M&T Bank Corp. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a stand-alone fourth-quarter filing. M&T provides banking, lending, trust and wealth-management services, primarily in the Northeast and Mid-Atlantic. On April 1, 2022, it acquired People’s United Financial, significantly expanding its footprint and balance sheet; acquired results are included from that date.
Financial performance and condition
| Metric | 2022 | 2021 |
|---|---|---|
| Total assets at year-end | $200.7 billion | $155.1 billion |
| Deposits at year-end | $163.5 billion | $131.5 billion |
| Loans and leases, net of unearned discount | $131.6 billion | $92.9 billion |
| Net interest income, GAAP | $5.82 billion | $3.82 billion |
| Other income | $2.36 billion | $2.17 billion |
| Provision for credit losses | $517 million | $(75) million |
| Net income | $1.99 billion | $1.86 billion |
| Diluted earnings per share | $11.53 | $13.80 |
| Net interest margin, taxable-equivalent | 3.39% | 2.76% |
| Efficiency ratio (non-GAAP calculation) | 56.6% | 59.0% |
Net income rose 7%, but diluted EPS fell as the acquisition increased the share count. The company reported a 1.05% return on average assets and an 8.67% return on average common equity, down from 1.22% and 11.54%, respectively, in 2021. Management’s non-GAAP net operating income was $2.47 billion, or $14.42 per diluted share; it excludes merger-related expenses and intangible amortization.
Cash flow: Net cash provided by operating activities was $4.57 billion, versus $2.71 billion in 2021. Investing activities provided $16.59 billion, largely reflecting a decline in interest-bearing deposits at banks; financing activities used $20.98 billion, including deposit outflows, $1.8 billion of share repurchases and dividends. Cash and cash equivalents increased $183 million to $1.52 billion.
Liquidity, funding and capital: Year-end short-term borrowings increased to $3.55 billion from $47 million; long-term borrowings were $3.96 billion. Core deposits averaged $153.8 billion, and estimated uninsured deposits were $74.2 billion at year-end. Management said available liquidity sources were adequate for anticipated normal-course needs. Consolidated shareholders’ equity was $25.3 billion. The CET1 ratio was 10.44%; M&T’s 4.7% stress capital buffer took effect October 1, making its CET1 requirement 9.2%.
Credit: The allowance for credit losses was $1.93 billion, or 1.46% of loans, compared with $1.47 billion, or 1.58%, in 2021. Net charge-offs fell to $160 million from $192 million. Nonaccrual loans increased in dollars to $2.44 billion, partly reflecting the acquisition, but declined to 1.85% of loans from 2.22%. Criticized commercial and commercial real estate loans rose to $10.7 billion from $9.0 billion; $7.8 billion were investor-owned commercial real estate loans.
Material changes and unusual items
- The People’s United acquisition was valued at approximately $8.4 billion and added $35.8 billion of loans and $53.0 billion of deposits at acquisition. M&T recorded $3.9 billion of goodwill and issued common and preferred shares as consideration.
- Taxable-equivalent net interest income grew 53%, reflecting higher rates, a 63-basis-point increase in the annual net interest margin and acquired earning assets. Average earning assets rose to $172.8 billion from $139.1 billion.
- Merger-related expenses were $580 million pre-tax ($432 million after tax) in 2022, including a $242 million provision on acquired non-PCD loans. Management does not expect material People’s United merger-related expenses in 2023.
- M&T recorded a $136 million pre-tax gain on the October sale of M&T Insurance Agency and made a $135 million tax-deductible contribution to The M&T Charitable Foundation in the fourth quarter.
- Net unrealized losses on investment securities reflected in shareholders’ equity were $329 million after tax, compared with net unrealized gains of $78 million in 2021. Management reported no credit-related losses on debt securities and said it did not intend, nor expect to be required, to sell impaired securities before recovery.
Outlook, risks and contingencies
The filing provides no formal numerical earnings or revenue guidance. Management cited inflation, potentially weaker growth, higher unemployment, lower residential property values and continued concerns about commercial real estate—particularly hospitality, health care and office—as factors in its year-end credit-loss estimates. It warned that interest rates affect margins, funding costs, securities values and mortgage activity; deposit competition and migration to higher-cost accounts could pressure funding costs.
Other significant risks include integrating People’s United and realizing anticipated cost savings; regional economic concentration; credit deterioration and commercial real estate exposure; liquidity and deposit retention; cybersecurity, third-party and operational risks; and regulatory, legal and climate-related risks. The transition away from LIBOR was ongoing: the company reported substantial legacy exposures and continued remediation work, with cessation expected after June 30, 2023.
The FDIC’s higher assessment rates were expected to increase M&T’s 2023 assessments by approximately $35 million. M&T expected to resume originating most newly committed residential mortgages for sale in the first quarter of 2023. Wilmington Trust’s sale of its collective investment trust business was expected to close in the first half of 2023 and produce a gain. M&T also disclosed $3.5 billion of senior-note issuances in January 2023.
Legal proceedings are ongoing in the normal course. Beyond recorded liabilities, management estimated reasonably possible aggregate losses of $0–$25 million at year-end, while noting outcomes in a particular period could still be material. The auditor issued unqualified opinions on the financial statements and internal control. However, controls over People’s United processes not yet converted to M&T systems were excluded from the assessment; those processes covered approximately $5.9 billion of assets and $280 million of nine-month revenue.
Important facts for investors to verify
- How deposit pricing, deposit balances and uninsured-deposit retention affect funding costs and net interest margin as rates change.
- Whether People’s United integration delivers expected benefits, and how acquired credit quality and remaining integration costs develop.
- Commercial real estate and criticized-loan trends, including office, hospitality and health-care exposures, and the adequacy of credit-loss reserves.
- The impact of securities valuation losses, capital requirements and capital distributions on tangible book value and shareholder returns.
- Completion of systems conversion and related control assessments, as well as progress on LIBOR remediation and the announced trust-business sale.