M&T Bank 10-Q 2023-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 August 1, 2023: 165,948,636 shares.

- 1 -

M&T BANK CORPORATION

FORM 10-Q

For the Quarterly Period Ended June 30, 2023

- 2 -

PART I. FINANCIAL INFORMATION

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

See accompanying notes to financial statements.

- 3 -

M&T BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

Showing the first 8K of 227K characters. Open the full section

Overview

M&T Bank Corporation (“M&T”) and its consolidated subsidiaries ("the Company") recorded net income of $867 million in the second quarter of 2023, compared with $218 million in the corresponding quarter of 2022 and $702 million in the first quarter of 2023. Diluted and basic earnings per common share were $5.05 and $5.07, respectively, in the recent quarter, $1.08 each in the second quarter of 2022 and $4.01 and $4.03, respectively, in the first quarter of 2023. For the first six months of 2023 net income totaled $1.57 billion or $9.06 and $9.09 of diluted and basic earnings per common share, respectively, compared with $580 million or $3.45 and $3.47 of diluted and basic earnings per common share, respectively, in the similar 2022 period. The after-tax impact of merger-related expenses associated with M&T's acquisition of People's United Financial, Inc. ("People's United") for the three-month and six-month periods ended June 30, 2022 was $346 million ($465 million pre-tax) or $1.94 of diluted earnings per common share and $359 million ($482 million pre-tax) or $2.33 of diluted earnings per common share, respectively. Merger-related expenses incurred in 2022 and associated with the People's United acquisition generally consisted of professional services, temporary help fees and other costs associated with actual or planned conversions of systems and/or integration of operations and the introduction of M&T to its new customers, costs related to terminations of existing contractual arrangements to purchase various services, severance, travel costs, and, in the second quarter of 2022, an initial provision for credit losses on loans not deemed to be purchased credit deteriorated ("PCD") on the April 1, 2022 acquisition date of People's United. The Company did not incur any merger-related expenses in the first or second quarters of 2023.

Net income expressed as an annualized rate of return on average total assets for the Company in 2023's second quarter was 1.70%, compared with 0.42% in the year-earlier quarter and 1.40% in the first quarter of 2023. The annualized rate of return on average common shareholders’ equity was 14.27% in the recent quarter, compared with 3.21% in the second quarter of 2022 and 11.74% in the first quarter of 2023. During the six-month period ended June 30, 2023, the annualized rates of return on average assets and average common shareholders' equity were 1.55% and 13.02%, respectively, compared with .65% and 5.34%, respectively, in the first six months of 2022.

On April 1, 2022, M&T closed the acquisition of People's United resulting in the issuance of 50,325,004 common shares. 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. 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). Additionally, People’s United outstanding preferred stock was converted into new shares of Series H Preferred Stock of M&T.

The People's United transaction has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date. The Company recorded assets acquired of $64.2 billion, including $35.8 billion of loans and leases and $11.6 billion of investment securities, and liabilities assumed totaling $55.5 billion, including $53.0 billion of deposits. The transaction added $8.4 billion to M&T's common shareholders' equity and $261 million to preferred equity. In connection with the acquisition the Company recorded $3.9 billion of goodwill and $261 million of core deposit and other intangible assets. The acquisition of People's United formed a banking franchise with approximately $200 billion in assets serving communities in the Northeast and Mid-Atlantic from Maine to Virginia, including Washington, D.C.

In April 2023 M&T completed the divestiture of its Collective Investment Trust ("CIT") business to a private equity firm. The sale of this business resulted in a pre-tax gain of $225 million ($157 million after tax, or $0.94 of diluted earnings per common share) in the second quarter of 2023 results of operations. Prior to the sale, the operations of that business did not have a material impact on M&T's net income.

M&T repurchased 3,505,946 shares of its common stock at an average cost per share of $171.14 resulting in a total cost of $600 million in 2022's second quarter and 3,838,157 shares at an average cost per share of

- 50 -

$154.76 resulting in a total cost, including the share repurchase excise tax, of $600 million in the first quarter of 2023. No share repurchases occurred in the second quarter of 2023.

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 aggregated $879 million in the second quarter of 2023, compared with $578 million in the year-earlier quarter. Diluted net operating earnings per common share in the recent quarter and the corresponding 2022 quarter were $5.12 and $3.10, respectively. Net operating income and diluted net operating earnings per common share were $715 million and $4.09, respectively, in the first quarter of 2023. For the first six months of 2023, net operating income and diluted net operating earnings per common share were $1.59 billion and $9.21, respectively, compared with $954 million and $5.88, respectively, in the first half of 2022.

Expressed as an annualized rate of return on average tangible assets, net operating income in the recent quarter was 1.80%, compared with 1.16% in the second quarter of 2022 and 1.49% in 2023’s first quarter. Net operating income represented an annualized return on average tangible common equity of 22.73% in the second quarter of 2023, 14.41% in the year-earlier quarter and 19.00% in the first quarter of 2023. For the first half of 2023, net operating income represented an annualized return on average tangible assets and average tangible common shareholders' equity of 1.65% and 20.90%, respectively, compared with 1.11% and 13.57%, respectively, in the corresponding 2022 period.

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

Taxable-equivalent Net Interest Income

Net interest income expressed on a taxable-equivalent basis was $1.81 billion in the second quarter of 2023 increased from $1.42 billion recorded in the year-earlier quarter. That increase reflects a 90 basis point (hundredths of one percent) expansion of the net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, to 3.91% in the recent quarter from 3.01% in the year-earlier quarter. The increased net interest margin was influenced by a rising interest rate environment resulting from actions taken by the Federal Reserve to mitigate inflationary pressures on the U.S. economy. The Federal Reserve raised its target Federal funds rate through multiple hikes totaling 5.0% from March 2022 through June 2023, which led to higher yields on loans, deposits at the Fe

Showing the first 8K of 210K characters. Open the full section

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.”

(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 Daryl N. Bible, Senior Executive Vice President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were effective as of June 30, 2023.

(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 June 30, 2023 that have materially affected, or are reasonably likely to materially affect, M&T’s internal control over financial reporting.

- 89 -

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 as of June 30, 2023. 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.

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, 2022.

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

(a) – (b) Not applicable.

(c)

(1)

The total number of shares purchased during the periods indicated includes shares purchased as part of publicly announced programs and/or shares deemed to have been received from employees who exercised stock options by attesting to previously acquired common shares in satisfaction of the exercise price or shares received from employees upon the vesting of restricted stock awards in satisfaction of applicable tax withholding obligations, as is permitted under M&T’s stock-based compensation plans.

(2)

In July 2022, M&T's Board of Directors authorized a program under which $3.0 billion of common shares may be repurchased with the exact number, timing, price and terms of such repurchases to be determined at the discretion of management and subject to all regulatory limitations.

Item 3. Defaults Upon Senior Securities.

(None.)

Item 4. Mine Safety Disclosures.

(Not applicable.)

(a) – (b) Not applicable.

(c) Certain of our officers or directors have made elections to participate in, and are participating in, our tax-qualified 401(k) plan and nonqualified deferred compensation plans, or have made, and may from time to time make,

- 90 -

elections to reinvest dividends in M&T Bank Corporation common stock, or have shares withheld to cover withholding taxes upon the vesting of equity awards or to pay the exercise price of options, each of which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K).

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

- 91 -

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.

- 92 -