M&T Bank Earnings Call Nuggets: BSA Update and Anti-Money Laundering
M&T Bank Corp (NYSE:MTB) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
Brian Klock – Keefe, Bruyette & Woods: So just real quick on the BSA update I guess. Thanks for giving us some of that color. I know you can’t say much, but as far as the expense base, and I guess your guidance for expense is for the rest of the year. You mentioned you hired the consultants. It looks like on your website, you had five new postings for some BSA related employees. I guess, should we be thinking about an uptick into the second quarter on an expense base related to that BSA issue?
Rene F. Jones – Executive Vice President and CFO: Well, I think, Brian, the first thing I’d say is, we’ll clearly make the investments we need to make and we’ll sort of go full steam ahead. I thought this is wonderful, you already noticed the postings, but look –I think let’s put it in context. We’ve been making just a quite a bit of investments in our overall infrastructure for some time now. Last year, it was heavily focused on – and the year before, are focused on investments in our capital planning exercises which of course effect our technology, but our people as well. You saw that we hired a Donald Truslow as a Chief Risk Officer, you saw that we hired Mahesh Sankaran about a year ago, little more than year ago around our forecasting process. We’ve been doing a lot on that front anyway, and I guess the way to think about it is when you think about over a course of a year, we now spent $2.5 billion. So we have a lot of resources to be able to sort of put to bear and I just think when you sort of think about earnings models I think it’s hard to find it all in that, because we’re constantly making investments. The other thing I’d point you to Brian is that if you look at because there is so much change we’re constantly tweaking business model so if you look at just the first quarter results over last year our salaries and benefits are up $10 million, $11 million, $12 million but that’s totally offset by FDIC expense coming down because credit quality is improving and we’re issuing the funding and so forth, right. So we’re sort of constantly trying to manage the hole. If I had a line item that said compliance you’d see that go up and we make a lot of investment there, but I’m not sure how to sort of put that in a context of the overall spending.
Brian Klock – Keefe, Bruyette & Woods: May be just a quick follow-up on the expense side you pointed out, the rest of the core cash expenses were down nicely sequentially from the fourth quarter and you mentioned FDIC insurance. So looks like the assessment rate has come down, should we look at that assessment rate irrespective of the changes in the base, should that continue to work down it was actually as high as 17 basis points last year’s first quarter, looks like it’s closer to 10 and 11. I guess first question is that a good run rate to go forward and then that other cost of operations, which was $170 million was there any sort of credits or adjustments in there that we should adjust for or is that a good run rate going forward.
Rene F. Jones – Executive Vice President and CFO: So overall typically we tend to have a lower expense base in the first quarter, tends to be a little bit higher, other than the salaries in the force, so that decline is kind of normal. I don’t know that it forecast anything, right. I think if you look for what happened last year from the first to second, it should be much different, right, it tend to be a little low. Then the first part of your question was…?
Brian Klock – Keefe, Bruyette & Woods: On the FDIC assessment base.
Rene F. Jones – Executive Vice President and CFO: On the FDIC assessment, I think, look, the formula is affected by a lot of things. So, as classified loans start to continue to come down, you are going to get lower rates there. As we begin – early on a year or so ago, we talked about changing some of way we did business that affected that. The issuance of the $800 million has an impact, and so to the extent that as we kind of go out and look at the liquidity coverage ratio and kind of move in that direction, you would logically see some offsets there.
Craig Siegenthaler – Credit Suisse: Has there been any MOU or cease and desist order or any of the former written agreement established with the Fed regarding the BSA or the anti-money laundering issue?
Rene F. Jones – Executive Vice President and CFO: So, let me answer in this regard. So, okay, so let’s step back for a bit. So, as you know that the regulatory dialogue that we have by its nature is confidential as you said, but it’s also ongoing. And if you think about how it works as an industry matter, formal enforcement actions are disclosed by the appropriate regulator, while some informal regulatory matters are such as MOUs and so forth are disclosed by the institution if they are material from a securities law perspective, we didn’t wait to receive any formal findings before including this issue last Friday, and as such, we’re not really aware of any sort of final outcomes or conclusions from the regulators. We did this in part because of its impact on Hudson City, and we tried to be as proactive as we possibly could. Having said that, we don’t believe – we do believe that we have the full understanding of what the issue is, issues are to be addressed, and so that’s why we’re running ahead and working on all of them. And in the end, I guess it will be up to other parties to sort of determine the appropriate sort of type of action that they take. But as I said before, we’ve never in our minds – I think this is the first time that I can remember in my 21 years, and as I talk to others where we’ve really ever discussed our regulatory matter in public, and it’s related to the transaction.
Craig Siegenthaler – Credit Suisse: Got it. Rene. Just as a follow-up, one of the local newspapers in Buffalo was commenting that some M&T employees were leaving Hudson City branches that were in the process of preparing. Can you confirm if that was true? And if it was, when would these employees be actually going back into the Hudson City branches preparing for the closure?
Rene F. Jones – Executive Vice President and CFO: So, I mean, what I can say is that each of the institutions have to focus on their own issues, and until you get yourself close to a date and actually close to having approval, you’ve got to be very careful and make sure that each institution takes care of their own matters, alright. So, that’s what we’ll do. Hudson City will continue to focus on managing its balance sheet and trying to keep themselves safe and sound, and then, on our front, we’re going to focus heavily on this issue and make sure that when the time comes we are ready.