M&T Bank (NYSE:MTB) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Summary
M&T Bank Corp reported a record high diluted GAAP earnings per share of $5.32, with net income reaching $818 million, marking strong quarterly growth from the previous quarter.
The company saw its highest quarterly net interest income (NII) since 2023, driven by robust loan growth, particularly in commercial lending, with average loans increasing by $3 billion.
M&T Bank Corp’s liquidity remains strong, with investment securities and cash totaling $53.9 billion, representing 25% of total assets, and the liquidity coverage ratio estimated at 106%.
The company anticipates continued loan and deposit growth in the second half of the year, with NII expected in the lower half of the $7.2 to $7.35 billion range and net interest margin in the high 360s.
Management highlighted strategic initiatives, including expanding innovation partnerships in Boston and celebrating the fifth anniversary of the tech hub at Seneca One in Buffalo, which supports the company’s technological transformation.
Credit quality improved, with a reduction in criticized loans and net charge-offs decreasing to 23 basis points.
M&T Bank Corp is focusing on core deposit growth to support robust loan demand, while maintaining flexibility through securitizations and alternative funding options if necessary.
Full Transcript
OPERATOR
Welcome to the M&T Bank Corp second quarter 2026 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 2. When posing your question, we ask that you please pick up your handset to allow for optimal sound quality.
Lastly, if you should require operator assistance, please press Star zero. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Stephen Windelbo, Senior Vice President of Investor Relations. Please go ahead.
Stephen Windelbo, Senior Vice President of Investor Relations
Thank you, Chelsea, and good morning. I’d like to thank everyone for participating in M&T Bank Corp’s second 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 Bank Corp’s Senior Executive Vice President and CFO, Daryl Bible. Now I’d like to turn the call over to Daryl.
Daryl Bible, Sr EVP & Chief Financial Officer
Thank you, Steve, and good morning everyone. Before we discuss our results, I’d like to begin with what continues to define M&T Bank Corp: our purpose to make a difference in people’s lives by knowing them, growing with them, and connecting them with everything they need to thrive. That purpose continues to guide how we invest in our business and in the communities we serve. During the quarter, we helped launch new initiatives to strengthen Boston’s position as a premier partner hub for innovation in partnership with the City and the Boston Foundation.
As part of the ‘You Can’t Beat Boston’ initiative, we also expanded our work with the Spanish government and the ICE to help support and connect international life science companies with Boston’s innovation ecosystem. Together, these efforts strengthen relationships among businesses, institutions, and communities while supporting long-term economic growth in one of the most dynamic markets we serve. We also celebrated the fifth anniversary of our tech hub at Seneca One in Buffalo.
We started with an investment in technology talent that has become an important part of both Buffalo’s innovation ecosystem and M&T Bank Corp’s transformation. Today, the hub serves as a center for technologists, designers, and business leaders working together to improve how we serve customers and operate the company. Put simply, we are using technology to scale what has always differentiated M&T Bank Corp: strong relationships, local knowledge, and disciplined execution.
Turning to Slide 5, we are pleased to receive continued recognition for our company and our people, reflecting the strength of our talent and the trust we have earned in the communities we serve. Now let’s turn to Slide 7 and our second quarter results. Diluted GAAP earnings per share were $5.32, up from $4.13 in the prior quarter. Net income was $818 million compared to $664 million in the linked quarter. M&T Bank Corp’s second quarter results produced an ROA and ROCE of 1.51% and 12.3%, respectively.
Our results reflect the highest quarterly diluted earnings per share in M&T Bank Corp’s history. Our earnings strength was broad-based. We reported the highest quarterly NII since 2023 and record fee income excluding the impact of notable items from prior periods. NII was supported by the strongest quarterly loan growth since 2012, excluding acquisitions and PPP during COVID. We also returned to CRE growth with average balances increasing for the first time in 2021.
Excluding acquisitions, we remain disciplined in our profitability, maintaining our strong and stable net interest margin at 3.70% and in the backdrop of strong loan growth, the asset quality continued to improve. Net charge-offs were 23 basis points and commercial criticized loans declined by $0.7 billion, making it the ninth consecutive quarterly decline. While the recent stress test results do not affect our required capital levels, we are pleased with the outcome, which reflected an implied stress capital buffer of less than 2.5% at 2.2%.
Slide 8 includes supplemental reporting of M&T Bank Corp’s results on a net operating or tangible basis. Net operating income was $823 million, up from $671 million in the linked quarter. Diluted operating earnings per share were $5.35 compared to $4.18 in the prior quarter. Net operating income yielded an ROTA and ROTCE of 1.59% and 18.57%. Next, we’ll look a little deeper into the underlying trends that drove our second quarter results. Please turn to Slide 9.
Taxable equivalent net interest income was $1.8 billion, an increase of $41 million, or 2% from the linked quarter. Net interest margin was 3.7%, unchanged from the prior quarter as the earning asset yield increase was offset by higher funding levels and in support of loan growth. In conjunction with the recent implementation of our new general ledger, we refined our methodology for calculating annualized taxable equivalent rates for earning assets and interest-bearing liabilities.
Previously reported amounts have been adjusted to conform to the current presentation. This adjustment provides a more consistent way of annualizing balance sheet yields. Turning to Slide 11 to talk about average loans, average loans increased $3 billion to $141.4 billion. Growth was broad-based across each of our portfolios led by our commercial lending. Commercial loans increased $2.3 billion to $66 billion aided by growth in middle market business banking and several of our specialty businesses.
Middle market balances benefited from higher utilization rates. Average CRE loans increased $57 million to $23.6 billion, reflecting strong origination volume. While not shown on the page, end-of-period CRE balances increased $1.1 billion since March to $24.5 billion, driven primarily by growth in multifamily and industrial. Average residential mortgage loans increased 1% to $25.1 billion. Consumer loans increased 2% to $26.7 billion with growth in the recreational finance and HELOC portfolios.
Loan yields increased 4 basis points to 5.89%, mostly reflecting higher CRE yields including a benefit from higher non-accrual related interest. This quarter our earnings release was enhanced to include additional loan balance detail including industry breakouts for C&I, property types for CRE, and additional detail on the consumer portfolios. These details can be found on Page 16 of the earnings release. Turning to Slide 12, our liquidity remains strong.
At the end of the second quarter, investment securities and cash held at The Fed totaled $53.9 billion representing 25% of total assets. Average investment securities increased $0.9 billion to $38.7 billion. The yield on investment securities increased 7 basis points to 4.29%. In the second quarter, we purchased $1.1 billion in debt securities with a yield of 5.02% at quarter-end. The investment portfolio had a duration of 3.6 years and the unrealized pre-tax loss on available for sale was $125 million.
While not subject to the LCR requirements, M&T Bank Corp estimates that its LCR at quarter-end was 106%, exceeding the regulatory minimum standards that would be applicable if M&T Bank Corp was a Category 3 bank. Turning to Slide 13, average total deposits declined $0.7 billion to $163.5 billion. Non-interest-bearing deposits decreased $0.6 billion to $43.9 billion, with lower institutional services and commercial partially offset by growth in consumer and business banking deposits.
Interest-bearing deposits were largely unchanged at $119.6 billion. However, we remixed the portfolio by shedding the highest cost money market deposits and replacing them with lower cost time deposits. Interest-bearing deposits cost decreased 2 basis points to 1.95% with deposit costs improving across most of our businesses. We remain disciplined in our deposit pricing with a 56% cumulative interest-bearing deposit beta since the start of the cutting cycle in 2024.
We saw encouraging deposit trends later in the quarter to end-of-period deposits increasing to $168.9 billion, driven by commercial business banking and trust demand deposits. Though end-of-period trust demand deposits can vary each quarter, we usually see more deposit growth in the second half of the year and expect the trend to continue. This focus on deposits should normalize borrowings in the coming year. Continuing on Slide 14, non-interest income was $740 million compared to $689 million in the linked quarter. Mortgage banking revenues were unchanged at $127 million. Residential mortgage revenues increased $7 million to $96 million from higher servicing fee income. Commercial mortgage decreased $7 million to $31 million, primarily from lower origination volume in the first quarter. Service charges increased $5 million to $144 million, reflecting higher consumer service charges mostly from higher transaction volume.
Trust income increased $14 million to $197 million from a $4 million increase in seasonal tax prep fees and growth in institutional services and wealth. Fee income derivatives and trading increased $8 million to $22 million from revenues from the interest rate swap transactions with commercial customers. Other revenues from operations increased $26 million to $213 million, reflecting a $47 million Bayview distribution compared to $33 million in the prior quarter and the higher credit card and merchant discount.
While the timing of Bayview distributions can vary over the course of the year, the investment remains a meaningful and recurring contributor to our annual earnings profile. New this quarter on pages 3, 17, and 18 of our earnings release include additional details on the underlying drivers of our residential and commercial mortgage and other fee income. Turning to Slide 15, non-interest expense for the quarter was $1.35 billion, a decrease of $89 million from the prior quarter.
Salaries and benefits decreased $88 million to $826 million from lower seasonal compensation and staffing levels, partially offset by one additional working day and a full quarter impact on the annual merit increases. Outside data processing and software costs increased $10 million, reflecting continued investments in technology, infrastructure, and cybersecurity. The efficiency ratio improved at 52.8% compared to 58.3% in the linked quarter. Next, let’s turn to Slides 16 and 17 for credit.
Asset quality remained strong in the quarter. The lower net charge-offs and continued improvement in non-accrual and criticized loans. Criticized commercial loans were $5.9 billion, down from $6.6 billion at the end of March. The improvement from the linked quarter was driven by a $590 million decline in CRE, primarily from upgrades in multifamily and office, and a $110 million decline in CNI. Criticized non-accrual loans decreased 3% to $1.2 billion, and the non-accrual ratio decreased 5 basis points to 84 basis points.
Net charge-offs for the quarter totaled $80 million or 23 basis points, decreasing from 31 basis points in the linked quarter. Net charge-offs were granular with no single net charge-off greater than $10 million. In the second quarter, we reported a provision for credit losses of $120 million compared to net charge-offs of $80 million. The allowance for loan losses as a percent of total loans declined 1 basis point to 1.52%. Turning to Slide 18 for capital, M&T’s estimated CET1 ratio was 10.19%, a decline of 14 basis points from the first quarter.
The lower CET1 ratio reflected $465 million in share repurchases and higher risk-weighted assets associated with $3.3 billion of loan growth. These factors were partially offset by continued strong capital generation. If included in regulatory capital, AFF and pension-related AOCI would decrease the CET1 ratio by 2 basis points. Tangible book value per share grew 1% from the first quarter. Now turning to Slide 19 for outlook. First, let’s begin with the economic backdrop.
The US economy has held up well thus far through the energy shock, though we remain cautious. The increase in gasoline prices has been challenging for households. We see them having the shock by reducing spending in other areas and aided by a boost in tax refunds this year. Although the geopolitical conflict has not been fully resolved, we are cautiously optimistic with an outlook of continued growth. US GDP has slowed, reflecting slowing consumer spending.
We do not see evidence of an energy shock seeping into core inflation, and we expect overall inflation to decelerate going forward. Encouragingly, job growth accelerated again in the second quarter as it did in the first. We remain well-positioned for a dynamic economic environment. Now turning to outlook, we expect NII in the lower half of the $7.2 to $7.35 billion range in the full year. NIM in the high 360s. We expect contingent loan and deposit growth in the second half of the year with full average loans of $141 to $143 billion.
This reflects the strength we’ve seen in the commercial loans, inflecting CRE balances and continued growth in consumer. Our deposit outlook remains in the $165 to $167 billion range with the cumulative interest-bearing deposit beta in the low to mid-50% range. NII has continued to depend on the shape of the yield curve and loan and deposit balances remain neutral on the short end of the curve. At the same time, our naturally asset-sensitive balance sheet provides flexibility, and we can adjust our sensitivity as warranted through maturities of cash flow swaps, shifts in cash and securities mix, and the addition of pay-fixed swaps.
We expect fee income to be $2.8 to $2.85 billion, reflecting broad-based strength in fee income year to date, the second quarter Bayview Distribution, and the higher subservicing fee income. Beginning in the third quarter, expenses are expected to be at the high end of the $5.5 to $5.6 billion range as we continue with our enterprise investments while maintaining overall expense discipline. Given the strong credit performance in the first half of the year and our favorable collateral positions, we now expect full-year net charge-offs of 37 basis points.
We expect to operate the CET1 ratio in the lower part of the 10 to 10.5% range unless market conditions start to deteriorate. To conclude on Slide 20, 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, remain focused on shareholder returns, and consistent dividend growth.
Finally, we are disciplined acquirers and prudent stewards of shareholder capital. The strength and diversification of M&T’s balance sheet, capital, 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 all of your commitment, M&T continues to create lasting value for everyone we serve.
Now let’s open the call up for questions before which Chelsea will briefly review instructions.
OPERATOR
Thank you. At this time, if you would like to ask a question, please press Star one on your keypad. To leave the queue at any time, press Star two. Once again, we ask that you please pick up your handset when posing your question. To allow for optimal sound quality, we also ask that you please limit yourself to one question and one follow-up. Our first question will come from Monan Gosali with Morgan Stanley. Please go ahead.
Monan Gosali, Analyst at Morgan Stanley
Hi, good morning.
Daryl Bible, Sr EVP & Chief Financial Officer
Good morning, Manan. Good morning.
Monan Gosali, Analyst at Morgan Stanley
So Daryl, in the NII guide, I guess you’re still pointing to the low end of the range. You upped the loan growth guide. I think you’re guiding to some NIM compression here in the second half relative to the 370 or so in the first half. Can you talk about what’s baked into that outlook in terms of, I guess, deposit pricing and loan pricing?
Daryl Bible, Sr EVP & Chief Financial Officer
Yeah, happy to. So as far as how we expect the balance sheet to go out, we have a lot of momentum in the loan area. If you look at the loan growth that we had this past quarter, it was very robust. We had growth in over $800 million in our middle market regional businesses. About half of that was due to higher utilization and the other half was permanent loans. We had growth in a lot of our specialty businesses. Mortgage warehouse was up 350. Institutional CRE 335, corporate institutional 309.
Banking was also up. Business banking, leaf lender finance, and health care. So it was very strong, very robust. We had a really strong finish in the quarter in CRE. If you look at it on an average basis, we eked out a little bit of growth, average over average. But when you look at the June numbers and what we put on the books, we’re set to have really strong average balance growth in CRE in the third quarter just because of everything that happened in June.
And then our two consumer portfolios, mortgage and the consumer indirect and direct businesses, also grew nicely. We expect all those portfolios to continue to grow in the third and the fourth quarter. We maybe not have quite as much growth in the third and fourth as we had in the second, but we’re pretty positive that these portfolios will continue to grow and have positive momentum. On the deposit side, we started the quarter off a little soft on deposit growth.
We’ve rebounded and you can’t really see it in averages. But if you look at the growth that we had at the end of middle to the end of second quarter, our deposit growth was very robust and strong. And really when you compare like June averages to second quarter averages, we’re up $3.4 billion. So we have a lot of deposit momentum going forward. And I know that we had a little bit elevated in short-term borrowings, that short-term borrowings number is going to come back down now.
It’s already down a couple billion dollars and it continues to come down as we’re starting to grow deposits pricing wise. You know, our deposit betas are still in the mid-50s and may eat down to the low-50s. But it’s the right thing to do to grow our loans with core funding, which is what we’re
Monan Gosali, Analyst at Morgan Stanley
Very thorough. Thank you. Maybe as a follow-up on capital, one of the things that Rene spoke about recently is how M&T has historically not done as many risk transfer deals as some of your peers. Now that we have the new capital proposals, is there any way you can help us think through what that opportunity is, how to think about the capital that you can free up and over what time frame?
Daryl Bible, Sr EVP & Chief Financial Officer
Yeah, so the Basel III proposal for SSFA type transactions specifically, you know, limit the downside risk that was there before. You can’t get to dollar for dollar capital in the worst-case situation only gets to the worst case of what the asset would have been if you put it on individually, not in a secured type transaction. So that kind of, that’s the, the risk off of how much capital you would have to redeploy if things deteriorated. So we have some products that we have out there.
We’re launching new products in CRE that will take advantage of that. You know, growth will build slowly over time, but our CRE team is excited about that and we’ll have a little bit of growth this year, but that will grow more into the next couple years as we move forward. And then in just the normal CNI space, our focus is really making sure we know what asset qualities are in the deals, how we monitor these asset qualities and make sure that we’re very diversified in these.
So we will on occasion do some of these transactions. So growth will be more than we have. We have hardly anything on our books today, so we’re coming from a very low level.
OPERATOR
Thank you. Our next question will come from Erika Najirian with UBS. Please go ahead.
Erika Najirian, Analyst at UBS
Hi, good morning, Darrell.
Daryl Bible, Sr EVP & Chief Financial Officer
Heard you loud and clear.
Erika Najirian, Analyst at UBS
In terms of anticipating seasonally stronger deposit growth in the second half of the year and your wholesale balance sheet will come down on the liability side. In the case though that loan growth continues obviously at this pace, you’ve hit an inflection point in CRE. Maybe talk to us about sort of how much you’re going to potentially just market core funding versus go to the wholesale market. I’m looking at like an 18 month CD at 360 on your website, which is lower obviously than your borrowing yield.
So as we think about loan growth continuing to outpace deposit growth even with those seasonal factors, how should you think about the mix of your liability growth from here and maybe sort of double click on your comments on deposit costs?
Daryl Bible, Sr EVP & Chief Financial Officer
Yeah, that’s a good question, Erika. Back early in the second quarter when we saw the loan growth starting to come through pretty strong in the pipeline’s building, we met with all of our businesses in the company and really had them focus. I’ve only been at M&T Bank Corp for a little over three years, but I basically have. We have both oars in the water. Loans are growing nicely and we had to get our deposit growth up to grow nicely as well. So we started with consumer and business banking.
They have responded, they have promotions going on that are attractive and still at a reasonable cost that we think. So they’re growing commercial and wealth are focused corporate trusts and we continue to get more escrow deposits and mortgage. So all those businesses are really focused at trying to grow deposits as much as possible. If by chance it’s not enough to support the loan growth that we have, we have other alternatives. We’ve consciously been active in putting out securitizations, funding securitizations out there in auto and RV and small ticket leasing to make sure the investors know our collateral and all that.
We could turn and dial that up if we had to. We could issue more debt, more federal home loan bank advances. So we have a lot of options. But the most important thing is to really focus and serve our clients and communities and really try to do it with core deposits to meet the core loan demand.
Erika Najirian, Analyst at UBS
Got it. And just to follow up, if the Fed doesn’t keep rates where they are, do you expect deposit costs to drift higher? Given what you just said and given what you said during prepared remarks about asset sensitivity, what does a 25 basis point rate hike do to that high three sixes NIM as we think about the go forward and the exit rate.
Daryl Bible, Sr EVP & Chief Financial Officer
Yeah. So for the Fed and if rates stay, they don’t change. The way I look at it is you look at deposit growth, interest bearing deposits are growing faster than non-interest bearing. Non-interest bearing rates are a little bit higher. We actually plan for rates being down this year. So we aren’t meeting our expectations on DDA growth right now. So for every marginal asset you put on the books is going to be at a lower margin than what we anticipated it to be.
So that does put down a little bit of pressure on net interest margin. But we operate with one of the highest net interest margins in the industry. I think we’re okay trading a few basis points away from that and getting more growth in NII. I think that’s a fair trade. I don’t think our NI or net interest margin is going to collapse by any reason, but I think it’s a good trade-off from what we see as far as the assets and rates going up 25, we’re really neutral.
And our forecast already has the steepness in the curve that we have today factored in for the rest of the year. So I don’t think you get much change either way with what we have. You know, by chance the curve gets steeper, that would be a good guy. If it gets flatter, it would be a bad guy. But we have pretty much that factored in our forecast today.
OPERATOR
Thank you. Our next question will come from John Pankari with Evercore. Please go ahead.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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