M&T Bank Corp. said Thursday that it has suffered about $100 million in "unrealized" losses on its investment portfolio because of the subprime mortgage crisis.
In a presentation to a Merrill Lynch & Co. investor conference in New York, M&T Chief Financial Officer Rene Jones said the losses on three investment securities will not affect the company's earnings unless the decline in their value is determined to be permanent.
In the meantime, it's a "paper" loss reflected in the bank's equity, as the securities are reduced from their original value to their current market value of just $31 million.
"It's something that we'll continue to monitor and determinations on the status of those securities will be made in the future," said spokesman C. Michael Zabel.
M&T shares fell $3.58 Thursday, closing at $91.
With the disclosure, M&T becomes the latest large bank to be hit by the growing credit market turmoil, which began during the summer following months of soaring mortgage losses on loans to borrowers with bad credit. However, the effect on M&T is minimal compared to that on others.
So far, more than nine major banks and brokerages have announced more than $46 billion in writedowns on the value of their mortgage investments, particularly in so-called "collateralized debt obligations" or "collateralized mortgage obligations."
In M&T's case, the bank said that, in all, it had $132 million in exposure to CDOs, representing less than 1 percent of its total securities portfolio of $8 billion, according to Jones' presentation, which was also filed with the Securities and Exchange Commission. About 75 percent of the total portfolio are mortgage-related investments.
Because the bank is holding the securities for possible sale and not to maturity, accounting rules require the investments to be recorded quarterly on the bank's balance sheet at their current market value. An actual loss will not be taken, however, unless the investments are actually sold or the drop in value is considered permanent.