18 July 2018

BUFFALO, N.Y.—M&T Bank Corporation (“M&T”) (NYSE: MTB) today reported its results of operations for quarter ended June 30, 2018.
 
GAAP Results of Operations.  Diluted earnings per common share measured in accordance with generally accepted accounting principles (“GAAP”) for the second quarter of 2018 were $3.26, up 39% from $2.35 in the corresponding 2017 quarter and 46% higher than $2.23 in the first quarter of 2018.  GAAP-basis net income in the recent quarter was $493 million, up from $381 million in the second quarter of 2017 and $353 million in the initial 2018 quarter. GAAP-basis net income for the second quarter of 2018 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.70% and 13.32%, respectively, improved from 1.27% and 9.67%, respectively, in the year-earlier quarter and 1.22% and 9.15%, respectively, in the first quarter of 2018. During the initial 2018 quarter, M&T increased its reserve for litigation matters by $135 million in anticipation of the settlement of a Wilmington Trust Corporation civil litigation matter that was preliminarily approved by the court in July 2018. That increase, on an after-tax basis, reduced net income in that quarter by $102 million, or $.68 of diluted earnings per common share. 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 second quarter, Darren J. King, Executive Vice President and Chief Financial Officer, noted, “M&T’s financial performance in the second quarter was strong, led by a 12 basis point expansion of the net interest margin and higher trust income.  Credit quality continued to be very good with the net charge-off ratio well below our long-term average.  Expenses were in line with our expectations as we continued with our plan to invest savings realized from lower income tax rates in our employees, communities and customer service delivery capabilities. Furthermore, the Federal Reserve did not object to our revised 2018 Capital Plan that includes the repurchase of up to $1.8 billion of common shares and a 25% increase in M&T’s quarterly common stock dividend.” 
 
Earnings Highlights  
                                         
                            Change 2Q18 vs.  
($ in millions, except per share data)   2Q18     2Q17     1Q18     2Q17     1Q18  
                                         
Net income   $ 493     $ 381     $ 353       29 %     40 %
Net income available to common shareholders - diluted   $ 473     $ 361     $ 333       31 %     42 %
Diluted earnings per common share   $ 3.26     $ 2.35     $ 2.23       39 %     46 %
Annualized return on average assets     1.70 %     1.27 %     1.22 %                
Annualized return on average common equity     13.32 %     9.67 %     9.15 %                








 
 




 
For the six-month period ended June 30, 2018, diluted earnings per common share were $5.48, up 23% from $4.47 in the year-earlier period. GAAP-basis net income for the first six months of 2018 totaled $846 million, 16% higher than $730 million 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 six-month period ended June 30, 2018 was 1.46% and 11.21%, respectively, improved from 1.21% and 9.28%, respectively, in the similar 2017 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 $3.29 in the recent quarter, up from $2.38 in the second quarter of 2017 and $2.26 in the initial 2018 quarter.  Net operating income for the second quarter of 2018 was $498 million, compared with $386 million in the year-earlier period and $357 million in the first quarter of 2018. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.79% and 19.91%, respectively, in the recent quarter, improved from 1.33% and 14.18%, respectively, in the second quarter of 2017 and 1.28% and 13.51%, respectively, in the first quarter of 2018.
Diluted net operating earnings per common share in the first six months of 2018 increased 22% to $5.54 from $4.53 in the first half of 2017. Net operating income during the six-month period ended June 30, 2018 was $855 million, up 16% from $740 million 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 1.53% and 16.65%, respectively, in the first half of 2018, compared with 1.27% and 13.61%, respectively, in the first six months of 2017.
 
Taxable-equivalent Net Interest Income.  Net interest income expressed on a taxable-equivalent basis aggregated $1.01 billion in 2018’s second quarter, 7% higher than $947 million in the similar 2017 quarter and 3% higher than $980 million in 2018’s initial quarter. That growth resulted from a widening of the net interest margin to 3.83% in the recent quarter from 3.45% in the second quarter of 2017 and 3.71% in the first 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 2Q18 vs.  
($ in millions)   2Q18     2Q17     1Q18     2Q17     1Q18  
                                         
Average earning assets   $ 106,210     $ 109,987     $ 107,231       -3 %     -1 %
Net interest income  ?  taxable-equivalent   $ 1,014     $ 947     $ 980       7 %     3 %
Net interest margin     3.83 %     3.45 %     3.71 %                
 
Provision for Credit Losses/Asset Quality.  The provision for credit losses was $35 million in the second quarter of 2018, compared with $52 million in the year-earlier quarter and $43 million in 2018’s first quarter. Net charge-offs of loans were $35 million during the recent quarter, compared with $45 million in the second quarter of 2017 and $41 million in the first quarter of 2018.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .16% and .20% in the second quarters of 2018 and 2017, respectively, and .19% in the first quarter of 2018.
 
Loans classified as nonaccrual totaled $820 million or .93% of total loans outstanding at June 30, 2018, improved from $872 million or .98% a year earlier and $865 million or .99% at March 31, 2018. Assets taken in foreclosure of defaulted loans were $98 million at June 30, 2018, compared with $105 million at June 30, 2017 and $101 million at March 31, 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 1.16% of loans outstanding at each of June 30, 2018 and March 31, 2018, compared with $1.01 billion or 1.13% at June 30, 2017.
 
Asset Quality Metrics  
                                         
                            Change 2Q18 vs.  
($ in millions)   2Q18     2Q17     1Q18     2Q17     1Q18  
                                         
At end of quarter                                        
Nonaccrual loans   $ 820     $ 872     $ 865       -6 %     -5 %
Real estate and other foreclosed assets   $ 98     $ 105     $ 101       -6 %     -3 %
Total nonperforming assets   $ 918     $ 977     $ 966       -6 %     -5 %
Accruing loans past due 90 days or more (1)   $ 223     $ 265     $ 235       -16 %     -5 %
Nonaccrual loans as % of loans outstanding     .93 %     .98 %     .99 %                
                                         
Allowance for credit losses   $ 1,019     $ 1,008     $ 1,020       1 %      
Allowance for credit losses as % of loans outstanding     1.16 %     1.13 %     1.16 %                
                                         
For the period                                        
Provision for credit losses   $ 35     $ 52     $ 43       -33 %     -19 %
Net charge-offs   $ 35     $ 45     $ 41       -22 %     -13 %
Net charge-offs as % of average loans (annualized)     .16 %     .20 %     .19 %                
 
(1)      Excludes loans acquired at a discount.  Predominantly residential real estate loans.

Noninterest Income and Expense.  Noninterest income totaled $457 million in the recent quarter, compared with $461 million in the second quarter of 2017 and $459 million in the first quarter of 2018. Improved trust income and mortgage banking revenues in the recent quarter were offset by the impact of higher credit-related fees and income from bank-owned life insurance and brokerage services in the year earlier quarter and $23 million of income in the initial 2018 quarter from M&T’s investment in Bayview Lending Group.
 
Noninterest Income  
                                         
                            Change 2Q18 vs.  
($ in millions)   2Q18     2Q17     1Q18     2Q17     1Q18  
                                         
Mortgage banking revenues   $ 92     $ 86     $ 87       7 %     6 %
Service charges on deposit accounts     107       106       105       1 %     2 %
Trust income     138       127       131       9 %     5 %
Brokerage services income     13       17       13       -24 %     -6 %
Trading account and foreign exchange gains     5       8       5       -35 %     13 %
Gain (loss) on bank investment securities     2             (9 )            
Other revenues from operations     100       117       127       -14 %     -21 %
Total other income   $ 457     $ 461     $ 459       -1 %      

Noninterest expense totaled $777 million in the second quarter of 2018, $751 million in the year-earlier quarter and $933 million in the first 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 the recent quarter, $743 million in the year-earlier period and $927 million in 2018’s first quarter. Higher costs for salaries and employee benefits were the most significant factor associated with the rise in noninterest operating expenses in the recent quarter as compared with the year-earlier quarter. The higher noninterest operating expenses in the first quarter of 2018 reflected a $135 million increase in the reserve for litigation matters and seasonally higher stock-based compensation and employee benefits expenses.
 
Noninterest Expense  
                                         
                            Change 2Q18 vs.  
($ in millions)   2Q18     2Q17     1Q18     2Q17     1Q18  
                                         
Salaries and employee benefits   $ 419     $ 398     $ 463       5 %     -10 %
Equipment and net occupancy     73       74       75       -1 %     -2 %
Outside data processing and software     49       45       49       12 %     3 %
FDIC assessments     20       25       20       -23 %     -4 %
Advertising and marketing     22       16       16       33 %     34 %
Printing, postage and supplies     9       9       9       -3 %     -6 %
Amortization of core deposit and other intangible assets     6       8       7       -21 %     -4 %
Other costs of operations     179       176       294       2 %     -39 %
Total other expense   $ 777     $ 751     $ 933       3 %     -17 %
 
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 52.4% in the second quarter of 2018, 52.7% in the year-earlier quarter and 64.0% in the first quarter of 2018.
 
Balance Sheet.  M&T had total assets of $118.4 billion at June 30, 2018, compared with $120.9 billion at June 30, 2017 and $118.6 billion at March 31, 2018. Loans and leases, net of unearned discount, were $87.8 billion at June 30, 2018 and $89.1 billion at June 30, 2017. The decline from June 30, 2017 reflects acquired residential mortgage loan repayments, partially offset by growth in commercial real estate and consumer loans. Total deposits were $89.3 billion at the recent quarter-end, compared with $93.5 billion at June 30, 2017 and $90.9 billion at March 31, 2018. Those declines reflect maturities of time deposits and lower commercial escrow deposits.
 
Total shareholders' equity was $15.6 billion at June 30, 2018 and $16.3 billion a year earlier, representing 13.15% and 13.47%, respectively, of total assets. Total shareholders’ equity was $15.7 billion, or 13.24% of total assets at March 31, 2018. Common shareholders' equity was $14.3 billion, or $99.43 per share, at June 30, 2018, compared with $15.1 billion, or $98.66 per share, a year-earlier and $14.5 billion, or $98.60 per share, at March 31, 2018.  Tangible equity per common share was $67.29 at June 30, 2018, compared with $68.20 at June 30, 2017 and $66.99 at March 31, 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 10.52% at June 30, 2018.
 
In accordance with its 2017 capital plan, M&T repurchased 2,608,376 shares of its common stock during the recent quarter at an average cost per share of $182.14, for a total cost of $475 million. In the aggregate, during the first six months of 2018, M&T repurchased 6,391,658 shares of common stock under that plan at a total cost of $1.2 billion.
 
Conference Call.  Investors will have an opportunity to listen to M&T's conference call to discuss second quarter financial results today at 10:00 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 #3553997.  The conference call will be webcast live through M&T's website at http://ir.mtb.com/events.cfm. A replay of the call will be available until Sunday, July 29, by calling (800) 585-8367, or (404) 537-3406 for international participants, and by making reference to ID #3553997.  The event will also be archived and available by 7:00 p.m. today on M&T's website at http://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.
Media Contact:
 
C. Michael Zabel
(716) 842-2311
 
Investor Contact:
Donald J. MacLeod
(716) 842-5138
 
Click to Download a PDF of the Financial Highlights:
 

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