M&T Bank Corporation — Q1 2024 Form 10-Q
Business context and reporting period
Quarter ended March 31, 2024; comparative results are for the three months ended March 31, 2023 unless otherwise noted. M&T is a bank holding company with Commercial Bank, Retail Bank, and Institutional Services and Wealth Management segments. Figures are in U.S. dollars; financial statement amounts are generally in millions.
Key financial metrics
| Metric | Q1 2024 | Comparison |
|---|---|---|
| Net interest income | $1.68 billion | Down 8% year over year |
| Net interest margin | 3.52% | 4.04% in Q1 2023 |
| Provision for credit losses | $200 million | $120 million in Q1 2023 |
| Other income | $580 million | $587 million in Q1 2023 |
| Other expense | $1.40 billion | $1.36 billion in Q1 2023 |
| Net income | $531 million | Down 24% from $702 million |
| Net income available to common shareholders | $505 million | $676 million in Q1 2023 |
| Diluted earnings per share | $3.02 | $4.01 in Q1 2023 |
| Cash from operating activities | $608 million | $428 million in Q1 2023 |
- Balance sheet at March 31: Total assets were $215.1 billion, up from $208.3 billion at year-end 2023. Loans and leases, net of allowance, were $132.8 billion; deposits were $167.2 billion; shareholders’ equity was $27.2 billion.
- Funding and liquidity: Short-term borrowings were $4.8 billion and long-term borrowings $11.5 billion, versus $5.3 billion and $8.2 billion, respectively, at December 31. Available liquidity sources totaled $81.5 billion. Uninsured deposits were estimated at $71.9 billion; available liquidity was approximately 135% of uninsured deposits not collateralized by the Company.
- Credit and capital: Allowance for credit losses was $2.19 billion, or 1.62% of loans, compared with $2.13 billion and 1.59% at year-end. Nonaccrual loans were $2.30 billion; total nonperforming assets were $2.34 billion. Consolidated CET1 ratio was 11.08%, total capital ratio 14.04%, and tangible common equity to tangible assets 8.03%.
- Margins and returns: Annualized return on average assets was 1.01%; return on average common equity was 8.14%. The non-GAAP efficiency ratio was 60.8%, compared with 55.5% in Q1 2023.
- Shareholder distributions: Common dividends were $1.30 per share. No shares were repurchased under the public repurchase program in Q1 2024.
Material changes versus the prior comparable period
- Net interest income fell $138 million as interest costs—especially on deposits and borrowings—increased faster than yields on earning assets. Net interest margin contracted 52 basis points.
- Provision for credit losses rose $80 million. Net charge-offs were $138 million, versus $70 million; criticized commercial and industrial and commercial real estate loans together increased to $12.9 billion from $12.6 billion at year-end 2023.
- Average loans and leases increased 1% to $133.8 billion. Commercial and industrial and consumer balances grew, while commercial real estate and residential real estate balances declined year over year.
- Average deposits increased 2% to $164.1 billion, but average core deposits decreased 3%. Management cited customers moving from noninterest-bearing accounts to higher-cost interest-bearing products and other alternatives.
- Net income declined 24%. The Q1 2023 comparison included $45 million of trust income from the CIT business, sold in April 2023; the divested business’s net operating effect in that quarter was described as not material.
Outlook, management commentary, risks and unusual items
- Management described an elevated-rate environment, deposit competition and a funding mix shift toward higher-cost products as pressures on net interest margin. The filing provides no specific earnings or margin guidance.
- Management cited credit pressure from lower commercial real estate values and higher rates, including among nonautomotive finance dealers and healthcare borrowers. Criticized investor-owned commercial real estate loans were $8.5 billion, or 26% of that portfolio; office, retail, multifamily, hotel and healthcare exposures are among areas monitored.
- The allowance analysis assumes a two-year forecast period. A modeled downside scenario would increase modeled credit losses by $347 million; this sensitivity is not a forecast of actual losses.
- The Company recorded $29 million of incremental FDIC special assessment expense in Q1, in addition to $197 million recognized in Q4 2023. The accrued assessment liability was $226 million at March 31; the FDIC may revise its estimate.
- Long-term borrowings increased following a $2.0 billion FHLB advance and issuance of $850 million in senior notes, alongside auto-loan-backed notes. Management said borrowing activity supports funding diversification and preparation for proposed long-term debt requirements.
- Investment securities had $1.5 billion of gross unrealized losses, largely associated with interest rates. Management said it expected to recover amortized cost and did not intend, nor expect to be required, to sell impaired securities at a loss.
- Potential risks include economic slowdown, inflation, interest-rate and deposit-pricing changes, real estate valuation and refinancing pressures, credit deterioration, liquidity or funding-market disruption, regulatory changes, and litigation. Reasonably possible legal losses beyond recorded liabilities were estimated at $0–$25 million; management said outcomes could affect results in a future period.
- The proposed bank capital rules could increase M&T’s risk-weighted assets by a mid-single-digit percentage, based on management’s current estimate. The rules remain proposed.
Important facts for investors to verify
- Whether deposit pricing and funding costs continue to outpace asset-yield changes, and how that affects net interest income and margin.
- Trends in criticized and nonaccrual commercial loans, particularly investor-owned commercial real estate, nonautomotive finance dealers and healthcare, and resulting charge-offs and reserves.
- Deposit stability, uninsured-deposit levels, wholesale funding reliance, borrowing maturities and the availability of secured liquidity under stress.
- Updates to the FDIC special assessment and any effect on expenses or the accrued liability.
- Final regulatory capital requirements and their effect on risk-weighted assets and capital ratios; the filing does not provide specific forward earnings guidance.