Q3 2025 M&T Bank Corp Earnings Call

I would now like to turn the conference over to Steve Wendelbo, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, Katie and good morning. I'd like to thank everyone for participating in MNT bank's. Third quarter 2025 earnings conference call.

If you have not read the earnings release, we issued this morning, you may access it along with the financial tables.

And schedules by going to our investor relations website at I mtb.com.

also, before we start, I'd like to mention that today's presentation may contain forward-looking information

Cautionary statements about this, information are included in today's earnings release materials, and in the investor presentation, as well as our SEC filings and other investor materials.

The presentation also includes non-GAAP financial measures as identified in the earnings release and investor presentation. The appropriate reconciliations to GAAP are included in the appendix.

Joining me on the call. This morning is mnc's senior, Executive Vice President and CFO Daryl Bible. Now, I'd like to turn the call over to sterile

Thank you, Steve, and good morning. Everyone MNT continues to serve as a trusted partner for our customers and communities. Bringing together people capital and ideas to make a difference.

Earlier this quarter, we released our 2024 Sustainability Report, which highlights our community impact and the progress we've made towards meeting our sustainability goals.

Highlights include 5 billion in sustainable, lending and Investments.

And over 58 million contributed to nonprofits through corporate giving and the M&T charitable Foundation.

We are also proud to share that M&T is now the top SBA lender across our footprint. My total volume as of the end of the SBA fiscal year, September 30th.

Our small business enterprise continues to be an important component of our support for entrepreneurs and the local economy.

Journey to slide 4, our businesses and leaders notably our women in leadership continue to receive accolades from the industry including recognition of our Wilmington, Trust team and individual recognition for leaders across the bank.

Returned to slide 6, which shows the results for the third quarter.

Our third quarter results reflect M&T's continuing momentum, with several successes to highlight.

We produce strong returns with operating art Roa and roce of 1.56% and 17.13%.

Our net interest margin expanded to 3.68% demonstrating our relatively neutral asset sensitivity, well-controlled deposit, and funding costs and the continued benefit of fixed rate asset repricing.

Strong fee income performance. We have seen throughout the year that fee income, excluding notable items, has reached a record level.

revenues grew more than expenses resulting in our third quarter, efficiency ratio of 53.6%

As quality continues to improve with a $584 million or 7% reduction, and commercialized criticized balances, and $61 million or 4% reduction, and not cruel loans.

We increased our quarterly dividend per share by 11%.

To $1.50 and executed a 409 million in share. Repurchases are also growing tangible book, value per share by 3%.

Now.

Let's look at the specifics for the third quarter.

Diluted GAAP earnings per share were $4.82, up from $4.24 in the prior quarter.

Net income was $792 million compared to $716 million in the link quarter.

Mnt's third quarter results, produced an Roa and roce of 1.49% and 11.45% respectively.

The third quarter included a notable fee item.

of 28 million related to the distribution of an earnout payment to MNT associated with a 2023 sale of our CIT business, adding 14 cents to eps,

Slide 7 includes supplemental reporting of M&T's results on a net operating or tangible basis. M&T's net operating income was $798 million compared to $722 million in the link quarter.

Diluted net, operating earnings per share. Were 4.87 up from 4.28 in the prior quarter.

next, we look a little deeper into the underlying trends that generated our third quarter results, please turn to slide 8

Taxable equivalent net interest income was $1.77 billion, an increase of $51 million, or 3%, from the linked quarter.

The net interest margin was 3.68%, an increase of 6 basis points from the prior quarter. This improvement was driven by a positive 4 basis points related to their prior quarter catch-up premium amortization on certain securities.

Positive 3 basis points from higher asset. Liability spread mostly from continued fixed asset repricing.

Partially offset by a lower contribution of net free funds.

Turn to slide 10 to talk about average loans. Average loans and leases increased by $1.1 billion to $136.5 billion.

Higher commercial, residential, mortgage, and consumer loans, partially offset by a decline in CRA balance is.

Commercial loans increased by $7 billion to $61.7 billion, aided by growth in our corporate and institutional fund banking and loans.

CRA loans declined 4% to 24.3 billion, reflecting the full quarter impact of the last quarter's loan, sale, and continued payoffs and pay Downs.

Residential mortgage loans increased 3% to $24.4 billion. Consumer loans grew 3% to $26.1 billion, reflecting increases in recreational, finance, and HELOC.

For auto loans, were largely stable from the second quarter.

Loan yields increased 3 basis points to 6.14%, aided by continued fixed-rate loan repricing, including a reduction in the negative carry on our interest rate swaps and sequentially higher non-accrual interest.

Starting to slide 11. Our liquidity remains strong.

At the end of the third quarter, investment securities and cash held at the Fed totaled $53.6 billion, representing 25% of total assets.

Average investment Securities increase 1.3 billion to 36.6 billion.

In the third quarter, we purchased a total of 3.1 billion in Securities with an average yield of 5.2%.

The yield on the investment Securities increased to 4.13% reflecting the prior quarter ketchup. Premium amortization on certain Securities and continued fixed rate. Securities repricing benefits.

The duration of the investment portfolio at the end of the quarter was 3.5 years, and the unrealized pre-tax gain on the available-for-sale portfolio was $163 million.

Story capital.

Well, on that subject to the LCR requirements, M&T estimates that its LCR on September 30th was 108%, exceeding the regulatory minimum standards that would be applicable if we were a Category 3 institution.

Turning to slide 12.

Average total deposits declined from $7 billion to $162.7 billion.

Non-interest bearing deposits, declined, 1.1 billion to 44, billion mostly from lower commercial, non-interest bearing deposits related to a single customer client.

We continue to consider the entirety of the customer relationships, as we assess our overall deposit funding, mechs

interfering deposits increased 0.4 billion to 118.27 billion driven by growth in commercial and business banking offset by the decline in consumer and institutional deposits.

Interest-bearing deposit costs decreased 2 basis points to 2.36%.

Needed by lower retail Prime.

Time deposit cost and lower interest, checking costs across our other business lines.

Continue on slide 13. Non-interest income was $752 million compared to $683 million in the linked quarter.

We saw continued strength across all three income categories. Mortgage banking revenues were $147 million, up from $130 million in the second quarter.

Residential mortgage revenues increased $11 million sequentially to $108 million, driven by higher servicing fee income.

Commercial Mortgage Banking, increased 6 billion to 39 million.

Trust income was relatively unchanged at $181 million compared to the prior quarter. Seasonal tax preparation fees were largely offset by growth in wealth management and fee income.

Trading in FX increased 6 million to 18 million from higher commercial.

Customer swap activity.

Other revenues from operations increased by $39 million to $230 million, reflecting $28 million from the distribution of an earn-out payment, $20 million from baby distribution, and the gain on the sale of equipment leases.

These items are partially offset by $25 million in notable items in the prior quarter.

Turning to slide 14, net interest expenses for the quarter were $1.36 billion, an increase of $27 million from the prior quarter.

Salaries and benefits increased by $20 million to $833 million, reflecting one additional working day and higher severance-related expenses, which increased by $17 million sequentially.

After expenses decreased by $9 million to $13 million, mostly related to the reduction in estimated special assessment expense.

Other costs of operations increased $23 million to $136 million, reflecting higher expenses associated with the supplemental executive retirement savings plan due to market performance and the impairment of renewable.

Energy tax credit investment.

The energy, you know the efficiency ratio was 53.6% compared to 55.2% in the link quarter.

Next on, slide 15 for credit.

Net charge offs for the quarter were 146 million or 42 basis points increasing from 32 basis points in the link quarter.

The increase in net charge-offs reflects a resolution of several previously identified CNI credits.

The largest, the second largest of which totaled $49 million. CRA losses remain muted in the third quarter. Non-accrual loans decreased by $61 million.

The non-accrual ratio decreased 6 basis points to 1.1%, driven largely by payoffs, paydowns, and charge-offs of commercial and CRA non-accrual loans.

And the third quarter. We recorded a provision for credit, losses of 125 million compared to net, charge offs of 146 billion.

Included in the provision. Expense is a 15 million provision for unfunded commitments related to the letter of credit to a commercial cut store.

The allowance for loan loss, as a percent of total loans, decreased 3 basis points to 1.58%, reflecting lower criticized loans.

Balances.

A decline in CRA criticized balances was broadly based, with lower criticized balances across nearly all property types.

Turning to slide 19 for Capital MIT, the CET1 ratio was an estimated 10.99%, unchanged from the second quarter. The stable CET1 ratio reflects capital distributions, including $409 million in share repurchases, as well as continued strong capital generation.

The third quarter. We also increased our quarterly dividend by 11% to a dollar fifty.

The AOCI impact on the CET1 ratio from available-for-sale securities and pension-related components.

Combined would be approximately 13 basis points if included in regulatory capital.

Now, turning to the slide for the Outlook.

First, let's begin with the economic backdrop.

The economy continues to hold up while despite ongoing concerns and uncertainty regarding tariffs and other policies.

The passage in signing as a 1. Big beautiful. Bill act into law removed 1, source of uncertainty and also gave businesses more incentive to invest in New Capital.

The economy bounced back in the second quarter after having contracted in the first.

Consumer spending proved resilient despite tariff impacts.

Businesses continued engaging in capex; though, it was heavily intact software and transportation and equipment.

While spending on new buildings remained in decline.

Overall, economic activity was resilient. We remain attuned to the risk of a slowdown in the coming quarters due to the weakening labor market.

The possibility of declining jobs or the rise in the unemployment rate would likely cause weaknesses in consumer spending and possibly business capex too.

We continue to monitor the possibility of a prolonged government shutdown and the potential impact on our customers, communities, and the broader economy.

Remain. Well, positioned for a dynamic economic environment with a strong liquidity, strong Capital generation and a cet1 ratio of nearly 11%.

Now returning to Outlook.

We have three quarters of the year complete. We will focus on the outlook for the fourth quarter.

We expect taxable equivalent NII of approximately $1.8 billion, which implies full year NII excluding notable items to be at the low end of the 7.

To 7.15%.

Margin is expected to be approximately 3.7%.

Our forecast, reflects 2 additional rate Cuts in the fourth quarter. We expect continued, long growth, and average, total loans of 137 to 138 billion with growth in cni, Residential, Mortgage and consumer and a moderating pace in CRA decline.

Average deposits are expected to be 163 to 164 billion.

Our outlook for the fourth quarter Non-interest income was $670 million to $690 million, reflecting continued strength in mortgage, trust service charges, and commercial services.

We expect other revenues from operations to revert toward a more normalized levels.

This would imply fully your non-interest income excluding notable items. Well above the top end of our prior range of 2.5 to 2.6 billion.

Fourth quarter expenses, including ta intangible amortization are expected to be 1.35 to 1.37 billion. This would imply 4 year expense in the top half of our prior Outlook of 5.4 to 5.5 billion. This is being driven by an increase in Professional Services.

Net charge-offs for the fourth quarter are expected to be 40 to 50 basis points, with full-year net charge-offs of less than 40 basis points.

Our outlook for the fourth quarter, tax rate is 23.5 to 24%.

We offer, we plan to operate with a cet1 ratio in the 10.75 to 11% range for the remainder of the year.

We will be opportunistic for share repurchases. Are also continuing to monitor the economic backdrop, and asset quality trends.

Making our systems resilient and scalable, and continuing to scale and develop our risk management capabilities.

To conclude on slide 22, our results underscore an optimistic investment thesis.

MNT has always been Purpose, Driven organization with a successful business, model that benefits, all stakeholders, including shareholders,

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

Remain focused on shareholder returns and consistent dividend growth.

Finally, we are disciplined Enquirer and a prudent Steward for shareholder capital.

Now, let's open the call up to questions before, which Katie were briefly review, the instructions.

Thank you at this time. If you would like to ask,

Your telephone keypad.

You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question. We will pause for just a moment to allow questions to queue.

Our first question will come from Scott cafres with Piper Sandler. Your line is open.

Morning, go. Thank you for taking the question. Um, I wanted to, um, I wanted to ask first on, uh, loan growth. So, you know, really good Traction in a, in a few components to the loan portfolio but the CRA is still moderating albeit at a slower Pace uh, maybe just um, sort of a a thought on where we stand with the actual um inflection of

Of the uh the CRA book, sort of sort of timing and and magnitude stuff like that.

Yeah, so are if you want to talk about CRA and our customers and CRA, I would say it's looking like much more of a rebound. Now um, the amount of production it's being done and it's going through our system and our approval rates are double what they were in Prior quarters. So our we're really producing and having a lot more activity, still having some payoffs and pay Downs. Overall uh but we feel very optimistic on the growth of that you know, coming in the next quarter or 2. If you look at the areas that were really focused on right now, um it's primarily in multi family with industrial close second.

Um, we also are interested in looking at retail hotel and Healthcare. That's on a Case. By case basis basis.

But office, you know, pretty much we're still looking to reduce their but that, that overall, I think we're really moving in the right direction and feel very good of what we're seeing and have a real good positive Trends. Moving forward.

Perfect. Okay, thank you. And then um you know, maybe just if if you could expand upon your thoughts on um sort of mnt's position in the the now consolidating large Regional uh environment just kind of giving all the events of the last few weeks. So I think you all have been, you know, quite transparent about um, uh, you know what, what you'd be interested in and have such a history of of discipline. But you know, just just

Just curious. Now that we're actually seeing activity. Um, how do you sort of balance? The, you know, maybe finite regulatory window, uh, need to have willing sellers, you know, does does it cause you at all to sort of expand your Geographic base, a little to increase the number of possibilities, or will you simply kind of stay close to your knitting?

Hey Scott, you know, we've been very successful with the model that we've had for a very long time, you know? And our strategy is really to continue to grow share and, um, customers in the markets that we serve. So, you know, I'm sure an acquisition will come at some point down the road, not sure when that's going to be up, when it happens, it will probably be within our footprint, you know, may, you know, stretch into another footprint, a little bit depending on, you know, who the company is that we partner with from that perspective but you know, it's going to happen when it happens Scott, you know, our strategy works. If you look at our performance and our earnings all really strong, and we're going to continue to execute on the strategy and and um be very successful.

Perfect. All right. Thank you very much, Cheryl.

Thank you. Our next question will come from Gerard Cassidy with RBC. Your line is open.

Hi Daryl. How are you?

I'm doing good, and you drive.

Good things. Just to follow up on what you just said about the approvals on commercial real estate. I think you said they're double from what they were prior. Can you share with us a little deeper? How did that happen? Or what's changed to have more approvals?

Problems as well as in the credit area with Rich Barry and his team. They're working much closely together with the people on the line and things are just flowing through a lot easier and that's, that's not just CRA. We're also seeing it on the cni front both in commercial as well as in our business banking area. So I think the momentum is growing and we're having a lot more success and a lot more wins. And um, seeing more loans go on the books.

Very good and then just a broader picture. If we step back for a moment, you've had in the past, some very good insights on what's going on in Washington with the regulators. And we saw the notice of proposed rulemaking on matters that require attention Mas. Um, can you give us your view of how the regulatory environment is changing, and how that may help your profitability going forward, as well as maybe the industry?

Yeah. And one of the big things that's happened and that we've started to see now is we used to always get.

When you have a review, you would get observations, and then if it was more serious, you might get a Management Response Action (MRA) or something really serious, and that's from that perspective. Observations are now being given, and the way we treat observations is, you know, you have a year to get it fixed before they come back the next year, and if it makes sense, you know, we go ahead and get them done. That's what's really helped a lot by just having.

Recommendation to do something. You don't have the whole process and everything else that you have to do when you're trying to cleanse an official issue like an MRA or MRI. So just that itself, the timeline to get it done.

It's a lot faster, a lot fewer people working on it. You know, as far as how much that actually reduces in headcount and all that, I think it's...

You know, definitely will be less people needed in the remediation areas, um, but you know, we'll probably read a try to redeploy those at folks, you know, in other areas throughout the company, because those people were really important, very expensive experienced people that you want to keep in the company from that perspective. So I don't look at it as too much as an expense save. I look at it as a way of just things getting done a lot faster, a lot smoother, and it gets our teams, a lot more energy to be more productive as well, which is really, really important. Um, I think as we kind of look forward,

And and just to stick with this uh for a second, obviously the buzz of 3 in-game is coming up soon. Maybe by the end of the year. First of next year, many investors have identified the benefits to the money center Banks. But in terms of regional Banks, what do you see the potential benefits for you from the Basler 3 in game being a lot less owner than what it was proposed in July of 23?

um,

You know, you know our hope is that it's a lot more straightforward really focused on, you know, key areas that we really, you know, should try to figure out what the capital is and that original proposal, you know, they had adjustments from people Bank of our size, which has a very low Market operation markets that to build something out. That really? We have very little risk in, didn't make a lot of sense. You know what they were looking. And what charging for operational, risk didn't seem very logical, um, from that perspective either. So I'm sure it'll be much more streamlined, much more trimmed down and really focused on what's really needed from a capital perspective, for the industry, as well as for M&T,

Thank you, appreciate the insights.

Thank you. Our next question will come from Erika Najarian with UBS. Your line is open.

Hi. Thank you for taking my question. Um, just wanted to follow up on Scott's line of questioning Daryl, you mentioned production picking up, you know, um, you know, the approval rate that you just talked about with Gerard. Uh, and but, you know, rates are in theory supposed to Trend lower from here, you know, how should we think about the push pull between, you know, um, some of these loans getting raphide away from you. And the production in other words, is the fourth quarter. Still a good inflection point for when CRA balances the bottom,

You know, when do we can we start seeing, you know, um, period, end balances start to tick upward in a more consistent way.

You know, I love to tell you the fourth quarter is the bottom.

Um, you know, and we hope it is. But, you know, you don't really know for sure. It really depends on what payoffs are coming through. I will tell you, though, in 2026, for the amount of maturities that we see come due in '26, it's much less than '25 than what we had in '25.

Out of the blocks in 26, with just less payoffs coming through, which is a positive. And with our production that we're growing, um, I think will be really helpful. So, you know, if I had to guess right now, it's probably bottoming in the first quarter, but maybe if we get fortunate enough, maybe it'll be sooner than that. We feel really good that it's going to bottom and start to grow, though it's going to be a really good rain asset to get back to positive momentum.

Got it. And um maybe the second question Daryl is you know, MNT has been known to be to have a conservative culture and there has been a lot of um, credit noise recently, you know, whether it's related to ndf or, you know, um, you know, credit pre-announcements which always makes the market nervous. So, um, you know, you're in the first management team to sort of call out and DFI, and additionally, the um, rwa treatment of ndf um, via ssfa. So, maybe my question is this, maybe walk us through what the ndf exposure is. Um, for MNT. You did mention that, you know, loans to financial and insurance companies was the driver for cni growth and maybe help investors figure. Like, what questions do we ask in order to really properly assess the, you know, the credit risk, from a go forward perspective, because all we're getting from other Banks, is that? Oh, don't worry.

Worry about it. This is way, you know, way less frequency and way narrower severity than a direct senior loan.

Yeah, no, thank you for the question, Erica. So if you look at the

Our ndf portfolio. We look at it in total, we're 1 of the lower. Um exposures we're probably 7 or 8% of total loans. Is what we have in that big bucket.

Um, we really focus on businesses in this bucket that, you know, we really believe in that are really good performing businesses that are on the lower end of the risk scale.

So we'll start with your top 3 categories. Fun banking, which help with our loan growth um this past quarter and pretty much throughout the year it has been growing nicely. You know those are capital call lines. Um and we we do those. Um but if we if you wanted to take more risk, which we don't is, you would do nav, lending, which we don't do from that perspective. So in that case, it's our choice to say in the more conservative brain, right?

The other category that we have that we have a fair amount in is, you know, in our industrial CRA made up a lot primarily from our reactivity that we have. And we say with really good conservative known REITs, that perform really well. So very good from an Institutional performance, the other business. I'd like to call out is, uh, Residential Mortgage Warehouse, you know, done properly from an operations perspective, you really can't lose money from a credit perspective.

It's really an operational risk business.

And if you have good operations and good controls in place, you know, it's a really safe business to run, um, from that perspective. So those are the ones that we have that are our largest, we do dabble and other ones and like we do lend to bdcs, but we only focus on public bdcs. We don't do private ones. We don't think there's enough.

Disclosure. And

Just more higher risk oriented. So we kind of, you know,

That's there, as far as your SSFA question goes. SSFA is basically transactions where you have securities, um, you know, over loans that are basically put on the balance sheet in a structure. So there's no recourse on the loans. Your ability to get paid back is strictly from the assets. I think the way we're looking at it is we have a very small exposure today, and you have to be selective on what assets you're going to put into these structures.

You know. And, you know, we have 1 structure that has loans and other structure that has mortgages, you know, most of our structures that we have is more in abl right now. Um, but the thing you have to really look at, when you look at sssas is its procyclical. So, you start off with a lower, um, rwa, and it's because of the structure that you have, but as delinquencies increase, as the economy turns down, you know, then your our, your rwa automatically increases so in times are really bad.

Stress, these portfolios will actually use up capital when you actually need capital the most from that standpoint.

On your balance sheet.

Thank you. Our next question will come from John Panari with Evercore. Your line is open.

Morning Daryl.

Good morning.

Um, on the Capitol front, I know you're at 1:09:09.

3/4 to 11% Target. Um, can you provide us your updated, thoughts around that Target? Um, what is keeping you from moving that lower? And as you get clarity on the regulatory front and and and once you do have that confidence in the ability to move it lower as the way to help us frame where you think, you know, a bank of your size and your you know, regulatory considerations where you really can be operating at

Start with, you know, when we look at, you know, where we're positioned right now, we're definitely feel comfortable in repurchasing shares. Um, you know, we didn't buy back as much as we could of this past quarter. Uh, just because we think the market was a little bit overheated, you know, and there was a more risk into the environment, so we're a little bit cautious there. Our credit quality continues to improve really well and that will probably continue. So we feel good about

About that, you know, and the other thing is we're a little bit price sensitive on how much we buy depending on when we buy it.

So we know we went up much higher, you know, last quarter, and we just bought less, you know, on a daily basis. So, I mean, right now, you know, we could buy anywhere from 400 to 900 million this quarter, depending on how we feel about the economy and how we

think the value of the stock is.

In terms of your C1 Target, the 1075 to 11, you need to see to move that lower.

You know, that's a discussion we'll have with our board later this quarter when we get our strategic plan approved and go through that. But, you know, as we continue to perform, we'll look for opportunities to potentially try to decrease our.

Capital ratio down over time as that makes sense, but that's really uh, Renee and board question. And uh, we'll probably have something to say about that. Come, our January earnings call.

Got it, got it. Okay. And then if I if I could just throw in more more on the um, you know, just on the loan front, I appreciate the color you gave around.

Yeah, appetite around CRA and some of the loan growth dynamics. Can you maybe talk about competition a bit? Are you seeing, what are you seeing in terms of loan spreads? We're hearing a little bit more that competition is starting to bear down again, and the larger banks are becoming even more of a formidable competitor to the regionals on the lending front. What are you seeing there in terms of, you know, front-end loan spreads on the commercial book?

Yeah. No it

Definitely is much more competitive, you know, if you if you take and look at you know, all of our commercial businesses which is cni and CRA together, you know, I would say spreads are down, maybe 10 or 15 pages points are approximately from what we're originating. Maybe a quarter or a go. Uh, but we still see in really good production. Um, you know, we're doing really good in our business banking business. You know, we don't talk much about business banking because it's really more of a deposit gatherer. It's 3 times more deposits than loans, but you know, they've had really big success. Um the last quarter, or 2, and growing their, their loan book and continue to build that out, which is really good for us. It's the, you know, smaller end of the commercial space. And it's, it's really serving our communities and our clients in the right space. So, with that said, you know, I think it's, it's competitive, but from a pricing perspective, you know, we're pretty efficient so we can still get our returns with these with this pricing.

Got it. All right. Thanks Sarah.

Thank you. Our next question will come from Chris McGrady with KBW. Your line is open.

Fresh.

Chris, your light is open. Please check your mute.

Oh, there we go. Sorry about that. Um, Daryl, if you think about operating leverage going into 2026,

Um, or the medium term, can you just speak to?

How you think this this plays out in terms of why need narrowing? And then the drivers, uh, between revenues and expenses?

What would you say is?

Just operating leverage. Is it going to widen or narrow? I guess?

You know, is is banking is simple when it comes down to, to this long term but, you know, it's really just growing Revenue faster than expenses at the end of the day, you know, we have a lot of momentum right now on our fee businesses, and if you look at our fees growing with trust mortgage and our commercial, um, SWAT of products that we have in the commercial area to our customers there. You know, we're going to grow that, you know, really strong again uh this next year. So that's a positive. You know, we have positive momentum on our net interest margin, we got it up for the fourth quarter, we're going to hit the 370s. Um, so we have momentum there and, you know, C is going to start growing as well. So we'll have all of our portfolios growing. So I, you know, I'm pretty positive that our earning assets will start to grow maybe a little bit faster, and we're still have good expansion on, um, on net interest margin from that. So, I feel good overall and I think that should come down to a good operating Leverage

Number.

Uh thanks for that and then I guess quick follow-ups kind of 2 part 1. Um I guess the visibility into the Improvement and the criticized and that you've noted in the crew book. Uh, I presume that will continue. And then secondly, I just noticed in a Nuance in kind of your uh geography question about m&a. I think you said adjacent markets. Just if you could unpack that for a minute. Uh that'd be great. Thanks.

Yeah. So from a credit quality perspective, you know our non-accrual loans um came down to 1.1% and that was really driven by both.

CNI and CRA, when you look at the criticized balances.

Um, it was really a function of the CRA portfolio. The CRA portfolio basically decreased in every category in CRA, but really driven by multifamily and healthcare, and those were the drivers. We’re pretty optimistic that that will continue for the next several quarters. Um, so we actually might think about pulling this slide out of our presentation in a quarter or two because, you know, we'll be pretty much back to normal credit quality and normal operating from that perspective. So we feel really good and excited about that.

As far as the geography goes. Well, the only I, I say expanded geography is if you buy a bank, you know, that's, you know, it's a headquartered in 1 of the 12 states that we are, but they might have some exposure, outside the 12 States. That's really how you might get a little bit. Some more growth in another area, but it's still really focused on getting scale and density in this 12 States and in the District of Columbia where we operate,

Okay, thank you. Appreciate it.

Thank you. Our next question will come from Mana Gosalia with Morgan Stanley. Your line is open.

Hey, good morning, Daryl.

Hey, good morning.

Um, you you noted in in your credit comments if you want timers and cni and cos um that was embedded in the overall uh 42 basis point, and Co number. Um and then I I guess your guide for next quarter is 40 to 50. Uh, are there more lumpy items that you're expecting next quarter? And um, you know, I guess the, the, the bigger picture question is

How do you expect that the trend will develop into 2026? And what's a good normalized NCO run rate for MNT?

Yeah. No, no. Thank you for the question. So this quarter, um, you know, our net charge on us for $1.46.

Yeah, um, it was really driven by two large C&I loans. Um, they were two contractors that added up to $49 million, um, and you know that's really what drove us higher than our, you know, 40 basis points this quarter. You know, as far as you go next quarter, you know, we could have maybe another $1 million or so in the fourth quarter.

But we still think that net net year to date. We will come in, um, for the year under 40 overall. So I think that's where it's kind of shaking out from that perspective, you know? And as far as you know, next year goes, we aren't going to give any guidance yet and all that, but, you know, the economy still overall is in relatively good shape.

You know there is stress in certain areas, but you know overall it's still in really good shape. So I wouldn't expect much change one way or the other for 2026, but we'll give you more of that in January.

Got it. Um, and then separately, uh, you spoke about, you know, more room on the operating leverage side. Um, some of your peers have spoken about accelerating investments in AI and tech. Um, can you talk a little bit about what M&T is doing there? And, um, if you will need to spend more next year, um, as you invest there?

Spending a lot of money in the company. I'm in the 2 and a half years. I've been here. We've had some really significant projects that we started and that we're starting to finish up.

um, like our

Uh, in my world in the finance world, the general ledger will go live probably in the next quarter or so. Um, so that will be a big.

Success and also be dropping run, right? But you know, we have other projects, you know, right behind that, that we're going to be investing in, we're putting in a new debit platform, um, for all to serve our customers that's going in. We're looking at a commercial servicing, um, system. Um, that needs to get upgraded commercial consumer, uh, servicing system that needs to get upgraded. So there's other Investments out there. Um, you know, from a data center perspective, or 2 Data, Centers are up and operating. We're still moving applications over there. That would take another year or 2 to get that fully accomplished and, you know, Mike wisler and his team are putting out as many as many applications so we can up into the cloud. Um, so we can maybe get out of doing some of the data centers, which in the long run, we're actually reduced costs. So you know, I think our cost will be controlled. I think our revenues will grow more than our expenses, uh but we are going to continue to invest in our company and and do the right thing and

to continue to have really strong service quality for our customers and really predictable sustainable platforms that this

Are got it. Thank you.

Thank you. Our next question will come from Matt O'Conor with Dosha Bank. Your line is open.

Uh, good morning. Um, just a bigger picture question on credit, you know, which is obviously driving the reasonable bank stocks today. You know, we're seeing some of these kind of one-offs in commercial that, you know, according to the media, are broadly related. Um, but what are your thoughts in terms of, like, why we're seeing these events now?

Um, you know, with rates kind of coming down, I thought maybe that would have taken the pressure off. But just any big picture thoughts, as you guys kind of sit around and think about the credit environment, I'm sure you talk about some of these.

kind of positions out there if you don't have any just any thoughts on that.

You know, I, you know, it's

I think people how many people have a lot of different ideas on this, I think, 1 of the things we think about is, you know, we've seen stress out in the marketplace for a while. So if you look at the consumers, you know, we've been saying for years that you know, the lower end, call it the 20 Botham percent and lower end are really hurting in in that space. And you know, those are the ones that are paying the higher credit card yields and all that. And then just

Really tough for them when they have to pay these high interest rates you if you look, you know, we've tightened a little bit in our small business um areas. So business banking is pulled back a little just because of you know, some of the weakness we were seeing there in the last year or so and we have a leasing business that also we tightened up there as well. So on those areas you know we're you know where there's stress. I think there's you know, things that we're just trying to tighten and see but there's definitely stress out there and sometimes people can only go so long and then they have to kind of throw in the towel.

You know, on the larger end commercial, you know, there's sectors that have been impacted, you know, in certain situations, whether it's tear offs or, you know, just how they're operating, you know, private Equity coming in to buying some of these companies. You know, sometimes it's a good thing, sometimes, maybe not, um, because they aren't experienced in kind of to run these companies um like the original teams were so you see 1 off from that that perspective. So you know there's there's things you have to be careful for you know what we really focus on is the fundamentals. Matt. And really try to make sure we're underwriting and looking at everything. We can making really good sound decisions for the long term. Uh, we don't want to put loans on the books that aren't going to.

Will be there, you know, in the next year or 2 because of a credit situation. So what we're trying to do that and trying to be really holistic, You Know, Rich Berry our chief credit officer, he stood up some verticals, um, and and some specialty areas for like, our leveraged lending area, um, and a couple other areas just to focus to make sure that, you know, we have controls in place in areas that we deem as higher risk in place. So, I think we're doing all the right things really trying to be guarded um from that but you know net net. You know, if rates come down more I think that will relieve some of the pressure. But right now I think you're just seeing some of the pressures from its it's been elevated for a while.

Easier to kind of get comfortable with with your book. Um, you know, you originated them. You can kind of evaluate it kind of on an ongoing basis. I mean, I guess hypothetically, if you were kind of looking at an external book, do you still feel like there's enough visibility where you could evaluate it, or are there enough red flags again just kind of generally in credit these headlines that you're seeing that that might give you a little pause.

all hypothetical obviously,

um, you know, I I think

I mean, it sounds like you're trying to lead to a question. If we do due diligence on a company and you're looking at a...

a credit book and all that. I mean it it really if if that's where you're going, it really starts with the culture and you know, do they underwrite similar to how we underwrite and that that needs to get established up front from that perspective and you really need to know

That and trust that. Like, when we acquired people's, you know, we knew they won that their culture was very similar to the MNT culture and that would fit in quite nicely, from that perspective. Uh but you know when you look at stuff, you have to be really careful and ask a lot of questions and information and, you know, keep digging until you get satisfied. I mean, I think that's that's the way it works. You have to do your homework and all comes back down to fundamentals again.

Okay, that's helpful. Thank you.

Thank you. Our next question will come from Dave Rochester with Cantor. Your line is open.

Hey, good morning, Daryl.

Good morning, it's back on your margin comment, you mentioned earlier, you had some momentum there. Got into uh that 370 level and 42. Do you see any upside potential of that going forward? Given your outlook for more Fed rate cuts, on the 1 hand and then given the repricing that you see, you still have left to do on the the fixed rate segments of your loan, Security's books.

So, I mean, what we have modeled right now is we have 2 cuts this year and 3 cuts next year, so 5 cuts total.

when we do our modeling our base scenario, embeds the forward curve,

Um, so when you look at that, and then you look at it down 100, um, you know, our down 100 is basically flat from an ni perspective. So that's really rates going down 200 plus basis points over 12 months. Um, from that. So I think we're very neutral from that perspective.

Um, if rates go up 100, which is basically rates staying flat.

Because you got the forward curve embedded into that, you know, we're off, you know, just a touch. So a little bit. I guess I'd say we were a little bit more liability sensitive on the way up, a little bit, but the way our balance sheet is really structured.

Is we have to hedge to kind of have the position that we are at. And if we don't do any hedging on how we operate within a year, we can become very asset sensitive very quickly, just naturally as things happen. So we're constantly having to hedge to kind of neutralize our interest rate, sensitivity, from that perspective. So we feel really good about where our net interest margin is we do have a piece of it, obviously, and based upon the, the shape of the yield curve, that's also impactful for us. Um, that's still, we're still benefiting from that from a row on row off basis. If you look at our loan book you know and the consumer book that we have we're still probably getting about 75 basis points. Spread positive, their Investment Portfolio is probably going to be anywhere from 50 to 75 basis points. Positive there from that perspective, so we're still benefiting from the row on and row off from that perspective. So that's really good and

In our deposit beta, or 54%, you know, we came in and we think that's pretty much what it was when rates were going up. So, coming down, we're going to mirror that as well. We feel very good that we'll stay in the low to mid-50s from a beta perspective.

So, I think we got things positioned pretty well from a sensitivity perspective on knee and feel good about what we're guiding to.

So it sounds like it all adds up to, you know, some upside potential there to that $370 going forward.

All else equal.

Great. Um, maybe just back on your comments on the government shutdown and M&T being ready for that. It doesn't sound like you're too concerned about it right now, given your comments. But when would you start to get worried about it from a credit perspective? How long will this have to drag on?

Before you guys get more concerned about it.

You know, um, from a government shutdown. You know, we are monitoring and looking at various sectors, um, that potentially could happen. Obviously, it hasn't been around long enough.

More stress on them, you know, because of the shutdown. So that's important. You know, the SBA business has got to shut down right now. So that's some stress from that. HUD and FHA, we're looking at that to see what impact that might have.

You have CNI Healthcare from a reimbursement perspective that will probably impact if it goes longer; reimbursements might slow down or stop.

Um, and then nonprofits that get grants and government employees, which is the heart and soul of the government and those people at all. So, we're monitoring all those areas. Haven't really seen anything yet, but if it goes on a few months, I think you're starting to see, you know, some stress maybe.

Yeah, okay, um, maybe it was just one. Last one was hoping you could give a little update on your exposure, if you have anything to the tri-color situation. I know you don't have any credit exposure, but if you could just talk about anything, like from a legal perspective or anything else there, it would just be great to hear how you're assessing that risk, just given Wilmington's roles there.

Yeah, yeah, happy. Happy to talk about it. So, first of all, as we've publicly reported, there are allegations of fraud, which is never good for an industry overall. Unfortunately, we will have, from time to time,

But we expect that the industry will improve over time to make sure that such events happen less frequently.

We are, and always have been, a very client-centric culture and company, and we always strive to provide the best services and execution.

We've got a thorough review of what we're looking at.

And enhancing our quality and service. You know, we still believe in our corporate trust business, feel good about where we are, and are just looking for better ways to partner with our clients.

You know, regarding your current situation that you have, it’s clear this will play out over a long period of time.

Um, it's really not helpful to kind of speculate what's going to happen from that perspective. You know, we were, um, our roles in the transaction, we have no lender experience, you know, exposure from M&T or Wilmington Trust whatsoever.

We have roles that we have there, which were focused in the warehouse account, bank, and custodian.

And on the securitization roles: owner trustee, indenture trustee, custodian, paying agent, note register, and certificate register. Those were our roles that we have, um, from that perspective.

Uh, so there's no credit exposure that we have there.

So I think that's really what we see right now, and we're just going through the process. I'm seeing how things play out.

Um, you know there will probably be people that sue other people just because of the bankruptcy and what happens. But we'll see, you know, if we're impacted or not from that; we don't know.

All right, thanks, Daryl. Appreciate it.

Thank you. Our next question will come from Ken Houston with Autonomous. Your line is open.

Hey, great. Hey Daryl just uh just 1 quick 1. Um you mentioned in the slides that the fourth quarter expense stuff up. Uh you pointed out Professional Services. I know you guys typically do have higher uh, expenses, third to Fourth but I'm just wondering is that a is that a specific Nuance that you're just finishing some projects or something like that and and just, uh, obviously, you know, we'll hear more in January about what next year's expenses look like. But uh, I just want to know if that's that's atypical or more kind of the normal ramp that we typically see towards your end.

You know? Okay, and we, we, we have a lot of projects going on and we're just trying to get some of them finished off. So it's kind of a cost of, you know, getting things done is just increase in expenses, from a Professional Services perspective, we're giving you guidance for 26. And, you know, we will make sure that we have Revenue growing faster than expenses.

Okay. All right, got it. Thanks for that clarification. Bye.

Thank you. Our next question.

From Christopher Spar with Wells Fargo, your line is open.

All right, thanks for taking the question. Uh, first is the BuyBacks during the quarter and you kind of indicated like you were being a little price sensitive um, you know, just with the accumulation of capital regulatory relief coming in a aoci becoming even more favorable for you. I'm a little surprised that you kind of talked about, kind of being being price sensitive, uh, just given where the overall stock is and, and your accumulation of capital.

That we have certain amounts that we buy at certain levels, and we adjusted its fluid from that perspective. But, you know, just like investors out there, you know, we're investing in our company as well, and we think of it the same way.

Okay. And as as a follow-up, I I with 5 Reitz Cuts kind of, um, in the forward. Curve, uh, what is your outlook for deposit growth over the next next year or so? Thank you.

Yeah, you know, my guess is our deposit growth. I mean, we'll give you guys some January, but deposit growth and loan growth shouldn't be much different than really the growth of the economy, you know, plus or minus a little bit. Um, it is what it is. So if the economy grows 2% or 3%, I think it'd be in that same neighborhood.

All right. Thank you.

Thank you. This concludes today's Q&A. I will now turn the program back over to our presenters for any additional or closing remarks.

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