M&T Bank Corporation (MTB)

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M&T Bank (MTB)

Q1 2011 Earnings Call

April 18, 2011 1:30 pm ET

Executives

Donald MacLeod - Vice President and Assistant Secretary

René Jones - Chief Financial Officer, Executive Vice President, Chief Financial Officer of M & T Bank and Executive Vice President of M & T Bank

Robert Wilmers - Chairman, Chief Executive Officer, Chairman of Executive Committee, Chairman of the Board of M&t Bank and Chief Executive Officer of M&t Bank

Analysts

Todd Hagerman - Sterne Agee & Leach Inc.

Craig Siegenthaler - Crédit Suisse AG

Collyn Gilbert - Stifel, Nicolaus & Co., Inc.

L. Erika Penala

Kenneth Usdin - Jefferies & Company, Inc.

John Pancari - Evercore Partners Inc.

Gerard Cassidy - RBC Capital Markets, LLC

Marty Mosby - Guggenheim Securities, LLC

Bob Ramsey - FBR Capital Markets & Co.

Matthew Clark - Keefe, Bruyette, & Woods, Inc.

Unknown Analyst -

Steven Alexopoulos - JP Morgan Chase & Co

Ken Zerbe

Presentation

Operator

Good afternoon. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the M&T Bank First Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now turn the conference over to Don MacLeod, Director of Investor Relations. Please go ahead.

Donald MacLeod

Thank you, Melissa, and good afternoon. This is Don MacLeod, and I’d like to thank everyone for participating in M&T's First Quarter 2011 Earnings Conference Call both by telephone and through the webcast. If you've not read the earnings release we issued this morning, you may access it along with the financial tables and schedules from our website, www.mtb.com, and by clicking on the Investor Relations link.

Also before we start, I would 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 8-K, 10-K and 10-Q for a complete discussion of forward-looking statements.

Now I’d like to introduce our Chief Financial Officer, Rene Jones.

René Jones

Thank you, Don, and good afternoon, everyone. Thank you for joining us on the call. I'll cover a few of the highlights from our earnings and then we'll take your questions.

Overall, our results for the first quarter of 2011 were consistent with the trends we've seen over the past several quarters, that is to say modest but steady improvement in most of our metrics.

Turning to the specific numbers. For the first quarter of 2011, diluted earnings per common share were $1.59, unchanged from the prior quarter and up 38% from the $1.15 in the first quarter of 2010.

Net income for the recent quarter was $206 million, compared with $204 million in the linked quarter and $151 million in last year's first quarter. M&T's results for the first quarter include the impact of a repositioning of our balance sheet, leading up to the merger of Wilmington Trust. During the recent quarter, M&T sold investment securities, predominantly including $484 million of agency pass-through securities, resulting in an after-tax gain amounting to $24 million or $0.20 per common share.

As we included in our November 1, 2010 investor presentation announcing the Wilmington deal, we have targeted post-closing capital ratios at a level that will approximate those in place as of September 30, 2010, before announcement of the deal. Also included in our GAAP earnings for this year's first quarter was after-tax expense from the amortization of intangible assets amounting to $7 million or $0.06 per common share. This compares with $8 million or $0.07 per common share in the linked quarter and $10 million or $0.08 per common share in the year-ago quarter.

The first quarter results included after-tax expenses related to the completed K Bank acquisition, as well as the upcoming Wilmington Trust merger amounting to $3 million or $0.02 per common share. The results in the fourth quarter of 2010 included a merger-related gain of $16 million or $0.14 per common share relating to the K Bank acquisition. There were no merger-related items in last year's first quarter.

Net operating income, which excludes the amortization of intangibles as well as merger-related items, was $216 million or $1.67 per common share for the first quarter of 2011, compared with $196 million or $1.52 per common share in the linked quarter and $161 million or $1.22 per common share in last year's first quarter. Excluding the securities gains I just mentioned, net operating income was improved by 20% from the year-ago quarter.

In accordance with the SEC guidelines, this morning's press release contains a tabular reconciliation of GAAP and non-GAAP results, including tangible assets and equity.

The annualized return on average tangible assets and average tangible common shareholders' equity was 1.36% and 20.16% for the recent quarter, compared with 1.2% and 18.43% in the fourth quarter of 2010.

Next, I'd like to cover a few highlights from the balance sheet and the income statement. Taxable equivalent net interest income was $575 million for the first quarter of 2011, up 2% from $562 million in the first quarter of 2010. But due to a lower day count, down from $580 million in the linked quarter. The net interest margin widened during the first quarter, averaging 3.92%, an increase of seven basis points from 3.85% in the sequential quarter. Five basis points of the improvement came as a result of the lower level of money market assets in the first quarter as compared with the fourth quarter. Recall that in the fourth quarter, we had an average of almost $800 million of reversed repurchase agreements on the balance sheet to collateralize the seasonal inflow of municipal deposits. The low yield on those balances had a downward impact on the net interest margin in the fourth quarter. Those balances were virtually zero in the first quarter. Our use of reverse repurchase agreements will fluctuate from time to time based on seasonal levels of municipal deposits which require authorization.

The day count of 90 days in the first quarter versus 92 days in the linked quarter accounted for an approximate three basis points increase in the margin as well.

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