M&T Bank's Mortgage Revenue Jumps 24%

  • M&T Bank reports first-quarter earnings per share of $1.50.
  • Analysts were expecting EPS of $1.48.
  • Mortgage banking revenue increased 24% year-over-year, to $56.2 million.

NEW YORK ( TheStreet) - M&T Bank ( MTB) on Monday reported a 24% year-over-year increase in mortgage banking revenue and a four-fold increase in trust revenue, as it continued to integrate its Wilmington Trust acquisition.

The Buffalo, N.Y. lender reported net income available to common shareholders of $188.2 million during the first quarter, or $1.50 a share, compared to fourth-quarter earnings to common shareholders of $129.8 million, or $1.04 a share, and earnings to common shareholders of $190.1 million, or $1.59 a share, during the first quarter of 2011.

M&T's fourth-quarter results were boosted by a $55 million litigation settlement, it its results during the first quarter of 2011 included $39 million in pretax gains from the sale of securities, primarily guaranteed by Fannie Mae ( FNMA).
M&T Bank Corp. CEO Robert Wilmers

The first-quarter earnings came in slightly ahead of the $1.48 estimate among analysts polled by Thomson Reuters.

M&T reported first-quarter mortgage banking revenue of $56.2 million, increasing from $40.6 million the previous quarter, and $45.2 million a year earlier. The company said that its new strategy of holding more mortgage loans on its balance sheet reduced "mortgage banking revenues by approximately $21 million that would have been recognized had the loans been held for sale."

First-quarter trust income totaled $117.0 million, increasing from $113.8 million the previous quarter and $29.3 million a year earlier, reflecting "continued progress with the integration of Wilmington Trust," according to CFO Rene Jones.

Jones added that "average loans grew an impressive 10% on an annualized basis as compared with the fourth quarter of 2011." Average loans totaled $60.5 billion in the first quarter, growing 16% year-over-year, reflecting in part the Wilmington acquisition.

M&T's net interest margin -- the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings -- was 3.69%, improving from 3.60% during the fourth quarter, reflecting "the impact of a $1.41 billion increase in average loans outstanding in 2012's initial quarter, which largely offset a decline in lower yielding balances held at the Federal Reserve Bank of New York." In keeping with the industry trend in the prolonged low-rate environment, the net interest margin declined from 3.92% in the first quarter of 2011.

M&T's first-quarter return on average assets was 1.06%, improving from 0.75% the previous quarter, but down from 1.23% a year earlier. The ROA was a solid number, considering that the year-earlier results reflected the $39 pretax gain on securities sales. During the most recent quarter, M&T saw negligible gain on securities sales.

The first-quarter return on average common equity was 9.04%, compared to 6.12% in the fourth quarter and 10.16% during the first quarter of 2011.

M&T owes $230 million in federal bailout money received through the Troubled Assets Relief Program, or TARP, in December 2008, plus an additional $151.5 million in TARP money that was originally provided to Provident Bancshares, which M&T acquired in May 2009. It remains to be seen whether or not the company will offer common shares to the public in order to raise money to repay the government.

Following the completion of the Federal Reserve's annual bank holding company stress tests in March, M&T made no announcement related to its capital management plans, or plans to repay TARP.

The company previously repaid $230 million in TARP money, and an additional $330 million originally provided by the government to Wilmington Trust.

Jones said that M&T's key "Tier 1 common ratio increased 18 basis points from the 2011 year-end to 7.04% at the end of the first quarter."

M&T's shares closed at $84.43 Friday, returning 12% year-to-date, following a 9% decline during 2011.

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The shares trade for 2.2 times the company's reported March 31, Tangible equity per common share of $37.79, and for 11 times the consensus 2013 EPS estimate of $7.46. The consensus 2012 EPS estimate is $6.68.

Based on a quarterly payout of 70 cents, the shares have a dividend yield of 3.32%.

Interested in more on M&T Bank? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.