OREANDA-NEWS. M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended March 31, 2015.

GAAP Results of Operations. Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the initial quarter of 2015 were \$1.65, up from \$1.61 in the first quarter of 2014.  GAAP-basis net income in the recent quarter was \$242 million, 6% higher than the \$229 million earned in the year-earlier quarter.  Net income for the first three months of 2015 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.02% and 7.99%, respectively, compared with 1.07% and 8.22%, respectively, in the corresponding 2014 period.  

Commenting on M&T's results for the recent quarter, Rene F. Jones, Vice Chairman and Chief Financial Officer, noted, "Significantly higher mortgage banking revenues in the recent quarter helped M&T record a 6% increase in net income from the first quarter of last year. Higher origination activity led to improvement in both residential and commercial mortgage banking revenues.  Credit quality remained strong during the quarter with net charge-offs continuing to be well below M&T's historical norm.  We also contained expense growth while making significant investments in our overall risk management infrastructure.  Capital levels continued to strengthen and during the quarter we received a non-objection to our capital plan and proposed capital actions from the Federal Reserve."

Diluted earnings per common share and net income in the fourth quarter of 2014 were \$1.92 and \$278 million, respectively.  The annualized returns on average assets and average common shareholders’ equity in the final 2014 quarter were 1.12% and 9.10%, respectively. 

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 gains and expenses associated with merging acquired operations into M&T, since such items 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.  

Diluted net operating earnings per common share were \$1.68 in the first three months of 2015, compared with \$1.66 and \$1.95 in the first and fourth quarters of 2014, respectively.  Net operating income for the first quarter of 2015 was \$246 million, compared with \$235 million and \$282 million in the quarters ended March 31 and December 31, 2014, respectively. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.08% and 11.90%, respectively, in the first quarter of 2015. The comparable returns were 1.15% and 12.76% in the year-earlier quarter and 1.18% and 13.55% in the fourth quarter of 2014.

Taxable-equivalent Net Interest Income. Taxable-equivalent net interest income totaled \$665 million in the initial quarter of 2015, up from \$662 million in the year-earlier period. Growth in average earning assets, reflecting increases of \$4.1 billion in average investment securities, \$2.8 billion or 4% in average loan balances and \$2.0 billion in average balances of interest-bearing deposits at banks, was largely offset by a 35 basis point (hundredths of one percent) narrowing of the net interest margin to 3.17% in the recent quarter from 3.52% in the first quarter of 2014. The growth in investment securities resulted from continued progress made in response to regulatory liquidity requirements that will become effective for M&T in January 2016. The growth in the loan portfolio reflects higher average balances of commercial loans, commercial real estate loans and consumer loans. The decline in the net interest margin was largely attributable to the higher balances of investment securities and interest-bearing deposits at banks that have substantially lower yields than loans. Net interest income and the net interest margin in the fourth quarter of 2014 were \$688 million and 3.10%, respectively. The recent quarter’s decline in net interest income as compared with the immediately preceding quarter resulted largely from two less days in 2015’s initial quarter, lower average balances of interest-bearing deposits at banks and the net impact of actions taken in response to the liquidity requirements that take effect in 2016. The 7 basis point improvement in net interest margin as compared with the final 2014 quarter was largely due to the lower average balances of interest-bearing deposits at banks, partially offset by higher average balances of investment securities and long-term borrowings.

Provision for Credit Losses/Asset Quality. The provision for credit losses was \$38 million in the first quarter of 2015, compared with \$32 million and \$33 million in the first and fourth quarters of 2014, respectively.  Net charge-offs of loans during the recent quarter aggregated \$36 million, compared with \$32 million in each of the first and fourth quarters of 2014.  Expressed as an annualized percentage of average loans outstanding, net charge-offs were .22% during the first three months of 2015, compared with .20% and .19% in the initial and final quarters of 2014, respectively.  

Loans classified as nonaccrual totaled \$791 million or 1.18% of total loans outstanding at March 31, 2015, improved from \$891 million or 1.39% a year earlier and \$799 million or 1.20% at December 31, 2014. Assets taken in foreclosure of defaulted loans totaled \$63 million at March 31, 2015, compared with \$59 million and \$64 million at March 31, 2014 and December 31, 2014, respectively.  

Allowance for Credit Losses. M&T regularly performs detailed analyses of individual borrowers and portfolios for purposes of determining the allowance for credit losses.  As a result of those analyses, the allowance totaled \$921 million or 1.37% of loans outstanding at March 31, 2015, compared with \$917 million or 1.43% a year earlier and \$920 million or 1.38% at December 31, 2014.  

Noninterest Income and Expense. Noninterest income totaled \$440 million in the recent quarter, \$420 million in the year-earlier quarter and \$452 million in the fourth quarter of 2014. The improvement as compared with the initial 2014 quarter resulted from higher residential and commercial mortgage banking revenues while the decline as compared with the final quarter of 2014 reflects a decrease in loan syndication fees and seasonally lower trust income and service charges on deposit accounts, partially offset by higher residential mortgage banking revenues.

Effective January 1, 2015, M&T adopted amended guidance from the Financial Accounting Standards Board for investments in qualified affordable housing projects under which the initial cost of such investments is amortized to income tax expense in proportion to the tax benefits received. The adoption of this accounting guidance did not have a significant effect on M&T’s financial position or results of operations, but did result in the restatement of the consolidated financial statements for 2014 and earlier years to remove net costs associated with qualified affordable housing projects from noninterest expense and include the amortization of the investments in income tax expense.  

Reflecting the application of the new accounting guidance, noninterest expense in the first quarter of 2015 aggregated \$686 million, compared with \$690 million and \$666 million in the first and fourth quarters of 2014, respectively.  Included in such amounts are expenses considered to be nonoperating in nature consisting of amortization of core deposit and other intangible assets.  Exclusive of those expenses, noninterest operating expenses were \$680 million in each of the first quarters of 2015 and 2014 and \$659 million in the fourth quarter of 2014. Operating expenses in the recent quarter as compared with the year-earlier period reflected lower costs for professional services, FDIC assessments and equipment and net occupancy expenses that were offset by higher salaries and employee benefits expenses. The rise in operating expenses from the fourth quarter of 2014 to the initial 2015 quarter was predominantly the result of seasonally higher stock-based compensation and employee benefits expenses offset, in part, by lower professional services costs.

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 61.5% in the first quarter of 2015, 62.8% in the year-earlier quarter and 57.8% in the fourth quarter of 2014.

Balance Sheet. M&T had total assets of \$98.4 billion at March 31, 2015, up 11% from \$88.5 billion a year earlier. Investment securities at March 31, 2015 were \$14.4 billion, up \$4.0 billion or 39% from March 31, 2014.  Loans and leases, net of unearned discount, rose 5% to \$67.1 billion at March 31, 2015 from \$64.1 billion a year earlier.  Total deposits were \$73.6 billion at the recent quarter-end, up 7% from \$68.7 billion at March 31, 2014.  

Total shareholders' equity rose 5% to \$12.5 billion at March 31, 2015 from \$11.9 billion at March 31, 2014, representing 12.73% and 13.43%, respectively, of total assets. Common shareholders' equity was \$11.3 billion, or \$84.95 per share at March 31, 2015, up from \$10.7 billion, or \$81.05 per share, a year earlier.    
 

Tangible equity per common share rose 8% to \$58.29 at March 31, 2015 from \$53.92 a year earlier.  Common shareholders' equity per share and tangible equity per common share were \$83.88 and \$57.06, respectively, at December 31, 2014.  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 the transitional capital rules that became effective for M&T on January 1, 2015 was approximately 9.78% as of March 31, 2015.  M&T's estimated   Tier 1 common ratio under previously effective regulatory capital rules would have been 9.98% at March 31, 2015, compared with 9.45% and 9.83% at March 31, 2014 and December 31, 2014, respectively.