M&T Bank Corp. 2021 Form 10-K Summary
Business context and reporting period. Annual report for the fiscal year ended December 31, 2021, with fourth-quarter comparisons. M&T is a regional bank holding company providing retail and commercial banking, trust and wealth management, mortgage, and related services, primarily across the Northeast and Mid-Atlantic. It reported $155.1 billion in consolidated assets and operated 688 domestic banking offices.
Key financial results and position
| Metric | 2021 | Prior comparable period |
|---|---|---|
| Net income | $1.859 billion; up 37% | $1.353 billion in 2020 |
| Diluted EPS | $13.80 | $9.94 in 2020 |
| Net interest income, GAAP | $3.825 billion | $3.866 billion in 2020 |
| Net interest income, taxable-equivalent | $3.840 billion | $3.884 billion in 2020 |
| Net interest margin | 2.76% | 3.16% in 2020 |
| Other income | $2.167 billion | $2.088 billion in 2020 |
| Provision for credit losses | $75 million recapture | $800 million provision in 2020 |
| Noninterest expense | $3.612 billion total; $3.558 billion excluding identified nonoperating items | $3.385 billion total in 2020 |
| Efficiency ratio | 59.0% | 56.3% in 2020 |
| Return on average assets | 1.22% | 1.00% in 2020 |
Other income was supported by trust income ($645 million), mortgage banking revenue ($571 million) and deposit service charges ($402 million). Total revenue before credit-loss provision, using GAAP net interest income plus other income, was approximately $5.992 billion.
Fourth quarter. Net income was $458 million, versus $471 million in Q4 2020; diluted EPS was $3.37 versus $3.52. Taxable-equivalent net interest income was $937 million, and net interest margin was 2.58%, down from 3.00% a year earlier. The quarter included a $15 million credit-loss provision recapture, $21 million of merger-related expense, and an efficiency ratio of 59.7%.
Balance sheet and liquidity. At year-end, total assets were $155.1 billion, up from $142.6 billion; deposits were $131.5 billion, up from $119.8 billion; and shareholders’ equity was $17.9 billion, up from $16.2 billion. Loans and leases, net of unearned discount, were $92.9 billion, compared with $98.5 billion. Interest-bearing deposits at banks were $41.9 billion. The company estimated $69.1 billion of uninsured deposits. It reported $47 million of short-term borrowings and $3.485 billion of long-term borrowings, down from $4.382 billion.
Regulatory capital ratios at year-end were 11.42% CET1, 13.11% Tier 1, 15.33% total capital and 8.87% leverage for M&T on a consolidated basis. The applicable stress capital buffer was 2.5%. Management stated that available liquidity sources were adequate for anticipated needs; M&T Bank had approximately $16.2 billion of FHLB facilities and a $13.8 billion Federal Reserve line available, subject to collateral requirements.
Cash flow. Net cash provided by operating activities was $2.715 billion, compared with $789 million in 2020. Investing activities used $13.632 billion, mainly reflecting an $18.208 billion increase in interest-bearing deposits at banks, partly offset by net loan repayments. Financing activities provided $10.701 billion, primarily from deposit growth. Cash, cash equivalents and restricted cash decreased $215 million to $1.338 billion; this cash-flow measure does not include the separately reported interest-bearing bank deposits.
Material changes versus prior periods
- Net income recovered from 2020, chiefly as the credit-loss provision shifted from an $800 million charge to a $75 million recapture. Net charge-offs declined to $192 million from $247 million.
- Net interest margin narrowed 40 basis points year over year as low rates reduced asset yields. Average earning assets rose to $139.1 billion from $122.9 billion, driven largely by low-yielding balances at the Federal Reserve and other banks.
- The allowance for credit losses fell to $1.469 billion from $1.736 billion. Nonaccrual loans rose to $2.060 billion, or 2.22% of loans, from $1.893 billion, or 1.92%; hotel-related commercial real estate loans were a notable concern.
- Expenses increased, including salaries and benefits, data processing and software, FDIC assessments, and professional services. The efficiency ratio worsened to 59.0% from 56.3%.
- Deposits continued to grow, particularly noninterest-bearing balances. M&T closed its Cayman Islands office after replacing the Eurodollar sweep product with a new interest-bearing sweep product.
Outlook, risks, contingencies and unusual items
- People’s United acquisition: M&T agreed to acquire People’s United in an all-stock transaction valued at approximately $7.8 billion. Shareholders and state regulators had approved it, but Federal Reserve approval and other closing conditions remained outstanding at year-end. M&T recorded $44 million of pretax merger expense ($34 million after tax) in 2021. The filing cites integration, approval, employee-retention and litigation risks; a $280 million termination fee could apply in certain circumstances.
- Management outlook: No specific earnings guidance is provided. Management said low interest rates could continue to pressure net interest margin until rates rise, and that future credit provisions could increase if economic assumptions or borrower repayment performance deteriorate. The company also cited possible continued pandemic effects and risks from new variants.
- Credit and economic exposure: Criticized commercial and commercial real estate loans totaled $9.0 billion, up from $7.2 billion. Management highlighted hotel, office and healthcare exposures and regional economic weakness. COVID-related deferrals totaled $1.2 billion at year-end, predominantly residential real estate loans; substantially all were expected to expire during 2022 or move to formal modified repayment terms.
- Interest-rate and benchmark risk: The filing describes exposure to rate changes and the transition from LIBOR, which was expected to cease or become nonrepresentative for the main U.S. dollar tenors by June 30, 2023. M&T had largely stopped entering new LIBOR-based contracts by year-end and continued remediating legacy exposures.
- Fees and capital returns: In February 2022, M&T announced overdraft and nonsufficient-funds fee changes that it estimated would reduce 2022 deposit service-charge income by approximately $40 million. It declared $4.50 per common share in 2021 dividends and authorized an $800 million repurchase program, but made no common-stock repurchases during 2021.
- Legal matters and audit: Beyond recorded legal liabilities, reasonably possible aggregate losses were estimated at $0–$25 million; outcomes could still materially affect a particular period. PwC gave unqualified opinions on the financial statements and internal control over financial reporting. The critical audit matter concerned adjustments to credit-loss model forecasts.
Most important facts for investors to verify
- Whether the People’s United transaction received approval and closed, and whether its integration costs, savings and benefits matched expectations.
- Whether net interest margin stabilizes or continues to decline as rates, deposit costs and balance-sheet mix change.
- Whether criticized and nonaccrual loans—particularly hotel, office and healthcare-related real estate—translate into higher charge-offs or provisions.
- How much of the $1.2 billion of COVID-related deferrals returned to contractual payment, and the subsequent performance of those loans.
- Whether deposit growth, uninsured-deposit levels, liquidity capacity and regulatory capital remain adequate under stress.
- Whether fee changes, LIBOR remediation, cybersecurity and other regulatory or operational risks materially affect revenue or expenses.