mtb-10q_20180630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9861

 

M&T BANK CORPORATION

(Exact name of registrant as specified in its charter)

 

 

New York

 

16-0968385

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

One M & T Plaza

Buffalo, New York

 

14203

(Address of principal executive offices)

 

(Zip Code)

(716) 635-4000

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes      No

Number of shares of the registrant's Common Stock, $0.50 par value, outstanding as of the close of business on July 27, 2018: 143,790,862 shares.

 

 

 


M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended June 30, 2018

 

Table of Contents of Information Required in Report

 

Page

 

 

 

 

 

Part I.  FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements.

 

 

 

 

 

 

 

 

 

CONSOLIDATED BALANCE SHEET - June 30, 2018 and December 31, 2017

 

3

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF INCOME – Three and six months ended June 30, 2018 and 2017

 

4

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME – Three and six months ended June 30, 2018 and 2017

 

5

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS - Six months ended June 30, 2018 and 2017

 

6

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY – Six months ended June 30, 2018 and 2017

 

7

 

 

 

 

 

 

 

NOTES TO FINANCIAL STATEMENTS

 

8

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

49

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk.

 

84

 

 

 

 

 

Item 4.

 

Controls and Procedures.

 

84

 

 

 

 

 

Part II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings.

 

84

 

 

 

 

 

Item 1A.

 

Risk Factors.

 

86

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds.

 

86

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities.

 

86

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures.

 

86

 

 

 

 

 

Item 5.

 

Other Information.

 

86

 

 

 

 

 

Item 6.

 

Exhibits.

 

87

 

 

 

 

 

SIGNATURES

 

87

 

 

 

 

 

 

 

 

- 2 -


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

 

 

 

 

 

June 30,

 

 

December 31,

 

Dollars in thousands, except per share

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

Cash and due from banks

 

$

1,367,594

 

 

$

1,420,888

 

 

 

Interest-bearing deposits at banks

 

 

6,669,985

 

 

 

5,078,903

 

 

 

Federal funds sold

 

 

1,500

 

 

 

 

 

 

Trading account

 

 

148,303

 

 

 

132,909

 

 

 

Investment securities (includes pledged securities that can be sold or repledged of

   $473,505 at June 30, 2018; $487,151 at December 31, 2017)

 

 

 

 

 

 

 

 

 

 

Available for sale (cost: $9,912,160 at June 30, 2018;

   $10,938,796 at December 31, 2017)

 

 

9,658,846

 

 

 

10,896,284

 

 

 

Held to maturity (fair value: $3,022,329 at June 30, 2018;

   $3,341,762 at December 31, 2017)

 

 

3,101,095

 

 

 

3,353,213

 

 

 

Equity and other securities (cost: $507,389 at June 30, 2018;

   $415,028 at December 31, 2017)

 

 

523,061

 

 

 

415,028

 

 

 

Total investment securities

 

 

13,283,002

 

 

 

14,664,525

 

 

 

Loans and leases

 

 

88,059,392

 

 

 

88,242,886

 

 

 

Unearned discount

 

 

(261,942

)

 

 

(253,903

)

 

 

Loans and leases, net of unearned discount

 

 

87,797,450

 

 

 

87,988,983

 

 

 

Allowance for credit losses

 

 

(1,019,248

)

 

 

(1,017,198

)

 

 

Loans and leases, net

 

 

86,778,202

 

 

 

86,971,785

 

 

 

Premises and equipment

 

 

637,809

 

 

 

646,451

 

 

 

Goodwill

 

 

4,593,112

 

 

 

4,593,112

 

 

 

Core deposit and other intangible assets

 

 

58,569

 

 

 

71,589

 

 

 

Accrued interest and other assets

 

 

4,887,977

 

 

 

5,013,325

 

 

 

Total assets

 

$

118,426,053

 

 

$

118,593,487

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

Noninterest-bearing deposits

 

$

32,086,191

 

 

$

33,975,180

 

 

 

Savings and interest-checking deposits

 

 

51,107,290

 

 

 

51,698,008

 

 

 

Time deposits

 

 

5,817,680

 

 

 

6,580,962

 

 

 

Deposits at Cayman Islands office

 

 

261,427

 

 

 

177,996

 

 

 

Total deposits

 

 

89,272,588

 

 

 

92,432,146

 

 

 

Short-term borrowings

 

 

3,239,416

 

 

 

175,099

 

 

 

Accrued interest and other liabilities

 

 

1,953,848

 

 

 

1,593,993

 

 

 

Long-term borrowings

 

 

8,382,316

 

 

 

8,141,430

 

 

 

Total liabilities

 

 

102,848,168

 

 

 

102,342,668

 

Shareholders' equity

 

Preferred stock, $1.00 par, 1,000,000 shares authorized;

   Issued and outstanding: Liquidation preference of $1,000 per

   share: 731,500 shares at June 30, 2018 and December 31,

   2017; Liquidation preference of $10,000 per share: 50,000

   shares at June 30, 2018 and December 31, 2017

 

 

1,231,500

 

 

 

1,231,500

 

 

 

Common stock, $.50 par, 250,000,000 shares authorized,

   159,767,147 shares issued at June 30, 2018;

   159,817,518 shares issued at December 31, 2017

 

 

79,884

 

 

 

79,909

 

 

 

Common stock issuable, 24,447 shares at June 30, 2018;

   27,138 shares at December 31, 2017

 

 

1,691

 

 

 

1,847

 

 

 

Additional paid-in capital

 

 

6,579,395

 

 

 

6,590,855

 

 

 

Retained earnings

 

 

10,763,638

 

 

 

10,164,804

 

 

 

Accumulated other comprehensive income (loss), net

 

 

(517,941

)

 

 

(363,814

)

 

 

Treasury stock — common, at cost — 15,530,445 shares at June 30, 2018;

    9,733,115 shares at December 31, 2017

 

 

(2,560,282

)

 

 

(1,454,282

)

 

 

Total shareholders’ equity

 

 

15,577,885

 

 

 

16,250,819

 

 

 

Total liabilities and shareholders’ equity

 

$

118,426,053

 

 

$

118,593,487

 

 

- 3 -


M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

 

 

 

 

 

Three Months Ended June 30

 

 

Six Months Ended June 30

 

In thousands, except per share

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

Loans and leases, including fees

 

$

1,024,471

 

 

 

924,640

 

 

$

2,004,440

 

 

 

1,822,678

 

 

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fully taxable

 

 

82,019

 

 

 

92,996

 

 

 

164,871

 

 

 

188,120

 

 

 

Exempt from federal taxes

 

 

172

 

 

 

379

 

 

 

420

 

 

 

809

 

 

 

Deposits at banks

 

 

21,869

 

 

 

12,213

 

 

 

40,546

 

 

 

24,375

 

 

 

Other

 

 

374

 

 

 

185

 

 

 

778

 

 

 

464

 

 

 

Total interest income

 

 

1,128,905

 

 

 

1,030,413

 

 

 

2,211,055

 

 

 

2,036,446

 

Interest expense

 

Savings and interest-checking deposits

 

 

48,738

 

 

 

30,543

 

 

 

89,265

 

 

 

56,177

 

 

 

Time deposits

 

 

11,362

 

 

 

16,303

 

 

 

22,298

 

 

 

35,301

 

 

 

Deposits at Cayman Islands office

 

 

542

 

 

 

281

 

 

 

923

 

 

 

546

 

 

 

Short-term borrowings

 

 

1,383

 

 

 

378

 

 

 

2,266

 

 

 

594

 

 

 

Long-term borrowings

 

 

58,093

 

 

 

44,708

 

 

 

111,999

 

 

 

91,368

 

 

 

Total interest expense

 

 

120,118

 

 

 

92,213

 

 

 

226,751

 

 

 

183,986

 

 

 

Net interest income

 

 

1,008,787

 

 

 

938,200

 

 

 

1,984,304

 

 

 

1,852,460

 

 

 

Provision for credit losses

 

 

35,000

 

 

 

52,000

 

 

 

78,000

 

 

 

107,000

 

 

 

Net interest income after provision for credit losses

 

 

973,787

 

 

 

886,200

 

 

 

1,906,304

 

 

 

1,745,460

 

Other income

 

Mortgage banking revenues

 

 

92,499

 

 

 

86,163

 

 

 

179,805

 

 

 

170,855

 

 

 

Service charges on deposit accounts

 

 

106,784

 

 

 

106,057

 

 

 

211,899

 

 

 

210,233

 

 

 

Trust income

 

 

137,641

 

 

 

126,797

 

 

 

269,016

 

 

 

246,812

 

 

 

Brokerage services income

 

 

12,629

 

 

 

16,617

 

 

 

26,021

 

 

 

34,001

 

 

 

Trading account and foreign exchange gains

 

 

5,255

 

 

 

8,084

 

 

 

9,892

 

 

 

17,775

 

 

 

Gain (loss) on bank investment securities

 

 

2,326

 

 

 

(17

)

 

 

(7,105

)

 

 

(17

)

 

 

Other revenues from operations

 

 

100,280

 

 

 

117,115

 

 

 

226,582

 

 

 

228,002

 

 

 

Total other income

 

 

457,414

 

 

 

460,816

 

 

 

916,110

 

 

 

907,661

 

Other expense

 

Salaries and employee benefits

 

 

418,537

 

 

 

398,054

 

 

 

881,965

 

 

 

847,795

 

 

 

Equipment and net occupancy

 

 

73,031

 

 

 

73,797

 

 

 

147,828

 

 

 

148,163

 

 

 

Outside data processing and software

 

 

49,712

 

 

 

44,575

 

 

 

98,141

 

 

 

88,876

 

 

 

FDIC assessments

 

 

19,560

 

 

 

25,353

 

 

 

39,840

 

 

 

54,180

 

 

 

Advertising and marketing

 

 

21,768

 

 

 

16,324

 

 

 

38,016

 

 

 

32,434

 

 

 

Printing, postage and supplies

 

 

8,719

 

 

 

8,957

 

 

 

18,038

 

 

 

18,665

 

 

 

Amortization of core deposit and other intangible assets

 

 

6,388

 

 

 

8,113

 

 

 

13,020

 

 

 

16,533

 

 

 

Other costs of operations

 

 

178,862

 

 

 

175,462

 

 

 

473,073

 

 

 

331,841

 

 

 

Total other expense

 

 

776,577

 

 

 

750,635

 

 

 

1,709,921

 

 

 

1,538,487

 

 

 

Income before taxes

 

 

654,624

 

 

 

596,381

 

 

 

1,112,493

 

 

 

1,114,634

 

 

 

Income taxes

 

 

161,464

 

 

 

215,328

 

 

 

266,723

 

 

 

384,654

 

 

 

Net income

 

$

493,160

 

 

 

381,053

 

 

$

845,770

 

 

 

729,980

 

 

 

Net income available to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

472,598

 

 

 

360,658

 

 

$

805,338

 

 

 

689,208

 

 

 

Diluted

 

 

472,600

 

 

 

360,662

 

 

 

805,342

 

 

 

689,217

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

3.26

 

 

 

2.36

 

 

$

5.49

 

 

 

4.49

 

 

 

Diluted

 

 

3.26

 

 

 

2.35

 

 

 

5.48

 

 

 

4.47

 

 

 

Cash dividends per common share

 

$

.80

 

 

 

.75

 

 

$

1.55

 

 

 

1.50

 

 

 

Average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

144,825

 

 

 

152,857

 

 

 

146,746

 

 

 

153,638

 

 

 

Diluted

 

 

144,998

 

 

 

153,276

 

 

 

146,941

 

 

 

154,108

 

 

 

- 4 -


M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

 

 

 

Three Months Ended June 30

 

 

Six Months Ended June 30

 

In thousands

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

493,160

 

 

 

381,053

 

 

$

845,770

 

 

 

729,980

 

Other comprehensive income, net of tax and reclassification adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses) on investment securities

 

 

(36,733

)

 

 

16,932

 

 

 

(137,417

)

 

 

15,576

 

Cash flow hedges adjustments

 

 

(2,569

)

 

 

(955

)

 

 

(13,011

)

 

 

(978

)

Foreign currency translation adjustment

 

 

(2,434

)

 

 

1,150

 

 

 

(1,144

)

 

 

1,626

 

Defined benefit plans liability adjustments

 

 

7,038

 

 

 

4,359

 

 

 

14,298

 

 

 

8,331

 

Total other comprehensive income (loss)

 

 

(34,698

)

 

 

21,486

 

 

 

(137,274

)

 

 

24,555

 

Total comprehensive income

 

$

458,462

 

 

 

402,539

 

 

$

708,496

 

 

 

754,535

 

 

 

- 5 -


M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

 

 

 

 

 

Six Months Ended June 30

 

In thousands

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating

   activities

 

Net income

 

$

845,770

 

 

 

729,980

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

78,000

 

 

 

107,000

 

 

 

Depreciation and amortization of premises and equipment

 

 

54,092

 

 

 

54,901

 

 

 

Amortization of capitalized servicing rights

 

 

24,207

 

 

 

27,984

 

 

 

Amortization of core deposit and other intangible assets

 

 

13,020

 

 

 

16,533

 

 

 

Provision for deferred income taxes

 

 

(123,980

)

 

 

17,136

 

 

 

Asset write-downs

 

 

5,237

 

 

 

8,797

 

 

 

Net gain on sales of assets

 

 

(8,738

)

 

 

(21,272

)

 

 

Net change in accrued interest receivable, payable

 

 

5,759

 

 

 

(6,350

)

 

 

Net change in other accrued income and expense

 

 

255,124

 

 

 

50,660

 

 

 

Net change in loans originated for sale

 

 

(756,003

)

 

 

545,864

 

 

 

Net change in trading account assets and liabilities

 

 

128,754

 

 

 

92,054

 

 

 

Net cash provided by operating activities

 

 

521,242

 

 

 

1,623,287

 

Cash flows from investing

   activities

 

Proceeds from sales of investment securities

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

418

 

 

 

512,129

 

 

 

Equity and other securities

 

 

505,841

 

 

 

31,016

 

 

 

Proceeds from maturities of investment securities

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

950,071

 

 

 

1,151,982

 

 

 

Held to maturity

 

 

247,385

 

 

 

245,105

 

 

 

Purchases of investment securities

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

(5,799

)

 

 

(244,449

)

 

 

Held to maturity

 

 

 

 

 

(1,175,608

)

 

 

Equity and other securities

 

 

(520,040

)

 

 

(68,825

)

 

 

Net decrease in loans and leases

 

 

859,071

 

 

 

1,134,470

 

 

 

Net increase in interest-bearing deposits at banks

 

 

(1,591,082

)

 

 

(23,191

)

 

 

Capital expenditures, net

 

 

(37,116

)

 

 

(49,862

)

 

 

Net decrease in loan servicing advances

 

 

262,947

 

 

 

104,289

 

 

 

Other, net

 

 

(8,708

)

 

 

47,742

 

 

 

Net cash provided by investing activities

 

 

662,988

 

 

 

1,664,798

 

Cash flows from financing

   activities

 

Net decrease in deposits

 

 

(3,157,898

)

 

 

(1,949,877

)

 

 

Net increase in short-term borrowings

 

 

3,064,317

 

 

 

1,532,011

 

 

 

Proceeds from long-term borrowings

 

 

999,594

 

 

 

898,200

 

 

 

Payments on long-term borrowings

 

 

(706,370

)

 

 

(2,728,059

)

 

 

Purchases of treasury stock

 

 

(1,196,062

)

 

 

(756,967

)

 

 

Dividends paid — common

 

 

(227,565

)

 

 

(230,652

)

 

 

Dividends paid — preferred

 

 

(36,260

)

 

 

(36,474

)

 

 

Other, net

 

 

24,220

 

 

 

8,662

 

 

 

Net cash used by financing activities

 

 

(1,236,024

)

 

 

(3,263,156

)

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(51,794

)

 

 

24,929

 

 

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

1,420,888

 

 

 

1,320,549

 

 

 

Cash, cash equivalents and restricted cash at end of period

 

$

1,369,094

 

 

 

1,345,478

 

Supplemental disclosure of cash

   flow information

 

Interest received during the period

 

$

2,210,063

 

 

 

2,038,009

 

 

 

Interest paid during the period

 

 

218,731

 

 

 

199,621

 

 

 

Income taxes paid during the period

 

 

175,619

 

 

 

321,106

 

Supplemental schedule of

   noncash investing and financing

   activities

 

Real estate acquired in settlement of loans

 

$

36,418

 

 

 

57,202

 

 

 

Securitization of residential mortgage loans allocated to

 

 

 

 

 

 

 

 

 

 

Available-for-sale investment securities

 

 

10,303

 

 

 

10,025

 

 

 

Capitalized servicing rights

 

 

150

 

 

 

106

 

 

 

 

- 6 -


M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Additional

 

 

 

 

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

 

Preferred

 

 

Common

 

 

Stock

 

 

Paid-in

 

 

Retained

 

 

Income

 

 

Treasury

 

 

 

 

 

Dollars in thousands, except per share

 

Stock

 

 

Stock

 

 

Issuable

 

 

Capital

 

 

Earnings

 

 

(Loss), Net

 

 

Stock

 

 

Total

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — January 1, 2017

 

$

1,231,500

 

 

 

79,973

 

 

 

2,145

 

 

 

6,676,948

 

 

 

9,222,488

 

 

 

(294,636

)

 

 

(431,796

)

 

 

16,486,622

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

729,980

 

 

 

24,555

 

 

 

 

 

 

754,535

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,474

)

 

 

 

 

 

 

 

 

(36,474

)

Exercise of 146,157 Series A stock

   warrants into 79,470 shares of

   common stock

 

 

 

 

 

 

 

 

 

 

 

(10,443

)