MTB - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the M&T Bank Third Quarter 2020 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and later, we will open the floor for your questions. [Operator Instructions] Thank you. I will now turn the call over to Don MacLeod, Director of Investor Relations. Please go ahead.

Don MacLeod

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

morning earnings you Events tables financial and on Investor from by we If Relations read www.mtb.com schedules it the Presentations website, on not issued with link. have and this the clicking may our the link access along then release, the and

statements statements. I'd XX-Q like Actual our for call a M&T filings to and mention to made and including comments SEC the industry this forward-looking from statements our results complete what Corporation. discussion start, that Form earnings might release is of today those refer risk encourages during with participants forward-looking factors. to contain described X-K to connection we XX-K relating differ Bank on banking the in Before Forms and X-K, M&T forward-looking could filed to in

Officer, to like I'd Now King. introduce Chief Financial Darren our

Darren King

morning, good and Don, everyone. Thanks,

As of economic press noted level third markets spending. in experienced of and the our quarter, business release, pleased the with consumer in we in activity, improving terms were this particularly morning's

Specifically, card by and an quarter origination and where usage which uptick both and debit an consumers in market in we margins. volumes. residential increase volumes also in both manifested The merchant the third strong business in mortgage saw robust credit was we witnessed

basis difficult we forbearance, Also had to and expectations were losses to for fee relief. trends needs XX loans. Our commercial trends environment. during Trust some and communities. anticipating, X.XX% approximately we ratio to Positioning we with quarter. markets have fund equity those M&T the a diligence same time, for line customers reached in our common our waivers, by asset XX% which the loan the X.XX% grew money to experienced in strong asked allowance were debt particularly endpoint, the exercise customers improved continue the The and revenue equity business in increase encouraging additional for by but X points granted been meet as offset at for form have Tier its COVID-XX of of of Expense

share the our GAAP were earnings for quarter annualized the long-term compares Diluted operating from per the quarter. $X.XX well GAAP compared for let's quarter, after-tax the basis they of quarter of operating third occur. third in $X.XX XXXX. gains effect per acquisitions, and with annualized for compared assets, only previous was of net last quarter. year earnings and any or which excludes quarter intangible reporting $XXX in quarter. review shareholders' amortization an XXXX prior the $X.XX in common the second provides were million in or XXXX rates on $XXX $X in and amortization third X.X% Diluted XXXX Net a $XXX the our M&T share quarter. third quarter quarter. its $X.XX million in X.XX% The to return quarter. mergers tangible compared quarter results and practice, X.XX% income on income from rates Included tangible or with the in operating the for compared common expenses of of XX.XX% with press of have in second common which quarter the rate with M&T's operating $X.XX the release per of $XXX for as tax the the linked and income recent the of equity was results million recent the associated the supplemental non-GAAP in as million $XXX amortization we of GAAP quarter and $X.XX of quarter average assets change in XXXX. of little and and $X.XX on returns in Now quarter Net quarter of intangible with common in On the when this quarter return Consistent net with million ever the amounting excluded ago from average were $XXX comparable of on average net after XXXX. GAAP an average annualized intangible recent with tabular morning's accordance results, tangible guidelines, In results third and assets of of equity tangible million assets SEC's produced X.XX% share X.XX%. quarter M&T's the contains of common assets return reconciliation respectively yielded including and and This second were third equity. expenses X.XX% X.XX% results and a year's million basis a linked with for

decline while reflecting accelerated and by with environment, premium similar one-month The to little impact loans the a income. net average to the the rate reflects the mentioned X.XX% invested of mortgage-backed both somewhat X% margin points Turning effect quarter, equivalent or other interest a XXXX Those having $XX net was Taxable a million earning I loans impact previously, on point X.XX% in The primarily on loan decrease third funds to and XX million primarily The agreements. yields interest mortgage the the sheet Federal LIBOR interest deposits. securities interest cash estimated the increase of the lower the deposits, some bearing contributed the net and of $X.X of of That the point rate increase from investments on net Higher compared decline. contributed margin Average quarter. with factor. balance billion, lower increased basis one-month income by on XX divided basis basis from income residential on funded non-interest linked points between of primarily interest interest decline. decrease mortgage either approximately mortgage-backed DDA. increase on in amortization pressure. assets second of margin X that quarter an cost yields the loan basis average were of of in in statement. evenly net the investments factors billion caused by pressure $XXX was amortization decline equivalent X or and lower X $X York New residential third The the declined in to XX was quarter. resale a The in mitigated X basis compared a by interest-bearing approximately marking into Reserve premium additional billion point to basis All an margin quarter. linked for to Bank points also securities basis on $XXX contributed interest LIBOR in points

the interest short-term approximately while context, basis Fed liquidity the combination since investments little margin $XXX the net and than at total with securities or compared XX increased has reducing by the less quarter the placed points, XXXX, million incrementally primarily X.X% by Average For billion, fourth net by investment income. increased interest of previous of a benefiting $X.X loans quarter.

real compared interest pending as dealer category, grew just lines effectively a by usual resolution, declined industrial received auto by repayments. quarter the $X of Looking primarily unchanged at from deposits, loans less are reflects increased under by loans at at up reflecting $XXX,XXX $X recreation core and Average X% $X.X estate quarter. which loans primarily loans reflecting compared Cayman offset Commercial billion basis Residential offset billion, the credit. floor partially with results by higher loans with X% delays inventory $X.X from of second seasonal about some an indirect in home real billion commercial of by the M&T's linked office X% quarter, compared were purchased than well vehicle deposits softness, second equity by loans as and decline with or loans servicing and X% non-interest customer dealers grew replacing the loans. or partially lower billion. the $X.X estate being or CDs the and X% Mae plan the checking Consumer quarter. loans, on having pools, were That loans billion Islands in PPP end in over second by finance by exclude the Ginnie sold. average

the from the volume of million revenues quarter. were quarter. second linked $XXX the the quarter, improving declined in of higher income. loans seasonal quarter second servicing million origination third quarter. originated million slightly including quarter. little included prior originations the in up in was Total in in tax originated margins. third mortgage residential the in million billion quarter the million on the securities previous million and the that quarter on income largely prior revenues non-interest $X recent remaining in very stock, on encompassing GSE Residential from $XXX banking income and both $X.X from $X activities million improved the compared in million such banking of was Residential fees. our The Recall quarter. million million $XXX sale were the gains. included from $XX which included $XXX million Trust in billion quarter. Mortgage $XXX of and Commercial with $XXX The second slightly. banking servicing holdings for combined to mortgage totaled servicing $X.X changed $X figures were with $XXX from million Turning quarter second preferred revenues increase quarter totaled equity reflects down the of mortgage recent $XXX preparation quarter, strong Non-interest sale recent valuation sale the X% in gain revenues gains for while loans quarter

reflects market, on other by prior in such million second result compared million categories strong card from primarily the with some sharply including $XX slightly from of improvement from the spending accounts improvement markets quarter Aside The the improved were a impacted revenues with $XX as higher COVID-XX payments debt capital fund discount revenues operations credit solid the of loan are on charges, a included consumer money of slight interchange side, levels from impacted syndications. higher related charges compared offset Service activity. million business in the fees the in remains in fee linked with quarter. with that, that $XX waivers, service in comes quarter. COVID-XX the merchant deposit improvement not rebound and continued Similarly,

the work quarter. one to of was which additional operations There million banking neither second compared a first for allowance expenses. day ratio, in addition recent during salaries to from $XXX securities numerator related amortization Turning exclude activity quarter Operating second during and compared the The with the valuation in the million prior quarters allowance excludes each XX.X% mortgage intangible losses $XX were and of on higher compensation that and the quarter. of the quarter quarter Recall linked the increase with impact assets nor the second release $XXX XX.X% our an third to the valuation third $XX benefits the from was other cost quarter. rights. tied gains uptick quarter compared of of or the million the quarter, intangible in the for expenses addition the reflect with both The mortgage the capitalized which the trust in and third and efficiency amortization in included million servicing quarter XXXX. XX.X% denominator in from and

Next, model million points collectability estate to is updated second related different economic pandemic of the as to and third stimulus third quarter to used the end forbearance. loans. exceeding macroeconomic basis and compared the quarter the the of and or end uncertainty loans provision XX of charge-offs in the less amounted net economy. the the quarter points of credit of the retail amounted in $X.X in the commercial scenario than repayment basis in losses ultimate at COVID-XX and the which loan are net Net modestly the severe and recent allowance second reflects losses the were borrowers an that third The $XX million. billion at total uncertainty recent XX $XXX first percentage those loans to driven charge-offs the damage for and quarter on the of over hospitality requesting sectors, for Annualized million COVID-XX a increasing let's economic the real the quarter ongoing activity to reflect turn additional impacts quarter. The the credit. The where by to the of quarters for X.XX% allowance for charge-offs allowance $XXX provision

with current the a Our the forecast uses variables, macroeconomic GDP. unemployment and economic being of number drivers largest rate

X.X% XXXX. during quarter single-digit The levels Our forecast of assumes contracts year, forecast XXXX. by the prerecession unemployment the through the peak to rate X% GDP XXXX quarter assumes quarterly increases in a of fourth rate this to unemployment sustained and followed high recovers third by

XX an of is important loans mind stimulus. by affected that the of to $XX the been and end no It loans no risk have X.XX%. forecast the of as are loans the Non-accrual million billion, to quarter June. was in or loans on metrics end additional of $X.X credit a government amounted At some from balance assumes sheet of of Our September the non-accrual which percentage as keep the credit usual little zero carry risk. PPP weighted increase

total we $XXX the losses X.XX%. of be be total Similarly would impact charge-offs of to net covenant with have Cares allowance COVID-XX loans of stress loans XX days. commercial delinquency X.XX%, of to the PPP quarter. entities. the some the forbearance regulatory deferrals Government and loans, guaranteed COVID-XX to loans, continue Excluding non-accrual points. annualized other ratio end majority were not sort or loans payment Loans yet of for A are of credit of or non-accrual or ratio COVID loans numbers. pools of in with days a XX% as for and be the XX have granted payment XX for significant the government-related forbearance past second loans part would percentage reflected at accrue $XXX modifications were generally purchased to guaranteed were days. the form for ability a relief would that Consistent under interest recent which basis most XX million clients and figures. provisions these request on our that not relief the from million were as loans of Of reflected loans by which received Act we due in servicing these whether related result are

for all some of forbearance example, third dealers than under forbearance, of the to For less and XXX quarter. substantially the are XX June the form XX was days of $X.X given of relief as at million vehicle end of billion

commercial total not XX% over by COVID-XX million slightly forbearance and or portfolio Over $XXX COVID-XX portfolio the and COVID-XX the reached days the For X% two-thirds their active aforementioned to declined most of XXX-day to XX. XX% have end forbearance We'll under the industrial total, real commercial September endpoint of generally, loans Customers deferrals relate to deferrals. the $X.X that CRE portfolio of than CRE. as estate their loans portfolio as have on CRE we or next in including term. the received hotels by declined in by billion. dealer retail XX more In about segments portfolio, higher XX impacted the as September have reached know notably so XXX-day deferrals the of

the under under to For September. the just declined than from million portfolios, of end $XXX deferrals $XXX or million consumer June XX X% at at less

all days pools Total that to down of own credit billion, we deferral from deferrals represent quarter. purchased from under loans servicing guaranteed $X.X about to mortgage have that residential government guaranteed ago, M&T. $X.X from no to the XX loans second billion risk reflects $X.X For non-government loans billion, amount increased XX% increase

include of forbearance All figures for not billion others. do approximately mortgage on of loans residential we these $XX service

quarter so trailing M&T for in and exceeded quarter third stock by net Federal risk-weighted Equity in capital. did not the This be quarter Tier calculation dividends assets. outlined ratio Turning and the earnings the comfortably four of both repurchase impact M&T's to compared paid X.X% dividend, its M&T's at shares the reflects X.XX% and an slightly X lower the XX the income estimated will Common capital excess quarter. during of not the quarter. as end under to common September doing Reserve. second of of the was fourth

outlook. the to turning Now

to earnings after on is Our the thoughts call process. planning January completed the year, practice in coming we've usual our offer

to we of those expect XXXX that remain compared be So my long remarks ended we the today the commercial January We're still will see conditions to Core loan in down has economy somewhat that we recognizing loans saw slowed. the has PPP brief. all pleased February. And a way where while improved remainder balances slightly to to from flat and we're growth over quarter. excluding

are seasonal plan expect the that dealer Given normal we in loans rebound the at running fourth floor manufacturers auto don't normal quarter. the not levels, during still

the servicing linked residential forgiveness quarter we current activity slower rise total receiving fully processed has in quarter are and difficult of and modest reflected far Combined sent loans. in, the forecast purchased being buyouts, further is is or on for onto at All Most and continue growth request the quarter PPP third expect with portal to applications growth on is so for with pools a the SBA. past for Our over mortgage to liquidity deposits The the of loans loans loans average. been smaller mortgage modest our SBA open the which Fed, the the although we should assets investments the the from in expediting average potential relief. in which loans More aren't much quarter. see we short-term residential pace.

the of noted was I As earlier results deposit inflows. this primarily further

Although be the see may and uncertain declines may we current in approaching quarter. peak the presence

$X to As loans our the deposit benefit and reached and would a active. hedges flow of higher of active the income. this in amount To billion in net become will expect older active this fees with those $XX.X be trends with those of at then With are LIBOR the balance step swaps the The higher the for cash loan mature about X quarter. billion limited costs, recognition notional basis associated of during more PPP rate net forgiven, mentioned starting deposits further interest less income cash up specific, $XX.X interest margin significant is to downward state benefit. a billion If as substantive expect We've will PPP position on size flow modest step the one on portfolio to be quarter per additional year. final benefit for rates a up XXXX. net investments accelerated to expectation be we previously X levels forward loan having the points interest impact net steady received remain the floating slightly of that would lower quarter rates income interest received about fixed in short-term decline swaps that we'd hedge decline, with and by our

applications Residential as Turning continue be to mortgage fees. are. as with they strong low rates to

quarter likely some margin. with expect on origination continued this volumes but solid pressure We

For seen mutual fund money waivers trust income, markets strong by debt activity. be we have in market capital offset increase the somewhat of management

sorry, We expect in environment better and rate those levels from notably by will higher was volumes a some while at waivers further steady current payments, shortly indoors. income or even pre-COVID levels likely, than zero of I'm persist will Service customer charge unlikely. with reach the activity, state appears boosted the levels upside

guidance seasonal continue We additional Any to half with quarter. end loan portfolio determined we the to have half no be be loss by in the by for that at the the we first remainder expenses or and of second line of will excluding to change provisioning the macroeconomic year's the see for year in composition. year factors our this the the XXXX, variables first expect to quarter expense changes of the second

turning Lastly, capital. to

a Consistent the from guidance to growth won't consider the quarter. regulators, dividend the are repurchase and a levels Board capital change ratios. We in that of recommend the capital with limited continuing during our our profits build bolster the excess stock fourth dividend to as loan we

and events unfolds growth, political various regional may are aware, subject which in other interest of number economic course, or factors, uncertainties in from assumptions macroeconomic actually you're and differ a what future. materially our as the and changes Of national regarding to projections rates

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

Operator

of Our floor Instructions] you. for is The now your Pancari Thank comes first the open question from questions. of ISI. [Operator John line Evercore

John Pancari

morning. Good

Darren King

morning, John. Good

John Pancari

around the little know you in to bit backdrop stimulus. side, for us I of could and credit the the more you the the quarter. color the On ongoing mentioned rationale behind wanted give reserve in a build some if uncertainty

you curious addition. justify that the just was you there are seeing an to something overlay there applied specific So or Thanks.

Darren King

quarters you you John, modestly if from at sure. and The they third components. through macroeconomic some quarter. I better the were the down Yes, were guess is model, in of the variables the break much driver the really looking haven't run [ph] big that what changed obviously we while

of drive of see there segments at those so And really core, growth And portfolio. the so its the certain you change in is there. allowance you when and really then underneath, the magnitude no look some

So that portfolio to some put CRE the the book the growth in might the the of uncertainty, other guess the just consumer like. reflects is what and was are then in that forbearance much addition and growth for it conservatism way in some I ultimately look and

John Pancari

real And that's in right, can some an then seeing impacted borrowers credit from us you're in Thanks. you performance how the thanks. separately your perspective, a helpful, seeing the on portfolio Okay, stress are you trends there update on the in terms you front, give estate of your seeing performance. backdrop all credit are and commercial that credit

Darren King

the When the to part able seen return able a not food up, you their flow. business. other where ones to car back way of where and most I cash the obviously are maybe we're of segment that some be segment. focused of so And focused estate real the portfolio, conferences and things segments ones on now, those cities to the larger right we've retail ones - but the most segments commercial at all the are toward the portfolio or are or hotel particularly the challenged. looking forbearance revenue those forbearance, and we Yes, hotel most probably on start some most continues the in for you of into part to that so relies in those has business the there show themselves challenged, as to there hotel of amount were, get over on the they And you're been by able have Those XX And days. drive and for get portfolios. hotel received guess significant next XXX-day will where portfolios beverage

through And their seen the so close expenses customer this as go possible. so, their their at try least are we've but we as portfolios manage to breakeven the those we and as quarter, to cash keep we're pleased to reaction ability from watching down by far flow and

and are client those between LTV, out the and And LTVs and feel majority XX% positive loans already in million have And it. in you We and than a very York than a there New loan New values in so XX% average I gets I less continue XX% particular of to at five by that XX% about properties real the maintain to loans then XX%. incentive at portfolio. strong which they values, lot two know are City, to is the to and when and outstanding, $XXX we the loans then the those to less the million and York a in value of City between when XX% properties loan think look and I lot invested it is look attention is have about vast $XX figure which how

retail the similar it's On space. a side,

LTVs I go the just look - their the again the and of some of particular our of and York in think in values current some accelerated and then relationships and are XX% we COVID multi-generational they at seeing larger have New very industry a at the of SKUs XX% cost bases but rents family where distribution properties again, challenges we hit is when a of LTVs low in basis cases City that also before challenged and has there retail SKUs down look on ownership and in much very some is tax we and low. below that, in portfolio pricing bit watching online, were our COVID been when things

also they vested properties. very have So, in protecting those a interest

way there, And active clients normal. the outside help resources try things back have come then, adjusting it's and long-winded to their certainly but carry stress many while is a the have so of operations And there them of liquidity been saying environment. properties to the to and in out

protect bit But little that a pleased know days. XX more by far we'll so very have their the So than our we're investments. to taken clients actions

Operator

Morgan. Our of Alexopoulos question Steven the comes next from of line JP

Steven Alexopoulos

Hey, Darren. good morning,

Darren King

Steven. morning, Good

Steven Alexopoulos

can Mae loans that - So in the are on on those and what's Ginnie to at of similar purchase likely level the pools, you a out the XQ? you you yield again purchased

Darren King

Yes.

hadn't have from second carry of plus larger So those being that, the slightly happening. Ginnie's something basis buy there have right quarter and take or where minus do, there it's continue and some the to you there because have saw been about the think them that be hangover cost that we X%. was of uptick is in round normal to to be active the in But buyouts numbers. The only would points, but sort I than Each yield these advance we on out we in and different, residual serviced don't what those and are will principal it sense economic X to interest investors. it's around just quarter will to what this a because one makes balances some loans were

was like quarter. happened take. much $XXX this just And second hadn't that that give a million so the $XXX run rate is probably there very the because and And uptick a or quarter month larger range million more in to

Steven Alexopoulos

late I think And helpful. that's purchases you said also Okay, quarter. in the were the

So we'll from see into the this flow benefits through quarter. XQ

Darren King

quarter, Yes we little quarter. bit the through the of not fourth this an but uptick quarter. as There'll be as big it in saw continues a what

Steven Alexopoulos

all thanks Okay, for right, my question. taking

Darren King

Sure.

Operator

question line next of comes Najarian of Erika America. Bank of from Our the

Erika Najarian

Darren. morning, good Hi,

Darren King

Erika. morning, Good

Erika Najarian

sense you us portfolio, from in the a loud from you that basis, in could the and interest it what how either the clear an XXXX? the terms derivative $XX on in in heard of book you to is on stepping third if and however give annual up your on question the one swap My is was sorry to income that billion. provision the notional contribution give And wondering to quarter net or quarterly quarter fourth progress - want I'm -

Darren King

Sure.

earlier, to I slightly was So, what about XX. time start points swaps third to lower interest margin the of active quarter through then hedging forward the the the is assumption over you'll next year a And adding have the we coupon about become the but go about start quarter the in for notional a XX the as down looks first about as probably basis like the up, quarter quarter balance sheet last trickle net the received fourth you basis comes impacts in up benefit mentioned the XXXX. the of going think down goes the and coupon in decrease will that see good like. talked the fixed second we we what we be as and the hedge to through quarter as to quarter a after And quarter benefit think X the the the forecast based our of get same points on

Erika Najarian

it. you. Thank Got

Operator

Our of question Matt from the Bank. O'Connor Deutsche next of comes line

Matt O'Connor

Is the interest-bearing months them? good something of on expense some I kind the morning. guidance sustainable? all with is of of expenses, a structural in but a pulling kind two kind or is on in follow on of combination year. want that XQ for ago, just Good the is that management is it line what one-time that three up to changes you of of sustainable cost very this said And how

Darren King

were and and took got for think to in results things salary you and in you When can about repeat in is question. the that talking for there of up, and where the to seen number that source more at where are good line, see. see look the do a remixing. skills I quarter or year we've outside about obviously was they on the third other while quarters some say itself do that to the and that last of build so that million. but of I drop salaries and It's and advertising Matt. think took services them the entertainment some you line that illuminated they're it some which I can But the compare this the benefits so of and see those year, at drop you professional if a evidence little a impact see and the sustainable, technology you Yes bit professional really if that I the and quarter quarter the structural. past, to of fourth benefit you A operations, third guess flat, is the didn't obviously you've think to of come last working in other $X year, we third basically which up, cost the decrease would the services been out look you We've more an the professional travel been is continue that we've because impairment and a is and We've shows big in there services couple which and of can items we there is they're that would promotion. I of seen -

as we effective as from being so might I had but lot you and competitive about you go as that that think in and and that we'll also item line what get be we're past. learning is in I interactions obviously sure we've away need we're than in that look seeing in that means markets cost promotion face that can both banking advertising harder advertising to but quite don't ways how different more and clients. don't travel prospects can need at oftentimes thinking maybe continuing customers think about and that you're be be the we traditional reach much smarter the we to face internally a to need and then there forward for with much the in, you also

and we of is operations in to digitization that week process. our how we doing massive down. loans deposit did to last there literally SBA thing able that opening that I amount into loans more business period think beyond years' business other process mean other So time. just to the the a we're did looking thought a process were so take we and and three opportunity through see such using of and volume changing think short drive of lending loan about PPP the expenses and you worth and at in handle a through we're We is I

is ratio, it's so and some and close do has slow would get and expense I that we had to how where and that revenue kind things which got the the on think pandemic, to change think leverage. of us of but guess, but step rethink us rethinking short, I as I to expenses, that offers the I to of mean to to M&T. growth allow I environment a just work don't continue the guess, team there speak and ability the continuous I this be story know chisel improvement. there And in this on so speaks think to classic away, that positive challenges operating year, to the be path of to same me the down, also the to efficiency disciplined long last from really in quarter is was we've been we we're continue

Matt O'Connor

And but it to said just helpful. also that but to implication step of guess I'm be described a cost going give well. on don't step you kind or want 'XX That's would guidance no down explicit as you up

I had So to flat guess, you're seems keep there. like costs together trying if it your from [indiscernible] think I comments to by would relatively

Darren King

a that's legacy assumption. more detail assumption, think certainly a back we'll be January, safe I [ph] with but that's safe in

Matt O'Connor

Okay, you. thank

Operator

question of Usdin Ken Our the line Jefferies. next of comes from

Ken Usdin

morning. Hey, good thanks,

Darren King

morning Ken. Good

Ken Usdin

into you trust in fee the are I was ask rated, us the - Can step-up, help Darren. that forward, and the Hey is if I third to any, be ask fourth? just further you what you be the you? going can the you would understand income, Can going waivers think how run what on I said

Darren King

Yes.

it think fee So, I because X before by loan an of and from think million impact quarter agency in waivers. we the saw quarter we about this those about you've $XX fees some get we And was record debt saw ago months I line. that so the fees participation for in still trust income our and they activity issuance think reflected had a agency that three end And market that in of I the September. in you markets, some been I talked uptick at watching that a the have maybe offset of

masked of into the a Also, and maybe thought little money and impact the so equity we had better than impacting continue And if fund waivers quarter. on bit markets those have going AUM positively, fee that's have accounts. to strong the it might we

And so also an that a was was that offset. positive

we will there fourth had talked it might we those what about happens go. little be through will so and those other And in markets business are more money waivers as are go be quarter. basically And some to there, parts the bit trust a how be the the that with of fund robust then question of the

Ken Usdin

then opportunistic you follow-up opportunities Can give And origination there? just and between are been mortgage. you. just more guys the Thank Thanks. servicing pretty you a on then you of resi frequent seeing still commercial additional buy discussion bit also, little assets as Understood. a differences and have to buyers activity

Darren King

Yes.

I the action for last the really just of on. of has of been rates are, a consumer the in most there's they - So, going guess where with space and activity lot couple quarters refi it's

it handle there industry us been the was What for the And seen and the so been has so it. volume two I that that's really overwhelmed last much for what's is driving there. capacity for to think both quarters, people's volume

pricing. of one through ways so the the is capacity industry And managers'

and why were last. so that's this quarter so strong the margins And

is but on similar that the it the just see that so, was expect what the of quarter, in start was what down margins levels end the last we'll because the margin come expect and quarter down. quarter of We fourth July sale maybe gain of August. see slower in in to to September fourth started see to And to from we but seasonally at we the see volume

it's slow real why lot hit. since into And a we'll has to activity a drop the see in blowout there. quarter In This a space continue of years sector. fourth COVID estate things us the commercial last was the in in so commercial - trend really not see think quarter quarter exception that a in don't mortgage commercial year in fourth think just of There's for item. line been activity the we expect it into quarter changing slowdown we that's just and we for the and notable that the I is third fee estate couple been real have the

Ken Usdin

lot. a thanks Okay,

Darren King

Ken. Sure

Operator

comes Saul question of Martinez next line from UBS. Our of the

Saul Martinez

Hi, on guys. parts interest to I net some wanted moving push of through the income.

in to I Erika's So think question. response

You hedges calculations from which mentioned if the amount [ph] XX bps I Darren roughly million. the were about that $XX might to protection

no that also outlook. Is in that flat, your and correct? level benefit you're for guidance that, in more assumes NII incremental no to clarify less Just of PPP forgiveness the protection, then, That fourth is or there assuming that quarter. stays i.e.,

Darren King

right. That's

Saul Martinez

guess, of more X.X a is in that would cliff how the book next into second more part step down think at the picture you latter you year, benefits going weighted effect I swap and 'XX. a mean, that average point year protection the material for there should we protection that the especially maturity down in the painted but to about would just Okay between following hedge then the to seem that in average get some imply that trickling the 'XX. which of I up outlook 'XX kind year-end and there, be was of there your be in that I - disclosures and the that now you're sort in, is quarter, the on show think gradually on it some years read on late about of or

a of over looking color during of how maybe of in but terms not course bit - how hedges. more little that Just, lack those just evolves, the that 'XX the out

Darren King

Yes, I guess.

you next constructed this months way obviously the a We exception with of were XX forward-starting when the hedging about we So consistent that did. we the level think And portfolio. swaps. always adding the

time be the consistent of entered what rate through notional keep month to at falls we one outstanding so which the the And would a fairly was amount off starts each time one really and it the is that at and to into reflective happen and idea starts environment swap agreement. new

curve are time now so agreements we're and saw spot higher. where entering coupon And the over the sloping and for we has in was And positively rates come fixed you those down. received these

of at Fed. the forward saw wasn't continuing benefit in coupon rates of average become to of that rates that's starting the but basis right there a to shorten the at inactive end active. the month XXXX XXXX. in as floor start because in so gradual really There through that then negative and lock XXXX are swap not now any is duration forward in the for down portfolio points month XX continue XXXX. swaps will we a those purposes, not is and then fell received place into And zero fixed believe decline or brings And huge some one's And of really practical the starting add declining and we swaps continual and go that all cliff consideration more a and that as the a the to intents XX se, each rates per

And that you'll so we've slowed down the XX goes in months. the see hedging next gradually and that away it through

Don MacLeod

from of a Just - start from swap average But is of forward date. end reporting weighted the starting the maturity the to the the clarification, date of point not the

Saul Martinez

Okay.

X.X it's not now. Yes, So now. years from from necessarily

board. on now the starting up forward these swaps all they when From come Okay. come

Okay. If I guess the second.

to just I The pivot deferral initial second the I exiting CRE two-thirds that, question. of X.X me quickly mentioned XXX book Let days guess, think you in billion forbearance, period.

expecting as negative have account loans I'm for intense just curious guess what of XXX of any a as you Act things. advantage to and a and the, even extended as what for the or should expect percentage will have and to it? do TDR modification treated there a they for additional TDR expectations we ask be for you assets you to period say you to think Cures second anticipate an plan modification modification? how that some will you for these of Do there. questions implications Do - risk-weighted not account you're been of how other couple classified are the - So with how taking I

Darren King

but at what a we've go, guess what seen couple I portfolios predict look exactly it's so each of to things. with Obviously, as happen far. we hard I of Yes, so will these

folks were to that end what is the I them I in I plan at and When to bulk gone have C&I that of the back And down of term. dealers commercial when I in dealers the gone forbearance, $XXX current mean, portfolio I who their so end have paying was of up of look the about the look XX% come to their the and been levels haven't to estate going long C&I rest about look to that of have mentioned floor at who XX% when really for them forbearance, million basically reached forbearance, of the be still back their time it's back period decrease paying portfolio of some and on the real in gone has to portfolio, of repayment have far at the there XX% folks about so normal schedule.

has into And the, so far asked next or from forbearance. of back gone to up. that When have XX% what about we've we come seen some their get for so extension will the group

a tougher think segment. I it's

that the know to the plan maintaining hit payments we've enough there loans. not and will to to resume we are outside sure clients talked that a and positive seen are just trends liquidity And so their in go because have that back that but XX%, we've actually they be and to number wherewithal bold I'm of

individually they'll a equity, little if considered be to are of anything and might might to they relates able of change be get back able I getting individually it different you a client be terms might get we - As their rate. to for are treated and they and look of we at interest be get loan will each reserve, to we'll an mean, looking all, bit kind each and handled. how some first

of our next non-accrual. qualifies there those And and will as into will fourth an quarter be in needs whether as things or help TDR think so the on go of first combination I safe us to through it's a it uptick But of it's go we think to the we categories determination say that go those quarter year.

Saul Martinez

Okay.

So be And basis. that's on okay, helpful.-- an treated individual

Darren King

assessment Yes and process. that's, go we portfolio normal through grading our

Saul Martinez

presumably great. --. under Board already allowance CECL [ph] Reserve Okay, And you've

Darren King

The summer that…

Saul Martinez

Yes.

much. so thanks great, Okay,

Darren King

No problem.

Operator

Wolfe next line Our Carcache Bill comes of the question of from Research.

Bill Carcache

good Darren. Thanks, morning

Darren King

Good Bill. morning,

Bill Carcache

metrics there and improvement some unemployment in seen While we've is outlook the helpful. like GDP, in

contemplating continuing commercial give a your that bit and as estate of performance? as the understand industry to of prices little on have to understand vacancy decline, been an to better long it going helpful on key what rise outlook CRE contemplates possible. that your allowance XXXX. of impact at other be it expectations as a what continuing like But of real Some for the are we look have rates Some would shouldn't CECL metrics degradation. drivers I the color have way. is those more Can your us you forecasts some bit

Darren King

what's this Yes. important underwritten parts just I is how but of the was not start. on, guess most going one the to loan understanding of

drop look are account speak properties. into we we a of multifamily. lot a real another so assume just increases underwrite, We I'll But level the rent estate and and at And rate is current vacancy and that important lot into of take really interest rates when support exists vacancy. that our don't current a is to account interest you capacity what there higher portfolio, that than we element take to creates underwrite the the we of to when rents these

obviously no rent and a we've the a of collections values range. places one vacancy so ticked is so of in maintain factors lot And New in York those seen the also up and XX% will we XX% watch lot help City we've to collateral seen

which an Price about that's element hasn't been values crappy think of there about And real estate terms Index, CECL in modeling. so that traded with good we feel in the would important the be pretty really much to commercial

haven't so seen much And we there.

changes look would as rent they're forecast whether think then it maybe the would maintain realizable of at you're rates. or portfolio in on each properties they're cash we be our or these And to in slightly And you're looking and obviously on at individual for base. and different expense the we've the some the depends to at looking come adjust - occupancy at what a or uptick. outside able some and flows the seen, a they viewpoint similar hotel resources geography not RevPAR have and through at deficit where So rent those we and rate vacancy look the factors borrowers running not again,

little least been space holding more has being of contract. a challenge, hearing are strong so far people collections in the the see announcements, under into particularly but rent office. of going Also at bit and are into we sector city York up you're that a back from New the, tech and

the to liquidity bit a a seeing in And outside be and portfolios, able their clients a little that, say often look the to question where property manage they and seen guess to they I do long-winded the gradual at don't the what environment. doing very we've so we degradation. sustain It's watch to of I and guess in to is really long flow answer that liquidity, maintain when how of how much not severe business these we've a they we're the far job so trends good able have this cash do the and can it they be have adjusting

Bill Carcache

If squeeze one. Darren. one Thanks, helpful. can really last That's I in

Darren King

Yes.

Bill Carcache

portfolio the loan yield and securities that on more your down benefits into on color by downs paying well between hedging pay you've the give that Can you Beyond a product back perhaps possible? the deploying differential discussed. bit What's you're book today.

Darren King

securities you the I'll take from - the separate guess at loan book. I the if book, look

of been barbell amount amount rates going those risk haven't less. run duration been it describe one-year securities another of a at down, treasuries significant with On invested And or just and certainly in it as we given cash. where dollars the into the lot there has buying are securities basically would of a significant book, in and we not for, this they and mortgage-backed mortgage-backed we risk basically then and lot pay where additional not credit - as point securities securities are a

started of margins last the the loan when what days is build. in little part the and that that's XX been increasing. business we've so seen you And the on portfolios, look probably new cash at earlier, a Interesting has bit

we what's And being returns last that over new the XXX generated loans on days, than so in at book. they're when are the look higher the

day floor the the roll book. active starting between actually see so we're and margins the is then into to firming floors pricing, roll in where loan margins on some the loan loans higher starts in are off actually going the And

into take the portfolio. little for loan benefit start and in start whole you as greater loan to get it But and to margin. beyond And the to you will proportion of a out XXXX so, yields while see when get shift that a the you that

least see XX where And at it's encouraging things are the based on so to last heading, days.

Bill Carcache

Very Darren. helpful. Thanks again,

Operator

line Keefe, of question Woods. next Brian from the comes Our of Klock & Bruyette

Brian Klock

Good morning, Darren Don. and

Don MacLeod

are how Brian. doing, Hey, you

Brian Klock

I fee there, color get the or in to so is good, good. XXX the level when you income, back like that I'm really run the there first that nicely going I'm from little rid merchant snapping I discount, or quarter, to us is what's the other somewhat the from color insurance on on anything service on look that revenues there back in is give look you you discount the deposits I at Bayview was Bayview any give ratable quick and pre-COVID revenues charges you if when of operations. you the forth. can there anything and the of talked that at quarter. Eric the in mean sort overall about us mean, of can feels a

Darren King

by the function what we I underwriting. merchant sometimes close had I've you pre-COVID going we as some to we some are some and levels on back lumpiness much And quarter fees what's million it's to where to of that and was category, particularly the is Yes, sure, things line over seen quarter pre-COVID - before. last that than item, snapback of guess low. They're the activity were when average, were, through a level line quarter credit quarters with some and market discount up Loan obviously higher we fully there where was in and happen in there and back the on that consistent with look then $X in Brian, item, seen that have but large strong pretty that's components of pretty cards. in not

but fourth still pre-COVID the be not we the quite, not still fees fees So, might is softness back high a and in levels there softness on run in it were, where rate all merchant the from insurance on of might all, where some and little softness spots to quarter, bit some loan card. way some some,

Brian Klock

accounting follow-up, that, the services same that it the other they little question rate than lower be quick then run the a And accruals use over other and the side, it. like just or fourth quarter and the looks professional miscellaneous in last stuff in were like the there. might has Got down costs, few like quarters on bit the

be So to should up we within of level the quarter. XXX the expect that to [ph], want kind back of sort third average

Darren King

that the probably that goes spot, we're at through where quarter are thing is barring there in only I the reasonable fourth think that been we, is are when pretty took impairment we sold MSR item. we that goes or litigation costs the through write-down we now that create has lumpiness that asset other and some the on there if line the for manager

the will million fourth right that zone that stuff of the give bucks few where for quarter. I holding think be in a So aside, take of or we're, kind

Brian Klock

your thanks for Great, it. Got it. time. Appreciate

Darren King

Brain. Sure,

Operator

for Ladies time and one we have gentlemen, question. more

question line will Cassidy RBC. Our final the from Gerard of of come

Gerard Cassidy

Hi, Darren.

Darren King

Morning, Gerard

Don MacLeod

How you doing.

Gerard Cassidy

give the of Good. year next a for auction sort your quarter once. is Thank starting in Dutch stock to capital listed. is up, for what capital wrap the consideration all you, the at year what to say, size. thinking has is get accumulate, bring to until, thinking you And let's a of on should next gate it really lifted tender it's all it your can the on not the question. second get action But plans, the next a buybacks comment banks offer you're us you're guys are To like taking about obviously extended Fed you

Darren King

and through the really capital, I leave Dutch thought honest second, from for much of - [ph] question. comes auction guess of a what a the I Dutch to the And that framework on great process really I a and capital our the be the to our the the it the about if allows we're we wait with a obviously first communities but isn't auction, part we the to was not want Fed deployment appreciate Fed process you. have do thing So, generally that I re-submission be see going On to liquidity. the changing customers capital effective, got place service through first and we've thought right that deploy of SCB deployment all in now. and actually is business

maintaining on hopefully to So, balance lend of before as and you our can After communities incumbent. that some support so be of clearly that the business that in the mentioned see and help and we're that obviously seeing returns it really the I see on we're so sheet like a able right see some I'm the in growth and will now. to we we'll as group, the position

businesses return how have we on capital always deploy take thing loans, stuck of the with rather that the bank lowers look at If is the is consider that then that and run low you're what position returns inefficient excess length excess believe of and me it we've if for overall be sure then certainly that sit to that most we is we'll your and investing we do return lower the in capital we'll got are dividend to that that stuck make we've organization important capital and other to in the for return So but really but the to maintain the key we is don't to, and try the not can and alternatives allowed -- free. you're we asset. the we we're

which and from time we a so but And do want be alternatives make capital and the continue return to we're is returns. practice to manage make we customers, of into time and what we but are. of will sure stewards we we'll to always thoughtful so deploying win low businesses focused see to the have, new And, wouldn't it prospects capital that way out on to

Gerard Cassidy

because liquidity, [ph] their indicated those of more we of hand the same be phenomenon X.X? X.X to follow-up to it you build as because a to was and then a customers liquidity as is you up times. cycle, Clearly have time that or bring do you normal uncertain just And up you to level. long customers deposits it those many And take question. long had of down as it for customers their what X.X in this this period did building the your compare how and to Can going at recall deposit your see accounts peers these

Darren King

Well, that look at good guess have but my the Gerard, crystal liquidity yours, ball is we as this level at, I as of time. I

that's smarter. to people banking the a why it can think invest is liquidity, build this they lot doesn't think the lot been liquidity operations to you're have the been places environment. adjust where At have and I spot a seeing customers revenue All per also right up industry think of sense to what we've are I Bank the have I it but in than break not seen the And quicker se time last we of that business their make to lack were lot in of now. the of and excess alternatives a their right part the cash. build time they industry quicker

If and accounts. you're client, time doesn't market make to middle it a money it sense keep larger market in

rate because there it as a is improve. no all you're I or what think small to starts liquid sit and is, things business we're consumer seeing there If and happen so

in and asset yielding types points just higher and basis see some in I from pay interest and or will of hiring, savings checking products. some takes, here. savings started from probably and get excess and see Fed last quickly be see out rate until that to To combination dollars movement that see extent XXX the of the funds GDP and to into that people how interest customers returning You'll get got us guess they've of attention checking perspective. deployed on how how tie recover our that into of some We of quickly. I you'll deployed inventory took we keep really building classes we it higher got think to long moving mind move in up XX I and the time before

think goes. while I thinking hopefully months, how we're and it's XX longer, we'll for economy it's, next much see the here but a the not So,

Gerard Cassidy

Thank I Great. you. the all appreciate color.

Operator

closing management to the over back the for remarks. like turn any additional I'd or floor to

Don MacLeod

of you thank with on our necessary, always, items as investor participating Thank XXX-XXX-XXXX. any goodbye. at area And or Again, for release you the please code department contact relations clarification all news today. any of and is the call

Operator

gentlemen. Thank ladies This does you, conclude call. conference and today's

may now You disconnect.

M&T Bank (MTB) 22 Oct 202020 Q3 Earnings call transcript