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M&T Bank Corporation Announces Second Quarter Results

GAAP Results of Operations. Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the second quarter of 2017 were $2.35, up 19% from $1.98 in the year-earlier period and 11% higher than $2.12 in the first quarter of 2017. GAAP-basis net income in the recently completed quarter totaled $381 million, a 13% rise from $336 million in the corresponding 2016 quarter and 9% above the $349 million recorded in the initial 2017 quarter. GAAP-basis net income for the second quarter of 2017 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.27% and 9.67%, respectively, compared with 1.09% and 8.38%, respectively, in the year-earlier quarter and 1.15% and 8.89%, respectively, in the first quarter of 2017.

Commenting on the recent quarter's performance, Darren J. King, Executive Vice President and Chief Financial Officer, stated, "Financial results for M&T in the second quarter were highlighted by a continued widening of the net interest margin, which rose 11 basis points from the previous quarter to 3.45%. Also contributing to the strong performance were increased trust income and well-controlled expenses that were in line with our expectations. As has been the case for some time, credit quality continued to be solid as net charge-offs were modest and nonaccrual loans decreased."

Earnings Highlights





































Change 2Q17 vs.


($ in millions, except per share data)


2Q17



2Q16



1Q17



2Q16



1Q17























Net income


$

381



$

336



$

349




13

%



9

%

Net income available to common shareholders - diluted


$

361



$

313



$

329




15

%



10

%

Diluted earnings per common share


$

2.35



$

1.98



$

2.12




19

%



11

%

Annualized return on average assets



1.27

%



1.09

%



1.15

%









Annualized return on average common equity



9.67

%



8.38

%



8.89

%









For the six-month period ended June 30, 2017, diluted earnings per common share were $4.47, up 20% from $3.71 in the year-earlier period. GAAP-basis net income for the first six months of 2017 totaled $730 million, or 15% higher than $635 million in the similar 2016 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, 2017 was 1.21% and 9.28%, respectively, compared with 1.03% and 7.91%, respectively, in the corresponding 2016 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" 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&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 $2.38 in the recent quarter, up from $2.07 and $2.15 in the year-earlier quarter and the first quarter of 2017, respectively. Net operating income rose to $386 million in the second quarter of 2017, 10% higher than $351 million in the second quarter of 2016 and 9% above $354 million in the initial 2017 quarter. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.33% and 14.18%, respectively, in the second quarter of 2017, compared with 1.18% and 12.68%, respectively, in the year-earlier quarter and 1.21% and 13.05%, respectively, in the first three months of 2017.

Diluted net operating earnings per common share in the first six months of 2017 increased 15% to $4.53 from $3.94 in the first half of 2016. Net operating income during the six-month period ended June 30, 2017 was $740 million, a rise of 10% from $671 million in the similar 2016 period. Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was 1.27% and 13.61%, respectively, in the first half of 2017, compared with 1.14% and 12.15%, respectively, in the first six months of 2016.

Taxable-equivalent Net Interest Income. Net interest income expressed on a taxable-equivalent basis totaled $947 million in the second quarter of 2017, an increase of $77 million, or 9%, from $870 million in the year-earlier quarter. That improvement resulted predominantly from a widening of the net interest margin to 3.45% in the recent quarter from 3.13% in the second quarter of 2016. Taxable-equivalent net interest income in the recent quarter rose 3% from $922 million in the initial 2017 quarter. That growth was primarily due to an 11 basis point widening of the net interest margin from 3.34% in the first quarter of 2017.






















Taxable-equivalent Net Interest Income





































Change 2Q17 vs.


($ in millions)


2Q17



2Q16



1Q17



2Q16



1Q17























Average earning assets


$

109,987



$

111,872



$

112,008




-2

%



-2

%

Net interest income - taxable-equivalent


$

947



$

870



$

922




9

%



3

%

Net interest margin



3.45

%



3.13

%



3.34

%









Provision for Credit Losses/Asset Quality. The provision for credit losses was $52 million in the second quarter of 2017, compared with $32 million in the year-earlier quarter and $55 million in the first quarter of 2017. Net charge-offs of loans were $45 million during the recent quarter, compared with $24 million in the second quarter of 2016 and $43 million in the initial 2017 quarter. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .20% and .11% in the second quarters of 2017 and 2016, respectively, and .19% in the first quarter of 2017.

Loans classified as nonaccrual totaled $872 million, or .98% of total loans outstanding at June 30, 2017, compared with $927 million or 1.04% at March 31, 2017 and $849 million or .96% at June 30, 2016. The decline in nonaccrual loans from March 31, 2017 to the recent quarter-end reflects the combined effect of borrower repayment performance and charge-offs of loans in nonaccrual status. The higher level of nonaccrual loans at the two most recent quarter-ends as compared with June 30, 2016 reflects the migration of previously performing loans obtained in the acquisition of Hudson City Bancorp, Inc. ("Hudson City") that became over 90 days past due after June 30, 2016. Nonaccrual Hudson City-related residential real estate loans totaled $211 million, $113 million and $207 million at June 30, 2017, June 30, 2016 and March 31, 2017, respectively. Assets taken in foreclosure of defaulted loans were $105 million at June 30, 2017, compared with $172 million at June 30, 2016 and $119 million at March 31, 2017.

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 $1.01 billion at June 30, 2017, compared with $970 million and $1.00 billion at June 30, 2016 and March 31, 2017, respectively. The allowance expressed as a percentage of outstanding loans was 1.13% at June 30, 2017, compared with 1.10% at June 30, 2016 and 1.12% at March 31, 2017.

Asset Quality Metrics





































Change 2Q17 vs.


($ in millions)


2Q17



2Q16



1Q17



2Q16



1Q17























At end of quarter





















Nonaccrual loans


$

872



$

849



$

927




3

%



-6

%

Real estate and other foreclosed assets


$

105



$

172



$

119




-39

%



-12

%

Total nonperforming assets


$

977



$

1,021



$

1,046




-4

%



-7

%

Accruing loans past due 90 days or more (1)


$

265



$

298



$

280




-11

%



-5

%

Nonaccrual loans as % of loans outstanding



.98

%



.96

%



1.04

%






























Allowance for credit losses


$

1,008



$

970



$

1,001




4

%



1

%

Allowance for credit losses as % of loans outstanding



1.13

%



1.10

%



1.12

%






























For the period





















Provision for credit losses


$

52



$

32



$

55




63

%



-5

%

Net charge-offs


$

45



$

24



$

43




86

%



6

%

Net charge-offs as % of average loans (annualized)



.20

%



.11

%



.19

%









Noninterest Income and Expense. Noninterest income totaled $461 million in the second quarter of 2017, compared with $448 million in the year-earlier quarter and $447 million in the initial quarter of 2017. The rise in noninterest income in the recent quarter as compared with the earlier quarters reflected higher trust income. An increase in credit-related fees also contributed to the improvement as compared with the year-earlier quarter.

Noninterest Income





































Change 2Q17 vs.


($ in millions)


2Q17



2Q16



1Q17



2Q16



1Q17























Mortgage banking revenues


$

86



$

89



$

85




-4

%



2

%

Service charges on deposit accounts



106




104




104




2

%



2

%

Trust income



127




121




120




5

%



6

%

Brokerage services income



17




16




17




2

%



-4

%

Trading account and foreign exchange gains



8




13




10




-39

%



-17

%

Other revenues from operations



117




105




111




12

%



6

%

Total other income


$

461



$

448



$

447




3

%



3

%

Noninterest expense in the second quarter of 2017 totaled $751 million, compared with $750 million in the year-earlier quarter and $788 million in the initial 2017 quarter. Included in such amounts are expenses considered to be nonoperating in nature consisting of amortization of core deposit and other intangible assets and merger-related expenses. Exclusive of those expenses, noninterest operating expenses were $743 million in the recent quarter, $726 million in the second quarter of 2016 and $779 million in the first quarter of 2017. The most significant factors for the higher level of operating expenses in the recent quarter as compared with the second quarter of 2016 were increased legal costs, FDIC assessments, and outside data processing and software expenses. As compared with the first quarter of 2017, the recent quarter's lower level of operating expenses was due, in large part, to a decline in salaries and employee benefits, including stock-based compensation, which were seasonally higher in the initial 2017 period. That decline was partially offset by higher legal and other professional services costs in 2017's second quarter.

Noninterest Expense





































Change 2Q17 vs.


($ in millions)


2Q17



2Q16



1Q17



2Q16



1Q17























Salaries and employee benefits


$

399



$

399



$

450







-11

%

Equipment and net occupancy



74




76




74




-3

%



-1

%

Outside data processing and software



45




43




44




5

%



1

%

FDIC assessments



25




22




29




13

%



-12

%

Advertising and marketing



16




23




16




-28

%



1

%

Printing, postage and supplies



9




10




10




-10

%



-8

%

Amortization of core deposit and other intangible assets



8




11




9




-29

%



-4

%

Other costs of operations



175




166




156




5

%



12

%

Total other expense


$

751



$

750



$

788







-5

%






















Memo: Merger-related expenses included in above





$

13







-100

%




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 improved to 52.7% in the recent quarter from 55.1% in the second quarter of 2016 and 56.9% in the first quarter of 2017.

Balance Sheet. M&T had total assets of $120.9 billion at June 30, 2017, compared with $123.8 billion at June 30, 2016 and $123.2 billion at March 31, 2017. Loans and leases, net of unearned discount, totaled $89.1 billion at the recent quarter-end, modestly changed from $88.5 billion at June 30, 2016 and $89.3 billion at March 31, 2017. Investment securities were $15.8 billion, $15.0 billion and $16.0 billion at June 30, 2017, June 30, 2016, and March 31, 2017, respectively. Total deposits were $93.5 billion at June 30, 2017, compared with $94.7 billion a year earlier and $97.0 billion at March 31, 2017.

Reflecting the impact of repurchases of M&T's common stock, total shareholders' equity declined to $16.3 billion at June 30, 2017 from $16.5 billion a year earlier, representing 13.47% and 13.30%, respectively, of total assets. Total shareholders' equity was $16.2 billion, or 13.16% of total assets, at March 31, 2017. Common shareholders' equity was $15.1 billion, or $98.66 per share, at June 30, 2017, compared with $15.2 billion, or $96.49 per share, at June 30, 2016 and $15.0 billion, or $97.40 per share, at March 31, 2017. Tangible equity per common share rose to .20 at the recent quarter-end from $66.95 a year earlier and $67.16 at March 31, 2017. 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 10.80% as of June 30, 2017.

In accordance with its 2016 capital plan, M&T repurchased 1,409,807 shares of common stock during the recent quarter at an average cost per share of $159.52, for a total cost of $225 million. In the aggregate, during the first six months of 2017, M&T repurchased 4,643,003 shares of common stock under that plan at a total cost of $757 million.

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# 40703727. The conference call will be webcast live through M&T's website at http://ir.mandtbank.com/events.cfm. A replay of the call will be available through Wednesday, July 26, 2017 by calling (800)585-8367, or (404)537-3406 for international participants, and by making reference to ID# 40703727. The event will also be archived and available by 7:00 p.m. today on M&T's website at http://ir.mandtbank.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...


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