M&T Bank Corporation Announces Third Quarter Results

October 17, 2018 at 6:35 AM EDT

BUFFALO, N.Y., Oct. 17, 2018 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended September 30, 2018.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the third quarter of 2018 were $3.53, 60% higher than $2.21 in the year-earlier quarter and 8% above $3.26 recorded in the second quarter of 2018.  GAAP-basis net income in the recent quarter was $526 million, up from $356 million in the third quarter of 2017 and $493 million in the second 2018 quarter. GAAP-basis net income for the third quarter of 2018 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.80% and 14.08%, respectively, improved from 1.18% and 8.89%, respectively, in the similar 2017 period and 1.70% and 13.32%, respectively, in the second quarter of 2018. As compared with 2017, income tax expense in 2018 reflects the reduction of the corporate Federal income tax rate from 35% to 21%.

Commenting on M&T's results for the recent quarter, Darren J. King, Executive Vice President and Chief Financial Officer, noted, "M&T posted another quarter of strong financial results. Growth in net interest income, fueled by a wider net interest margin, reduced credit costs and controlled operating expenses led to an 8% rise in diluted earnings per common share compared with the second quarter. Reflecting the consistency of our earnings, we increased the quarterly common stock dividend by 25% to $1.00 per share."

Earnings Highlights





































Change 3Q18 vs.


($ in millions, except per share data)


3Q18



3Q17



2Q18



3Q17



2Q18























Net income


$

526



$

356



$

493




48

%



7

%

Net income available to common shareholders - diluted


$

505



$

336



$

473




50

%



7

%

Diluted earnings per common share


$

3.53



$

2.21



$

3.26




60

%



8

%

Annualized return on average assets



1.80

%



1.18

%



1.70

%









Annualized return on average common equity



14.08

%



8.89

%



13.32

%









For the first nine months of 2018, diluted earnings per common share were $9.00, up 35% from $6.69 in the year-earlier period. GAAP-basis net income for the nine-month period ended September 30, 2018 totaled $1.37 billion, 26% above $1.09 billion in the corresponding 2017 period. Expressed as an annualized rate of return on average assets and average common shareholders' equity, GAAP-basis net income in the first nine months of 2018 was 1.57% and 12.16%, respectively, improved from 1.20% and 9.15%, respectively, in the year-earlier 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, 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 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.  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 $3.56 in the recent quarter, up from $2.24 in the third quarter of 2017 and $3.29 in the second quarter of 2018.  Net operating income for the third quarter of 2018 was $531 million, compared with $361 million in the year-earlier period and $498 million in 2018'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 recent quarter was 1.89% and 21.00%, respectively, improved from 1.25% and 13.03%, respectively, in the similar 2017 quarter and 1.79% and 19.91%, respectively, in the second quarter of 2018.

Diluted net operating earnings per common share in the first nine months of 2018 increased to $9.10 from $6.78 in the corresponding 2017 period. Net operating income during the nine-month period ended September 30, 2018 was $1.39 billion, up from $1.10 billion in the year-earlier period. Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was 1.65% and 18.09%, respectively, in the first nine months of 2018, compared with 1.26% and 13.42%, respectively, in the year-earlier period.

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis totaled $1.03 billion in 2018's third quarter, 7% higher than $966 million in the year-earlier quarter and 2% above $1.01 billion in the second quarter of 2018. That growth resulted from a widening of the net interest margin to 3.88% in the recent quarter from 3.53% in the third quarter of 2017 and 3.83% in the second quarter of 2018. In each quarterly comparison, the impact of the improved margin was partially offset by lower average balances of loans and investment securities.






















Taxable-equivalent Net Interest Income





































Change 3Q18 vs.


($ in millions)


3Q18



3Q17



2Q18



3Q17



2Q18























Average earning assets


$

105,835



$

108,642



$

106,210




-3

%




Net interest income  ̶  taxable-equivalent


$

1,035



$

966



$

1,014




7

%



2

%

Net interest margin



3.88

%



3.53

%



3.83

%









Provision for Credit Losses/Asset Quality.  The provision for credit losses was $16 million in the third quarter of 2018, compared with $30 million in the year-earlier quarter and $35 million in 2018's second quarter. Reflecting significantly higher recoveries of previously charged-off loans, net loan charge-offs were $16 million during the recent quarter, compared with $25 million in the third quarter of 2017 and $35 million in the second quarter of 2018.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .07% and .11% in the third quarters of 2018 and 2017, respectively, and .16% in the second quarter of 2018.

Loans classified as nonaccrual totaled $871 million or 1.00% of total loans outstanding at September 30, 2018, compared with $869 million or .99% a year earlier and $820 million or .93% at June 30, 2018. Assets taken in foreclosure of defaulted loans were $87 million at September 30, 2018, improved from $111 million at September 30, 2017 and $98 million at June 30, 2018.

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.  As a result of those analyses, the allowance for credit losses totaled $1.02 billion or 1.18% of loans outstanding at September 30, 2018, compared with $1.01 billion or 1.15% at September 30, 2017 and $1.02 billion or 1.16% at June 30, 2018.

Asset Quality Metrics





































Change 3Q18 vs.


($ in millions)


3Q18



3Q17



2Q18



3Q17



2Q18























At end of quarter





















Nonaccrual loans


$

871



$

869



$

820







6

%

Real estate and other foreclosed assets


$

87



$

111



$

98




-21

%



-11

%

Total nonperforming assets


$

958



$

980



$

918




-2

%



4

%

Accruing loans past due 90 days or more (1)


$

254



$

261



$

223




-3

%



14

%

Nonaccrual loans as % of loans outstanding



1.00

%



.99

%



.93

%






























Allowance for credit losses


$

1,019



$

1,013



$

1,019




1

%




Allowance for credit losses as % of loans outstanding



1.18

%



1.15

%



1.16

%






























For the period





















Provision for credit losses


$

16



$

30



$

35




-47

%



-54

%

Net charge-offs


$

16



$

25



$

35




-37

%



-56

%

Net charge-offs as % of average loans (annualized)



.07

%



.11

%



.16

%









_________________________________________

(1)      Excludes loans acquired at a discount.  Predominantly residential real estate loans.

Noninterest Income and Expense.  Noninterest income totaled $459 million in each of the third quarters of 2018 and 2017 and $457 million in the second quarter of 2018. As compared with the third quarter of 2017, higher trust income and credit-related fees in the recent quarter were predominantly offset by lower mortgage banking revenues and valuation losses on equity securities. Higher credit-related fees in the recent quarter were offset by a decline in mortgage banking revenues, seasonally lower trust income and valuation losses on equity securities as compared with the second quarter of 2018.

Noninterest Income





































Change 3Q18 vs.


($ in millions)


3Q18



3Q17



2Q18



3Q17



2Q18























Mortgage banking revenues


$

88



$

97



$

92




-9

%



-4

%

Service charges on deposit accounts



109




109




107




-1

%



2

%

Trust income



133




125




138




7

%



-3

%

Brokerage services income



12




15




13




-16

%



-3

%

Trading account and foreign exchange gains



6




7




5




-14

%



16

%

Gain (loss) on bank investment securities



(3)







2








Other revenues from operations



114




106




100




7

%



13

%

Total other income


$

459



$

459



$

457








Noninterest expense aggregated $776 million in the third quarter of 2018, $806 million in the year-earlier quarter and $777 million in the second quarter of 2018.  Excluding expenses considered to be nonoperating in nature, such as amortization of core deposit and other intangible assets, noninterest operating expenses were $770 million in each of the two most recent quarters and $798 million in the third quarter of 2017. The decline in noninterest expense in the third quarter of 2018 as compared with the year-earlier quarter reflected a $50 million increase to the reserve for legal matters in the third quarter of 2017 that was partially offset by higher salaries and employee benefits expenses in the recent quarter. As compared with the second quarter of 2018, lower costs for professional services in the recent quarter were largely offset by higher salaries and employee benefits expenses.

Noninterest Expense





































Change 3Q18 vs.


($ in millions)


3Q18



3Q17



2Q18



3Q17



2Q18























Salaries and employee benefits


$

431



$

399



$

419




8

%



3

%

Equipment and net occupancy



77




75




73




3

%



6

%

Outside data processing and software



51




46




49




11

%



2

%

FDIC assessments



19




24




20




-21

%



-4

%

Advertising and marketing



22




17




22




25

%




Printing, postage and supplies



9




9




9




1

%



1

%

Amortization of core deposit and other intangible assets



6




8




6




-21

%



-4

%

Other costs of operations



161




228




179




-30

%



-10

%

Total other expense


$

776



$

806



$

777




-4

%




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 51.4% in the third quarter of 2018, 56.0% in the corresponding 2017 quarter and 52.4% in the second quarter of 2018.

Balance Sheet.  M&T had total assets of $116.8 billion at September 30, 2018, compared with $120.4 billion and $118.4 billion at September 30, 2017 and June 30, 2018, respectively. Loans and leases, net of unearned discount, were $86.7 billion at September 30, 2018, $87.9 billion at September 30, 2017 and $87.8 billion at June 30, 2018. The decline from September 30, 2017 reflects repayments of acquired residential mortgage loans, partially offset by growth in commercial real estate loans and consumer loans. The lower outstanding balances of loans and leases at the recent quarter-end as compared with June 30, 2018 reflect acquired residential mortgage loan repayments and a decline in commercial real estate loans, predominantly loans held for sale. Total deposits were $89.1 billion at the recent quarter-end, compared with $93.5 billion at September 30, 2017 and $89.3 billion at June 30, 2018. The decrease from September 30, 2017 reflects maturities of time deposits, and lower commercial savings and noninterest-bearing deposits.

Total shareholders' equity was $15.4 billion at September 30, 2018 and $16.3 billion a year earlier, representing 13.21% and 13.55%, respectively, of total assets. Total shareholders' equity was $15.6 billion, or 13.15% of total assets at June 30, 2018. Common shareholders' equity was $14.2 billion, or $100.38 per share, at September 30, 2018, compared with $15.1 billion, or $99.70 per share, a year-earlier and $14.3 billion, or $99.43 per share, at June 30, 2018.  Tangible equity per common share was $67.64 at September 30, 2018, compared with $69.02 at September 30, 2017 and $67.29 at June 30, 2018. 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 10.44% at September 30, 2018.

In accordance with its 2018 capital plan, M&T repurchased 2,844,159 shares of its common stock during the recent quarter at an average cost per share of $175.27, for a total cost of $498 million. In the aggregate, during the first nine months of 2018, M&T repurchased 9,235,817 shares of common stock at a total cost of $1.7 billion.

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 (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 #1797788.  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 until Wednesday, October 24, by calling (800) 585-8367, or (404) 537-3406 for international participants, and by making reference to ID #1797788.  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.

M&T is a financial holding company headquartered in Buffalo, New York.  M&T's principal banking subsidiary, M&T Bank, operates banking offices in New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia.  Trust-related services are provided by M&T's Wilmington Trust-affiliated companies and by M&T Bank.

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; the impact of changes in market values on trust-related revenues; 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 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.

Financial Highlights



Three months ended







Nine months ended








September 30







September 30






Amounts in thousands, except per share


2018



2017



Change



2018



2017



Change


Performance

























Net income


$

526,091




355,923




48

%


$

1,371,861




1,085,903




26

%

Net income available to common shareholders



505,365




335,804




50

%



1,310,703




1,025,023




28

%

Per common share:

























Basic earnings


$

3.54




2.22




59

%


$

9.01




6.71




34

%

Diluted earnings



3.53




2.21




60

%



9.00




6.69




35

%

Cash dividends


$

1.00




.75




33

%


$

2.55




2.25




13

%

Common shares outstanding:

























Average - diluted (1)



142,976




151,691




-6

%



145,605




153,293




-5

%

Period end (2)



141,479




151,291




-6

%



141,479




151,291




-6

%

Return on (annualized):

























Average total assets



1.80

%



1.18

%







1.57

%



1.20

%





Average common shareholders' equity



14.08

%



8.89

%







12.16

%



9.15

%





Taxable-equivalent net interest income


$

1,034,771




965,962




7

%


$

3,029,281




2,835,157




7

%

Yield on average earning assets



4.40

%



3.89

%







4.26

%



3.79

%





Cost of interest-bearing liabilities



.82

%



.57

%







.72

%



.54

%





Net interest spread



3.58

%



3.32

%







3.54

%



3.25

%





Contribution of interest-free funds



.30

%



.21

%







.27

%



.19

%





Net interest margin



3.88

%



3.53

%







3.81

%



3.44

%





Net charge-offs to average total net loans (annualized)



.07

%



.11

%







.14

%



.17

%





Net operating results (3)

























Net operating income


$

530,619




360,658




47

%


$

1,385,986




1,100,667




26

%

Diluted net operating earnings per common share



3.56




2.24




59

%



9.10




6.78




34

%

Return on (annualized):

























Average tangible assets



1.89

%



1.25

%







1.65

%



1.26

%





Average tangible common equity



21.00

%



13.03

%







18.09

%



13.42

%





Efficiency ratio



51.41

%



56.00

%







55.87

%



55.21

%
































At September 30
















Loan quality


2018



2017



Change














Nonaccrual loans


$

870,832




869,362

















Real estate and other foreclosed assets



87,333




110,515




-21

%













Total nonperforming assets


$

958,165




979,877




-2

%













Accruing loans past due 90 days or more (4)


$

254,360




261,288




-3

%













Government guaranteed loans included in totals above:

























Nonaccrual loans


$

33,570




34,687




-3

%













Accruing loans past due 90 days or more



195,450




252,072




-22

%













Renegotiated loans


$

242,892




226,672




7

%













Accruing loans acquired at a discount past due 90 days or more (5)


$

47,681




56,225




-15

%













Purchased impaired loans (6):

























Outstanding customer balance


$

572,979




779,340




-26

%













Carrying amount



325,980




466,943




-30

%













Nonaccrual loans to total net loans



1.00

%



.99

%

















Allowance for credit losses to total loans



1.18

%



1.15

%

















___________________________

(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 and other intangible assets and merger-related expenses which, except in the 

           calculation of the efficiency ratio, are net of applicable income tax effects. Reconciliations of net income with net operating income appear herein.

(4)      Excludes loans acquired at a discount.  Predominantly residential real estate loans.

(5)      Loans acquired at a discount that were recorded at fair value at acquisition date. This category does not include purchased impaired loans that are presented separately.

(6)      Accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value.

 

 

Financial Highlights, Five Quarter Trend



Three months ended




September 30,



June 30,



March 31,



December 31,



September 30,


Amounts in thousands, except per share


2018



2018



2018



2017



2017


Performance





















Net income


$

526,091




493,160




352,610




322,403




355,923


Net income available to common shareholders



505,365




472,600




332,749




302,486




335,804


Per common share:





















Basic earnings


$

3.54




3.26




2.24




2.01




2.22


Diluted earnings



3.53




3.26




2.23




2.01




2.21


Cash dividends


$

1.00




.80




.75




.75




.75


Common shares outstanding:





















Average - diluted (1)



142,976




144,998




148,905




150,348




151,691


Period end (2)



141,479




144,261




146,799




150,112




151,291


Return on (annualized):





















Average total assets



1.80

%



1.70

%



1.22

%



1.06

%



1.18

%

Average common shareholders' equity



14.08

%



13.32

%



9.15

%



8.03

%



8.89

%

Taxable-equivalent net interest income


$

1,034,771




1,014,184




980,326




980,457




965,962


Yield on average earning assets



4.40

%



4.28

%



4.11

%



3.93

%



3.89

%

Cost of interest-bearing liabilities



.82

%



.71

%



.64

%



.59

%



.57

%

Net interest spread



3.58

%



3.57

%



3.47

%



3.34

%



3.32

%

Contribution of interest-free funds



.30

%



.26

%



.24

%



.22

%



.21

%

Net interest margin



3.88

%



3.83

%



3.71

%



3.56

%



3.53

%

Net charge-offs to average total net loans (annualized)



.07

%



.16

%



.19

%



.12

%



.11

%

Net operating results (3)





















Net operating income


$

530,619




497,869




357,498




326,664




360,658


Diluted net operating earnings per common share



3.56




3.29




2.26




2.04




2.24


Return on (annualized):





















Average tangible assets



1.89

%



1.79

%



1.28

%



1.12

%



1.25

%

Average tangible common equity



21.00

%



19.91

%



13.51

%



11.77

%



13.03

%

Efficiency ratio



51.41

%



52.42

%



63.98

%



54.65

%



56.00

%
























September 30,



June 30,



March 31,



December 31,



September 30,


Loan quality


2018



2018



2018



2017



2017


Nonaccrual loans


$

870,832




819,984




864,671




882,598




869,362


Real estate and other foreclosed assets



87,333




98,062




101,514




111,910




110,515


Total nonperforming assets


$

958,165




918,046




966,185




994,508




979,877


Accruing loans past due 90 days or more (4)


$

254,360




223,026




235,325




244,405




261,288


Government guaranteed loans included in totals above:





















Nonaccrual loans


$

33,570




34,870




36,618




35,677




34,687


Accruing loans past due 90 days or more



195,450




202,394




223,611




235,489




252,072


Renegotiated loans


$

242,892




242,528




226,829




221,513




226,672


Accruing loans acquired at a discount past due 90 days or

        more (5)


$

47,681




47,405




49,349




47,418




56,225


Purchased impaired loans (6):





















Outstanding customer balance


$

572,979




606,683




643,124




688,091




779,340


Carrying amount



325,980




352,465




378,000




410,015




466,943


Nonaccrual loans to total net loans



1.00

%



.93

%



.99

%



1.00

%



.99

%

Allowance for credit losses to total loans



1.18

%



1.16

%



1.16

%



1.16

%



1.15

%


(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 and other intangible assets and merger-related expenses which, except in the 
           calculation of the efficiency ratio, are net of applicable income tax effects. Reconciliations of net income with net operating income appear herein.

(4)      Excludes loans acquired at a discount.  Predominantly residential real estate loans.

(5)      Loans acquired at a discount that were recorded at fair value at acquisition date. This category does not include purchased impaired loans that are presented separately.

(6)      Accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value. 

 

 

Condensed Consolidated Statement of Income



Three months ended







Nine months ended








September 30







September 30






Dollars in thousands


2018



2017



Change



2018



2017



Change


Interest income


$

1,167,375




1,057,210




10

%


$

3,378,430




3,093,656




9

%

Interest expense



138,337




100,076




38




365,088




284,062




29


Net interest income



1,029,038




957,134




8




3,013,342




2,809,594




7


Provision for credit losses



16,000




30,000




-47




94,000




137,000




-31


Net interest income after provision for credit losses



1,013,038




927,134




9




2,919,342




2,672,594




9


Other income

























Mortgage banking revenues



88,408




96,737




-9




268,213




267,592





Service charges on deposit accounts



108,647




109,356




-1




320,546




319,589





Trust income



133,545




124,900




7




402,561




371,712




8


Brokerage services income



12,267




14,676




-16




38,288




48,677




-21


Trading account and foreign exchange gains



6,073




7,058




-14




15,965




24,833




-36


Loss on bank investment securities



(3,415)










(10,520)




(17)





Other revenues from operations



113,769




106,702




7




340,351




334,704




2


Total other income



459,294




459,429







1,375,404




1,367,090




1


Other expense

























Salaries and employee benefits



431,371




398,605




8




1,313,336




1,246,400




5


Equipment and net occupancy



77,481




75,558




3




225,309




223,721




1


Outside data processing and software



50,678




45,761




11




148,819




134,637




11


FDIC assessments



18,849




23,969




-21




58,689




78,149




-25


Advertising and marketing



21,784




17,403




25




59,800




49,837




20


Printing, postage and supplies



8,843




8,732