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M&T reports strong 1st quarter profits

By Jonathan D. Epstein
NEWS BUSINESS REPORTER
Published:April 18, 2011

M&T Bank Corp. said Monday that first-quarter profits rose 36 percent, as lending income rose, credit costs fell and noninterest income surged despite regulatory changes that dampened fees from deposit service charges.

The Buffalo-based bank reported profits of $206 million, or $1.59 per share, up from $151 million, or $1.15 per share, in the same period a year ago. Profits were flat from the fourth quarter, when the $67.9-billion-asset bank earned $204 million, or $1.59 per share.

During the quarter, the area’s No. 2 bank by market share recorded $24 million in gains from selling investment securities, particularly residential mortgage-backed securities guaranteed by Fannie Mae. There were no similar gains in either the first or fourth quarters of 2010.

Not including accounting changes and merger-related gains or costs, net operating income rose 34.2 percent to $216 million, or $1.67 per share, from $161 million, or $1.23 per share, in the first quarter of 2010. Profits rose 10 percent from the fourth quarter, when the bank’s net operating income was $196 million, or $1.52 per share.

“M&T experienced a positive start to 2011 by recording solid financial results in the first quarter,” said Chief Financial Officer Rene F. Jones.

“Revenue showed noticeable improvement from last year's first quarter... We are also encouraged by continuing improved credit quality, which resulted in lower credit costs in the recent quarter. Although nonperforming assets remain at historically high levels, we have seen some encouraging signs of improving economic conditions within M&T's footprint.”

M&T, which came through the financial crisis and recession virtually unscathed in stark contrast to many of its peers, is one of the first large regional banks to report earnings.

By comparison to M&T, rival KeyCorp of Cleveland, the No. 4 bank in Buffalo, swung to a profit for common shareholders of $173 million, a significant improvement from a net loss of $96 million a year ago.

At M&T, net interest income from taking deposits and making loans rose 2 percent to $575 million, as the profit margin on lending widened from paying lower interest rates on deposits.



Credit quality continued to improve. The bank set aside $75 million for loan losses, down from $105 million a year ago and $85 million in the fourth quarter, and wrote off $74 million as uncollectible, down from $95 million a year ago and $77 million in the fourth quarter.

Fees and other noninterest income soared 22 percent to $314 million, including $23 million in gains from investment securities compared to a loss of $26 million from securities a year ago. Excluding the gains and losses, noninterest income rose 2.5 percent to $291 million from $284 million a year ago, led by higher commercial mortgage banking revenues, letter of credit and other credit fees, trading and foreign exchange gains and other operating revenues. That was partially offset by lower consumer deposit fees.

Expenses rose 2.2 percent to $500 million, including merger and other non-operating costs. Excluding those, operating expenses rose 2.1 percent to $483 million, mostly because of higher costs for advertising, processing and professional services.