BUFFALO, N.Y., Jan. 17, 2019 -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for 2018.

GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") were $3.76 in the fourth quarter of 2018, 87% higher than $2.01 in the year-earlier quarter and 7% above $3.53 in the third quarter of 2018.  GAAP-basis net income in the recent quarter was $546 million, up from $322 million in the fourth quarter of 2017 and $526 million in the third 2018 quarter. GAAP-basis net income for the fourth quarter of 2018 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.84% and 14.80%, respectively, improved from 1.06% and 8.03%, respectively, in the corresponding 2017 period and 1.80% and 14.08%, respectively, in the third quarter of 2018. In December 2018, M&T received approval from the Internal Revenue Service to change its tax return treatment for certain loan fees retroactive to 2017. Given the reduction of the Federal income tax rate in 2018, that change in treatment resulted in a $15 million reduction of income tax expense in the recent quarter. The impact of that benefit on net income was offset by a $20 million contribution to The M&T Charitable Foundation in the fourth quarter that, after applicable tax effect, reduced net income by $15 million. As compared with 2017, income tax expense in all 2018 periods reflects the reduction of the corporate Federal income tax rate from 35% to 21%. M&T's results in 2017's final quarter were reduced by $98 million, or $.65 of diluted earnings per common share, predominantly reflecting the impact of that lower tax rate on the carrying values of M&T's net deferred tax assets and other items.

Commenting on M&T's financial performance, Darren J. King, Executive Vice President and Chief Financial Officer, noted, "We are extremely pleased with M&T's performance this past quarter and for 2018 as a whole.  Our results reflect a continuation of many positive factors including growth in interest and noninterest revenues, subdued credit costs and well-controlled expenses. Average balances of loans to commercial customers rose in the recent quarter and year-end commercial balances grew $2.2 billion from the end of the third quarter. We believe M&T is well positioned as we enter 2019."

 

Diluted earnings per common share were $12.74 for the year ended December 31, 2018, 46% higher than $8.70 in 2017. GAAP-basis net income for 2018 aggregated $1.92 billion, up 36% from $1.41 billion in 2017. Expressed as a rate of return on average assets and average common shareholders' equity, GAAP-basis net income for 2018 was 1.64% and 12.82%, respectively, improved from 1.17% and 8.87%, respectively, in 2017.

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 $3.79 in the recent quarter, compared with $2.04 in the fourth quarter of 2017 and $3.56 in the third quarter of 2018.  Net operating income for the fourth quarter of 2018 was $550 million, compared with $327 million in the year-earlier period and $531 million in 2018's third 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 1.93% and 22.16%, respectively, compared with 1.12% and 11.77%, respectively, in the corresponding 2017 quarter and 1.89% and 21.00%, respectively, in the third quarter of 2018.

For the year ended December 31, 2018, diluted net operating earnings per common share were $12.86, compared with $8.82 in 2017. Net operating income in 2018 increased 36% to $1.94 billion from $1.43 billion in 2017. Net operating income expressed as a rate of return on average tangible assets and average tangible common shareholders' equity was 1.72% and 19.09%, respectively, in 2018, compared with 1.23% and 13.00%, respectively, in 2017.

Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis totaled $1.06 billion in 2018's fourth quarter, improved 9% from $980 million in the year-earlier quarter and 3% above $1.03 billion in the third quarter of 2018. That growth predominantly resulted from a widening of the net interest margin to 3.92% in the recent quarter from 3.56% in the fourth quarter of 2017 and 3.88% in the third quarter of 2018 that reflects generally higher interest rates. Taxable-equivalent net interest income for the full year of 2018 increased 7% to $4.09 billion from $3.82 billion in 2017. The net interest margin was 3.83% in 2018 and 3.47% in 2017.

 

Provision for Credit Losses/Asset Quality.  The provision for credit losses was $38 million in the fourth quarter of 2018, compared with $31 million in the year-earlier quarter and $16 million in 2018's third quarter. Net loan charge-offs were $38 million during the recent quarter, compared with $27 million in the fourth quarter of 2017 and $16 million in the third quarter of 2018. The lower net charge-offs in 2018's third quarter reflected significantly higher recoveries of previously charged-off loans.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .17% and .12% in the final quarters of 2018 and 2017, respectively, and .07% in the third quarter of 2018. The provision for credit losses was $132 million for the year ended December 31, 2018, compared with $168 million in 2017. Net loan charge-offs during 2018 and 2017 aggregated $130 million and $140 million, respectively, or .15% and .16%, respectively, of average loans outstanding.

Loans classified as nonaccrual totaled $894 million or 1.01% of total loans outstanding at December 31, 2018, compared with $883 million or 1.00% a year earlier and $871 million or 1.00% at September 30, 2018. Assets taken in foreclosure of defaulted loans were $78 million at December 31, 2018, improved from $112 million at December 31, 2017 and $87 million at September 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 at each of December 31, 2018, December 31, 2017 and September 30, 2018. As a percentage of loans outstanding, the allowance was 1.15% and 1.16% at December 31, 2018 and 2017, respectively, and 1.18% at September 30, 2018.

Noninterest Income and Expense.  Noninterest income totaled $481 million in the recent quarter, little changed from $484 million in the fourth quarter of 2017, but up from $459 million in the third quarter of 2018. As compared with the fourth quarter of 2017, higher credit-related fees, trading account and foreign exchange gains, and trust income in the recent quarter were offset by a decline in residential mortgage banking revenues and lower gains on investment securities. Higher trading account and foreign exchange gains, valuation gains on equity securities and increased commercial mortgage banking revenues in the recent quarter contributed to the improvement from the third quarter of 2018.

 

Noninterest income aggregated $1.86 billion in 2018 and $1.85 billion in 2017. Higher trust income in 2018 was largely offset by the impact of investment securities gains in 2017.

Noninterest expense aggregated $802 million in the fourth quarter of 2018, $796 million in the year-earlier quarter and $776 million in the third 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 $797 million in the recent quarter, $789 million in the fourth quarter of 2017 and $770 million in the third quarter of 2018. Higher salaries and employee benefits expenses in the recent quarter were largely offset by lower charitable contributions and FDIC assessments as compared with the fourth quarter of 2017. The higher level of noninterest expense in the final 2018 quarter as compared with the third quarter of 2018 was attributable to increased charitable contributions and costs for professional services and salaries and employee benefits, that were partially offset by lower FDIC assessments.

 

For the year ended December 31, 2018, noninterest expense aggregated $3.29 billion, compared with $3.14 billion in 2017. Noninterest operating expenses were $3.26 billion and $3.11 billion in 2018 and 2017, respectively. The higher level of such expenses in 2018 resulted largely from increased costs for salaries and employee benefits, professional services and legal-related matters.

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 51.7% in the fourth quarter of 2018, 54.7% in the corresponding 2017 quarter and 51.4% in the third quarter of 2018. The efficiency ratio for the full year 2018 was 54.8%, improved from 55.1% in 2017.

Balance Sheet.  M&T had total assets of $120.1 billion at December 31, 2018, compared with $118.6 billion and $116.8 billion at December 31, 2017 and September 30, 2018, respectively. Loans and leases, net of unearned discount, were $88.5 billion at December 31, 2018, $88.0 billion at December 31, 2017 and $86.7 billion at September 30, 2018. Contributing to the higher outstanding balances of loans and leases at the recent quarter-end as compared with September 30, 2018 were growth in commercial loans and commercial real estate loans that was partially offset by acquired residential mortgage loan repayments. Total deposits were $90.2 billion at the recent year-end, compared with $92.4 billion at December 31, 2017 and $89.1 billion at September 30, 2018.

Total shareholders' equity was $15.5 billion at December 31, 2018 and $16.3 billion a year earlier, representing 12.87% and 13.70%, respectively, of total assets. Total shareholders' equity was $15.4 billion, or 13.21% of total assets at September 30, 2018. Common shareholders' equity was $14.2 billion, or $102.69 per share, at December 31, 2018, compared with $15.0 billion, or $100.03 per share, a year-earlier and $14.2 billion, or $100.38 per share, at September 30, 2018.  Tangible equity per common share was $69.28 at December 31, 2018, compared with $69.08 at December 31, 2017 and $67.64 at September 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 10.13% at December 31, 2018.

In accordance with its 2018 capital plan, M&T repurchased 3,060,000 shares of its common stock during the recent quarter at an average cost per share of $163.34, for a total cost of $500 million. In the aggregate, during the 2018, M&T repurchased 12,295,817 shares of common stock at a total cost of $2.2 billion.

Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss fourth 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 #8982419.  The conference call will be webcast live through M&T's website at https://ir.mtb.com/events.cfm. A replay of the call will be available through Thursday, January 24, 2019 by calling (800) 585-8367, or (404) 537-3406 for international participants, and by making reference to ID #8982419.  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.cfm.

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.