M&T Bank (MTB) 20 Jul 222022 Q2 Earnings call transcript

Welcome to the M&T Bank Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Brian Klock, Head of Markets and Investor Relations. Please go ahead.

Thank you, Gretchen and good morning. everyone call, in through both thank XXXX second the to conference earnings by like for M&T’s participating quarter webcast. I’d telephone and

Investor issued on access have morning, from financial financial our as webpage you participants not encourage in information. and our non-GAAP materials. the and this today’s Relations schedules well and filings materials release our other If investor as all by www.mtb.com clicking read included tables that Presentations Relations start, are and you SEC are I’d we These Investor we along earnings it measures we may materials as and release on website, them for with of the only link the speak earnings today’s may complete no reconciliations Also, obligation presentation them. link. of a then These forward-looking about to and on undertakes the discussion as before factors. risk statements Cautionary M&T contain as well refer update to to and forward-looking statements the to information Events this made available mention statements date of and like

King. over Now, Financial Darren Chief the I’d call to Officer, like turn to our

good you, Thank Brian morning everyone. and

past the we reflect first with the half of we and As on are progress. quarter the year, our pleased very

on X. results The Financial acquisition, second the include impact April quarter which of United the closed People’s

positive progress up both later quarter. making million repurchased $X stock the operating generated billion Directors M&T in our strong versus the about conversion stock. excited revenue a effective Board growth With expense are momentum we to increased net especially common in by have pre-provision franchises the yesterday, pre-tax common are million as repurchase NII than program $XXX new management, the of And authorized of to last combined We preparation quarter. $XXX We planned quarter. more second a for as in leverage, this systems the M&T and organization,

excess to benefit and we higher rate With from net sheet securities and us boosting the management to rate continue expanding balance margin to sheet program. balance into year, interest fixed more environment, our continue projected add deploy more our interest to interest with the enabled this Our cash changing investment to rate assets hikes hedging us Fed yields. allowing

we for have from the While prompted to rates, are beginning see for net mortgage positive both gain-on-sale income just our banking in higher margins. same volumes interest business, and rates headwinds origination benefit those rising

quality to these the strong. macro persist. We rate remains the expect challenges, and unemployment low Despite credit headwinds remains

future People’s excess the well excess excited are and positioned and capital. to of continue the and integration to the our for We United franchise cash deploying

were in practice, The its Consistent from the quarter. million. per compares the expenses quarter results on X.XX% well or total amortization quarter. GAAP to the for per common supplemental merger-related assets yielded Now, $X.XX long-term quarter. share. annualized share XX.XX% charges was we per results. assets results per This effect returns included in press intangible of income and additional reporting comprised with acquisitions. first pre-tax Included which the $X.XX results, on recent were $XXX expenses Net shareholders’ were or the provides contains comparable share. X.XX% gains common quarter million XXXX. first United XX.XX% and for of translate expenses in in merger-related of million the expenses, SEC’s for $XXX with net million average return Pre-tax second common the and $XXX accordance so-called basis, intangible in this these in with a assets of Diluted $X.XX CECL of M&T’s average were acquisition quarter let’s which quarter. return of X.XX% as excludes of morning’s an quarter XXXX’s $XXX are or assets recent to release compared $XXX in X.XX% amounting operating operating the plus annualized on compared M&T as The quarter and count common and GAAP reconciliation first linked In equity. results $X ever share the tangible guidelines, merger-related People’s GAAP equity quarter expenses $XXX after-tax for million review of net These annualized and rate per with of tangible on intangible operating the a the $X.XX Day quarter X in compared common in net merger-related income the or the On amortization to quarter. after-tax from with associated Diluted X.XX% average previous any compares merger-related quarter. in mergers results return of related assets double the of produced and the of of rates GAAP tangible also million recent quarter, prior the $XX an Net after-tax quarter. the $XXX was exclude million $X.XX share for the were expenses of GAAP to average our linked the with for million common equity the X.XX%. of of or million non-GAAP basis, amortization That XXXX $XXX of and earnings XXXX. including million income earnings respectively $X.XX only of and with M&T’s operating a tangible rates common second second

the first this As investment $X.XX amounted year’s after-tax and in a any a our to $XX million in share. was common distributions receive did from effect distribution quarter’s Bayview We Lending $XX second in operating results million reminder This Group. per not net GAAP quarter. and included

of the an The take generated accretion. net Bank net the $XX these received billion due linked underlying quarter rates points net million day the additional offset addition, $XXX increase million a with on basis partially contribution X from the non-accrual offset XXXX, count, driver loans. PPP purchase and $X past interest higher in the reduced basis on income lower we interest for of interest-earning in the linked from basis by to income benefited X from points other were recovered and income decline $XX and increase to for quarter cash in largely interest from that Net XX% in the sequentially, $XX $XXX including margin. margin included was yields United linked factors, X from loans. an a primary the of The XX These $XX held cash basis flow to a X.XX%, All point the related Federal the level added impact Taxable $X.XX from interest income a dive amount increase United. or deposit This million non-accrual The on impact partially up million interest the second interest accounting higher results. X.XX% $XXX decrease from X deeper interest million a increased decline interest Earning day the into on $X of interest quarter. and Next, loans of margin points. fees the And quarter the legacy by assets, a People’s million margin. rates, items million had let’s decline we was margin swaps which which People’s estimate from estimate the inclusive in was quarter. benefit by million asset the was a on the from boosted M&T net little trends basis equivalent increase points. XX negligible to income in Reserve, resulting added quarter The margin million

reclassified People’s to for loans. we of Compared United In loans CRE there C&I $XX.X within of discuss order quarter average by the loans. over billion the billion as United People’s increased reclassifications were commercial we loan first due $XX.X just consistent M&T’s were Before loans XX% to reporting the or average United with balance $X the loan in portfolios. more the primarily the that be XXXX, had average methodology, note with billion outstanding quarter, impact trends classified People’s into

with by average in or compared loans to by amounted loans Looking loans the approximately average million. the loans was average dealer with floor average billion. impact bank, PPP loans, from Average real the average estate loans loans or $X.X category, quarter, On first an about by loans. and PPP at $XX.X billion of plan combined for The C&I basis, United million a billion $XXX basis increased end-of-period $XX.X increased by CRE commercial an with $XXX compared Legacy XX% the XX%. quarter almost increased industrial M&T of middle-market People’s $XXX linked million. in balance and C&I billion, permanent This balances impact decrease growth by Legacy $XXX partially strong United construction average about in $XX.X loans, during acquired People’s The offset billion. on reductions growth from the quarter. due was $XX.X M&T was acquired growth loans. million the to equal and second declined commercial

in the exposure activity construction to permanent mortgages. in conversion to uptick financing quarter. a new continue of There construction offset reduce mortgage an our of We is there as the was loans lack permanent into

offset to investment, for loans. the for from loan loans. again Mae of up that $X.X new However, M&T to People’s it new of combined with part retention of sale or billion loans essentially outpaced $X.X real originations became the $X.X balances loans Average the XX% entirely buyouts billion flat by runoff, were impact billion estate re-pooling eligible level was average normal in due People’s United average large Residential XX%, an of as almost into pay-downs. impact by by were due the were legacy elevated or consumer increased retained the average the The United Ginnie RMBS.

was occurred resulted will average the billion decline deposits, the M&T, is the optimize deposits Reserve placements, some available municipal of resulting a investment end in result restructuring of informative due thought June, growth United $XX.X legacy billion be the of at rising deposits, to increased decline end-of-period billion reduction associated quarter, investment billion at key mortgage $XX.X $XX include billion the capital United legacy notably billion the a increased a deposit impact funding $XX.X deposits. After and in excluding over largely demand a deposits, the decreased high in increase a we billion factors. the cash billion we billion of $XX.X actions first For cash from related in investment $X $XXX of lower balances M&T securities decrease of Average a acquisition, change various securities from closing several broker the deposits. $XX.X down of in a balances. it in inclusive be base more actions money the reflecting billion at activity finance average lower People’s sheet $X.X $X bank. April United in actions or warehouse compared a These People’s of and some by trust in during due $X.X on market and quarter, Many levels escrow securities. continues Cash market of of increase People’s growth driver so levels M&T $XX.X the XX% look X. Average with billion and restructuring growth. These with securities. of to cash the billion on environment, to The assets, average in cost acquired legacy just from million combined to Federal rate utilize activity securities, $X which the drop balance and impact to these recreational earning the by investment implemented to loan

cost the interest $XX to actively compared able are With desire. to they customer to that off-balance deposits, average continue the manage was balances alternative XX% and We $XX an move which CDs the The quarter. deposits with retaining People’s by billion. excludes provides $XXX,XXX the and average first sheet many background, cases, increased about higher deposits, United customer impact over from that core or their rate billion in

The million $XXX in second income, Turning $XXX while linked declined non-interest compared quarter. the non-interest $XX $XX People’s legacy income contributed the million, United in quarter non-interest income totaled by to million M&T with million.

with did million received a $XX Revenues interest The figures compared any reflect our sheet. Bayview our Mortgage the recent investment mortgage quarter in distribution first on this which second banking Ginnie with of M&T $XX pools the revenue were quarter. the or in quarter. revenues in noted, in were quarter driver has business originated As substantial and Lending million in prior $XX for to decision decline recent from for receive Both the originations of $XX the a the quarter year. second first margins from linked with became in our pressured in rate Group higher of quarter distribution gain-on-sale the not balance Mae for the from $XXX sale our previously majority the compared in compared were resale is Residential loans million million the residential quarter in $XX which $XXX million primary million quarter. million servicing linked eligible purchased repooling. mortgage loans environment, quarter for retain and

With the for new these loans Ginnie yields has negative over past driven originations rapid increase repooled the origination sale which margin. mortgage months, yields, gain in new below the have on Mae fallen few

the from that was $XXX administration. People’s the partially waivers lower management fee of million Service Trust million in mortgage Commercial income quarter. repricing to in the charges United revenues and in million were valuations deposit previously of recent M&T United. was $XX about $X sold residential in the this quarter, to million in quarter. $XXX reflects figure of mortgage quarter, unchanged seasonal and Legacy under a in $XX the due $XX on a the loans million checking tax by were and contributed in $XX assets impact million M&T fee with During decline fees on ago on announced first income compared million million our $XX market sale the products. about included the service the second quarter, linked money million in X% largely $XXX income the preparation accounts from million quarter. trust line fees, at compared million prior quarter essentially market quarter. year People’s gain $XX during primarily were legacy banking about consumer income the The recapture $XX of loss to offset from increased

year. million the expenses, were the the the compensation run-rate in about the half M&T billion expenses operating which million for revenues for exclude to million foregone second first of of from quarter, operating the seasonally quarter $XX year of Legacy included United. assets in reach People’s ago Operating per in linked to million during merger-related expect second about intangible quarter. approximately $XXX million of and operations expenses compared from program the million $XXX a We and of quarter expenses Recall, the quarter higher costs. amortization the $X.XX $XXX were $XXX $XX expenses and include

the This recent the those quarter by quarter almost and legacy year. second increases from to tied X and from impact the additional merit bank gains which accruals a from in improved in merger-related costs with salaries numerator quarter and compared that expenses flows the last business XX.X% intangible seasonal performance. XXXX’s Aside benefits from efficiency amortization resulting losses The securities or factors from salaries higher incentive first through first entirely ratio, million and of in $XX was benefits, excludes XX.X% XX.X% M&T denominator, was due operating full of quarter. day, increased quarter increased to the and increase and expenses

of at to largely million credit the variance, loans. million Next, is of the allowance and accounting labor Despite at to chain challenges to their second of stable $XXX let’s credit. persistent the the from end loans provisions of to through increase the $XXX quarter, deteriorated, we linked assigned pandemic closing. supply inflation, United impact improving. to its The for the the from credit People’s was the or United loan confirmed People’s disruption, end The billion of lingering million up the allowance the shortages the the the and We credit and PCD quarter. losses $X.XX amounted CECL due allowance turn essentially allowance to principle, $XX purchase portfolio. our methodology Applying loan to related acquired acquired non-PCD book ran allowance and

in at inflation of show the recorded quarter. provision $XX Partially year’s levels. to In million period, the indicators net this offsetting charge-offs first prior improvement million high continue increases remains compared a from million in second $XX Economic but addition, we to the a just in quarter historically were quarter. second $X these

Aside that growth loans of at for non-accrual entirely in When loan X.X% file our second those as of was rate the baseline from Non-accrual residential second legacy increase the forecast portfolio the end $X.X to CECL United interest non-accrual from a the loans. relatively compared macroeconomic sequentially. including indicators modeling XX-Q increased M&T result sequentially. weeks, unemployment down the have significant a commercial results, was The X.X% an and of second movements our expect quarter curves, quarter. decreased People’s quarter the and represented rate, on increase impact few quarter’s the quarter, unchanged forward prior real criticized the in At values. estate acquired report billion GDP end billion $X.X loans from loans we loans, we to in the at linked of to

percentage the to increase loans United portfolio, the of loans the People’s to the the the trends of entirely non-accrual criticized will dollar Similar recognized in portfolio. due decrease. in criticized as However, acquired amount is

a legacy modest in M&T criticized decline loans. expect We

As $XXX $XXX were XX million were these amounted guaranteed XX% which for million noted, a on the down the XX entities. we sequentially. at loans charge-offs due the points charge-offs quarter basis in as continue for government-related recent quarter, past by accrue days of million. of past of total, $XX compared to In the the net days were first interest end Loans due from percentage quarter. total points Annualized basis X to loans XX to quarter

the Tangible stock. increased decrease our The common common $XXX M&T’s repurchase per was quarter Turning of amounted $XX.X from equity shares, end of compared common share end quarter. which to People’s People’s and the at United XX.X% to impact to merger. XX.X% Tier the common of X% common United of an in of represented the Tangible with capital, the the to was first end of the down estimated million share, $X.XX largely largely ratio quarter. of prior X impact outstanding the acquisition X% the equity equity due first billion, from XX% or per due totaled the $XX.XX the

for the which $X second program, authorized common $XXX in previous of billion of the were Directors replaces million repurchase $XXX the noted, up program which under shares new quarter. million a previously stock, of repurchase As purchased Board M&T to

outlook. to volatile Now a Interest full outlook expectations curve United more basis. full follows outlook XXXX. material quarter, let’s on three the balance turn a as as year the on and to well that our for impact year is can sheet to have quarters continue and be combined rate reflects forward Similar from with of recent People’s operations the a last

about the talk balance let’s First, our outlook sheet. for

expect We securities quarter $X billion for grow continue portfolio year. the to to investment of remainder by the per the

as cadence as that accelerate could on well slow loan conditions However, market depending customer or demand.

the expect standalone to to outlook of compared XXXX for franchise turning XX% loan average be $XX to year to M&T average when Now the growth average XX% full in we balances range. billion, our continue for to loans, combined loan

in we loans People’s XX% in come the expect range. and the for to CRE reflect near C&I CRE we that year growth C&I combined C&I that average may in lower rates loans book the average XX% growth loan average a former into However, mentioned the reclassification end earlier. full basis, On of growth updated United and the of that range. Note loans

to XX% range, in mortgage average range to consumer residential XX% the We growth XX% CRE loan average XX% in the growth growth to expect range. XX% XX% in average and the

the higher statement this at noted on from operations compared manage believe we the XXXX, As we’re earlier to positioned we call. income combined and stand-alone from challenges macro look rates to we through well benefit to M&T

full growth for Our franchise $X.X XX% compared XXXX. net the curve year from outlook the the month. the combined interest is for with the forward reflects yield of billion beginning in income for This

interest pricing excess loan and hikes minus the X%. the the Given net plus liquidity deployment and of be income interest rate of or of the full deposit speed growth, reactivity Fed, year the could by

growth money albeit income lower fee Turning quarter. market expect equity new fee business as to the but second the of by a lower trust and expectations We still waivers than recapture of strong driven valuations result the businesses. from previous

to expected are on In interest addition, higher originations margins. continue to and sale mortgage pressure rates gain

the mortgages, we sale We have from to income sales almost minimal residential half X% year. the year. Ginnie We, in for retention to we on with in expect the of this to $X.X of gain non-interest mortgages be the mind, the originations completed the repooled of rest will With in Mae of the and grow therefore, the XXXX. range all for full billion second to the compared expect year X% in now continue

impacted year United of operating Next, our by expense non-interest outlook XXXX subsequent of the timing the People’s conversion is realization for and expense full systems synergies.

XX% anticipate to when $X.X growth the compared XXXX. to in XX% combined We billion in operating expenses to continue non-interest

inflationary expenses higher wages are be likely pressures and improved on to the end the of However, near reflecting performance. range, bank

As operating expect We to these merger-related include different estimates. our not charges. non-interest a do initial materially do reminder, not these be expenses than pretax charges

credit. to Turning

credit expect XX basis long-term to remain of to M&T’s well points. continue average We below losses

For conservatively we for combined in will point that range. net company the estimate XXXX, be the basis XX charge-offs

lending capital. run released and SCB, measured in Based plan the to support We of is organization pace. core or needed turning our Federal stress estimated is the to in stress capital of to to level than We its M&T’s shareholders X.X%. known the DFAST capital Reserve to DFAST. the return a these safely the communities. preliminary on capital is Late higher combined current results what test, also Finally, believe buffer, as at at June, excess results,

X, XXXX, capital to comfortably although threshold, could limited As is exceeds equity be regulation. that ratio Tier X effect regulation, XX.X% of M&T’s the XXXX. from September X.X% be X we will June through at XX, Tier by under equity subject common distributions a which a common SCB which threshold in the October ratio result, XX,

generate potential XX.X% position We to capital change continue a of few significant additional years, over a material ending capital distribution to next anticipate range. starting our – the we With anticipate to ratio don’t the XXXX CETX the and capital plans. capital amounts a solid in with

end our always, shares is the Our objective, the repurchase under to CETX near We the bring down a gradually $X as high billion continuing to new of of quartile group. ratio to our peer common is repurchase lower program. level that anticipate

which the Now will review instructions. let’s briefly before up questions open Gretchen the call to

take first The we question Instructions] Stanley. will is Graseck Morgan Betsy [Operator from

Hi, bit could to good the plays on time? rate is was morning. update that your do This out, the an further Brian rate little I expect if wondering current today Thanks. for assuming that give into us we’re that curve you trend Betsy. where a sensitivity you on now hike over cycle. And forward

Sure, Brian.

about As obviously, that based XX% and we’re we’re and the might seeing, interest of the our deposits how on basis. our to on looking we at portfolio. kind XX $XXX any million sensitized and quarter for us again, on the point started to XX, move the sheet is thinking reactivities When that of when of income It’s where X growth think of funding, the the range. mix and when XX%. at net what of year. some to net quarter of actions towards of deposits look we’ve that, kind than the next And this balance a look a some range anticipated the on of hiking Fed margin it is to in at each mix we million the impact be, basis we faster out pace in started increase we basis the lot what of high-cost increase points taken we’ve about hikes $XXX several that’s XX And interest at look an more annualized one

funding And some end? though of you you. helpful in you I your the through overall made just wondering if was deposit your of expectations high could talk cost changes thank really about light and That’s sources, growth year

of look M&T I we and amongst peers and would Well, core funding the banks. portfolios have what when one our funding, call, our amongst the higher, you at

significant a interest operational which is so well be as tend accounts. noninterest-bearing DDA checking, to And as portion

continue small gradual. the given it’s so those or fairly But been we been at as that decline look rate we’ve be has customers, of consumer, business the we when so expect commercial spend some accounts, far, inflation. people there whether decline do will watching And to

commercial have you That’s the the loans. pay some We when see seen declines. of some some of cash part excess customers down loan use to of

We’re seeing or price using to earlier, that cash. where the in start the short-term, deposit wealth by payoffs tends as customer in place mentioned And most be, the them the space. as the sensitivity you to offset space the well we by municipal really in see as

on checking And And is space, some so we in pricing start migrate balances actual see will instances expect towards first, some movement to particularly to what Brian, what where are savings goes there happens, generally, the you there. consumer money typically, but happens see up interest time is or and market, the deposits.

and kind rapid for beta so more costs. up And a the than the migration for is moving will particular deposit so what be part of deposits towards overall category one the expect in of deposits, will would time of what that we see we for and industry any us drives pace.

be nature in expect excessive much. we X% the maybe we from – expect range, not the be but to of And so just deposit given some it don’t to decline, really here, but that X% our base,

you. Thank

Our question comes Pancari, next John Evercore from ISI.

Good morning.

Hi, John.

on just balances. – average the appreciate the On growth the for loan XX% on front, the to XX% I guide total

color terms the a the declines alluded Is of be but assume portfolio. you outright Thanks. would And balances trajectory to growth declines it overall that. commercial are kind to just give see to or I continue in that a estate shrinking mix, fair to of there? you in know want in could see actually maybe if of the it could going Just little real the you

I The PPP, aggregate, on. commercial We they be the two happening And at likely C&I think aggregate. think look So is at decline to when offset two things flat. in CRE. at what’s look will going balances there, in growth in there close the to what’s be really in relatively important looking we it’s to will CRE a ex and

decline. a construction been first, talking about The for we’ve loans while the is on which are

XXXX have drawn have in and in the construction XXXX XXXX, XXXX down back XXXX had we so that as real and projects course underway. and of lines over been And growth some been

a as did off come they You follow track. the course to And delay those on into pandemic, got permanent in will back often converted of our balance mortgages that see sheet. their happens where but get little projects normal they and completion, will

we so some to construction expect decline in continue balances. And

as side, On the cash. using we permanent have payoffs from seen some I customers mentioned,

to rates We rates low. With typically haven’t declining of their you level moving, cap excess their see it’s been – The affecting balances. using cash values. and that and activity be space in CRE continues cash asset their the

And not turnover properties so affect have CRE. in you’re circumstances. decline permanent and pace seeing – might the growth under the of will starting in you normal that And like our you’re

saw very of best back what if weighted and across so this qualifiers And look bit I quarter, quarter. originations, sign. which the in quarter was it there, increase positive loan the it of originations actually in towards C&I quarter, post-pandemic our was CRE, at a a end we little the I thought non-fourth lots And was

to $X bit year, billion by takes which down, about think maybe slightly, guess, down mortgages, X%, X%, C&I. course little down growth permanent construction more over in probably the mortgages I so it, And a in the call X% dollars offset of

it. Got

was Okay, think quarter as saw could the coming authorization. on fair here? repurchases in billion it then of the Is front, about $XXX quarters? see piece get the $X in should pace of buybacks separately, to a some in just million? it thanks, acceleration second the we you the buyback the Darren. And to good pace new of you similar assume Or How actually what

accelerate It and to is We’ve capital $XXX is affect go growth how good interest which way and depending think best rates through, with a quarter of could through will to on it, that happening think pace. net The fast John, one income merger the what’s Yes. to coming about move sure. Yes, expenses with got some million capital. generation. about

it But of that bit about. good million. a could we I think a think a little or So pace down little move $XXX looking to forward, purposes bit off for up that’s

Darren. thanks, Alright, Great.

will from question next We Ebrahim our take of America. from Bank Poonawala

morning. Good

Good morning.

XX%. NII to wanted the I guide follow-up up on guess, one, for I

all fourth given of around right? we billion. implies north pieces run quarter $X.X sure, make sheet, balance moving to the the have wanted this rate exit It Just

make for do much what of to Just well? And the if the us mind accounting jumping an you in of and maybe you want number reasonable if how that sounds about half as expect point purchase back next is reminding terms off have in think accretion XXXX. year sure, how we for don’t you updated

Sure.

of on your of use. good sorry, answer billion mind number a lots keep that a mentioned, and was. to the on I at is I’m betas, my that’s $X.X me reasonable think again I’m remind based the but assumptions obviously, rate I’ll as mind forward first and that’s we second losing the deposit in to So that end the caveat question, number. – curve about year run – that what then And question already. the

the Just for... much in is how in terms of purchase there of accounting accretion numbers

good the start Yes, million purchase $XX And number blends time second is in we mean, a its over quarter obviously, that the talked point, that down. I that saw accounting. way you about the

as the you run-rate but of good three accounting so, think a year, million to about there. million purchase this of $XX be accretion about kind XXXX, think place versus quarter a to four quarters is And $XX

hear couple follow-up a past just versus you terms talked separate we on sheet had of how guess, as love are as of about where tweak some evolution the any I the strategy just you about in I the that that in of not would thinking And think terms a appointments I And as balance we just CRE the then anything obviously CRE test? much and announcement of a – of you coming surprises, function within CRE to updated about have stress think an days new of in One, you the side the around the stress ago? about Good. you to test, business your think of would business? out thoughts. think

Yes.

– look answer pleased when process to short we we decline the at test XX% I in the in XX%. We down around guess pandemic on path couple stress that think from of that on see CRE I CRE rates is we are the comments to hasn’t were from stress test. our the loss and thought the changed a

around or even earlier test, X% at of CRE. stress for averaged However, kind if you they look X% it

look pandemic, our you And a minimal. test look real stress that So at there performance own at it’s support that. losses number. get from from space, live much much without the were still when years X over pretty in last and can’t time, the was that when anywhere on CRE the pretty pretty government the what’s And we really is near we over elevated CRE interesting the

talented to of our really about And there operate we sets our customers space. underwriting, and we’re use we’ve with We underwriting those have we are looking in so kind who support that that others the that of skill got experience comfortable think we sheets sets really in a skill actually and for think we group when balance individuals can think about underwriting. and to the maybe continue use the our

make a loan and broader into income, customers take great And it can more can a dollars and we our skill We capital. for advantage efficient of provide for of range them offer convert where we which capital maybe capital so, there those and there up and where over some balances funding set. is will free can our alternatives match and them even of fee be there time,

been feel path the that we it. so And good really we’ve about on,

in weeks. capital added We bank. We’ve of our some in that start in what about up we it innovation bit added of we that our quite or where As off. you the team more slowly build percentage the the rest We still coming of the the noted, and a we’ve noninterest call not numbers, added build And folks couple the little but into folks. It’s CRE hear and markets a and in increase area players office. you some probably to also balance as ends at we on that slowly sheet go income mix XXXX. can through a out will point year see the this

in to helps context color a some give hopefully, And of no that long-winded we’re guess, path strategy, that change so but the way of saying on. I why we’re the on

you my questions. helpful. That’s Thank taking for

from question next comes Bank. Matt Deutsche from Our O’Connor

Good morning.

that. about Sorry

Matt. Hi,

expense year in explicit saves several obviously, coming over next guidance Pretty cost and quarters. this the

kind bit. and expense expense little and which puts As how component more and kind kind But year some about of is of bottom with credit, inflation about there growth, we takes of underlying tied of the the is just line just always expense might a to growth? medium-term think normalize given next think some underlying do you

Matt, way Well, ahead you’re of me.

But through geared and we’re net XXXX we give through expenses getting that start that was excludes get – still planning rate idea as an expense suggest might go run would exit we the as of what some What the path The up start on. to gave here. a so you is the quarter, a in system with basis, that’s the to guide third our final We’re this conversion we like – pieces reduction. XXXX the let’s we operating merger do I XXXX. of should you look key to expense the once on of it and moment

immediately. there will contracts will decommissioning happen so on, don’t And expenses go and those that systems, be and

folks acquired plus that months. be days. month institution we days, Sometimes systems There XX two or be retain XX a plus from that XX the takes conversion that plus will days, can that, will

to of will from that saves maybe the to be bit quarter run expenses when efficiency we make the some the always kind our sure expenses fourth. expenses of in investments that the first, solid fourth improved but been about which that we the technology has and so end the are and and that that, rate should X% on It rate into inflation. might been first productivity, close the the be making the of are towards the where a And be pay making, of basis. our should we different into exit to normalized quarter to at pretty bleed and of a have we attention shouldn’t in you the by historically, real the And slightly end to philosophy be ratio the little growth getting Outside of expense history get investments X% save. we an higher much because provide expense it

numbers the at but if of zero, see have to Sometimes seen something end like it’s inflation mid-single that not end digits can we you last lower over years. up where we of couple the expect is

there circumstances That’s to positive us long run, are bank do that’s some expect operating leverage run. kind goal. how But over it led think there. run extenuating I our to we the and over of we achieve the that the long

kind of mean I hoping pretty much a to minimum year some regulatory Thank the how minimum. the following helpful. the over is That’s to term, are just do big And regulatory you you longer then up Obviously, But what’s ending XX.X hold capital buffer on questions, the thought of down you you. want clear the much want drive over this minimum? time. regulatory at over how would buffer. it’s on

with account number as get can our the and own Matt. the keep test. insight internal Sure, from when at CCAR mind well analysis the as And we capital in losses that stress the take years to and into change. Yes. under the I mean our targets, thing SCB we look stress every test X we stress is

we have on got year’s based the our we place want so test. to careful setting capital X be any about be And ratio to

how test last is with is and the The in growth keep to years couple the other in take and size balance account PPNR important think mind, what operational of into part models sheet that of I does for the especially that risk. Fed expense

And drive factors within that losses, is stress other and credit is so capital then there there buffer, these up. that that

those we will go And also through so change time. as

stress on impact well are PPNR reduce negative and can on which construction, as And factors Many test and intended work CRE doing in the cash CCAR, that time. things over think the so the you have that to rates bring loss help will CRE. into of securities, help that deploy work just we losses should we in help focused down next the to doing the as balances in are about reduction in buffer and will the – are impact that the lending on are we the which capital

on off that’s year we of an And will which talked normally so go through test, go for year the a again, it but as this is enter XX.X the Category about we basis. a for when the really X combined XXXX year we stress into bank, we that be will first through January

little portfolio which excuse think losses a we stress the a for People’s so or their more because that skewed we to SCB me, be year. will CRE and – mortgages, under lower have towards under sorry, is tend actually helpful is think permanent portfolio the stress loss – helpful Now, a our next higher to also

end the about always ratio. CETX peer operating in top talked at have bottom quartile, the terms the of the range end so in quartile of And low of we the bottom

Given combined through direction. want to year this our about. the expect through basis we that down first we things into of end continue that move bring buffer and history, the range our and on we and with get in But test a history that loss underwriting to some then talked to

Thank Okay. you.

Cassidy comes next The Gerard RBC from from Markets. question Capital

Darren. Hi

Good morning Gerard.

with to us go number to implement organization. strategies your level? any what to anyway, number a back regulators with down for out, It to a not the may capital more hope year didn’t in through capital you your obviously, next the minute, you extraordinarily high. XXXX from try bring one pointed right that, this retribution compared to can to But regulators. stress Sticking you annual when was your to just report stress buffer in it’s exam, be of the reasonable the about aside risk as year seem that in the letters show Bob’s share how I you

just with guess I Gerard. sure, Yes, starting the test.

keep give thing Another and And Fed the commercial of years, on people having time system mind it’s in the to the and in the were banks a Fed tests perfect. the put good in to think base stresses country process. couple a by to were be never challenges based country. of stress on in the in the been going put asset what’s place each the year, very parts history it’s It’s and certain that on last of some is, unique estate. confidence at focused in And the real place the was I going

is when felt an M&T. historically focus, little a real concentration like organization pain disproportionately estate, as had in a the so commercial And that’s has banks that the at

we comfortable are the look As to can’t we I at but with operate that going peers and to that our earlier, are clear the have if we relative class, – history in the very we past. of we mentioned with portfolio of actual underwriting the it’s asset size losses,

And different so about going to doing but ways thing most are is that’s continue are going we about work the to do important we to support our why are we that we them, there talk which the to that that. customers, be think for to

And will of naturally probably C&I so we a slightly as look we come as little go construction to real estate. construction commercial and down will loans, have that our a forward, big, and towards portfolio in then talked we got about. better to consumer balance move And addition loans

the of of something will could because or loss the portfolio should that construction to be C&I part The mortgage overall year, be it be what – categories. could test, the and so help that a it be else. different higher one are could It could loans outcome. just stressed lead in And next

of had we of test, we went always interest net system at zero, for cash the M&T drops this when produces of particular, keep – the on to our the in when reduce size going system, have think balance sheets, also will that’s in the to in happens test is is I to expense though, and come quantitative losses thing, and reducing the effect reduce reduce will tightening I sheets the SCB. the in sheet value the important deposits other and in that operational The highest earlier reduced because test that will as income. keep of the out balance year, mentioned mind of Fed the balance the level that the funds that mind those and zero growth Fed anyone cash And test through in

of And so assets driving with them. income of the you not have benefit expense, the but comes the earning that the any benefit

those over through PPNR shrink fixed more And little bit a that and those more and so start help invest bit rate securities test. to the generate a little balances we will securities as in see we the –

we improve it and might on that buffer of pieces capital that help expect path. to things a take actions are but the are will we it are closer and all all we where so be. of bring down to puzzle – And it these And taking that’s to time,

not, on and maintaining give growth SCB continue in to if generate to on We capital number have to down, us path distribute talked friendly to the while balance the drive franchise invested the suggests the continue we the where a it opportunity that bring will cushion the down to shareholders we way. appropriate need capital and are will to work in sheet SCB an about ratios help to in to we be which

Thank you Very good. answer. thorough for

the question, that follow-up anticipation obviously, credit, problems the your coming with charge-offs still weakness are certain best amongst of have to us, stocks some in a of developing, they yet discounted or are cycle and we markets net evidence the clear through starting the your you equity seem the is metrics of regionals, best, anticipate? year all to share As next early-stage in on tightening not the Fed. the rising credit are no, credit parts is if of bank certain on the from and – of have clear it’s or losses policies guys it franchise Can to seeing any you product it’s up there that something maybe delinquency creep types

never credit we the percentage mortgage, home does And equity, across at at in lows. look card, rates particular, also have low. portfolio last all Consumer it’s portfolios, that M&T below I consumer the And look near LTVs the when of still Delinquency is thing delinquency, auto, of indirect if we I also look When various portfolios. is been start at very the subprime see credit, portfolios and we are pre-pandemic at levels. are with a the customers I whether those in place refi, prime

of are well years, home as inflation in price LTVs over very With the low. the last increase automobiles of as value couple

And good so, of so far lot and delinquency coverage. not a collateral

signs nothing we are so And – that that in in seeing those as portfolios.

C&I in their for increases costs input on with function price C&I CRE to ability and end what’s it’s is C&I happening customers and the it’s how customer. to – pass and a their Within of strong nuanced, space,

to our coverage. And debt some so to some than decreases input we have led pricing. that’s in seen on where faster risen list where watch costs some we credits instances have have moved service And

have our watch we moved so to And list. people some on

interesting Within the it’s remixing. a estate a real what’s of is portfolio, bit

strong And real NOI. in we seen improvement so have a hotel

again. We are seeing people travel

fact and was and entertainment I as in an expenses, one the of In see expense up things our our organization. travel could

that I in a portfolio the which are think that’s a across urban organizations numbers. true statement for many and sign the country, positive for we is hotel our seeing

And of some occupancy are They off be the for better, are I living, continue us. challenges think still watch better. elective about those up to but sector, and pandemic office healthcare continues so – care some assisted seeing see acute a still which as some they surgery, in are is we lows, lower levels. the are get to And there

we our levels. are at country. true look in when that’s people people back we I think the also own to staff, more it’s not As but come back office. the seeing Again, pre-pandemic And the to office, across

some So, within we are space. the space challenges and still and the in healthcare hotel office estate seeing retail and no improved in performance real

our a in focus in really but And change so not aggregate, a shift is. where

So, I unmet signal. That very the wouldn’t give like. be all would clear

is be. looking We red quarters. several that says are a right big next always that’s flashing nothing the where worried there could that there coming now is the in for next But and issue crisis

– leverage in C&I you in widened there the in finance? Darren, have category And that do portfolio, is much spreads Obviously, particular?

small it’s percentage We portfolio. but have leveraged the a financing of there,

we with to on of of a commitments, maybe are. the they assets. million of size is it’s even where think percentage given it still the $X at I on call small billion $X.X a pretty combined pretty in basis, which what of those look $X that the in space bank billion our now, maybe billion grading outstandings, total And when is the strong rates $X.X

Great. Thank you.

our [Operator UBS. from from question Najarian Erika take next Instructions] will We

Hi.

Just one me. for follow-up

XX% are expecting second what’s given like actually follow-up It about growing two-part I do deposit guess levels. much figure deposits of question, peers dive assumptions underneath growth interesting – the NII? how pressures. in that first trying the pretty some you in much for have am how quarter a inflationary Number I declines. have left? accounts is from And talked one, guess your underlying surge all Your conservative deposits question. out I four to your you sounds are is more a to

are accounts. the as the deposit you back guess our to base of look to we deposit I Yes. from comments I what go portfolio, as before, bulk operational refer through the

consumers it’s where so customers, banking daily our business accounts. those our are their There from in commercial are our and there. running surge lives And customers balances

We are not of seeing of we not seeing are this changes kind them is pace. programs than run reason in painstaking at The from running various lots the explaining a stimulus happened a consumers, faster went dramatic that to see and of have pace was they our deposit the still really the is runoff accounts. task through point we the dramatic get crisis. of for wage There all to out that core the we of during where deposits of that our things the challenge pace growth, many but inflation

then is pay for come how those customers be some commercial out many like some the to and can they using of to use, much we beyond to that down excess And balances balances to our they down, our deployed other peers, deposit debt, for excess really, will the we position thing talked decline who will we on customers. – excess and look question but liquidity with what relative will will of will believe folks for types a the down how for given cash and loans. what customers want And some And do come pay get about balances rate so down have pay gradually.

we a we match XX pricing then on And do the your to out be relationship have willing the rate at looking commercial thing the probably would And are to a the And similar tend true depth if account or so excess we the will won’t you loan single broader pricing. of be your side. rates the service are if relationship. what you deposit on is we time given with some more a of for do that and there look on bank, liquidity,

any between core by in our accounts. stretch, balance – the cash of of function, so And that Erika, and are rapid might percentage our that sheet I not those really any position But depletion difference. the it’s cause versus think of a that of the anticipating the difference we peers level sits cash

I understand.

So, Darren, to interpret greater that, that for seeking your sure thinking is good are that about so a those it? think correctly, way just to just about making higher have I that Is sensitivity am you much it yield? cash

balances we give as renting that people guess rate describe I focused And total be for seeking will that where balance that relationship for balance are of sheet. we it, Yes. are will sheet. and just on our I keep relationship-oriented folks on places say the I kind those and would will our would what

And of that being cash selectivity the those the sensitive off. we and could balances little bit have We in we have. be position of run that excess to are fortunate a will well less able because

Thank it. Got you.

next Our Sandler. Piper question Frank Schiraldi from from comes

morning Good Darren.

hate to a dead severely what wondering, has stronger you the and even is is what overall. looks obviously the beat balances, basically Just adverse set categories test larger to it credit across side. the stress despite a horse assumed you loan on the But like capital pointed scenario if and I in history losses M&T almost than aside relatively higher pre the media

it would any than regional have assumptions more their much Fed is you loss thinking is wondering to color Just guys you of that on able a the sort if more thing? makes What punitive been assume? so gather

rate hood, there any to Yes. Fed when most remember loss portfolio, to that’s a portfolio Frank, similar the thing with look important is you what is anyone by right. no to M&T from the under applied the they different else apply

blunt course of the came so December this the XXXX test of this over And the all the most function years difference the of remember correctly, is of results couple where out asset Fed one, would a versus that And little mix. if much bit was some in loss lower first it being sector retail that and recent last what was were in I the was assumed I a the notably And lead test, that there and pandemic more this between think rates found, in that categories, the to in that trauma hotel whole nuanced. values. more and was

so recovery hotel better to more seen increases In was they collateral could values I apply travel see as the haven’t did couldn’t this And stress. they led and you test, ones last Fed rely hotels, drive to you nuanced the people conventions that more were business suburban on values think And was occupancy asset And where it collateral. still that that what and tended resort-oriented again. where properties started to and – travel winnings in and had was properties. seen still could areas, to urban the in in under in those we large the they

City. And the portfolio, some we at in real look particularly some the hotel, of estate We M&T in obviously New you and And there. had York applied were loss have when our so Boston. rates

Philadelphia We have some Washington. in and

help stress more so, properties at place. that that be rate. those loss to lead And would faced the that And would little seem a higher to and bit have M&T

was and a there office. some still beginning of on bit little stress think I retail on

impact bit – and C what and with Fed at us the buildings gives bit think B they tougher grade test insight bit little things, more look consider loss think still points more above gives we about again, to with those other when – the with our for But is PPNR. XXX in even me, we you comments the capital made about how types. and were rates, to – categories. were us to the more little stress more and about those values a minimum consider levels, looking about how at property basis applied it us under positive little I a I office It’s into scrutiny of a those that questions in we asset thinks the

sit, pretty we when Fed can so good be confirm in still look in asset withstand downturn us that classes severe capital great the the and where of ratios at just the of and some we helped these And feel really shape. we a we and bank

And the the adjustments through balance capital to and can talked so make to about as that be. learn efficient before as to we the we process be continue we sheet

all color. all Thanks Great. have. That’s for the I

we at [Operator I speakers. no further this time. now over Instructions] questions to will And have turn program it the our back appears

you Good is And And always, area any our release if any contact clarification Yes. department XXX-XXX-XXXX. on Great. code the at Thank day. Investor items participating thank all for Relations you. news as necessary, again, call today. or of please

program. participation. This Thank for you your today’s does conclude

Have You day. may a now great disconnect.