Q2 2024 M&T Bank Corp Earnings Call

July 18, 2024

Speaker Change: [inaudible] Please stand by your program is about to begin. If you need audio assistance during your call today, please press star zero.

Operator: Please stand by; your program is about to begin. If you need audio assistance during your call today, please press star zero. Welcome to the M&T Bank Second Quarter 2024 Earnings Conference. All lines have been placed on mute.

Speaker Change: Welcome to the M&T Bank Second Quarter 2024 Earnings Conference Call.

Operator: 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 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing start.

All lines have been placed on mute, 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 1 on your telephone keypad.

Speaker Change: If at any point your question has been answered, you may remove yourself from the queue by pressing Star 2. When posing your question, we ask that you please pick up your handset to allow for optimal sound quality. Lastly, if you should require operator assistance, please press Star 0.

Operator: After posting 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, and I would now like to hand the conference over to Brian Klock, Head of Market, Investor Relations.

Please be advised that today's conference is being recorded and I would now like to hand the conference over to Brian Klock, Head of Market of Investor Relations. Please go ahead.

Brian Paul Klock: Thank you, Ashley, and good morning. I'd like to thank everyone for participating in M&T's second 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

Speaker Change: 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.

Speaker Change: Once there, you can click on the Investor Relations link, and then on the Events and Presentations link.

Brian Paul Klock: Also, before we start, I'd like to mention that today's presentation may contain forward-looking information. Cautionary statements about this information are included in today's earnings release materials and in the investor presentation as well as in our SEC filings and other investor materials. The presentation also includes non-GAAP financial measures as identified in the earnings release and investor presentation. The appropriate reconciliations to GAAP are included in the appendix. Joining me on the call this morning is M&T's Senior Executive Vice President and CFO, Daryl Bible. Now, I'd like to turn the call over to Daryl.

Speaker Change: Also, before we start, I'd like to mention that today's presentation may contain forward-looking information. Cautionary statements about this information are included in today's earnings release materials and in the investor presentation, as well as our SEC filings and other investor materials.

Speaker Change: The presentation also includes non-GAAP financial measures as identified in the earnings release and investor presentation.

Speaker Change: The appropriate reconciliations to GAAP are included in the appendix.

Speaker Change: Joining me on the call this morning is M&T's Senior Executive Vice President and CFO , Daryl Bible. Now I'd like to turn the call over to Daryl. Thank you, Brian , and good morning, everyone.

Daryl N. Bible: Thank you, Brian, and good morning, everyone. As you will hear on today's call, the second quarter results continue M&T's strong momentum for 2024. Turning to slide four, this April, we released our fourth annual sustainability report. We are proud of our continued progress towards our sustainability goal. Our efforts are creating positive outcomes for our businesses, our customers, and our community. Of note, in 2023, our total sustainability finance loans and investments totaled $3.1 billion. Turning to slide five, we continue to garner awards for our businesses, products, and employees. Including the highest customer satisfaction for mobile banking apps among regional banks, according to J.D.

Speaker Change: As you will hear on today's call, the second quarter results continue M&T's strong momentum for 2024.

Speaker Change: Turning to slide 4, this April we released our 4th Annual Sustainability Report. We are proud of our continued progress towards our sustainability goals.

Speaker Change: Our efforts are creating positive outcomes for our businesses, our customers, and our communities. Of note, in 2023, our total sustainability, finance loans, and investments total $3.1 billion.

Speaker Change: Turning to slide 5, we continue to garner awards for our businesses, products, and employees, including the highest customer satisfaction for mobile banking apps among regional banks according to J.D. Power.

Daryl N. Bible: Power, and the Securitization Trustee of the Year for Wilmington Trust from Global Capital. Turn to slide 7, which shows the results for the second quarter. As noted in this morning's press release, we are pleased with the second quarter results and the performance through the first half of the year. We will continue to grow loans while also shifting the composition of our loan portfolio and reducing CRE. Custom deposits increase sequentially, while total deposit costs have leveled off.

Speaker Change: and the Securitization Trustee of the Year for Wilmington Trust from Global Capital.

Speaker Change: Turn to slide 7, which shows the results for the second quarter. As noted in this morning's press release, we are pleased with the second quarter results and the performance through the first half of the year.

Speaker Change: We continue to grow loans while also shifting the composition of our loan portfolio and reducing CRE.

Speaker Change: Customer deposits increased sequentially while total deposit costs have leveled off.

Daryl N. Bible: Net interest income and net interest margin both inflected off the first quarter cyclical low. Asset quality trends are performing as expected, with reductions in non-accrual and criticized balance, and NetChargeOps in line with our full year outline.

Speaker Change: Net interest income and net interest margin both inflected off the first quarter cyclical loan.

Speaker Change: Asset quality trends are performing as expected with reductions in non-accrual and criticized balances.

Speaker Change: and NetChargeOps in line with our full year outlook.

Daryl N. Bible: Capital continues to build with a CET1 ratio increasing to over 11.4%. We continue to make progress on our capital return consideration, and our stress capital buffer decreased 20 basis points to 3.8%, reflecting the strength of our core earnings power and ongoing risk management work. Now let's look at the specifics for the second quarter. The unaudited GAAP earnings per share were $3.73 for the second quarter, improved from $3.02 in the first quarter.

Speaker Change: Capital continues to build with a CET-1 ratio increasing to over 11.4%.

Speaker Change: We continue to make progress on our capital return considerations.

Speaker Change: And our stress capital buffer decreased 20 basis points to 3.8%, reflecting the strength of our core earnings power and ongoing risk management work.

Daryl N. Bible: Net income for the quarter was $655 million compared to $531 million in the previous quarter, an increase of 23%. M&T's second quarter results produced an ROA and ROCE of 1.24% and 9.95%, respectively. The CET-1 ratio remains strong, growing to 11.44% at the end of the second quarter, and tangible book value per share grew 3%.

Speaker Change: Now let's look at the specifics for the second quarter.

Speaker Change: Diluted GAAP earnings per share were $3.73 for the second quarter, improved from $3.02 in the first quarter.

Speaker Change: Net income for the quarter was $655 million compared to $531 million in the late quarter, an increase of 23%.

emmett: M&T's second quarter results produced an ROA and ROCE of 1.24% and 9.95% respectively.

emmett: The CET-1 ratio remained strong, growing to 11.44% at the end of the second quarter, and tangible book value per share grew 3%.

Daryl N. Bible: Included in our GAAP results for the recent quarter were pre-tax expenses of $5 million related to the FDIC Special Assessment. This amounts to $4 billion after tax, or $0.02 per share. As a reminder, results for this year's first quarter included $29 million related to the FDIC Special Assessment, amounting to $22 million after tax, or $0.13 per share. Friday included supplemental reporting of M&T's results on a net operating or tangible basis, from which we have only ever excluded the after-tax effect of the amortization of intangible assets, as well as any gains or expenses associated with mergers and acquisitions.

emmett: Included in our GAAP results for the recent quarter were pre-tax

emmett: expenses of $5 million.

emmett: Related to the FDIC Special Assessment.

emmett: This amounts to $4 billion after tax or $0.02 per share.

emmett: As a reminder, results for this year's first quarter included $29 million related to the FDIC Special Assessment, amounting to $22 million after tax effect or $0.13 per share.

emmett: Slide 8 includes supplemental reporting of M&T's results on a net operating or tangible basis.

Daryl N. Bible: M&T's net operating income for the second quarter was $665 million, compared to $543 million in the late quarter. Diluted Net Operating Earnings per share were $3.79 for the recent quarter, up from $3.09 in the first quarter. Next, let's look a little deeper into the underlying trends that generated our second quarter results. Please turn to slide 9.

emmett: M&T's net operating income for the second quarter was $665 million, compared to $543 million in the late quarter.

emmett: Diluted Net Operating

emmett: Earnings per share were $3.79.

emmett: For the recent quarter, up from $3.09 in the first quarter.

emmett: Net operating income yielded an ROTA and an ROTCE of 1.31% and 15.27% for the recent quarter.

Daryl N. Bible: Taxable equivalent net interest income was $1.73 billion in the second quarter, an increase of $39 million or 2% from the previous quarter. Net interest margin was 3.59%, an increase of 7 basis points from the first quarter. The primary drivers for the increase to the margin were a positive six basis points from fixed rate asset repricing, primarily within the investment and consumer loan portfolio, positive five basis points from sequentially high or not accruing interest, a positive one basis point from lower interest bearing deposit cost, partially offset by a negative three basis points from the impact of swaps, and a negative two basis points from higher borrowing costs and balance. The second quarter included non-accrual If accrual interest had been at the average run rate, the second quarter NIM would have been 3.56%.

emmett: Next, let's look a little deeper into the underlying trends that generated our second quarter results. Please turn to slide 9. Please turn to slide 9.

emmett: Taxable Equivalent Net Interest Income was $1.73 billion in the second quarter, an increase of $39 million, or 2% from the link quarter. Net Interest Margin was 3.59%, an increase of 7 basis points from the first quarter.

emmett: The primary drivers for the increase to the margin were a positive six basis points from fixed rate asset repricing, primarily within the investment and consumer loan portfolios.

Unknown Executive: Positive 5 basis points from sequentially higher or not accrual interest, positive 1 basis points from lower interest bearing deposit costs, partially offset by a negative 3 basis points from the impact of swaps and a negative 2 basis points from higher barring cost and balances.

emmett: Positive five basis points from sequentially high or non-accrual interest.

emmett: Positive one basis point from lower interest bearing deposit costs.

emmett: partially offset by a negative three basis points from the impact of swaps.

emmett: and a negative two basis points from higher borrowing costs and balances.

Unknown Executive: The second quarter included not accrual interest of 30 million compared to an average of 14 million in the prior 5 quarters. If not accrual interest was at the average run rate, the second quarter would have been 3.56%. And total swaps reduced now by 23 basis points in the second quarter.

emmett: The second quarter included non-accrual interest of $30 million compared to an average of $14 million in the prior five quarters.

emmett: If non-accrual interest was at the average run rate, the second quarter NIM would have been 3.56%.

Daryl N. Bible: In total, swaps reduced NIM by 23 basis points in the second quarter. Turn to slide 11 to talk about average loans. Average loans and leases increased 1% to $134.6 billion compared to the previous quarter.

emmett: In total, swaps reduced NIM by 23 basis points in the second quarter.

Unknown Executive: Turn this slide 11 to talk about average loans. Average loans and wages increased 1% to 134.6 billion compared to the length quarter. As have been the trend for the last several quarters, CNI and consumer growth outpaced the decline in CRA. CNI loans grew 2% to 58.1 billion, driven by increases in middle market, dealer commercial services, mortgage warehouse lending, and fund banking. The CNI grew 3% to increase in line utilization and higher origination activity.

emmett: Turn to slide 11 to talk about average loans. Average loans and leases increased 1% to $134.6 billion compared to the late quarter.

Daryl N. Bible: As has been the trend for the last several quarters, CNI and consumer growth outpaced the decline in CRE. C&I loans grew 2% to $58.1 billion, driven by increases in the middle market, dealer commercial services, mortgage warehouse lending, and fund banking. This CNI growth reflects an increase in line utilization and higher origination activity. CRE loans declined 4% to $31.5 billion, reflecting continued low originations and elevated paydowns as we continue to manage our CRE concentrations. Residential mortgage loans were relatively unchanged at $23 billion.

emmett: As have been the trend for the last several quarters, C&I and consumer growth outpaced the decline in CRE.

emmett: C&I loans grew 2% to $58.1 billion driven by increases in middle market, dealer commercial services, mortgage warehouse lending, and fund banking.

emmett: The CNI growth reflects an increase in line utilization and higher origination activity.

Unknown Executive: CRA loans declined 4% to 31.5 billion, reflecting continued low originations and elevated pay down as we continue to manage our CRA concentration. Rather than mortgage loans were relatively unchanged at 23 billion. Consumer loans grew 4% to 22 billion, reflecting growth in recreational finance and indirect auto loans.

emmett: CRE loans declined 4% to $31.5 billion, reflecting continued low originations and elevated paydowns as we continue to manage our CRE concentration.

emmett: Residential mortgage loans were relatively unchanged at $23 billion.

Daryl N. Bible: Consumer loans grew 4% to $22 billion, reflecting growth in recreational finance and indirect auto loans. Low yields increased six basis points. 6.38% aided by sequentially higher non-accrual interest and fixed rate loan repricing, partially offset by a higher drag on our cash flow. Turning to slide 12, our liquidity remains strong. At the end of the second quarter, investment securities and cash, including cash out at the Fed, totaled $56.5 billion, representing 27% of total assets. Average investment securities increased by $1.1 billion.

emmett: Consumer loans grew 4% to $22 billion, reflecting growth in recreational finance and indirect auto loans.

Unknown Executive: Low notes increased 6 basis points to 6.38%, aided by sequentially higher non-accrual interest and fixed rate loan repricing, partially offset by a higher drag on our cash flow hedges.

emmett: Loan yields increased 6 basis points to 6.38%, aided by sequentially higher non-accrual interest and fixed rate loan repricing, partially offset by a higher drag on our cash flow hedges.

Unknown Executive: Learning to slide 12: are liquidity remains strong. At the end of the second quarter, investment securities and cash, including cash out at the Fed total 56.5 billion, representing 27% of total assets. Average investment securities increased 1.1 billion. The yield on the investment securities increased 31 basis points to 3.61% as the yield on new purchases exceeded the yield on maturing securities.

emmett: Turning to slide 12, our liquidity remains strong. At the end of the second quarter, investment securities and cash, including cash held at the Fed, totaled $56.5 billion, representing 27% of total assets.

emmett: Average investment securities increased by $1.1 billion.

Daryl N. Bible: The yield on the investment securities increased 31 basis points, or 3.61%, as the yield on new purchases exceeded the yield on maturing securities. During the second quarter, we purchased over $3 billion in securities with an average yield of 5.16% and a duration of 2.9 years. Over the remainder of the year, we expect an additional $2.8 billion in security maturities with an average yield of 2.5%, which we intend to reinvest at higher yields. The duration of the investment for Foreo at the end of the quarter was 3.7 years, and the unrealized pre-tax loss on the AFS portfolio was only $239 million, a 12 basis points drag on CET1.

emmett: The yield on the investment securities increased 31 basis points to 3.61%, as the yield on new purchases exceeded the yield on maturing securities.

Unknown Executive: During the second quarter, we purchased over 3 billion in securities with an average yield of 5.16% and a duration of 2.9 years. Over the remainder of the year, we expect an additional 2.8 billion in security maturities with an average yield of 2.5% which we intend to reinvest at higher yields. The duration of the investment for 4.0 at the end of the quarter was 3.7 years, and the unrealized pre-tax loss on AFS portfolio was only 239 million or 12 basis point drag on CET1.

emmett: During the second quarter, we purchased over $3 billion in securities with an average yield of 5.16% and a duration of 2.9 years.

emmett: Over the remainder of the year, we expect an additional $2.8 billion in security maturities with an average yield of 2.5%, which we intend to reinvest at higher yields.

Speaker Change: The duration of the investment for Foreo at the end of the quarter was 3.7 years, and the unrealized pre-tax loss on AFS portfolio was only $239 million, or 12 bases point dragged on CET-1.

Unknown Executive: Turning to slide 13, remain focused on growing customer deposits and are pleased with the stabilization of our yields. Average total deposits declined 0.6 billion, less than a half a percent, to a 163.5 billion, reflecting sequential growth in average customer deposits, offset by a 1.2 billion decline in broker deposits. Average broker deposits of 12 billion reflect a decision to shrink non-customer funding sources. Consumer mortgage business banking and institutional finance had stable to growing average deposits compared to the first quarter; rock commercial deposits declined. Average non-interest bearing deposits declined 0.9 billion, 47.7 billion, with lower commercial and business banking balances as the result of seasonally and continued by moderating disemmediation.

Daryl N. Bible: Turning to slide 13, we remain focused on growing customer deposits and are pleased with the stabilization of our yield. Average total deposits declined $0.6 billion, or less than 0.5%, to $163.5 billion, reflecting sequential growth in average customer deposits offset by a $1.2 billion decline in broker deposits. Average broker deposits of $12 billion reflected a decision to shrink non-customer funding sources. Consumer, Mortgage, Business Banking, and Institutional Finance had stable to growing average deposits compared to the first quarter, while commercial deposits declined.

emmett: Turning to slide 13. We remain focused on growing customer deposits and are pleased with the stabilization of our yields.

emmett: Average total deposits declined $0.6 billion, or less than a half a percent, to $163.5 billion, reflecting sequential growth in average customer deposits offset by a $1.2 billion decline in broker deposits.

emmett: Average broker deposits of $12 billion reflects a decision to shrink non-customer funding sources.

emmett: Consumer, mortgage, business banking, and institutional finance had stable to growing average deposits compared to the first quarter, while commercial deposits declined.

Daryl N. Bible: Average non-interest bearing deposits declined 0.9 billion to 47.7 billion with lower commercial and business banking balances as a result of seasonal and continued but moderating disintermediation. Non-interest bearing deposits were relatively stable for all other business lines, excluding broker deposits.

emmett: Average non-interest bearing deposits decline 0.9 billion to 47.7 billion with lower commercial and business banking balances as a result of seasonally and continued but moderating disintermediation.

Unknown Executive: Non-interest bearing deposits were relatively stable for all other business sites. Excluding broker deposits, the non-interest bearing deposits mix in the second quarter was 31.5 percent compared to 32.2 percent in the first quarter. Intersparing deposit costs decreased 3 basis points to 2.9 percent, while the total deposit cost was unchanged at 2.06 percent. This reflects more rational pricing in our markets.

emmett: Non-interest bearing deposits were relatively stable for all other business lines.

Daryl N. Bible: The non-interest-bearing deposit mix in the second quarter was 31.5% compared to 32.2% in the first quarter. Interest-bearing deposit costs decreased three basis points to 2.9%, while the total deposit cost was unchanged at 2.06%. This reflects more rational pricing in our market. Continuing on slide 14, non-interest income was $584 million compared to $580 million in the late quarter.

emmett: Excluding Broker Deposits

emmett: The non-interest bearing deposit mix in the second quarter was 31.5%, compared to 32.2% in the first quarter.

emmett: Interest bearing deposit cost decreased 3 basis points to 2.9%, while the total deposit cost was unchanged at 2.06%.

emmett: This reflects more rational pricing in our markets.

Unknown Executive: Intanguate on slide 14. Non-interest income was 584 million compared to 580 million in the link quarter. Recall that the first quarter included 25 million Bay View distribution. Trust income increased 10 million to 170 million, reflecting approximately 4 million in seasonally tax preparation fees, typically earned in the second quarter, and strong sales performance across our institutional services business. Second quarter mortgage fees were 106 million compared to 104 million in the first quarter. Commercial mortgage fees increased 4 million from the link quarter to 30 million, reflecting an uptake in origination activity. For our residential mortgage fees decreased 2 million to 76 million, reflecting lower servicing fees.

emmett: Continuing on slide 14.

emmett: Non-interest income was $584 million compared to $580 million in the late quarter.

Daryl N. Bible: Recall that the first quarter included 25 million Bayview distributions. Trust income increased $10 million to $170 million, reflecting approximately $4 million in seasonal tax preparation fees typically earned in the second quarter and strong sales performance across our institutional services. Second quarter mortgage fees were $106 million compared to $104 million in the first quarter.

emmett: Recall that the first quarter included $25 million Bayview distribution.

emmett: Trust income increased $10 million to $170 million, reflecting approximately $4 million in seasonally tax preparation fees.

emmett: Typically earned in the second quarter and strong sales performance across our institutional services business.

emmett: Second quarter mortgage fees were $106 million compared to $104 million in the first quarter.

Daryl N. Bible: Commercial mortgage fees increased $4 million from the late quarter to $30 million, reflecting an uptick in origination activity, while residential mortgage fees decreased $2 million to $76 million, reflecting lower servicing fees. Service charges increased $3 million to $127 million from higher consumer debit interchange fees. Other revenues from operations were unchanged at $152 million, with increases in merchant discounts, credit cards, Letter of Credit, and other credit-related fees offsetting the $25 million first quarter BLG distribution.

emmett: Commercial mortgage fees increased $4 million from the late quarter to $30 million, reflecting an uptick in origination activity, while residential mortgage fees decreased $2 million to $76 million, reflecting lower servicing fees.

Unknown Executive: Service charges increased 3 million to 127 million from higher consumer debit interchange fees. Other revenues from operation were unchanged at 150 million, which increases in merchant discount, credit card, letter of credit and other credit related fees offsetting the 25 million first quarter B.O.G. distribution.

emmett: Service charges increased $3 million to $127 million from higher consumer debit interchange fees.

emmett: Other revenues from operation were unchanged at $152 million, with increases in merchant discount, credit card,

emmett: Letter of Credit and other credit related fees offsetting the $25 million first quarter BLG distribution.

Unknown Executive: Security losses of 8 million primarily reflect real-life losses on the sale of non-agency securities as we de-risked our portfolio.

Daryl N. Bible: Security losses of $8 million primarily reflect realized losses on the sale of non-agency securities as we de-risk our portfolio. Turning to slide 15, non-interest expenses were $1.3 billion, a decrease of $99 million from the first quarter. As is typical for M&T's first quarter results, expenses in the quarter included approximately $99 million of seasonally higher compensation costs. Salaries and benefits decreased $69 million to $764 million.

emmett: Security losses of $8 million primarily reflect realized losses

emmett: on the sale of non-agency securities as we de-risk our portfolio.

Unknown Executive: Turning aside 15. Non-interest expenses were 1.3 billion, a decrease of 99 million from the first quarter. As a typical for M.T.'s first quarter results, expenses in the quarter included approximately 99 million of seasonally higher compensation cost. .

emmett: Turning to slide 15.

emmett: Non-interest expenses were $1.3 billion, a decrease of $99 million from the first quarter. As is typical for M&T's first quarter results, expenses in the quarter included approximately $99 million of seasonally higher compensation costs.

emmett: Salaries and benefits decreased $69 million to $764 million.

Daryl N. Bible: Reflecting seasonally elevated expenses in the first quarter offset by the full quarter impact of annual merit, the second quarter included $5 million related to the FDIC special assessment compared to $29 million in the prior quarter. Other costs of operations decreased $18 million to $116 million from lower supplemental executive retirement costs and lower losses on lease termination. The Adjusted Efficiency Ratio, excluding the impact of the FDIC Special Assessment, was 55.1% compared to 59.6% in the first quarter.

emmett: Reflecting seasonally elevated expenses in the first quarter, offset by the full quarter impact of annual merit increases.

emmett: The second quarter included $5 million related to the FDIC special assessment compared to $29 million in the prior quarter.

emmett: Other costs of operations decreased $18 million to $116 million from lower supplemental executive retirement costs and lower losses on lease terminations.

emmett: The adjusted efficiency ratio, excluding the impact of the FDIC special assessment, was 55.1%, compared to 59.6% in the first quarter.

Daryl N. Bible: Next, let's turn to slide 16 for credit. Net charge-offs for the quarter totaled $137 million or 41 basis points, down from 42 basis points in the fourth quarter. The three largest charge-offs were $40 million combined and represent C&I loans that span industries including services, manufacturing, and retail. The CRE charge-offs, including charge-offs within the office portfolio, remain at manageable levels through the first half of the year. Non-accrual loans decreased $278 million to $2 billion.

emmett: Next, let's turn to slide 16 for credit.

emmett: Net charge-offs for the quarter totaled $137 million or 41 basis points, down from 42 basis points in the late quarter.

emmett: The three largest charge-offs were $40 million combined and represent C&I loans that span industries including services, manufacturing, and retail.

emmett: The CRE charge-offs, including charge-offs within the office portfolio, remain at manageable levels through the first half of the year.

emmett: Non-accrual loans decreased $278 million to $2 billion.

Daryl N. Bible: The non-accrual ratio decreased 21 basis points to 1.5%, driven largely by a decrease in CRE, reflecting favorable resolutions with borrowers, including payoffs and paydowns. In the second quarter, we recorded a provision of $150 million compared to net charge-offs of $137 million. The allowance to loan ratio increased one basis point to 1.63%. However, the provision for credit losses decreased $50 million compared to the first quarter, reflecting lower CRE loans, including criticized loans. A modest improvement in forecasted real estate prices is partially offset by growth in C&I and consumer portfolios.

emmett: The non-accrual ratio decreased 21 basis points to 1.5%, driven largely by a decrease in CRE, reflecting favorable resolutions with borrowers, including payoffs and paydowns.

emmett: In the second quarter, we recorded a provision of $150 million compared to net charge-offs of $137 million.

emmett: The allowance to loan ratio increased one basis point to 1.63%.

emmett: The provision for credit losses decreased $50 million compared to the first quarter, reflecting lower CRE loans, including criticized loans.

emmett: and Modest Improvement in Forecasted Real Estate Prices, Partially Offset by Growth in C&I and Consumer Portfolios.

Daryl N. Bible: Please turn to slide 17. When we file our Form 10-Q in a few weeks, we estimate that the level of criticized loans will be $12.1 billion, and $12.9 billion at the end of March. The improvement for the Linc quarter was largely driven by a $987 million decrease in CRE criticized loans.

emmett: Please turn to slide 17.

emmett: When we file our Form 10-Q in a few weeks, we estimate that the level of criticized loans will be $12.1 billion, compared to $12.9 billion at the end of March.

emmett: The improvement for the Linc quarter was largely driven by a $987 million decrease in CRE-criticized loans.

Daryl N. Bible: Item 18 provides additional detail on the C&I criticized balance. The total CNI criticized balance is increased by $98 million. The majority of the increase is concentrated within vehicle and recreational finance dealers and health care sectors, although offset by declines in most other areas. We saw additional migration to criticize within non-auto dealer portfolio continuation from trends we discussed in the first quarter. However, there has been limited, incremental migration within the portfolio since early in the second quarter. Turning to slide 19, which includes detail on the CRE criticized balance. Total CRE criticized balances decreased $987 million from the last quarter.

emmett: Item 18 provides additional detail on C&I Credit Size Balances.

Speaker Change: Total CNI criticized balance is increased $98 million.

Speaker Change: The majority of the increase is concentrated within vehicle and recreational finance dealers and healthcare sectors, offset by declines in most other industries.

Speaker Change: We saw additional migration to criticize within non-auto dealer portfolio continuation from trends we discussed in the first quarter. However, there has been limited incremental migration within the portfolio since early in the second quarter.

Speaker Change: Joining the slide 19 includes a detail on CRE criticized balances.

Speaker Change: Total CRE criticized balances decreased $987 million from the last quarter.

Daryl N. Bible: Upgrades and payoffs of criticized loans outpace downgrades into deteriorating. The decline was across multifamily, retail, health services, hotel, and construction, but we did see modest increases in office and industrial. The decrease reflects the effects of working with borrowers to find favorable resolution. We are actively working through our criticized population for favorable outcomes. Turning to slide 20 for capital, the M&T CET1 ratio at the end of the second quarter was an estimated 11.44% compared to 11.08% at the end of the first quarter.

Speaker Change: Upgrades and Payoffs of Criticized Loans Outpace Downgrades into Criticized.

Speaker Change: The decline was across multi-family, retail, health services, hotel and construction, though we did see modest increases in office and industrial.

Speaker Change: The decrease reflects the effects to work with borrowers to find favorable resolutions.

Speaker Change: We are actively working through our criticized population for favorable outcomes.

Speaker Change: Turning to slide 20 for capital, M&T CET1 ratio at the end of the second quarter was an estimated 11.44% compared to 11.08% at the end of the first quarter.

Daryl N. Bible: The increase was due in part to the continued pause in repurchasing shares and strong capital generation. At the end of the second quarter, the negative AOCI impact on the CET-1 ratio from AFS securities and pension related components would be approximately 19 basis points. Now turning to slide 20 for output.

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

Speaker Change: At the end of the second quarter, the negative AOCI impact on the CET1 ratio from AFS securities and pension related components would be approximately 19 basis points.

Daryl N. Bible: The economy is slowing a bit, but it remains in good health. Job growth, wage growth, and spending have slowed to a more sustainable level. We see the so-called soft landing scenario as having the highest probability. But the possibility remains for a mild recession brought on by the legged impact of rate hikes. Consumer spending has slowed to a pace consistent with job and wage growth.

Speaker Change: Now turning to slide 20 for output.

Speaker Change: The economy is slowing a bit, but remains in good health. Job growth, wage growth, and spending have slowed to more sustainable levels.

Speaker Change: We see the so-called soft landing scenario as having the highest probability.

Speaker Change: But the possibility remains for a mild recession brought on by the legged impact of rate hikes.

Speaker Change: Consumer spending has slowed to a pace consistent with job and wage growth, alleviating inflation pressure for many goods and services.

Daryl N. Bible: Alleviating Inflation Pressure for Many Goods and Services. The labor market remains positive, but it is clearly slowed. In turn, keeping a lid on wage pressure and leading to longer spells of unemployment. We expect that to continue for the rest of 2024. Inflation figures remain above the Fed's target of 2%, chiefly because of rent and home prices. We expect the weaknesses seen in rent listings to play through in the official inflation data, helping bring the headline inflation figures down. Inflation in the second quarter slowed, an encouraging development after higher readings in the first quarter.

Speaker Change: The labor market remains positive but is clearly slowed.

Speaker Change: In turn, keeping a lid on wage pressure and leading to longer spells of unemployment.

Speaker Change: We expect that to continue for the rest of 2024.

Speaker Change: Inflation figures remain above the Fed's target of 2% chiefly because of rent and home prices.

Speaker Change: We expect the weaknesses seen in rent listings to play through the official inflation data, helping bring the headline inflation figures down.

Speaker Change: Inflation in the second quarter slowed and encouraging development after higher readings in the first quarter.

Daryl N. Bible: Difting to 2024 Outlook. We expect Net Interest Income to be $6.85 billion to $6.9 billion. Our outlook incorporates the latest forward curve that has one rate cut in September and another in December. However, we expect the level of rates to have a limited direct effect on non-interest income.

Speaker Change: Shifting to 2024 Outlook.

Speaker Change: We expect Net Interest Income to be $6.85 billion to $6.9 billion. Our outlook incorporates the latest forward curve that has one rate cut in September and another in December .

Speaker Change: However, we expect the level of rates to have a limited direct effect on non-interest income outlook.

Daryl N. Bible: As we have taken steps to reduce our asset sensitivity and are now more nutritious, hire for longer rates in the first half of the year allowed us to take additional action. Protect NII from lower interest rate environments. For example, in the first half of the year, we shifted $3 billion of cash into securities and added $5 billion in forward-starting cash flow hedges, which became active in 2025. During or further, we expect that the downside and interest-bearing deposit beta will be approximately 30 to 40% in the first couple of rate cuts. For the remainder of the year, M&T's balance sheet will be smaller, with total average assets closer to $208 billion.

Speaker Change: As we have taken steps to reduce our asset sensitivity and are now more neutral.

Speaker Change: Higher for longer rates in the first half of the year allowed us to take additional actions to protect NII from lower interest rate environment.

Speaker Change: For example, in the first half of the year, we shifted $3 billion of cash into securities and added $5 billion in forward starting cash flow hedges.

Speaker Change: which became active in 2025.

Speaker Change: For further, we expect that the downside and interest bearing deposit beta will be approximately 30 to 40 percent in the first couple of rate cuts.

Speaker Change: For the remainder of the year, M&T's balance sheet will be smaller, with total average assets closer to $208 billion.

Daryl N. Bible: We expect average cash to be approximately $25 billion and securities to be $30 billion with modest growth in loans and deposits. Our outlook for fees and expenses is unchanged, with fees excluding any security gains or losses of $2.3 to $2.4 billion, and expenses excluding the amounts related to the FDIC special assessment expected to be $5.25 billion to $5.3 billion. We continue to expect charge-offs for the full year to be near 40 basis points.

Speaker Change: We expect average cash to be approximately $25 billion and securities to be $30 billion with modest growth in loans and deposits.

Speaker Change: Our outlook for fees and expenses is unchanged, with fees excluding any security gains or losses of $2.3 to $2.4 billion.

Speaker Change: And expenses, excluding the amounts related to the FDIC special assessment, are expected to be $5.25 billion to $5.3 billion.

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

Daryl N. Bible: The allowance level will be dependent on many factors, including changes... Macroeconomic Outlook, Portfolio Mix, and Underlying Asset Quality. Our outlook for the tax rate is 24 to 24.5 percent, excluding the discrete tax benefit in the first quarter. Preferred dividends are expected to be approximately $47 million in the third quarter.

Speaker Change: The allowance level will be dependent on many factors, including changes...

Speaker Change: and the macroeconomic outlook, portfolio mix, and underlying asset quality.

Speaker Change: Our outlook for the tax rate is 24 to 24.5% excluding the discrete tax benefit in the first quarter.

Speaker Change: Preferred dividends are expected to be approximately $47 million in the third quarter.

Daryl N. Bible: And 36 in the fourth quarter, reflecting our Series J issuance in May and the upcoming Series E redemption in August. Finally, as it relates to capital. Last quarter, we laid out five factors for consideration as we assessed our capital return plans for the rest of the year. The macroeconomic environment remains healthy. M&T continues to generate significant capital, with the bank growing tangible common equity by over $500 million in the second quarter.

Speaker Change: and 36 in the fourth quarter, reflecting our Series J issuance in May and the upcoming Series E redemption in August .

Speaker Change: Finally, as it relates to capitals.

Speaker Change: Last quarter we laid out five factors for consideration as we assessed our capital return plans for the rest of the year.

Speaker Change: The macroeconomic environment remains healthy.

Speaker Change: M&T continues to generate significant capital, with the bank growing tangible common equity by over $500 million in the second quarter.

Daryl N. Bible: We continue to manage our CRE concentration. CRE as a percent of Tier 1 capital and allowance of 151% as of the end of the second quarter. Asset quality continues to improve. Non-accrual and Criticized Loans, Net charge-offs are in line with expectations we laid out in the first quarter. M&T's Preliminary Stress Capital Buffer declined 20 basis points to 3.8%, reflecting many of the factors just mentioned.

Speaker Change: We continue to manage our CRE concentration.

Speaker Change: with CRE as a percent of Tier 1 capital and allowance of 151% as of the end of the second quarter.

Speaker Change: As the quality continues to improve with declines in non-accrual and criticized loans and net charge-offs in line with expectations we laid out in the first quarter.

Speaker Change: M&T's Preliminary Stress Capital Buffer declined 20 basis points to 3.8%, reflecting many of the factors just mentioned.

Daryl N. Bible: Given the improvements in these factors, we plan to begin our share repurchase in the third quarter at a pace of $200 million per quarter through the end of the year. We expect to maintain our capital ratios, at least at the current levels, for the remainder of the year. We will continue to monitor the previously discussed factors, as well as the revised Basel III proposal, what's been made public, and we'll adjust our capital return plan if necessary.

Speaker Change: Given the improvements in these factors, we plan to begin our share repurchase in the third quarter at a pace of $200 million per quarter through the end of the year.

Speaker Change: We expect to maintain our capital ratios at least at the current levels for the remainder of the year.

Speaker Change: We will continue to monitor the previously discussed factors as well as the revised Basel III proposal What's made public and we'll adjust our capital return plan if necessary

Daryl N. Bible: Our capital will also be used to support organic growth and grow new customer relationships. Our strong balance sheet will continue to differentiate us with our clients, communities, regulators, investors, and Rady Nation. We conclude on slide 22. Our results underscore an optimistic investment decision. M&T has always been a purpose-driven organization with a successful business model that benefits all stakeholders, including shareholders.

Speaker Change: Our capital will also be used to support organic growth and grow new customer relationships.

Speaker Change: Our strong balance sheet will continue to differentiate us with our clients, communities, regulators, investors, and rating agencies.

Speaker Change: We conclude on slide 22.

Speaker Change: Our results underscore an optimistic investment thesis.

Speaker Change: M&T has always been a purpose-driven organization with a successful business model that benefits all stakeholders, including shareholders.

Daryl N. Bible: We have a long track record of credit outperformance through all economic cycles while growing within the markets we serve. 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 questions, before Ashley will briefly review the instructions. Certainly, at this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may withdraw your question at any time by pressing star 2.

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. Now let's open up the questions, before which Ashley will briefly review the instructions.

Speaker Change: Certainly, at this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may withdraw your question at any time by pressing star 2. Once again, that is star and 1 for your questions. We'll take our first question from Manan Gosalia with Morgan Stanley . Please go ahead.

Operator: Once again, that is a star and 1 for your questions. We'll take our first question from Manan Gosalia on behalf of Morgan Stanley. Please go ahead. Hey, good morning, Daryl.

Manan Gosalia: Good morning, Manan. So, you know, I wanted to ask you about NII. So you beat NII this quarter, and then your new guide for NII implies that quarterly NII will be relatively flat from 2Q levels. And you did see a noticeable increase quarter-on-quarter this quarter in NII. So can you just unpack the drivers in the back half?

Speaker Change: Hey, good morning, Daryl. Good morning, Manan.

Manan Gosalia: So, you know, I wanted to ask on NII, so you beat on NII this quarter, and then your new guide for NII implies that quarterly NII will be relatively flat from 2Q levels.

Manan Gosalia: and you did see a noticeable increase quarter-on-quarter this quarter in NII. So can you just unpack the drivers in the back half? Is there some conservatism baked in there or, you know, is there some, you know, timing difference in, you know, being neutral to rates but maybe perhaps being a little bit more asset sensitive with the first rate cuts if you can just unpack those drivers there.

Daryl N. Bible: Is there some conservatism baked in there? Or is there some timing difference in being neutral to rates but maybe perhaps being a little bit more asset sensitive with the first rate cuts if you can just unpack those drivers there? Yeah, no, thanks, Manan.

Daryl N. Bible: Our position from rate sensitivity is really quite neutral. You know, it's based on assumptions, but I feel we are really neutral there. If you look at the slide deck where we had net interest income, in one of the bullets there, we highlight that we had a five basis point positive impact on nonaccrual interest. So let me explain that to you.

Speaker Change: Thanks, Manan. Our position from rate sensitivity is really quite neutral. It's based on assumptions, but I feel we are really neutral there. If you look on the slide deck where we had net interest income, in one of the bullets there we highlight that we had a five basis point positive impact.

Daryl N. Bible: So when our loans go into non-accrual, basically, when we still receive payments, both principal and interest, all that goes to principal. And then if the loan is basically resolved favorably, and they pay us off, obviously, we pay off the principal balance, and then anything left over goes into net interest income. So what we saw in the second quarter was basically a large amount of loans that basically came out favorably from our non-accrual portfolio.

Speaker Change: on non-accrual interest.

Speaker Change: So let me explain that to you. So when our loans go into non-accrual,

Speaker Change: We basically, when we still receive payments, both principal and interest, all that goes to principal.

Speaker Change: and then if the loan is basically resolved favorably and they pay us off

Speaker Change: You know, obviously, we pay off the principal balance and then anything left over goes into net interest income. So what we saw in the second quarter was basically a large amount of loans that basically came out favorably out of our nonaccrual portfolio.

Daryl N. Bible: So what we put on there and what I talked about in the prepared remarks is that if you look at our average non-accrual interest for the last five quarters, it's been running around 15 million. This quarter, we got double that.

Speaker Change: So, what we put on there and what I talked about in the prepared remarks is that if you look at our average nonaccrual interest for the last five quarters, it's been running around 15 million.

Daryl N. Bible: So I would basically say that our NIN this quarter was actually on track, because if you adjust the $15 million out, we were at $5.56 NIM, and I said that we would be in the mid $3.50s for the second quarter. So we're really on the path to what I said, you know, mid $3.50s for second quarter, and high $3.50s for third and fourth quarter is really where we wanted to be. Transcription by Trans-Expert at Fiverr.com.

Speaker Change: This quarter we got double that. So, I would basically say...

Speaker Change: Our NEM this quarter was actually on track, because if you adjust the $15 million out, we were at $5.56 NEM, and I said that we would be mid $350s.

Speaker Change: for the second quarter. So we're really on path to what I said, mid 350s second quarter, then high 350s for third and fourth quarter is really where we wanted to be.

Manan Gosalia: And just to confirm that five basis points is where you are above normal, right? The five basis points isn't the total impact. It's three, which I would say would be normal for the run rate. Yeah, so and Go ahead. And you are five ACES points above that. No, no, no, we were three.

Monon: and expect to be. So I think we're just on track, Manan.

Monon: Got it and just to confirm that five basis points is where you are above normal right the five basis points isn't the total impact

Speaker Change: It's three is what I would say would be normal to the run rate.

Speaker Change: Yeah, so...

Speaker Change: Go ahead. And you are five basis points above that.

Daryl N. Bible: So we were 352. We said we'd be in the mid 350s. I say we really came in at $3.56 if you back out the extra above nonaccrual interest that we normally get. I mean, we're going to get nonaccrual interest every quarter. We've been averaging a couple of basis points of benefit every quarter because of that, and that's going to continue for a long time. Got it. All right, perfect. And then maybe, you know, you can put this in the category of no good deed goes unpunished.

Speaker Change: No, no, no, we were three. So, we were 352, we said we'd be in the mid-350s.

Speaker Change: I say we really came in at $3.56, if you back out the extra above.

Speaker Change: Daryl Bible, Brian Klock

Manan Gosalia: But on the buyback resumption, your message in the deck is that capital levels should at least stay at current levels of around 11 and a half percent. You know, just given that the SCB went lower, given the excess capital position, what do you need to see before you accelerate the pace of buybacks and bring that capital ratio down? Yeah, I think it's pretty simple.

Speaker Change: Daryl Bible, Brian Klock

Speaker Change: You know, just given that the SCB went lower, given the excess capital position, what do you need to see before you accelerate the pace of buybacks and bring that capital ratio lower?

Daryl N. Bible: I think, you know, we are aggressively working down our asset quality, our criticized loans, not performing assets. I think we need to continue to make progress on that. As we make progress on that, you could see us decide to increase our, you know, repurchase shares, potentially. Obviously, the economy is a factor in my prepared remarks. You know, we said we didn't think it's likely, but it's possible that maybe you go into recession. So if that were to happen, I think we'd have to look at that and just be a little bit more defensive if that made sense or not.

Speaker Change: Yeah, I think it's, you know...

Speaker Change: Pretty simple. I think, you know, we are aggressively working down, you know, our asset quality, our criticized loans, not performing assets.

Speaker Change: I think we need to continue to make progress on that.

Speaker Change: As we make progress on that, you could see us decide to increase our repurchase shares potentially. Obviously, the economy is a factor in my prepared remarks. You know, we said we don't think it's likely, but it's possible that maybe you go into recession. So, if that were to happen, I think we'd have to view that.

Daryl N. Bible: You know, I still want to see the impacts of Basel III. I know, you know, we are hearing more favorable things, but until we actually see it in writing, you really don't know what's going on. But those are probably the primary things that we're working on. We continue to shrink our CRE concentration and make great progress there. I have no doubt we will continue to make great progress in the next couple of quarters as well. Great, thank you.

Speaker Change: and just be a little bit more defensive if that made sense or not.

Speaker Change: You know, I still want to see the impacts of Basel III. I know.

Speaker Change: We are hearing more favorable things, but until we actually see it in writing, you really don't know what's going on. Those are probably the primary things that we're working on. We continue to shrink our CRE concentration and make great progress there. I have no doubt we will continue to make great progress in the next couple quarters as well there.

Matt O'connor: Thank you. We'll take our next question from Matt O'Connor with Deutsche Bank. Please go ahead. Good morning.

Speaker Change: Great, thank you.

Speaker Change: Thank you. We'll take our next question from Matt O'Connor with Deutsche Bank. Please go ahead.

Unknown Speaker: I was hoping to collaborate on, Unknown Speaker, The Big Drop in Commercial Real Estate on a Period-End Basis. I think it's down about 9%. Obviously, you know, great job bringing that down.

Matt O'connor: Good morning. I was hoping we could collaborate on...

Daryl N. Bible: And I know you touched on some of the opportunities to offload that, but it's just a bigger drop than I would have thought. And I didn't know if there was any reclassification into C&I as you kind of improve some of those like guarantees and things like that. So just elaborate on all that in terms of how you're able to bring it down so much. Thank you. Yeah, no; I'm happy to answer that, Matt.

Matt O'connor: The big drop in the commercial real estate on a period end basis, I think it's down about 9%, obviously, you know, great job bringing that down. And I know you touched on some of the kind of opportunities to offload that, but it's just a bigger drop than

Speaker Change: I would have thought. And I didn't know if there was any reclass into C&I as you kind of improve some of those like guarantees and things like that. So just elaborate on all that in terms of how you're able to bring it down so much. Thank you.

Daryl N. Bible: So we are very focused and working really hard, both the first line and the second line of working hard and making tremendous progress and bringing our CRE concentration numbers down. You know, we did see a lot more liquidity in the marketplace this quarter, and we were able to see some of our clients that we had actually in criticized multifamily be able to do government placements out into the marketplace. The other thing that I would tell you is that, you know, we are doing a finance transformation.

Matt O'connor: Yeah, no, happy to answer that, Matt.

Speaker Change: We are very focused and working really hard, both the first line and second line of working hard and made tremendous progress in bringing

Speaker Change: Our CRE concentration number is down.

Speaker Change: We did see a lot more liquidity in the marketplace this quarter, and we were able to see some of our clients that we had actually in criticized multifamily be able to do government placements out into the marketplace.

Speaker Change: for liquidity. So as we continue to have that liquidity, that helps us basically cure some of our criticized loan balances.

Speaker Change: The other thing that I would tell you is that...

Daryl N. Bible: You know, finance transformation is basically, you know, putting in a new general ledger system, subledgers, which, you know, we are doing really well, and we're about halfway through that process now. But it's also improving and changing processes. So as we improve and change the process. We are putting in better controls and more ways of actually how we put loans on the books, and that is causing some grading to go from what CRE would be into C&I owner-occupied because it really comes down to the source of repayment. One source of repayment, you know, is from an operating entity; it's basically not a CRE loan; it is CNI owner-occupied. Okay, that makes sense. I think that's how others do that too.

Speaker Change: We are doing a finance transformation.

Speaker Change: You know, finance transformation is basically...

Speaker Change: You know putting a new general ledger system sub ledgers which.

Speaker Change: We are doing really well, and we're about halfway through that process now. But it's also improving and changing processes.

Speaker Change: So, as we improve and change processes...

Speaker Change: We are putting in better controls and more ways of actually how we put loans on the books.

Speaker Change: and that is causing some grading to go from what CRE would be into C&I owner-occupied. Because it really comes down to the source of repayment.

Speaker Change: Source of repayment, you know, is from an operating entity. It's basically not a CRE loan, it is a C&I owner-occupied loan.

Matt O'connor: And then just separately on the other income line, you pointed to a couple of positives there. Is that a sustainable level? Or, I know, it should be lumpy.

Speaker Change: Okay, that makes sense. I think that's how others do that too. And then just separately on the all other income line, you pointed to a couple of

Speaker Change: Daryl Bible, Brian Klock

Daryl N. Bible: But how do you think about that? That all other feeds are like 152? Thank you. Um, you know, it is at a relatively high level. You know, I probably would have to trim, you know, maybe, you know, five or 10% out of that potentially on a run rate basis. But it's, you know, a lot of that other revenue that we talked about is the merchant fees, and we had a good quarter there, more activity that could continue as we continue to have activity.

Speaker Change: You know, it is at a relatively high level.

Speaker Change: I probably trim maybe 5% or 10% out of that potentially on a run rate, but a lot of that other revenue that we talked about is the merchant.

Daryl N. Bible: The other is on loan demand, and we're having loan syndication fees and all that, and that's going to be lumpy. We had a good quarter this past quarter in that area. You know, we are seeing maybe a little bit of softening in some of the commercial areas, so it might be a little light.

Speaker Change: We have a good quarter there with more activity that could continue as we continue to have activity. The other is on loan demand and we're having loan syndication fees and all that and that's going to be lumpy.

Speaker Change: We had a good quarter this past quarter in that area. You know, we are seeing maybe a little bit of softening in some of the commercial areas, so it might be a little light, but yeah, I'd say, you know, at that same level to maybe down 5 or 10 percent.

Matt O'connor: But yeah, I'd say, you know, at that same level, maybe down five or 10%. Okay, thank you so much. Thank you. We'll take our next question from Erika Najarian with UBS. Please go ahead.

Speaker Change: Okay, thank you so much.

Speaker Change: Yep.

Speaker Change: Thank you. We'll take our next question from Erika Najarian with UBS. Please go ahead.

Erika Najarian: Hi, I have two follow-up questions, please. Daryl, the company clearly did a great job in terms of interest-bearing deposit costs coming down. I know some of that is a mix of the broker being actively taken down in terms of exposure. Could you give us a sense, before the rate cuts, and we appreciate the downside beta guide that you gave us, if we don't have rate cuts, how do you feel like this level of progress is sustainable?

Erika Najarian: Yes, hi. Two follow-up questions, please.

Erika Najarian: Daryl, the company clearly did a great job in terms of interest-bearing deposit costs coming down.

Erika Najarian: I know some of that is a mix of broker being actively taken down in terms of exposure. Could you give us a sense before the rate cuts, and we appreciate the downside beta guide that you gave us, but...

Speaker Change: If we don't have rate cuts, how do you feel like this level of progress is sustainable? And maybe break it down in terms of what you're observing with deposit rates versus the continued runoff in brokerage CDs.

Erika Najarian: And maybe break it down in terms of what you're observing with current deposit rates versus the continued runoff in brokered CDs. Yeah, so brokerage fees will continue to run off. We have another big chunk coming off in the third and fourth quarters.

Daryl N. Bible: So we'll be pretty much out of brokerage deposit CDs, at least by the end of the year. As far as betas go and rates, you know, we continue to see more rational pricing in the marketplace, and we're able to maybe offer specials, but the specials that we're offering just aren't as high as what they were before. So you're still seeing that there is still some disintermediation. It is slowing down, but there's still continued disintermediation. The one that impacts NII the most is obviously the one that goes to DDA for interest-bearing deposit balances.

Speaker Change: Yeah, so brokerage fees will continue to run off. We have another big chunk coming off in third and fourth quarter. So we'll be pretty much out of brokerage deposit CDs at least by the end of the year.

Speaker Change: As far as the betas go and rates, you know, we continue to just see more rational pricing in the marketplace and we're able to maybe offer specials, but the specials that we're offering just aren't as high as what they were before.

Speaker Change: So you're still seeing that. There is still some disintermediation, you know, it is slowing down, but there's still continued disintermediation. The one that impacts NIA the most is obviously the one that goes to DDA too.

Erika Najarian: You know, we're capturing any disintermediation, but it's still seeing a little bit in the commercial area. The other thing is, on the retail side, as long as rates are at this level, you're going to see a little bit of an attraction of, you know, money going out of the non-maturity bucket into the CD deposits. You know, but we feel pretty good that our deposit costs are, you know, flat, and maybe down, you know, as the year progresses and into next year. I think it's just more rational pricing in the marketplace right now. Thank you. And my second question is a follow-up to Manan.

Speaker Change: Interest-Bearing Deposit Balances

Speaker Change: We're capturing any disintermediation, but it's still seen a little bit in the commercial area.

Speaker Change: The other thing is on the retail side, as long as rates are at this level, you're gonna see a little bit of a traction of.

Speaker Change: Money going out of the non-maturity bucket into the CD deposits.

Speaker Change: We feel pretty good that our deposit costs are flat and maybe down as the year progresses and into next year. I think it's just more rational pricing in the marketplace right now.

Daryl N. Bible: So last quarter and during the quarter, I think you guys were telling us, oh, don't back into this 11% CET1 when, you know, thinking about buybacks, listen to what we're saying about the total amount of what we're buying back. And then, of course, you had pretty strong progress in terms of CET1 this quarter, and the floor went up even more. And I appreciate your response to Manan's question.

Speaker Change: Thank you. And my second question is a follow-up to Manan.

Speaker Change: So...

Speaker Change: Last quarter, and during the quarter, I think you guys are telling us, oh, don't back into this 11% CET1 when, you know, thinking about buybacks. You know, listen to what we're saying on the total amount of what we're buying back. And then, of course, you had a pretty strong, you know, pretty strong progress in terms of CET1 this quarter, and the floor went up even more.

Speaker Change: And I appreciate your response to Manan's question, and I know that's part of the, you know, conservatism of this company and why long-lonelies value you guys so highly. I guess I'm wondering, you know, how should we think about...

Erika Najarian: And I know that's part of the, you know, conservatism of this company and why Long Lonely values you guys so highly. I guess I'm wondering, you know, what we should think about the future. I get that there's still uncertainty; there's still a willingness, a desire to take down CRE concentration, a desire to see the economy play out. But at this level of earnings power with $200 million, you're going to continue to build capital, especially if, you know, the C&I loan growth is engulfed by CRE declines.

Speaker Change: I get that there's still uncertainty, there's still a desire to take down CRE concentration, a desire to see the economy play out.

Speaker Change: But at this level of earnings power with $200 million, you're going to continue to build capital, especially if...

Erika Najarian: So I guess as your long-term shareholders think about, you know, forget buybacks for a second, returns, and what that appropriate capital floor is, how would you help them frame that? From a financial perspective, obviously, we are much higher than where we have to run the company long term for M&T. You know, we do have an elevated, criticized low-in-balance. And we're really working hard. Our teams are working their butts off to basically bring those balances down, and we can't wait.

Speaker Change: Daryl Bible, Brian Klock

Speaker Change: You know, from a floor perspective, obviously, we are much higher than where we have to run the company long term for M&T.

Speaker Change: We do have elevated credit side flow imbalances.

Speaker Change: and we're really working hard. Our teams are working their butts off to basically bring those balances down and we will

Daryl N. Bible: I hope and plan for that to continue through the rest of this year and into next year. So that is definitely one of the key things that we're looking at. We are conservative. What I've said, you know, in prior quarters, the capital is not going anywhere. Erica, we will return it. We promise you that we are not going to be wasteful or do anything stupid.

Speaker Change: Hope and plan to that to continue through the rest of this year into next year. So that is definitely one of the key things that we're looking at. We are conservative. What I've said, you know, in prior quarters, the capital is not going anywhere, Erika. We will return it. We promise you that. We aren't going to be.

Daryl N. Bible: It will come back to the shareholders at some point down there. We're just going to do it in a very conservative manner because that's just who we are. So I guess, you know, to, you know, to compare it to how Jamie says it, I guess the better way for your shareholders and to think about is earnings in store. Transcribed by https://otter.ai. All right.

Speaker Change: So.

Speaker Change: So I guess, you know, to, you know, to compare it to what how Jamie says it, I guess the better way for your shareholders and to think about it is earnings in store.

Speaker Change: [inaudible]

Speaker Change: All right. Thanks, guys.

Erika Najarian: Thanks, guys. Thank you. We'll take our next question from John Pancari with Evacor ISI. Please go ahead. Good morning, Daryl.

Speaker Change: Thank you. We'll take our next question from John Pancari with Avacore ISI. Please go ahead.

John G. Pancari: Morning, John. On the CRE front, I know you mentioned the ongoing focus to reduce the concentration of CRE. Where do you see the CRE, the risk-based capital percentage going? I believe in the past you've indicated you wanted to see it into the 150% range. So I wanted to get that update.

John G. Pancari: Morning, Daryl.

Daryl N. Bible: Good morning, John .

John G. Pancari: On the, back to CRE, I know you mentioned the ongoing focus to reduce the concentration of CRE. Where do you see the CRE, the risk-based capital percentage going? I believe in the past you've indicated you wanted to see it into the 150% range. So when we get that update, and then separately, in terms of the

Daryl N. Bible: And then separately, in terms of the improvement that you saw in credit this quarter, in terms of past due declines, non-accruals, and credit size, can you just talk about what specifically you saw that is driving that, and broadly whether those trends can continue in that direction? Thanks. Yeah, sure. So, you know, we've made tremendous progress over the last three plus years on getting our CRE concentration down the plant that we put into place at that point and continue to execute, and you saw the benefits in our stress capital buffer because of that, and that will hopefully continue when we continue to submit the stress capital CFIR.

Speaker Change: The improvement that you saw in credit this quarter, in terms of the past due declines, non-accruals, and the credit size. Can you just talk about what specifically you saw that is driving that, and if broadly, those trends can continue in that direction? Thanks.

Speaker Change: Yeah, sure. So, you know, we've made tremendous progress over the last three plus years on getting our CRE concentration down, the plans that we, you know, put into place at that point, and continue to execute, and you saw the benefits in our stress capital buffer because of that, and that will hopefully continue.

Speaker Change: when we continue to submit the stress capital CPER test.

Daryl N. Bible: You know, I would say we're getting close, John. You know, you know, we are at 151 now. You know, I think we're in the neighborhood of being close to where, you know, CRE will be a much more normal space for us. You know, we're at a level that we think makes sense for the size of the company we are and serving our communities and clients. So we're probably maybe a quarter or two away, but I think that's not too far off.

Speaker Change: You know, I would say we're getting close, John .

John G. Pancari: You know, you know, we are at 151 now, you know.

John G. Pancari: I think we're in the neighborhood of being close to where CRE will be much more normal space for us.

John G. Pancari: We're at a level that we think makes sense for the size company we are and serving our communities and clients, so we're probably maybe a quarter or two away, but I think that's not too far off.

Daryl N. Bible: As far as non-accruals go, you know, I tell you, this quarter everything kind of worked, came together really strong. Our first line credit team was working with our clients. We have a process in place. We're looking at all the CRE loans that are maturing and trying to see where and how we can work with our clients to either get it right-sized or get it upgraded off of distressed. We are seeing some of our criticized loans getting refinanced by others in the industry.

John G. Pancari: As far as non-accruals go, you know, I tell you, this quarter everything kind of worked.

John G. Pancari: came together really strong. Our first line credit team was working with our clients, we have a process in place.

John G. Pancari: We're looking at all the CRE loans that are maturing and trying to see where and how we can work with our clients to either get it right-sized to get it upgraded off of criticized

John G. Pancari: We are seeing, you know, some of our criticized loans getting refinanced by others in the industry. And I talked earlier that we're seeing, you know, some of our criticized loans getting placed in the agencies with our programs with the GSEs.

Daryl N. Bible: And I talked earlier about how we're seeing some of our criticized loans getting placed in the agencies with our programs with the GSEs. So we're basically really focused on that. The teams are diligent and working hard, and we plan to have those numbers continue to drive down and be really positive. Great, thanks for all that helps.

John G. Pancari: So, we're basically, you know, really focused on that, the teams are diligent, working hard, and you know, we plan to have those numbers continue to drive down and be really positive.

John G. Pancari: And then related to that, maybe could you just talk about the role that low modifications have played here as you've addressed commercial real estate? Maybe help us with the trajectory of your financial difficulty modifications, they continue to rise. And maybe if you could just talk about the concerns out there that, you know, they're simply kicking the can down the road.

Great: Thanks to all that helps. And then related to that, maybe could you just talk about the role that low modifications have played here as you've addressed commercial real estate? Maybe help us with the trajectory of

Speaker Change: Your financial difficulty modifications they continue to rise and maybe if you could just talk about the concerns out there that You know, they're simply kicking the can down the road and we a year from now. We can see these these pressures rear drug We had again

Daryl N. Bible: And a year from now, we can see these pressures rear directly again. So when you look at loan modifications, you know, when we are working with our clients, loan modification, we are asking for, you know, more type of recourse or capital to be put into the transactions, for them to get more time to work through the higher interest rates that we have. So the modifications we are doing are actually enhancing our... our position.

Daryl N. Bible: When you look at loan modifications, when we are working with our clients, loan modifications

Daryl N. Bible: We are asking for more type of recourse or capital to be put into the transactions.

Daryl N. Bible: So we're giving them more extension on time, and they're giving us more capital liquidity recourse for that time. So we're actually in a better spot. So yes, our modifications are going up. You know, this is our history of M&T.

Speaker Change: Our position. So we're giving them more extension on time, and they're giving us more capital, liquidity, recourse.

Daryl N. Bible: for that time. So we're actually in a better spot. So yes.

Speaker Change: Our modifications are going up. This is our history at M&T. We work with our clients. If our clients support us, we're going to support them. That's what we do, and that's what we're going to continue to do.

Daryl N. Bible: We work with our clients. If our clients support us, we're going to support them. That's what we do. And that's what we're going to continue to do. Great. Thanks, Daryl.

Daryl N. Bible: Great, thanks Daryl.

John G. Pancari: Thank you. We'll take our next question from Ebrahim Poonawala with Bank of America. Please go ahead. Good morning. Good morning.

Speaker Change: Thank you. We'll take our next question from Ebrahim Poonawala with Bank of America. Please go ahead.

Ebrahim Huseini Poonawala: Hey Daryl, good morning.

Ebrahim Huseini Poonawala: I just wanted to go back to the criticized CNI and CRE. So a lot of decision making on capital revolves around how some of this plays out. If you don't mind, give us a sense of what we think about criticized loans if rates go lower, I think you mentioned. Soft landing, base case probability, most likely for you.

Ebrahim Huseini Poonawala: Good morning.

Ebrahim Huseini Poonawala: I just wanted to go back to the criticized CNI and CRE, so a lot of...

Ebrahim Huseini Poonawala: Decision-making on capital revolves around how some of this plays out. If you don't mind, give us a sense of, if you think about criticized loans, if rates go lower, I think you mentioned...

Speaker Change: Soft landing, base case probability, most likely for you.

Daryl N. Bible: Is there a point in time, if rates are lower, you get the financials, maybe in March of next year, we could see a meaningful reset lower from this 12 billion going down by a couple billion? Like, I'm just wondering, could there be a step function decline in criticized loans at some point in the first half of next year based on rates and macro clarity? Yeah, so Ebrahim, that's a great question

Speaker Change: Is there a point in time if rates are lower, you get the financials maybe in March of next year, we could see a meaningful reset lower from this $12 billion going down by a couple billion? I'm just wondering, could there be a step function decline in criticized loans at some point in the first half of next year?

Daryl N. Bible: We saw a short window in the fourth quarter of December when the 10-year dropped to 4% or a little bit under that, and we had huge volumes that we were able to place our clients out with the agencies. Our RCC business was able to place a lot of loans out because of that. So I think our 10-year, last time I looked, was 418. So I think we're getting closer to more of a pivot point where more volume would definitely help us. Unknown Attendee, Erika Najarian, Manan Gosalia, Bill Carcache, Manan Goss, Manan Yokum, Dominique, That's helpful.

Speaker Change: Based on rates and macro clarity.

Speaker Change: Yeah, so Ebrahim, that's a great question. We saw a short window and...

Speaker Change: The fourth quarter in December when the tenure dropped to 4% or a little bit under that, and we had huge volume that we were able to place our clients out with the agencies. Our RCC business was able to place a lot of clients.

Speaker Change: Loans out because of that so I think our 10-year last time I looked was 418 So I think we're getting closer to more of a pivot point or more volume or actually happen So I think lower rates

Speaker Change: would definitely help us lower our credit size balances sooner and faster from that perspective. That would be even more liquidity in the marketplace than what we saw this this past quarter.

Ebrahim Huseini Poonawala: And I guess the other question on CRE is, given all the work you've done over the past year, stress testing, etc. on the CRE book, just give us your perspective on the loss content in these loans as maybe some of these go into non-accrual, based on what you know today and what's already been reserved. And as we think about like charge-offs relative to the 40 BIPs that you've guided us through this year. Yeah, you know, we have a long-term history of our great, strong credit performance. So, if you look at the LTVs that we have,

Speaker Change: That's helpful. And I guess the other question on CRE, given all the work you've done over the past year, stress testing, etc. on the CRE book.

Speaker Change: Just give us your perspective on the lost content in these loans as they maybe some of these go into non-accrual based on what you know today what's already been deserved and as we think about like charge-offs relative to the 40 bips that you've guided for this year.

Speaker Change: Yeah, you know, we have a long term history of our great, strong credit performance.

Speaker Change: So, if you look at our LTVs that we have...

Daryl N. Bible: CRE portfolio, you know, even office, we're still under 60% LTV there. So a great thing to look at, if you look at our non-accruals, half of our non-accruals don't have a reserve against them, and typically, you'd have a specific reserve on non-accruals.

Speaker Change: for a CRE portfolio, you know, even office, you know, we're still under 60% LTV there.

Speaker Change: So, you know, a great thing to look at, if you look at our non-accros.

Speaker Change: Half of our non-accrolls don't have a reserve against it.

Daryl N. Bible: That's because we have collateral value that's stronger than what the loan value is today. So it's really the strength of how we underwrite. And that credit performance is really what shows through in times of stress. So yes, we have, you know, a higher level of criticism and not a crow, we're working those down, but we think the lost content is still a lot lower. Got it.

Speaker Change: And typically you'd have a specific reserve on articles, that's because we have collateral value that's stronger than what the loan value is today.

Speaker Change: So it's really the strength of how we underwrite, and that credit performance is really what shows through in times of stress.

Speaker Change: So, yes, we have, you know, a higher level of criticized and non-approved, we're working those down, but we think the lost content is still a lot lower.

Ebrahim Huseini Poonawala: That's great, Carla. Thanks, guys. Thank you. We'll take our next question from Ken Usdin with Jeffrey. Please go ahead.

Speaker Change: Got it. That's great, Kallal. Thanks, Al.

Speaker Change: Thank you. We'll take our next question from Kenneth Usdin with Jeffrey. Please go ahead.

Kenneth Michael Usdin: Thanks, good morning. Hey, Daryl, you had a great amount of securities repricing this quarter, up 31 basis points on a bigger book. And I can imagine some of that was just a switch from cash, but I think you had talked about 15 to 20 going forward. So maybe you could just give us a little background on what drove that 31?

Kenneth Michael Usdin: Thanks. Good morning. Hey, Daryl, you had a great amount of securities repricing this quarter, up 31 basis points on a bigger book, and I can imagine some of that was just a switch from cash.

Speaker Change: I think you had talked about 15 to 20 going forward, so maybe can you just give us a little back color on what drove that 31 and then how you're looking at what securities yields could look like from an incremental perspective going forward. Thanks.

Daryl N. Bible: And then how you're looking at what securities yields could look like from an incremental perspective going forward? Thanks. Yeah, so we are being very disciplined in how we're approaching our security purchases. We're trying to keep our durations relatively short. We really don't want to have a negatively convex portfolio.

Speaker Change: Yeah, so, you know, we are being very disciplined in how we're approaching our security purchases. You know, we're trying to keep our durations relatively short. We really don't want to have a negatively convex portfolio.

Daryl N. Bible: So when we go to market, when we buy securities, you know, we are basically balancing our securities between positively convex securities like treasuries and CMBS agency securities, coupled with some negative convex securities, which could be some agency CMOs or MBS. So we're being very balanced from there, so we're trying to keep our duration around three years. Because of that, you know, our yields, if you look at where rates are today, are blended to be around 5%, the negatively convexed are over 5, the positively convexed are under 5, approximately, and we're living in, you know, three-year type duration type instruments.

Speaker Change: So when we go to market when we buy securities, you know, we are basically balancing our securities between

Speaker Change: Because of that, our yields, if you look at where rates are today, are blended to be around 5%. The negatively convexed are over 5%, the positively convexed are under 5%, approximately, and we're living in three-year type duration type instruments.

Daryl N. Bible: Overall, it's kind of what we're focused on. That said, though, we're still going to have a nice benefit. If you look at what's maturing in the third and fourth quarter, the average yield of what's maturing is about two and a half percent.

Speaker Change: Overall is kind of what we're focused on

Speaker Change: That said, though, we're still going to have a nice benefit if you look at what's maturing.

Speaker Change: And the third and fourth quarter, the average yield of what's maturing is about two and a half percent.

Daryl N. Bible: You know, so we'll depend on where rates go. But right now, we would get a 250 basis point increase in that yield portfolio as that turns and turns over. So I think we feel really good. We're just being very disciplined. I'm not good at timing, right?

Speaker Change: So we'll, depending on where rates go, but right now, we would get 250 basis points, still increase.

Speaker Change: and that yield portfolio as that churns.

CastingWords: Transcription by CastingWords

CastingWords: So, I think we feel really good. We're just being very disciplined. I'm not good at timing rates, so we kind of do dollars averaging over time. We've done that now for the last year. We're going to continue to do that going forward, and we'll just do it over time and average in and hopefully continue to average up higher.

Kenneth Michael Usdin: So we kind of do dollars averaging every time we need. We've done that now for the last year. We're going to continue to do that going forward, and we're just doing it. For more information, visit www.fema.gov. Okay.

Kenneth Michael Usdin: And then, obviously, for a long time, M&T has had a really healthy amount of cash. And I think cash and earning assets together are about, cash is like 30 something percent, still low-30s percent. And do you still anticipate, given that conservatism, keeping cash and securities at, you know, over 30% as you look forward? And what would change that, if anything?

CastingWords: Okay, and then, obviously for a long time...

Speaker Change: M&T has had a really healthy amount of cash and I think cash and earning assets together is about

Speaker Change: Daryl Bible, Brian Klock

Daryl N. Bible: Yeah, so in the prepared call notes, what I mentioned is that right now, our investment portfolio is about $30 billion. We believe that the cash at the Fed is closer to the mid-20s, so closer to $25 billion. We're basically just trying to get out of some wholesale funding and just shrinking the balance sheet a little bit, so our balance sheet size is coming down as well. So we'll have a smaller balance sheet. It shouldn't really impact NII just because the cost of the borrowings and what we earned on the Fed balance kind of canceled each other out, but we just feel that mid-25s is good.

Speaker Change: On the prepared call notes, what I mentioned is that right now our investment portfolio is about $30 billion. We believe that the cash hit the Fed.

Speaker Change: [inaudible]

Speaker Change: Just because of the cost of the borrowings and what we earned on the Fed balance kind of canceled each other out

Speaker Change: But, you know, we just feel mid-25s good. We do have limits in place of how low we go that be in the mid- to high-teens, so we have

Kenneth Michael Usdin: We do have limits in place at how low we go that are in the mid to high teens, so we have well above that buffer that we're operating right now, but just want to be here again conservative. You know, if we go into a recession, which we don't think will happen, but if we do, this will be a really conservative balance sheet. Okay. Thanks, Daryl.

Speaker Change: Well, well above that buffer that we're operating right now, but just want to be here again conservative, you know, if we could go into a recession, which we don't think will happen, but if we do, this will be really conservative balance sheet.

Daryl N. Bible: Okay. Thanks, Daryl.

Daryl N. Bible: Thank you. We'll take our next question from Gerard Cassidy with RBC. Please go ahead. Hey Daryl. Hey Gerard.

Speaker Change: Thank you. We'll take our next question from Gerard Cassidy with RBC. Please go ahead.

Gerard Sean Cassidy: Daryl, you obviously did a good job with the DFAS and, you know, the stress capital buffer coming down. I have a couple of questions. First, when you look at the improvement, and you touched on that, what you've obviously done, do you think that improvement can be as large next year as you guys continue, you know, to reduce these risks to M&T? As we look out into 2025? Yeah, so our plans right now, Gerard, we were really pleased that we were down 20 basis points in our peer group; we were one of three banks that had a lower SCB. So we were really excited to have that outcome.

Gerard Sean Cassidy: Hey, Daryl. Hey, Jared.

Gerard Sean Cassidy: Harold.

Gerard Sean Cassidy: You obviously did a good job with the...

Speaker Change: D-FAST and you know the stress capital buffer coming down.

Gerard Sean Cassidy: I guess a couple of questions. First is, when you look at the improvement, and you touched on it, what you've obviously done,

Speaker Change: Do you think that improvement can be as large next year as you guys continue, you know, to reduce these risks to M&T as we look out into 2025?

Speaker Change: Yeah, so our plans right now, Gerard, we were really pleased, you know, that we were down 20 basis points in our peer group, we were one of three banks that had a lower SCB, so we were really excited to have

Daryl N. Bible: But by us really focusing on and pushing down our criticized, besides share repurchase, maybe increasing, it's also going to help us with our stress capital buffer when we go through the stress test. So we're really focused on trying to bring down our criticized levels by as much as we can, working with our clients over the next couple quarters, so that when we do CCAR next year, if we decide to do it. You may or may not like it, probably well, though.

Speaker Change: So, we're really focused in trying to bring down our criticized levels to as much as we can, working with our clients over the next couple quarters, so that when we do CCAR next year, if we decide to do it, which...

Speaker Change: We may or may not, probably will though, continue to try to get a lower stress capital buffer.

Daryl N. Bible: We'll continue to try to get lower-stress capital. Got it. And then when you, you know, when you look at M&T's history, obviously, organic growth has always been complemented very successfully with acquisitions. And when you look out over the landscape over the next 12 to 24 months, can you give us your views on, you know, depository acquisitions? Not to say that you're going to do anything, you know, in the near term, but just how are you guys thinking about depository acquisitions?

Speaker Change: Got it. And then, when you, you know, when you look at M&T's history, obviously, the organic growth has always been complemented very successfully with acquisitions.

Speaker Change: And when you look out over the landscape over the next 12 to 24 months,

Speaker Change: Can you give us your views on, you know, depository acquisitions, not to say that you're going to do anything, you know, near term, but just how are you guys thinking about

Daryl N. Bible: And I know there are changes and we've got a presidential election coming up, which could influence things as well. What are you guys thinking about that, you know, in that strategy? So M&T has a long-term history of doing acquisitions, successful acquisitions, and that is one of the reasons, you know, why we grow here. But to be honest with you, we haven't really been talking about acquisitions.

Speaker Change: Depository Acquisitions. And I know there's changes and we've got a presidential election coming up which could influence as well, but what have you guys been thinking in that, you know, in that strategy?

Speaker Change: So M&T has a long-term history of doing acquisitions, successful acquisitions, and that is one of the reasons

Speaker Change #102: You know, how we grow here.

Gerard Sean Cassidy: You know, we're working on our four priorities that we have in the company right now. Our four priorities are basically building out, you know, our markets from the people's acquisition in New England and Long Island. I think that's really important.

Speaker Change: But to be honest with you, we haven't really been talking about acquisitions, you know, we're working on our four priorities that we have in the company right now. Our four priorities that we have are basically building out

Speaker Change: You know our markets in from the people's acquisition in New England and Long Island.

Daryl N. Bible: Continue to build out. That's a great opportunity for us, and we think M&T Bank will be really good in the markets that we serve theirs. I think they need a bank like us in those markets, and we want to deliver to those clients.

Speaker Change: I think that's really important.

Speaker Change: Continue to build out. That's a great opportunity for us and

Speaker Change: The M&T Bank will be really good in the markets that we serve theirs. I think they need a bank like us in those markets and we want to deliver to those clients.

Gerard Sean Cassidy: You know, we're enhancing our risk areas throughout the company, making great progress in those areas. We will continue to focus on that. We're also improving resiliency, some of the transformations that we're doing, putting in data centers, you know, putting things up into the cyber or applications.

Speaker Change: You know, we're enhancing our risk areas throughout the company, making great progress in those areas. We will continue to focus on that.

Speaker Change: We're also improving resiliency, some of the transformations that we're doing, we're putting in data centers, you know, putting things up into the cyber or applications.

Speaker Change: into the cloud. So all that is going forward. And then lastly, you know, we're continuing to optimize revenue and expenses.

Daryl N. Bible: [inaudible] You know, we put some money into treasury management this past year, and we're now growing our treasury management revenues at double-digit rates, 13% right now. So we're doing really well and, you know, we continue to gain more momentum there in that treasury management. As we push more into CNI, that's a huge growth opportunity for us, and that's really what we're focused on in trying to grow and serve our clients. Great, thank you.

Speaker Change: We put some money into treasury management this past year.

Speaker Change: and we're now growing our treasure management revenues at double-digit paces, 13% right now.

Speaker Change: They're doing really good and continue to gain more momentum there in that treasury management. As we push more into CNI, that's a huge growth opportunity for us, and that's really what we're focused on in trying to grow and serve our clients.

Speaker Change: Great, thank you.

Speaker Change #100: Thank you. We'll take our next question from Chris Spahr with Wells Fargo. Please go ahead.

Gerard Sean Cassidy: Good morning, so my question is just a little bit on expenses, the. wondering about headcount, what you're thinking about it going forward, since salaries expenses were up 4% year over year, which seems pretty good overall. Yeah, I mean, we're right on track from our expense guidelines. Actually, we're doing a little bit better than what was planned. So you might see a little bit of a shift in the second half of the year, but we're right on track.

Christopher James Spahr: Good morning. So my question is just a little bit on expenses.

Christopher James Spahr: Just wondering about headcount, what you're thinking about it going forward since salaries expenses were up 4% year-over-year, which seems pretty good overall.

Gerard Sean Cassidy: We're going to hit our plan numbers on expense, I have no doubt about that. FTEs, we are down a couple hundred million in FTEs from the start of the year. So, you know, that's just being managed by all the leaders and their groups and all that. So, you know, I think from an expense perspective, we really have an owner's mindset at M&T. They really take to heart, you know, how we spend money and make sure that we're spending money in the right places and getting the right outcomes from that.

Speaker Change #103: Yeah, I mean, we're right on track from our expense. Guidelines actually were doing a little bit better than what was in plan. So you might see a little bit of shift in that in the second half of the year. But we're right on track. We're going to hit our plan numbers on expenses.

Speaker Change #104: I have no doubt about that, FTEs.

Speaker Change #104: We are down a couple hundred million in FTEs from the start of the year.

Speaker Change #104: So, you know, that's just being managed by all the leaders and their groups.

Speaker Change #104: and all that.

Speaker Change #105: You know, I think from an expense perspective, we really have an owner's mindset at M&T. They're really...

Daryl N. Bible: So I'm really fortunate to have a really great company that really understands how to run a company, both from a revenue and expense side. So it's all really good. And just to clarify, down a couple hundred, not a couple hundred million, correct? No, no, no. A couple hundred FTE. Yeah, I have a copy.

Speaker Change #106: And just to clarify, down a couple hundred, not a couple hundred million, correct?

Gerard Sean Cassidy: All right. Sorry, sorry. And then, no worries. And then just on the outside data processing, the big delta is how much is that related to this upgrade that you've been talking about? And will some of that run off?

Speaker Change #107: No, no, no, a couple hundred FTEs.

Speaker Change #108: Outside data processing, a big delta, and how much is that related to this upgrade that you've been talking about, and will some of that run off, or are you kind of now at a higher operating plateau on tech expense?

Daryl N. Bible: Are you kind of now at a higher operating plateau on tech expense? You know, I would say the second half of the year you might see elevations in outside data processing and professional services. As we have now seven projects in our Investment Council that are ramped up. Those probably will be areas of increase but will still come into our target that we set on expenses. So I feel really good about that. You know, some of the projects are just larger and take time to ramp up.

Speaker Change #109: I would say second half of the year you might see elevation in outside data processing and professional services. We have now seven projects in our Investment Council ramped up. Those probably will be areas of increase. We'll still come in to our target that we set on expenses.

Speaker Change #109: So I feel really good about that, you know, some of the projects are just larger and takes time to ramp up But you know as we get into 25, you know, you see some projects start to complete

Daryl N. Bible: But, you know, as we get into 25, you see some projects start to complete, and, you know, whether we reinvest in other areas or not, we'll talk to you at that time right now, but overall, the company is making tremendous progress on many fronts, and we have a lot of momentum going, and we're gonna continue to press on that. Thank you. There are no further questions at this time. I'll turn the call back over to Brian Klock for any closing remarks. 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.

Speaker Change #109: and you know what whether we reinvest in other areas or not we'll talk to you at that time right now but overall the company's making tremendous progresses on many fronts and we got a lot of momentum going and we're going to continue to press on that.

Speaker Change #109: Thank you.

Speaker Change #109: There are no further questions at this time. I'll turn the call back over to Brian Klock for any closing remarks.

Brian Paul Klock: 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.

Brian Paul Klock: Thank you, and have a great day. Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Speaker Change #110: Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Speaker Change #110: ?? ?? ?? ?? ??

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