M&T Bank (MTB) Q3 2026 Earnings Call Transcript

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DATE

Friday, Oct. 16, 2026

CALL PARTICIPANTS

• Senior Vice President of Investor Relations - Steve Wendelboe
• Senior Executive Vice President and Chief Financial Officer - Daryl Bible

TAKEAWAYS

• Diluted GAAP EPS -- $5.04, representing a decrease from $5.32 in the prior quarter.
• Net Income -- $775 million, reflecting a decline from $818 million in the linked quarter.
• Taxable-Equivalent Net Interest Income -- $1.8 billion, remaining largely unchanged as earning asset growth and fixed asset repricing were offset by higher funding costs and lower non-accrual interest.
• Net Interest Margin -- 3.65%, down 5 basis points from the prior quarter primarily due to lower non-accrual interest income.
• Average Loans Held for Investment -- $143.3 billion, an increase of $2.6 billion or 2% driven by growth in commercial real estate and consumer portfolios.
• Average Commercial Real Estate Loans -- $24.9 billion, representing a 7% increase reflecting strong originations and stable payoffs.
• Average Consumer Loans -- $27.3 billion, growing 2% due to expansion in recreational finance and home equity lines of credit.
• Average Total Deposits -- $166.8 billion, rising $3.3 billion from the linked quarter and providing funding to reduce short-term borrowings.
• Interest-Bearing Deposit Cost -- 2.05%, an increase of 10 basis points driven by the September rate hike and the repricing of time deposits.
• Average Short-Term Borrowings -- $5.2 billion, a decrease of $2.8 billion as the bank optimized its funding mix using customer deposit growth.
• Non-Interest Income -- $743 million, compared to $740 million in the linked quarter, with increased mortgage servicing fees offsetting lower capital markets and advisory revenues.
• Mortgage Banking Revenues -- $152 million, an increase of $25 million driven by higher residential mortgage servicing income.
• Efficiency Ratio -- 54.4%, representing an increase from 52.8% in the linked quarter.
• Non-Interest Expenses -- $1.39 billion, an increase of $44 million reflecting higher data processing, professional services, and technology infrastructure costs.
• Estimated CET1 Ratio -- 10.16%, a decline of 3 basis points from the second quarter due to share repurchases and risk-weighted asset growth.
• Share Repurchases -- $323 million, consisting of 1.3 million common shares repurchased during the quarter.
• Criticized Loans -- $6.1 billion, an increase of $245 million driven primarily by the commercial and industrial portfolio.
• Non-Accrual Loans -- $1.3 billion, an increase of $90 million primarily related to office and assisted living credits.
• Liquidity Coverage Ratio -- 107%, exceeding the regulatory minimum standards applicable to Category III institutions.
• Guidance: Q4 Net Interest Income -- $1.83 billion to $1.85 billion, assuming one interest rate hike in Dec. 2026.
• Guidance: Q4 Average Loans -- $145 billion to $146 billion, with growth expected in C&I, CRE, and consumer segments.
• Guidance: Q4 Average Deposits -- $169 billion to $170 billion, focused on customer deposit growth.
• Guidance: Q4 Non-Interest Income -- $710 million to $730 million, reflecting stable fee categories and lower distributions from Bayview.
• Guidance: Q4 Non-Interest Expense -- $1.39 billion to $1.41 billion, including continued investment in enterprise initiatives.

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RISKS

• Bible stated, "As you go out into next year and if rates stay higher, that could put pressure on debt service coverage ratios, and that could have some creep maybe starting back into the portfolio there," referring to potential credit quality impacts in the commercial real estate sector.
• Bible warned that non-accrual loans are expected to remain flat to slightly up in the next quarter, stating, "We're just bouncing at the bottom right now, and there's a couple credits that we see out there that we think will go into non-accrual."

SUMMARY

M&T Bank Corporation (NYSE:MTB) reported quarterly results characterized by growth in loan and deposit balances alongside the strategic management of its investment portfolio. Management noted that loan growth in the commercial real estate and consumer sectors was supported by deposit increases, which allowed the bank to reduce its reliance on external short-term funding. The company transferred $8.3 billion of residential mortgage-backed securities to a held-to-maturity designation to protect tangible capital from interest rate volatility. Operational focus remained on technology enhancements, including the tracking of hundreds of artificial intelligence use cases aimed at automating processes and improving risk identification.

• Management reported tracking hundreds of artificial intelligence use cases aimed at improving productivity, risk management, and customer experience scalability.
• The bank maintained its ranking as a leading SBA lender in its footprint for the 18th consecutive year and reached a fifth-place national ranking for SBA 7(a) loan volume.
• Bible stated, "AI is helping employees make better decisions, reduce manual work, find information faster, and identify risks earlier."
• M&T completed the transfer of $8.3 billion in residential mortgage-backed securities to a held-to-maturity status to protect tangible capital from potential regulatory changes.
• Bible noted, "We remain disciplined in evaluating the trade-offs between NII and net interest margin with a focus on optimizing overall returns."
• Management indicated the company is engaged in ongoing dialogue with potential merger partners, specifically prioritizing institutions with high-quality operating deposit franchises.
• The bank added $62.9 billion in residential mortgage sub-servicing balances in June 2026, which drove the increase in mortgage banking revenues during the third quarter.

INDUSTRY GLOSSARY

• AOCI: Accumulated Other Comprehensive Income; a component of shareholders' equity that includes unrealized gains and losses on certain investments.
• CET1 Ratio: Common Equity Tier 1 ratio; a core measure of a bank's financial strength that compares its capital against its risk-weighted assets.
• Criticized Loans: Loans that management identifies as having potential weaknesses and a higher risk of default than standard loans.
• LCR: Liquidity Coverage Ratio; a requirement ensuring that financial institutions have enough high-quality liquid assets to survive a 30-day stress scenario.
• Non-accrual Loans: Loans for which the bank no longer expects to receive full payment of principal and interest, stopping the accrual of interest income.
• RMBS: Residential Mortgage-Backed Securities; debt obligations representing interests in a pool of residential mortgage loans.
• SBA 7(a) Loans: The Small Business Administration's primary program for providing financial assistance to small businesses in the United States.

Full Conference Call Transcript

Operator: Welcome to the M&T Bank third quarter 2026 earnings conference call. All lines have been placed on listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star, then the number one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. When posing your question, we ask that you please pick up your handset to allow for optimal sound quality. Lastly, if you should require operator assistance, please press star zero. Please be advised that today's conference is being recorded.

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

Steve Wendelboe: Thank you, Angela, and good morning. I'd like to thank everyone for participating in M&T's third quarter 2026 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 ir.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 M&T's Senior Executive Vice President and CFO, Daryl Bible. Now I'd like to turn the call over to Daryl.

Daryl Bible: Thank you, Steve, and good morning, everyone. Before discussing our results, I'd like to begin with what continues to define M&T, our purpose, to make a difference in people's lives. That purpose informs how we serve customers, invest in our company, and create long-term value. At a recent conference, we discussed our focus on teaming for growth and operational excellence. Those priorities continue to guide our work across M&T. We are investing in technology, simplifying processes, and creating more capacity for our teams to serve customers and support growth. These efforts build on what has always differentiated M&T, strong relationships and disciplined execution. You can see that approach across our company.

During the quarter, more than 100 M&T colleagues participated in the Pan-Mass Challenge. Overall, we raised more than $850,000 for cancer research and treatment. We also continued investing in our branch network, opening new locations in Torrington and Waterbury, Connecticut, to serve our customers. For the 18th consecutive year, we ranked among the nation's top SBA lenders. We were again number one across our footprint and improved to number five nationally for SBA 7(a) loans by volume for SBA's 2026 fiscal year. Together, these efforts reflect the connections we build with customers, communities, and institutions across our footprint. Slides 20 and 21 provide additional context on M&T's approach to AI.

We are seeing AI help automate, augment, and reinvent work across the bank. In the near term, AI is helping employees make better decisions, reduce manual work, find information faster, and identify risks earlier. Growing engagements across the organization, including hundreds of tracked use cases, shows strong interest in moving quickly from ideas to execution. These efforts are improving productivity, risk management, and customer experience while enabling greater scalability. Turning to slide five, we were pleased to see continued recognition of our people during the quarter. American Banker, Fast Company, and InvestmentNews recognized M&T's leaders for their contributions to our bank, customers, and industry. These honors reflect the strength of our talent and culture.

Now let's turn to slide 8 and our third quarter results. Diluted GAAP earnings per share were $5.04 compared to $5.32 in the prior quarter. Net income was $775 million compared to $818 million in the linked quarter. M&T's third quarter results produced an ROA and ROCE of 1.4% and 11.44% respectively. Our results continue to reflect a disciplined approach to generating attractive returns, delivering consistent balance sheet and earnings growth, and continuing to generate and preserve capital. Loan growth remains solid and deposit growth more than funded the increase, allowing us to reduce our reliance on short-term borrowings while maintaining strong net interest margin.

We also continue to grow earnings per share with year-to-date net operating earnings per share increasing 17% from the same period in 2025. We delivered net earnings growth while maintaining a return discipline. Third quarter net operating ROTA and ROTCE were 1.47% and 17.29%, both exceeding the targets established for our long-term incentive structure. Our focus on capital generation and preservation is also reflected in our decision to transfer $8.3 billion of residential mortgage-backed securities from available for sale to held to maturity. That action reflects our continued discipline to protecting tangible capital and positioning us well with potential regulatory framework that includes AFS related AOCI and regulatory capital.

Turning to slide nine, we provide a supplemental reporting of our results on a net operating or tangible basis. Net operating income totaled $780 million compared to $823 million in the linked quarter, while diluted net operating earnings per share were $5.08 compared to $5.35. Next, we look a little deeper into the underlying trends that drove the third quarter results. Please turn to slide 10. Taxable equivalent net interest income was $1.8 billion, largely unchanged from the linked quarter, as the benefits from one additional day earning asset growth and fixed asset repricing were muted by lower non-accrual interest and higher funding costs.

In line with the outlook we provided in July and September, net interest margin was 3.65%, down 5 basis points from the prior quarter, mostly reflecting those same factors that impacted NII. As I mentioned last quarter, we remain disciplined in evaluating the trade-offs between NII and net interest margin with a focus on optimizing overall returns. Turn to slide 12 to talk about average loans. Average loans held for investment increased $2.6 billion or 2% to $143.3 billion. This quarter's growth was driven by commercial real estate and consumer. C&I loans were largely unchanged at $65.9 billion, with growth in institutional CRE offset by lower dealer commercial services.

Average CRE loans increased $1.6 billion or 7% to $24.9 billion, reflecting continuation of the origination strength we saw late in the second quarter and relatively stable payoffs and pay downs. Average residential mortgage loans increased $0.4 billion or 1% to $25.2 billion. Consumer loans increased $0.6 billion or 2% to $27.3 billion with growth in recreational finance and HELOC portfolios. Loan yields decreased three basis points to 5.86%, reflecting lower non-accrual related interest. For context, third quarter results reflect a $15 million reduction in interest income recognized on commercial loans that were previously in non-accrual status. Turning to slide 13. Our liquidity remains strong.

At the end of the third quarter, investment securities and cash out with the Fed totaled $52.2 billion, representing 24% of total assets. Average investment securities decreased modestly to $38.6 billion. The yield on investment securities increased four basis points to 4.33%, as reinvestment rates continue to exceed the yields on maturing balances. In the third quarter, we purchased $0.9 billion in debt securities with a yield of 5.12%. The investment portfolio had a duration of 4.1 years, and the unrealized pre-tax loss on the available for sale portfolio was $745 million.

While not subject to LCR requirements, M&T estimates its LCR at quarter end was 107%, exceeding the regulatory minimum standards that would be applicable if M&T was a Category III bank. Turning to slide 14. Average total deposits rose $3.3 billion-$166.8 billion. Non-interest bearing deposits decreased $256 million-$43.7 billion, primarily from lower trust demand deposits. Interest bearing deposits increased $3.5 billion-$123.1 billion. Growth was driven by commercial mortgage, business banking and time deposits. Interest bearing deposit costs increased 10 basis points to 2.05%. The increase was driven by several factors, including two basis points related to the impact of the September rate hike and four basis points related to the growth and repricing of the time portfolio.

The remainder largely attributed to growth in other interest-bearing deposit categories. Importantly, the deposit growth allowed us to reduce our reliance on borrowings, with average short-term borrowing decreasing by $2.8 billion-$5.2 billion. As a result, total interest-bearing liability cost increased less than the interest-bearing deposit cost, reflecting our continued focus on optimizing overall funding costs and mix. Continuing on slide 15. Non-interest income was $743 million compared to $740 million in the linked quarter. Higher residential servicing fee income was largely offset by lower capital markets and advisory and other revenues from operation. Mortgage banking revenues increased $25 million-$152 million.

The primary driver was residential mortgage, which increased $23 million-$119 million from higher servicing fee income, reflecting $63 billion of sub-servicing balances added in June. Trust and investment services decreased $5 million-$230 million, mostly related to seasonal tax preparation fees in the second quarter. Capital markets and advisory decreased $9 million-$32 million from lower interest rate swap transactions with commercial customers and lower loan syndication activity. Other revenues from operations decreased $10 million, mostly reflecting a $31 million Bayview distribution compared to $47 million in the prior quarter. Turning to slide 16. Non-interest expenses for the quarter were $1.39 billion, an increase of $44 million from the prior quarter.

Salary and benefits increased $6 million to $832 million, mainly from one additional working day in the quarter. Outside data processing and software costs increased $19 million and professional services increased $8 million, reflecting higher software maintenance, enhancements to our technology infrastructure, and other enterprise initiatives. Other costs from operations increased $6 million, primarily from the Visa-related litigation obligations. Our efficiency ratio was 54.4% in the third quarter, up from 52.8% in the linked quarter. Year to date, however, efficiency continues to improve, with the ratio improving to 55.1% from 56.3% last year. Next, let's turn to slide 17 and 18 for credit.

Asset quality remained relatively stable this quarter, with net charge-offs below our initial year expectations and non-accrual loans remaining near cyclical lows. Criticized loans increased $245 million-$6.1 billion. The increase was driven by a $213 million increase in C&I criticized and a $32 million increase in CRE. Non-accrual loans increased $90 million-$1.3 billion, and the non-accrual ratio increased five basis points to 90 basis points. The increase was driven by higher commercial non-accrual loans, mostly related to office and assisted living credits. Net charge-offs for the quarter totaled $127 million, or 35 basis points. Five credits accounted for approximately $40 million in the net charge-offs and were mostly in the leveraged lending and franchise portfolios.

In the third quarter, we recorded a provision for credit losses of $135 million. The allowance for loan losses as a percent of total loans declined two basis points to 1.51%. Turning to slide 19 for capital. M&T's estimated CET1 ratio was 10.16%, a decline of three basis points from the second quarter. The decline reflected $323 million share repurchases and higher risk-weighted assets associated with $2.2 billion of loan growth. These factors were partially offset by continued strong capital generation. If included in regulatory capital, AFS and pension-related AOCI would have decreased CET1 ratio by 29 basis points. Now turning to slide 22 for the outlook. First, let's begin with the economic backdrop.

The U.S. economy continues to expand despite multiple shocks and heightened uncertainty. Although geopolitical conflicts have not been fully resolved, we are cautiously optimistic with an outlook of continued growth. Gasoline prices remain high, but consumer spending has held up well in spite of energy shocks. We see households as having managed the shock by reducing spending in other areas. The build-out of artificial intelligence infrastructure is helping drive overall construction and CapEx while other sectors are more subdued. While we do not see evidence of energy shocks seeping into core inflation, we expect overall inflation to decelerate going forward.

Labor market remains in a low hire, low fire environment with slow job growth and low unemployment rate with very little wage pressure. We remain well positioned for a dynamic economic environment. Now turning to the outlook. With three quarters of the year complete, we are focused on the fourth quarter. We expect taxable equivalent NII to be $1.83 billion-$1.85 billion and interest margin to be in the mid-3.60s. Our forecast reflects one rate hike in December. We expect modest loan growth with average loans of $145 billion-$146 billion in growth in C&I, CRE, and consumer. Average deposits are expected to increase to $169 billion-$170 billion with continued focus on growing customer deposits at a reasonable cost.

Our outlook for the fourth quarter non-interest income is $710 million-$730 million, reflecting stable to modest growth across most fee income categories, except for other revenues from operations, given the benefit of Bayview distribution in the third quarter. Fourth quarter expenses, including intangible amortization, are expected to be $1.39 billion-$1.41 billion, reflecting continued investment in the enterprise initiatives and well-managed non-investment spend. Net charge-offs for the fourth quarter are expected to be 35-40 basis points. We plan to continue to operate a CET1 ratio of 10%-10.25% for the remainder of the year. To conclude on slide 23, our results underscore an optimistic investment thesis.

M&T has always been a purpose-driven organization with a successful business model that benefits all stakeholders, including shareholders. We have a long track record of credit outperforming through all economic cycles while growing within the markets we serve. We remain focused on shareholder returns and consistent dividend growth. Finally, we are a disciplined acquirer and prudent steward of shareholder capital. The strength and diversification of M&T's balance sheet, asset quality, and revenue will continue to allow M&T to outperform consistently across cycles. As we close, I want to thank all of my M&T colleagues whose dedication and hard work make a difference every day for our customers, communities, and one another.

Because of your commitment, M&T continues to create lasting value for everyone we serve. Now let's open the call up to questions, before which Angela will briefly review the instructions.

Operator: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. Our first question today comes from Daniel Tamayo with Raymond James. Your line is now open.

Daniel Tamayo: Thank you. Good morning, Daryl.

Daryl Bible: Good morning, Daniel.

Daniel Tamayo: Maybe just starting on the funding side. You mentioned the mix shift from borrowings to deposits in the quarter, and the benefit that had. Is there any benefit left from this mix shift? Just diving into the increase in deposit costs, just curious if that was more related to competition or how much of that was impacted by the rate hike in September. Thanks.

Daryl Bible: Yeah, thanks, Daniel. Let me start with the deposit one first. Our deposit costs were up 10 basis points quarter-over-quarter. When you kind of decompose that, four basis points of that increase was really attributable to time deposits that we put on towards the end of the second quarter and early third quarter. We had a promotion that we were running. We were doing 12 and 18 months maturities. At that time, we put on a 4.05% rate on those CDs. Not knowing that rates were going to go up a whole lot, we just thought it was a good time to issue, get more term funding, and pay down borrowings.

With the rate increase that we saw late in the third quarter, we're now close to the overnight rate with this term money. We think now that's acting really well, and that will stay stable. If you take that away, our costs were really up around six basis points, and that's just normal repricing that we saw that we had to as we start to implement increases with the higher funds rate from that perspective. On the funding side, we are always looking on the balance sheet for ways to be optimized and do things better. I'm sure we aren't fully optimized yet, and we'll continue to work on trying to become more optimal.

I feel very optimistic on the outlook for net interest income and net interest margin. I think we'll find other things that we can do down the road over the next year or so that will help us continue to maintain and have really strong performance in this space.

Daniel Tamayo: Great. Thank you. Then maybe just a longer-term question, kind of similar topic, though. Given your focus on growing the operating accounts but the pressure that we're seeing in the industry on funding on the deposit side, how are you thinking about the trade-off between maintaining deposit pricing discipline and funding loan growth going forward? Just your thoughts on if the deposit pricing could ultimately become a bigger constraint on growth than maybe demand for loans going forward.

Daryl Bible: Yeah. So as you know, Danny, all of our businesses, whether it's consumer, business banking, commercial, wealth, we always go to market to get the operating account. That, we believe, is the most important thing to have a relationship. The relationship starts with that. Once we get that, we have other opportunities to kind of deepen our relationship with our customers. That's not going to change. That's really good. If you look at business banking, I've said this before, but it has more deposits than loans, three to one. 80% of those deposits are operating accounts. So that's just a pure way you can see of how focused we really are in getting on those operating accounts.

As far as pricing goes, yes, it's competitive out in the marketplace, and there is loan demand. We'll see how much loan demand we have in 2027 with rates increasing. My guess is we'll have loan demand, but probably at a little bit more modest pace. I think we'll be able to manage the funding of that effectively. If we go out to term funding, M&T issues very well in the capital market. So we can do that if we need to. But first and foremost, we're going to try to fund our loan growth with our deposit growth.

Daniel Tamayo: Terrific. Thanks so much for taking my questions, Daryl.

Daryl Bible: Thank you.

Operator: Thank you. We'll go next to Scott Siefers with TD Cowen. Your line is now open.

Bill Young: Hey, good morning, guys. This is actually Bill Young on for Scott. How are you?

Daryl Bible: Hey, Bill.

Bill Young: Hi. My first question. You had some very strong pull-through on CRE this quarter, which was expected, and it looks like the outlook for Q4 growth is also looking very solid. What are your updated thoughts on the positive commercial growth inflection story balanced against the rate outlook as we look out over the next year and given the evolving higher rate environment?

Daryl Bible: Yeah, that's a great question, Bill. I spent a lot of time talking to Tim Gallagher this week preparing for this call. He runs our CRE space, and him and his team have worked really hard to start growing our CRE portfolio again. We have two quarters in a row now where it's grown really nicely. Higher rates, just by definition, is going to make it more challenging for projects to actually basically pencil out from a financial perspective. We're still optimistic. I think Tim and his team have worked hard to get growing, and even in a more challenging environment, we still feel confident we're going to be able to grow.

Probably maybe mid-single digit, plus or minus, in that neighborhood is kind of our expectations. We were really good at CRE, and to be honest with you, it's always not all on what's on the balance sheet. We also have a lot of off-balance sheet alternatives, too, and we really want to serve our customers and meet their needs, whether that's on or off balance sheet. I think both ways we will be successful in what we need to do.

Bill Young: Great. Very helpful. Then a separate topic. Given the slight uptick in criticized assets this quarter and some of the uncertainties you flagged on the macro in your prepared remarks, do you see criticized assets levels perhaps stabilizing at these levels? How do you kind of think about that as well in the backdrop of a higher rate environment?

Daryl Bible: Yeah. When you look at our at least near-term projections for criticized balances, we still think the overall portfolio will still be down a little bit. If you look at CRE, that is where most of the improvement has been over the last year. That is probably where you are going to continue to see it near term. As you go out into next year and if rates stay higher, that could put pressure on debt service coverage ratios, and that could have some creep maybe starting back into the portfolio there. The C&I portfolio has been up and down a little bit on a criticized basis.

We do not think that is going to necessarily have a downward trajectory, but kind of bounce along up and down a little bit throughout the next several quarters. But net, overall, I think we are optimistic that it is still at least short term down in criticized, and we will see how much rates impact our customers going forward. As you know, as we underwrite our customers, we stress test them under a lot higher interest rates, and they will perform well because of that stress testing and renewal. So we are concerned about losses coming in with this higher interest rates, but you might see a little creep in the criticized side.

Bill Young: Perfect. Thank you for taking my questions. Appreciate it.

Daryl Bible: Thank you.

Operator: Thank you. We'll go next to John Pancari with Evercore. Your line is now open.

Girard Sweeney: Hey, good morning. This is Girard Sweeney on for John. Just revisiting the criticized loans on the auto leasing credit, the auto leasing company credit that you flagged. Can you provide a little more color on this in terms of was this something you had some prior visibility into, and if you think this is driven by broader macro or industry pressures? Or for this credit, was a little more idiosyncratic? Thank you.

Daryl Bible: Yeah. We believe it was idiosyncratic. It was in our NDFI portfolio. This company was an auto leasing vehicle remarketing and used car platform. We knew this was coming down the path. We also have a feel for non-accrual next quarter as well, and we think that's going to be flat to up a little bit as well. We're just bouncing at the bottom right now, and there's a couple credits that we see out there that we think will go into non-accrual. But as loans go in non-accrual, we do have some curing as well. Net, we were up a little bit this quarter. But we're still having a lot of our customers also cure in this portfolio.

But we're at really low periods for M&T, very close to the bottom. We're going to bounce along the bottom for a while, I believe.

Girard Sweeney: Thank you. One more just on back on the lending side, revisiting pricing there. Given broader competitiveness, what have you observed in loan spreads in 3Q, and have you seen any changes in recent weeks as credit spreads across the industry have widened?

Daryl Bible: Yeah. When you look at the commercial portfolio, includes CRE or whatever, we're actually up 10 basis points from what we had run off versus what we ran up, put on the books this past quarter. I wouldn't say that you can say that's going to stay that way, but I would say we're relatively flat. Right now we're showing a little bit positive bias from that perspective. I think that's good. It's competitive out there, but we're willing to give a little bit on pricing if we have really good structure. We don't want to sacrifice on structure is really what's important to us, and that's something that we aren't going to change from that perspective.

Right now, we think what we're putting on the books is still meeting our returns in pretty much most of the situations that we are able to do.

Girard Sweeney: Understood. Thank you very much.

Daryl Bible: Thank you.

Operator: Thank you. Our next question comes from Ryan Kenny with Morgan Stanley. Your line is now open.

Ryan Kenny: Hey, good morning. On the fee income side, it's been a strength for M&T for several quarters. Can you walk through what you expect to see in terms of higher rates impact on the fee businesses and maybe how that trajectory would vary across the major line items?

Daryl Bible: Yeah. The easy ones are higher interest rates on the yield curve is definitely going to slow down our residential mortgage business, and you're seeing that now, obviously, with new home rates above 7.5%-8% in that range bouncing along right now. Our RCC business, which is our originate and sell business in the commercial real estate space is also higher and has lower volumes just because it's hard to pencil out and get the economics that we need for our customers in that space. Those would be softer. One of the countercyclical items we have is our mortgage servicing, sub-servicing businesses. What we have there is most of our sub-servicing businesses are in government servicing FHA.

When loans are delinquent and then when we're able to cure loans, we actually get paid a reward fee for that. If that actually not wishing our customers to have issues, but if they do have issues, we generate more revenue, and when we're able to cure them, we get paid for that even more from that. That's more countercyclical. Doing our corporate trust. Corporate trust business is a great fee business, but it's also a good deposit business for us. If market activity slows down in the capital markets areas, we'll see that space there. We now broke out our line items on capital markets and commercial.

That's going to probably do well in most situations just because we're putting more resources and more people in that space. We're coming off pretty much very low bottoms. We're very optimistic as we push more into that space and offer it more to our customers. Even in tougher environments, I think we'll be able to hold our own and still have success growing in that area. Net overall, we're very optimistic on fees. It's about 28% of our revenue. We're going to continue to push hard, and we still have strong net interest income and margin, but try to get the fee revenue up into the 30s would be a great objective for us to achieve.

Ryan Kenny: Thank you. Very clear and appreciate the enhanced disclosure around fees. Separately on the M&A question, any updated thoughts on the board's appetite for potentially expanding inorganically given the movement in rates? Does higher rates limit the pool of available sellers because of unrealized losses, or does it make high-quality deposit franchises more attractive? If you just walk through the puts and takes there. Thanks.

Daryl Bible: Yeah. Higher rates definitely changes the mark of the balance sheet, and that's real. What we look at, to be honest with you, deposit franchise is one of the most important things we look at, no matter what the conditions are, because it's hard to really have a bank that funds with operating transaction accounts and have that mindset. When you find those, you really get a lot of value there. So we're still actively talking to a lot of people in our footprint, and something may happen at some point down the road. There's nothing imminent from that perspective, but Rene knows all the CEOs in our marketplace plus, and he has good dialogue.

When somebody wants to maybe want to partner with us, they'll reach out to us, and at that point, we'll engage and see if it can work for both parties from that perspective.

Ryan Kenny: Thank you.

Daryl Bible: Yep.

Operator: Thank you. Our next question comes from David Chiaverini with Jefferies. Your line is now open.

David Chiaverini: Hi. Thanks for taking the questions. Wanted to follow up on the loan side of things. CRE consumer drove the growth, but C&I was muted. Can you talk through why C&I was muted in the outlook from here on the C&I side?

Daryl Bible: Yeah. C&I is a big business for us. We have lots of businesses within C&I. I'll just cut to the chase. It was flat this quarter. We had actually nice growth in our institutional CRE kind of REIT lending. We had good growth in our large corporate institutional. We actually had good growth in three of our four major regions in our regional C&I space. What offset us was seasonally dealer commercial services is at a point now where there's less inventory cars on the platform, so that went down. And then if you look at owner-occupied, that was the other one that kind of decreased. So net, it added to pretty flat.

Our outlook, though, for C&I is very optimistic and good. For next quarter, in my prepared remarks, we said we'd have growth in commercial CRE as well as consumer, so all three portfolios, and we believe that's going to happen and maybe a little bit more challenging with higher rates next year and all that. But our teams are really good. We have great relationships with our customers. So we will hold our own, and I'm sure we'll have good loan growth and still continue to perform really well as we get into 2027 and beyond.

David Chiaverini: Great. Thanks for that. On the net interest margin, you're guiding mid-3.60s for the fourth quarter. Should we think of that as a sustainable level for multiple quarters? Can you also remind us of the sensitivity to rates on the NIM for M&T going forward?

Daryl Bible: Yeah. Okay. Let me do sensitivity first. Sensitivity on the short end, we're relatively neutral, maybe a touch liability sensitive, but pretty relatively neutral in that space. The curve is steeper, and that's a good guy for us. I feel very comfortable where we're operating in the mid-3.60s. We aren't going to give 2027 guidance. But when you look at where the shape of the curve is, if that holds, if you look at where our asset repricing is, we have really good asset repricing in a lot of our portfolios. Our investment portfolio, for a given next 12 months, will reprice $6 billion up easily over 100 basis points.

If you look at loans, over the next 12 months, we have about $10 billion of fixed rate loans going off. That should reprice up for about 75 basis points. If you look at our swap book, it's come down in the last quarter or two. It starts to go back up again in the second quarter next year and climbs out of that. I feel good on our swap book giving us momentum as you get into the middle and later part of 2027. I'm actually pretty optimistic, David, that we're going to continue to have a strong net interest margin for our company and have good loan growth and see how that plays out.

But we're really performing really well, all the businesses, and I think you're going to see that performance continue.

David Chiaverini: Very helpful. Thank you.

Daryl Bible: Yep.

Operator: Thank you. Our next question comes from Christopher McGratty with KBW. Your line is now open.

Chris O'Connell: Hi, thanks. This is Chris O'Connell on for Christopher McGratty. I was just hoping to touch on some of the pricing dynamics on the loan and the security side. Maybe just post hike where the average pipeline origination yields are coming on for the C&I and CRE books.

Daryl Bible: Yeah. I mentioned it earlier, but on the commercial side, when you look at the roll-on, roll-off, we're up about 10 basis points in the third quarter in that space. That kind of bounces around. I don't know what it will be next quarter, but net overall, it's competitive in that space. We're really not giving on our structure, and we're getting the pricing. I would say the vast majority of the loans we put on our books are meeting our hurdles. That's what's really important from that perspective. As far as the pricing securities, I mentioned that just a minute ago, but we have good momentum. We're going to be able to reprice that portfolio up.

It went up four basis points this quarter. I would say that will continue to be up for the next several quarters, each quarter.

Chris O'Connell: Okay, great. Thank you. On the capital side, you guys are pretty close to your capital targets now and expected to stay in that range for Q4. As you move into Q4 into next year and given the Basel III proposals, any change do you think in the level of buybacks going forward?

Daryl Bible: We first want to get the rules out there and know what they are. We'll look at what actually is out there. There's three regulations that will probably be out by the end of the year, Basel III, tailoring, and liquidity. I think all of them will have some positives, maybe not as much as what everybody wants, but still positives in each of them to some extent. I think we'll just have to evaluate what the new rules are, what we have. But I think where we are now, we feel really good at that. With the increase in AOCI, we are being very careful with our tangible equity and all that.

That's why we moved those $8.3 billion out to maturity. The other caveat out there in the marketplace is rating agencies. Rating agencies, we don't want to get downgraded, so we have to see how they interpret the new rules as well. But net overall, we're optimistic that we'll have some flexibility there and continue to do really well.

Chris O'Connell: Great. Appreciate the detail. Thanks for taking my questions.

Daryl Bible: Yeah.

Operator: Thank you. Our next question comes from Matt O'Connor with Deutsche Bank. Your line is now open.

Nate Stein: Hey, this is Nate Stein on behalf of Matt O'Connor. I actually wanted to ask about the decision to break out new fee line items like capital markets and advisory and card fees. What drove the decision to start breaking all that out versus lumping a lot of other items into other income previously? Separately, I noticed a reclassification of C&I, CRE, and resi mortgage loans, and I didn't see any footnotes highlighting it in case I missed it. Could you just elaborate more on this?

Daryl Bible: Yeah. Let me take your second question first. We didn't change any classification of our loans with the exception of we broke out available for sale, held for sale out of there. That was really for our two portfolios in residential mortgage and in our RCC CRE business. Those will actually show that there. Other than that, the balance sheet didn't change. That's the only thing we had, and we're averaging a little less than $1 billion in that new held for sale line item. As far as the fees go, we had a very large other revenue category. It was either the largest or second largest out there.

We just had a lot of, we believe, good news within that other category. So we wanted to break it out and show more transparency there. We created those new buckets, like in capital markets and card fees and other things, and just bucketed things how we thought it would be and consistent. It was that way for a long, long time. We would have changed it earlier, but we were putting in the general ledger, and we just didn't want to change our line items and have to redo kind of our new system all over again. So we waited till the new system was in and working, and then we broke it out.

You may see a little bit more changes positively over the next quarter or two as well, just trying to enhance and improve our transparency and information that we share with you guys.

Nate Stein: Well, I'll just reiterate another person's comments. The increased transparency is definitely appreciated, so thank you for that. Then I wanted to ask also about ROTCE. You called out a 17.3% operating ROTCE in 3Q, which is a little above the high end of your 15%-17% medium-term range. In the past, you've said 17% next year is achievable. Is that still a fair assumption, or is there maybe upside to this target?

Daryl Bible: Yeah, Nate, we believe we're on track with what we shared with the board. We believe that 17% is attainable for 2027 for us. It will be challenging. It won't be easy, especially with higher rates. Might have a little bit softer economy because of that. That said, though, our businesses are performing well. All of our people know our clients, customers really well. We will compete, I think, really well against others in the marketplace. I think we're all focused, and I think we're going to achieve our goals that we're setting out. But a year from now, you kind of know if we're there or not.

But I think that's the objective, and that's what we're going to try to execute to.

Nate Stein: Thank you.

Operator: Thank you. Our next question comes from Gerard Cassidy with RBC Capital. Your line is now open.

Gerard Cassidy: Hi, Daryl. How are you?

Daryl Bible: I'm doing good. And you, Gerard?

Gerard Cassidy: Good. I got a bigger picture question for you. There has been a lot of talk lately about the agentic AI agents coming in and maybe moving deposits around on the consumer deposit accounts, thereby pressuring deposit rates for banks like yours and others. What is your guys' take on this news and other types of AI agents?

Daryl Bible: You have been in the industry a long time. Information has gotten a lot better over the last 30 years. People can move money to higher rates. You get information out there very easily. These agents will make it easier out there. I think it is going to come down to trust, to be honest with you, where our customers really trust to let their agents allow them to have all their credentials come in and have the ability to move money to other places and have that agent decide where that money is going to move and understand that really well. If you look at our center that we have now, agents are coming in every day.

We have tons of that coming in. But we are not really seeing much impact of actually money being moved out or anything yet. But it is happening today. And we are monitoring that very closely. But net-net, I think it is going to take time for people to get comfortable with that and having access to move money around. But it will probably become more efficient over time. But right now, I just think it is going to be not as much of a big deal. And over time, as people get comfortable and actually trust these agents with all their money and move it to other places, then it is purely mobile at that point down the road.

Gerard Cassidy: Sure. Okay. Thank you. And then you guys have had good insights into the private credit market. What are the trends that you are seeing? Obviously, in the beginning of the year, there were some real concerns about credit quality in that market. Are you seeing increased competition from the spread, or what are you folks seeing?

Daryl Bible: Yeah, I'd say private credit including BDCs and that, it's just a little bit softer. They've had, I wouldn't say issues, but they've had to address some of their liability side of their balance sheets. So the funding that they have now probably isn't as robust as what it had a few years ago from that perspective. We actually like to partner with those if it makes sense for us, and maybe support them and help them doing what they're doing, or split a customer up or take a senior position, or they take a more subordinated position. I think net-net overall, it's not having a negative impact for us. If anything, it's neutral to slightly positive for us.

Gerard Cassidy: Got it. Thank you. Appreciate the color.

Daryl Bible: Yep.

Operator: Our next question comes from Ken Houston with Autonomous Research. Your line is now open.

Mokshith Reddy: Hi, good morning, Daryl. This is Mokshita for Ken. Could you just talk through the trade-off between AEA growth and NIM? I think you briefly touched on it in your comments, but just going into the higher or longer rate environment, how do you guys think about just the trade-off between the two?

Daryl Bible: Yeah. I would say if you're purely minded to get the maximum interest margin, you probably won't optimize your return performance and your revenue growth. To be honest with you probably aren't solving all of your customers' needs in the marketplaces. There's a balance there that our goal is to support customers and communities first and foremost. We need to have the ability to have balance there. We look at can they hurdle and can they get the right returns? Is really what we're looking for. Can they get a 17% return on tangible relationship in that? If that requires a lower spread, so be it. Maybe we make it up in fee income or balances as well.

Net-net overall, it's more about getting the right returns is really what we're focused on. That sometimes could be margin, sometimes it's getting more NII. Right now we're leaning into trying to be as open as we can with customers and try to bring in more of the relationship that way, and seems to be working right now. I think we'll continue to exercise it and do that.

Mokshith Reddy: Okay, got it. Just one on fees. You guys had this nice sub-servicing add this quarter, but how are you guys thinking about the opportunity to continue scaling originations and sub-servicing capabilities over the medium term?

Daryl Bible: Our sub-servicing business and mortgage is really important to us. We have good systems. We have good people that are trained in there who perform really well in that space. We actually like the hard to service type of business there just because we think we're really good at it. That's something that we're in and going to continue to stay in that space. As we have opportunities to grow it some more and compete competitively, we will. That requires continuation of investment in technology. I mean, we're prepared to do whatever we need to in that space. It's a good important fee income line item. It's counter-cyclical for us, which is also really good from a diversification perspective.

George Taylor, who runs that function for us, is doing a great job with that, and we will continue to grow and do well and take advantage of opportunities when they come our way.

Mokshith Reddy: Great. Thanks for your answers.

Daryl Bible: Yep.

Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to Steve Wendelboe for closing remarks.

Steve Wendelboe: Thank you all for participating today. As always, if any clarification is needed, please contact our investor relations department at 716-842-5138. Thank you.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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