It has been about a month since the last earnings report for M&T Bank (MTB Quick QuoteMTB - Free Report) . Shares have lost about 3.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is M&T Bank due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

M&T Bank Q1 Earnings Beat on Lower Costs & Provisions

M&T Bank delivered a positive earnings surprise of 2.7% in first-quarter 2019 led by expansion of margins and improved cost management. Net operating earnings of $3.38 per share surpassed the Zacks Consensus Estimate of $3.29. Also, the bottom line improved 50% year over year.

The company’s results reflect robust organic growth during the quarter. It recorded rise in net interest income with support from margin expansion and loan growth. Further, improved credit quality and decline in expenses were other positive factors.

Net operating income came in at $486 million, up around 36.1% from $357 million recorded a year ago.

On a GAAP basis, M&T Bank reported first-quarter net income of $483 million or $3.35 per share compared with $353 million or $2.23 in the prior-year quarter.

Revenues Increase, Loans Climb, Expenses Decline

M&T Bank’s revenues came in at $1.55 billion, comparing favorably with the year-ago figure of $1.43 billion. Also, it surpassed the Zacks consensus estimate of $1.51 billion.

Taxable-equivalent net interest income increased 8% year over year to $1.06 billion in the quarter driven by higher net interest margin, partly offset by lower average earning assets. Furthermore, net interest margin expanded 33 basis points to 4.04%.

The company’s non-interest income came in at $501 million compared with $459 million in the year-ago quarter. Higher mortgage banking revenues and valuation gains on equity securities were partially offset by lower brokerage services income.

Non-interest expenses were $894 million, down nearly 4% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $889 million, down 4%. The decline was mainly attributable to lower FDIC assessments charges, partially offset by higher salaries and employee benefits expenses.

Efficiency ratio came in at 57.6%, down from 64% in the prior-year quarter. Lower ratio indicates rise in profitability.

Loans and leases, net of unearned discount, jumped sequentially to $88.6 billion at the end of the reported quarter. Also, total deposits increased marginally to $90.5 billion.

M&T Bank's net operating income highlighted an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.76% and 19.56%, respectively, compared with 1.28% and 13.51% recorded in the prior-year quarter.

Impressive Credit Quality

Provision for credit losses declined 49% year over year to $22 million. Also, net charge-offs of loans came in at $22 million, down 45%.

The ratio of non-accrual loans to total net loans was 0.99%, flat year over year. Non-performing assets decreased marginally to $963 million.

Capital Position

M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules were around 10.05%. Tangible equity per share came in at $71.19, up 6.3% year over year from $66.99.

Share Repurchase

During the March-end quarter, M&T Bank repurchased a total of 2.15 million shares of its common stock for a total cost of $366 million.

Outlook for 2019

Management expects continued runoff of the residential real estate portfolio mostly at low double-digits.

In 2019, average total loans are likely to grow on a full-year basis at a low single-digit pace. Further, the company expects to exceed this pace if C&I portfolio continues to grow like in fourth-quarter 2018 and slowdown in paydown continues.

Management foresees slight benefit to NIM in case Fed doesn’t announces further rate hikes. However, better upside is expected if the Fed continues to raise interest rates in 2019.

Based on margin assumptions, the company expects low single-digit year-over-year growth in net interest income.

The higher interest rate environment will likely to challenge residential mortgage banking in 2019, specifically with respect to residential mortgage loan originations. However, we also anticipate seasonal improvement in commercial mortgage banking revenues as the year progresses.

Fee income is expected to grow in low single-digit range with the exception of trust revenues, which might grow in mid-single-digits.

Low nominal growth in total operating expenses for 2019 is expected. This includes the full-year benefit of approximately $40 million from the elimination of the FDIC surcharge.

Seasonal increase in salaries and benefits in first-quarter 2019, which primarily reflects annual equity incentive compensation as well as a handful of other items, is likely to impact expenses.

Effective tax rate for 2019 in the range of 25% to 26% is expected.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, M&T Bank has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

M&T Bank has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.