PR Newswire | Oct 22, 2020 06:39AM EDT

10/22 05:37 CDT

M&T Bank Corporation Announces Third Quarter Results BUFFALO, N.Y., Oct. 22, 2020

BUFFALO, N.Y., Oct. 22, 2020 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended September 30, 2020.

GAAP Results of Operations. Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") were $2.75 in the third quarter of 2020, compared with $3.47 in the year-earlier quarter and $1.74 in the second quarter of 2020. GAAP-basis net income was $372 million in the recent quarter, $480 million in the third quarter of 2019 and $241 million in the second 2020 quarter. GAAP-basis net income in the third quarter of 2020 expressed as an annualized rate of return on average assets and average common shareholders' equity was 1.06% and 9.53%, respectively, compared with 1.58% and 12.73%, respectively, in the similar 2019 period and .71% and 6.13%, respectively, in the second quarter of 2020.

Darren J. King, Executive Vice President and Chief Financial Officer, commented on M&T's third quarter results, "Our results for the recent quarter reflect an uptick in economic activity across large portions of our customer base that contributed significantly to higher transaction levels and robust mortgage banking revenues. Coupled with well-controlled expenses that were in line with our expectations and prudent loan loss provisioning, M&T remains well-positioned as we enter the final quarter of 2020."

Earnings Highlights

Change 3Q20 vs.

($ in millions, except per share data) 3Q20 3Q19 2Q20 3Q19 2Q20

Net income $ 372 $ 480 $ 241 -22 % 54 %

Net income available to common shareholders ? diluted $ 353 $ 461 $ 223 -23 % 58 %

Diluted earnings per common share $ 2.75 $ 3.47 $ 1.74 -21 % 58 %

Annualized return on average assets 1.06 % 1.58 % .71 %

Annualized return on average common equity 9.53 % 12.73 % 6.13 %

For the first nine months of 2020 and 2019, diluted earnings per common share were $6.42 and $10.16, respectively. GAAP-basis net income for the nine-month period ended September 30, 2020 totaled $882 million, compared with $1.44 billion in the year-earlier period. Expressed as an annualized rate of return on average assets and average common shareholders' equity, GAAP-basis net income during the nine-month period ended September 30, 2020 was .89% and 7.57%, respectively, and was 1.62% and 12.85%, respectively, in the similar 2019 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 and core deposit and other intangible asset balances, net of applicable deferred tax amounts) and expenses associated with merging acquired operations into M&T (when incurred), since such items are considered by management to be "nonoperating" in nature. The amounts of such "nonoperating" expenses 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 $2.77 in the third quarter of 2020, $3.50 in the third quarter of 2019 and $1.76 in the second quarter of 2020. Net operating income in 2020's third quarter was $375 million, compared with $484 million in the third quarter of 2019 and $244 million in the second quarter of 2020. Expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity, net operating income in the recent quarter was 1.10% and 13.94%, respectively, 1.66% and 18.85%, respectively, in the corresponding quarter of 2019 and .74% and 9.04%, respectively, in the second quarter of 2020.

Diluted net operating earnings per common share during the first nine months of 2020 and 2019 were $6.49 and $10.24, respectively. Net operating income during the nine-month period ended September 30, 2020 was $891 million, compared with $1.45 billion in the similar 2019 period. Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was .93% and 11.15%, respectively, in the initial nine months of 2020 and was 1.70% and 19.07%, respectively, in the year-earlier period.

Taxable-equivalent Net Interest Income. Net interest income expressed on a taxable-equivalent basis totaled $947 million in the recent quarter, compared with $1.04 billion in the third quarter of 2019. That decline resulted from an 83 basis point narrowing of the net interest margin, to 2.95% in the third quarter of 2020 from 3.78% in the year-earlier quarter, that was partially offset by the impact of a $19.1 billion or 18% increase in average earning assets to $127.7 billion in the recent quarter from $108.6 billion in the third quarter of 2019. In the second quarter of 2020, taxable-equivalent net interest income was $961 million, the net interest margin was 3.13% and average earning assets were $123.5 billion. Included in average earning assets in the third and second quarters of 2020 were $6.5 billion and $4.8 billion, respectively, of balances associated with the Paycheck Protection Program ("PPP") loans originated by M&T during 2020. As compared with the third quarter of 2019, the recent quarter's narrowing of the net interest margin resulted largely from lower yields on loans and deposits held at the Federal Reserve Bank of New York, while the rise in average earning assets reflected higher balances of those same asset types. The narrowing of the net interest margin from the second quarter to the third quarter of 2020 resulted from lower yields on loans and investment securities and the impact of a $4.4 billion rise in average balances of short-term earning assets, which earn a significantly lower yield than loans and investment securities.

Taxable-equivalent Net Interest Income

Change 3Q20 vs.

($ in millions) 3Q20 3Q19 2Q20 3Q19 2Q20

Average earning assets $ 127,689 $ 108,643 $ 123,492 18 % 3 %

Net interest income ? taxable-equivalent $ 947 $ 1,035 $ 961 -9 % -1 %

Net interest margin 2.95 % 3.78 % 3.13 %

Provision for Credit Losses/Asset Quality. The provision for credit losses totaled $150 million in the third quarter of 2020, up from $45 million in the year-earlier quarter, but down from $325 million in 2020's second quarter. The significantly higher level of the provision in the 2020 quarters reflected projections of expected credit losses under the provisions of new accounting guidance that became effective on January 1, 2020. Those projections included estimates of the impact of the COVID-19 pandemic. Prior to 2020, the provision for credit losses reflected incurred losses only. Net loan charge-offs were $30 million during the recent quarter, compared with $36 million in the similar quarter of 2019 and $71 million in the second quarter of 2020. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .12% and .16% during the three-month periods ended September 30, 2020 and 2019, respectively, and .29% in the second quarter of 2020.

Loans classified as nonaccrual totaled $1.24 billion or 1.26% of total loans outstanding at September 30, 2020, compared with $1.16 billion or 1.18% of total loans at June 30, 2020. Nonaccrual loans outstanding at September 30, 2019 were $1.01 billion or 1.12% of total loans. The adoption of the new accounting guidance previously mentioned resulted in an increase in nonaccrual loans on January 1, 2020 of $171 million. Assets taken in foreclosure of defaulted loans were $50 million at September 30, 2020, compared with $80 million and $67 million at September 30, 2019 and June 30, 2020, respectively.

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 $1.76 billion or 1.79% of loans outstanding at September 30, 2020, compared with $1.04 billion or 1.16% at September 30, 2019, $1.64 billion or 1.68% at June 30, 2020 and $1.18 billion or 1.30% as of January 1, 2020 following adoption of the current expected credit loss accounting rules. The adoption of the amended accounting guidance resulted in an increase to the allowance of $132 million on January 1, 2020. The allowance at September 30, 2020 and June 30, 2020 represented 1.91% and 1.79%, respectively, of total loans on those dates, excluding outstanding balances of PPP loans.

Asset Quality Metrics

Change 3Q20 vs.

($ in millions) 3Q20 3Q19 2Q20 3Q19 2Q20

At end of quarter

Nonaccrual loans $ 1,240 $ 1,005 $ 1,157 23 % 7 %

Real estate and other foreclosed assets $ 50 $ 80 $ 67 -37 % -25 %

Total nonperforming assets $ 1,290 $ 1,085 $ 1,224 19 % 5 %

Accruing loans past due 90 days or more (1) $ 527 $ 461 $ 536 14 % -2 %

Nonaccrual loans as % of loans outstanding 1.26 % 1.12 % 1.18 %

Allowance for credit losses $ 1,759 $ 1,038 $ 1,638 69 % 7 %

Allowance for credit losses as % of loans outstanding 1.79 % 1.16 % 1.68 %

For the period

Provision for credit losses $ 150 $ 45 $ 325 233 % -54 %

Net charge-offs $ 30 $ 36 $ 71 -18 % -58 %

Net charge-offs as % of average loans (annualized) .12 % .16 % .29 %

(1) Predominantly residential real estate loans. Prior to 2020, excludes loans acquired at a discount.

Noninterest Income and Expense. Noninterest income was $521 million in the recent quarter, $528 million in the year-earlier quarter and $487 million in the second quarter of 2020. As compared with the third quarter of 2019, the recent quarter's higher residential mortgage banking revenues and trust income were more than offset by lower service charges on deposit accounts and trading account and foreign exchange gains. The recent quarter's improvement as compared with the second quarter of 2020 predominantly reflects higher service charges on deposit accounts, residential mortgage banking revenues and merchant discount and credit card fees.

Noninterest Income

Change 3Q20 vs.

($ in millions) 3Q20 3Q19 2Q20 3Q19 2Q20

Mortgage banking revenues $ 153 $ 137 $ 145 12 % 6 %

Service charges on deposit accounts 91 111 78 -18 % 18 %

Trust income 150 144 152 4 % -1 %

Brokerage services income 12 12 10 -4 % 11 %

Trading account and foreign exchange gains 4 16 8 -75 % -51 %

Gain on bank investment securities 3 4 7 -26 % -60 %

Other revenues from operations 108 104 87 4 % 23 %

Total $ 521 $ 528 $ 487 -1 % 7 %

Noninterest expense totaled $827 million in the third quarter of 2020, compared with $878 million in the corresponding quarter of 2019 and $807 million in the second quarter of 2020. Excluding expenses considered to be nonoperating in nature, such as amortization of core deposit and other intangible assets, noninterest operating expenses were $823 million in the recent quarter, $873 million in the third quarter of 2019 and $803 million in 2020's second quarter. Contributing to the decreased level of noninterest expenses in the recent quarter as compared with the year-earlier quarter were lower costs for professional and outside services, advertising and marketing, and travel and entertainment. Additionally, the third quarter of 2019 included a $14 million addition to the valuation allowance for capitalized mortgage servicing rights, reflecting the impact of lower interest rates at that time on the valuation of such servicing rights. There was no similar increase to the valuation allowance in the recent quarter. As compared with the second 2020 quarter, higher costs for salaries and employee benefits in the recent quarter, reflective of improving business activity and one additional day, were partially offset by the impact of a $10 million addition to the valuation allowance for capitalized mortgage servicing rights recognized in the second quarter of 2020.

Noninterest Expense

Change 3Q20 vs.

($ in millions) 3Q20 3Q19 2Q20 3Q19 2Q20

Salaries and employee benefits $ 479 $ 477 $ 459 - 4 %

Equipment and net occupancy 81 83 77 -2 % 5 %

Outside data processing and software 65 60 61 7 % 5 %

FDIC assessments 12 10 14 22 % -15 %

Advertising and marketing 12 22 10 -46 % 20 %

Printing, postage and supplies 9 10 11 -8 % -16 %

Amortization of core deposit and other intangible assets 4 5 4 -23 % -

Other costs of operations 165 211 171 -22 % -3 %

Total $ 827 $ 878 $ 807 -6 % 2 %

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 56.2% in the third quarter of 2020, 56.0% in the year-earlier quarter and 55.7% in the second quarter of 2020.

Balance Sheet. M&T had total assets of $138.6 billion at September 30, 2020, compared with $125.5 billion and $139.5 billion at September 30, 2019 and June 30, 2020, respectively. Loans and leases, net of unearned discount, were $98.4 billion at September 30, 2020, up from $89.8 billion at September 30, 2019 and $97.8 billion at June 30, 2020. The increase in total loans and leases at the recent quarter-end as compared with the third quarter of 2019 was driven largely by growth in commercial loans of $4.7 billion and commercial real estate loans of $2.6 billion. The commercial loan growth reflects loans originated as part of the PPP, which totaled $6.5 billion at September 30, 2020. Total deposits rose to $115.2 billion at the recent quarter-end, compared with $95.1 billion at September 30, 2019 and $115.0 billion at June 30, 2020. The higher levels of deposits at the two most recent quarter-ends as compared with September 30, 2019 reflect both increased commercial and consumer deposits, as well as higher deposits associated with residential mortgage servicing activities.

Total shareholders' equity was $16.1 billion, or 11.61% of total assets at September 30, 2020, compared with $15.8 billion, or 12.57% at September 30, 2019 and $15.9 billion, or 11.43% at June 30, 2020. Common shareholders' equity was $14.9 billion, or $115.75 per share, at September 30, 2020, up from $14.5 billion, or $109.84 per share, a year-earlier and $14.7 billion, or $114.54 per share, at June 30, 2020. Tangible equity per common share was $79.85 at September 30, 2020, $74.93 at September 30, 2019 and $78.62 at June 30, 2020. 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 9.81% at September 30, 2020, up from 9.50% three months earlier.

Conference Call. Investors will have an opportunity to listen to M&T's conference call to discuss third quarter financial results today at 11:00 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 #1169149. The conference call will be webcast live through M&T's website at https://ir.mtb.com/events-presentations. A replay of the call will be available through Thursday, October 29, 2020 by calling (800) 585-8367, or (404) 537-3406 for international participants, and by making reference to ID #1169149. The event will also be archived and available by 3:00 p.m. today on M&T's website at https://ir.mtb.com/events-presentations.

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 and related conference call may contain 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. Any statement that does not describe historical or current facts is a forward-looking statement, including statements regarding the potential effects of the Coronavirus Disease 2019 ("COVID-19") pandemic on M&T's business, financial condition, liquidity and results of operations. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

Future Factors include changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations, credit losses and market values on loans, collateral securing loans, and other assets; sources of liquidity; common shares outstanding; common stock price volatility; fair value of and number of stock-based compensation awards to be issued in future periods; risks and uncertainties relating to the impact of the COVID-19 pandemic; the impact of changes in market values on trust-related revenues; legislation affecting the financial services industry as a whole, and M&T and its subsidiaries individually or collectively, including tax legislation or regulation; regulatory supervision and oversight, including monetary policy and capital requirements; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board, regulatory agencies or legislation; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of pending and future litigation and governmental proceedings, including tax-related examinations and other matters; continued availability of financing; financial resources in the amounts, at the times and on the terms required to support M&T and its subsidiaries' future businesses; and material differences in the actual financial results of merger, acquisition and investment activities compared with M&T's initial expectations, including the full realization of anticipated cost savings and revenue enhancements.

These are representative of the Future Factors that could affect the outcome of the forward-looking statements. In addition, such statements could be affected by general industry and market conditions and growth rates, general economic and political conditions, either nationally or in the states in which M&T and its subsidiaries do business, including interest rate and currency exchange rate fluctuations, changes and trends in the securities markets, and other Future Factors.

Further, statements about the potential effects of the COVID-19 pandemic on M&T's business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond M&T's control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on customers, clients, third parties and M&T.

M&T provides further detail regarding these risks and uncertainties in its 2019 Form 10-K and subsequent Form 10-Qs, including in the respective Risk Factors sections of such reports, as well as in subsequent SEC filings. Forward-looking statements speak only as of the date made, and M&T does not assume any duty and does not undertake to update forward-looking statements.

Financial Highlights

Three months ended Nine months ended

September 30 September 30

Amounts in thousands, except per share 2020 2019 Change 2020 2019 Change

Performance

Net income $ 372,136 480,081 -22 % $ 882,012 1,436,083 -39 %

Net income available to common shareholders 353,400 461,410 -23 % 827,204 1,376,129 -40 %

Per common share:

Basic earnings $ 2.75 3.47 -21 % $ 6.42 10.16 -37 %

Diluted earnings 2.75 3.47 -21 % 6.42 10.16 -37 %

Cash dividends $ 1.10 1.00 10 % $ 3.30 3.00 10 %

Common shares outstanding:

Average - diluted (1) 128,355 132,999 -3 % 128,813 135,443 -5 %

Period end (2) 128,303 132,277 -3 % 128,303 132,277 -3 %

Return on (annualized):

Average total assets 1.06 % 1.58 % .89 % 1.62 %

Average common shareholders' equity 9.53 % 12.73 % 7.57 % 12.85 %

Taxable-equivalent net interest income $ 947,114 1,035,469 -9 % $ 2,890,353 3,138,902 -8 %

Yield on average earning assets 3.13 % 4.51 % 3.53 % 4.62 %

Cost of interest-bearing liabilities .30 % 1.10 % .50 % 1.09 %

Net interest spread 2.83 % 3.41 % 3.03 % 3.53 %

Contribution of interest-free funds .12 % .37 % .19 % .38 %

Net interest margin 2.95 % 3.78 % 3.22 % 3.91 %

Net charge-offs to average total net loans (annualized) .12 % .16 % .21 % .15 %

Net operating results (3)

Net operating income $ 375,029 483,830 -22 % $ 890,692 1,447,271 -38 %

Diluted net operating earnings per common share 2.77 3.50 -21 % 6.49 10.24 -37 %

Return on (annualized):

Average tangible assets 1.10 % 1.66 % .93 % 1.70 %

Average tangible common equity 13.94 % 18.85 % 11.15 % 19.07 %

Efficiency ratio 56.17 % 55.95 % 56.97 % 56.49 %

At September 30

Loan quality 2020 2019 Change

Nonaccrual loans $ 1,239,972 1,005,249 23 %

Real estate and other foreclosed assets 49,872 79,735 -37 %

Total nonperforming assets $ 1,289,844 1,084,984 19 %

Accruing loans past due 90 days or more (4) $ 527,258 461,162 14 %

Government guaranteed loans included in totals above:

Nonaccrual loans $ 45,975 43,144 7 %

Accruing loans past due 90 days or more 505,446 434,132 16 %

Renegotiated loans $ 242,581 240,781 1 %

Accruing loans acquired at a discount past due 90 days or more (5) N/A 40,733 -

Purchased impaired loans (6):

Outstanding customer balance N/A 453,382 -

Carrying amount N/A 253,496 -

Nonaccrual loans to total net loans 1.26 % 1.12 %

Allowance for credit losses to total loans 1.79 % 1.16 %

(1) Includes common stock equivalents.

(2) Includes common stock issuable under deferred compensation plans.

Excludes amortization and balances related to goodwill and core deposit and other intangible assets and merger-related expenses which, except in(3) the calculation of the efficiency ratio, are net of applicable income tax effects. Reconciliations of net income with net operating income appears herein.

(4) Predominantly residential real estate loans. Prior to 2020, excludes loans acquired at a discount.

Prior to 2020, loans acquired at a discount that were recorded at fair(5) value at acquisition date. This category does not include purchased impaired loans that are presented separately.

(6) Prior to 2020, accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value.

Financial Highlights, Five Quarter Trend

Three months ended

September 30, June 30, March 31, December 31, September 30,

Amounts in thousands, except per share 2020 2020 2020 2019 2019

Performance

Net income $ 372,136 241,054 268,822 493,066 480,081

Net income available to common shareholders 353,400 223,099 250,701 473,372 461,410

Per common share:

Basic earnings $ 2.75 1.74 1.93 3.60 3.47

Diluted earnings 2.75 1.74 1.93 3.60 3.47

Cash dividends $ 1.10 1.10 1.10 1.10 1.00

Common shares outstanding:

Average - diluted (1) 128,355 128,333 129,755 131,549 132,999

Period end (2) 128,303 128,294 128,282 130,589 132,277

Return on (annualized):

Average total assets 1.06 % .71 % .90 % 1.60 % 1.58 %

Average common shareholders' equity 9.53 % 6.13 % 7.00 % 12.95 % 12.73 %

Taxable-equivalent net interest income $ 947,114 961,371 981,868 1,014,225 1,035,469

Yield on average earning assets 3.13 % 3.38 % 4.18 % 4.27 % 4.51 %

Cost of interest-bearing liabilities .30 % .40 % .83 % .97 % 1.10 %

Net interest spread 2.83 % 2.98 % 3.35 % 3.30 % 3.41 %

Contribution of interest-free funds .12 % .15 % .30 % .34 % .37 %

Net interest margin 2.95 % 3.13 % 3.65 % 3.64 % 3.78 %

Net charge-offs to average total net loans (annualized) .12 % .29 % .22 % .18 % .16 %

Net operating results (3)

Net operating income $ 375,029 243,958 271,705 496,237 483,830

Diluted net operating earnings per common share 2.77 1.76 1.95 3.62 3.50

Return on (annualized):

Average tangible assets 1.10 % .74 % .94 % 1.67 % 1.66 %

Average tangible common equity 13.94 % 9.04 % 10.39 % 19.08 % 18.85 %

Efficiency ratio 56.17 % 55.71 % 58.91 % 53.15 % 55.95 %

September 30, June 30, March 31, December 31, September 30,

Loan quality 2020 2020 2020 2019 2019

Nonaccrual loans $ 1,239,972 1,156,650 1,061,748 963,112 1,005,249

Real estate and other foreclosed assets 49,872 66,763 83,605 85,646 79,735

Total nonperforming assets $ 1,289,844 1,223,413 1,145,353 1,048,758 1,084,984

Accruing loans past due 90 days or more (4) $ 527,258 535,755 530,317 518,728 461,162

Government guaranteed loans included in totals above:

Nonaccrual loans $ 45,975 51,165 50,561 50,891 43,144

Accruing loans past due 90 days or more 505,446 454,269 464,243 479,829 434,132

Renegotiated loans $ 242,581 234,768 232,439 234,424 240,781

Accruing loans acquired at a discount past due 90 days or N/A N/A N/A 39,632 40,733 more (5)

Purchased impaired loans (6):

Outstanding customer balance N/A N/A N/A 415,413 453,382

Carrying amount N/A N/A N/A 227,545 253,496

Nonaccrual loans to total net loans 1.26 % 1.18 % 1.13 % 1.06 % 1.12 %

Allowance for credit losses to total loans 1.79 % 1.68 % 1.47 % 1.16 % 1.16 %

(1) Includes common stock equivalents.

(2) Includes common stock issuable under deferred compensation plans.

Excludes amortization and balances related to goodwill and core deposit and other intangible assets and merger-related expenses which, except in(3) the calculation of the efficiency ratio, are net of applicable income tax effects. Reconciliations of net income with net operating income appears herein.

(4) Predominantly residential real estate loans. Prior to 2020, excludes loans acquired at a discount.

Prior to 2020, loans acquired at a discount that were recorded at fair(5) value at acquisition date. This category does not include purchased impaired loans that are presented separately.

(6) Prior to 2020, accruing loans acquired at a discount that were impaired at acquisition date and recorded at fair value.

Condensed Consolidated Statement of Income

Three months ended Nine months ended

September 30 September 30

Dollars in thousands 2020 2019 Change 2020 2019 Change

Interest income $ 1,001,161 1,229,469 -19 % $ 3,153,822 3,693,691 -15 %

Interest expense 58,066 199,579 -71 276,785 572,260 -52

Net interest income 943,095 1,029,890 -8 2,877,037 3,121,431 -8

Provision for credit losses 150,000 45,000 233 725,000 122,000 494

Net interest income after provision for credit losses 793,095 984,890 -19 2,152,037 2,999,431 -28

Other income

Mortgage banking revenues 153,267 137,004 12 426,200 339,636 25

Service charges on deposit accounts 91,355 111,092 -18 274,971 321,991 -15

Trust income 149,937 143,915 4 450,570 421,083 7

Brokerage services income 11,602 12,077 -4 35,194 37,031 -5

Trading account and foreign exchange gains 4,026 16,072 -75 33,332 45,327 -26

Gain (loss) on bank investment securities 2,773 3,737 -26 (11,040) 24,489 -

Other revenues from operations 107,601 103,882 4 327,967 351,082 -7

Total other income 520,561 527,779 -1 1,537,194 1,540,639 -

Other expense

Salaries and employee benefits 478,897 476,780 - 1,474,582 1,431,717 3

Equipment and net occupancy 81,080 82,690 -2 237,809 241,187 -1

Outside data processing and software 64,660 60,360 7 190,446 168,011 13

FDIC assessments 12,121 9,906 22 38,599 29,104 33

Advertising and marketing 11,855 22,088 -46 44,072 66,409 -34

Printing, postage and supplies 9,422 10,201 -8 31,534 30,380 4

Amortization of core deposit and other 3,914 5,088 -23 11,740 15,185 -23 intangible assets

Other costs of operations 164,825 210,506 -22 511,450 663,006 -23

Total other expense 826,774 877,619 -6 2,540,232 2,644,999 -4

Income before income taxes 486,882 635,050 -23 1,148,999 1,895,071 -39

Applicable income taxes 114,746 154,969 -26 266,987 458,988 -42

Net income $ 372,136 480,081 -22 % $ 882,012 1,436,083 -39 %

Condensed Consolidated Statement of Income, Five Quarter Trend

Three months ended

September 30, June 30, March 31, December 31, September 30,

Dollars in thousands 2020 2020 2020 2019 2019

Interest income $ 1,001,161 1,032,242 1,120,419 1,185,902 1,229,469

Interest expense 58,066 75,105 143,614 177,069 199,579

Net interest income 943,095 957,137 976,805 1,008,833 1,029,890

Provision for credit losses 150,000 325,000 250,000 54,000 45,000

Net interest income after provision for credit losses 793,095 632,137 726,805 954,833 984,890

Other income

Mortgage banking revenues 153,267 145,024 127,909 118,134 137,004

Service charges on deposit accounts 91,355 77,455 106,161 110,987 111,092

Trust income 149,937 151,882 148,751 151,525 143,915

Brokerage services income 11,602 10,463 13,129 11,891 12,077

Trading account and foreign exchange gains 4,026 8,290 21,016 16,717 16,072

Gain (loss) on bank investment securities 2,773 6,969 (20,782) (6,452) 3,737

Other revenues from operations 107,601 87,190 133,176 118,238 103,882

Total other income 520,561 487,273 529,360 521,040 527,779

Other expense

Salaries and employee benefits 478,897 458,842 536,843 469,080 476,780

Equipment and net occupancy 81,080 77,089 79,640 82,892 82,690

Outside data processing and software 64,660 61,376 64,410 61,720 60,360

FDIC assessments 12,121 14,207 12,271 12,431 9,906

Advertising and marketing 11,855 9,842 22,375 27,063 22,088

Printing, postage and supplies 9,422 11,260 10,852 9,513 10,201

Amortization of core deposit and other 3,914 3,913 3,913 4,305 5,088 intangible assets

Other costs of operations 164,825 170,513 176,112 156,679 210,506

Total other expense 826,774 807,042 906,416 823,683 877,619

Income before income taxes 486,882 312,368 349,749 652,190 635,050

Applicable income taxes 114,746 71,314 80,927 159,124 154,969

Net income $ 372,136 241,054 268,822 493,066 480,081

Condensed Consolidated Balance Sheet

September 30

Dollars in thousands 2020 2019 Change

ASSETS

Cash and due from banks $ 1,489,232 1,818,861 -18 %

Interest-bearing deposits at banks 20,197,937 12,495,524 62

Federal funds sold - 200 -

Trading account 1,215,573 614,256 98

Investment securities 7,723,004 10,677,583 -28

Loans and leases:

Commercial, financial, etc. 27,891,648 23,201,372 20

Real estate - commercial 37,582,084 34,945,231 8

Real estate - consumer 16,663,708 16,500,955 1

Consumer 16,309,608 15,175,635 7

Total loans and leases, net of unearned discount 98,447,048 89,823,193 10

Less: allowance for credit losses 1,758,505 1,038,437 69

Net loans and leases 96,688,543 88,784,756 9

Goodwill 4,593,112 4,593,112 -

Core deposit and other intangible assets 17,294 33,339 -48

Other assets 6,702,048 6,483,295 3

Total assets $ 138,626,743 125,500,926 10 %

LIABILITIES AND SHAREHOLDERS' EQUITY

Noninterest-bearing deposits $ 44,201,670 31,766,724 39 %

Interest-bearing deposits 70,061,680 61,785,212 13

Deposits at Cayman Islands office 899,989 1,561,997 -42

Total deposits 115,163,339 95,113,933 21

Short-term borrowings 46,123 5,513,896 -99

Accrued interest and other liabilities 1,857,383 2,090,762 -11

Long-term borrowings 5,458,885 7,002,524 -22

Total liabilities 122,525,730 109,721,115 12

Shareholders' equity:

Preferred 1,250,000 1,250,000 -

Common 14,851,013 14,529,811 2

Total shareholders' equity 16,101,013 15,779,811 2

Total liabilities and shareholders' equity $ 138,626,743 125,500,926 10 %

Condensed Consolidated Balance Sheet, Five Quarter Trend

September 30, June 30, March 31, December 31, September 30,

Dollars in thousands 2020 2020 2020 2019 2019

ASSETS

Cash and due from banks $ 1,489,232 1,354,815 1,298,192 1,432,805 1,818,861

Interest-bearing deposits at banks 20,197,937 20,888,341 8,896,307 7,190,154 12,495,524

Federal funds sold - - - 3,500 200

Trading account 1,215,573 1,293,534 1,224,291 470,129 614,256

Investment securities 7,723,004 8,454,344 8,956,590 9,497,251 10,677,583

Loans and leases:

Commercial, financial, etc. 27,891,648 29,203,862 26,243,648 23,838,168 23,201,372

Real estate - commercial 37,582,084 37,159,451 36,684,106 35,541,914 34,945,231

Real estate - consumer 16,663,708 15,611,462 15,643,014 16,156,094 16,500,955

Consumer 16,309,608 15,782,773 15,571,507 15,386,693 15,175,635

Total loans and leases, net of unearned discount 98,447,048 97,757,548 94,142,275 90,922,869 89,823,193

Less: allowance for credit losses 1,758,505 1,638,236 1,384,366 1,051,071 1,038,437

Net loans and leases 96,688,543 96,119,312 92,757,909 89,871,798 88,784,756

Goodwill 4,593,112 4,593,112 4,593,112 4,593,112 4,593,112

Core deposit and other intangible assets 17,294 21,208 25,121 29,034 33,339

Other assets 6,702,048 6,812,303 6,826,311 6,784,974 6,483,295

Total assets $ 138,626,743 139,536,969 124,577,833 119,872,757 125,500,926

LIABILITIES AND SHAREHOLDERS' EQUITY

Noninterest-bearing deposits $ 44,201,670 45,397,843 35,554,715 32,396,407 31,766,724

Interest-bearing deposits 70,061,680 68,701,832 63,410,672 60,689,618 61,785,212

Deposits at Cayman Islands office 899,989 868,284 1,217,921 1,684,044 1,561,997

Total deposits 115,163,339 114,967,959 100,183,308 94,770,069 95,113,933

Short-term borrowings 46,123 52,298 59,180 62,363 5,513,896

Accrued interest and other liabilities 1,857,383 2,250,316 2,198,116 2,337,490 2,090,762

Long-term borrowings 5,458,885 6,321,291 6,321,435 6,986,186 7,002,524

Total liabilities 122,525,730 123,591,864 108,762,039 104,156,108 109,721,115

Shareholders' equity:

Preferred 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000

Common 14,851,013 14,695,105 14,565,794 14,466,649 14,529,811

Total shareholders' equity 16,101,013 15,945,105 15,815,794 15,716,649 15,779,811

Total liabilities and shareholders' equity $ 138,626,743 139,536,969 124,577,833 119,872,757 125,500,926

Condensed Consolidated Average Balance Sheet and Annualized Taxable-equivalentRates

Three months ended Change in balance Nine months ended

September 30, September 30, June 30, September 30, 2020 from September 30, Change

Dollars in millions 2020 2019 2020 September 30, June 30, 2020 2019 in

Balance Rate Balance Rate Balance Rate 2019 2020 Balance Rate Balance Rate balance

ASSETS

Interest-bearing deposits at banks $ 16,440 .10 % 7,405 2.16 % 16,454 .10 % 122 % - % $ 13,021 .28 % 6,054 2.30 % 115 %

Federal funds sold and agreements

to resell securities 5,113 .13 18 2.01 692 .11 - 639 2,353 .33 6 2.06 -

Trading account 50 1.62 67 .89 49 2.04 -26 2 54 2.15 67 2.15 -19

Investment securities 7,876 1.95 11,075 2.48 8,500 2.24 -29 -7 8,490 2.14 12,058 2.50 -30

Loans and leases, net of unearned

discount

Commercial, financial, etc. 28,333 3.05 23,326 4.82 29,733 3.10 21 -5 27,455 3.37 23,225 4.95 18

Real estate - commercial 37,243 4.19 35,200 5.14 36,947 4.42 6 1 36,743 4.47 34,833 5.26 5

Real estate - consumer 16,558 3.69 16,673 4.20 15,599 4.00 -1 6 16,032 3.90 16,778 4.29 -4

Consumer 16,076 4.76 14,879 5.44 15,518 4.85 8 4 15,683 4.96 14,405 5.49 9

Total loans and leases, net 98,210 3.89 90,078 4.96 97,797 4.05 9 - 95,913 4.17 89,241 5.06 7

Total earning assets 127,689 3.13 108,643 4.51 123,492 3.38 18 3 119,831 3.53 107,426 4.62 12

Goodwill 4,593 4,593 4,593 - - 4,593 4,593 -

Core deposit and other intangible

assets 19 36 23 -46 -17 23 41 -43

Other assets 7,880 7,116 8,338 11 -5 7,983 6,524 22

Total assets $ 140,181 120,388 136,446 16 % 3 % $ 132,430 118,584 12 %

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing deposits

Savings and interest-checking

deposits $ 65,848 .14 55,680 .75 62,927 .17 18 % 5 % $ 61,729 .27 53,770 .68 15 %

Time deposits 4,715 1.22 6,343 1.59 5,354 1.49 -26 -12 5,245 1.43 6,408 1.49 -18

Deposits at Cayman Islands

office 957 .10 1,522 1.62 1,017 .06 -37 -6 1,214 .42 1,249 1.82 -3

Total interest-bearing

deposits 71,520 .21 63,545 .85 69,298 .27 13 3 68,188 .37 61,427 .79 11

Short-term borrowings 62 .01 1,212 2.28 63 .01 -95 -1 61 .06 1,189 2.43 -95

Long-term borrowings 5,499 1.51 7,121 3.13 6,189 1.86 -23 -11 5,974 2.01 7,959 3.19 -25

Total interest-bearing liabilities 77,081 .30 71,878 1.10 75,550 .40 7 2 74,223 .50 70,575 1.09 5

Noninterest-bearing deposits 44,786 30,550 42,497 47 5 39,931 30,323 32

Other liabilities 2,241 2,123 2,446 6 -8 2,360 2,007 18

Total liabilities 124,108 104,551 120,493 19 3 116,514 102,905 13

Shareholders' equity 16,073 15,837 15,953 1 1 15,916 15,679 2

Total liabilities and

shareholders' equity $ 140,181 120,388 136,446 16 % 3 % $ 132,430 118,584 12 %

Net interest spread 2.83 3.41 2.98 3.03 3.53

Contribution of interest-free funds .12 .37 .15 .19 .38

Net interest margin 2.95 % 3.78 % 3.13 % 3.22 % 3.91 %

Reconciliation of Quarterly GAAP to Non-GAAP Measures

Three months ended Nine months ended

September 30 September 30

2020 2019 2020 2019

Income statement data

In thousands, except per share

Net income

Net income $ 372,136 480,081 882,012 1,436,083

Amortization of core deposit and other intangible assets (1) 2,893 3,749 8,680 11,188

Net operating income $ 375,029 483,830 890,692 1,447,271

Earnings per common share

Diluted earnings per common share $ 2.75 3.47 6.42 10.16

Amortization of core deposit and other intangible assets (1) .02 .03 .07 .08

Diluted net operating earnings per common share $ 2.77 3.50 6.49 10.24

Other expense

Other expense $ 826,774 877,619 2,540,232 2,644,999

Amortization of core deposit and other intangible assets (3,914) (5,088) (11,740) (15,185)

Noninterest operating expense $ 822,860 872,531 2,528,492 2,629,814

Efficiency ratio

Noninterest operating expense (numerator) $ 822,860 872,531 2,528,492 2,629,814

Taxable-equivalent net interest income 947,114 1,035,469 2,890,353 3,138,902

Other income 520,561 527,779 1,537,194 1,540,639

Less: Gain (loss) on bank investment securities 2,773 3,737 (11,040) 24,489

Denominator $ 1,464,902 1,559,511 4,438,587 4,655,052

Efficiency ratio 56.17 % 55.95 % 56.97 % 56.49 %

Balance sheet data

In millions

Average assets

Average assets $ 140,181 120,388 132,430 118,584

Goodwill (4,593) (4,593) (4,593) (4,593)

Core deposit and other intangible assets (19) (36) (23) (41)

Deferred taxes 5 10 6 11

Average tangible assets $ 135,574 115,769 127,820 113,961

Average common equity

Average total equity $ 16,073 15,837 15,916 15,679

Preferred stock (1,250) (1,373) (1,250) (1,279)

Average common equity 14,823 14,464 14,666 14,400

Goodwill (4,593) (4,593) (4,593) (4,593)

Core deposit and other intangible assets (19) (36) (23) (41)

Deferred taxes 5 10 6 11

Average tangible common equity $ 10,216 9,845 10,056 9,777

At end of quarter

Total assets

Total assets $ 138,627 125,501

Goodwill (4,593) (4,593)

Core deposit and other intangible assets (17) (33)

Deferred taxes 4 8

Total tangible assets $ 134,021 120,883

Total common equity

Total equity $ 16,101 15,780

Preferred stock (1,250) (1,250)

Common equity, net of undeclared cumulative preferred dividends 14,851 14,530

Goodwill (4,593) (4,593)

Core deposit and other intangible assets (17) (33)

Deferred taxes 4 8

Total tangible common equity $ 10,245 $ 9,912

(1) After any related tax effect.

Reconciliation of Quarterly GAAP to Non-GAAP Measures, Five Quarter Trend

Three months ended

September 30, June 30, March 31, December 31, September 30,

2020 2020 2020 2019 2019

Income statement data

In thousands, except per share

Net income

Net income $ 372,136 241,054 268,822 493,066 480,081

Amortization of core deposit and other intangible assets (1) 2,893 2,904 2,883 3,171 3,749

Net operating income $ 375,029 243,958 271,705 496,237 483,830

Earnings per common share

Diluted earnings per common share $ 2.75 1.74 1.93 3.60 3.47

Amortization of core deposit and other intangible assets (1) .02 .02 .02 .02 .03

Diluted net operating earnings per common share $ 2.77 1.76 1.95 3.62 3.50

Other expense

Other expense $ 826,774 807,042 906,416 823,683 877,619

Amortization of core deposit and other intangible assets (3,914) (3,913) (3,913) (4,305) (5,088)

Noninterest operating expense $ 822,860 803,129 902,503 819,378 872,531

Efficiency ratio

Noninterest operating expense (numerator) $ 822,860 803,129 902,503 819,378 872,531

Taxable-equivalent net interest income 947,114 961,371 981,868 1,014,225 1,035,469

Other income 520,561 487,273 529,360 521,040 527,779

Less: Gain (loss) on bank investment securities 2,773 6,969 (20,782) (6,452) 3,737

Denominator $ 1,464,902 1,441,675 1,532,010 1,541,717 1,559,511

Efficiency ratio 56.17 % 55.71 % 58.91 % 53.15 % 55.95 %

Balance sheet data

In millions

Average assets

Average assets $ 140,181 136,446 120,585 122,554 120,388

Goodwill (4,593) (4,593) (4,593) (4,593) (4,593)

Core deposit and other intangible assets (19) (23) (27) (31) (36)

Deferred taxes 5 6 7 8 10

Average tangible assets $ 135,574 131,836 115,972 117,938 115,769

Average common equity

Average total equity $ 16,073 15,953 15,720 15,832 15,837

Preferred stock (1,250) (1,250) (1,250) (1,250) (1,373)

Average common equity 14,823 14,703 14,470 14,582 14,464

Goodwill (4,593) (4,593) (4,593) (4,593) (4,593)

Core deposit and other intangible assets (19) (23) (27) (31) (36)

Deferred taxes 5 6 7 8 10

Average tangible common equity $ 10,216 10,093 9,857 9,966 9,845

At end of quarter

Total assets

Total assets $ 138,627 139,537 124,578 119,873 125,501

Goodwill (4,593) (4,593) (4,593) (4,593) (4,593)

Core deposit and other intangible assets (17) (21) (25) (29) (33)

Deferred taxes 4 5 6 7 8

Total tangible assets $ 134,021 134,928 119,966 115,258 120,883

Total common equity

Total equity $ 16,101 15,945 15,816 15,717 15,780

Preferred stock (1,250) (1,250) (1,250) (1,250) (1,250)

Common equity, net of undeclared cumulative preferred 14,851 14,695 14,566 14,467 14,530 dividends

Goodwill (4,593) (4,593) (4,593) (4,593) (4,593)

Core deposit and other intangible assets (17) (21) (25) (29) (33)

Deferred taxes 4 5 6 7 8

Total tangible common equity $ 10,245 10,086 9,954 9,852 9,912

(1) After any related tax effect.

INVESTOR CONTACT: Donald J. MacLeod(716) 842-5138

MEDIA CONTACT: C. Michael Zabel(716) 842-5385

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SOURCE M&T Bank Corporation