Q1 2024 M&T Bank Corporation Earnings Call

Operator: Good day, and welcome to the M&T Bank First Quarter 2024 Earnings Conference Call. All lines have been placed in listen-only mode, and the floor will be open for your questions 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.

Good day and welcome to the M and T Bank first quarter 2024 earnings conference call.

All lines have been placed on listen only mode and the floor will be opened for your questions. 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 two.

Operator: 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, please press star zero. Please be advised that today's conference is being recorded. I would now like to turn the call over to you.

When posing your question, we ask that you. Please pickup your handset to allow for optimal sound quality.

Lastly, if you should require operator assistance, please press star zero.

Please be advised that today's conference is being recorded.

Speaker Change: I would now like to turn the hand.

Operator: Conference. Now, over to Brian Klock, Head of Market and Investor Relations. Please go ahead.

Conference over to Brian Clark.

Brian Clark: Head of marketing and Investor Relations. Please go ahead.

Thank you Todd and good morning.

Brian Paul Klock: Thank you, Todd, and good morning. I'd like to thank everyone for participating in M&T's first quarter 2024 earnings conference call, both by telephone and through the webcast. 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 website, www.mtb.com. Once there, you can click on the Investor Relations link and then on the Events and Presentations link. Also, before we start, I'd like to mention that today's presentation may contain forward-looking information. Questionary statements about this information are included in today's earnings release material, and in the investor presentation as well, as well as our SEC filings and other investor materials. This 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, Daryl Bible, and I'd like to turn the call over to him.

Brian Clark: Thank you everyone for participating in <unk> first quarter 2024 earnings conference call, both by telephone and through the webcast.

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 website www Dot MTBE dot com.

Brian Clark: Once there you can click on the Investor Relations link and then on the events and presentations link.

Brian Clark: Also before we start I'd like to mention that today's presentation may contain forward looking information.

Brian Clark: Gosh scenario statements about this information are included in today's earnings release materials.

Brian Clark: And in the Investor presentation as well.

Brian Clark: And as well as our SEC filings and other investor materials.

Brian Clark: The presentation also includes non-GAAP financial measures as identified in the earnings release and Investor presentation.

Brian Clark: Presentation.

Brian Clark: The appropriate reconciliations to GAAP are included in the appendix joining.

Brian Clark: Joining me on the call. This morning, <unk> Senior Executive Vice President and CFO Daryl Bible.

Daryl N. Bible: I'd like to turn the call over to Darryl.

Brian Paul Klock: Over to Daryl. Thank you, Brian. And good morning, everyone.

Daryl N. Bible: Thank you, Brian and good morning, everyone.

Daryl N. Bible: As you were here today, our first quarter results for a strong start for M&T Bank. Turning to slide three, we start the year with a renewed and strengthened commitment to making a difference in people's lives. Along with helping our customers meet their financial goals, we've continued to launch programs to uplift our communities and partners. Let me share with you a few examples of how we put these words into action. Since the beginning of the year, M&T has provided $900,000 to 30 organizations across our footprint to address affordable housing and homelessness in underserved, low to middle-income communities. We launched a new Spanish-language small business accelerator program in French Georges County, Maryland, which will support many small business owners in the region.

Daryl N. Bible: Here today.

Daryl N. Bible: Our first quarter results were a strong start for <unk> bank.

Daryl N. Bible: Turning to slide three we start the year with a renewed and strengthened commitment to making a difference in people's lives.

Darryl: Along with helping our customers meet their financial goals. We've continued to launch programs top left our communities and partners.

Darryl: Let me share with you a few examples of how we put these words into action since.

Darryl: Since the beginning of the year MMC has provided $900000 30 organizations across our footprint to address affordable housing and homelessness and underserved low to middle income communities.

Darryl: We launched our new Spanish language small business accelerator program, and French George's County, Maryland.

Darryl: Which will support many small business owners in the region.

Daryl N. Bible: We continue to invest in New England and Long Island through the second phase of our Amplify fund. We do this because when our communities are successful, so is our business. Turning to slide 4, we are excited to see how deeply we have embedded sustainability across the bank and into our products and services. We have included several sustainability accomplishments from our upcoming 2023 sustainability report and look forward to sharing more when we release the complete report this quarter.

Darryl: We continue to invest in new England, and long island through the second phase of our amplify five.

Darryl: We do this when our communities are successful so it's our business.

Darryl: Turning to slide four we are excited to see how deeply we embedded sustainability across the bank and into our products and services. We have included several sustainability accomplishments from our upcoming 2023 sustainability report and look forward to sharing more when we release the rig.

Darryl: The complete report this quarter.

Daryl N. Bible: Turn to slide 6, which shows the results for the first quarter. The quarter was highlighted by strong CNI consumer loan growth. PPNR was a solid $891 million. Expense control remains a key focus and was evident as adjusted expenses increased only 0.6% compared to the first quarter of 2023. Diluted Gap.

Darryl: Turning to slide six which shows the results for the first quarter.

Darryl: Quarter was highlighted by strong C&I consumer loan growth.

Darryl: <unk> was a solid $891 million.

Darryl: Spence control remains a key focus and was evident as adjusted expenses increased only <unk>.

Darryl: 6% compared to the first quarter of 2023.

Darryl: Diluted GAAP earnings per share were $3 <unk> for the quarter.

Daryl N. Bible: Earnings per share were $3.02 for the quarter. However, if you exclude the additional FDIC special assessment, adjusted diluted earnings per share were $3.15. On an adjusted basis, M&T's first quarter results produced an ROA and ROCE of 1.05% and 8.49%, respectively. The CET-1 ratio remains strong, growing to 11.07% at the end of the first quarter, and tangible book value per share grew 1% to $99.54. Next, we look a little deeper into the underlying trends that generated our first quarter results. Please turn to slide 8. Axel Equivalent.

Darryl: If you exclude the additional FDIC special assessment adjusted diluted earnings per share were $3 15.

Darryl: On an adjusted basis <unk> first quarter results produced an ROA.

Darryl: And <unk> of 1.05% and 849% respectively.

Darryl: The CET one ratio remains strong.

Darryl: Growing to 11.07% at the end of the first quarter and tangible book value share grew 1% to 99 $504.

Darryl: Next we look a little deeper into the underlying trends that generated our first quarter results. Please turn to slide eight.

Darryl: Export equivalent.

Daryl N. Bible: Net Interest Income was $1.7 billion in the first quarter, down 2% from the link quarter. The net interest margin was 3.52%, down 9 basis points from the link quarter. The primary drivers for the decrease to the margin were a negative 6 basis points from lower non-accrual interest and the impact of interest rate swaps, and a negative three basis points from higher liquidity and cash moving into security. Negative three basis points from a deposit mix and pricing, and positive three basis points from all other items, including the benefit of asset repricing in the investment portfolio and consumer loans. Turning to slide 9 to look at the average balance sheet trend. Average investment securities increased $1.1 billion to $28.6 billion, reflecting the reinvestment of maturing security balances and a measured shift of a portion of our cash balances into investment securities.

Darryl: Net interest income was $1 7 billion in the first quarter down 2% from linked quarter. The net interest margin was 352% down nine basis points from the linked quarter. The primary drivers for the decrease to the margin or a negative six basis points from lower.

Darryl: Non accrual interest and the impact of interest rate swaps.

Darryl: And negative three basis points from higher liquidity and cash moving into securities.

Negative three basis points from a deposit mix and pricing and a positive three basis points from all other items, including the benefit of asset repricing in the investment portfolio and consumer loans.

Darryl: Turning to slide nine to look at the average balance sheet trends.

Darryl: Average investment securities increased $1 $1 billion to $28 6 billion, reflecting the reinvestment of maturing security balances and a measured shift of a portion of our cash balances into investment securities.

Daryl N. Bible: Average interest-bearing deposits at the Fed increased approximately $0.5 billion to $30.7 billion as our decision to have more liquidity on the balance sheet was largely offset by the previously mentioned investment security purchases. Average loans increased $1 billion, or 1%, to $133.8 billion. Average deposits decreased $648 million, or less than 1.5%, to $164.1 billion. Turn to slide 10 to talk about average loans.

Darryl: Average interest bearing deposits at the fed increased approximately <unk> 5 billion, a $37 billion as our decision to have more liquidity on the balance sheet, which largely offset by the previously mentioned investment security purchases.

Darryl: Average loans increased $1 billion or 1%.

Darryl: $33 8 billion.

Darryl: Average deposits decreased $648 million or less than one half percent to hunter.

Darryl: $164 1 billion.

Darryl: Turn to slide 10 to talk about average loans average loans and leases increased 1% to $133 8 billion compared to the linked quarter.

Daryl N. Bible: Average loans and leases increased 1% to $133.8 billion compared to the length of the quarter. Solid Growth in C&I and Consumer Loans Outpaced Declines in CRE and Residential Mortgages. The growth in C&I loans was driven by a combination of increased line utilization in our middle market and dealer business lines, combined with new origination activity in equipment finance, Corporate and Institutional, and Fund Banking as we continue to grow existing and new clients.

Darryl: Solid growth in C&I, and consumer loans outpaced declines in CRE and residential mortgages.

Darryl: Growth in C&I loans was driven by a combination of increased line utilization in our middle market and dealer business lines.

Darryl: Bind with new origination activity and equipment finance corporate and institutional and fund banking as we continue to grow existing and new clients.

Daryl N. Bible: Loan yields decreased 1%, to 6.32%, but increased two basis points sequentially when excluding the impact of the cashflow hedges on interest income in our CRE portfolio. Within our consumer portfolio, we continue to see the benefit of higher rates on new originations compared to maturing balances, with a consumer loans yield increasing 12 basis points to 6.54%. Turning to slide 11, our liquidity remains strong. At the end of the first quarter, investment securities and cash, including cash held at the Fed, totaled $62.3 billion, representing 29% of total assets. Average investment securities grew by $1.1 billion.

Darryl: <unk> decreased 1% to $6, three 2%, but increased two basis points sequentially when excluding the impact of the cash flow hedges.

Interest income and our CRE portfolio.

Darryl: Within our consumer portfolio, we continue to see the benefit of higher rates on new originations compare to maturing balances with a consumer loans, yielding increased 12 basis points a 654%.

Darryl: Turning to slide 11, our liquidity remains strong.

Darryl: At the end of the first quarter investment securities and cash, including cash held at the fed totaled $62 $3 billion, representing 29% of total assets.

Darryl: Average investment Securities grew $1 1 billion.

Daryl N. Bible: Reflecting the reinvestment of maturing securities and a shift of a portion of our cash balances into securities, the yield on investment securities increased 17 basis points to 3.30% as the yield on new purchases exceeded the yield on maturing securities. The duration of the securities portfolio at the end of the quarter was 3.8 years, and the unrealized pre-tax loss on the available for sale portfolio was only $263 million.

Darryl: Reflecting the reinvestment of maturing securities and a shift of a portion of our cash balances into securities.

Darryl: The yield on investment Securities increased 17 basis points to 3.30% as the yield on new purchases exceeded the yields on maturing securities.

Darryl: The duration of our securities portfolio at the end of the quarter was three eight years and the unrealized pretax loss on the available for sale portfolio was $263 million.

Daryl N. Bible: Turning to slide 12, we continue to focus on growing customer deposits, and we're pleased with the stabilization of our deposit balances and prices. Average total deposits declined $648 million, less than 1.5% to $164.1 billion, while the average customer deposit increased sequentially. We saw average deposit growth in institutional services and wealth management.

Darryl: Turning to slide 12, we continue to focus on growing customer deposits.

Darryl: And we're pleased with the stabilization of our deposit balances and pricing.

Darryl: Average total deposits declined $648 million less than one half of 1% to $164 1 billion, while the average customer.

Darryl: Deposits increased sequentially.

Darryl: Average deposit growth in institutional services and wealth management relatively stable deposits within commercial and a modest decline in the retail bank.

Daryl N. Bible: Relatively stable deposits within commercial and a modest decline in the retail bank. This growth allowed us to roll off some of our brokerage business. Average demand deposits declined $1.5 billion, partially impacted by seasonal deposit declines in commercial and business banking, a shift toward higher yielding project products continued during the quarter, but at a much slower pace. The mixed average of non-interest-bearing deposits was 30% of total deposits, largely unchanged from last quarter. Excluding broker deposits, the non-interest-bearing deposit mix in the first quarter was 32 percent. Encouragingly, we saw the pace of deposit cost increases slow through the quarter, with the cost of interest-bearing deposits increasing three basis points to 2.93 percent. This represents the smallest quarterly increase since the start of the tightening in early 2022. Our core non-maturity deposit costs increased only one basis point sequentially. Continue on slide 13.

Darryl: This growth allowed us to roll off some of our brokered Cds.

Darryl: Average demand deposits declined $1 5 billion, partially impacted by seasonal deposit declines in commercial and business banking.

Darryl: The shift toward higher yielding projects products.

Darryl: Continued during the quarter, but at a much slower.

Darryl: Slowed meaningfully then.

Darryl: The mix average of noninterest bearing deposits was 30% of total deposits largely unchanged from last quarter.

Darryl: Excluding broker deposits noninterest bearing deposit mix in the first quarter was 32%.

Darryl: Currently we saw the pace of deposit cost increases slow through the quarter, whereas the cost of interest bearing deposits increased three basis points to 293%.

Darryl: This represents the smallest quarterly increase since the start of the tightening in early 2022.

Darryl: Our core non maturity deposit costs increased only one basis point sequentially.

Darryl: Continuing on slide 13.

Daryl N. Bible: Non-interest income was $580 million, up slightly from the fourth quarter. M&T normally receives an annual distribution from Bayview Lending Group during the first quarter of the year. This distribution was $25 million in 2024 compared to $20 million last year. Excluding the Bayview distribution, non-interest income declined $23 million sequentially. The decrease was largely driven by lower commercial mortgage banking revenues and syndication fees reflected in our other revenues from operations. Both of these fee items posted strong fourth-quarter results. Recall that last year's first quarter included $45 million of fee income from CIT prior to the sale in April. Turning to slide 14.

Darryl: Non interest income was $580 million up slightly from the linked quarter.

Darryl: M. A T normally receives an annual distribution from Bayview lending group during the first quarter of the year. This distribution was $25 million in 2024 compared to $20 million last year.

Darryl: Excluding the Bayview distribution noninterest income declined $23 million sequentially.

Darryl: The decrease was largely driven by lower commercial mortgage banking revenues and syndication fees reflected in our other revenues from operations.

Darryl: So these fee items posted strong fourth quarter results recall that last year's first quarter included $45 million of fee income from <unk> prior to the sale in April.

Darryl: Turning to slide 14.

Daryl N. Bible: We continue to focus on controlling expenses. Non-interest expenses were $1.4 billion. This year's first quarter and last year's fourth quarter each had incremental FDIC special assessments amounting to $29 million and $197 million, respectively. Excluding the special assessment, adjusted non-interest expense increased by $8 million or 0.6% compared to last year's first quarter. On a similar basis, adjusted non-interest expense increased $114 million, or 9% from the previous quarter. This increase was largely driven by an approximate $99 million of seasonal higher compensation costs included in the first quarter. This figure is unchanged from last year's first quarter. As usual, we expect seasonal factors to decline significantly as we enter the second quarter. The adjusted efficiency ratio was 59.6% compared to 53.6% in the fourth quarter. Next, let's turn to slide 15 for credit.

Darryl: We continue to focus on controlling expenses.

Noninterest expenses were $1 4 billion.

Darryl: This year's first quarter and last year's fourth quarter, each had incremental FDIC special assessment amounting to $29 million and $197 million respectively.

Darryl: Excluding the special assessment adjusted non interest expense increased by $8 million, a 0.6% compared to last year's first quarter.

Darryl: Similar basis, adjusted noninterest expense increased $114 million or 90% from the linked quarter.

This increase was largely driven by an approximate $99 million of seasonal higher compensation costs included in the first quarter.

Darryl: This figure is unchanged from last year's first quarter.

Darryl: As usual, we expect those seasonal factors to decline significantly as we enter the second quarter.

Darryl: Adjusted efficiency ratio was 59, 6% compared to 53, 6% in the fourth quarter.

Speaker Change: Next let's turn to slide 15 for credit.

Daryl N. Bible: Net charge-offs for the quarter totaled $138 million, or 42 basis points, down from 44 basis points in the late quarter. CRE net charge-offs declined meaningfully due to the resolution of three office-related credits in last year's fourth quarter. The two largest charge-offs were previously criticized C&I loans and amounted to approximately $31 million total. One credit was a non-automotive dealer, and the other was in the services industry. Non-accrual loans increased by $136 million to $3.2 billion. The non-accrual ratio increased 9 basis points to 1.71%. This was largely driven by an increase in CNI. CRE Healthcare Not Accrual Loan Loans 30 to 89 days past due decline sequentially across each portfolio. In the first quarter, we recorded a provision of $200 million compared to net charge-offs of $138 million.

Speaker Change: Net charge offs for the quarter totaled $138 million or 42 basis points down from 44 basis points in the linked quarter.

Speaker Change: CRE net charge offs declined meaningfully due to the resolution of three office related credits in last year's fourth quarter.

Speaker Change: The two largest charge offs were previously criticized C&I loans and amounted to approximately $31 million total.

Speaker Change: One credit was a non automotive dealer and the other was in the services industry.

Speaker Change: Nonaccrual loans increased by 136 million to $3 2 billion and non accrual ratio increased nine basis points to 171%.

Speaker Change: This was largely driven by an increase in C&I and CRE health care and non accrual loans.

Speaker Change: Loans 30 to 89 days past due declined sequentially across each portfolio.

Speaker Change: In the first quarter, we recorded a provision of $200 million compared to the net charge offs of $138 million.

Daryl N. Bible: This resulted in an allowance bill of $62 million and increased the allowance to loan ratio by 3 basis points to 1.62%. The allowance bill primarily reflects a deterioration in the performance of loans to certain commercial borrowers, including non-automotive dealers and healthcare facilities, as well as growth in some sectors of M&T's C&I and consumer loan portfolios. Please turn to slide 16.

Speaker Change: This resulted in an allowance build of $62 million, an increase the allowance to loan ratio by three basis points to 162%.

Speaker Change: The current.

Speaker Change: So primarily reflects the deterioration in the performance of the loans to certain commercial borrowers, including non automotive dealers at health care facilities as well as growth in some sectors of M. A T C&I and consumer loan portfolios.

Speaker Change: Please turn to slide 16, when we file our Form 10-Q, and a few weeks, we estimate that the level of criticized loans will be $12 9 billion compared to $12 6 billion.

Daryl N. Bible: When we file our Form 10-Q in a few weeks, we estimate that the level of criticized loans will be $12.9 billion, compared to $12.6 billion at the end of December. D&I criticized loans increased $641 million, while CRE criticized loans decreased $277 million, with declines in both permanent and construction. Slide 17 provides additional detail on the C&I criticized balance. Total E&I criticized balances increased $641 million. The majority of that increase is concentrated within dealer and manufacturing. We're seeing areas of pressure, particularly in certain businesses that may be more acutely impacted by the late effects of higher rates, for those impacted by reduced large ticket consumer discretionary spending or a shift in spending on goods to service. For example, we saw an uptick in criticized loans to non-auto dealer industries, as higher rates have impacted large ticket discretionary consumer spend, and earlier COVI Slide 18 includes detail on the CRE criticized balance. The total CRE criticized balance decreased $277 million from the last quarter. The decline is across most property types, though we did not see an increase in office and Healthcare.

Speaker Change: End of December.

Speaker Change: DNI criticized loans increased $641 million, while C. R E criticized loans decreased $277 million with declines in both permanent and construction.

Speaker Change: Slide 17 provides additional detail on C&I criticized balances.

Speaker Change: Total Eni criticized balances increased 641 million majority of that increase is concentrated within dealer and manufacturing industries, we are seeing.

Speaker Change: Areas of pressure, particularly in certain businesses that may be more acutely impacted by the lag effects of higher rates.

Speaker Change: For those impacted by reduced large ticket consumer discretionary spending or a shift in spending on goods to services.

Speaker Change: For example, we saw an uptick in criticized loans two are not auto dealer industries as higher rates have impacted large ticket discretionary consumer spend.

Speaker Change: And earlier Covid, driven buying set saturated demand for these types of purchases.

Speaker Change: Slide 18 includes detail on CRE criticized balances total CRE criticized balances decreased $277 million from the last quarter. A decline is across most property types that we did not see an increase in office.

Speaker Change: And health care criticized.

Speaker Change: We are seeing improvements in occupancy and staffing.

Daryl N. Bible: We are seeing improvements in occupancy and staffing within healthcare, but reimbursement rate improvement has been uneven, resulting in a modest net increase in criticized balances within the portfolio. Last quarter, we noted an upcoming review of the construction portfolio. Over 80% of that review has been completed, and I am pleased to note that the review resulted in a limited information, downgrade of construction loans to credit. The remainder of the review generally consists of smaller, balanced loans. But we would not expect the outcome of the remainder of that review to be significantly different from the portion already completed.

Speaker Change: And health care, but reimbursement rate improvement has been uneven resulting in modest net increase in criticized balances within the portfolio.

Last quarter, we noted and upcoming review of the construction portfolio over 80% of that review has been completed and I am pleased to note that that review resulted in limited incremental.

Speaker Change: Downgrades of construction loans into criticized the remainder of the review generally consists of smaller balance loans, but we would not expect the outcome of the remainder of that review to be significantly different than the portion of our already completed.

Daryl N. Bible: Turning to slide 19 for capital, M&T's CET1 ratio at the end of the first quarter was an estimated 11.7% compared to 10.98% at the end of the fourth quarter. The increase was due, in part, to the continued pause in repurchasing shares combined with continued strong capital generation. At the end of the quarter, the negative AOCI impact on the CET-1 ratio from the AFS securities and pension related components would be approximately 20 basis points. Now turning to slide 20 for the, The economy continues to perform well, and the labor market remains strong, despite the challenges faced by firms and consumers. The Economic Outlook

Speaker Change: Turning to slide 19 for capital <unk> CET, one ratio at the end of the first quarter was an estimated 11, 7% compared to $10 nine 8% at the end of the fourth quarter.

Speaker Change: The increase was due in part due to the continued pause in repurchasing shares combined with continued strong capital generation.

Speaker Change: At the end of the quarter the negative OCI impact.

Speaker Change: CET one ratio from the HFF securities and pension related components would be approximately 20 basis points.

Speaker Change: Now turning to slide 20 for the outlook.

Unknown Attendee: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, M&T Bank Corp. Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, M&T Bank Corp.

Speaker Change: The economy continues to perform well in the labor market remains strong despite the challenges faced by firms and consumers the economic outlook that we discussed on the January earnings call remains unchanged.

Daryl N. Bible: We discussed on the January earnings call remains unchanged. Shifting to 2024 earnings, the outlook is largely unchanged from our update in March, with an upward bias to our NI outlook. For NII, recall that the outlook we provided in January considered a range of rate cut scenarios from six cuts. As the forward curve has settled closer to two cuts, we expect NII to be $6.8 billion with possible upside. Our outlook for fees and expenses is unchanged. The expense outlook excludes the incremental FDIC special assessment incurred in the first quarter.

Speaker Change: Shifting to 2024 earnings outlook is largely unchanged from our update in March with an upward bias to our NII outlook for NII recall that the outlook. We provided in January considered a range of rate cut scenarios from six cuts Q3 for us.

Speaker Change: As a forward curve has said or settled closer to two cuts, we expect NII to be $6 $8 billion with possible upside or outlook for fees and expenses is unchanged. The expense outlook excludes incremental F. CIC special assessment incurred in the <unk>.

Speaker Change: First quarter.

Daryl N. Bible: We continue to expect net charge-offs for the full year to be near 40 basis points. The allowance level will be dependent on many factors, including changes in the macro, the economic outlook, portfolio mix, and underlying asset quality. Our outlook for the tax rate of 24 to 24.5% excludes the discrete tax benefit in the first quarter.

Speaker Change: We continue to expect net charge offs for the full year to be near the 40 basis points.

Speaker Change: Now its level will be dependent on many factors, including changes in the macro economic outlook portfolio mix of underlying asset quality.

Speaker Change: Our outlook for the tax rate of 24 to 24, 5% excludes the discrete tax benefit in the first quarter.

Daryl N. Bible: Finally, as it relates to capital. Our capital, coupled with our limited investment security marks, has been a clear differentiator for M&T. We take our responsibility to manage our shareholders' capital very seriously and return more when it is appropriate to do that. Our businesses are performing well, and we are growing new relationships each and every day. While the economic uncertainty is improving, our share repurchases remain on hold. We plan to reassess repurchases after the second quarter and will consider a range of factors, including the macroeconomic environment. The Bank's Capital Generation, Results from the 2024 stress test, the level of commercial real estate loans and overall asset quality

Finally, as it relates to capital.

Speaker Change: Our capital coupled with our limited investment security marks has been a clear differentiator for <unk>.

Speaker Change: We take our responsibility to manage our shareholders capital very seriously and returned more when it is appropriate to do that.

Our businesses are performing well and we are growing new relationships each and every day.

Speaker Change: While the economic uncertainty is improving our share repurchases remain on hold we plan to reassess repurchases. After the second quarter, and we will consider a range of factors, including the macroeconomic environment. The.

Speaker Change: The bank's capital generation.

Speaker Change: As always from the 'twenty 'twenty four our stress test.

Speaker Change: Level of commercial real estate loans and overall asset quality.

Daryl N. Bible: That said, we continue to use our capital for organic growth and growing new customer relations. Buybacks have always been part of our core capital distribution strategy and will continue to be so in the future. In the meantime, our strong balance sheet will continue to differentiate us with our clients, communities, regulators, investors, and rating agencies. To conclude on slide 21, our results... underscore, an optimistic investment. While economic uncertainty remains high, that is when M&T has historically outperformed its peers. M&T has always been a purpose-driven organization with a successful business model that benefits all stakeholders, including shareholders.

Speaker Change: That said, we continue to use our capital for organic growth and growing new customer relationships.

Speaker Change: Buybacks have always been part of our core capital distribution strategy and will again in the future in the meantime, our strong balance sheet will continue to differentiate us with our clients communities regulators investors and rating agencies.

Speaker Change: To conclude on slide 21, our results underscore.

Speaker Change: Underscore an optimistic investment thesis.

Speaker Change: While economic uncertainty remains high and that is what <unk> has historically outperformed its peers MTT has always been a purpose driven organization with a successful business model that benefits all stakeholders, including shareholders.

Operator: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, Manan Gosalia, and Ebrahim Poonawala, We remain focused on shareholder returns and consistent dividend growth. Finally, we are a disciplined acquirer and prudent steward of shareholder capital. Now, let's open up the call.

Speaker Change: We have a long track record of credit outperforming through all economic cycles, while growing within the markets we serve.

Speaker Change: We remain focused on shareholder returns and consistent dividend growth. Finally, we are a disciplined acquirer and prudent steward of shareholder capital.

Speaker Change: Now, let's open up the call.

Speaker Change: At this time, we will open the floor for questions.

Operator: At this time, we will open the floor for questions. If you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing star 2. Again, we ask you please pick up your handset to allow for optimal sound quality. Again, that's star number one for your question. Our first question will come from Manan Gosalia with Morgan Stanley. Please go ahead. Hi, good morning.

Speaker Change: You would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: You may remove yourself at any time by pressing star two.

Speaker Change: Again, we ask you please pickup your handset to allow for optimal sound quality.

Speaker Change: Again, Thats star one for your questions.

Speaker Change: Our first question will come from Manav. That's all you with Morgan Stanley. Please go ahead.

Speaker Change: Yeah.

Manav: Hi, good morning.

Daryl N. Bible: [inaudible]

Manav: <unk>.

Daryl N. Bible: Daryl, can you unpack the NII guidance for us in terms of puts and takes in a higher for longer rate environment? I mean, it looks like, you know, NIB deposits are holding up well, and you're moving some of the liquidity into high-yielding securities. So is the $6.8 billion an easy bar to hit if we only get two cuts? And what would that look like if we don't get any rate cuts this year?

Doug can you unpack the NII guidance for us in terms of just the puts and takes in that higher for longer rate environment. I mean, it looks like a you know an IV deposits are holding up well.

Manav: Moving some of the liquidity into higher yielding securities. So is the $6 8 billion, an easy bar to hit if we only got two cuts and what would that look like if we don't get any at any rate cuts this year.

Daryl N. Bible: Yeah, so let me start with the latter part first, Manan. Thanks for the question.

Doug: Yeah. So let me start with the latter part first Mohan thanks for the question.

Daryl N. Bible: You know, we are really pretty neutral on interest rates right now. So whether we get, you know, two cuts, three cuts, or we get no cuts, we're going to probably be pretty comfortable with 6.8. $6.8 billion plus or in that range. I think because of the size of the balance sheet we had this quarter, we're a little bit heavy with liquidity and a margin of $3.52. I think, for the most part, our margin has bottomed out this year, and we'll probably be in the mid to high $3.50s the rest of the year, but we'll probably have a little smaller balance sheet, maybe $2 or $3 billion shorter than that. But we feel really good about it. If you look at how things are playing out, you know, our deposits, the real value of our deposit franchise I think came out really strong this quarter. I mean, our core deposits hardly budged, despite the increase in interest rates.

Speaker Change: We are really pretty neutral to interest rates right now.

Speaker Change: So whether we get two cuts three cuts or we get no cuts, we're gonna probably pretty much be pretty comfortable with six eight.

Speaker Change: $6 8 billion plus in that range I.

I think because of the size of the balance sheet. We had this quarter were a little bit heavy with liquidity and a margin of $3 52.

I think for the most part our margin has bottomed out this year, you know and we'll probably be in the mid to high $3 50, as the rest of the year, but we'll probably have a little smaller balance sheet, maybe two or $3 billion shorter than that.

Speaker Change: But we feel really good about it if you look at how things are playing out.

Speaker Change: Our deposits you know the real value of our deposit franchise I think came out really strong this quarter I mean, our core deposits hardly budged and increasing interest rates, we still saw some growth in our retail Cds, which kind of drove the increase but other than that core deposits were flat from a cost.

Daryl N. Bible: We still saw some growth in our retail CDs, which kind of drove the increase, but other than that...

Daryl N. Bible: Core Deposits were flat from a cost perspective, and if you look on the asset side of the equation, we're getting nice reactivity both on our consumer loans. Our consumer loans are increasing nicely in Otto, RV, and HELOC, and all those are contributing positively. And then as we put money to work in the investment securities portfolio, I know it's not as high as what it is at the Fed, but as we help manage our sensitivities, we're going to have some really nice repricing on our investment portfolio. We're up 17 basis points. We could easily do that for the next couple of quarters plus throughout the year. So I think we feel pretty good about NII going forward right now.

Speaker Change: Active.

And if you look on the asset side of the equation, we're getting nice reactivity, both on our consumer loans, our consumer loans or increase increasing nicely and auto RV and HELOC and all of those are contributing positively and then as we put money to work in the investment securities portfolio I know.

Speaker Change: It's not as high as what it is at the fed but you know as we help manage our sensitivities you know we're going to have some really nice repricing on our investment portfolio were up 17 basis points, we could easily do that for the next couple of quarters plus throughout the year. So I think we feel pretty good about NII going forward.

Speaker Change: We're at right now.

Speaker Change: Oh, Okay can you did you mentioned with duration, you're putting on on the on the Securities book.

Daryl N. Bible: Oh, did you mention what duration you're putting on the securities book? So the purchases we did

Speaker Change: So on the purchases we did this quarter.

Unknown Attendee: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, Manan Gosalia, and Ebrahim Poonawala

Speaker Change: Quarter, we basically they had three chunks of securities and the way we look at it is trying to keep our convexity flat. So we've been purchasing treasuries and MBS, which patiently as positive convexity.

Speaker Change: With low convex NBS together, so the yields have been we've been getting it in the first quarter four six so 4% four 6% yield duration of about little over three years off from that perspective, you know where rates are today now.

Daryl N. Bible: Unknown Attendee, Bill Carcache, Alexander Yokum, Manan Gosalia, Ebrahim Poonawala, So 4%, 4.6% yield, duration at about a little over three years from that perspective. You know, where rates are today, you can probably easily add another 30 to 40 basis points higher yield from that. So as we continue to do the same thing we did in the first quarter, we'll probably get some more uplift in the second quarter.

Speaker Change: You can probably easily add another 30 to 40 basis points higher your own from that so as we continue to do the same thing we did in the first quarter and second quarter, we'll probably get some more uplift.

Daryl N. Bible: That's really helpful. And then maybe a quick follow-up on the liquidity side, you know, cash as a percentage of assets is up another 150 basis points or so this quarter. Can you talk about the rationale for continuing to ratchet up that liquidity level? Is it the CRE exposure? Is it partly, you know, some of the stress we saw in the markets last quarter? So, you know, maybe you can talk about what the right level of liquidity is, given the current credit environment.

Speaker Change: That's really helpful. And then maybe a quick follow up on the liquidity side.

Speaker Change: Cash as a percentage of assets is up another 150 basis points or so this quarter.

Speaker Change: Can you talk about.

Speaker Change: The rationale for continuing to ratchet up that liquidity level as it is at the CRE exposure is it.

Speaker Change: Barclays you know some of the stress we saw in the market.

Speaker Change: Last quarter. So maybe if you could talk about what the right level of liquidity is.

Speaker Change: Kevin.

Speaker Change: The current credit environment.

Kevin: It was the latter you know anytime there is any scare in the industry, we're going to be conservative. That's just who we are and where we're going to make sure. We take care of the company has strong capital.

Daryl N. Bible: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, Manan Gosalia, Ebrahim Poonawala, I would say we're comfortable, you know, as we kind of let some of this excess liquidity come out of our balance sheet and have it go down to, you know, maybe $27, $26 billion at the Fed ballpark, you know, over as we kind of go throughout the year from So it will come down far in any other stresses that hit our industry.

Kevin: A lot of liquidity and that's first and foremost.

Kevin: I would say we're comfortable you know as we kind of let some of that excess liquidity come out of our our balance sheet have it go down to maybe 27% and $26 billion at the fed ballpark.

Kevin: Oh over as we kind of go throughout the year from that perspective, so it will come down barring any other stresses that hit that hit our industry.

Operator: Great, thank you. Thank you. Our next question will come from John Pancari with Evercore. Please go ahead. Good morning.

Speaker Change: Great. Thank you.

Speaker Change: Thank you. Our next question will come from John <unk> with Evercore. Please go ahead.

Speaker Change: Okay.

John: Good morning.

Operator: Hey John,

John: Hey, John.

Unknown Attendee: Unknown Attendee Back to the balance, hey Daryl, back to the balance returns, the C&I loans, you sounded relatively constructive in your commentary there and the growth you're seeing, you cited better line utilization. Maybe elaborate there a little bit, where are you seeing demand and what's your outlook there on that front of it, where can you actually see some growth in the coming quarters?

John: Back to the balance.

John: Well go back to the balance sheet for them.

John: C&I loans.

John: Relatively constructive in your commentary there the growth Youre seeing you cited better line utilization.

John: Elaborate there a little bit where you see.

John: Demand and and what's your outlook there on that front to where you can actually see some growth in coming quarters.

Daryl N. Bible: Yeah. So if you look at growth, it was actually broad-based. We had really good growth in many sectors. So if you look at our dealer financial services area, you know, just the auto floor planning is funding up. So you have increased utilization there.

John: Yeah.

John: So if you look at our growth it was actually broad based.

John: We had really good growth in many sectors. So if you look at our dealer financial services area. Just the auto floor planning is funding up. So you had increased utilization there are middle market business.

Daryl N. Bible: Our middle market business, you know, was strong and actually had increases in that space. Corporate and Institutional was also up. Fund banking was up. Our equipment leasing was higher, as well as mortgage warehouse. So those were the businesses that drove it. If you look at the regions, you know, we operate in 28 community bank regions. Two-thirds of our community bank regions are now growing positively. The highlights were in Massachusetts, New Jersey, Philadelphia, and Western New York. We're

John: It was strong and actually had increases in that space.

John: Corporate <unk> institutional was also up fund banking was up our equipment leasing was higher as well as mortgage warehouse. So those were the businesses that drove it.

John: If you look at the regions you know we operate in 28 community Bank regions two thirds of our community Bank regions now are growing positively the highlights were in Massachusetts, New Jersey, Philadelphia, and Western New York, where kind of the drivers where the growth came from.

Speaker Change: Okay, great. Thanks for all that on the credit front, it's good to see the commercial dose group.

Operator: Okay, great. Thanks, Daryl.

Daryl N. Bible: And then on the credit front, it's good to see the commercial real estate amount of lending crawl down in the quarter. What are you seeing on the CRE front in terms of MPA inflows? Are you seeing a slowing, or is that somewhat impacted by an increase in loan modifications? And then, just separately on the C&I front, I know you noted some higher numbers of crawls there. Just what are you seeing on that front that's driving the added stress?

Cools down in the quarter.

Speaker Change: What are you seeing on the CRE front in terms of NPA inflows are you seeing.

Speaker Change: A slowing or is that somewhat impacted by an increase in loan modifications and then just separately on the C&I front there.

Speaker Change: Some higher non accruals that are just what are you seeing on that front, that's driving the added.

Speaker Change: Stress.

Daryl N. Bible: Yeah, so on the CRE front, you know, I think we saw really good performance this quarter. One quarter doesn't make a trend yet, but it was a positive quarter. We had our criticized numbers come down, still had health care and office go up a little bit. But overall, I think we're seeing that stabilize.

Speaker Change: Yes on the CRE front, you know I think we saw really good performance. This quarter, you know one quarter doesn't make a trend yet but it was a positive quarter. We had our criticized numbers come down still had health care and office go up a little bit, but overall I think we're seeing that stabilize.

Daryl N. Bible: You know, we did, I talked about it in the prepared remarks, we did go through that construction review. You know, we got through, you know, 80% of the construction review; we only had 200 million change in criticism. You know, we have a little bit left to go, and we'll have a very nominal increase there. So getting through that construction book, you know, was huge. It was like $8.6 billion in size when we went through it. So that was a really good review.

Speaker Change: Did I talked about it in the prepared remarks, we did go through that construction review.

Speaker Change: We got through 80% of the construction review, we only had $200 million change in criticized we have a little bit left to go we will have very nominal increase there so getting through that construction book was huge it was I think $8 6 billion in size. We went through so that was it really.

Daryl N. Bible: You know, we'll continue to monitor it. You know, obviously, office and health care are more the troubled sectors. And, you know, those we will work with over time. But our teams are working with our customers each and every day. You know, we're trying to get out in front of working with them to make sure we can help them through any stress that we have. [inaudible] You know, I think we feel pretty good, you know, just going forward with that. So.

Good review.

Speaker Change: We will continue to monitor it obviously office and health care more of that troubled sectors.

Speaker Change: You know those where we will work with over time.

Speaker Change: But our teams are working with our customers each and every day.

Speaker Change: We're trying to get out in front of working with them to make sure. We can help them through any stress that we have.

Speaker Change:

Speaker Change: And.

Speaker Change: I think we feel pretty good just going forward with that so definitely not out of the words with CRE, but I think we're feeling that we're having some positive trends as far as C&I goes you know to be honest with you. We had two really credits one was a non auto dealer and.

Unknown Attendee: Definitely not out of the woods.

Daryl N. Bible: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, Manan Gosalia, Ebrahim Poonawala, You know, it was a marine dealer such that, you know, a lot of activity in the boats, you know, was coming down, didn't have as much demand there. And we just basically, you know, had to put a specific reserve on that and take a charge off And the other one that came through was a health care credit, you know, and those were the two largest CNI credits that came through that really impacted the numbers. So if it wasn't for those, you probably wouldn't have noticed anything, you know, from a charge-off perspective.

Speaker Change: Not auto dealer was stressed a little bit with higher interest rates you know it was a marine dealers such that a lot of activity in the boats was coming down it didn't have as much demand there and we just basically had to put a specific reserve on that and take a charge off in that sector.

Speaker Change: And the other one that came through was a healthcare credit.

Speaker Change: Those were the two largest C&I.

Speaker Change: Credits that came through that really impacted the numbers. So it wasn't for those you probably wouldn't have noticed anything from a charge off perspective or provision.

Speaker Change: Yeah.

Daryl N. Bible: Thanks Daryl. If I can ask just one more question on the credit front tied to that, Your criticized loans do trend above your peer levels, but is there a degree of conservativeness in there in terms of, I guess, how you treat your recourse agreements as part of GRE and elsewhere? Is there something in the way you're doing your internal risk ratings that may influence your criticized levels? We're getting a fair amount of incoming calls regarding that.

So if I can ask just one more on the credit front, probably do that as well.

Speaker Change: Criticized loans do trend.

Speaker Change: Above your peer levels, but is there a degree of conservatism in there in terms of.

Speaker Change: Treat the recourse agreements as part of <unk>.

Speaker Change: And elsewhere is there something in the way youre doing their internal risk ratings that may include for criticized levels, we're getting a fair amount of incoming regarding that.

Speaker Change: Yeah. So.

Daryl N. Bible: Yeah, so you know, we have had a long history of running with a higher level of criticism. We do that intentionally because we want to work with our clients. Because if we work with our clients and get them through these stressful times, they're very loyal to our company. It's the right thing for our communities and all of that. So that's first and foremost.

Speaker Change: We have had a long history of running with a higher level of criticized we do that intentionally because we want to work with our clients.

Speaker Change: Cause if we work with our clients and get them through the stress times, they're very loyal to our company if the right things for our communities.

Speaker Change: And all of that so that's first and foremost.

Daryl N. Bible: You know, I would say, you know, we just tend to be a conservative company. You know, I'm on the financial side. So I'm conservative with capital and liquidity. You know, you have Mike Todaro and Bob, our chief credit officer; they're conservative on the credit side. So it's just how we run and operate the bank. You know, we're going to do the right things and, you know, try to work with our customers to get through issues. You know, when we customers are not supportive and getting through issues, that's when we might try to sell some loans, but that's usually few and far between. But you know, our history is to work with them. We find that working with our clients over the long term produces less losses, better capital preservation, and better for both, you know, shareholders, as well as us as a company, and all that. So that's how we're going to continue to operate.

Speaker Change: I would say, we just tend to be a conservative company you know I'm on the financial side, So I'm conservative with capital and liquidity.

Speaker Change: Mike <unk> and Bob our Chief Credit Officer, Theyre Conservative on the credit side. So it's just how we run and operate the bank, we're going to do the right things and.

Speaker Change: Try to work with our customers to get through issues.

Speaker Change: Our customers are not supportive and getting through issues thats when we might try to sell some credits, but that's usually a few and far be training.

Speaker Change: But you know our history is to work with them, we find that working with our clients over the long term produces less losses, better capital preservation and better for both shareholders as well as us as a company and at all of that so that's how we're going to continue to operate.

Operator: It takes, uh, yeah. Thank you. Our next question comes from Ebrahim Poonawala with Bank of America. Please go ahead. Say good morning, Darren. Good morning.

Speaker Change: Thanks Bill.

Speaker Change: Yep.

Speaker Change: Thank you. Our next question comes from Ebrahim <unk> with Bank of America. Please go ahead.

Ebrahim: Hey, good morning, Dan.

Ebrahim: Good morning.

Ebrahim: So I guess.

Daryl N. Bible: So I guess a question on commercial real estate. You've done a lot of work over the last year, diving into the portfolio. If we think about I think the stress in the market, and it's been the wet blanket on your stock, is around what higher rates could mean for commercial real estate risk. Give us a sense of, when you look at sensitivity, be it loan-to-value, discounted, sort of debt service coverage ratios, if we don't get any rate cuts for the next two years, does that, and the economy, and that's because the economy Like, give us a sense of no rate cuts, an elevated yield curve, and what the sensitivity to that portfolio is in terms of credit losses.

Ebrahim: Question on commercial real estate, you've done a lot of work over the last year keep diving on the portfolio.

Ebrahim: All yours.

Ebrahim: If we think about I think the success in the market and it's been the wet blanket on your stock is around what higher rates could mean on commercial real estate can you just give us a sense of when you look at sensitivity.

Ebrahim: Loan to value discounted.

Ebrahim: Debt service coverage ratios, if we don't get any rate cuts for the next two years does that Lee and the economy and that's because the economy is doing fairly well does that lead to worse outcomes, just because it needs a higher like give us a sense of.

Ebrahim: No <unk> got elevated yield curve, what's the sensitivity to that portfolio is in terms of credit losses.

Daryl N. Bible: Yeah, if you don't mind, Ebrahim, I'm going to pivot a little bit because we actually ran a scenario last quarter and stressed our CRE portfolio up 100 basis points to see what impact that might have for us. So I mean, if you look at it from that perspective, it really depends on, you know, what level of rates are going higher. So let's just assume right now that it's the Fed rates, the short-term rates.

If you don't mind, Ebrahim I'm going to pivot a little bit because we actually ran a scenario last quarter.

Ebrahim: And stress, our CRE portfolio up 100 basis points of what impact that might have for us.

Ebrahim: So if you look at it from that perspective, it really depends on.

Ebrahim: What level of rates are going higher so, let's just assume right now the fed rates. The short term rates. If you look at our CRE portfolio. The vast majority of the CRE portfolio is fixed rate either a fixed rate loan or are they synthetically have swaps that have effects, so only 29% floats.

Daryl N. Bible: If you look at our CRE portfolio, the vast majority of the CRE portfolio is fixed rate, either a fixed rate loan, or they synthetically have swaps that have it fixed. So only 29% float. You know, if you look at going up 100 basis points, we see really very minimal impact on the portfolio. You know, maybe at most, approximately $500 million might go into criticism if they fall below the 1.2 debt service coverage ratio. That's what we had from that.

Ebrahim: If you look at going up 100 basis points, we see really very minimal impact on the portfolio.

Ebrahim: <unk> Atmos approximately $500 million might go into criticized say fall below the one two debt service coverage ratio. That's what we had from that if you look at the C&I book C&I book $58 billion is all floating now the vast majority of the C&I book has debt service coverage ratios well over.

Daryl N. Bible: If you look at the CNI book, CNI book, $58 billion is all floating. Now, the vast majority of the CNI book has debt service coverage ratios well over 2% and very strong. But if you look at a subset of the leverage.., book that we have in there, that's closer to $5 billion. You know, we call them leveraged. But when we put them on, they were leveraged, about half of those aren't even levered anymore, because of their performance. So you're really only looking at about half of that is really pure levered loans. And when you look at those levered loans coming through and stress them 100 basis points, you know, it's a minimal impact for us, you know, a couple hundred million dollars from a criticized, Now, if you go to the longer end of the curve, and longer end of the curve, it's a, you know, five or 10 year goes up 100 basis points, that really impacts more our construction book, because you need to have takeouts there, you know, and from

Ebrahim: <unk>, 2% in and very.

Ebrahim: But if you look at a subset of the leverage.

Book that we have in there that's closer to $5 billion.

Ebrahim: We call them leverage, but when we put them on they were leveraged about half of those aren't even levered anymore because of their performance. So you're really only looking at about half of that is really pure levered loans and when you look at those levered loans coming through in stress them.

Ebrahim: 100 basis points.

Ebrahim: It's a minimal impact for us a couple of hundred million dollars from our criticized.

Ebrahim: Now if you go to the longer end of the curve.

And in a longer end of the curve, let's say.

Ebrahim: Five or 10 year goes up 100 basis points that really impacts more our construction book because you need to have take outs there.

Ebrahim: And from that perspective, you know, it's going to mean.

Unknown Attendee: Unknown Attendee.

Daryl N. Bible: Transcribed by https://otter.ai You know, it's just what's happening now. People are going shorter. They aren't going 10 years; they're going five years.

Ebrahim: It was just whats happening now people are going shorter they aren't going 10 years ago five years try to get placement and all that so all that being said, we think its very manageable if rates. Even go up 100 basis points that we can get through and not have a significant impact on our credit performance.

Daryl N. Bible: You know, try to get placement and all that. So all that being said, we think it's very manageable. If rates even go up 100 basis points, we can get through and not have a significant impact on our credit performance.

Daryl N. Bible: That was good, Kallal. Thanks for talking it through with me. And then one question, in terms of buybacks, you have a lot of excess capital. You called out four things, macro, overall asset quality, stress test results, and the level of CRE. If the first three are okay, and fast forward to July, there will be no issues with the first three. Is there something around the level of CRE that we should be mindful of when we think about the potential for buybacks getting started?

Ebrahim: That is good color. Thanks for talking through and then one question in terms of buybacks you have a lot of excess capital you called out four things macro overall asset quality <unk> and <unk>.

Ebrahim: A level of CRE.

Ebrahim: The first Seattle, Ken Zaslow to July Nobody Susan Firstly is this something that on the level of CRE that we should be mindful of when you think about potential for buybacks.

Unknown Attendee: Unknown Attendee Yeah, so there's actually five, so let me go through them again. We might have missed them when I was going through them, so macroeconomic, that's all right, no problem, macroeconomic environment, bank capital generation, results from the stress test, the level of CRE, and then overall asset quality. You know, I would say, you know, we're going to evaluate those at the end of the second quarter. From that perspective, there's still a lot of uncertainty in the marketplace, you know, and we just want to be good stewards of our capital. You know, the capital is not going anywhere.

Ebrahim: Getting started in the back half of the year.

Speaker Change: Yes, so there's actually five so let me go through them again.

Speaker Change: And when I was gone through it.

Speaker Change: Macroeconomic that's alright, no problem macroeconomic environment.

Speaker Change: <unk> capital generation.

Speaker Change: Results from the stress test the level of CRE, and then overall asset quality.

Speaker Change: I would say, we're going to evaluate those at the end of <unk>.

Speaker Change: Second quarter from that perspective.

Speaker Change: Still a lot of uncertainty in the marketplace.

Speaker Change: And we just want it will be good.

Stewards of our capital.

Speaker Change: Capital is not going anywhere and this capital is for our investors, it's going to come to the investors sooner or later, it's just a matter when we feel comfortable right now.

Daryl N. Bible: You know, and this capital is for investors; it's going to come to the investors sooner or later, just a matter of when we feel comfortable right now. We just don't want to make sure that, you know, it's now the right time, and we can basically put it over. But it's not going anywhere. You know, I would feel that if we did decide, and I'm not saying we are, but if we did decide, I would say we'd probably start off modestly and probably keep 11% plus CET1 ratio. And then kind of see how that goes. But right now, what I can tell you is we're going to review it at our earnings call three months from now. And we'll let you know how we feel about share repurchases at that point in time, and then we'll go from there. But it's not going anywhere. The investors; it's core to who we are. We buy back stock when we don't deploy it in acquisitions, and that's what we're going to do.

Speaker Change: Just don't want to make sure that.

Speaker Change: It's now is the right time, and we can basically put it over but it's not going anywhere.

Speaker Change: I would feel that if we did decide and I'm not saying we are but if we did decide I would say, we probably start off modestly.

Speaker Change: And probably keep up 11% plus CET one ratio.

Speaker Change: And then just kind of see how that goes but right now what I can tell you is we're going to review it at our earnings call three months from now and we'll let you know how we feel about share repurchase at that point in time and then we'll go from there, but it's not going anywhere the investors. It's core to who we are we buy back stock.

Speaker Change: Don't deploy it in acquisitions and that's.

Speaker Change: That's what we're going to do.

Operator: Thank you for taking my questions. Thank you. Our next question comes from Ken Usdin with Jeffries. Please go ahead. Thanks, good morning.

Speaker Change: Got it thanks for taking my questions.

Speaker Change: Yes.

Thank you. Our next question comes from Ken <unk> with Jefferies. Please go ahead.

Thanks, Good morning.

Operator: Morning.

Unknown Attendee: Darren, I was wondering if you could elaborate a little bit more on deposits. So I think, typically, M&T, you see a little bit of a seasonal decline in the first Q. And I think the quarter had a weird ending date with a

Speaker Change: Hum.

Dan I was wondering if you can elaborate a little bit more on deposits. So I think typically I mean do you see a little bit of a seasonal decline in the first Q and I think.

Kenneth Michael Usdin: Quarter had like a weird ending date with a holiday in payroll, but it really interesting to see your DDA and interest bearing up at period end versus the averages can you talk about your flows what youre seeing and how that dynamic is changing with the with the higher for longer environment.

Unknown Attendee: The Holiday Inn Payroll, but really interesting to see your DDAs and interest bearing up at period end versus the averages. Can you talk about your flows, what you're seeing, and how that dynamic is changing?

Daryl N. Bible: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, M&T Bank Corp.

You know, Canada, its really all around trying to make sure we grow our core deposits.

Daryl N. Bible: You know, Kenneth, it's really all around trying to make sure we grow our core deposits, you know, and to be honest with you, some of our businesses, I mentioned it in my prepared remarks, but in our trust businesses, you know, they're growing nicely, getting a lot of traction, and we had some nice wins in those businesses that added to our deposits in the second half of the first quarter and early part of the second quarter, so we You know, I can't be more pleased, though, with the other areas.

Kenneth Michael Usdin: And to be honest with you or some of our business as I mentioned in prepared remarks, but in our trust businesses.

Kenneth Michael Usdin: They are growing nicely again, a lot of traction and we had some nice wins in those businesses that added to our deposits in the second half of the first quarter early part of the second quarter. So we have a lot of momentum in that business and doing really well.

Kenneth Michael Usdin: Oh I can't be more pleased though with the other areas. Our commercial bank is really focused on growing deposits as well as well as the retail bank. So I mean, everybody's focused and doing the right thing and that's.

Daryl N. Bible: Our commercial bank is really focused on, you know, growing deposits as well as the retail bank, so, I mean, everybody's focused on doing the right thing, and that's where we are. You know, our bread and butter is really getting the operating account, and we're really good at that, and once we get them, they tend not to leave us, so we're happy with that as we move forward. Got it. Great. And one question on the loan side. You talked about the benefit of securities yield.

Kenneth Michael Usdin: That's where we are our bread and butter is really getting the operating account and we're really good at that and once we get them. They tend not to leave us. So we're happy with that as we move forward.

Speaker Change: Got it great and one question on the loan side, you talked about the benefit from securities yields grinding higher can you give us any color on where fixed rate loan repricing and what that looks like over the next year or two.

Speaker Change: Yeah. So if you look at.

Speaker Change: Yields on the.

Speaker Change: To give you a couple of examples.

Speaker Change: So, let's just look at auto and RV and give you examples.

Daryl N. Bible: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, M&T Bank Corp.

So if you look at it on a spread basis.

Our spreads are higher and this is to our marginal cost of funds of 24 basis points in auto in 63 in RV.

Daryl N. Bible: Loan repricing and what that looks like over the next year or two.

Speaker Change: But when you look at the yields that we're getting incrementally versus what's rolling off we're getting 192 basis points higher yields in auto and 140 basis point higher yield in RV.

Daryl N. Bible: Yeah, so if you look at the yields on the to give you a couple of examples. So let's just look at the auto and RV and give you an example. So, if you look at it on a spread basis... Our spreads are higher, and this is to our marginal cost of funds of 24 basis points in auto and 63 in RV. But when you look at the yields that we're getting incrementally versus what's rolling off, we're getting 192 basis points higher yields in auto and 140 basis points higher yields in RV. So that's really what's moving the yields on the consumer loan portfolios, as an example. Does that help?

Speaker Change: That's really what's moving the.

Speaker Change: The yields in the consumer loan portfolios as an example does that help.

Speaker Change: It does into those two books that are the majority of where you'll get that benefit over the next year or two.

Speaker Change: You know I would say.

Speaker Change: Or the other.

Speaker Change: Businesses, you know, it's competitive in middle market.

Speaker Change: But some of our other businesses that we're in I think we're getting a little bit higher spreads and yields overall, if you look at some of the businesses. So I think overall, we feel pretty good about that and then on the securities portfolio that is going to reprice nicely I talked a little bit.

Unknown Attendee: Unknown Attendee It does. And are those the two books that are the majority of where you'll get that benefit over the next year or two?

Daryl N. Bible: You know, I would say, for the other businesses, it's competitive and the middle market, but some of our other businesses that we're in, I think we're getting a little bit higher spreads and yields overall, if you look at some of the businesses. So I think, you know, overall, we feel pretty good about that. And then on the securities portfolio, you know, that's going to reprice nicely. I talked a little bit about that with Manan, but, you know, with what we have maturing in the securities portfolio and what we plan to buy and repurchase, we could easily go up 20 plus basis points in the next couple of quarters on that OU in the portfolio.

With <unk>, but.

Speaker Change: With what we have maturing on the securities portfolio and what we plan to buy in a repurchase we could easily go off 20 plus basis points in next couple of quarters and that.

Speaker Change: Oh yield on that portfolio.

Speaker Change: Great. Thanks, Sarah.

Speaker Change: Thank you. Our next question will come from Steven Alexopoulos with J P. Morgan. Please go ahead.

Steven A. Alexopoulos: Hey, good morning narrow.

Steven A. Alexopoulos: Hey, good morning.

Steven A. Alexopoulos: I wanted to start I appreciate all the comments on what.

Steven A. Alexopoulos: The creep portfolio could do under different stress scenarios looking forward, but if we stay with what actually happened. This quarter. I know you guys have roughly 8 billion coming due this year.

Steven A. Alexopoulos: What came due in the first quarter and walk us through how did it play out.

Operator: Great

Operator: Thanks, Daryl.

Operator: Thank you. Our next question will come from Steven Alexopoulos with J.P. Morgan. Please go ahead. Hey, good morning, Daryl.

Steven A. Alexopoulos: What what percentage of these refinance what paid off or did you have to extend because they couldn't refinance could you just give us some color on what actually happened this quarter the portfolio.

Daryl N. Bible: I wanted to start, I appreciate all the comments on what the Cree portfolio could do under different stress scenarios looking forward, but if we stay with what actually happened this quarter, I know you guys have roughly $8.5 billion coming due this year. What came due in the first quarter, and walk us through it. How did it play out? What percent of these refinanced, what paid off, what did you have to extend because they couldn't refinance? Could you just give us some color of what actually happened this quarter in the portfolio? Yeah,

Speaker Change: Yeah, Yeah, I can do that I think we had about $2 $3 billion mature in their first quarter out of that $2 $3 billion.

Speaker Change: I would say 56% of it was basically extended and added that was extended there was about 9% of that was and upgrades.

Speaker Change: We had I think another percent, maybe 23% actually paid off.

Speaker Change: And then we have the residual that we're working through right now and that's gonna easily either be extended out or paid off so very little incremental went into criticized small portion but for the most part our teams are working very closely but that was the impact of the maturities we had for the first quarter.

Daryl N. Bible: Yeah, I can do that. I think we had about $2.3 billion mature in the first quarter. Out of that $2.3 billion, I would say 56% of it was basically extended, and out of that that was extended, there was about 9% of that was in upgrades. We had, I think, another percent, maybe 23% actually paid off. And then we have the residual that we're working through right now, and that's going to either be extended out or paid off. So very little incremental went into criticize, you know, a small portion, but for the most part, our teams are working very closely. But that was the impact of the maturities we had for the first quarter. We hope that plays out through the rest of the year.

Speaker Change: We hope that plays out through the rest of the year.

Speaker Change: Got it and when you say extended do mean refinanced or they weren't in a position to refinance. So you gave them another year as an example.

Speaker Change: So typically when we extend you always.

Try to get more equity or more recourse from the customer. So if he is wanting to extend out a year, we're going to try to rightsize the debt service coverage ratio and they'll put more equity in or give us more.

Speaker Change: Tangible assets to protect us as we move forward is kind of how we were the negotiation goes and.

Speaker Change: Typically we extend anywhere from six months to a year after we willing to support it.

Speaker Change: Got it okay. Thanks, and then just as a margin. So I heard you earlier said you thought.

Daryl N. Bible: And when you say extended, do you mean refinanced? Or were they not in a position to refinance, so you gave them another year as an example?

Speaker Change: It would be mid to high 300 Fifty's.

For the rest of the year, but it's funny when you look at deposit cost it slowed materially seems you're fairly close to market.

Daryl N. Bible: So typically, when we extend, you know, you always try to get more equity or more recourse from the customer. So if he's wanting to extend out a year, we're going to try to right-size the debt service coverage ratio, and he'll put more equity in or give us more tangible assets to protect us as we move forward. That's kind of how the negotiation goes, and typically, we extend anywhere from six months to a year after we're willing to support it.

Speaker Change: I look at the components of earning assets rate loan yield 6.3, C&I is coming in way above that you've already outlined securities coming in higher.

Speaker Change: Why is the outlook not more robust for it just seems like you're there on the deposit side you have a lot of room for earning assets to reset higher just curious what does the other side of this thing.

Daryl N. Bible: Thanks for that. It's just on the margin. So I heard you earlier said you thought it would be mid to high 350s for the rest of the year. But it's funny when you look at deposit cost, it's slowed materially, and it seems you're fairly close to market. And when I look at the components of earning assets, right, loan yield 6.3 CNI is coming in way above that, you've already outlined securities coming in higher. Why is the outlook not more robust for NIFA? It just seems like you're there on the deposit side, but you have a lot of room for earning assets to reset higher. Just curious what's on the other side of this. Thanks.

Speaker Change: I'm trying to give you the best color that I can give you with what I know, but.

Speaker Change: At the end of the day is the biggest factor and it's been this way my whole career and asset liability management.

Speaker Change: How deposits behave, especially the non maturity deposits really drives your interest rate sensitivity.

Speaker Change: And while it's slowing in the commercial we're still going to see growth in the retail CD book, just because you're over 3%. So youre going to have that now to offset that worry are paying off some of our brokered deposits, which is a good guy to counteract some of that but.

Unknown Attendee: Yeah, you know, I'm trying to give you the best color that I can give you with what I know, but, you know, I, at the end of the day, the biggest factor, and it's been this way my whole career in asset liability management, you know, how deposits behave, especially non-maturity deposits, really drives your interest rate sensitivity. And, you know, while it's slowing in the commercial, we're still going to see growth in the retail CD book just because you're over 3%. So you're going to have to do that. Now, to offset that, we are paying off some of

Speaker Change: But there's this intermediation pieces, just really hard to model you know and we've put our best guess out there of what we think is going to do there you know, obviously, we could outperform but I'd much rather.

Speaker Change: Under promise and over deliver right now.

Speaker Change: So it sounds like you're being conservative okay. Thanks for taking my questions.

Speaker Change: Thank you.

Matt O'connor: Thank you. Our next question comes from Matt O'connor with Deutsche Bank. Please go ahead.

Matt O'connor: Morning, I was hoping you could talk about the recent.

Matt O'connor: The recent action by S&P to lower your ratings to a negative outlook. There was no major change, but just the negative outlook.

Obviously capital strong earnings strong.

Daryl N. Bible: is a good guy that counteracts some of that. But you know, this disintermediation piece is just really hard to model, you know, and we put our best guess out there about what we think is going to happen there. You know, obviously, you know, we could outperform, but I'd much rather, you know, under promise and over deliver right now.

Matt O'connor: Liquidity is strong so a lot of those boxes are checked but I do think they one of the things they flag with the CRE concentration.

Matt O'connor: So maybe just address that topic overall and how do you think he can.

Matt O'connor: Alleviate some of their concerns.

Matt O'connor: Sure.

Speaker Change: Yeah. So Matt you know, we actively made with all of our rating agencies all four of them on a very frequent basis.

Speaker Change: S&P did put us on negative outlook.

Speaker Change: But I think we feel very comfortable that that won't result in a downgrade. We think we have a good handle on both our CRE exposure and the amount of criticized that we have and what we're working towards right. Now. So I think we feel that where he got strategies in place to over time.

Unknown Attendee: sounds like you're Thanks for taking my questions. Thank you. Our next question comes from Matt O'Connor with Deutsche Bank. Please go ahead.

Operator: Morning. I was hoping you could talk about the recent action by S&P to lower your ratings or give you a negative outlook. There was no rating change, but just a negative outlook. I mean, obviously, capital strong, earnings strong.

Speaker Change: Get that to be.

Speaker Change:

Speaker Change: Less of a risk in the balance sheet from a credit perspective, but you know <unk> are one consistent one constituency it's an important constituency.

Unknown Attendee: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, Manan Gosalia, Ebrahim Poonawala, John Pancari, Brent Erensel, Daryl Bible, Manan Gosalia, Ebrahim Poonawala, John Pancari, Brent Erensel, Daryl Bible, Manan Gosalia, John Pancari,

Speaker Change: We also have to deal with our other constituencies it as well too, but we're all doing the right things we come to work every day and I'm excited to be working with the professionals that we have in our commercial and credit teams are they're working their asses off each and every day.

Speaker Change: Answered the call question earlier about go through the $2 3 billion maturities, we had in the first quarter, we really worked through almost all of those.

Daryl N. Bible: Yeah, Matt, we actively meet with all of our rating agencies, all four of them, on a very frequent basis. S&P did put us on a negative outlook, but I think we feel very comfortable that that won't result in a downgrade.

Speaker Change: Fruition and had very minimal impact as we move forward, we're going to continue to just grind it out and do a good job and we'll just see how things play out.

Speaker Change: Okay, and then just separately on the trust fees, you talked about them being a driver going forward.

Daryl N. Bible: We think we have a good handle on both our CRE exposure and the amount of credit that we have and what we're working towards right now. So I think we feel that we've got strategies in place to, over time, you know, get that to be less of a risk on the balance sheet from a credit perspective.

Speaker Change: Maybe just like frame.

Speaker Change: How much equity this drives that business what's in the other drivers are because obviously like the underlying trends are a little tricky to see because year over year. As you mentioned you had a sale linked quarter I think there's some seasonality there, but maybe it's a drag from like annuity sales or something but just talk about some of the underlying drivers of that business and what gives you confidence in that being a key driver of this.

Speaker Change: Sure.

Yeah, I mean, if you look at that business.

Daryl N. Bible: But, you know, grantees are one constituency; it's an important constituency; we also have to deal with our other constituencies, as well. But, you know, we're all doing the right things. You know, we come to work every day, and I'm excited to be working with the professionals that we have on our commercial and credit teams. They're working their asses off each and every day. I answered the call and the question earlier about going through the 2.3 billion maturities we had in the first quarter. We really worked through almost all of those to fruition and had very minimal impact as we move forward. You know, we're going to continue to just grind it out and do a good job, and we'll just see how things play out.

I think our disclosures are a lot easier I understand now as we move forward with our changes segments they come out on.

Speaker Change: On quarter ends you'll be able to be able to track our business performance is there.

Speaker Change: The Ics business, specifically now they have a little over 20 different products services that they offer you know some of them are fee based some of them are fees and funding base oriented examples would be escrow M&A activity.

Speaker Change: From that you know some of it can be lumpy at times that can go back and forth.

Speaker Change: But just getting in the flow in that business and just doing a good job and good reputation.

Speaker Change: Jen <unk>.

Speaker Change: Who runs this business her and her team.

Speaker Change: We've built a really great reputation and really have done a good job growing this space nicely over the last couple of years and we're investing in this space. We think it's a good business core business for us and we're really happy to have it and we will continue to focus on it.

Daryl N. Bible: Okay, and then separately on the trust fees, you know, you talked about them being a driver going forward, maybe just like frame how much equity drives that business, what some of the other drivers are, because obviously, like the underlying trends are a little tricky to see, because year over year, as you mentioned, you had a sale, you know, length quarter. I think there's some seasonality that maybe is a drag from like annuity sales But just talk about some of the underlying drivers of that business and what gives you confidence, and that being a key driver of sales this year.

Speaker Change: We are seeing some of the benefits that you saw the first quarter hopefully play out throughout future quarters for us.

Speaker Change: Okay. Thank you.

Speaker Change: Yep.

Speaker Change: Thank you. Our next question comes from Brian Foran with.

Brian D. Foran: Autonomous Please go ahead.

Brian D. Foran: Hi, I just wanted to follow up on the 11%.

Brian D. Foran: Staying at or above that even if you restart buybacks this year.

Brian D. Foran: Is there any thoughts you can give on framing is is that a moment in time given the factors.

Daryl N. Bible: Yeah, I mean, if you look at that business, and, you know, I think our disclosures are a lot easier to understand now as we move forward with our change segments that come out, you know, on quarter ends, you'll be able to track our business performances there. But the ICS business specifically, you know, they have a little over 20 different product services that they offer. You know, some of them are fee-based, some of them are fee-and funding-based oriented. Examples would be escrow, M&A activity, from that. Some of it can be lumpy at times, and it can go back and forth.

Brian D. Foran: Factors you cite versus.

Brian D. Foran: That may be where the new normal.

Brian D. Foran: Each trending just kind of any thought on.

Brian D. Foran: When we look at this 11, 1% I guess ultimately.

Brian D. Foran: How much of it is is excess capital and how much is.

Brian D. Foran: The new normal for running the business.

Speaker Change: Yeah, Brian I think we need to kind of see where our.

Speaker Change: Stress capital buffer comes out, but I mean at the end of the day, we're going to be really conservative. We are in uncertain times risky times. So we are just going to be a little bit more cautious tip.

Daryl N. Bible: But you know, just getting in the flow, you know, in that business, and just doing a good job and a good reputation. You know, Jen, who runs this business, her and her team, they've built a really great reputation and really have done a good job growing this space nicely over the last couple years. And, you know, we're investing in this space, think we think it's a good business, a core business for us, and we're really happy to have it and we'll continue to focus on it. And I think we received some of the benefits that you saw in the first quarter. Hopefully, those benefits will play out throughout, you know, future quarters for us.

Speaker Change: Typically.

Speaker Change: I would say long term you know our average might be lower than that but you know just starting the share repurchase I think would be a significant change to be honest with you as we move forward. So I'd say that's going to happen.

Speaker Change: But if it does happen we're going to be very modest as we started out.

Speaker Change: And then maybe I could ask the same question I think he noted on cash 26 billion at the end of the year and some potential landing spot.

Operator: Okay, thank you. Thank you. Our next question comes from Brian Foran with Autonomous. Please go ahead.

Speaker Change: Again, it's at.

Operator: Hi, I just wanted to follow up on the 11% likely staying at or above that, even if you restart buybacks this year. You know, is there any thought you can give on framing is, is that a moment in time, given the, you know, five factors you cite versus, you know, is that maybe where the new normal is trending? Just kind of any thoughts on, you know, when we look at this 11.1%, I guess, ultimately, how much of it is excess capital? And how much is, you know, the new normal for running the business?

Speaker Change: Still in excess cash position in your mind or is that kind of more of a normal cash position you see going forward.

Any thoughts on that.

Speaker Change: The level of excess liquidity right now.

Speaker Change: You know so there is a new liquidity proposal, that's supposed to come out from the regulators probably in the next quarter or so so we'll see what's in there we've done some of our own modeling the treasury team has and when you look at what we need from an operating basis, what's the fluctuations that we have within our businesses.

Daryl N. Bible: Yeah, you know, Brian, I think we need to kind of see where our stress capital buffer comes out. But I mean, at the end of the day, we're going to be really conservative; we are in uncertain times, risky times. So we're just going to be a little bit more cautious. Typically, I would say, you know, long term, our average, you know, might be lower than that. But you know, just starting this year to repurchase, I think it would be a significant change, to be honest with you. As we move forward. So that's saying that it's going to happen. But if it does happen, we're going to be very modest as we start it out.

Speaker Change: Our minimum is probably $15 billion. So we would operate with a cushion over that but.

Speaker Change: But we are no way going to come near that in the near future, we're going to be more work much more conservative than that as we move forward.

Yeah.

Speaker Change: Thank you thank you for taking bolt.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question comes from Peter Winter with D. A Davidson. Please go ahead.

Peter Winter: Good morning, I was wondering.

Peter Winter: There's been so much focus on commercial real estate. So I guess I was a little bit surprised by the increase in criticized loans on the C&I side I'm just wondering.

Unknown Attendee: As modest as we started out, and then maybe I could ask the same question. I think you noted cash, $26 billion at the end of the year, as a potential landing spot. Again, is that... Transcripts provided by Transcription Outsourcing, LLC.

Peter Winter: Do you feel like we're in.

Peter Winter: This is in early stages of more C&I, just given that we're in.

Peter Winter: Higher for longer rate environment.

Speaker Change: Yeah, So you know for us.

Speaker Change: It's.

Speaker Change: It's really three primary industries or kind of the bigger.

Daryl N. Bible: You know, there's a new liquidity proposal that's supposed to come out from the regulators probably in the next quarter or so, so we'll see what's in there. We've done some of our own modeling, the Treasury team has, and when you look at what we need from an operating basis, what the fluctuations that we have within our businesses, you know, our minimum is probably $15 billion, so we would operate with a cushion over that, but we are in no way going to come near that in the near future. We're going to be much more conservative than that as we move forward.

Speaker Change: That we see within our our book right now the non auto dealer, so like RV and marine.

Speaker Change: It has some specific items, where some of those dealers a buildup inventory post COVID-19 in 'twenty, two and had to flush that inventory at courses so that hurt their operating performance coupled with higher rates.

Speaker Change: Lower discretionary spend in those spaces as well so they had some issues there.

Speaker Change: <unk> talked about.

Speaker Change: As far as health care goes.

Operator: Thank you. Thank you for taking part. Thank you. Our next question comes from Peter Winter with DA Davidson. Please go ahead. Good morning.

Speaker Change: I think it's getting a little bit better from an occupancy perspective, I think that end product, but still reimbursement rates are lumpy staffing might be getting a little bit better there, but that's still a stressful place from that perspective and the other theme that we would have is more in trucking and freight during COVID-19 we increased.

Operator: I was wondering, there's been so much focus on commercial real estate. So I guess I was a little bit surprised by the increase in criticized loans on the C&I side. I'm just wondering, you know, do you feel like we're in the early stages of more C&I, just given that we're in a higher for longer rate environment?

I mean, a lot of our clients increased capacity because there are a lot of things that needed to be shipped now they're stuck with that excess capacity. You know they are just moving a lot less freight so their operating performance is just a little bit lower so those you know besides the one offs that I talked about earlier those are probably the three underlying theme side.

Daryl N. Bible: Yeah, so you know, for us, it's It's really three primary industries that are kind of the bigger ones that we see within our book right now, a non-auto dealer, so like RV and Marine, you know, that has some specific items where some of those dealers built up inventory post-COVID in 22 and had to flush that inventory at losses. So that hurt their operating performance, coupled with higher rates. You have lower discretionary spend in those spaces as well, so they have some issues there. Healthcare, we talked about, you know, as far as healthcare goes, I think it's getting a little bit better, you know, from an occupancy perspective, I think, and product, but still, reimbursement rates are lumpy. You know, staffing might be getting a little bit better there, but that's still a stressful place from that perspective. And the other theme that we would have is more about trucking and freight. You know, during COVID, we increased... Many of our clients increased capacity because there were a lot of things that needed to be shipped. Now they're stuck with that excess capacity. They're just moving a lot less freight, so their operating performance is just a little bit lower.

Speaker Change: I would say within the C&I book that I would be.

Speaker Change: Willing to discuss.

Speaker Change: Okay.

Speaker Change: And then just separately Daryl.

Speaker Change: Yes.

Daryl N. Bible: I've conference Youre looking to lower the CRE.

Daryl N. Bible: As a percent of capital reserves to about 160%.

Daryl N. Bible: How long do you think it'll take to get there and is that one of the I know you listed five things about starting up the buyback, but how important is that in terms of the overall theme of starting back starting buybacks.

Daryl N. Bible: Yeah, I mean, it's one of the five themes.

Daryl N. Bible: It's important but you know what.

Daryl N. Bible: I mean, you have to remember we started where we were what in that.

Daryl N. Bible: $222 64 years ago, we started we were at $2 60.

Daryl N. Bible: So I mean, the tremendous progress we've made over the last three to four years.

Daryl N. Bible: I have pretty much expect that we're going to be you know in the mid to low sixty's by the end of the year on the pace, we're going right now.

Daryl N. Bible: So those, besides the one-offs that I talked about earlier, those are probably the three underlying themes, I would say, within the C&I book that I would be willing to discuss.

Speaker Change: Okay. Thanks, Tom.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question will come from Frank Schiraldi with Piper Sandler. Please go ahead.

Daryl N. Bible: Okay. And then separately, Darren, you said at a conference that you're looking to lower the CRE as a percent of capital reserves to about 160%. How long do you think it'll take to get there? And is that one of the...

Frank Joseph Schiraldi: Good morning.

Frank Joseph Schiraldi: Good morning.

Frank Joseph Schiraldi: Wondering if.

Frank Joseph Schiraldi: If you could.

Frank Joseph Schiraldi: Just in terms of the.

Frank Joseph Schiraldi: Criticized balances the reduction inquiry overall.

Frank Joseph Schiraldi: I'm curious if you can just point to any specific driver there.

Daryl N. Bible: I know you listed five things about starting up the buyback, but how important is that in terms of the overall theme of starting buybacks?

Frank Joseph Schiraldi: The second quarter in a row, where.

Frank Joseph Schiraldi: Where you've seen a reduction in criticized balances is it.

Unknown Attendee: You know, it's one of the five themes. You know, it's important, but, you know.

Frank Joseph Schiraldi: Just occupancies better and debt service coverage better or is it stuff moving maybe into modification just any sort of like specific driver in terms of the last couple of quarters seeing those balances move lower.

Unknown Attendee: You have to remember, we started when we were, what, in the...

Unknown Attendee: Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, Manan Gosalia, Ebrahim Poonawala, So, I mean, the tremendous progress we've made over the last three to four years, you know, I pretty much expect that we're going to be, you know, in the mid to low 160s by the end of the year on the pace that we're going right now.

Speaker Change: Yeah, I mean in the CRE portfolio with the exception of office.

Speaker Change: And health care.

Speaker Change: The operating performance of the CRE businesses are performing well some of them are stress just because of higher rates.

Speaker Change: But as we continue to work with our clients going through we feel very good.

Speaker Change: That we're gonna have worked through these issues.

Daryl N. Bible: Okay. Thanks, Darren. Thank you. Our next question will come from Frank Schiraldi with Piper Sandler.

Speaker Change: It's one that we said earlier in other calls shrank, but you know our customers work with us and put capital in and we're definitely seeing all of our customers. Our sponsors really support. These these projects I think it really starts with client selection and we have really good client selection.

Operator: Please go ahead. Good morning, morning.

Daryl N. Bible: Wondering if you can, Daryl, just in terms of the The Criticized Balances, the reduction in CRE overall. Curious if you can just point to any specific driver there. I think this is the second quarter in a row where you've seen a reduction in criticized balances. Is it just that occupancy is better and debt service coverage is better? Is it stuff moving maybe into modification? Just any sort of like specific driver in terms of the last couple of quarters seeing those balances move lower?

Speaker Change: It really helps when the day for us So I think you're just seeing that commitment come through in <unk>.

Speaker Change: We're working really closely with them and I think that's that's really important as we move forward. So I.

Speaker Change: I think we will continue to work through this but definitely feel that.

Speaker Change: Sorry is very manageable.

Speaker Change: To address that.

Speaker Change: Okay, and then just to follow up on the on the expense side I know, even though you have limited expense growth baked in for this year you do have some.

Daryl N. Bible: Yeah, I mean, the CRE portfolio, with the exception of Office and Healthcare. The operating performance of the CRE businesses is performing well. Some of them are stressed just because of higher rates.

Speaker Change: Some investments you guys are focused on and just wondering if given the stronger.

Speaker Change: And I I outlook.

Daryl N. Bible: But as we continue to work with our clients going through these issues, we feel very good that, you know, we're going to work through these issues. You know, it's one that we said earlier in another call, Frank, but our customers work with us and put capital in, and we're definitely seeing all of our customers, our sponsors really supporting these projects. I think it really starts with client selection, and we have really good client selection that really helps win the day for us. So I think you're just seeing that commitment come through, and, you know, we're working really closely with them, and I think that's really important as we move forward. So, you know, I think we will continue to work through this, but definitely feel that, you know, CRE is very manageable, and we're going to continue to address that.

Speaker Change: You know driven by rates, if you could potentially pursue accelerating some of that.

Speaker Change: Investment in 2024.

Speaker Change: Yeah, you know I I would tell him.

Sometimes you can only do so much in a company that once we got six major projects. We're working on right now in the company, we're all making really good progress in these six major projects you know.

Speaker Change: And theyre going as fast as they can go to be honest with you with what we're doing I can't imagine that we would push them to go faster. If we try to start up another project, they're just a lot of change going on in the company and I think we're just gonna be conservative get these things across the finish line and then start up other ones as we move forward.

Speaker Change: Right, Okay. Thanks for the color.

Speaker Change: Thanks Frank.

Speaker Change: Thank you. Our next question will come from Gerard Cassidy with RBC. Please go ahead.

Speaker Change: Hi, Good morning. This is Thomas <unk>, calling on behalf of Gerard.

Daryl N. Bible: Okay, and then just to follow up on the expense side, I know even though you have limited expense growth baked in for this year, you do have some investments you guys are focused on, and I was just wondering if given the stronger NII outlook, you know, driven by rates, if you could potentially proceed with some of that investment in 2024. Thanks.

Thomas: Given the jump in criticized loans in the quarter and the fact that you guys tend to historically carry a little bit more than peers I'm. Just curious how does the criticized levels today compared.

Thomas: Compared to where they were in the low eight or nine and then 2020 peaks.

Speaker Change: I'm going to frame it.

Speaker Change: See if I have a friend here to help me with that I don't have that here hold on a second time.

Speaker Change: Good.

Speaker Change: Okay.

Daryl N. Bible: Yeah, you know, I would tell you, you know, sometimes you can only do so much in a company at once. We've got six major projects we're working on right now in the company. We're all making really good progress on these six major projects, you know, and they're going as fast as they can go, to be honest with you about what we're doing. I can't imagine that we would push them to go faster if we tried to start up another project. There's just a lot of change going on in the company. And I think we're just going to be conservative, you know, get these things across the finish line and then start up other ones as we move forward.

Speaker Change: So it's back back in <unk> and it was more just.

John <unk>, our corporate controller. He was here back then I'll, let him talk about it I don't know that I'll, just say that obviously <unk> was more of a residential mortgage type issue. So.

Speaker Change: Don't criticize per se.

Speaker Change: Monitor delinquencies on the residential side there were pockets of criticized so they did rise I don't have those numbers at my disposal, but.

John: These these numbers on the commercial side are higher than what they would have been back then.

Daryl N. Bible: Great. Okay. Thanks for the call.

Okay. Thank you that's helpful. And then just a quick follow up with the increase in criticized C&I loans reported today do you guys still feel pretty confident that you can maintain.

Operator: Thanks, Frank.

Operator: Thank you. Our next question will come from Gerard Cassidy with RBC. Please go ahead. Hi, good morning. This is Thomas Leady calling on behalf of Gerard. Given the jump in criticized loans in the quarter and the fact that you guys tend to historically carry a little bit more than peers, I'm just curious, how do criticized loan levels today compare to where they were in the 08, 09, and then 2020 peaks?

John: And then to use historical track record of outperformance in terms of credit losses relative to peers.

Speaker Change: Yeah, I think we do.

We have a long term history of performing in good times in stress times and I think we will continue to.

Speaker Change: To do really well and perform.

Speaker Change: And all of that will come to fruition I mean, I couldnt be more pleased with how hard everybody is working and the success that we're making.

Thomas Leady: Um, I'm gonna see if I have a friend here to help me with that. I don't have that here. Hold on a second, Tom. Okay.

Speaker Change: We have a ways to go but you know you kind of see that we have a path.

Unknown Attendee: Okay.

Unknown Attendee: Oh, so back in 08-09, it was more... I'll just let John talk about it. John's our corporate controller. He was here back then. I'll let him talk about it. I don't know that.

Speaker Change: And we're going to get through that and I have no doubt in my mind that we will get through this positively and still have really good credit performance.

John: Yeah, I'll just say that obviously, 08-09 was more of a residential mortgage type issue. So, you know, we don't criticize per se; we monitor delinquencies on the residential side. There were pockets of criticism, so they did rise. I don't have those numbers at my disposal, but these numbers on the commercial side are higher than they would have been back.

Speaker Change: Okay, Great. That's helpful. Thanks for taking my questions.

Speaker Change: Thank you. Our next question will come from Christopher Spahr with Wells Fargo. Please go ahead.

Christopher James Spahr: Hi, good morning, So two questions versus just reconciling your outlook for the NIM and the increase in long term borrowings that we saw both at end of period on an average basis this quarter.

Christopher James Spahr: So we basically did some federal home loan bank advances back.

John: Okay, thank you. That's helpful. And then just a quick follow-up. With the increase in criticized C&I loans reported today, do you guys still feel pretty confident that you can maintain M&T's historical, you know, track record of outperformance in terms of credit losses relative to peers?

Christopher James Spahr: Closer to when New York community was happening.

Christopher James Spahr: Then we did an unsecured issuance in the month of March that will carry through.

Christopher James Spahr: For the rest of the year you know our focus is really on growing customer deposits and paying down non customer funding. That's really what we're really focused on you might see us do some more securitization we've done securitizations now in our equipment leasing business as well as our auto business, that's something that could possibly play.

Daryl N. Bible: Yeah, I think we do. You know, we have a long-term history of performing in good times and in stressful times, and I think we will continue to do really well and perform, and all that will come to fruition.

Daryl N. Bible: I couldn't be more pleased with how hard everybody's working and the success that we're having. We have a ways to go, but you kind of see that we have a path and how we're going to get through that. And I have no doubt in my mind that we will get through this positively and still have really good credit performance.

Christopher James Spahr: [noise] out.

Down the road.

Christopher James Spahr: But we will prudently grow customer deposits as much as possible and then we're going to work and try to work down our broker deposits and work down our federal home loan bank advances.

And put it into more other types of funding like Securitizations, if we if we need to from that perspective.

Christopher James Spahr: That way, we have more capacity if and when there is another stress period, we will always want to keep keep it open in case something happens. So we can find if we have to.

Operator: Okay, great. That's helpful. Thanks for taking my questions. Thank you. Our next question will come from Christopher Spahr with Wells Fargo. Please go ahead.

Speaker Change: Okay. So thanks and then so my follow up is just when I look at the schedule on slide 17.

Operator: Hi, good morning. So, I have two questions.

[inaudible]

So, you know, we basically did some federal home loan bank advances.

Speaker Change: Criticized loans and see that motor vehicle and RBS kind of had a huge spike in criticized and then in response to Ken's question, though you talked about the increase in yields in highlighting the increase in yields. So how do you reconcile the issue of just some of these portfolios under a more weakness and yet you kind of also highlighting you're getting greater yields.

Unknown Attendee

Unknown Attendee, Erika Najarian, Bill Carcache, Alexander Yokum, Manan Gosalia, Ebrahim Poonawala, And try to work down our broker deposits and work down our federal home loan bank advances and put it into more other types of funding, like securitizations, if we need to, from that perspective. That way, we have more capacity if and when there's another stress period. We always want to keep it open in case something happens so we can fund it if we have to. Okay, so, thanks.

Speaker Change: I would think to kind of fight against each other.

Speaker Change: Yeah, no. So it's two different businesses.

Speaker Change: The stresses in the floor planning business for the non auto so RV and marine So that's floor planning, that's where the stresses.

And then, so, my follow-up is just, when I look at the schedule on slide 17, about the criticized loans and see that motor vehicles and RVs kind of had a huge spike in criticized loans. And then, in response to Ken's question, though, you talked about the increase in yields and highlighted the increase in yields. So, how do you reconcile the issue of just some of these portfolios under more weakness, and yet, you're kind of also highlighting that you're getting greater yields? I would think they kind of fight against each other.

Speaker Change: We are also are all in in the indirect business for RV, just like you have indirect auto you have indirect RV.

And Thats, where were getting the yield pick up on the consumer loan portfolio.

Speaker Change: You know we have a very prime based consumer loan credit box. If you look at the average FICO score that we have in that portfolio is $7 90.

So it's pretty pristine in there and we feel good about.

Speaker Change: The performance of that portfolio.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you at this time I will now turn the call back to our speakers for additional or closing remarks.

Speaker Change: Thanks, Todd and again, thank you all for participating today and as always if clarification of any of the items in the fall or news release is necessary. Please contact our Investor Relations Department at area Code 71684 to 5138, Thank you and have a great day.

Yeah, no, so it's two different businesses. So the stress is in the floor planning business for the non-auto, so RV, and marine. So that's floor planning. That's where the stress is.

We also are all in the indirect business for RV, just like you have indirect auto, you have indirect RV. And that's where we're getting the yield pickup on the consumer loan portfolio. So, you know, we have a very prime-based consumer loan credit box. If you look at the average FICO score that we have in that portfolio, it's 790. So it's pretty pristine in there, and we feel good about the performance of that portfolio.

Speaker Change: And this does conclude the <unk> Bank first quarter 2024 earnings conference call you.

Speaker Change: You may disconnect your lines at this time and have a wonderful day.

Speaker Change: [music].

Speaker Change: Uh huh.

Speaker Change: [music].

Thank you. At this time, I will now turn the call back to our speakers for additional or closing remarks. And thanks, Todd. And again, thank you all for participating today. And, as always, if clarification of any of the items in the call or news release is necessary, please contact our Investor Relations Department at area code 716-842-5138. Thank you, and have a great day. And this does conclude the M&T Bank first quarter 2024 earnings conference call. You may disconnect your line at this time and have a wonderful day. Unknown Attendee, Bill Carcache, Alexander Yokum, Manan Gosalia, Ebrahim Poonawala, John,??

Speaker Change: Okay.

Speaker Change: [music].