PR Newswire | Jul 23, 2020 06:36AM EDT

07/23 05:35 CDT

M&T Bank Corporation Announces Second Quarter Results BUFFALO, N.Y., July 23, 2020

BUFFALO, N.Y., July 23, 2020 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended June 30, 2020.

GAAP Results of Operations. Diluted earnings per common share measured in accordance with generally accepted accounting principles ("GAAP") were $1.74 in the second quarter of 2020, compared with $3.34 in the year-earlier quarter and $1.93 in the initial 2020 quarter. GAAP-basis net income in the recent quarter was $241 million, compared with $473 million in the second quarter of 2019 and $269 million in the first quarter of 2020. GAAP-basis net income for the second quarter of 2020 expressed as an annualized rate of return on average assets and average common shareholders' equity was .71% and 6.13%, respectively, compared with 1.60% and 12.68%, respectively, in the corresponding 2019 period and .90% and 7.00%, respectively, in the initial quarter of 2020.

Commenting on M&T's second quarter results, Darren J. King, Executive Vice President and Chief Financial Officer, noted, "While the low interest rate environment resulted in a decline in our net interest income, it also led to a 13% improvement in mortgage banking revenue compared with the first quarter. During the quarter we added to our provision for credit losses and at the same time grew our Common Equity Tier 1 ratio to 9.51%. M&T's conservatively positioned balance sheet continues to be strong, with substantial liquidity and sufficient capital to meet the needs of our customers and communities."

Financial results for the second quarter of 2020 were adversely impacted by the COVID-19 pandemic. The economic outlook at June 30 deteriorated as compared with what had been assumed as of the end of the first quarter of 2020, with considerable uncertainty existing about the length and extent of the pandemic's impact on the nation's economy. The provision for credit losses in the recent quarter rose to $325 million from $250 million in the initial 2020 quarter and $55 million in the second quarter of 2019. The 2020 periods reflect the adoption of new accounting guidance for the measurement of expected credit losses on financial instruments that became effective on January 1, 2020. Spurred by the COVID-19 pandemic, the low interest rate environment resulted in decreased taxable-equivalent net interest income, while waivers and reduced customer transaction activity led to lower fees earned on deposit accounts.

Earnings Highlights

Change 2Q20 vs.

($ in millions, except per share data) 2Q20 2Q19 1Q20 2Q19 1Q20

Net income $ 241 $ 473 $ 269 -49 % -10 %

Net income available to common shareholders ? diluted $ 223 $ 453 $ 251 -51 % -11 %

Diluted earnings per common share $ 1.74 $ 3.34 $ 1.93 -48 % -10 %

Annualized return on average assets .71 % 1.60 % .90 %

Annualized return on average common equity 6.13 % 12.68 % 7.00 %

For the first six-months of 2020, diluted earnings per common share were $3.67, compared with $6.69 in the year-earlier period. GAAP-basis net income for the first half of 2020 totaled $510 million, compared with $956 million in the corresponding 2019 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, 2020 was .80% and 6.56%, respectively, compared with 1.64% and 12.91%, 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 $1.76 in the second quarter of 2020, compared with $3.37 in the year-earlier quarter and $1.95 in the first quarter of 2020. Net operating income in 2020's second quarter was $244 million, compared with $477 million in the second quarter of 2019 and $272 million in the first 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 .74% and 9.04%, respectively, compared with 1.68% and 18.83%, respectively, in the corresponding 2019 quarter and .94% and 10.39%, respectively, in the first quarter of 2020.

Diluted net operating earnings per common share in the first six months of 2020 were $3.71, compared with $6.74 in the similar 2019 period. Net operating income during the first half of 2020 was $516 million, compared with $963 million in the six-month period ended June 30, 2019. Net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was .84% and 9.71%, respectively, in the initial six months of 2020, compared with 1.72% and 19.19% respectively, in the corresponding 2019 period.

Taxable-equivalent Net Interest Income. Net interest income expressed on a taxable-equivalent basis totaled $961 million in the recent quarter, compared with $1.05 billion in the second quarter of 2019. That decline resulted from a 78 basis point narrowing of the net interest margin, to 3.13% in the second quarter of 2020 from 3.91% in the second quarter of 2019, that was partially offset by the impact of a $16.0 billion or 15% increase in average earning assets to $123.5 billion in the second quarter of 2020 from $107.5 billion in the year-earlier quarter. Included in average earning assets in the recent quarter were $4.8 billion of average loan balances associated with the Paycheck Protection Program ("PPP") that were funded during the quarter. In total, $6.5 billion of PPP loans originated by M&T were outstanding at June 30, 2020. In the first quarter of 2020, taxable-equivalent net interest income was $982 million, the net interest margin was 3.65% and average earning assets were $108.2 billion. As compared with the year-earlier quarter and the initial 2020 quarter, the recent quarter's narrowing of the net interest margin resulted largely from lower yields on loans and deposits at the Federal Reserve Bank of New York, while the rise in average earning assets reflected higher balances in each of those asset types.

Taxable-equivalent Net Interest Income

Change 2Q20 vs.

($ in millions) 2Q20 2Q19 1Q20 2Q19 1Q20

Average earning assets $ 123,492 $ 107,511 $ 108,226 15 % 14 %

Net interest income ? taxable-equivalent $ 961 $ 1,047 $ 982 -8 % -2 %

Net interest margin 3.13 % 3.91 % 3.65 %

Provision for Credit Losses/Asset Quality. The provision for credit losses was $325 million in the second quarter of 2020, compared with $55 million in the year-earlier quarter and $250 million in 2020's initial quarter. The significant increases in the provision in the two most recent quarters as compared with the second quarter of 2019 follow the adoption of new accounting guidance on January 1, 2020 and reflect updated economic assumptions and projections of expected credit losses as of the end of each of the first two quarters of 2020 that include estimates of the impact of the COVID-19 pandemic. Net loan charge-offs were $71 million during the recent quarter, compared with $44 million in the corresponding quarter of 2019 and $49 million in the first quarter of 2020. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .29% and .20% during the three-month periods ended June 30, 2020 and 2019, respectively, and .22% in the first quarter of 2020. Net charge-offs were .31% of average loans in the recent quarter, excluding the impact of PPP loans.

Loans classified as nonaccrual totaled $1.16 billion or 1.18% of total loans outstanding at June 30, 2020. Nonaccrual loans outstanding at March 31, 2020 were $1.06 billion or 1.13% of total loans and at June 30, 2019 were $865 million or .96%. 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 $67 million at June 30, 2020, compared with $73 million and $84 million at June 30, 2019 and March 31, 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 $1.64 billion or 1.68% of loans outstanding at June 30, 2020, compared with $1.03 billion or 1.15% at June 30, 2019, $1.38 billion or 1.47% at March 31, 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 June 30, 2020 represented 1.79% of total loans, excluding outstanding balances of PPP loans.

Asset Quality Metrics

Change 2Q20 vs.

($ in millions) 2Q20 2Q19 1Q20 2Q19 1Q20

At end of quarter

Nonaccrual loans $ 1,157 $ 865 $ 1,062 34 % 9 %

Real estate and other foreclosed assets $ 67 $ 73 $ 84 -8 % -20 %

Total nonperforming assets $ 1,224 $ 938 $ 1,146 30 % 7 %

Accruing loans past due 90 days or more (1) $ 536 $ 349 $ 530 54 % 1 %

Nonaccrual loans as % of loans outstanding 1.18 % .96 % 1.13 %

Allowance for credit losses $ 1,638 $ 1,030 $ 1,384 59 % 18 %

Allowance for credit losses as % of loans outstanding 1.68 % 1.15 % 1.47 %

For the period

Provision for credit losses $ 325 $ 55 $ 250 491 % 30 %

Net charge-offs $ 71 $ 44 $ 49 60 % 45 %

Net charge-offs as % of average loans (annualized) .29 % .20 % .22 %

_____________

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

Noninterest Income and Expense. Noninterest income was $487 million in the recent quarter, compared with $512 million in the year-earlier quarter and $529 million in the first quarter of 2020. The lower level of noninterest income in the second quarter of 2020 as compared with those prior periods largely resulted from declines in service charges on deposit accounts, trading account and foreign exchange gains, merchant discount and credit card fees, and loan syndication fees, partially offset by higher residential mortgage banking revenues and trust income. In addition, income from Bayview Lending Group LLC of $23 million received in 2020's initial quarter was predominantly offset by unrealized losses on investment securities of $21 million during that quarter.

Noninterest Income

Change 2Q20 vs.

($ in millions) 2Q20 2Q19 1Q20 2Q19 1Q20

Mortgage banking revenues $ 145 $ 107 $ 128 35 % 13 %

Service charges on deposit accounts 78 108 106 -28 % -27 %

Trust income 152 145 149 5 % 2 %

Brokerage services income 10 12 13 -16 % -20 %

Trading account and foreign exchange gains 8 18 21 -55 % -61 %

Gain (loss) on bank investment securities 7 9 (21) -22 % -

Other revenues from operations 87 113 133 -23 % -35 %

Total $ 487 $ 512 $ 529 -5 % -8 %

Noninterest expense totaled $807 million in the second quarter of 2020, down from $873 million in the corresponding quarter of 2019 and $906 million in the first quarter of 2020. Excluding expenses considered to be nonoperating in nature, such as amortization of core deposit and other intangible assets, noninterest operating expenses aggregated $803 million in the recent quarter, $868 million in the second quarter of 2019 and $903 million in 2020's first quarter. Factors contributing to the lower level of noninterest expenses in the recent quarter as compared with the year-earlier quarter were lower costs for professional and outside services and advertising and marketing, and a $48 million charge associated with an equity investment in an asset manager recorded in the second quarter of 2019. As compared with the initial 2020 quarter, the lower level of noninterest expenses in the recent quarter was largely attributable to a decline in expenses for salaries and employee benefits, reflecting decreased incentive compensation costs and seasonally higher stock-based compensation and employee benefits expenses during the first quarter, and lower advertising and marketing costs.

Noninterest Expense

Change 2Q20 vs.

($ in millions) 2Q20 2Q19 1Q20 2Q19 1Q20

Salaries and employee benefits $ 459 $ 456 $ 537 1 % -15 %

Equipment and net occupancy 77 79 80 -3 % -3 %

Outside data processing and software 61 55 64 11 % -5 %

FDIC assessments 14 10 12 45 % 16 %

Advertising and marketing 10 24 22 -59 % -56 %

Printing, postage and supplies 11 10 11 9 % 4 %

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

Other costs of operations 171 234 176 -27 % -3 %

Total $ 807 $ 873 $ 906 -8 % -11 %

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 55.7% in the second quarter of 2020, 56.0% in the year-earlier quarter and 58.9% in the first three months of 2020.

Balance Sheet. M&T had total assets of $139.5 billion at June 30, 2020, up from $121.6 billion and $124.6 billion at June 30, 2019 and March 31, 2020, respectively. Loans and leases, net of unearned discount, were $97.8 billion at June 30, 2020, $89.9 billion at June 30, 2019 and $94.1 billion at March 31, 2020. The increase in total loans and leases at the recent quarter-end as compared with the second quarter of 2019 was driven largely by growth in commercial loans of $5.8 billion and commercial real estate loans of $2.0 billion. The commercial loan growth reflects loans originated as part of the PPP, which totaled $6.5 billion at June 30, 2020. Total deposits rose to $115.0 billion at the recent quarter-end, compared with $91.7 billion at June 30, 2019 and $100.2 billion at March 31, 2020. The higher level of deposits at the recent quarter-end as compared with the prior dates reflects both increased commercial and consumer deposits, as well as higher levels of deposits associated with residential mortgage servicing activities.

Total shareholders' equity was $15.9 billion, or 11.43% of total assets at June 30, 2020, compared with $15.7 billion, or 12.91% at June 30, 2019 and $15.8 billion, or 12.70% at March 31, 2020. Common shareholders' equity was $14.7 billion, or $114.54 per share, at June 30, 2020, compared with $14.5 billion, or $107.73 per share, a year-earlier and $14.6 billion, or $113.54 per share, at March 31, 2020. Tangible equity per common share was $78.62 at June 30, 2020, compared with $73.29 at June 30, 2019 and $77.60 at March 31, 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 9.51% at June 30, 2020, up from 9.19% three months earlier.

Conference Call. Investors will have an opportunity to listen to M&T's conference call to discuss second 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 #9253404. 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, July 30, 2020 by calling (800) 585-8367, or (404) 537-3406 for international participants, and by making reference to ID #9253404. 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 contains 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.

Financial Highlights

Three months ended Six months ended

June 30 June 30

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

Performance

Net income $ 241,054 473,260 -49 % $ 509,876 956,002 -47 %

Net income available to common shareholders 223,099 452,633 -51 % 473,795 914,719 -48 %

Per common share:

Basic earnings $ 1.74 3.34 -48 % $ 3.67 6.69 -45 %

Diluted earnings 1.74 3.34 -48 % 3.67 6.69 -45 %

Cash dividends $ 1.10 1.00 10 % $ 2.20 2.00 10 %

Common shares outstanding:

Average - diluted (1) 128,333 135,464 -5 % 129,044 136,685 -6 %

Period end (2) 128,294 134,200 -4 % 128,294 134,200 -4 %

Return on (annualized):

Average total assets .71 % 1.60 % .80 % 1.64 %

Average common shareholders' equity 6.13 % 12.68 % 6.56 % 12.91 %

Taxable-equivalent net interest income $ 961,371 1,047,406 -8 % $ 1,943,239 2,103,433 -8 %

Yield on average earning assets 3.38 % 4.64 % 3.75 % 4.68 %

Cost of interest-bearing liabilities .40 % 1.11 % .60 % 1.08 %

Net interest spread 2.98 % 3.53 % 3.15 % 3.60 %

Contribution of interest-free funds .15 % .38 % .22 % .37 %

Net interest margin 3.13 % 3.91 % 3.37 % 3.97 %

Net charge-offs to average total net loans (annualized) .29 % .20 % .26 % .15 %

Net operating results (3)

Net operating income $ 243,958 477,001 -49 % $ 515,663 963,441 -46 %

Diluted net operating earnings per common share 1.76 3.37 -48 % 3.71 6.74 -45 %

Return on (annualized):

Average tangible assets .74 % 1.68 % .84 % 1.72 %

Average tangible common equity 9.04 % 18.83 % 9.71 % 19.19 %

Efficiency ratio 55.71 % 55.98 % 57.36 % 56.77 %

At June 30

Loan quality 2020 2019 Change

Nonaccrual loans $ 1,156,650 865,384 34 %

Real estate and other foreclosed assets 66,763 72,907 -8 %

Total nonperforming assets $ 1,223,413 938,291 30 %

Accruing loans past due 90 days or more (4) $ 535,755 348,725 54 %

Government guaranteed loans included in totals above:

Nonaccrual loans $ 51,165 36,765 39 %

Accruing loans past due 90 days or more 454,269 320,305 42 %

Renegotiated loans $ 234,768 254,332 -8 %

Accruing loans acquired at a discount past due 90 days or more (5) N/A 43,079 -

Purchased impaired loans (6):

Outstanding customer balance N/A 473,834 -

Carrying amount N/A 263,025 -

Nonaccrual loans to total net loans 1.18 % .96 %

Allowance for credit losses to total loans 1.68 % 1.15 %

______________

(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 appear 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

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

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

Performance

Net income $ 241,054 268,822 493,066 480,081 473,260

Net income available to common shareholders 223,099 250,701 473,372 461,410 452,633

Per common share:

Basic earnings $ 1.74 1.93 3.60 3.47 3.34

Diluted earnings 1.74 1.93 3.60 3.47 3.34

Cash dividends $ 1.10 1.10 1.10 1.00 1.00

Common shares outstanding:

Average - diluted (1) 128,333 129,755 131,549 132,999 135,464

Period end (2) 128,294 128,282 130,589 132,277 134,200

Return on (annualized):

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

Average common shareholders' equity 6.13 % 7.00 % 12.95 % 12.73 % 12.68 %

Taxable-equivalent net interest income $ 961,371 981,868 1,014,225 1,035,469 1,047,406

Yield on average earning assets 3.38 % 4.18 % 4.27 % 4.51 % 4.64 %

Cost of interest-bearing liabilities .40 % .83 % .97 % 1.10 % 1.11 %

Net interest spread 2.98 % 3.35 % 3.30 % 3.41 % 3.53 %

Contribution of interest-free funds .15 % .30 % .34 % .37 % .38 %

Net interest margin 3.13 % 3.65 % 3.64 % 3.78 % 3.91 %

Net charge-offs to average total net loans (annualized) .29 % .22 % .18 % .16 % .20 %

Net operating results (3)

Net operating income $ 243,958 271,705 496,237 483,830 477,001

Diluted net operating earnings per common share 1.76 1.95 3.62 3.50 3.37

Return on (annualized):

Average tangible assets .74 % .94 % 1.67 % 1.66 % 1.68 %

Average tangible common equity 9.04 % 10.39 % 19.08 % 18.85 % 18.83 %

Efficiency ratio 55.71 % 58.91 % 53.15 % 55.95 % 55.98 %

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

Loan quality 2020 2020 2019 2019 2019

Nonaccrual loans $ 1,156,650 1,061,748 963,112 1,005,249 865,384

Real estate and other foreclosed assets 66,763 83,605 85,646 79,735 72,907

Total nonperforming assets $ 1,223,413 1,145,353 1,048,758 1,084,984 938,291

Accruing loans past due 90 days or more (4) $ 535,755 530,317 518,728 461,162 348,725

Government guaranteed loans included in totals above:

Nonaccrual loans $ 51,165 50,561 50,891 43,144 36,765

Accruing loans past due 90 days or more 454,269 464,243 479,829 434,132 320,305

Renegotiated loans $ 234,768 232,439 234,424 240,781 254,332

Accruing loans acquired at a discount past due 90 days or N/A N/A 39,632 40,733 43,079 more (5)

Purchased impaired loans (6):

Outstanding customer balance N/A N/A 415,413 453,382 473,834

Carrying amount N/A N/A 227,545 253,496 263,025

Nonaccrual loans to total net loans 1.18 % 1.13 % 1.06 % 1.12 % .96 %

Allowance for credit losses to total loans 1.68 % 1.47 % 1.16 % 1.16 % 1.15 %

______________

(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 appear 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 Six months ended

June 30 June 30

Dollars in thousands 2020 2019 Change 2020 2019 Change

Interest income $ 1,032,242 1,237,913 -17 % $ 2,152,661 2,464,222 -13 %

Interest expense 75,105 196,432 -62 218,719 372,681 -41

Net interest income 957,137 1,041,481 -8 1,933,942 2,091,541 -8

Provision for credit losses 325,000 55,000 491 575,000 77,000 647

Net interest income after provision for credit losses 632,137 986,481 -36 1,358,942 2,014,541 -33

Other income

Mortgage banking revenues 145,024 107,321 35 272,933 202,632 35

Service charges on deposit accounts 77,455 107,787 -28 183,616 210,899 -13

Trust income 151,882 144,382 5 300,633 277,168 8

Brokerage services income 10,463 12,478 -16 23,592 24,954 -5

Trading account and foreign exchange gains 8,290 18,453 -55 29,306 29,255 -

Gain (loss) on bank investment securities 6,969 8,911 -22 (13,813) 20,752 -

Other revenues from operations 87,190 112,763 -23 220,366 247,200 -11

Total other income 487,273 512,095 -5 1,016,633 1,012,860 -

Other expense

Salaries and employee benefits 458,842 455,737 1 995,685 954,937 4

Equipment and net occupancy 77,089 79,150 -3 156,729 158,497 -1

Outside data processing and software 61,376 55,234 11 125,786 107,651 17

FDIC assessments 14,207 9,772 45 26,478 19,198 38

Advertising and marketing 9,842 24,046 -59 32,217 44,321 -27

Printing, postage and supplies 11,260 10,324 9 22,112 20,179 10

Amortization of core deposit and other 3,913 5,077 -23 7,826 10,097 -22 intangible assets

Other costs of operations 170,513 233,692 -27 346,625 452,500 -23

Total other expense 807,042 873,032 -8 1,713,458 1,767,380 -3

Income before income taxes 312,368 625,544 -50 662,117 1,260,021 -47

Applicable income taxes 71,314 152,284 -53 152,241 304,019 -50

Net income $ 241,054 473,260 -49 % $ 509,876 956,002 -47 %

Condensed Consolidated Statement of Income, Five Quarter Trend

Three months ended

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

Dollars in thousands 2020 2020 2019 2019 2019

Interest income $ 1,032,242 1,120,419 1,185,902 1,229,469 1,237,913

Interest expense 75,105 143,614 177,069 199,579 196,432

Net interest income 957,137 976,805 1,008,833 1,029,890 1,041,481

Provision for credit losses 325,000 250,000 54,000 45,000 55,000

Net interest income after provision for credit losses 632,137 726,805 954,833 984,890 986,481

Other income

Mortgage banking revenues 145,024 127,909 118,134 137,004 107,321

Service charges on deposit accounts 77,455 106,161 110,987 111,092 107,787

Trust income 151,882 148,751 151,525 143,915 144,382

Brokerage services income 10,463 13,129 11,891 12,077 12,478

Trading account and foreign exchange gains 8,290 21,016 16,717 16,072 18,453

Gain (loss) on bank investment securities 6,969 (20,782) (6,452) 3,737 8,911

Other revenues from operations 87,190 133,176 118,238 103,882 112,763

Total other income 487,273 529,360 521,040 527,779 512,095

Other expense

Salaries and employee benefits 458,842 536,843 469,080 476,780 455,737

Equipment and net occupancy 77,089 79,640 82,892 82,690 79,150

Outside data processing and software 61,376 64,410 61,720 60,360 55,234

FDIC assessments 14,207 12,271 12,431 9,906 9,772

Advertising and marketing 9,842 22,375 27,063 22,088 24,046

Printing, postage and supplies 11,260 10,852 9,513 10,201 10,324

Amortization of core deposit and other 3,913 3,913 4,305 5,088 5,077 intangible assets

Other costs of operations 170,513 176,112 156,679 210,506 233,692

Total other expense 807,042 906,416 823,683 877,619 873,032

Income before income taxes 312,368 349,749 652,190 635,050 625,544

Applicable income taxes 71,314 80,927 159,124 154,969 152,284

Net income $ 241,054 268,822 493,066 480,081 473,260

Condensed Consolidated Balance Sheet

June 30

Dollars in thousands 2020 2019 Change

ASSETS

Cash and due from banks $ 1,354,815 1,271,611 7 %

Interest-bearing deposits at banks 20,888,341 8,791,753 138

Trading account 1,293,534 479,403 170

Investment securities 8,454,344 11,580,249 -27

Loans and leases:

Commercial, financial, etc. 29,203,862 23,431,408 25

Real estate - commercial 37,159,451 35,194,375 6

Real estate - consumer 15,611,462 16,693,737 -6

Consumer 15,782,773 14,558,538 8

Total loans and leases, net of unearned discount 97,757,548 89,878,058 9

Less: allowance for credit losses 1,638,236 1,029,867 59

Net loans and leases 96,119,312 88,848,191 8

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

Core deposit and other intangible assets 21,208 38,428 -45

Other assets 6,812,303 5,952,148 14

Total assets $ 139,536,969 121,554,895 15 %

LIABILITIES AND SHAREHOLDERS' EQUITY

Noninterest-bearing deposits $ 45,397,843 30,747,946 48 %

Interest-bearing deposits 68,701,832 59,568,223 15

Deposits at Cayman Islands office 868,284 1,364,855 -36

Total deposits 114,967,959 91,681,024 25

Short-term borrowings 52,298 4,611,390 -99

Accrued interest and other liabilities 2,250,316 1,915,147 18

Long-term borrowings 6,321,291 7,655,507 -17

Total liabilities 123,591,864 105,863,068 17

Shareholders' equity:

Preferred 1,250,000 1,231,500 2

Common 14,695,105 14,460,327 2

Total shareholders' equity 15,945,105 15,691,827 2

Total liabilities and shareholders' equity $ 139,536,969 121,554,895 15 %

Condensed Consolidated Balance Sheet, Five Quarter Trend

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

Dollars in thousands 2020 2020 2019 2019 2019

ASSETS

Cash and due from banks $ 1,354,815 1,298,192 1,432,805 1,818,861 1,271,611

Interest-bearing deposits at banks 20,888,341 8,896,307 7,190,154 12,495,524 8,791,753

Federal funds sold - - 3,500 200 -

Trading account 1,293,534 1,224,291 470,129 614,256 479,403

Investment securities 8,454,344 8,956,590 9,497,251 10,677,583 11,580,249

Loans and leases:

Commercial, financial, etc. 29,203,862 26,243,648 23,838,168 23,201,372 23,431,408

Real estate - commercial 37,159,451 36,684,106 35,541,914 34,945,231 35,194,375

Real estate - consumer 15,611,462 15,643,014 16,156,094 16,500,955 16,693,737

Consumer 15,782,773 15,571,507 15,386,693 15,175,635 14,558,538

Total loans and leases, net of unearned discount 97,757,548 94,142,275 90,922,869 89,823,193 89,878,058

Less: allowance for credit losses 1,638,236 1,384,366 1,051,071 1,038,437 1,029,867

Net loans and leases 96,119,312 92,757,909 89,871,798 88,784,756 88,848,191

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

Core deposit and other intangible assets 21,208 25,121 29,034 33,339 38,428

Other assets 6,812,303 6,826,311 6,784,974 6,483,295 5,952,148

Total assets $ 139,536,969 124,577,833 119,872,757 125,500,926 121,554,895

LIABILITIES AND SHAREHOLDERS' EQUITY

Noninterest-bearing deposits $ 45,397,843 35,554,715 32,396,407 31,766,724 30,747,946

Interest-bearing deposits 68,701,832 63,410,672 60,689,618 61,785,212 59,568,223

Deposits at Cayman Islands office 868,284 1,217,921 1,684,044 1,561,997 1,364,855

Total deposits 114,967,959 100,183,308 94,770,069 95,113,933 91,681,024

Short-term borrowings 52,298 59,180 62,363 5,513,896 4,611,390

Accrued interest and other liabilities 2,250,316 2,198,116 2,337,490 2,090,762 1,915,147

Long-term borrowings 6,321,291 6,321,435 6,986,186 7,002,524 7,655,507

Total liabilities 123,591,864 108,762,039 104,156,108 109,721,115 105,863,068

Shareholders' equity:

Preferred 1,250,000 1,250,000 1,250,000 1,250,000 1,231,500

Common 14,695,105 14,565,794 14,466,649 14,529,811 14,460,327

Total shareholders' equity 15,945,105 15,815,794 15,716,649 15,779,811 15,691,827

Total liabilities and shareholders' equity $ 139,536,969 124,577,833 119,872,757 125,500,926 121,554,895

Condensed Consolidated Average Balance Sheet and Annualized Taxable-equivalentRates

Three months ended Change in balance Six months ended

June 30, June 30, March 31, June 30, 2020 from June 30, Change

Dollars in millions 2020 2019 2020 June 30, March 31, 2020 2019 in

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

ASSETS

Interest-bearing deposits at banks $ 16,454 .10 % 6,122 2.38 % 6,130 1.24 % 169 % 168 % $ 11,292 .41 % 5,368 2.39 % 110 %

Federal funds sold and agreements

to resell securities 692 .11 1 2.83 1,224 1.34 - -43 958 .90 1 2.83 -

Trading account 49 2.04 68 2.20 64 2.64 -28 -24 56 2.38 66 2.79 -16

Investment securities 8,500 2.24 12,170 2.49 9,102 2.22 -30 -7 8,801 2.23 12,557 2.51 -30

Loans and leases, net of unearned

discount

Commercial, financial, etc. 29,733 3.10 23,335 4.97 24,290 4.10 27 22 27,011 3.55 23,173 5.02 17

Real estate - commercial 36,947 4.42 34,768 5.30 36,034 4.83 6 3 36,491 4.62 34,647 5.32 5

Real estate - consumer 15,599 4.00 16,723 4.29 15,931 4.03 -7 -2 15,765 4.02 16,830 4.33 -6

Consumer 15,518 4.85 14,324 5.53 15,451 5.30 8 - 15,484 5.07 14,165 5.52 9

Total loans and leases, net 97,797 4.05 89,150 5.09 91,706 4.61 10 7 94,751 4.32 88,815 5.12 7

Total earning assets 123,492 3.38 107,511 4.64 108,226 4.18 15 14 115,858 3.75 106,807 4.68 8

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

Core deposit and other intangible

assets 23 41 27 -44 -14 25 43 -42

Other assets 8,338 6,342 7,739 31 8 8,037 6,224 29

Total assets $ 136,446 118,487 120,585 15 % 13 % $ 128,513 117,667 9 %

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing deposits

Savings and interest-checking

deposits $ 62,927 .17 53,495 .69 56,366 .56 18 % 12 % $ 59,646 .35 52,799 .64 13 %

Time deposits 5,354 1.49 6,530 1.53 5,672 1.55 -18 -6 5,513 1.52 6,441 1.44 -14

Deposits at Cayman Islands

office 1,017 .06 1,247 1.94 1,672 .82 -18 -39 1,344 .54 1,110 1.96 21

Total interest-bearing

deposits 69,298 .27 61,272 .80 63,710 .65 13 9 66,503 .45 60,350 .75 10

Short-term borrowings 63 .01 1,263 2.51 58 .16 -95 9 60 .08 1,177 2.50 -95

Long-term borrowings 6,189 1.86 8,278 3.20 6,240 2.60 -25 -1 6,215 2.23 8,386 3.21 -26

Total interest-bearing liabilities 75,550 .40 70,813 1.11 70,008 .83 7 8 72,778 .60 69,913 1.08 4

Noninterest-bearing deposits 42,497 30,099 32,456 41 31 37,477 30,207 24

Other liabilities 2,446 1,945 2,401 26 2 2,422 1,948 24

Total liabilities 120,493 102,857 104,865 17 15 112,677 102,068 10

Shareholders' equity 15,953 15,630 15,720 2 1 15,836 15,599 2

Total liabilities and

shareholders' equity $ 136,446 118,487 120,585 15 % 13 % $ 128,513 117,667 9 %

Net interest spread 2.98 3.53 3.35 3.15 3.60

Contribution of interest-free funds .15 .38 .30 .22 .37

Net interest margin 3.13 % 3.91 % 3.65 % 3.37 % 3.97 %

Reconciliation of Quarterly GAAP to Non-GAAP Measures

Three months ended Six months ended

June 30 June 30

2020 2019 2020 2019

Income statement data

In thousands, except per share

Net income

Net income $ 241,054 473,260 509,876 956,002

Amortization of core deposit and other intangible assets (1) 2,904 3,741 5,787 7,439

Net operating income $ 243,958 477,001 515,663 963,441

Earnings per common share

Diluted earnings per common share $ 1.74 3.34 3.67 6.69

Amortization of core deposit and other intangible assets (1) .02 .03 .04 .05

Diluted net operating earnings per common share $ 1.76 3.37 3.71 6.74

Other expense

Other expense $ 807,042 873,032 1,713,458 1,767,380

Amortization of core deposit and other intangible assets (3,913) (5,077) (7,826) (10,097)

Noninterest operating expense $ 803,129 867,955 1,705,632 1,757,283

Efficiency ratio

Noninterest operating expense (numerator) $ 803,129 867,955 1,705,632 1,757,283

Taxable-equivalent net interest income 961,371 1,047,406 1,943,239 2,103,433

Other income 487,273 512,095 1,016,633 1,012,860

Less: Gain (loss) on bank investment securities 6,969 8,911 (13,813) 20,752

Denominator $ 1,441,675 1,550,590 2,973,685 3,095,541

Efficiency ratio 55.71 % 55.98 % 57.36 % 56.77 %

Balance sheet data

In millions

Average assets

Average assets $ 136,446 118,487 128,513 117,667

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

Core deposit and other intangible assets (23) (41) (25) (43)

Deferred taxes 6 11 7 11

Average tangible assets $ 131,836 113,864 123,902 113,042

Average common equity

Average total equity $ 15,953 15,630 15,836 15,599

Preferred stock (1,250) (1,232) (1,250) (1,232)

Average common equity 14,703 14,398 14,586 14,367

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

Core deposit and other intangible assets (23) (41) (25) (43)

Deferred taxes 6 11 7 11

Average tangible common equity $ 10,093 9,775 9,975 9,742

At end of quarter

Total assets

Total assets $ 139,537 121,555

Goodwill (4,593) (4,593)

Core deposit and other intangible assets (21) (38)

Deferred taxes 5 10

Total tangible assets $ 134,928 116,934

Total common equity

Total equity $ 15,945 15,692

Preferred stock (1,250) (1,232)

Undeclared dividends - cumulative preferred stock - (3)

Common equity, net of undeclared cumulative preferred dividends 14,695 14,457

Goodwill (4,593) (4,593)

Core deposit and other intangible assets (21) (38)

Deferred taxes 5 10

Total tangible common equity $ 10,086 9,836

________________

(1)After any related tax effect.

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

Three months ended

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

2020 2020 2019 2019 2019

Income statement data

In thousands, except per share

Net income

Net income $ 241,054 268,822 493,066 480,081 473,260

Amortization of core deposit and other intangible assets (1) 2,904 2,883 3,171 3,749 3,741

Net operating income $ 243,958 271,705 496,237 483,830 477,001

Earnings per common share

Diluted earnings per common share $ 1.74 1.93 3.60 3.47 3.34

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

Diluted net operating earnings per common share $ 1.76 1.95 3.62 3.50 3.37

Other expense

Other expense $ 807,042 906,416 823,683 877,619 873,032

Amortization of core deposit and other intangible assets (3,913) (3,913) (4,305) (5,088) (5,077)

Noninterest operating expense $ 803,129 902,503 819,378 872,531 867,955

Efficiency ratio

Noninterest operating expense (numerator) $ 803,129 902,503 819,378 872,531 867,955

Taxable-equivalent net interest income 961,371 981,868 1,014,225 1,035,469 1,047,406

Other income 487,273 529,360 521,040 527,779 512,095

Less: Gain (loss) on bank investment securities 6,969 (20,782) (6,452) 3,737 8,911

Denominator $ 1,441,675 1,532,010 1,541,717 1,559,511 1,550,590

Efficiency ratio 55.71 % 58.91 % 53.15 % 55.95 % 55.98 %

Balance sheet data

In millions

Average assets

Average assets $ 136,446 120,585 122,554 120,388 118,487

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

Core deposit and other intangible assets (23) (27) (31) (36) (41)

Deferred taxes 6 7 8 10 11

Average tangible assets $ 131,836 115,972 117,938 115,769 113,864

Average common equity

Average total equity $ 15,953 15,720 15,832 15,837 15,630

Preferred stock (1,250) (1,250) (1,250) (1,373) (1,232)

Average common equity 14,703 14,470 14,582 14,464 14,398

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

Core deposit and other intangible assets (23) (27) (31) (36) (41)

Deferred taxes 6 7 8 10 11

Average tangible common equity $ 10,093 9,857 9,966 9,845 9,775

At end of quarter

Total assets

Total assets $ 139,537 124,578 119,873 125,501 121,555

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

Core deposit and other intangible assets (21) (25) (29) (33) (38)

Deferred taxes 5 6 7 8 10

Total tangible assets $ 134,928 119,966 115,258 120,883 116,934

Total common equity

Total equity $ 15,945 15,816 15,717 15,780 15,692

Preferred stock (1,250) (1,250) (1,250) (1,250) (1,232)

Undeclared dividends - cumulative preferred stock - - - - (3)

Common equity, net of undeclared cumulative preferred 14,695 14,566 14,467 14,530 14,457 dividends

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

Core deposit and other intangible assets (21) (25) (29) (33) (38)

Deferred taxes 5 6 7 8 10

Total tangible common equity $ 10,086 9,954 9,852 9,912 9,836

__________________

(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