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M&T considers more than banks as it weighs acquisition options

As M&T Bank considers making acquisitions, it's thinking about more than just banks, said M&T's chief financial officer, Darren King.

M&T recently received the green light to make deals again, after the Federal Reserve lifted a restriction in place since 2013. For M&T, acquisitions have historically meant buying banks, but King said M&T's "spectrum is a little broader" than in the past, given its growth in business lines such as mortgage servicing and wealth management.

"We're certainly open to having those conversations," King said, as M&T released its third quarter earnings on Wednesday. "It takes both a willing buyer, which we are, and a willing seller."

King said he viewed the landscape for dealmaking, particularly among larger banks, as having been "frozen" but now "thawing." Most consolidations in the past couple of years involved banks with $10 billion in assets and below. But some bigger deals have emerged, such as KeyBank's deal for First Niagara Bank and Huntington Bank's purchase of FirstMerit Bank.

"I think people are kind of opening up to it," King said. "And now the really question is, what's on the sellers' minds?"

While there has been "some warming," King said he doesn't think the mergers and acquisitions world "is about to take off any time soon."

King said M&T's criteria hasn't changed from the past, focusing on factors including the purchase price and the impact on its earnings per share. "All those numbers have to work, along with having a willing seller," he said.

Darren King, M&T Bank's chief financial officer. (Derek Gee/Buffalo News)

M&T tends to prefer deals in places where the bank already has a presence, or in a contiguous market, so that M&T can tap into its brand and its personnel in that region, King said.

M&T has also favored deals large enough to make an impact on its financial results to justify the investment, but not so large that the risk of combining the two organizations is unmanageable, King said. M&T has historically bought banks generally 20 to 40 percent of its size, he said.

M&T in the third quarter reported a 2 percent increase in net income from a year ago, to $356 million. Its diluted earnings per share increased 5 percent, to $2.21.

Wilmington Trust, an M&T subsidiary, recently announced a $60 million settlement with the U.S. Attorney's Office in Delaware, to resolve allegations predating M&T's purchase of Wilmington Trust.

The $60 million included $16 million previously paid to the U.S. Securities and Exchange Commission in a related action, M&T said. The $44 million payment to cover the rest of the settlement was not deductible for income tax purposes. M&T in the third quarter increased its reserve for legal matters by $50 million to handle the expense.

The bank's third quarter net income was reduced by $48 million during the third quarter due to the settlement. But King put that into the context of the $1 billion or so in profits M&T will likely earn this year. "Sixty million dollars on that, we produce so much earnings that we're able to handle a hit like that without really much impact on the bank overall. In the quarter that it happens, it can be material."

"We'd rather have the $60 million back than not, don't get me wrong," he said. "But it's something that we're able to handle fairly easily within our earnings stream."

Wilmington Trust did not admit liability as part of the settlement, and King said M&T was "pleased to have that legal proceeding behind us."

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