M&T(MTB) - 2024 Q1 - Quarterly Results

First Quarter 2024 Performance Overview Financial Highlights M&T Bank reported Q1 2024 net income of $531 million, a year-over-year decrease but sequential increase, impacted by margin compression Q1 2024 Key Financial Metrics | (Dollars in millions, except per share data) | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net income | $531 | $482 | $702 | | Diluted earnings per common share | $3.02 | $2.74 | $4.01 | | Net interest income | $1,680 | $1,722 | $1,818 | | Provision for credit losses | $200 | $225 | $120 | | Net interest margin | 3.52% | 3.61% | 4.04% | | CET1 capital ratio (estimated) | 11.07% | 10.98% | 10.16% | - The Common Equity Tier 1 (CET1) capital ratio improved to an estimated 11.07% at March 31, 2024, up 9 basis points from 10.98% at the end of 2023[5] - Net interest margin narrowed to 3.52% from 3.61% in Q4 2023, attributed to higher liquidity, a shift from cash to investment securities, and increased deposit and borrowing costs[5] - First quarter expenses included $99 million in seasonal employee compensation and a $29 million incremental FDIC special assessment[5] Chief Financial Officer Commentary CFO Daryl N. Bible noted a solid start to 2024, with growth in specific loan portfolios, reduced CRE exposure, and strengthened capital and liquidity - The bank successfully grew certain sectors of its commercial and consumer loan portfolios[4] - Management continued to shrink the bank's commercial real estate (CRE) exposure[4] - M&T's liquidity and capital position strengthened, reflecting a stable deposit base and increased borrowings[4] Detailed Financial Analysis Net Interest Income Taxable-equivalent net interest income was $1.69 billion, declining due to a narrowing net interest margin of 3.52%, primarily from increased interest-bearing liability costs Net Interest Income and Margin Analysis | (Dollars in millions) | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Taxable-equivalent Net Interest Income | $1,692 | $1,735 | $1,832 | | Net interest margin | 3.52% | 3.61% | 4.04% | | Yield on average earning assets | 5.74% | 5.73% | 5.16% | | Cost of interest-bearing liabilities | 3.26% | 3.17% | 1.86% | - Compared to Q4 2023, the decrease in NII was influenced by a $2.9 billion increase in average borrowings and higher rates on both borrowings and deposits[11] - Year-over-year, the cost of interest-bearing deposits rose by 144 basis points, and average borrowings increased by $4.5 billion, significantly pressuring the net interest margin[11] Average Earning Assets Average earning assets grew to $193.1 billion, driven by higher interest-bearing deposits and commercial & industrial and consumer loans, partially offset by commercial real estate loan declines Average Earning Assets Breakdown (in millions) | Category | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Interest-bearing deposits at banks | $30,647 | $30,153 | $24,312 | | Investment securities | $28,587 | $27,490 | $27,622 | | Commercial and industrial loans | $56,821 | $55,420 | $52,510 | | Real estate - commercial loans | $32,696 | $33,455 | $35,245 | | Total earning assets | $193,135 | $190,536 | $184,069 | - Sequentially, average loans and leases increased by $1.0 billion, led by growth in commercial & industrial and consumer loans, while commercial real estate loans declined[16] Average Interest-bearing Liabilities Average interest-bearing liabilities increased to $131.5 billion, primarily due to significant rises in short-term and long-term borrowings and a shift to interest-bearing deposit products Average Interest-bearing Liabilities Breakdown (in millions) | Category | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Total interest-bearing deposits | $115,450 | $114,589 | $99,683 | | Short-term borrowings | $6,228 | $5,156 | $4,994 | | Long-term borrowings | $9,773 | $7,901 | $6,511 | | Total interest-bearing liabilities | $131,451 | $127,646 | $111,188 | - Compared to Q4 2023, average borrowings increased by $2.9 billion, mainly due to a senior notes issuance and higher FHLB borrowings[19] Provision for Credit Losses and Asset Quality Provision for credit losses was $200 million, down sequentially but up significantly year-over-year, reflecting commercial real estate pressures and higher interest rates, with nonaccrual loans at $2.3 billion Asset Quality Metrics (in millions) | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Provision for credit losses | $200 | $225 | $120 | | Net charge-offs | $138 | $148 | $70 | | Net charge-offs as % of avg. loans | 0.42% | 0.44% | 0.22% | | Nonaccrual loans | $2,302 | $2,166 | $2,557 | | Allowance for credit losses as % of loans | 1.62% | 1.59% | 1.49% | - Higher provisions in recent quarters reflect declines in commercial real estate values and deteriorating performance of loans to commercial borrowers, including nonautomotive dealers and healthcare facilities[21] - Nonaccrual loans increased by $136 million from Q4 2023, largely due to an increase in commercial and industrial nonaccruals, partially offset by a decrease in commercial real estate nonaccruals[22] Noninterest Income Noninterest income was $580 million, stable sequentially but down 1% year-over-year, boosted by a $25 million distribution but offset by lower mortgage banking and trust income from a business sale Noninterest Income Breakdown (in millions) | Category | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Mortgage banking revenues | $104 | $112 | $85 | | Service charges on deposit accounts | $124 | $121 | $113 | | Trust income | $160 | $159 | $194 | | Other revenues from operations | $152 | $145 | $159 | | Total | $580 | $578 | $587 | - Other revenues from operations increased sequentially due to a $25 million distribution from Bayview Lending Group LLC[25] - Trust income decreased by $34 million year-over-year, reflecting the sale of the company's Collective Investment Trust (CIT) business in April 2023[25] Noninterest Expense Noninterest expense was $1.40 billion, decreasing sequentially due to a lower FDIC special assessment but increasing year-over-year due to higher salaries and an incremental FDIC assessment Noninterest Expense Breakdown (in millions) | Category | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $833 | $724 | $808 | | FDIC assessments | $60 | $228 | $30 | | Professional and other services | $85 | $99 | $125 | | Other costs of operations | $134 | $110 | $115 | | Total | $1,396 | $1,450 | $1,359 | - Salaries and benefits expense increased by $109 million sequentially, reflecting annual merit increases and $99 million of seasonally higher compensation and taxes[28] - FDIC assessments in Q1 2024 included a $29 million incremental special assessment, compared to a $197 million special assessment in Q4 2023[28] Income Taxes The effective tax rate for Q1 2024 was 20.0%, lower than prior quarters due to a net discrete tax benefit from resolving a tax matter related to the People's United Financial acquisition - The effective tax rate was 20.0% in Q1 2024, compared to 22.9% in Q4 2023 and 24.2% in Q1 2023[29] - The lower tax rate reflects a net discrete tax benefit from resolving a tax matter related to the People's United Financial, Inc. acquisition[29] Capital M&T's capital position strengthened, with the estimated Common Equity Tier 1 (CET1) ratio increasing to 11.07%, remaining well above regulatory minimums, with dividends declared but no common stock repurchases Capital Ratios | Ratio | Q1 2024 (est.) | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | CET1 | 11.07% | 10.98% | 10.16% | | Tier 1 capital | 12.37% | 12.29% | 11.48% | | Total capital | 14.03% | 13.99% | 13.28% | - M&T did not repurchase any shares of its common stock in Q1 2024, compared to repurchasing 3.8 million shares for $600 million in Q1 2023[31] Financial Statements and Reconciliations Financial Highlights and Trends This section provides a comparative view of M&T's financial performance, highlighting key metrics for Q1 2024 versus Q1 2023, five-quarter trends, and recent credit quality metrics Performance Comparison: Q1 2024 vs Q1 2023 | (Dollars in millions, except per share) | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net income | $531 | $702 | -24% | | Diluted earnings per common share | $3.02 | $4.01 | -25% | | Taxable-equivalent net interest income | $1,692 | $1,832 | -8% | | Net interest margin | 3.52% | 4.04% | | Five Quarter Net Interest Margin Trend | Quarter | Net Interest Margin (%) | | :--- | :--- | | Q1 2024 | 3.52% | | Q4 2023 | 3.61% | | Q3 2023 | 3.79% | | Q2 2023 | 3.91% | | Q1 2023 | 4.04% | Condensed Consolidated Financial Statements The condensed consolidated financial statements provide detailed line-item data for the Statement of Income, Balance Sheet, and Average Balance Sheet, offering a comprehensive view of the company's financial position and performance - The Condensed Consolidated Statement of Income shows a year-over-year decrease in net interest income and an increase in provision for credit losses, leading to a 24% decline in net income[45] - The Condensed Consolidated Balance Sheet as of March 31, 2024, shows total assets of $215.1 billion, up 6% from a year ago, driven by increases in interest-bearing deposits at banks and net loans[48] - Total deposits grew 5% year-over-year to $167.2 billion, with a significant shift from noninterest-bearing (-16%) to interest-bearing deposits (+18%)[48] Reconciliation of GAAP to Non-GAAP Measures This section reconciles GAAP results to non-GAAP measures, with Q1 2024 diluted net operating earnings at $3.09 per share, primarily adjusted for after-tax amortization of core deposit and other intangible assets Q1 2024 GAAP to Non-GAAP Reconciliation | (per share) | GAAP ($) | Adjustments ($) | Non-GAAP ($) | | :--- | :--- | :--- | :--- | | Diluted earnings per common share | $3.02 | $0.07 | $3.09 | - Non-GAAP measures exclude the after-tax effect of amortization of core deposit and other intangible assets, which management considers to be 'nonoperating' in nature[8]