M & T Bank : We’d like to welcome you to our M&T Bank Second Quarter 2022 earnings conference call. Instructions for operators: Be aware that today’s conference will be recorded. I’d now like to turn the recording on the conference to Brian Klock, head of markets and investor relations.
In the wake of our past quarter and the first quarter of the year, we’re extremely pleased with our performance. The results for the second quarter reflect the effects from the People’s United Financial acquisition, that was closed on April 1. We’re thrilled with the momentum we’re experiencing as a unified organization, particularly the progress that both franchises have made in preparing for the anticipated system conversion during the second quarter.
With the strong NII growth and efficient cost control, M&T generated positive operating leverage as the pre-tax net revenue from pre-provision was up by over $300 million from the previous quarter. We repurchased $600m in our stock during the first quarter. The board of directors approved the repurchase of the equivalent of $3 billion of M&T shares of common stock. The management of our balance sheet allowed us to profit from the current interest rate environment which has increased the margin of net interest, and permitting us to invest surplus cash into investment securities that offer greater yields.
With further Fed rate hikes anticipated for this year, we will continue in adding fixed rate asset to the balance sheets and to grow our interest rate hedging programme. Although we’re only beginning to realize an increase in net interest earnings benefits of rising rates, these rates that are higher have created negatives for the mortgage lending business for both origination volumes as well as to increase margins on sales. We anticipate that these headwinds will remain. Despite the macro issues the unemployment rate is relatively low and credit quality is solid.
We’re in a good position to take on the next phase and we’re excited to keep integrating People’s United into the People’s United franchise and to use our extra capital and cash. Let’s look at our results for the second quarter. The diluted GAAP profits per common share was $1.08 in 2nd quarter 2022 in contrast to $2.62 during the opening quarter of 2022. Net earnings for the quarter were $218 million, compared to $362 million in the preceding quarter.
On an GAAP method, M&T’s 2nd quarter results yielded an annualized return on assets average of 0.42 percent and an annualized yield on average the common stock of 3.21%. This compares with returns of 0.97 percent and 8.55 percent, respectively, in the preceding quarter. In the GAAP results from the latest quarter were expenses after tax arising related to the amortization process of intangible assets, which amounted to $14 million, or $0.08 per share of common stock. This is compared to one million dollars in the prior quarter, or $0.01 per share of common stock during the previous quarter. Pretax charges for merger-related costs of $465 million relating with People’s United’s acquisition People’s United acquisition were also included in the GAAP results.
The merger-related costs are made up of the CECL day 2 , which is a double count of $242 million as well as additional pre-tax merger related expenses in the amount of $223 millions. The total amount of merger-related costs equates in $346m after tax , or $1.94 per share of common stock. In line with our long-term policy, M&T provides supplemental reporting of its financial results on the basis of a tangible or net operating basis. We do not exclude the tax-free impact of amortization of intangible assets, as well as any expenses or gains that are associated in mergers and acquisitions. M&T’s net operating profit in the second quarter of 2018 which does not include amortization for intangibles as well as merger-related expenses was $578 million, compared to $376 million for the linked quarter.
Diluted net operating profits per common share was $3.10 in the latest quarter, compared to $2.73 in the 2022’s first quarter. Net operating income produced an annualized rate of returns on tangible assets as well as average tangible common shareholders equity of 1.16 percent and 14.41 percent in the latest quarter. Similar results were 1.04 percent and 12.44 percent in the beginning quarter of 2022. As per the guidelines of the SEC today’s press release includes an reconciliation of GAAP results and non-GAAP ones which include tangible assets as well as equity.
For your reference, it was it was included as part of the quarter’s GAAP and operating net results is an amount of $30 million in dividends from our participation into Bayview Lending Group. The amount was $23 million after tax as well as $0.17 for each common share. There were no distributions during the second quarter. Let’s now explore a little more deeply into the fundamental patterns that brought about these results.
Net interest income taxable equivalent to tax is $1.42 billion in the second quarter of 2022, an increase of $515 million , or 57% over that linked quarter. The link quarter’s increase was due in large part to the net interest income of $420 million donation by People’s United. This figure included 35 million for the accretion of purchase accounting. The previous M&T Bank net interest income increased by $95 million over the course of the quarter including the impact of $138 million of higher interest rates on investment-grade assets, and an 8 million increase over one additional day during the quarter, which was partially offset by a decrease of $22 million as well as the benefits of cash flow swaps as well as the reduction of $16 million in interest paid on loans that were not accrual as well as a decline of $9 million in fees and interest earned related with PPP loan.
Net interest margin in the last period was 3.01%, an increase of 36 basis points over 2.65 percent in the previous quarter. The main driver for the improvement in margin was rising prices for interest that, according to our estimates, that boosted it by 26 basis point. In addition, the People’s United Earning asset yields increased by 8 basis points your net margin. In addition, the margins benefited from a lower quantity of cash held on deposit at the Federal Reserve, which we think to have added 7.7 basis points.
