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M&T Bank Corporation Announces First Quarter Results

BUFFALO, New York, April 17, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- M&T Bank Corporation ("M&T")(NYSE: MTB) today reported its results of operations for the quarter ended March 31, 2007.

GAAP Results of Operations. Diluted earnings per share measured in accordance with generally accepted accounting principles ("GAAP") for the first quarter of 2007 were $1.57, compared with $1.77 in the year-earlier quarter. GAAP-basis net income in the recent quarter totaled $176 million, down 13% from $203 million in the similar 2006 period. GAAP-basis net income for 2007's initial quarter expressed as an annualized rate of return on average assets and average common stockholders' equity was 1.25% and 11.38%, respectively, compared with 1.49% and 13.97%, respectively, in the first quarter of 2006.

Supplemental Reporting of Non-GAAP Results of Operations. Since 1998, M&T has consistently provided 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 expenses are considered by management to be "nonoperating" in nature. 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. Amortization of core deposit and other intangible assets, after tax effect, was $11 million ($.10 per diluted share) in the recently completed quarter, compared with $8 million ($.07 per diluted share) in the first quarter of 2006. There were no merger-related expenses in either of the first quarters of 2007 or 2006.

Diluted net operating earnings per share, which exclude the impact of amortization of core deposit and other intangible assets, were $1.67 for the first quarter of 2007, 9% below $1.84 in the corresponding quarter of 2006. Net operating income for the quarter ended March 31, 2007 was $187 million, compared with $211 million in the year-earlier quarter. Expressed as an annualized rate of return on average tangible assets and average tangible stockholders' equity, net operating income was 1.40% and 24.11%, respectively, in the initial quarter of 2007, compared with 1.64% and 29.31% in the first quarter of 2006.

Reconciliation of GAAP and Non-GAAP Results of Operations. A reconciliation of diluted earnings per share and net income with diluted net operating earnings per share and net operating income follows:



                                            Three months ended
                                                  March 31
                                            2007          2006
                                            ----          ----
                                              (in thousands,
                                             except per share)

    Diluted earnings per share          $   1.57          1.77
    Amortization of core deposit
     and other intangible assets(1)          .10           .07
                                         -------       -------
    Diluted net operating earnings
     per share                          $   1.67          1.84
                                         =======       =======

    Net income                          $175,973       202,917

    Amortization of core deposit
     and other intangible assets(1)       11,189         7,939
                                         -------       -------
    Net operating income                $187,162       210,856
                                         =======       =======

    (1) After any related tax effect



Reconciliation of Total Assets and Equity to Tangible Assets and Equity. A reconciliation of average assets and equity with average tangible assets and average tangible equity follows:

                                            Three months ended
                                                  March 31
                                            2007           2006
                                            ----           ----
                                              (in millions)

    Average assets                       $57,207         55,106
    Goodwill                              (2,909)        (2,907)
    Core deposit and other
     intangible assets                      (241)          (112)
    Deferred taxes                            28             43
                                          ------         ------
    Average tangible assets              $54,085         52,130
                                          ======         ======

    Average equity                       $ 6,270          5,893
    Goodwill                              (2,909)        (2,907)
    Core deposit and other
     intangible assets                      (241)          (112)
    Deferred taxes                            28             43
                                          ------         ------
    Average tangible equity              $ 3,148          2,917
                                          ======         ======



Taxable-equivalent Net Interest Income. Taxable-equivalent net interest income totaled $456 million in the first quarter of 2007, compared with $452 million in the first quarter of 2006. Higher average loan balances outstanding, which rose 6% to $43.1 billion in 2007's initial quarter from $40.5 billion in the year-earlier period, were the most significant contributor to the increase. Partially offsetting the favorable impact of loan growth was a lower net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, which declined to 3.64% in the recent quarter from 3.73% in the first quarter of 2006. That decline reflects lower fees from customer prepayments of commercial real estate loans and higher rates paid on deposits.

Provision for Credit Losses/Asset Quality. The provision for credit losses was increased to $27 million in the initial 2007 quarter from $18 million in the first quarter of 2006. Net charge-offs of loans during the recent quarter and the year-earlier quarter were $17 million. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .16% and .17% in the first quarter of 2007 and 2006, respectively.

Loans classified as nonperforming totaled $273 million, or .63% of total loans at March 31, 2007, up from $143 million or .35% a year earlier and $224 million or .52% at December 31, 2006. The increase from a year ago was due in part to the addition of $40 million of loans to automobile dealers. Lower domestic automobile sales have resulted in a difficult operating environment for certain automobile dealers, leading to deteriorating financial results. Also contributing to the year-over-year increase in nonperforming loans was the addition during 2007's first quarter of two commercial relationships totaling $40 million, which also represented the majority of the rise in that category from the end of 2006. Loans past due 90 days or more and accruing interest were $118 million at the end of the recently completed quarter, compared with $109 million at March 31, 2006. Included in these past due but accruing amounts were loans guaranteed by government-related entities of $71 million and $86 million at March 31, 2007 and 2006, respectively. Assets taken in foreclosure of defaulted loans were $15 million at March 31, 2007, compared with $10 million a year earlier.

Allowance for Credit Losses. The allowance for credit losses totaled $660 million, or 1.52% of total loans, at March 31, 2007, compared with $639 million, or 1.56%, a year earlier and $650 million, or 1.51%, at December 31, 2006. The decline in the allowance as a percentage of loans from March 31, 2006 to the two most recent quarter-ends reflects a change in portfolio mix resulting from higher balances of residential real estate loans and lower balances of consumer loans. In general, M&T experiences significantly lower charge-offs on residential real estate loans than on consumer loans. The ratio of M&T's allowance for credit losses to nonperforming loans was 241%, 448% and 290% at March 31, 2007, March 31, 2006 and December 31, 2006, respectively.

Noninterest Income and Expense. Noninterest income in the initial quarter of 2007 totaled $236 million, compared with $253 million in the year-earlier quarter. The decline was due to a $21 million decrease in mortgage banking revenues and lower income from commercial leasing and educational lending, partially offset by higher deposit account service charges and trust income. As discussed in a news release issued by M&T on March 30, 2007, the lower mortgage banking revenues were predominantly the result of market conditions that affected the valuation of alternative ("Alt-A") residential mortgage loans that had been held for sale by M&T. As stated in the March news release, unfavorable market conditions and lack of market liquidity resulted in M&T deciding to transfer $883 million of Alt-A loans previously held for sale ($808 million of first mortgage loans and $75 million of second mortgage loans) to its held-for-investment residential mortgage loan portfolio. As a result, the carrying value of those loans was reduced by $12 million in the recent quarter, resulting in an after-tax reduction of net income of $7 million, or $.07 per diluted share. In addition, M&T accrued $6 million to provide for declines in market value of previously sold loans that M&T may be required to repurchase. That accrual reduced M&T's net income in the recent quarter by $4 million, or $.03 per diluted share.

Noninterest expense in the first quarter of 2007 totaled $399 million, compared with $382 million in the similar quarter of 2006. Included in such amounts are expenses considered to be nonoperating in nature consisting of amortization of core deposit and other intangible assets of $18 million in 2007 and $13 million in 2006. The increased amortization reflects M&T's acquisition of 21 branch offices in upstate New York on June 30, 2006. Exclusive of these nonoperating expenses, noninterest operating expenses were $381 million in the recently completed quarter and $369 million in the first quarter of 2006. Contributing to the rise in operating expenses in 2007 were higher salaries expenses, reflecting the impact of 2006 acquisitions, primarily the branch office acquisition noted above, annual merit increases, and stock-based and other incentive compensation costs. Also contributing to the increased level of operating expenses was a lower reversal of the valuation allowance for impairment of capitalized residential mortgage servicing rights of $1 million in the recent quarter, compared with $7 million in the year-earlier quarter. Excluding the impact of those reversals, operating expenses in 2007's first quarter were up only 1.6% from the year- earlier period.

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 55.1% in the first quarter of 2007, compared with 52.4% in the year-earlier period.

Balance Sheet. M&T had total assets of $57.8 billion at March 31, 2007, up from $55.4 billion a year earlier. Loans and leases, net of unearned discount, rose 6% to $43.5 billion at the recent quarter-end from $40.9 billion at March 31, 2006. Deposits were $38.9 billion at March 31, 2007, compared with $38.2 billion a year earlier. Total stockholders' equity was $6.3 billion and $5.9 billion at March 31, 2007 and 2006, respectively, representing 10.81% of total assets at the recent quarter-end and 10.68% a year earlier. Common stockholders' equity per share was $57.32 and $53.11 at March 31, 2007 and 2006, respectively. Tangible equity per common share was $28.77 at March 31, 2007, compared with $26.41 a year earlier. In the calculation of tangible equity per common share, stockholders' equity is reduced by the carrying values of goodwill and core deposit and other intangible assets, net of applicable deferred tax balances, which aggregated $3.1 billion and $3.0 billion at March 31, 2007 and 2006, respectively.

During the first quarter of 2007, M&T repurchased, 1,736,800 shares of common stock under authorized repurchase plans at an average cost of $119.69 per share, including a new plan authorized by M&T's Board of Directors allowing for the purchase of up to 5,000,000 shares of common stock. Under that new plan, M&T repurchased 40,500 shares in the recent quarter at an average cost per share of $116.52.

Conference Call. Investors will have an opportunity to listen to M&T's conference call to discuss first quarter financial results today at 3:00 p.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 conference ID #8628825. 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 Wednesday, April 18, 2007 by calling 877-519-4471, or 973- 341-3080 for international participants, and by making reference to ID #8628825. The event will also be archived and available by 7:00 p.m. today on M&T's website at http://ir.mandtbank.com/conference.cfm.

M&T is a bank holding company whose banking subsidiaries, M&T Bank and M&T Bank, National Association, operate branch offices in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware, New Jersey and the District of Columbia.

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 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; 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 required capital levels; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other 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; 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 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.



       M&T BANK CORPORATION
       Financial Highlights
                                             Three months ended
       Amounts in thousands,                      March 31
        except per share                      -----------------
                                              2007         2006        Change
                                              ----         ----        ------
       Performance
       -----------
       Net income                           $175,973      202,917        -13%

       Per common share:
         Basic earnings                     $   1.60         1.82        -12%
         Diluted earnings                       1.57         1.77        -11
         Cash dividends                     $    .60          .45         33

       Common shares outstanding:
         Average - diluted (1)               112,187      114,347         -2%
         Period end (2)                      109,090      111,447         -2

       Return on (annualized):
         Average total assets                   1.25%        1.49%
         Average common stockholders'
          equity                               11.38%       13.97%

       Taxable-equivalent net interest
        income                              $455,550      451,757          1%

       Yield on average earning assets          6.93%        6.46%
       Cost of interest-bearing
        liabilities                             3.90%        3.28%
       Net interest spread                      3.03%        3.18%
       Contribution of interest-free
        funds                                    .61%         .55%
       Net interest margin                      3.64%        3.73%

       Net charge-offs to average total
         net loans (annualized)                  .16%         .17%

       Net operating results (3)
       -------------------------
       Net operating income                 $187,162      210,856        -11%
       Diluted net operating earnings per
        common share                            1.67         1.84         -9
       Return on (annualized):
         Average tangible assets                1.40%        1.64%
         Average tangible common equity        24.11%       29.31%
       Efficiency ratio                        55.09%       52.36%



                                                 At March 31
                                             --------------------
       Loan quality                           2007         2006        Change
       ------------                          -------      -------      ------

       Nonaccrual loans                     $259,015      127,934        102%
       Renegotiated loans                     14,210       14,790         -4
                                             -------      -------
         Total nonperforming loans          $273,225      142,724         91%
                                             =======      =======

       Accruing loans past due 90 days or
        more                                $118,094      109,287          8%

       Nonperforming loans to total net
        loans                                    .63%         .35%
       Allowance for credit losses to
        total net loans                         1.52%        1.56%

       ----------------------------------------------------------------------
       (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.  A reconciliation of net income
            and net operating income is included herein.



    M&T BANK CORPORATION
    Condensed Consolidated Statement of Income

                                              Three months ended
                                                  March 31
                                              -------------------
    Dollars in thousands                       2007        2006      Change
                                              -------     -------    ------

    Interest income                          $861,049     777,272       11%
    Interest expense                          410,622     330,246       24
                                              -------     -------
    Net interest income                       450,427     447,026        1

    Provision for credit losses                27,000      18,000       50
                                              -------     -------
    Net interest income after
       provision for credit losses            423,427     429,026       -1

    Other income
         Mortgage banking revenues             13,873      34,511      -60
         Service charges on deposit
          accounts                             94,587      88,876        6
         Trust income                          36,973      33,796        9
         Brokerage services income             15,212      14,724        3
         Trading account and foreign
          exchange gains                        6,223       6,506       -4
         Gain on bank investment
          securities                            1,063          58        -
         Other revenues from operations        68,552      74,460       -8
                                              -------     -------
              Total other income              236,483     252,931       -7


    Other expense
         Salaries and employee benefits       236,754     224,082        6
         Equipment and net occupancy           42,846      43,402       -1
         Printing, postage and supplies         8,906       8,567        4
         Amortization of core deposit and
          other intangible assets              18,356      13,028       41
         Other costs of operations             92,175      92,924       -1
                                              -------     -------
              Total other expense             399,037     382,003        4


    Income before income taxes                260,873     299,954      -13

    Applicable income taxes                    84,900      97,037      -13
                                              -------     -------

    Net income                               $175,973     202,917      -13%
                                              =======     =======



    M&T BANK CORPORATION
    Condensed Consolidated Balance Sheet

                                                    March 31
                                            -----------------------
    Dollars in thousands                       2007         2006      Change
                                            ----------   ----------   ------

    ASSETS

    Cash and due from banks                $ 1,437,859    1,277,809       13%
    Interest-bearing deposits at banks           7,908       14,271      -45
    Federal funds sold and agreements
      to resell securities                     429,895        8,670        -
    Trading account assets                     153,511      201,268      -24
    Investment securities                    7,027,709    8,294,067      -15
    Loans and leases, net of unearned
     discount                               43,507,176   40,858,598        6
      Less: allowance for credit losses        659,757      638,831        3
                                            ----------   ----------

      Net loans and leases                  42,847,419   40,219,767        7

    Goodwill                                 2,908,849    2,908,849        -
    Core deposit and other intangible
     assets                                    231,877      110,614      110
    Other assets                             2,797,444    2,384,547       17
                                            ----------   ----------
      Total assets                         $57,842,471   55,419,862        4%
                                            ==========   ==========


    LIABILITIES AND STOCKHOLDERS' EQUITY

    Noninterest-bearing deposits at U.S.
     offices                               $ 7,614,624    7,697,855       -1%
    Other deposits at U.S. offices          26,561,707   27,306,015       -3

    Deposits at foreign office               4,761,575    3,167,515       50
                                            ----------   ----------
      Total deposits                        38,937,906   38,171,385        2

    Short-term borrowings                    4,048,782    4,351,347       -7
    Accrued interest and other
     liabilities                               938,290      885,091        6
    Long-term borrowings                     7,664,309    6,092,570       26
                                            ----------   ----------

      Total liabilities                     51,589,287   49,500,393        4

    Stockholders' equity (1)                 6,253,184    5,919,469        6
                                            ----------   ----------

      Total liabilities and stockholders'
       equity                              $57,842,471   55,419,862        4%
                                            ==========   ==========

    ---------------------------------------------------------------------
    (1)  Reflects accumulated other comprehensive loss, net of applicable
         income tax effect, of $36.2 million at March 31, 2007 and $122.9
         million at March 31, 2006.



      M&T BANK CORPORATION
      Condensed Consolidated Average Balance Sheet
       and Annualized Taxable-equivalent Rates

                                            Three months ended
                                                 March 31
                                      -----------------------------
      Dollars in millions                  2007            2006     Change in
                                      Balance  Rate   Balance  Rate   balance
                                      -------  ----   -------  ----   -------
      ASSETS

      Interest-bearing deposits at
       banks                          $     8  3.56%       10  3.03%      -22%

      Federal funds sold and
       agreements to resell
       securities                         304  6.40        31  4.88         -

      Trading account assets               53   .83        98  2.75       -45

      Investment securities             7,214  5.04     8,383  4.71       -14

      Loans and leases, net of
       unearned discount
        Commercial, financial, etc     11,753  7.28    11,034  6.65         7
        Real estate - commercial       15,474  7.30    14,678  7.09         5
        Real estate - consumer          5,939  6.48     4,601  6.18        29
        Consumer                        9,948  7.43    10,231  6.79        -3
                                       ------          ------
           Total loans and leases,
            net                        43,114  7.26    40,544  6.84         6
                                       ------          ------

        Total earning assets           50,693  6.93    49,066  6.46         3

      Goodwill                          2,909           2,907               -

      Core deposit and other
       intangible assets                  241             112             116

      Other assets                      3,364           3,021              11
                                       ------          ------

        Total assets                  $57,207          55,106               4%
                                       ======          ======

      LIABILITIES AND STOCKHOLDERS' EQUITY

      Interest-bearing deposits
        NOW accounts                  $   437  1.08       409   .65         7%
        Savings deposits               14,733  1.67    14,335  1.23         3
        Time deposits                  11,657  4.76    11,870  4.03        -2
        Deposits at foreign office      3,717  5.20     3,383  4.41        10
                                       ------          ------
           Total interest-bearing
            deposits                   30,544  3.27    29,997  2.69         2
                                       ------          ------

      Short-term borrowings             4,852  5.31     4,555  4.50         7
      Long-term borrowings              7,308  5.59     6,293  5.19        16
                                       ------          ------

      Total interest-bearing
       liabilities                     42,704  3.90    40,845  3.28         5

      Noninterest-bearing deposits      7,422           7,572              -2

      Other liabilities                   811             796               2
                                       ------          ------
        Total liabilities              50,937          49,213               4

      Stockholders' equity              6,270           5,893               6
                                       ------          ------

        Total liabilities and
         stockholders' equity         $57,207          55,106               4%
                                       ======          ======

      Net interest spread                      3.03            3.18
      Contribution of interest-free
       funds                                    .61             .55
      Net interest margin                      3.64%           3.73%

    INVESTOR CONTACT: Donald J. MacLeod
                      (716) 842-5138

    MEDIA CONTACT:    C. Michael Zabel
                      (716) 842-5385

SOURCE M&T Bank Corporation

Investors, Donald J. MacLeod, +1-716-842-5138, or Media, C. Michael Zabel,
+1-716-842-5385, both of M&T Bank Corporation
http://www.mandtbank.com/

Copyright (C) 2007 PR Newswire. All rights reserved

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