M&T Bank Corporation ("M&T")
Effective January 1, 2003, M&T began expensing the fair value of stock-based compensation in accordance with the fair value method of accounting described in Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," as amended. As a result, salaries and employee benefits expense in the initial 2003 quarter included $10 million of stock-based compensation, resulting in a reduction of net income of $7 million, or $.08 per diluted share. Using the retroactive restatement method described in SFAS No. 148, which amended SFAS No. 123, salaries and employee benefits expense for the first quarter of 2002 was restated to include $10 million of stock-based compensation, resulting in a reduction of previously reported net income of $7 million, or $.07 per diluted share.
Diluted cash earnings per share for the first quarter of 2003 were $1.34, 6% higher than $1.27 in the year-earlier quarter. Cash net income for the recent quarter was $127 million, up 4% from $122 million in the corresponding 2002 quarter. Cash net income in 2003's initial quarter represented an annualized rate of return on average tangible assets and average tangible common equity of 1.62% and 24.68%, respectively, compared with 1.65% and 28.41%, respectively, in the first quarter of 2002. As has been M&T's consistent practice since 1998, reported cash earnings exclude the after-tax effect of amortization of core deposit and other intangible assets and expenses associated with merging acquired operations into M&T. Amortization of core deposit and other intangible assets, after related tax effect, was $7 million ($.07 per diluted share) in the recent quarter, compared with $9 million ($.09 per diluted share) in the similar quarter of 2002. Merger-related expenses incurred during the first quarter of 2003 associated with the April 1, 2003 acquisition of Allfirst Financial Inc. ("Allfirst") were, after related tax effect, $4 million or $.04 per diluted share. Such amount represents the after-tax effect of costs for professional services, travel and other expenses associated with planning for the acquisition and the related integration of data processing and other operating systems and functions. M&T will incur additional merger-related expenses in future quarters as Allfirst's operations are integrated into M&T. There were no merger-related expenses in the first quarter of 2002.
A reconciliation of net income and diluted earnings per share with cash net income and diluted cash earnings per share follows:
Three months ended
March 31
2003 2002
-------- --------
(in thousands,
except per share)
Net income $116,538 113,577
Amortization of core deposit
and other intangible assets(1) 7,094 8,793
Merger-related expenses(1) 3,599 --
-------- --------
Cash net income $127,231 122,370
======== ========
Diluted earnings per share $ 1.23 1.18
Amortization of core deposit
and other intangible assets(1) .07 .09
Merger-related expenses(1) .04 --
-------- --------
Diluted cash earnings per share $ 1.34 1.27
======== ========
(1) After any related tax effect
Taxable-equivalent net interest income rose 5% to $320 million in the recently completed quarter from $305 million in 2002's first quarter. The improvement reflects a $1.7 billion, or 6%, increase in average earning assets. Average loans and leases outstanding during the initial 2003 quarter were $25.8 billion, up 3% from $25.1 billion in the corresponding 2002 quarter. Average investment securities totaled $3.6 billion during the first quarter of 2003, up 25% from $2.9 billion in the corresponding 2002 quarter, due largely to the impact of the securitization of $1.1 billion of residential real estate loans in November 2002. Approximately 88% of the mortgage-backed securities resulting from the securitization were retained in M&T's investment securities portfolio. Net interest margin declined 5 basis points (hundredths of one percent) to 4.32% in the first quarter of 2003 from 4.37% in the year-earlier quarter.
The provision for credit losses was $33 million in the recent quarter, up from $24 million in the initial 2002 quarter. Net charge-offs of loans totaled $25 million during the first quarter of 2003, compared with $16 million a year earlier. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .39% in the recent quarter and .26% in the corresponding quarter of 2002. Nonperforming loans totaled $230 million or .88% of total loans at March 31, 2003, up from $182 million or .73% a year earlier. Loans past due 90 days or more and accruing interest were $146 million at the recent quarter-end, compared with $148 million in 2002's initial quarter. Included in these loans at March 31, 2003 and 2002 were $120 million and $109 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 $445 million, or 1.70% of total loans at March 31, 2003, compared with $433 million, or 1.72% a year earlier. The ratio of the allowance for credit losses to nonperforming loans was 193% at the recent quarter-end, compared with 238% at March 31, 2002. Assets taken in foreclosure of defaulted loans were $17 million and $22 million at March 31, 2003 and 2002, respectively.
Noninterest income in the recent quarter totaled $133 million, up 7% from $124 million in the first quarter of 2002. Higher revenues from mortgage banking and deposit account services contributed to the year-over-year increase. Noninterest operating expenses, which exclude the previously mentioned merger-related expenses and amortization of core deposit and other intangible assets, but include expenses attributable to stock-based compensation, were $225 million in the first quarter of 2003 and $220 million in the corresponding 2002 period.
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 efficiency ratio, calculated using the noninterest operating expense totals noted above and excluding gains from sales of bank investment securities from noninterest income, was 49.8% in the first quarter of 2003, improved from 51.3% in 2002's first quarter.
Michael P. Pinto, Executive Vice President and Chief Financial Officer of M&T observed, "The weakened economy continued to present a challenging environment in which to operate. Nevertheless, we are encouraged by the operating results of our mortgage banking business and continued strong growth in our consumer loan portfolio, although those positive factors were offset by generally lackluster revenue growth in other business lines. Excluding the effects of Allfirst and assuming that the economy begins to rebound later this quarter, we remain comfortable with our previously stated belief that M&T's full-year results will be within the range of $5.25 to $5.35 of diluted earnings per share. Of course, this estimate is subject to the possible adverse impact of future economic and political conditions. Moreover, we are excited to welcome our colleagues from Allfirst to the M&T family, and we believe that our combined company will be one of the premier financial institutions in the country."
At March 31, 2003, M&T had total assets of $33.4 billion, compared with $31.3 billion a year earlier. Loans and leases, net of unearned discount, rose 4% to $26.2 billion from $25.1 billion at March 31, 2002. Deposits were $21.9 billion at the recent quarter-end, compared with $21.6 billion a year earlier. Total stockholders' equity was $3.3 billion at March 31, 2003, representing 9.91% of total assets, compared with $3.0 billion or 9.48% at March 31, 2002. Common stockholders' equity per share was $35.81 at the recent quarter-end, up from $31.89 at March 31, 2002. Tangible equity per common share was $23.13 and $18.90 at March 31, 2003 and 2002, respectively.
Investors will have an opportunity to listen to M&T's conference call to discuss first quarter financial results at 10:00 a.m. Eastern Time today, April 10, 2003. 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. The conference call will be webcast live on M&T's website at http://ir.mandtbank.com/conference.cfm. A replay of the call will be available until April 11, 2003 by calling 877-519-4471, code 3839690 and 973-341-3080 for international participants. The event will also be archived and available later this morning on M&T's website 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; common shares outstanding; common stock price volatility; fair value of and number of stock options to be issued in future periods; 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 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 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 2003 2002 Change
---------- ---------- ------
Performance
Net income $116,538 113,577 3 %
Per common share:
Basic earnings $ 1.26 1.22 3 %
Diluted earnings 1.23 1.18 4
Cash dividends $ .30 .25 20
Common shares outstanding:
Average - diluted (1) 95,062 96,300 -1 %
Period end (2) 92,503 93,071 -1
Return on (annualized):
Average total assets 1.43 % 1.47 %
Average common stockholders'
equity 14.46 % 15.56 %
Taxable-equivalent net interest
income $319,590 304,659 5 %
Yield on average earning assets 5.94 % 6.67 %
Cost of interest-bearing liabilities 1.89 % 2.65 %
Net interest spread 4.05 % 4.02 %
Contribution of interest-free funds .27 % .35 %
Net interest margin 4.32 % 4.37 %
Net charge-offs to average total
net loans (annualized) .39 % .26 %
Cash operating results (3)
Cash net income $123,632 122,370 1 %
Cash net income, excluding
acquisition-related expenses 127,231 122,370 4
Diluted cash earnings per common
share 1.30 1.27 2
Diluted cash earnings per
common share, excluding
acquisition-related expenses 1.34 1.27 6
Return on (annualized):
Average tangible assets 1.57 % 1.65 %
Average tangible assets, excluding
acquisition-related expenses 1.62 % 1.65 %
Average tangible common equity 23.99 % 28.41 %
Average tangible common equity,
excluding acquisition-related
expenses 24.68 % 28.41 %
Efficiency ratio, excluding
acquisition-related expenses 49.81 % 51.26 %
At March 31
2003 2002 Change
---------- ---------- ------
Loan quality
Nonaccrual loans $222,334 173,197 28 %
Renegotiated loans 7,630 9,057 -16
---------- ----------
Total nonperforming loans $229,964 182,254 26 %
========== ==========
Accruing loans past due 90 days
or more $146,355 148,038 -1 %
Nonperforming loans to total net
loans .88 % .73 %
Allowance for credit losses to
total net loans 1.70 % 1.72 %
(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 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 2003 2002 Change
---------- ---------- ------
Interest income $435,559 461,187 -6 %
Interest expense 119,592 160,127 -25
---------- ----------
Net interest income 315,967 301,060 5
Provision for credit losses 33,000 24,000 38
---------- ----------
Net interest income after
provision for credit losses 282,967 277,060 2
Other income
Mortgage banking revenues 34,464 27,912 23
Service charges on deposit
accounts 43,349 39,525 10
Trust income 14,199 15,805 -10
Brokerage services income 10,048 10,919 -8
Trading account and foreign
exchange gains 641 1,043 -39
Gain on sales of bank
investment securities 233 171 36
Other revenues from operations 29,913 28,853 4
---------- ----------
Total other income 132,847 124,228 7
Other expense
Salaries and employee benefits 124,074 123,454 1
Equipment and net occupancy 27,151 27,204 --
Printing, postage and supplies 7,013 6,033 16
Amortization of core deposit
and other intangible assets 11,598 13,543 -14
Other costs of operations 72,442 63,050 15
---------- ----------
Total other expense 242,278 233,284 4
Income before income taxes 173,536 168,004 3
Applicable income taxes 56,998 54,427 5
---------- ----------
Net income $116,538 113,577 3 %
========== ==========
M&T BANK CORPORATION
Condensed Consolidated Balance Sheet
March 31
Dollars in thousands 2003 2002 Change
---------- ---------- ------
ASSETS
Cash and due from banks $ 841,827 695,999 21 %
Money-market assets 59,229 356,137 -83
Investment securities 4,146,303 2,861,453 45
Loans and leases, net of
unearned discount 26,224,113 25,137,849 4
Less: Allowance for credit losses 444,680 433,029 3
---------- ----------
Net loans and leases 25,779,433 24,704,820 4
Goodwill 1,097,553 1,097,553 --
Core deposit and other intangible
assets 107,342 156,730 -32
Other assets 1,412,104 1,444,193 -2
---------- ----------
Total assets $33,443,791 31,316,885 7 %
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits
at U.S. offices $ 3,901,172 3,549,650 10 %
Other deposits at U.S. offices 16,111,791 17,391,961 -7
Deposits at foreign office 1,911,259 682,484 180
---------- ----------
Total deposits 21,924,222 21,624,095 1
Short-term borrowings 2,387,043 2,142,870 11
Accrued interest and other
liabilities 424,887 472,494 -10
Long-term borrowings 5,394,920 4,109,158 31
---------- ----------
Total liabilities 30,131,072 28,348,617 6
Stockholders' equity (1) 3,312,719 2,968,268 12
---------- ----------
Total liabilities and
stockholders' equity $33,443,791 31,316,885 7 %
========== ==========
(1) Reflects accumulated other comprehensive income, net of applicable
income taxes, of $49.4 million at March 31, 2003 and $12.6 million at
March 31, 2002.
M&T BANK CORPORATION
Condensed Consolidated Average Balance Sheet
and Annualized Taxable-equivalent Rates
Three months ended
March 31
Dollars in millions 2003 2002
---- ---- Change in
Balance Rate Balance Rate balance
ASSETS ------- ---- ------- ---- -------
Money-market assets $ 577 1.28 % 262 1.80 % 120 %
Investment securities 3,638 5.41 2,910 5.93 25
Loans and leases, net of
unearned discount
Commercial, financial, etc 5,340 4.59 5,059 5.23 6
Real estate - commercial 9,687 6.57 9,371 7.11 3
Real estate - consumer 3,181 6.47 4,441 7.09 -28
Consumer 7,581 6.30 6,238 7.18 22
Total loans and leases, ------ ------
net 25,789 6.11 25,109 6.80 3
------ ------
Total earning assets 30,004 5.94 28,281 6.67 6
Goodwill 1,098 1,098 --
Core deposit and other
intangible assets 113 163 -31
Other assets 1,846 1,748 6
------ ------
Total assets $33,061 31,290 6 %
====== ======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
NOW accounts $ 789 .36 738 .51 7 %
Savings deposits 9,623 .96 8,459 1.29 14
Time deposits 5,877 2.63 8,141 3.63 -28
Deposits at foreign office 1,052 1.20 479 1.52 120
Total interest-bearing ------ ------
deposits 17,341 1.51 17,817 2.33 -3
------ ------
Short-term borrowings 3,490 1.30 2,963 1.76 18
Long-term borrowings 4,838 3.67 3,725 4.86 30
------ ------
Total interest-bearing
liabilities 25,669 1.89 24,505 2.65 5
Noninterest-bearing deposits 3,737 3,455 8
Other liabilities 388 370 5
------ ------
Total liabilities 29,794 28,330 5
Stockholders' equity 3,267 2,960 10
------ ------
Total liabilities and
stockholders' equity $33,061 31,290 6 %
====== ======
Net interest spread 4.05 4.02
Contribution of
interest-free funds .27 .35
Net interest margin 4.32 % 4.37 %
CONTACT:
Michael S. Piemonte
716-842-5138
Web site: http://www.mandtbank.com/