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Net income rises by 1% as M&T tackles compliance

M&T Bank expects spending on compliance with the Bank Secrecy Act and its program against money laundering to decline this year, as the Buffalo-based bank awaits word on the proposed merger with Hudson City Bancorp.

The bank will likely spend in the mid-$90 million range in that category this year, compared with about $150 million in 2014, said René F. Jones, vice chairman and chief financial officer.

M&T on Thursday reported second-quarter net income of $286.7 million, up by 1 percent from a year ago. It recorded diluted earnings per share of $1.98, unchanged from a year ago.

M&T has been spending heavily to bring compliance with the Bank Secrecy Act and its program against money laundering up to federal regulators’ standards, as M&T and New Jersey-based Hudson City seek approval of their long-stalled deal.

M&T’s spending on professional services in the quarter dropped $15 million from a year ago. That decline reflected reduced spending primarily on consulting services, as the bank reached certain milestones to comply with the Bank Secrecy Act and upgrade its program against money laundering, Jones said.

The Federal Reserve Board has not said whether the M&T-Hudson City deal will be approved, but the two banks have said the Fed has indicated that it will act on the merger application by Sept. 30.

Of the bank’s investments in regulatory compliance, Jones said: “We feel very good about the robust program we have in place today.”

Beyond that, he said, bank officials have to wait to hear from regulators.

Meanwhile, M&T is ramping up its investments in technology, Jones said. That includes spending on mobile check deposit for retail customers, a feature that the bank expects to roll out next year, and its data warehouse. The long-range goal, Jones said, is to make M&T a more efficient organization as it grows, by capitalizing on its investments in technology.

In the second quarter, M&T reported net interest income from making loans and taking deposits of $683 million, up by 2 percent from a year ago. M&T’s non-interest income from sources such as fees was $497 million, up by 9 percent from the previous year.

Also during the quarter, M&T sold the trade processing business within the retirement services division of its Institutional Client Services business. That sale resulted in an after-tax gain of about $23 million, the bank said.

Also in the quarter, M&T made $40 million of tax-deductible cash contributions to the M&T Charitable Foundation. The bank said the after-tax impact of those two items lowered net income and diluted earnings per common share in the recent quarter by about $1 million and 1 cent, respectively.

Hudson City is to report its second-quarter earnings July 29.