M&T Bank Corporation (MTB)

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M&T Bank Corporation (MTB)

Q4 2010 Earnings Call Transcript

January 13, 2011 10:30 am ET


Don MacLeod – VP and Assistant Secretary, IR

René Jones – EVP and CFO


John Pancari – Evercore Partners

Todd Hagerman – Collins Stewart

Matthew O'Connor – Deutsche Bank

Matthew Clark – Keefe, Bruyette & Woods

Bob Ramsey – FBR Capital Markets

Steve Alexopoulos – JP Morgan Securities

Kenneth Usdin – Jefferies

John Fox – Fenimore Asset Management

Andrew Jave [ph] – Cowen

Collyn Gilbert – Stifel Nicolaus

Gary Paul [ph]

Brian Foran – Nomura

Gerard Cassidy – RBS

Mac Hodgson – SunTrust Robinson Humphrey

Sachin Shah – Capstone Global

Matthew Kelley – Sterne Agee Leach



Good morning. My name is Wess, and I will be your conference operator today. At this time, I would like to welcome everyone to the M&T Bank fourth quarter fiscal year 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I'll now turn the conference over to Mr. Don MacLeod, Director of Investor Relations. Please go ahead, sir.

Don MacLeod

Thank you, Wes and good morning everyone. This Don MacLeod I'd like to thank everyone for participating in M&T's fourth quarter 2010 earnings conference call, both by telephone and through the webcast. If you have not read the earnings release, we issued this morning, you may access it along with the financial tables and schedules from our website at www.mtb.com and by clicking on the Investor Relations link.

Also before we start, I'd like to mention that comments made during this call might contain forward-looking statements relating to the banking industry and to M&T Bank Corporation. M&T encourages participants to refer to our SEC filings, including those found on Forms 10-K, 8-K, and 10-Q for a complete discussion of forward-looking statements.

Now, I'd like to introduce our Chief Financial Officer, René Jones.

René Jones

Thank you, Don, and good morning everyone. Thank you for joining us on the call today. I understand that both we and our much larger friends downstairs are reporting our results this morning, hopefully both of us will set a positive tone for the coming earnings season.

I'll quickly review some of the highlights from our results and then we'll take your questions. As slight break from the past I'd like to start by summarizing M&T's performance for 2010.

Overall our results for 2010 were driven by steadily improving credit trends, that saw net charge-offs fall 33% to $346 million or 67 basis points of average loans and provisioning for loan losses fall 39% to $368 million. Losses on investment securities including other than temporary impairment charges presumably fell 39% to $84 million. Taken together these two factors contributed significantly to our strong year-over-year performance.

M&T's liquidity position continued to improve in 2010 as the slow pace of economic recovery contributed to balance sheet contraction for much of the year. While core deposit growth remained robust. Encouragingly late fourth quarter growth in our commercial loan and commercial real estate loan portfolios resulted in a positive linked quarter loan increase for the first time in several quarters.

Additionally expansion of the net interest margin coupled with good expense control contributed to improving operating efficiencies and higher returns, enabling M&T to offset the reduction in consumer service charges caused by the mid-year implementation of changes to regulation E.

Turning to the specific numbers, for the full year of 2010 diluted earnings per common share were $5.69, an increase of 97% over $2.89 in 2009. Net income for 2010 was $736 million which represents 94% increase over the $380 million in 2009.

GAAP basis net income for the full year of 2010 expressed as a rate of return on average assets and average common shareholders' equity rose 1.08% and 9.3% respectively up from 0.56% and 5.07% in 2009.

M&T consistently provides supplemental reporting of its results on a net operating or tangible basis from which we exclude the after tax effect of amortization of intangible assets. As well as expenses and gains associated with mergers and acquisitions. Included in GAAP earnings for 2010 was net after tax merger related gain from the K Bank acquisition of $16 million or $0.14 per common share. This compares to $36 million or $0.31 per common share of net after-tax merger-related expenses in 2009, reflecting costs arising from the Provident and Bradford Bank mergers, partially offset by the gain on the Bradford transaction.

Also included in these earnings for the past year was the after-tax expense from the amortization of intangible assets amounting to $35 million or $0.29 per common share compared to $39 million or $0.34 per common share in 2009.

Net operating income for 2010, which excludes those items I just mentioned, was $755 million or $5.84 per common share for 2010, an increase of 66% from $455 million or $3.54 per common share in 2009.

In accordance with the SEC guidelines, this morning’s press release contains a tabular reconciliation of GAAP and non-GAAP results including tangibles assets and equity. For the rate of return on average tangible assets and average tangible common stockholders' equity was 1.17% and 18.95% respectively for 2010, up from 0.71% and 13.42% in 2009.

Turning for the most recent quarter, diluted GAAP earnings per common share were $1.59 in the fourth quarter of 2010, improved from $1.48 earned in the third quarter of 2010. Net income for the recent quarter was $204 million, up from $192 million in the linked quarter. GAAP-basis net income for the fourth quarter of 2010 expressed as an annualized rate of return on average assets and average common equity was 1.18% and 10.03% respectively compared with 1.12% and 9.56% respectively in the prior quarter.

As I noted earlier, the net after-tax merger-related gain in the recent quarter arising from the K Bank acquisition was $16 million or $0.14 per common share. There was no merger-related activity in the third quarter of 2010.

After-tax expense from the amortization of core deposits and other intangible assets amounted to $8 million or $0.07 per common share in both the third and fourth quarters of 2010 and M&T’s net operating income for the quarter, which excludes those items, was $196 million compared with $200 million on a lined quarter. Diluted net operating earnings per common share were $1.52 for the recent quarter compared with the $1.55 in the linked quarter.

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