M&T Bank Corporation (MTB) Q2 2025 Earnings Call Transcript

M&T Bank Corporation (NYSE: MTB) Q2 2025 Earnings Call dated Jul. 16, 2025

Corporate Participants:

Unidentified Speaker

Steven Wendelboe — Corporate Participant

Daryl N. Bible — Chief Financial Officer

Analysts:

Unidentified Participant

Kenneth Michael Usdin — Analyst

Christopher Edward McGratty — Analyst

Ebrahim Huseini Poonawala — Analyst

Peter J. Winter — Analyst

John G. Pancari — Analyst

Manan Gosalia — Analyst

Bill Carcache — Analyst

Erika Najarian — Analyst

Matthew Derek O’Connor — Analyst

Gerard Sean Cassidy — Analyst

Presentation:

operator

Good morning everyone. Welcome to the M and T Bank second quarter 2025 earnings conference call. All lines have been placed on a listen only mode and the floor will be open for your questions for following the presentation. If you would like to ask a question at that time, please press Star then the number one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2.

When posing your question, we ask that you please pick up your handset to allow for optimal sound quality. Lastly, if you should require operator assistance today, please press 0 and please be advised that today’s conference is being recorded. I would now like to hand the conference over to Mr. Steve Wendelboe, senior Vice President, Investor Relations. Please go ahead, sir.

Steven Wendelboe — Corporate Participant

Thank you BO and good morning. I’d like to thank everyone for participating in M&T’s second quarter 2025 earnings conference call. If you have not read the earnings release we issued this morning, you may access it along with the financial tables and schedules by going to our new and improved investor relations website@ir.mtv.com also, before we start, I’d like to mention that today’s presentation may contain forward looking information.

Cautionary statements about this information are included in today’s earnings release materials and in the investor presentation as well as our SEC filings and other investor materials. The presentation also includes non GAAP financial measures as identified in the earnings release and investor presentation. The appropriate reconciliations to GAAP are included in the appendix. Joining me on the call this morning is M&T’s senior executive vice president and CFO Darrell Bible. Now I’d like to turn the call over to Darrell.

Daryl N. Bible — Chief Financial Officer

Thank you Steve and good morning everyone. Our purpose continues to drive M&T’s bank success. We strive to make a difference in people’s lives, serving our communities with dedication and integrity.

This quarter we continued to deliver on our purpose as we supported entrepreneurs with our small business accelerator labs, invested in our New England and Long island communities through our third and final round of our Amplify Fund and announced several high visibility sponsorships. We remain optimistic about the ability to deliver shareholder value and continue serving our communities with excellence. Turning to Slide 4, we continue to enjoy notable recognition from our customers and the industry. I want to thank our teams in commercial business, banking, corporate trust and wealth that made these recognitions possible. Turn to Slide 6 which shows the results for the second quarter.

Our second quarter results reflect M&T’s continued momentum with several successes to highlight. First, we are pleased with the recent stress test outcome. Our SCB declined from 3.8 to 2.7% reflecting the resiliency and strength of our earnings power and continued risk management efforts. We started this effort five years ago to reduce our on balance sheet CRE exposure and still serve our customers. We are also focused on reducing our criticized loans. I want to thank both our commercial and credit teams for a great job they have done to make this Happen. We executed 1.1 billion in share repurchases in the second quarter while also growing tangible book value per share by 1%.

We grew average residential, mortgage and consumer loans by 1.1 billion combined reflecting our diversified business model. Fee income continues to perform well excluding security gains and losses and other notable Items. Fee income grew 11% since the second quarter of 2024. Our expenses remain well controlled reflected in our second quarter efficiency ratio of 55.2%. Asset quality continues to improve with a 1 billion or 11% reduction in commercial criticized balances. Net charge offs of 32 basis points also remain below our full year expectations as we discussed in January. Now let’s look at the specifics. For the second quarter, diluted GAAP earnings per share were $4.24 up from $3.32 in the prior quarter.

Net income was 116 million compared to 584 million in the linked quarter. M&T’s second quarter results produced an ROA and ROCE of 1.37% and 10.39% respectively. There were three notable items in the second quarter including 17 million in catch up premium amortization on tax exempt bonds obtained from the People’s United Acquisition. The corresponding impact of that item on a taxable equivalent basis was 20 million. This item reduced EPS by $0.09. We also had two gains reported within fee income which included a 15 million pre tax gain on sale of our out of footprint CRE loan portfolio and a 10 million pre tax gain on the sale of an ICF subsidiary.

Those two gains impacted EPS by 7 and 4 cents respectively. Slide 7 includes supplemental reporting of M&T’s results on a net operating or tangible basis. M&T’s net operating income was 724 million compared to 594 million compared to in the linked quarter. Diluted net operating earnings per share were $4.28 up from $3.38 in the prior quarter. Net operating income yielded an ROTA and an ROTCE of 1.44% and 15.54%. Next, we’ll look a little deeper into the underlying trends that generated our second quarter results. Please turn to Slide 8 Taxable equivalent net interest income was 1.72 billion, an increase of 15 million or 1% from the linked quarter.

The net interest margin was 3.62%, a decrease of 4 basis points from the prior quarter. The net interest margin decline was primarily driven by a negative 4 basis points related to the premium amortization impact. Negative 5 basis points related to higher cost and interest bearing deposits and long term debt. Negative 2 basis points from lower net free funds contribution, partially offset by a 7 basis point benefit related to fixed asset repricing including reduction in negative carry on our interest rate swaps. Excluding the notable premium amortization, the net interest margin would be 3.66% unchanged from the first quarter.

Turn to Slide 10 to talk about Average loans. Average loans and leases increased $0.6 billion to $135.4 billion. Higher consumer and residential mortgage loans were partially offset by a decline in CRE balances. Commercial loans were unchanged at 61 billion, with continued growth in certain specialty segments such as CNI and Mortgage Warehouse offset by a decline in dealer floor plan balances. However, at the end of the period, commercial loans increased 1.1 billion driven by growth in our specialty segments including CNI, mortgage warehouse and fund banking. Similarly, we saw strong growth in total commitments. The CRE loans declined 4% to $25.3 billion reflecting continued payoffs and pay downs.

However, we continue to see our CRE pipeline build. Residential mortgage loans increased 2% to $23.7 billion. Consumer loans grew 4% to $25.4 billion, reflecting increases in recreational finance and and indirect auto loans. Combined, average residential mortgage and consumer loans grew 1.5 billion or 3% sequentially representing the strength of our diversified loan portfolio and business model. Loan yields increased 5 basis points to 6.11% aided by the reduction in negative carry on our interest rate swaps. Regarding commercial loan growth, earlier this year we implemented enhancements to our commercial credit and sales processes to improve the ability to serve customers through market cycles, become more responsive to customer needs, scale our risk management and position ourselves for future growth.

We have taken the time to assimilate both our employees and customers who to this new process and we enter the second half of the year in a strong position to support our growing pipeline. Turning to slide 11 our liquidity remains strong. At the end of the second quarter. Investment securities and cash held at The Fed totaled 54.9 billion representing 26% of total assets. Average investment securities increased 0.9 billion to 35.3 billion. The yield on investment securities decreased 19 basis points to 3.81% primarily from the catch up premium amortization on certain securities. Excluding that item, the securities Yield would be 4.03% reflecting continued fixed rate repricing in the investment portfolio.

The duration of the investment portfolio at the end of the quarter was 3.6 years and the unrealized pre tax gain on available for sale portfolio was 82 million or 4 basis points CET1 benefit if included in regulatory capital. Turning to slide 12, average total deposits rose 2.2 billion or 1% to 1.63.4 billion. Deposit growth was across most segments including commercial, business, banking, consumer mortgage and corporate trust, while average broker deposits declined 0.3 billion to 10.5 billion. Average non interest bearing deposits declined 0.3 billion to 45.1 billion, primarily from lower trust demand deposits. Interest bearing deposit costs increased 1 basis point to 2.38%.

Growth in certain high cost deposits, particularly within commercial mortgage and corporate trusts contributed to the deposit cost increase that was partially offset by time and broker deposits. Continuing on slide 13, non interest income was $683 million compared to $611 million in the linked quarter. We saw continued strength across many fee income categories with increases in mortgage banking service charges, trust and other revenues. Mortgage banking revenues were $130 million up from $118 million in the first quarter. Residential mortgage banking revenues increased $15 million sequentially to $97 million from higher servicing fee income aided by the full quarter benefit of subservicing which started in February.

Trust income increased 5 million to 182 million, largely driven by higher seasonal tax preparation fees. Other revenues from operations increased 49 million to 191 million, reflecting 25 million in notable items mentioned earlier along with higher loan syndication fees and merchant and credit card revenue. Turning to slide 14, we continue to execute our expense plan. Non interest expenses for the quarter were 1.34 billion, a decrease of 79 million from the prior quarter. Salaries and benefits decreased 74 million to 813 million, mostly reflecting the seasonal decline from the first quarter partially offset by the full quarter impact of annual merit increases.

Other non compensation expenses items changed relatively modestly from the first quarter. The efficiency ratio was 55.2% compared to 60.5% in the linked quarter. Now let’s turn to Slide 15 for credit. Net charge offs for the quarter totaled 108 million or 32 basis points, decreasing from 34 basis points in the linked quarter. Net charge offs were relatively granular with the five largest charges amounting to less than 35 million in total representing both CNI and CRE credits. Non accrual loans increased 33 million or 2% to 1.6 billion. A non accrual ratio increased two basis points to 1.16%, driven largely by higher CNI non accruals concentrated in recreational finance.

Dealers in the second quarter recorded a provision for credit losses of 125 million compared to the net charge offs of 108 million. Included within the provision for credit losses is a 20 million provision for unfunded credit commitments related to credit recourse obligations for certain CRE loans sold by MTRCC under the Fannie Mae DUST program. The allowance for loan losses as a percent of total loans decreased 2 basis points to 1.61%, reflecting lower levels of criticized losses. Please turn to Slide 16. The level of criticized loans was 8.4 billion compared to 9.4 billion at the end of March.

The improvement from the linked quarter was driven by an 813 million decline in CRE criticized balances and 226 million decline in commercial. The CRE decline was primarily within multifamily office healthcare and construction and was driven by payoffs, pay downs and upgrades to past status. Turning to Slide 19 for capital M&T’s CET1 ratio at the end of the second quarter was an estimated 10.98% compared to 11.5% at the end of the first quarter. The the decline in the CET1 ratio reflects increased capital distributions including $1.1 billion in share repurchases, partially offset by continued strong capital generation.

The AOCI impact on the CET1 ratio from AFS, securities and Pension related components combined would be approximately a positive 10 basis points if included in regulatory capital. Now turning to slide 20 for the outlook. First, let’s begin with the economic backdrop. The economy fared better than field given the market volatility and uncertainty regarding tariffs and other policies. The economy contracted in the first quarter as domestic production gave way to a surge of imports of consumer and business goods. We expect a positive figure in the second quarter thanks in part to lower imports, but also do see slowing in domestic spending which is a risk worth watching.

We see the impact of tariffs hitting categories that are most exposed to imports, but consumers are cutting back on service spending such as travel and recreation, reducing price price pressure on service side and is the counterweight to tariffs. We acknowledge the potential for a slowing in the economy and are attuned to downside risks and uncertainty. We ended the second quarter well positioned for a dynamic economic environment with strong liquidity, strong capital generation and a CET1 ratio of nearly 11%. With that economic backdrop, let’s review our net interest income outlook. We expect taxable equivalent net interest income excluding notable items to be 7 to 7.15 billion, with net interest margin averaging in the mid to high 360s.

We lowered the range due to continued softness in commercial and CRE loan growth. We expect full year average loan growth to be 135 to 137 billion. Full year average deposit balances are expected to be $162 to $164 billion. We remain focused on growing customer deposits at a reasonable cost and reducing non core funding. Turning to fee income, we continue to expect non interest income excluding notable items to be at the high end of our 2.5 to 2.6 billion range. Our strong quarter provides increased confidence in achieving the high end of the range. Continuing with expenses we anticipate total non interest expenses, including intangible amortization to be 5.4 to 5.5 billion.

Trending toward the lower end of the range, our business lines remain focused on closely managing their expenses, allowing the bank to continue to make targeted investments in projects and business opportunities that support our enterprise priorities and also achieve positive operating leverage. Regarding credit, net charge offs for the first half of the year were below our initial expectations. With that positive start to the year, we now expect net charge offs for the full year to be less than 40 basis points. We also expect criticized loans to continue to decline through 2025, though at a more moderate pace.

As it relates to capital, we expect to operate in a 10.75% to 11% range for the remainder of the year. We will be opportunistic with share repurchases while also continuing to monitor the economic backdrop and asset quality trends. As shown on slide 21. We’re we remain committed to our four priorities including growing our New England and Long island markets, optimizing our resources through simplification, making our systems resilient and scalable, and continuing to scale and develop our risk management capabilities. To Conclude on slide 22, our results underscore an optimistic investment thesis. MNT has always been a purpose driven organization with a successful business model that benefits all stakeholders including shareholders.

We have a long track record of credit outperforming through all economic cycles while growing within the markets we Serve we remain focused on our shareholder returns and consistent dividend growth. Finally, we are disciplined acquirer and prudent steward of shareholder capital. Now, let’s open the call to questions before which BO will briefly review the instructions.

Questions and Answers:

operator

Thank you very much, sir. Ladies and gentlemen, at this time, if you would like to ask a question, please press star one on your telephone at this time. Again, if you do find that your question has been addressed, you may remove yourself from the queue at any time by pressing Star two.

And we do ask that you please limit yourself to one question and one follow up question. We’ll go first this morning to Ken Usden of Autonomous Research. Ken, please go ahead. Ken.

Kenneth Michael Usdin

Yeah, there you go. Hey, Darrell, Good morning. How are you? Good. Darrell, I wanted to ask you to expand on the loan dynamics. I think you did sell a portfolio of out of footprint cre. I’m just wondering how close are we to getting to that bottom in cre and are you seeing any change in terms of the underlying originations that just keeps getting taken out by payouts and the like? Yes, thanks for the question on that, Ken.

What I would tell you is the CRE portfolio, I think the pipeline continues to build. We had our best month in June that we’ve had this year so far. We had over 5 billion in the pipeline right now. So we feel pretty good that we’re headed in a good direction from that perspective. If you look at when it’s going to grow because of the runoff that we had now this past quarter, the chances of growing linked quarter and CRE would be pretty challenging. But as we get towards the end of the year, I think as the pipeline continues to build and still serve clients and all that, I think we have a chance for maybe later of the year for that to happen.

Got it. You mentioned on capital, the good stress test result and it’s nice to see that you’re kind of moving that buyback activity a little forward still. 1075-11 is still way above where you need to sit. And you said that maybe you’d get towards 10 over time, but what’s the right level of capital for M and T to hold? And how do you think about this balancing act of all the excess you have versus your potential uses of it?

Daryl N. Bible

Yeah. So I think it first starts with right now. There’s still a lot of uncertainty in the marketplace.

We did really well with our stressed capital buffer. We did a great job bringing down our criticized loans, but we still have more wood to chop, you know, and getting our criticized loans down farther and hopefully next year we’ll get down to 2.5% on the stressed capital buffer. But if you look at what’s in the marketplace right now, there’s a lot of uncertainty with tariffs, which create a lot of trade uncertainty. You have worsening geopolitical conditions, high fiscal deficits and elevated asset prices. I think those risks right now just way out there. Our long term target that the board approved in January this year is 10%.

But I think given the risk that we have right now, we think the range of 11 to 1075 is the right place to operate.

Kenneth Michael Usdin

Okay, got it. All right, thanks, Darrell.

operator

Thank you. We’ll go next now to Steven Alexopoulos at TD Cowan.

Unidentified Participant

Hey, Darrell, how’s everything?

Daryl N. Bible

Good. And you, Steve?

Unidentified Participant

Good, good. I wanted to start, I saw your guiding to the high end of the fee income range. And when I look at trust, it was a nice positive surprise this quarter, again, 182 million. Can you give some color what’s driving that and do we think of that as back to being high, single digit, low, double digit, grower from here?

Daryl N. Bible

You know, it’s had a tremendous last year and it’s had a tremendous this year.

We are actually investing in Europe. We started operations there and it’s starting to grow now. We had some big wins this past quarter in that space and we were asked by our customers to support them in Europe. So we’re just following where our customers are from that perspective. So we’re very positive and in our corporate trust business think it’s growing really well and have a lot of potential. But if you look at the other fees that we have on the mortgage side, we have a great subservicing business that’s growing really well, you know, and we have from a origination perspective, you know, we’ve been investing in producers and resi.

You can’t see it because rates aren’t really down yet, but that will happen at some point down the road. And then our commercial mortgage business, RCC is really doing well, really core to our businesses as we operate and we’ll have a lot of potential. But I think the highlight that we have right now, Steve is really in treasury management. If you look at treasury management revenues year over year, we’re up 12, 13%, which is really strong.

Unidentified Participant

That’s great. And Darrell, I’d love to get your reaction to this. So we just wrapped a PNC call and I had asked Bill about the argument that they need more scale.

And you know, the comment was competing at some mega banks in order to drive Retail deposit growth. You do need more scale. You’re in a pretty unique position because you came from a much larger bank and now you’re at M and T. What’s your take on this? I mean, you guys have always done a good job, you know, M and T of growing retail deposits, lower cost commercial deposits. But do you feel more of a burning need just to get larger to compete against the mega banks which are net growing checking accounts pretty well here?

Daryl N. Bible

Absolutely not, Steve.

I mean, if you look at our business model, you know, we are basically serving our communities and we bring our full bank to those customers within those communities. I think that’s a huge advantage for us. I think that’s very successful. We also look at efficiency ratios and all that. We operate with one of the best efficiency ratios in the industry. And while we will continue to grow in size, one of the advantages we have and what we focus on is being simple, less complexity in the company so we can manage the company as we get bigger and all that.

And I think that’s really key. You know, we don’t have to be the biggest bank to serve in our communities and all that. We just do a really great job doing that. I think everybody’s happy from that. You know, we will probably grow in market, maybe contiguous markets over time when it’s right. But here again, we’re real compact in one area. So you get a lot of advantages of scale in those areas too. So we love. Our business model is very successful. Our community’s customers love us. So I think it’s going to continue to stay with that.

Unidentified Participant

I’m with you. Thanks for that color.

operator

Thank you. We’ll go next now to Chris McGrady with KBW.

Christopher Edward McGratty

Oh great. Thanks for the question. Maybe I want to ask that tech topic from a different angle. The expense guide for the back half of the year. I know you’ve had this GL cost that’s been nearing completion. I guess number one, is that a part of the reason for the expense improvement. And two, I believe in the past you’ve talked about needing to get that done before you consider perhaps a tuck in. Not a large scale acquisition. But any thoughts about timing where you might be ready to do a deal if it afforded you.

Thank you.

Daryl N. Bible

Yeah. So we got about a half a dozen major projects going on in the company. The GL is one of them that had nothing to do with a change in guidance. It really was. At the end of the day, we want to make sure we can contribute and have positive operating leverage. And our leadership team Decided that we could bend the expense curve down a little bit and flatten it out so that we can still generate positive operating leverage. Our loan growth isn’t as much as we thought it would be for this plan year.

We’re still doing really well and hope that we finish the year out stronger. But it’s the unselfishness and the leadership that we have on our leadership team that actually made that happen.

Okay,

Christopher Edward McGratty

Okay, thank you for that, Darrell. And just a follow up. You know, you’ve done a lot of progress on the CRE diversification does do acquisitions. A lot of the small and community banks that you might be talking to, they have a lot of commercial real estate. Does that stop the conversation or is there perhaps ways to work around, you know, not trying to go backwards on the improvement in concentration?

Daryl N. Bible

Yeah, Chris, there’s a lot of optionality and things you can do with what’s been developed.

I mean, obviously you could potentially sell credits, you know, once you close the transaction. You could do risk transfer trades. You can do a lot of things, but first and foremost, you know, to acquire somebody, we’ll look for somebody that basically fits with us from a culture perspective, from a credit perspective. So the hope is that we would maintain most of those relationships. But for if we wanted to reduce some of them or exit some of them, we do have ways of doing that or minimizing the risk now. So that’s not a concern whatsoever. It’s just a cost of doing the transaction.

Christopher Edward McGratty

Understood. Thanks so much.

operator

We’ll go next now to Ibrahim Poonawalla of Bank of America.

Ebrahim Huseini Poonawala

Hey, Darrell, Good morning. Good morning. Just maybe one on the margin outlook, as we think about it, it’s kind of in the range where you expect it to be for the full year in the mid to high 360s. Just remind us X any changes to interest rates? Are we at a point where incremental asset repricing is offset by funding costs? Like, how do you think about just mechanically how the margin should operate? Like what brings it? What could take it above 370 versus below 360, I guess.

X rate changes.

Daryl N. Bible

Yes. So we’ve kept the guidance in the mid to high 360s. You know, it’s really. It depends on how much commercial and CRE growth that we get is really the biggest driver. Ibrahim, at the end of the day. Yeah, I think we’re optimistic that we will be growing our commercial CNI balances third and fourth quarter that will turn positive. And we’re hoping that we end the year strong with CRE. As well. So we can start 26 really strong as far as getting to 370. You know we have a lot of positives going on in the balance sheet still on that fixed asset repricing was really huge for us this quarter with our auto loans and RV loans that we put on.

We put on a lot of those loans and you know we priced higher in those areas. Even our residential mortgages that we booked also repriced higher if you look at the yields. So all that’s really positive. The investment portfolio as we continue to invest we’re probably averaging about 150 basis points on what’s rolling off to what’s rolling on. We’ve been adding a little bit to the portfolio as well which has been a positive. And then our swap book, our swap book I’ve mentioned a couple times in the prepared remarks but we are getting positive repricing in the swap book and you’re going to continue to see that drag on for the next four quarters.

So that’s a positive. So while is it possible to get to 370 this year? Yes, but it’s really going to rely on loan growth Ibrahim and right now I’m just a little cautious which is why we’re keeping it in the mid to high 360s.

Ebrahim Huseini Poonawala

That’s helpful. Thanks for that and I guess maybe just on CNI loan growth and sorry if I missed it but remind us when we think about the opportunity within sort of the people’s market in Long island, et cetera, just how big is that pipeline? Like is it a multi year thing? It’s been helpful to the bank over the last year or two.

So if you don’t mind just double clicking on CNI loan growth in some of these markets we acquired through peoples. Thanks.

Daryl N. Bible

Yeah Ibrahim we put, you know, lots of people, new leaders into those markets. If you look at this past quarter, Eastern Mass was one of the fastest growing regions of our 27 regions that we had this quarter. So it has a lot of momentum. Connecticut. It’s also a great market for us. We have a lot of share in that space so that’s a positive. So I think all that’s really good. The key thing though that we got from Peoples which is kind of the whenever you do acquisitions sometimes you get some positive intangibles is that we got a lot of specialty businesses like fund banking, mortgage warehouse, corporate, institutional and we didn’t have those businesses at mt.

So we’ve been able over the last couple years to scale those businesses, invest in those businesses because they’re really good, sound businesses that we have and we’re growing them very nicely. And that’s really, I think where the growth of second half of the year is going to come from is from these businesses that we’ve acquired from peoples and they continue to grow and really pay dividends for us.

Ebrahim Huseini Poonawala

That’s helpful. Thanks, darl.

operator

Thank you. We’ll go next now to Peter Winter, B.A. davidson.

Peter J. Winter

Good morning, Darrell. The consumer loan growth has really been consistently strong. I’m just wondering would you expect some of that growth maybe to moderate just as discretionary expending is slowing and consumer prices are starting to rise? Some of these tariffs pass throughs are just starting.

Daryl N. Bible

Yeah. So, you know, the big amount of loans that we had in indirect RV and in our auto was basically just people buying ahead of before higher car prices or RV prices came on board. That was a pull forward. But you know, I think in the RV space talking to our leader, Mike Drury in that space, he’s pretty optimistic that RV will continue auto as well. Auto. It really depends on which manufacturers and what’s going on the lots. That’s actually hurt us on the commercial side beyond floor planning because our utilization’s down. But as manufacturers figure out where to make the cars and put them on the lots, I think that will be a positive for both sides of us as we move forward.

So think that’s good. One of the nice surprises though that we have, and I really give a call out to Rich McCarthy who ran the branches and all that, is we actually grew HELOC for the first time in a while and our credit card book this past quarter and they believe they’re pretty optimistic for the rest of the year. So that’s a huge positive for us. So we have a lot of really good things going on in that space today.

Peter J. Winter

Got it. Thank you. And then separately last quarter you lowered the average deposit range, but mentioned that you expect to be at the high end of that new range.

And I was just wondering, with average deposits at 162 billion in the first half of the year, do you still expect to be at that upper end of that range of 162 to 164?

Daryl N. Bible

You know, Peter, we will, you know, we have an always on, we’re always paying competitive rates to our customers as they come in. We’ll get our share from that perspective. We had a great quarter this quarter. We grew 2.2 billion, you know, of what we brought in. It was from mortgage, our corporate trust business, as well as commercial. But it was really Nice growth.

It allowed us to pay off some broker deposits and some other non core funding, which is what I’m all about. So I would continue to focus on growing as much as we can, as long as we grow it at a competitive reasonable rate at that sense and we’ll fund loans with it and then if we have not more than what we need there, we will pay down non core funding which is what we’ve been doing. So it’s a positive and I think we will continue to see growth in that sector.

Peter J. Winter

Got it. Okay. Thanks Darrell.

operator

Thank you. We’ll go next now to John Pentkare at Evercore isi.

John G. Pancari

Good morning, Darrell. Hey, good morning, John. You know, just to go back to capital, a couple things there. Good to see the acceleration in the buybacks to the 1.1 billion level up from the 6 to 700 before that. Can you maybe give us your thoughts on the pace of buybacks through the remainder of the year? I believe you had indicated the 4 billion authorization could be completed over six quarters. Are you still on that type of pace as you look at it? And then separately I know MA has been brought up a couple times and you mentioned that you may be interested when the time is right.

I guess if you can just talk about is anything about the evolving backdrop with the other regionals starting to do deals that’s made whole bank M and A any more interesting to you or would you say you’re no change in your outlook on that perspective today. Thanks.

Daryl N. Bible

Yeah. So John, I mean we’re always looking and talking to people and all that. So I mean that’s just part of what we do. We don’t really have anything known. Obviously we wouldn’t say anything. But when opportunities are right and when we find a partner that really fits us for all the various reasons that will happen when it happens.

It’s happened 27 times since the early 80s. So I’m sure it will happen at some point down the road. From that perspective, as far as the pace goes, I would say we will probably operate at 11, you know, and if the economy, you know, if we get more constructive on the economy and feel good about it, we could go down to 10.75 at some point down the road. If you look at what we’ve done, you know, for the first half of the year, John, and we bought 5.7% of our shares outstanding in the first and second quarter.

So we’re buying a fair amount of stock back from that perspective. And I think our investors are would be happy that we would continue to do that when it makes sense from that perspective.

John G. Pancari

Okay, got it. All right, thanks. And then just separately back to the NII guide and regarding the lowering of the lower bound of that guide, you discussed TRE is a factor and mentioned that already. You also mentioned cni. Can you just give us a little bit more detail? Detail in terms of what you’re seeing on the CNI front that’s contributing still to the sluggishness, or are you beginning to see some green sheets there?

Daryl N. Bible

Yeah, I think if you look at cni, I mean, our fastest growth regions besides Eastern Mass was in Jersey and York.

They were all really positive, which is really good. You know, I would say if we have a really good growth among many of our portfolios, pipeline and middle market continues to be robust. As far as line utilization and dealer commercial services, that’s low now. That could start to drift back up towards the end of the year. That could be a positive for us. I think that that would be good. You know, and then as far as uncertainty of pay downs and all that, you know, it’s been relatively strong to date. You know, that pace will probably moderate at some point, whether it’s this quarter or next quarter.

It’s hard to call when that moderates, but it’s going to happen at some point and then that will bring more natural growth to the portfolio. But our specialty businesses, specifically cni, mortgage, warehouse and fund banking, are operating really strong. And our RMs are out there calling with our customers and very active in our pipelines, both in commercial and cre are our ability to continue to get stronger. So I think we’re optimistic. You know, I’m just a little bit cautious, to be honest with you. I think you know that about me, John, so. But you know, I think we will have some good green shoots and we’ll actually pay dividends.

John G. Pancari

Great. All right, thank you, Darrell.

operator

Thank you. We go next now to Manon Gosalia at Morgan Stanley.

Manan Gosalia

Hey, good morning, Daryl. Just a follow up on the capital return question. As we think about the back half of the year, how much of a priority is raising the dividend? So I know it’s a board decision, But M&T’s dividend yield is below peers. Is that more of a focus than buybacks?

Daryl N. Bible

They’re both really important. I mean, when I look at how we allocate capital, first and foremost, we allocate to our customers organically. Secondly, I put dividends in there to make sure we can pay a strong growing dividend and make it repeatable over Time you’re seeing some action out of our board this quarter.

So I think you will be pleased when the board votes on that and we make our public press release on it. Then after dividends we look at organic and then after that we buy back. Buyback is probably at the end.

Manan Gosalia

Got it. Very helpful. And then on Nim, can you talk about what drove that five basis point headwind to Nim from higher liability costs? I know you spelled out a few categories on the deposit side where costs went up, Q on Q. But I was hoping you could give us some more color on that. How much of that is one time in nature versus what could be some more sticky, I guess pressure on those funding costs.

Daryl N. Bible

So it really wasn’t sticky funding costs and all that. We actually asked for and brought in these deposits. The average cost came in at around 390 to 440. We view that as something less than our marginal funding curve. So we aren’t fluid in that when you bring a deposit in, you just can’t pay off a borrowing. You have to do it over time to right size it. But it came in and made sense to come out our balance sheet because it’s under the funding curve and if we don’t need it to fund loans, we will pay off more non core funding with that growth.

So it’s the right thing to do. We’re always taking it from our customers and paying fair rates, reasonable rates from that perspective. So I think this was a great quarter for us for our ability to attract these good funds in. And we got them at a really good cost. It’s just, it’s higher than the average of the interest bearing costs that we have just because we have a lot lower rates in certain categories. But these marginal deposits actually were good for us.

Manan Gosalia

So from a total funding cost perspective, it sounds like it’s a little bit more of a timing difference than anything else.

Daryl N. Bible

It is. That’s exactly right. Manon.

Manan Gosalia

Got it. Thank you.

Thank

operator

Thank you. We’ll go next now to Bill Carcatchi at Wolff Research.

Bill Carcache

Hey, good morning, Darrell. Following up on your diversification strategy. As your CRE mix falls and you get bigger and bigger in CNI and consumer, how much room is there to increase your CNI and consumer mix from here as we look ahead?

Daryl N. Bible

Yeah, Bill, we will continue to grow our CNI and right now our CRE businesses have been shrinking. We’re trying to stabilize that and grow that. We actually like the mixes that we have today.

Right now, if you look at CRE, I think it’s under 20%, closer to 18 or 19%. So that actually has room to maybe grow a little bit from that perspective. CNI we are obviously trying to grow that as much as we can in our markets that we serve as well as in our specialty businesses that we operate in. I think that’s really good. And we also want to continue to grow our consumer portfolios. We like the diversification that we have and what it gives us and I think it’s a good mix for us and we’ll be tilted a little bit more on the consumer side.

So you might see us run with a little bit higher allowance ratios just because of charge offs, but net net overall the risk adjusted spreads are strong.

Bill Carcache

Thanks. That’s helpful, Darrell. And then following up on your comments around the increase in your interest bearing deposit costs to the extent of that loan growth were to further accelerate from here. Is there room to let your loan growth outpace your deposit growth for a time or do you envision having to pay up a little bit more for deposits?

Daryl N. Bible

I would say we will always continue to be consistent in trying to attract deposits at the right price from that perspective.

And we’ve been very successful and I think we can do that and manage that with the loan growth that we’re going to have. I don’t view that as an issue one way or the other. Pricing up, you know, isn’t really something we really do at M and T that much, to be honest with you. We give fair prices more consistently.

Bill Carcache

Helpful. Thanks. Thanks very much.

operator

We’ll go next now to Erica Najarian of ubs.

Erika Najarian

Hi, good morning or afternoon. Just following up with a question on capital. You mentioned you’d like to operate around 11% and cited some economic and macro factors.

As we think about the difference between you guys operating around 11 and B of A operating around 11, how much are the ratings agencies versus the regulators playing a part in how regional banks like MT are setting their targets?

Daryl N. Bible

You know, Brady agencies definitely have some say in that as well as the regulators and other constituencies too. From our perspective though, we’ve been on a journey to de risk the company. I think our stressed capital buffer that came out really showed the progress that we made with that. And you know, with us still continuing to shrink our criticized book, you know, we have a shot, you know, of even improving from where we are, you know, next year.

So I think we’re getting more aligned with, you know, where we want to operate with and feel more comfortable. And when you do that, you know, the rating agencies take notice of that. And acknowledge that, because this is the one test that all banks take at the same time. And they can compare you against everybody else from that perspective. So that’s why it’s a good test out there. And I think we will continue to make great progress from that.

Erika Najarian

Got it. And just to clarify, your deposit cost did increase. In your response to Manon, you mentioned that you did gather deposits at more wholesale rates that were sort of under your funding costs.

Again, in terms of core deposit competition, how is that faring underneath the surface? And we clearly just had some headlines as you guys are running this call about Chair Powell. How should we think about deposit competition in the scenario of more cuts versus scenario of maybe a prolonged hold from the Fed?

Daryl N. Bible

Yeah. So, Erica, I mean, we have six businesses and all of our businesses first and foremost come with the mindset that to attract new customers, we want to get operating accounts. And that’s first and foremost to us. When you look at the tracking of what our businesses do and what we generate, we generate lots of new operating accounts each and every month and every quarter that we have.

And we track that and we really value that. Once you get the operating account, that opens up other channels so you can get other services, other deposit products, other loan products and all that. But that is first and foremost the core to us. So, I mean, the value of M and T, one of the biggest things we have is our core deposit franchise. And it starts with the operating accounts that we have from that. So I think that’s really what we focus on. And then we pay competitive rates to our customers to get more share of the wallet over time.

But getting the operating account is really first and foremost and we’ve been very successful and will continue to be successful in accomplishing that.

Erika Najarian

Got it. Thanks. Thank you.

operator

We’ll go next now to Matt o’ Connor with Deutsche Bank.

Matthew Derek O’Connor

Good morning. Most of the questions have been answered, but just looking at the criticized CNI and CRE loans on Slide 16, obviously this is, you know, one of the things that rating agencies look at. One of the things you look at this big drop that you’re down to eight and a half or 8.4 billion. How does that compare to a few years ago? I don’t know if you have anything handy.

I’m just trying to figure out like are we back to more. More normalized levels or pre Fed hike levels or trying to frame the current levels. Thanks.

Daryl N. Bible

Yeah, so I would say we probably peaked a few years ago at our highest level, at least in the history that I’ve seen. Here at mnt and we’ve been coming down for the last couple years nicely. I think our goal is to continue to come down, you know, over the next year or two to levels that, you know, maybe be a little bit lower than where we operate today.

But we’re making great progress and doing really well from that. So I think that has been really good. But you know, I think overall, you know, we’ll be back down in the next couple years to something that’s probably half of winter. Repeat.

Matthew Derek O’Connor

Yeah. Okay. And then the modest reserve, the 20 million for unfunded credit commitments. Did you comment on what that related to? Or is that maybe a little conservatism, expecting growth in the future? What’s that for?

Daryl N. Bible

Yeah, so we have our MTRCC business, you know, has relationships with all the agencies. Specifically there’s one program with Fannie Mae that we have where we sell loans to them.

We remain a third of the risk is on our balance sheet and two thirds is on their balance sheet. We’ve been in this business since 2003 and to date we have until this quarter had very minimal losses at all in this portfolio. I think over that 22 year time period, we had 7 million of net charge offs this quarter. Up until this quarter, this quarter we had four clients come through, you know, and the provision is 20, but the charge off we took is closer to 15 or 16 million so far that we have. And they’re all very unique clients.

One client focuses on manufactured housing with pads. Fannie Mae actually had a special program called Pilot where they were targeting these customers. They’ve now discontinued that program and we are just basically sharing the losses with the agency on this transaction. Another one involved a multifamily project with a university and the university was housing students and it was for foreign students. And now that the need for foreign students isn’t there anymore, that project isn’t as profitable as it was before. And then another one is a senior living facility and the other one was just a renovation that had bad luck and had fire and flood issues and behind schedule.

So I think there are one offs. I think we expect to have our allowance and reserves for this business to go back to where it was before on a go forward basis. MT RCC is really important to our strategy in the CRE space. We can serve a lot of clients with permanent financing by selling to the agencies and keep it off our balance sheet and just make it a fee income perspective for us. So we love the business. One quarter, does it mean much? And we had some Losses here. But long term, it’s been a great business and will be a great business for MNT as we move forward.

Matthew Derek O’Connor

Okay, thank you.

operator

And we’ll go next now to Gerard Cassidy of RBC Capital Markets.

Gerard Sean Cassidy

Darrell.

Daryl N. Bible

Hey, Gerard.

Gerard Sean Cassidy

Darrell, can you give us some thoughts on how, how you guys are looking at the expectation that stablecoins, once the COIN act is passed down in Washington, may impact your payments, business or deposit gathering? How are you guys approaching adopting a digital currency as part of your offerings for your customers?

Daryl N. Bible

Yeah, so we have a group of people that are looking at this and you know, obviously, you know, stablecoin could be a payment rail that people could use potentially, you know, and maybe do it for cross border trading if you want to.

I think from our perspective, for people to adopt that it’s got to be something that’s easier than what we have today and that it’s less expensive to move the money than what we have today. You know, some of the usage that you see happening right now is doing in the off hours, when banking hours are closed so late at nights or on weekends. I think people are using this type of payment rail for that piece. You know, we’ll see how much it develops over time. Obviously, you know, we will continue to monitor this, probably partner with some folks over time to participate in this space.

If our customers are want this product, we will be there to service and serve it to them.

Gerard Sean Cassidy

Very good. And then circling back to the net charge off guidance, if I heard it correctly, it’s less than 40 basis points, which is a modest improvement from the beginning of the year. And you guys pointed out that charge offs are coming in less than expected. Any color on where you’re seeing the charge offs today versus what you expected at the beginning of the year? What segments of the portfolio are doing better than expected?

Daryl N. Bible

Yeah. So year to date, we’re 33 basis points right now.

So can it be 40? Yes, but I think we’re just very cautious right now just because the uncertainty in the marketplace, the tariff issues are still out there. I talked about all these other risks that are still out there that could impact and we’re just being a little cautious with some of our guidance. We may come in and be much better than that. But right now we feel comfortable that it’s under 40, but we don’t really know how much under 40 yet.

Gerard Sean Cassidy

I see. And just a quick follow up on the sale of the commercial real estate that you guys had.

The $15 million gain, any color there on the buyer or the types of loans that were sold.

Daryl N. Bible

I mean, it was an out of footprint business. It was really a business decision because we really didn’t have relationships with these customers. We just had loans with them because it wasn’t in our footprint. And you know, from a credit perspective, you know, they performed very well credit, that’s what we got a gain on the sale from that. But it was in the CRE space from that perspective. But we think long term we can deploy that capacity that we sold out to our core clients within our footprint and have more wholesome relationship with that space.

So it’s an M and T thing. It’s a long term trade to do the right thing.

Gerard Sean Cassidy

Very good. Thank you.

operator

Thank you. And gentlemen, it appears we have no further questions today. Mr. Wendelboe, I’d like to turn things back to you for any closing comments.

Steven Wendelboe

Again, thank you all for participating today and as always, if clarification is needed, please contact our Investor Relations Department at 716-842-5138. Thanks.

operator

Thank you again. Ladies and gentlemen. This will conclude the M and T Bank second quarter 2025 earnings conference call. Again, thanks so much for joining us everyone and we wish you all a great day.

Goodbye.