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M&T Bank's earnings tumble Fannie, Freddie stock largely to blame

M&T Bank Corp. said Tuesday that profits for the third quarter fell 54.3 percent, as one-time charges for the bank's holdings of Fannie Mae and Freddie Mac stock and a higher provision for bad debt swamped otherwise stable results in a tumultuous quarter.

The Buffalo-based bank reported net income of $91 million, or 82 cents per share, down from $199 million, or $1.83 per share, in the same period a year ago. Excluding special accounting charges in both quarters, net operating income was $101 million, or 91 cents per share, down from $209 million, or $1.92 per share.

That included a one-time pretax charge of $153 million for the drop in value of the bank's investment in preferred shares of Fannie and Freddie, the mortgage finance giants that were seized by the government and placed in conservator's oversight last month, diluting stockholders. That's a 94 percent loss on the investment, which originally cost $162 million.

The charge reduced earnings after taxes by $97 million, or 88 cents per share. The bank had warned it would take a hit, but hadn't quantified it.

On the other side, M&T lowered its taxes by $40 million, or 36 cents per share, after it took back reserves that had previously been set aside for taxes in various jurisdictions that it no longer had to pay following closed audits.

Not including those factors, the bank would have reported per-share earnings of $1.34, handily beating the consensus estimate of Wall Street at $1.07.
"I think we're doing a very good job," said Chief Financial Officer Rene Jones, in an interview. "When you look at our year-over-year earnings, you do get a sense of how challenging the market is for all banks. But when you see this earnings season done, we will be among the top performers of the 21 largest banks, even with the write down."

Jones said the bank expects mid- to upper-single-digit loan growth and a stable profit margin in the fourth quarter, as well as higher losses, particularly on consumer loans.

M&T's results offered concrete support to what it has said all along: that it hasn't been as heavily affected by the national banking and credit crisis as many other regional and giant banks nationwide.
Net interest income rose 4 percent to $493 million, as average loans and leases during the quarter rose 11 percent to $48.5 billion, driven by growth in business loans, commercial real estate loans and consumer loans.

M&T set aside $101 million for loan losses, triple the $34 million a year ago, but flat with the second quarter. Write-offs totaled $94 million, nearly quadruple the $22 million a year ago but down from $99 million in the second quarter. That included $33 million and $38 million from home builders in the current and second quarters, respectively.


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