M&T(US:MTB)2024-05-03 19:12Part I. FINANCIAL INFORMATION Financial Statements This section presents M&T Bank Corporation's unaudited consolidated financial statements as of March 31, 2024 Consolidated Balance Sheet As of March 31, 2024, total assets increased to $215.1 billion, with corresponding growth in liabilities and equity Consolidated Balance Sheet Highlights (Unaudited) | (In millions) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Total loans and leases, net | $132,782 | $131,939 | | Total investment securities | $28,496 | $26,897 | | Total assets | $215,137 | $208,264 | | Liabilities & Equity | | | | Total deposits | $167,196 | $163,274 | | Total borrowings | $16,245 | $13,517 | | Total liabilities | $187,968 | $181,307 | | Total shareholders' equity | $27,169 | $26,957 | Consolidated Statement of Income Q1 2024 net income was $531 million, down from $702 million in Q1 2023, due to lower net interest income Q1 2024 vs. Q1 2023 Income Statement (Unaudited) | (In millions, except per share) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net interest income | $1,680 | $1,818 | | Provision for credit losses | $200 | $120 | | Total other income | $580 | $587 | | Total other expense | $1,396 | $1,359 | | Income before taxes | $664 | $926 | | Net income | $531 | $702 | | Diluted EPS | $3.02 | $4.01 | Notes to Financial Statements Detailed disclosures supporting financial statements, covering investment securities, loan portfolio, and borrowing activities - In Q2 2023, the Company sold its Collective Investment Trust (CIT) business, resulting in a pre-tax gain of $225 million. Prior to the sale, the CIT business contributed $45 million to trust income in Q1 202324 - The Company recorded an additional FDIC special assessment expense of $29 million in Q1 2024, related to bank failures in 2023. This is in addition to the $197 million recorded in Q4 2023, bringing the total accrued liability to $226 million at March 31, 2024118 - The Company holds a 20% minority interest in Bayview Lending Group, LLC (BLG) and recognized income of $25 million from cash distributions in Q1 2024, compared to $20 million in Q1 2023122 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses Q1 2024 financial condition and results, highlighting interest rate impact and credit losses Overview Q1 2024 net income was $531 million, up sequentially but down YoY, impacted by interest rates and FDIC assessment Q1 2024 Financial Highlights | (In millions, except per share) | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $1,680 | $1,722 | $1,818 | | Provision for credit losses | $200 | $225 | $120 | | Net Income | $531 | $482 | $702 | | Diluted EPS | $3.02 | $2.74 | $4.01 | | Net Interest Margin | 3.52% | 3.61% | 4.04% | - The effective tax rate was 20.0% in Q1 2024, compared to 24.2% in Q1 2023, reflecting a net discrete benefit from the resolution of a tax matter inherited from the People's United acquisition131 Net Interest Income Net interest income decreased to $1.69 billion in Q1 2024, with NIM compressing to 3.52% due to elevated interest rates - The net interest margin was 3.52% in Q1 2024, a decrease of 9 basis points from Q4 2023 (3.61%) and 52 basis points from Q1 2023 (4.04%)142 - The yield on earning assets in Q1 2024 was 5.74%, while the rate paid on interest-bearing liabilities was 3.26%, resulting in a net interest spread of 2.48%. This compares to a spread of 3.30% in Q1 2023162 - Interest rate swaps had a negative impact of $100 million on net interest income in Q1 2024, compared to a negative impact of $69 million in Q1 2023167 Asset Quality and Allowance for Credit Losses Asset quality showed stress with a $200 million provision for credit losses in Q1 2024, and increased net charge-offs - The provision for credit losses was $200 million in Q1 2024, compared to $120 million in Q1 2023, reflecting declines in commercial real estate values and deterioration in performance of certain commercial and consumer loans169 Net Charge-offs (NCOs) | (In millions) | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Total NCOs | $138 | $148 | $70 | | NCOs as % of avg. loans | 0.42% | 0.44% | 0.22% | - Nonaccrual loans increased to $2.30 billion at March 31, 2024, from $2.17 billion at December 31, 2023, largely due to an increase in commercial and industrial nonaccruals175 - Criticized investor-owned commercial real estate loans were $8.5 billion (26% of such loans) at March 31, 2024, compared to $8.8 billion (27%) at December 31, 2023182 - The allowance for credit losses was $2.2 billion, or 1.62% of total loans, at March 31, 2024, up from 1.59% at December 31, 2023201 Other Income Total other income was $580 million in Q1 2024, slightly down due to CIT business sale, offset by mortgage banking revenues Other Income Components | (In millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Mortgage banking revenues | $104 | $85 | | Service charges on deposit accounts | $124 | $113 | | Trust income | $160 | $194 | | Other revenues from operations | $152 | $159 | | Total other income | $580 | $587 | - The decrease in trust income was driven by the divestiture of the CIT business, which had contributed $45 million in Q1 2023216 - Residential mortgage banking revenues increased to $78 million from $55 million year-over-year, mainly due to higher loan servicing fees from a bulk purchase of servicing rights in March 2023206207 Other Expense Total other expense increased to $1.40 billion in Q1 2024, driven by higher FDIC assessments and salaries Other Expense Components | (In millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Salaries and employee benefits | $833 | $808 | | FDIC assessments | $60 | $30 | | Professional and other services | $85 | $125 | | Outside data processing and software | $120 | $106 | | Total other expense | $1,396 | $1,359 | - Salaries and employee benefits included $99 million of seasonally higher costs in both Q1 2024 and Q1 2023218 - FDIC assessments in Q1 2024 included a $29 million estimated incremental special assessment related to 2023 bank failures219 Liquidity and Capital The company maintained strong liquidity with $81.5 billion in available sources and all regulatory capital ratios well above minimums Available Liquidity Sources (March 31, 2024) | (In millions) | Amount | | :--- | :--- | | Deposits at the FRB of New York | $32,033 | | Unused secured borrowing facilities (FRB & FHLB) | $32,993 | | Unencumbered investment securities (after haircuts) | $16,506 | | Total | $81,532 | Regulatory Capital Ratios (March 31, 2024) | Ratio | M&T (Consolidated) | | :--- | :--- | | CET1 | 11.08% | | Tier 1 capital | 12.38% | | Total capital | 14.04% | | Tier 1 leverage | 9.47% | - There were no common stock repurchases in Q1 2024. In Q1 2023, the company repurchased 3.8 million shares for $600 million250 Segment Information Retail Bank was the largest contributor to Q1 2024 net income at $446 million, followed by Commercial Bank and Institutional Services Net Income by Segment (Q1 2024 vs Q1 2023) | (In millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Commercial Bank | $201 | $333 | | Retail Bank | $446 | $452 | | Institutional Services & Wealth Management | $128 | $110 | | All Other | ($244) | ($193) | | Total Net Income | $531 | $702 | - Commercial Bank net income fell 40% YoY, driven by lower net interest income and a higher provision for credit losses261 - Retail Bank net income was stable YoY, as higher noninterest income (from mortgage servicing) offset a higher provision for credit losses268 - Institutional Services & Wealth Management net income grew 16% YoY, despite lower trust income from the CIT sale, due to lower expenses and higher net interest income272 Quantitative and Qualitative Disclosures About Market Risk This section incorporates by reference discussions on Liquidity Risk, Market Risk, Interest Rate Sensitivity, and Capital from MD&A - Information regarding market risk, including liquidity risk and interest rate sensitivity, is incorporated by reference from the MD&A section of the report293 Controls and Procedures The CEO and CFO concluded that disclosure controls were effective as of March 31, 2024, with no material changes to internal control - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report (March 31, 2024)294 - No changes in internal control over financial reporting occurred during Q1 2024 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting295 Part II. OTHER INFORMATION Legal Proceedings The company estimates reasonably possible losses for legal matters to be between $0 and $25 million beyond existing liabilities - The company estimates the range of reasonably possible losses for legal matters, beyond existing recorded liabilities, to be between $0 and $25 million as of March 31, 2024298 Risk Factors No material changes to the risk factors disclosed in the company's 2023 Annual Report on Form 10-K have occurred - No material changes in risk factors have occurred since those disclosed in the 2023 Annual Report299 Unregistered Sales of Equity Securities and Use of Proceeds The company purchased 18,415 shares of equity securities in Q1 2024, primarily for tax obligations on employee awards Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Jan 2024 | 210 | $136.94 | | Feb 2024 | 0 | N/A | | Mar 2024 | 18,205 | $140.05 | | Total | 18,415 | $140.01 | - As of March 31, 2024, approximately $1.2 billion remained available for repurchase under the publicly announced program authorized in July 2022300301 Exhibits This section lists exhibits filed with the Form 10-Q, including a retirement agreement and Sarbanes-Oxley certifications - Exhibits filed include a retirement agreement for Doris Meister, Sarbanes-Oxley certifications (Sections 302 and 906) from the CEO and CFO, and XBRL data files305