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M&T Bank Corporation Announces First Quarter Results

The following excerpt is from the company's SEC filing.

BUFFALO, NEW YORK M&T Bank Corporation (M&T) (NYSE: MTB) today reported its results of operations for the quarter ended March 31, 2016.

GAAP Results of Operations.

Diluted earnings per common share measured in accordance with generally accepted accounting principles (GAAP) for the initial quarter of 2016 were $1.73, up 5% from $1.65 in each of the first and fourth quarters of 2015. GAAP-basis net income in the recent quarter was $299 million, 24% higher than the $242 million earned in the year-earlier quarter and 10% above the $271 million recorded in the final 2015 quarter. Net income for the initial 2016 quarter expressed as an annualized rate of return on average assets and average common shareholders equity was .97% and 7.44%, respectively, compared with 1.02% and 7.99%, respectively, in the corresponding 2015 period and .93% and 7.22% in the fourth quarter of 2015. M&Ts first quarter 2016 results reflect a full-quarter impact of its November 1, 2015 acquisition of Hudson City Bancorp, Inc. (Hudson City).

Commenting on M&Ts recent quarter performance, René F. Jones, Vice Chairman and Chief Financial Officer, noted, Results in 2016s initial quarter reflected strong growth in net interest income, solid loan growth, stable credit performance and well-controlled expenses, leading to an 11% rise in diluted net

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M&T BANK CORPORATION

operating earnings per share, to $1.87, over the year-earlier period. The quarter was highlighted by the full integration of Hudson Citys operations through the successful conversion of the deposit system and branch network. Our entire banking franchise is now operating under the M&T flag, enabling us to extend to our new customers our unwavering commitment to outstanding service.

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 expense are presented in the tables that accompany this release. Although net operating income as defined by M&T is not a GAAP measure, M&Ts management believes that this information helps investors understand the effect of acquisition activity in reported results.

Diluted net operating earnings per common share were $1.87 in the first three months of 2016, up 11% from $1.68 in the year-earlier period. Net operating income for the initial quarter of 2016 rose 30% to $320 million from $246 million in the first quarter of 2015. Diluted net operating earnings per common share and net operating income in the fourth quarter of 2015 were $2.09 and $338 million, respectively.

Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders equity, net

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operating income was 1.09% and 11.62%, respectively, in the first quarter of 2016, compared with 1.08% and 11.90%, respectively, in the year-earlier quarter and 1.21% and 13.26%, respectively, in the fourth quarter of 2015.

Taxable-equivalent Net Interest Income.

Taxable-equivalent net interest income aggregated $878 million in the initial quarter of 2016, up 32% from $665 million in the year-earlier period. That growth resulted predominantly from a 31% rise in average earning assets, which grew to $111.2 billion in the recent quarter from $85.2 billion in the year-earlier quarter. The improvement reflects the Hudson City acquisition that added approximately $18.1 billion to average loans in the recent quarter plus growth of $2.9 billion in M&Ts other loan portfolios. The net interest margin in the first quarter of 2016 was 3.18%, improved slightly from 3.17% in the initial 2015 quarter. Taxable-equivalent net interest income in the fourth quarter of 2015 was $813 million. The $65 million improvement in the recent quarter as compared with the final 2015 quarter was largely due to the full-quarter impact of the Hudson City transaction, growth in commercial loans and commercial real estate loans and a 6 basis point widening of the net interest margin.

Provision for Credit Losses/Asset Quality.

The provision for credit losses was $49 million in the first quarter of 2016, compared with $38 million in the year-earlier quarter. The provision in the final 2015 quarter was $58 million, reflecting a merger-related charge of $21 million associated with loans obtained in the Hudson City acquisition. Net charge-offs of loans during the recent quarter aggregated $42 million, compared with $36 million in each of the first and fourth quarters of 2015. Expressed as an annualized percentage of average loans

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outstanding, net charge-offs were .19% during the first three months of 2016, compared with .22% and .18% in the first and fourth quarters of 2015, respectively.

Loans classified as nonaccrual totaled $877 million or 1.00% of total loans outstanding at March 31, 2016, compared with $791 million or 1.18% a year earlier and $799 million or .91% at December 31, 2015. Loans obtained from Hudson City that were over 90 days past due as of the acquisition date are reported as purchased impaired loans and, in accordance with GAAP, interest continues to accrue on those loans despite their delinquency status. Those acquired loans have not been reported as nonaccrual as of either March 31, 2016 or December 31, 2015. The higher level of nonaccrual loans at the recent quarter-end reflects the normal migration of $80 million of previously performing loans obtained in the acquisition of Hudson City that became over 90 days past due during the recent quarter and, as such, were not identifiable as purchased impaired as of the acquisition date. Assets taken in foreclosure of defaulted loans totaled $188 million at March 31, 2016, compared with $63 million a year earlier and $195 million at December 31, 2015. The higher level of such assets at the two most recent quarter-ends resulted from residential real estate properties associated with the Hudson City acquisition.

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 $963 million at March 31, 2016, compared with $921 million a year earlier and $956 million at December 31, 2015. The allowance expressed as a percentage of outstanding loans was 1.10% at March 31, 2016, compared with 1.37% at March 31, 2015 and 1.09% at

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December 31, 2015. The decline in those ratios at the two most recent quarter-ends as compared with March 31, 2015 reflects the impact of residential mortgage loans obtained in the Hudson City acquisition.

Noninterest Income and Expense.

Noninterest income totaled $421 million in the initial 2016 quarter, $440 million in the year-earlier quarter and $448 million in the...


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