Earnings Call
M&T Bank Corp (MTB)
Earnings Call Transcript - MTB Q1 2026
Operator, Operator
To all sites on hold, we appreciate your patience and ask that you please continue to stand by. Your program will begin in six minutes. To all sites on hold, we appreciate your patience and ask that you please continue to stand by. Your program will begin in four minutes. To all sites on hold, we appreciate your patience and ask that you please continue to stand by. The program will begin in just a moment. Please stand by. Your meeting is about to begin. Welcome to the M&T Bank Corporation First Quarter 2026 Earnings Conference Call. All lines have been placed on listen-only mode, and the floor will be open for your questions. Lastly, if you require operator assistance, please press 0. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Rajeev Ranjan, Head of Investor Relations and Corporate Development. Please go ahead.
Rajeev Ranjan, Head of Investor Relations and Corporate Development
Thank you, Angela, and good morning. I would like to thank everyone for participating in M&T Bank Corporation’s First 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.mtv.com. Also, before we start, I would 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 Bank Corporation’s Senior Executive Vice President and CFO, Daryl Bible. I will now turn the call over to Daryl.
Daryl Bible, CFO
Thank you, Rajeev, and good morning, everyone. Our mission continues to define M&T Bank Corporation: to positively impact people's lives. We achieve this by supporting our customers' growth, facilitating commerce, and serving our communities. We prioritize long-term relationships and aim to be a pillar of strength and stability for our stakeholders through various economic cycles. We remain committed to investing in the areas we serve. In this quarter, we opened a new Baltimore Ravens College Track Center, a modern learning support facility for local high school students. In New York City, we launched a new full-service branch in the Bronx. Additionally, we recently announced our collaboration with the Boston Foundation on a multi-million dollar initiative with the City of Boston to enhance the city’s innovation ecosystem. Looking forward to 2026, our priorities are clear: achieving operational excellence by streamlining operations and collaborating for growth to strengthen relationships and broaden opportunities in our markets. We approach this season with unwavering dedication to disciplined execution and long-term performance. Before we dive into this quarter’s results, I want to emphasize some enduring qualities that characterize M&T Bank Corporation’s performance. We have consistently maintained a robust balance sheet, beginning with a high-quality loan portfolio, demonstrated long-term asset quality performance, strong levels and quality of capital, and ample liquidity. Regardless of the business climate, we remain committed to a disciplined approach to underwriting, pricing, and risk management. This sometimes leads us to focus on growth in certain loan categories while staying cautious in others, as we did last year and in this quarter. I prefer to decline a transaction rather than compromise on structure and pricing. We choose to be selective to ensure the high quality and stability of our revenue and earnings. These principles have served us well. I am confident that we will experience growth across all loan categories this year, but we will do so in a way that protects all our stakeholders, including customers, communities, and investors. As the industry faces new uncertainties from current events, we are cautious about our net interest margin expectations, yet we remain optimistic about achieving the performance we anticipated at the start of the year. Our pipelines are strong, but we will not pursue growth or yield if a transaction does not meet our underwriting criteria and return expectations. We maintain one of the highest-quality risk-adjusted net interest margins in our peer group, and we will continue to do so while generating strong results from a well-diversified revenue stream. We are beginning with a solid year-over-year momentum in fee income, and the sources of this growth are high-quality and stable. Asset quality has shown notable improvement. Our solid capital levels and consistent capital generation provide us with the flexibility for share repurchases. These combined elements will enable us to achieve strong pre-tax pre-provision revenue and earnings, aligning with or potentially exceeding expectations. Throughout today’s presentation, I will highlight the strength and diversification of M&T Bank Corporation’s balance sheet, capital, asset quality, and revenue, which consistently allow us to excel across economic cycles. We continue to receive recognition for our performance, including the impact of our charitable efforts and investor engagement, reflecting the commitment of our teams across M&T Bank Corporation. Now let’s turn to the results for the first quarter. Our outcomes signify a strong start to the year with several achievements. Our net interest margin expanded by 2 basis points, reflecting ongoing fixed-rate asset repricing and disciplined deposit costs. Commercial and industrial loan growth was robust, with average loans increasing by $1.5 billion since the fourth quarter, particularly in the middle market. Fee income remains a bright spot, growing by 13% compared to 2025, with solid year-over-year growth across all fee categories. Credit quality remains strong, with a reduction of over $700 million in criticized balances and net charge-offs of 31 basis points. We brought our capital levels into our target range and executed $1.25 billion in share repurchases, equating to over 3.5% of shares outstanding as of 2025. Diluted GAAP earnings per share were $4.13, down from $4.67 in the prior quarter. Net income was $664 million, compared to $759 million in the previous quarter. M&T Bank Corporation’s first-quarter results yielded strong return metrics. Supplemental reporting on a net operating or tangible basis shows net operating income of $671 million, down from $767 million in the linked quarter. Diluted net operating earnings per share were $4.18, down from $4.72 in the prior quarter. Net operating income yielded strong recent quarter return metrics. Next, we will examine in detail the trends that contributed to our first-quarter results. Taxable-equivalent net interest income was $1.76 billion, a decrease of $27 million or 2% from the linked quarter. The net interest margin stood at 3.71%, reflecting a 2 basis point increase from the previous quarter, driven by higher spreads from fixed asset repricing, changes in cash allocation to securities, disciplined deposit pricing, and beneficial effects from our swap portfolio. However, this was partially offset by a decline in contributions from free funds due to share repurchases and lower rates affecting the value of free funds. Average loans and leases increased by $800 million to $138.4 billion, with higher commercial loans partially offset by declines in commercial real estate and consumer balances. Commercial loans increased by $1.5 billion to $63.8 billion, supported by growth in the middle market, business banking, and several specialty businesses. Increased middle market loans reflected higher utilization in the first quarter. Commercial real estate loans fell by 3% to $23.5 billion due to moderating paydowns and reduced volume, especially in January and February, although we observed strong origination activity in March. Residential mortgage loans remained stable at $24.8 billion. Consumer loans decreased by 1% to $26.3 billion due to lower recreational and auto loans attributed to poor weather early in the year. Loan yields dropped by 14 basis points to 5.86%, reflecting lower rates on variable-rate loans, which were partially offset by fixed-rate loan repricing. Our liquidity remains strong, with securities and cash held at the Fed amounting to $53.1 billion, representing 25% of total assets at the end of the first quarter. Average investment securities went up by $1.1 billion to $37.8 billion. The yield on investment securities rose by 9 basis points to 4.26%. The duration of the investment portfolio at the quarter’s end was 3.8 years, and the unrealized pre-tax gain on the available-for-sale portfolio amounted to $9 million. Based on our LCR requirements, we estimate that our LCR at the end of the quarter was 107%, which exceeds the regulatory minimum standards that would apply if we were a Category 3 institution. Average total deposits decreased by $800 million to $164.3 billion. Non-interest-bearing deposits increased by $400 million to $44.6 billion, boosted by institutional services. Interest-bearing deposits fell by $1.2 billion to $119.7 billion due to reduced brokered deposits. The costs of interest-bearing deposits decreased by 21 basis points to 1.96%, reflecting lower deposit costs across all segments. We have successfully grown customer deposits while maintaining discipline in deposit costs. Since 2025, our average customer deposits have outpaced loan growth by over $1 billion. We experienced growth in customer deposits while adhering to disciplined deposit cost management, as reflected in a 56% interest-bearing deposit beta since the beginning of the rate-cutting cycle in 2024. Non-interest income totaled $689 million compared to $696 million in the previous quarter. Mortgage banking revenues fell to $127 million from $155 million in the fourth quarter. Residential mortgage revenues decreased by $16 million to $89 million, primarily due to changes in accounting for MSR time decay. Commercial mortgage banking revenues dropped by $12 million to $38 million, influenced by lower volumes relative to the fourth quarter. Other operational revenues increased by $24 million to $187 million, supported by a $33 million Bayview distribution, though offset by lower merchant discount contributions. Non-interest expenses for the quarter increased to $1.44 billion, a rise of $59 million from the prior quarter. Salary and benefit expenses grew by $105 million to $914 million, driven by approximately $115 million in seasonal compensation. Professional services costs decreased by $12 million to $93 million, thanks to lower legal expenses. FDIC expenses rose by $31 million, mainly from a prior quarter reduction in estimated special assessment expenses. Other operational costs decreased by $50 million to $101 million due to prior quarter changes related to MSR portfolio accounting and a $50 million charitable contribution from the previous quarter. The efficiency ratio stood at 58.3%, compared to 55.1% in the linked quarter. Moving to credit quality, we saw strong asset quality, characterized by lower net charge-offs and continued improvements in non-accrual and criticized loans. Criticized loans decreased to $6.6 billion from $7.3 billion in December. This improvement from the linked quarter was largely driven by a $400 million reduction in commercial real estate and a more than $300 million reduction in criticized commercial and industrial loans. Non-accrual loans slightly decreased to $1.2 billion, with the non-accrual ratio dropping by 1 basis point to 89 basis points. Net charge-offs for the quarter totaled $105 million or 31 basis points, down from 54 basis points in the previous quarter. The net charge-offs were widely distributed, with no single charge-off exceeding $10 million. In the first quarter, we reported a provision for credit losses of $140 million compared to charge-offs of $105 million. The allowance for loan losses as a percentage of total loans remained stable at 1.53%. Our non-depository financial institution portfolio accounts for a smaller portion of total loans relative to our peers. Three portfolios—fund banking, residential mortgage warehouse lending, and institutional commercial real estate—comprise over two-thirds of the non-depository financial institution loans and are well understood by the market. Business credit intermediaries account for approximately $700 million in wholesale lender finance, $600 million in business leasing, and $400 million in loans to business development companies. Across our non-depository financial institution portfolio, advance rates vary and are aligned with asset quality, historical recovery data, and collateral performance. We maintain strong visibility into collateral with frequent reporting, borrowing bases, independent valuations, and field exams. Diversification serves as a key mitigating factor both within structures and throughout the broader non-depository financial institution portfolio. For instance, software exposure within our business development company portfolio is under 15%. Regarding capital, M&T Bank Corporation’s CET1 ratio was estimated at 10.33%, a decrease of 51 basis points from the fourth quarter. The reduction in CET1 ratio reflects $1.25 billion in share repurchases and increased risk-weighted assets, partially offset by continued robust capital generation. In March, the Federal Reserve proposed changes to the regulatory capital framework. Based on initial estimates, we expect about a 90 basis point benefit to our CET1 from decreased risk-weighted assets under the standardized approach. If we opt for the expanded risk-based approach, we anticipate an additional benefit of 10 to 20 basis points. The proposal also includes a phase-in and the incorporation of available-for-sale securities and pension-related adjustments into regulatory capital, projected to yield a 4 basis point benefit to the CET1 ratio once fully phased in. We are well-prepared for these proposals due to our current capital levels, asset composition, disciplined credit practices, and straightforward business model. Now, let’s look at the outlook. Firstly, on the economic front: the economy appears resilient despite ongoing concerns about tariffs and other policies. The situation in Iran introduces new risks to both the U.S. and global economies through energy prices and uncertainty. Consumer spending has slowed but still shows aggregate growth; however, there is a growing divide between high- and low-income households—the K-shaped economy. Higher-income consumers continue to spend strongly, while lower-income consumers have managed to maintain but are at risk from current environmental challenges. U.S. GDP growth has slowed, reflecting reduced consumer spending among other factors. On a positive note, details for the first quarter indicate continued strength in equipment investment by businesses. The labor market showed signs of potentially stabilizing after a weak 2025, but we remain cautious about risks stemming from geopolitical conflicts. We are well-positioned for a dynamic economic environment. Our expectations for the full year remain aligned with the ranges discussed during January's earnings call, though I will highlight some current trends. We anticipate net interest income of around $7.2 billion to $7.35 billion, translating to a net interest margin in the high 3.60s. We started the year with slower commercial real estate and consumer growth than initially expected, though strength in commercial and industrial sectors has helped offset this. We recorded stronger commercial real estate origination volumes in March. Net interest income will continue to depend on the shape of the curve as well as loan and deposit balances. We expect fee income and expenses to trend toward the upper end of their respective projections, indicating strength across fee income categories and additional subservicing balances expected to be brought in during the latter half of the year. We will manage pre-tax pre-provision revenue effectively within the range outlined in January's guidance. Our taxable-equivalent tax rate is projected to be roughly 24%, adjusted from the previous outlook of 24% to 24.5%. We are also at the lower end of our CET1 ratio target of 10%, due to continued improvements in asset quality and strong performance. Overall, our performance remains consistent with our initial forecasts. In closing, our results reinforce a positive investment thesis. M&T Bank Corporation has always been a purpose-driven organization with a successful business model that benefits all stakeholders, including shareholders. We have a long history of credit outperformance across economic cycles while growing within our markets. We remain committed to delivering shareholder returns and consistent dividend growth. Lastly, we are disciplined acquirers and careful stewards of shareholder capital. As we conclude, I want to express my gratitude to my colleagues at M&T Bank Corporation, who tirelessly work each day to make a difference in people’s lives. Thanks to their efforts, M&T Bank Corporation can continue to support all our communities. Thank you. We will now open the call for questions.
Operator, Operator
Thank you. If you would like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. Once again, that is 1 to ask a question.
Manan Gosalia, Analyst
Good morning. I really appreciate all the detail on the capital side, so maybe I will start there. First, you are saying ERBA is a positive. I just wanted to clarify that you were saying that you will be adopting that, or is it still something you are deciding on? And is there a higher expense impact from opting in or anything else that we might not be considering? And second, on the ERBA, what is driving that benefit? How are you thinking about credit risk and operational risk?
Daryl Bible, CFO
Thank you for the question. The proposal just came out. It has to go through the comment process and then the approval process. I cannot commit that we will adopt the ERBA, but what I can tell you is, if there is an advantage that we see today that does not change, it is up to us to make good decisions for our shareholders. That would mean we would probably opt in. We will see how things play out, but if you are going to get that much of an advantage, we can put processes in place that should more than pay for it.
Manan Gosalia, Analyst
Got it. And then you did a pretty significant buyback this quarter, and you are bringing down the CET1 guide. Now that we have the new capital proposals, assuming they go through as written, what would the right normalized CET1 level be for M&T Bank Corporation over the longer term after the RWA benefit? And what will determine how quickly you get there?
Daryl Bible, CFO
It is a proposal, so let us use round numbers. If we adopt it and CET1 goes up roughly 100 basis points, we would need to see what other constituencies—primarily the rating agencies—think about that, because there is actually capital coming out of the system, but they also use RWA in many of their calculations. We need more measurement there. My guess is, whether you get the full benefit or not, you probably will trend down lower, and you will probably see that easily in the tangible equity ratio.
Scott Siefers, Analyst
Thanks for taking the question. Daryl, I was hoping you could expand on what caused the margin to come in a little below your prior expectations. I think you mentioned in your prepared remarks that you are choosing to be a little cautious on the guide. Has anything changed, or are you just approaching with an abundance of caution?
Daryl Bible, CFO
It is a combination of two things. We did not come out of the blocks really strong in consumer indirect. That is an important portfolio to us because it has higher yields, and it was more of a weather event. We believe we are going to catch that up and make progress, but until that happens, we are being cautious. From a CRE perspective, seasonally it always drops off in the first quarter, but we had over $1 billion in originations in March. We are off to a great start in the second quarter, so we should have a lot of confidence that CRE is going to get on track and grow this year and do really well. It is just a matter of when that happens, and that would be a benefit. The only other thing I would weigh in is, with higher rates it is harder to get growth in our DDA accounts. We were hoping to grow those a little more. We will see if rates stay flat or go down. We are just being cautious based on what we are seeing; we do not want to overcommit.
Scott Siefers, Analyst
Perfect. Thank you. And one tick-tock one: maybe discuss the overall level of borrowings. As I look at end-of-period short-term borrowings, it is about as high as I can remember for some time, and it did not look seasonality related. Anything going on there we should be aware of?
Daryl Bible, CFO
We were managing to our short-term ratios, and we also have a lot of volatility in deposits within our ICS business. We have it for a while, then it goes away, and it replaces it. We are good at keeping our lines open in multiple places so we always have access. I am a big believer in leaving lines in place, and if we need to draw upon them and increase them, we can do it immediately, same day. It is how we manage our balance sheet to minimize size. We do not want it too large. We want to operate at an optimal balance sheet size.
Gerard Cassidy, Analyst
Hi, Daryl.
Daryl Bible, CFO
Hey, Gerard.
Gerard Cassidy, Analyst
Circling back to the NDFI portfolio, which you give us very good detail on. Based upon M&T Bank Corporation’s history as being one of the better credit underwriters, your institution—similar to your peers—has grown these portfolios quite rapidly over the last five years. What has driven such material growth in this category versus other categories? Are there one or two reasons, whether better capital treatment or something else, that drove the growth?
Daryl Bible, CFO
The bulk of our NDFI portfolio is three primary businesses. Mortgage warehouse lending is a core business for us. It is a really safe credit business if you run strong operations and perfection of collateral. We run it efficiently and profitably. Lending to REITs is something we have done for a long period; it is another sound way of growing, and that portfolio has been growing nicely. Fund banking and capital call lines is a business we acquired from Webster. We like the business from a credit perspective and believe it is a good fit. We have been growing it to right-size for M&T Bank Corporation rather than the size it was when we acquired it. Those three are really our core ones; everything else is relatively small. We feel very comfortable growing what we have.
Gerard Cassidy, Analyst
Speaking of growth, you touched on CRE mortgages picking up in March. Can you expand on what you are seeing in CRE lending versus C&I? What is the outlook?
Daryl Bible, CFO
Our CRE business platform is one of the best in the industry. We have five distinct business lines. First is our regional portfolio—core to us—which had been shrinking, but we are now very active in those regions and generating more production. We believe our regional businesses will continue to grow. Several years ago, we got into the originate-and-sell business with RCC. RCC is another way of serving clients. We do business on and off balance sheet. Last year, RCC originations were about the same as on-balance-sheet originations; we get paid fee income even when it is off balance sheet. That business had record performance last year and continues to perform very well. We also have the institutional CRE business with REITs, which has been growing nicely and will continue to grow. We formed a dedicated affordable housing business line—more complicated underwriting, but by pulling it together we will generate more consistent volume and build relationships. Lastly, we have the warehouse business, which is also attractive. Net, we feel really positive that CRE will continue to grow and you will see loan growth and fee income; it is bigger than just the balance sheet. It is broad-based. We have seen improvement in operating performance, and some borrowers are paying off and going elsewhere. It is a combination. The improvement in credit quality gives us confidence to continue bringing down capital levels, and you see that in our share repurchases.
Nate Stein, Analyst
Hey, everyone. This is Nate Stein on behalf of Matt O'Connor. I wanted to drill down on the CRE comments. You said originations picked up in March, but is it fair to say that CRE loan balances can grow in Q2 and beyond?
Daryl Bible, CFO
I have been saying that for a couple of quarters, so you probably do not believe me anymore. I will not commit to that. What I will tell you is we have a lot of momentum. We are growing and getting more customers. Whether we grow average or point-to-point in the second quarter, I am not concerned. I know it is going to grow this year. Our teams are working hard and having fun working with customers and projects. We will have a very successful business with positive revenue from both fees and balances.
Nate Stein, Analyst
Thank you. And then a quick question on the use of excess capital. First-quarter buybacks were really strong—more than double the quarterly pace. How do you think about the CET1 range 10.5% to 10% and pacing, given the backdrop?
Daryl Bible, CFO
The reason we widened the range is continued improvement in asset quality. We feel comfortable that our long-term CET1 ratio, approved by the Board, is 10%. We feel comfortable going there. We left 10.5% out there because there is a lot of geopolitical risk. If we see signs of stress, we will stop buybacks and accrete capital. In any quarter without share repurchases, net of dividend, we accrete about 25 basis points, so we can accrete back quickly. Right now, we feel very good and will continue to move ratios down, but if we see something we do not like, we will pause and accrete capital.
Chris McGratty, Analyst
Good morning. Interested in your comments on deposit competition. Any specific geographies or markets given the industry is putting up a little better loan growth?
Daryl Bible, CFO
We have a lot of ability to grow customer deposits and have been doing so consistently for many years. We pay competitive rates; we are not the highest or the lowest, but we get our fair share. Competition is always present, but I would not view it as worse than other environments. We had nice growth this past quarter, and I think that continues through the year. Net-net, as in my prepared remarks, we have grown customer deposits more than loans the last couple of years and will continue, shrinking non-core funding if needed. Importantly, across M&T Bank Corporation our businesses are incented to get the operating account first. Once we get that, it opens the door and increases wallet share. In business banking, we have a ratio of three times more deposits than loans, and 80% of deposits are operating—really strong. They are growing deposits and have huge loan pipelines. Business banking is performing as well as I have ever seen it. Spreads have moved around a bit; with the conflict in Iran, they probably widened a touch. It is also very competitive, so sometimes a little wider, sometimes narrower—net about the same. We try to be competitive and make sure we get paid for the risk we take. We went live on our general ledger this past weekend. It is performing really well, and that is behind us. Hats off to the team—hundreds of people across technology, business, and finance—and our partner EY over three years. As for tech spend, it gets reallocated to other priority projects. Priorities now: teaming for growth—deeper wallet from customers and in regions—and operational excellence—simplify and automate operations using AI and other tools. We are off to a good start. This will be a multiyear effort. As projects like the GL roll off, others fill in. We have a strong planning process to allocate spend, balancing strong investor returns with getting a lot done across the company. We have to wait to see final rules after the comment period and what gets passed. It is directionally right. With LTVs, we are a conservative lender and have a huge lift because of our LTVs; that will continue to be core. It is too early to say how we will deploy the capital. We want to serve all constituencies and will decide as we know more.
Operator, Operator
Thank you. We will now open the call for questions.
Rajeev Ranjan, Head of Investor Relations and Corporate Development
Again, thank you all for participating today. As always, if any clarification is needed, please contact our Investor Relations department at 716-842-2518. Thank you all.
Operator, Operator
Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.