17.07.2015, 17:47
M&T Bank Corporation Announces Second Quarter Results
OREANDA-NEWS. M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended June 30, 2015.
GAAP Results of Operations. Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the second quarter of 2015 were $1.98, equal to the year-earlier period and 20% higher than the $1.65 recorded in the first quarter of 2015. GAAP-basis net income in the recently completed quarter totaled $287 million, up from $284 million and $242 million in the second quarter of 2014 and the initial 2015 quarter, respectively. GAAP-basis net income for the second quarter of 2015 expressed as an annualized rate of return on average assets and average common shareholders’ equity was 1.18% and 9.37%, respectively, compared with 1.27% and 9.79%, respectively, in the year-earlier quarter and 1.02% and 7.99%, respectively, in the first quarter of 2015.
The recent quarter’s results reflect two noteworthy items. In early April 2015, M&T sold the trade processing business within the retirement services division of its Institutional Client Services business. That sale resulted in an after-tax gain of approximately $23 million ($45 million pre-tax). Also during the second quarter of 2015, M&T made $40 million of tax-deductible cash contributions to The M&T Charitable Foundation. The after-tax impact of those two items lowered net income and diluted earnings per common share during the recent quarter by approximately $1 million and $.01, respectively.
Commenting on the recent quarter’s performance, Ren? F. Jones, Vice Chairman and Chief Financial Officer, noted, “M&T’s results for the second quarter reflect strong activity in our commercial loan portfolios, as we experienced 10% annualized growth in balances and significantly higher loan syndication fees as compared with the first quarter. Charge-offs remained at historically low levels and expenses during the quarter were again well-contained. We were pleased to make a significant contribution to The M&T Charitable Foundation, so that it may continue to support the communities we serve. M&T’s performance in the second quarter was indicative of what we do best – focusing on prudent banking practices that result in internal capital generation while striving to exceed our customers’ needs.”
For the six-month period ended June 30, 2015, diluted earnings per common share were $3.63, up from $3.59 in the year-earlier period. GAAP-basis net income for the first half of 2015 totaled $528 million, 3% higher than $513 million in the corresponding 2014 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, 2015 was 1.10% and 8.69%, respectively, compared with 1.17% and 9.02%, respectively, in the similar 2014 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 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 $2.01 in the recent quarter, compared with $2.02 and $1.68 in the year-earlier quarter and the first quarter of 2015, respectively. Net operating income during each of the second quarters of 2015 and 2014 was $290 million, compared with $246 million in the initial 2015 quarter. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.24% and 13.76%, respectively, in the second quarter of 2015. The comparable returns were 1.35% and 14.92% in the second quarter of 2014 and 1.08% and 11.90% in the first quarter of 2015.
Diluted net operating earnings per common share in the first six months of 2015 were $3.69, compared with $3.68 in the first half of 2014. Net operating income during the six-month period ended June 30, 2015 was $536 million, 2% higher than $525 million in the similar 2014 period. Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders’ equity was 1.16% and 12.85%, respectively, in the first half of 2015, compared with 1.25% and 13.86%, respectively, in the first six months of 2014.
Taxable-equivalent Net Interest Income. Net interest income expressed on a taxable-equivalent basis aggregated $689 million in the second quarter of 2015, up 4% from $665 million in the first quarter of 2015. That improvement reflects a $2.1 billion increase in average earning assets, including a $1.1 billion increase in average loans and an $819 million rise in average investment securities resulting from continued purchases of mortgage-backed securities. The net interest margin during each of the first two quarters of 2015 was 3.17%. Taxable-equivalent net interest income in the recent quarter was up 2% from $675 million in the year-earlier period. The effect of growth in average earning assets, predominantly due to increases of $3.2 billion in average investment securities and $3.3 billion in average loans and leases, was partially offset by a 23 basis point narrowing of the net interest margin in the recent quarter from 3.40% in the second quarter of 2014. The increases in investment securities reflect continued progress made in response to regulatory liquidity requirements that will become effective for M&T in January 2016.
Provision for Credit Losses/Asset Quality. The provision for credit losses was $30 million in each of the second quarters of 2015 and 2014, compared with $38 million in the first quarter of 2015. Net charge-offs of loans were $21 million during the recent quarter, improved from $29 million in the second quarter of 2014 and $36 million in the first quarter of 2015. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .13% and .18% in the second quarters of 2015 and 2014, respectively, and .22% in the first quarter of 2015.
Loans classified as nonaccrual totaled $797 million, or 1.17% of total loans outstanding at June 30, 2015, compared with $880 million or 1.36% a year earlier and $791 million or 1.18% at March 31, 2015. Assets taken in foreclosure of defaulted loans were $64 million at June 30, 2015, compared with $60 million at June 30, 2014 and $63 million at March 31, 2015.
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 totaled $930 million or 1.36% of loans outstanding at June 30, 2015, compared with $918 million or 1.42% of loans at June 30, 2014 and $921 million or 1.37% of loans at March 31, 2015.
Noninterest Income and Expense. Noninterest income aggregated $497 million in the second quarter of 2015, up from $456 million in the year-earlier quarter and $440 million in the first quarter of 2015. Reflected in the recent quarter’s total was the $45 million pre-tax gain realized from the sale of the trade processing business noted earlier. Revenues from the divested business, which had been recorded as trust income, aggregated $10 million in the year-ago quarter and $9 million in the first quarter of 2015. After considering the impact of the recent quarter gain and the revenues recorded in prior quarters related to the sold business, noninterest income in the recent quarter was improved from the second quarter of 2014 and from the initial 2015 quarter. As compared with the second quarter of 2014, higher mortgage banking revenues and loan syndication fees contributed to that improvement. On that same basis, the rise in noninterest income from the first quarter of 2015 was largely due to higher loan syndication fees, trust income and fees for providing deposit account services.
Noninterest expense in the second quarter of 2015 totaled $697 million, up from $668 million in the year-earlier quarter and $686 million in the first quarter of 2015. 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 $691 million in the recent quarter, compared with $658 million in the second quarter of 2014 and $680 million in 2015's initial quarter. Reflected in operating expenses in the recent quarter was the aforementioned higher level of contribution to The M&T Charitable Foundation.
Without the impact of charitable contributions, noninterest operating expenses in the recent quarter declined from the year-earlier quarter. Higher salaries and employee benefits expenses were more than offset by lower expenses for professional services, FDIC assessments and litigation-related costs. On that same basis, as compared with the initial 2015 quarter, 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 2015 period. Also contributing to the decline were reduced costs for professional services that were mitigated by higher legal fees. The lower operating expense level in the recent quarter was reflective of the noted sale of the trade processing business.
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 58.2% in each of the second quarters of 2015 and 2014, compared with 61.5% in the first quarter of 2015. Excluding the impact of the two notable items in the recent quarter, the efficiency ratio was 57.0%.
Balance Sheet. M&T had total assets of $97.1 billion at June 30, 2015, up 7% from $90.8 billion a year earlier. Investment securities were $14.8 billion at June 30, 2015, up $2.6 billion or 22% from June 30, 2014. Loans and leases, net of unearned discount, totaled $68.1 billion at the recent quarter-end, up $3.4 billion or 5% from $64.7 billion at June 30, 2014. Total deposits rose 4% to $72.6 billion at June 30, 2015 from $69.8 billion a year earlier.
Total shareholders' equity grew 4% to $12.7 billion at June 30, 2015 from $12.2 billion a year earlier, representing 13.05% and 13.40%, respectively, of total assets. Common shareholders' equity was $11.4 billion, or $85.90 per share, at June 30, 2015, up from $10.9 billion, or $82.86 per share, at June 30, 2014. Tangible equity per common share rose 6% to $59.39 at the recent quarter-end from $55.89 a year earlier. Common shareholders' equity perd services are provided by M&T's Wilmington Trust-affiliated companies and by M&T Bank.
GAAP Results of Operations. Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") for the second quarter of 2015 were $1.98, equal to the year-earlier period and 20% higher than the $1.65 recorded in the first quarter of 2015. GAAP-basis net income in the recently completed quarter totaled $287 million, up from $284 million and $242 million in the second quarter of 2014 and the initial 2015 quarter, respectively. GAAP-basis net income for the second quarter of 2015 expressed as an annualized rate of return on average assets and average common shareholders’ equity was 1.18% and 9.37%, respectively, compared with 1.27% and 9.79%, respectively, in the year-earlier quarter and 1.02% and 7.99%, respectively, in the first quarter of 2015.
The recent quarter’s results reflect two noteworthy items. In early April 2015, M&T sold the trade processing business within the retirement services division of its Institutional Client Services business. That sale resulted in an after-tax gain of approximately $23 million ($45 million pre-tax). Also during the second quarter of 2015, M&T made $40 million of tax-deductible cash contributions to The M&T Charitable Foundation. The after-tax impact of those two items lowered net income and diluted earnings per common share during the recent quarter by approximately $1 million and $.01, respectively.
Commenting on the recent quarter’s performance, Ren? F. Jones, Vice Chairman and Chief Financial Officer, noted, “M&T’s results for the second quarter reflect strong activity in our commercial loan portfolios, as we experienced 10% annualized growth in balances and significantly higher loan syndication fees as compared with the first quarter. Charge-offs remained at historically low levels and expenses during the quarter were again well-contained. We were pleased to make a significant contribution to The M&T Charitable Foundation, so that it may continue to support the communities we serve. M&T’s performance in the second quarter was indicative of what we do best – focusing on prudent banking practices that result in internal capital generation while striving to exceed our customers’ needs.”
For the six-month period ended June 30, 2015, diluted earnings per common share were $3.63, up from $3.59 in the year-earlier period. GAAP-basis net income for the first half of 2015 totaled $528 million, 3% higher than $513 million in the corresponding 2014 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, 2015 was 1.10% and 8.69%, respectively, compared with 1.17% and 9.02%, respectively, in the similar 2014 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 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 $2.01 in the recent quarter, compared with $2.02 and $1.68 in the year-earlier quarter and the first quarter of 2015, respectively. Net operating income during each of the second quarters of 2015 and 2014 was $290 million, compared with $246 million in the initial 2015 quarter. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income was 1.24% and 13.76%, respectively, in the second quarter of 2015. The comparable returns were 1.35% and 14.92% in the second quarter of 2014 and 1.08% and 11.90% in the first quarter of 2015.
Diluted net operating earnings per common share in the first six months of 2015 were $3.69, compared with $3.68 in the first half of 2014. Net operating income during the six-month period ended June 30, 2015 was $536 million, 2% higher than $525 million in the similar 2014 period. Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders’ equity was 1.16% and 12.85%, respectively, in the first half of 2015, compared with 1.25% and 13.86%, respectively, in the first six months of 2014.
Taxable-equivalent Net Interest Income. Net interest income expressed on a taxable-equivalent basis aggregated $689 million in the second quarter of 2015, up 4% from $665 million in the first quarter of 2015. That improvement reflects a $2.1 billion increase in average earning assets, including a $1.1 billion increase in average loans and an $819 million rise in average investment securities resulting from continued purchases of mortgage-backed securities. The net interest margin during each of the first two quarters of 2015 was 3.17%. Taxable-equivalent net interest income in the recent quarter was up 2% from $675 million in the year-earlier period. The effect of growth in average earning assets, predominantly due to increases of $3.2 billion in average investment securities and $3.3 billion in average loans and leases, was partially offset by a 23 basis point narrowing of the net interest margin in the recent quarter from 3.40% in the second quarter of 2014. The increases in investment securities reflect continued progress made in response to regulatory liquidity requirements that will become effective for M&T in January 2016.
Provision for Credit Losses/Asset Quality. The provision for credit losses was $30 million in each of the second quarters of 2015 and 2014, compared with $38 million in the first quarter of 2015. Net charge-offs of loans were $21 million during the recent quarter, improved from $29 million in the second quarter of 2014 and $36 million in the first quarter of 2015. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .13% and .18% in the second quarters of 2015 and 2014, respectively, and .22% in the first quarter of 2015.
Loans classified as nonaccrual totaled $797 million, or 1.17% of total loans outstanding at June 30, 2015, compared with $880 million or 1.36% a year earlier and $791 million or 1.18% at March 31, 2015. Assets taken in foreclosure of defaulted loans were $64 million at June 30, 2015, compared with $60 million at June 30, 2014 and $63 million at March 31, 2015.
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 totaled $930 million or 1.36% of loans outstanding at June 30, 2015, compared with $918 million or 1.42% of loans at June 30, 2014 and $921 million or 1.37% of loans at March 31, 2015.
Noninterest Income and Expense. Noninterest income aggregated $497 million in the second quarter of 2015, up from $456 million in the year-earlier quarter and $440 million in the first quarter of 2015. Reflected in the recent quarter’s total was the $45 million pre-tax gain realized from the sale of the trade processing business noted earlier. Revenues from the divested business, which had been recorded as trust income, aggregated $10 million in the year-ago quarter and $9 million in the first quarter of 2015. After considering the impact of the recent quarter gain and the revenues recorded in prior quarters related to the sold business, noninterest income in the recent quarter was improved from the second quarter of 2014 and from the initial 2015 quarter. As compared with the second quarter of 2014, higher mortgage banking revenues and loan syndication fees contributed to that improvement. On that same basis, the rise in noninterest income from the first quarter of 2015 was largely due to higher loan syndication fees, trust income and fees for providing deposit account services.
Noninterest expense in the second quarter of 2015 totaled $697 million, up from $668 million in the year-earlier quarter and $686 million in the first quarter of 2015. 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 $691 million in the recent quarter, compared with $658 million in the second quarter of 2014 and $680 million in 2015's initial quarter. Reflected in operating expenses in the recent quarter was the aforementioned higher level of contribution to The M&T Charitable Foundation.
Without the impact of charitable contributions, noninterest operating expenses in the recent quarter declined from the year-earlier quarter. Higher salaries and employee benefits expenses were more than offset by lower expenses for professional services, FDIC assessments and litigation-related costs. On that same basis, as compared with the initial 2015 quarter, 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 2015 period. Also contributing to the decline were reduced costs for professional services that were mitigated by higher legal fees. The lower operating expense level in the recent quarter was reflective of the noted sale of the trade processing business.
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 58.2% in each of the second quarters of 2015 and 2014, compared with 61.5% in the first quarter of 2015. Excluding the impact of the two notable items in the recent quarter, the efficiency ratio was 57.0%.
Balance Sheet. M&T had total assets of $97.1 billion at June 30, 2015, up 7% from $90.8 billion a year earlier. Investment securities were $14.8 billion at June 30, 2015, up $2.6 billion or 22% from June 30, 2014. Loans and leases, net of unearned discount, totaled $68.1 billion at the recent quarter-end, up $3.4 billion or 5% from $64.7 billion at June 30, 2014. Total deposits rose 4% to $72.6 billion at June 30, 2015 from $69.8 billion a year earlier.
Total shareholders' equity grew 4% to $12.7 billion at June 30, 2015 from $12.2 billion a year earlier, representing 13.05% and 13.40%, respectively, of total assets. Common shareholders' equity was $11.4 billion, or $85.90 per share, at June 30, 2015, up from $10.9 billion, or $82.86 per share, at June 30, 2014. Tangible equity per common share rose 6% to $59.39 at the recent quarter-end from $55.89 a year earlier. Common shareholders' equity perd services are provided by M&T's Wilmington Trust-affiliated companies and by M&T Bank.
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