M&T Bank 10-Q 2022-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2022

or

Commission File Number 1-9861

M&T BANK CORPORATION

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code:

(716) 635-4000

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Number of shares of the registrant's Common Stock, $0.50 par value, outstanding as of the close of business on April 29, 2022: 179,417,450 shares.

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M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended March 31, 2022

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PART I. FINANCIAL INFORMATION

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

See accompanying notes to financial statements.

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M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

See accompanying notes to financial statements.

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M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

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Overview

Net income for M&T Bank Corporation (“M&T”) in the first quarter of 2022 was $362 million, compared with $447 million in the corresponding quarter of 2021 and $458 million in the fourth quarter of 2021. Diluted and basic earnings per common share were $2.62 and $2.63 in the recent quarter, respectively, and each were $3.33 in the first quarter of 2021 and $3.37 in the fourth quarter of 2021. The after-tax impact of merger-related expenses was $13 million ($17 million pre-tax), or $.10 of basic and diluted earnings per common share in the recent quarter, $8 million ($10 million pre-tax) or $.06 of basic and diluted earnings per common share in the first quarter of 2021 and $16 million ($21 million pre-tax) or $.12 of basic and diluted earnings per common share in the fourth quarter of 2021. Such expenses were associated with M&T’s acquisition of People’s United Financial, Inc. (“People’s United”), headquartered in Bridgeport, Connecticut, and consisted predominantly of professional services, including legal expenses and technology-related and other activities to prepare for planned integration efforts associated with the merger.

The annualized rate of return on average total assets for M&T and its consolidated subsidiaries (“the Company”) in 2022’s first quarter was .97%, compared with 1.22% in the year-earlier quarter and 1.15% in the fourth quarter of 2021. The annualized rate of return on average common shareholders’ equity was 8.55% in the recent quarter, 11.57% in the first quarter of 2021 and 10.91% in the fourth 2021 quarter.

On March 4, 2022, M&T received Federal Reserve approval to acquire People’s United and on April 1, 2022 closed the acquisition. Pursuant to the terms of the merger agreement, People’s United shareholders received consideration valued at .118 of an M&T common share in exchange for each common share of People’s United. Additionally, People’s United outstanding preferred stock was converted into shares of Series H preferred stock of M&T. The purchase price totaled approximately $8.4 billion (with the price based on M&T’s closing price of $164.66 per share as of April 1, 2022). Excluding the impact of acquisition accounting adjustments, as of March 31, 2022 People’s United reported approximately $63.0 billion of assets, including $36.3 billion of loans and $11.6 billion of investment securities, approximately $55.5 billion of liabilities, including $53.0 billion of deposits, and approximately $7.5 billion of stockholders’ equity, including $244 million of preferred stock. M&T anticipates completing preliminary acquisition accounting adjustments during the second quarter of 2022 and transferring financial records of People’s United to M&T’s core operating systems by the end of the third quarter.

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 (when realized) and expenses (when incurred) associated with merging acquired operations into the Company, 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.

Net operating income totaled $376 million in the first quarter of 2022, compared with $457 million in the year-earlier quarter. Diluted net operating earnings per common share in the first quarters of 2022 and 2021 were $2.73 and $3.41, respectively. Net operating income and diluted net operating earnings per common share were $475 million and $3.50, respectively, in the fourth quarter of 2021.

Net operating income in the recent quarter expressed as an annualized rate of return on average tangible assets was 1.04%, compared with 1.29% in the first quarter of 2021 and 1.23% in 2021’s fourth quarter. Net operating income represented an annualized return on average tangible common equity of 12.44% in the first quarter of 2022, 17.05% in the year-earlier quarter and 15.98% in the fourth quarter of 2021.

Reconciliations of GAAP amounts with corresponding non-GAAP amounts are provided in table 2.

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Taxable-equivalent Net Interest Income

Taxable-equivalent net interest income was $907 million in the first quarter of 2022, compared with $985 million in the first quarter of 2021. That decrease reflects the impact of a 32 basis point (hundredths of one percent) narrowing of the net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earnings assets, to 2.65% in the recent quarter from 2.97% in the year-earlier quarter that resulted from lower yields on loans and a $7.2 billion decline in average loans outstanding. The impacts of those factors were mitigated, in part, by higher average balances of deposits at the Federal Reserve Bank of New York and investment securities. Taxable-equivalent net interest income in the recent quarter declined $30 million from the fourth quarter of 2021 reflecting the fewer number of days in the first quarter of 2022 and a $1.1 billion reduction in average loans outstanding. The net interest margin in the recent quarter increased by 7 basis points from 2.58% in the prior quarter.

Average loans and leases totaled $92.2 billion in the first quarter of 2022, down $7.2 billion or 7% from $99.4 billion in the similar quarter of 2021. Commercial loans and leases averaged $23.3 billion in the first quarter of 2022, $4.4 billion or 16% lower than in the year-earlier quarter. That decline was largely the result of decreased average balances of Paycheck Protection Program (“PPP”) loans, reflecting loan repayments by the Small Business Administration. PPP loans averaged $870 million in the first quarter of 2022, compared with $5.7 billion in the first quarter of 2021. Average commercial real estate loans were $35.0 billion in the recent quarter, down $2.7 billion, or 7%, from $37.6 billion in the corresponding quarter of 2021. Included in average commercial real estate loans in the first quarters of 2022 and 2021 were loans held for sale of $234 million and $258 million, respectively. Average residential real estate loans declined $1.5 billion or 9% to $15.9 billion in the first quarter of 2022 from $17.4 billion in the year-earlier quarter. Included in average residential real estate loans were loans held for sale of $410 million in the recent quarter and $663 million in the first quarter of 2021. Consumer loans averaged $18.0 billion in the first quarter of 2022, up $1.4 billion, or 8%, from $16.6 billion in the year-earlier quarter, due to growth in average recreational finance loans (consisting predominantly of loans secured by recreational vehicles and boats) and average automobile loans that was partially offset by declines in balances of home equity loans and lines of credit.

Average loan and lease balances in the first quarter of 2022 decreased $1.1 billion from $93.3 billion in the fourth quarter of 2021. Commercial loan and lease average balances in the recent quarter increased $976 million from fourth quarter of 2021, despite a reduction in average balances of PPP loans. The average balance of PPP loans included in commercial loans in 2021’s fourth quarter was $1.65 billion. Reflecting customer repayments, average commercial real estate loans in the first quarter of 2022 declined $1.8 billion from $36.7 billion in the fourth quarter of 2021. Commercial real estate loans held for sale averaged $535 million in the fourth quarter of 2021. Average balances of residential real estate loans in the recently completed quarter declined $420 millio

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Incorporated by reference to the discussion contained under the caption “Taxable-equivalent Net Interest Income” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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(a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the effectiveness of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), René F. Jones, Chairman of the Board and Chief Executive Officer, and Darren J. King, Senior Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were effective as of March 31, 2022.

(b) Changes in internal control over financial reporting. M&T regularly assesses the adequacy of its internal control over financial reporting and enhances its controls in response to internal control assessments and internal and external audit and regulatory recommendations. No changes in internal control over financial reporting have been identified in connection with the evaluation of disclosure controls and procedures during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings. | --- | --- |

M&T and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings and other matters in which claims for monetary damages are asserted. On an on-going basis management, after consultation with legal counsel, assesses the Company’s liabilities and contingencies in connection with such proceedings. For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent the pending or threatened litigation could result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond the existing recorded liability, was between $0 and $25 million at March 31, 2022. Although the Company does not believe that the outcome of pending legal matters will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

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There have been no material changes in risk factors relating to M&T to those disclosed in response to Item 1A. to Part I of Form 10-K for the year ended December 31, 2021.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. | --- | --- |

(a) – (b) Not applicable.

(c)

Item 3. Defaults Upon Senior Securities. | --- | --- |

(Not applicable.)

Item 4. Mine Safety Disclosures. | --- | --- |

(None.)

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(None.)

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The following exhibits are filed as a part of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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