supplies 6,033 7,074 -15
Amortization of goodwill -- 14,747 --
Amortization of core deposit
and other intangible assets 13,543 15,064 -10
Other costs of operations 63,050 63,871 -1
----------- -----------
Total other expense 223,233 234,801 -5
Income before income taxes 178,055 130,407 37
Applicable income taxes 57,491 46,741 23
----------- -----------
Net income $120,564 83,666 44 %
=========== ===========
M&T BANK CORPORATION
Condensed Consolidated Balance Sheet
March 31
Dollars in thousands 2002 2001 Change
----- ---- -------
ASSETS
Cash and due from banks $ 695,999 691,104 1 %
Money-market assets 356,137 53,527 565
Investment securities 2,861,453 3,704,788 -23
Loans and leases, net of
unearned discount 25,137,849 24,167,786 4
Less: Allowance for
credit losses 433,029 399,412 8
----------- -----------
Net loans and leases 24,704,820 23,768,374 4
Goodwill 1,097,553 1,164,435 -6
Core deposit and other
intangible assets 156,730 215,026 -27
Other assets 1,423,283 1,327,289 7
----------- -----------
Total assets $31,295,975 30,924,543 1 %
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits
at U.S. offices $ 3,549,650 3,236,649 10 %
Other deposits at U.S. offices 17,391,961 17,480,164 -1
Deposits at foreign office 682,484 260,870 162
----------- -----------
Total deposits 21,624,095 20,977,683 3
Short-term borrowings 2,142,870 2,943,979 -27
Accrued interest and other
liabilities 472,494 520,376 -9
Long-term borrowings 4,109,158 3,490,447 18
----------- -----------
Total liabilities 28,348,617 27,932,485 1
Stockholders'
equity (1) 2,947,358 2,992,058 -1
----------- -----------
Total liabilities and
stockholders' equity $31,295,975 30,924,543 1 %
=========== ==========
(1) Reflects accumulated other comprehensive income, net of
applicable income taxes, of $12.6 million at March 31, 2002 and
$21.1 million at March 31, 2001.
M&T BANK CORPORATION
Condensed Consolidated Average Balance Sheet
and Annualized Taxable-equivalent Rates
Three months ended March 31
Dollars in thousands 2002 2001 Change
-------------- ------------- in
Balance Rate Balance Rate balance
------- ---- ------- ---- -------
ASSETS
Money-market assets $ 261,763 1.79% 74,634 5.11% 251%
Investment securities 2,909,897 5.93 3,470,016 7.04 -16
Loans and leases, net of
unearned discount
Commercial, financial,
etc 5,058,508 5.23 5,178,321 8.45 -2
Real estate - commercial 9,371,220 7.11 8,934,976 8.42 5
Real estate - consumer 5,240,366 7.33 4,991,217 7.96 5
Consumer 5,438,613 6.94 4,287,470 9.14 27
----------- -----------
Total loans and leases,
net 25,108,707 6.80 23,391,984 8.53 7
----------- -----------
Total earning assets 28,280,367 6.67 26,936,634 8.33 5
Goodwill 1,097,553 1,091,641 1
Core deposit and other
intangible assets 163,320 208,571 -22
Other assets 1,728,825 1,641,344 5
----------- -----------
Total assets $31,270,065 29,878,190 5%
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing
deposits
NOW accounts 737,838 .51 717,232 1.80 3%
Savings deposits 8,458,625 1.29 6,765,003 2.29 25
Time deposits 8,141,440 3.63 9,803,311 5.80 -17
Deposits at foreign
office 478,989 1.53 263,141 5.25 82
----------- -----------
Total interest-bearing
deposits 17,816,892 2.34 17,548,687 4.27 2
----------- -----------
Short-term borrowings 2,963,301 1.76 2,451,864 5.67 21
Long-term borrowings 3,724,373 4.86 3,442,773 6.76 8
----------- -----------
Total interest-bearing
liabilities 24,504,566 2.65 23,443,324 4.78 5
Noninterest-bearing
deposits 3,454,961 3,185,347 8
Other liabilities 370,112 383,129 -3
----------- -----------
Total liabilities 28,329,639 27,011,800 5
Stockholders' equity 2,940,426 2,866,390 3
----------- -----------
Total liabilities and
stockholders' equity $ 31,270,065 29,878,190 5%
============ ===========
Net interest spread 4.02 3.55
Contribution of
interest-free funds .35 .61
Net interest margin 4.37% 4.16%