M&T Bank Corporation’s (MTB) second quarter operating earnings of $1.53 per share left behind the Zacks Consensus Estimate of $1.25. Earnings nearly doubled from 79 cents per share earned in the prior-year quarter, aided by an expansion in net interest margin coupled with lower credit costs.
On a GAAP basis, the company reported a net income of $188.75 million or $1.46 per share, compared with $51.19 million or 36 cents per share in the prior-year quarter.
The favorable comparison is due to the levying of assessment charges by the Federal Deposit Insurance Corporation (FDIC) and acquisition-related expenses incurred in the prior-year quarter. M&T Bank had acquired Provident Bankshares Corporation on May 23, 2009, and its subsequent integration had added to its expenses.
Net interest income (NII) came in at $573 million, up 13% year over year. The growth reflects a 41 basis point expansion in the net interest margin, which improved to 3.84% from 3.43% in the year-earlier quarter.
Non-interest income increased 1% year over year to $274 million. Excluding gains and losses from investment securities, non-interest income totaled $296 million, flat with the prior-year quarter. Increased service charges on deposit accounts, mainly due to the impact of the 2009 acquisitions, were offset by declines in mortgage banking revenues, trading account and foreign exchange gains, and losses at Bayview Lending Group.
Non-interest operating expenses were $461 million, down from $482 million in the prior-year quarter. The year-over-year decline was primarily due to FDIC assessment charges in the prior-year quarter. However, excluding the FDIC charges, operating expenses in the reported quarter fell $3 million year over year. The company experienced a decline in personnel costs.
Credit metrics improved during the quarter, witnessing a 42% decline in provision for credit losses to $85 million and a 41% reduction in net charge-offs. Net charge-offs as a percentage of average loans outstanding were 0.64%, down from 0.74% in the prior quarter and 1.09% in the year-ago quarter. Non-accrual loans as a percentage of total loans were 2.13%, compared with 2.60% in the prior quarter and 2.11% a year earlier.
Return on tangible common equity, which has been trending upwards for the past six quarters, came in at 20.36%. Efficiency ratio (which measures the relationship of operating expenses to revenues) improved to 53.1% from 60.0% in the year-ago quarter.
Despite the ongoing economic turmoil, M&T Bank has been maintaining an increasing trend in its NII for the past couple of years. The acquisition of Provident and Bradford in the Mid-Atlantic region has proved to be meaningful, both in terms of customer base and profitability.
Though the financial condition of the economy is stabilizing, the pace of recovery is slow. As a result, we expect both loan and overall earnings asset growth at M&T Bank to be sluggish.
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