- Earnings call transcript Q3 2022

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Operator

Welcome to the M&T Bank Third Quarter 2022 Earnings Conference Call. All lines have been placed on listen-only and the floor will be opened for questions following the presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Brian Klock, Head of Markets and Investor Relations. Please, go ahead.

Brian Klock

good and Gretchen, 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

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

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

Darren King

Thank you, morning, Brian, and good everyone.

thereby impact three accumulated plans and same the the rebuild billion on of growth, we hedging began pleased at of net the the time, securities laid with the our in past income, dry year, quarters reflect we on been first powder actively out investing As the Through at we're of deployed made year, to on have yields, the cash and higher quarter we nine our work. into first comprehensive portfolio. the the executing months we progress have to $X January. putting we We derivatives other consecutively investment limiting

real the loans, loans loans $X.X by way. about $XXX and commercial $X the while Excluding a we've loans decision million, by in CRE slightly reflects to customer in PPP impact balances the consumer our base billion, of different our grown estate commercial billion acquired decline and industrial serve

All and capital of sensitivity, reduction shocks balance these our helping from making sheet rate efforts have to our net in our asset interest future more to a efficient. margin protect led

share In valuable capital, have year's in of in we this began of of terms the stock, of restarted outstanding now acquisition common shares. closed quarter we representing repurchases $X.X franchise. and And second People's integrating X% common billion the this Bank United process and repurchased

ratio strong leverage pre-provision representing year, pre-tax hard quarter generated the Looking translated back growth stronger quarter into third in revenue. than this results. net pre-provision in X% trend $X of this of level of book net revenue has leverage has compared We billion not done. year, other share despite per during the remained peer impact is exceeds and But XX.X%, can accumulated to the linked quarter also work wide by ended the quarter. with comprehensive a our rising third has value grown And through financial positive We as environment stable Tangible margin. we operating more CETX on the the the a each income. positive of first median that rate have this work XXXX, nine bank the operating months which and XX% pre-tax generated relatively

expanded communities. excited plan our the about that recognize a combined our shareholders, the company element that footprint our at franchise. key A beginning revenue and and customers, will to We're the from balance more the year continue predictable capital-efficient, out combined value of our to on produce set is this can sheet less path the build We asset-sensitive and of benefits created bring employees to earnings.

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

loans. look into Taxable increase these an or largely Next, past boosted up in by the quarter in little margin interest we'll higher in hedges. XX% quarter XXXX, XX of net the was increase results. $X from $X deeper a the and million interest for additional basis from increase from billion quarter. of margin from X.XX%, rates, to inclusive increase the of that interest-earning quarter. the linked trends margin effect in assets, net million X.XX% points the The generated basis third quarter higher we $X.XX of the an the driver linked day approximately equivalent estimate was The was million which on million income points. of the a was one XX rate by non-accrual interest $XXX the driven primary impact Also interest of received rates $XXX The increase on underlying

two margin. the a with on basis added to reduced we addition, benefited factors the XX All held cash Federal level from deposit of points. In points other margin which the estimate basis Reserve added

essentially to see during XXXX. let's linked able the where balance Next, the billion during transitioning sheet. a trends be loans with quarter to more quarter. the balance unchanged make leases third the average quarter progress The capital-efficient were Average to of and the discuss we continue loan $XXX.X you'll

on loans by growth loans an million X% Looking partially $XXX second million clients and and largely X% at billion, basis, of or compared commercial core plan the leases million coming by in offset floor quarter, $XXX average to loans. approximately dealer average and the $XX.X or million growth banking $XXX was commercial category, This with $XXX increased from PPP growth decrease industrial in a or XX% with balances.

are total a loans or and on growth impact not third only PPP $XXX by $XXX forward. average at loans loans, million PPP ended C&I expected Excluding have to loan grew quarter leases material quarter-over-quarter. going the X% million and

With X% sheet. financing solid, the in lines business have to average or acquisition, Growth $XXX new continues United million impact equipment sequentially. People's balance growing we be our that two

in million was However, XX% or average decline mortgage this warehouse by $XXX usage. line growth offset a

During the equally estate construction Permanent $XX.X by the to commercial average and billion. third real to loans mortgages decreased or loans X% $XXX contributed decrease. million quarter, commercial

growth. continues or growth loans These as loans. excluding offset $XXX billion. $XX sheet billion, construction $XXX for billion X% by Residential securities. and commercial assets, in projects the Recreational $XX or investment, real in converting decline loans interest-bearing reach increased by to Average is estate sheet mortgages the balances, that average balance part million $XXX by X% offset some our X% or to loans main subsidiary. the in and partially earning decline hold $X.X Capital of continued finance financing were increased auto $XXX facilitated completion by cash originations deposit of permanent to X%. million due growth be largely about X% we driver to grew partially million million loan billion the was or on Average is of of the Realty increase That exposure M&T investment up off-balance Reserve into decline due on in a to Corporation inclusive due new continues consumer amortization. normal retention the cash or Our about Federal loans to the at these $X.X to average average which

some base balance various combined optimize of quarter, resulted funding These sheet bank. utilize cash a we completed of the to in deposits. excess the decrease During actions and available restructuring in actions the the

of cash due deposits $X.X The balances largely billion balances deposits decreased this by decline conditions second actions. interest-bearing into deployed investment of relatively cash and to the or deposit to balance sheet $X.X Average management decline by the to with end stable securities. this impact X% the to planned purchase and billion remain the third $XX.X billion cash compared balances We the in year, during market in quarter quarter. the decreased of Average reflect expect year.

$X $X move billion shifted higher-yielding as reduction Customer time year. to declined operating commercial commercial million billion escrow planned levels warehouse decline from $X.X a non-core lower quarter; balances rising in of balance mortgage reduction higher paying stabilized. account in include; billion off-balance have and capital products. in customers a compared balances line balances reduction down rate in in trust as this deposits demand other well and as and levels third customers of deposit billion as balances during a $X related lower activity of of products. markets municipal sheet these, to deposit pay reduction resulting balances deposits; the high-cost in the a and there of Average reflecting a with mortgages $XXX non-interest-bearing average utilization. associated second was in quarter rate-sensitive off Some lower sweep And billion was in activity the $X some environment. with deposits, X% reduction $X lines billion

However, grew balances these X% basis. an million or by end-of-period deposit $XXX on

in loans the originated income. from in were mortgage were compared to administration. was retain our balance quarter the quarter. recent the $XX revenues of $XXX $XX to compared business million $XX quarter linked prior our income quarter. management for third in on due in Turning million banking was totaled figure The for third ago down assets in the in with under million $XX $XXX the in mortgage in Both million mortgage and decrease linked million sale the on in to quarter. quarter, the second the that reflect third $XX Trust banking market mortgage a quarter, largely Residential were non-interest the unchanged to million million in compared Non-interest the income the $XX was impact quarter. quarter $XX million $XXX with from the lower quarter. substantial Commercial recent recent residential under million the million second in of decision million valuations linked investment quarter $XX Revenues with majority the compared from quarter. the revenues quarter, assets in figures million X% year our were originations sheet. $XXX Mortgage

incremental recapture preparation reflects fully accounts. are in deposit recur partially of on primarily fee acquired September In of $X Service recent decline now recaptured. in waiver which million an customer did compared fee offset addition, the market in quarter. quarter the second waivers quarter. recall with $XXX on These were deposit charges million These not waivers. the accounts the were and $XXX included charges service tax in million fees, second $X The declines million that money by

intangible tied in of business salary performance. an to of expenses which accruals increased well talent as Operating was The to the day that investment third additional improved assets Turning affected amortization $X.XX expenses compared resulting billion higher bank quarter, billion our in the one -- organization the expenses. to half in that for linked were merger-related investment and quarter. incentive due and approximately from in benefit and exclude costs $X.XX to the largely our as talent increase

expense, an recent expenses in We deemed quarter securities from efficiency of increase impact quarter and merger-related gains second which saw ratio, last also to in be loans losses XX.X% acquired criticized. reflecting compared the denominator in or amortization FDIC XXXX the year. of excludes from and quarter the and XX.X% numerator in XX.X% insurance The with third the was the intangible

in second Next, Despite credit credit count this deteriorated let's amount billion the million for loans. turn charge-offs quarter losses this quarter. quarter. the double the to $XX remained quarter, quarter, In third provision excludes CECL to up the of allowance the the were in Net recorded the $XXX third disruptions, the growth quarter, acquired $XXX at in changes economic million for credit in The million non-purchase to assumptions a The $XX and the included related that so-called Note to second amounted $XX the $XX end credit million inflation, consumer losses labor to as of million portfolios. reserve in million third as year's compared credit. quarter. provision chain compared reserve we from supply build stable. our the linked our due second methodology persistent end shortages largely $X.XX well was to in in

the the the environment, third residential billion, and outstanding, rising At interest X.X% indicators forecast the for to, to decreased from methodology X.X% third the of commercial the curves is to at loans billion unemployment loans a of quarter compared real including our in that non-accrual estate values. Non-accrual forward and interest adjusted quarter. growth of reserve experienced represented those rate end deterioration reflect As most rate, sensitive macroeconomic end GDP baseline were $X.X sequentially. quarter, down to rate $X.X linked loans the

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

an the Turning the due Reflecting Tangible common X% estimated a the repurchases, quarter. share Tier common of down of second from per X% shares, equity impact largely or XX.X% to represented totaled at capital. common $XX.X of of end $X.XX common M&T's ratio to compared amounted XX.X% quarter. the was $XX.XX to the equity billion, X tangible end quarter. the with of $XXX end million common second X% stock. outstanding share from of of decrease the repurchase in was The decrease which the the prior equity

outlook. this With on third quarters the for year's we'll fourth to outlook the quarter the to focus three books, relative turning Now, quarter. in the

take balance a look for sheet. at First, outlook the let's the

to We continue final investment quarter customer the grow in of this $X Keep accelerate this cadence billion securities or portfolio slow on could year. to demand. expect depending by market the conditions loan and mind, in

outlook the average to Turning for loans.

largely third and the to We quarter average be of billion. loan expect lease average in $XXX line with balances

residential average anticipate loans mortgage CRE C&I, average and in growth expect slight decline a in We and sequentially. consumer balances

is uncertainty well the minus look $X.X we're interest quarter guidance as As expected plus pre-provision in net about deployment deposit to statement, the hikes of continued by fourth the and revenue speed variability be the to of pre-tax billion, interest liquidity $XX in quarter. the we or excited reflects growth pricing the as the of The reactivity of income Fourth growth. this Fed loan rate million. and excess the in income

Turning costs exclude flat both expenses fourth third expect be which to quarter. essentially income merger-related amortization. fee our to quarter to we operating businesses, compared intangible fee anticipate We and the

benefit We be decline do be line. of further the a quarter. from merger We third reflected to expect expect them realization a the in also in salary to synergies flat

decline introduce elevated our franchises services M&T continue markets. new offset be promotion this work costs expect we we integrate However, to to advertising and by to both as to to professional and and

credit. to Turning

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

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

the in of Any reflective Our losses and provision any economic is CECL in assumptions. upon follows their would methodology, credit dependent heavily which our allowance outlook changes assumptions. the for be macroeconomic change

do to a our September which needed comfortably and our plan capital Turning capital to to XX, X current equity ratio shareholders account measured XXXX, in the year this takes Tier quarter our pace We shares a excess core capital communities. the exceeds CETX $XXX lending range safely company level the and buffer, the required not to pace. to our capital of combined to capital. We at previously. into plan. All potential or With over of amounts return repurchase of M&T's that CETX support capital We the change solid common current been expect run threshold, slightly we right. stress additional continuing exceeds targeting We the SCB. with distribution above ending common XX.X% starting at we minimum generate regulatory years, at believe anticipate next XX.X% plans. have the ratio a to per under capital ratio, million of to anticipate

review to the which questions briefly Session call the instructions. Gretchen before up Question-and-Answer open let's will Now

Operator

America. take We'll [Operator Ebrahim our from of Bank Poonawala Instructions] first question from

Ebrahim Poonawala

some… I just guess

Operator

mute, sir. I on you're think

Ebrahim Poonawala

Thank morning. you. Good

Darren King

Good morning.

Ebrahim Poonawala

line. of shy expectations, talk quarter just, bit. fourth a little I quarter Obviously, NII guess maybe I a about in seems little was Darren, third think

NII sheet, outlook the XXXX, should As higher rates from tailwind outlook steady question a do and from growing lift how -- given XQ we we on there about onwards, any view balance around. from expect into see the your you think given your

Darren King

Sure.

Let go me and order. of take reverse kind in -- sequence for those in I'll

high-cost XXXX, is for where we third back and might billion, have at in anticipated, the $X.X ended point at thinking down XXXX, versus the cash So and objective we where the And forward that at But with we've about in year where been our we'll come of of the think up basically fourth. to January for looking we're the quarter is When some difference full the for XXXX. the get look talking the that quarter, expect really jumping-off level about to of good managing obviously, outlook. at, a we it end excess And been about balances. was deploying end third to the as we cash we've the funding. at the we end

sheet the see little going bit. little up a talked money as broadly funds. balance little the of more third what I in bit market And you quarter our level on think we And so to the is that was before is the we see Barclays broadly number see reason the we or would And saw for line client at. been forward bit into why that in and we across quarter betas betas. we start at the we because before move in off-balance deposit look the sheet quarter. inflection deposit base, balances we're a expected industry have think that really expectation move is deposit when I third movement what where cash were would a about what's that's a is big And cash fourth with with And say we I point is, happening a

then but some help working benefit margin see and net is. of on restructuring we've probably in about into we'll quarters margins in some positive. the lock so It down. still the And XXXX what might we've protect to be talked get you'll those see slow to we've But been interest and of where not still in. rising balance from as we outlook the part And seen what should sheet is be the growth start get try And them rates. prior the we'll

at lending new have businesses combined like and sheet we're so to about to be rates we'll various that that should forward. in are are business in that looking And into the point balance the presence And well feels balances going our interest the the and warehouse geographies where we'll that the we're as level as bottom two the a there. fee our businesses mortgage and It new and as getting then rates. advantage work fees that towards on get at Think that getting mortgage we tied tied taking they continue building for we be XXXX, to organization. to of

specifics January And get firms deposit combined to not -- call. so we'll with or delivered in our we'll the But growth more first loan that back more come back look in -- levels pre-pandemic. you like the for

Ebrahim Poonawala

Okay. Thank helpful. you and

Operator

next from Our comes Stanley. question Graseck Morgan from Betsy

Betsy Graseck

Hi, good morning.

Darren King

Betsy. morning, Good

Betsy Graseck

thinking amount to to loan know how wanted about But us you do could capital. capital you're have the thinking how maybe funding just understand excess leaning growth? you're I you loan going help And I understand anticipate of then looking that significant environment, be levels. be or a this into be in buyback helpful? you you opposite. the Just you how sense about little more does more? would know Thanks. less? gave And but dynamic of do the you're that back it a it grow make buy and to amount, would growth, loans bit us I to

Darren King

we by that. -- we're our demanded to The loans customers. lending loan sure. Yeah, that about can can't demand Happy is we talk for way one, at provide have number them. bank and about the are create We always think only

that trying for clients always their shareholders on earning return we're there always entrusted we're to work capital support right we're that, our find making the so us. as through balance to investment our providing communities that we with And sure capital between the our a needs. to need And that have clients and

is which always of the the that just and the like but there each combination is so not the what level, what at demand We at returns individual And that those in with look start loan pace, look returns we we marketplace. governor And returns. across dictates the grow at relationship. whole

from will their to support we shareholder, about to outcome And combination is an to return We'll to which capital capital really and the so with that typically through able an only way, it buybacks. dividends I support a I a that The be lending. forecast look change think and of meaning we've need hold of be growth, thinking a don't will to we buybacks the is cognizant all, clients to another provision a quarter on thing emphasis is of up, name. little got that capital which macroeconomic that see is by worse, started think, this means bit little the that but provision is and

be what's provider our And the in and like combination of the we the communities, to and protected. we're to sure of capital. that so we'll thinking about are in capital that well to feel bank our make here growth ratios anxious But sitting support what is be allowance

rate And time, that so, see. the in period growth you growth it's over the what long is of a communities kind happens real GDP generally of with

January of try that's about it make, think said, how we'll a about trade-offs how with more as be And we I we in kind color and the so, to that feel we XXXX. with and little back,

Betsy Graseck

et funding sense cetera. Right. of in through but fund, how I'm capital, either this how not tilt obviously from loan that of higher the about just does It's how to you're wondering decisioning? rate wholesale deposits we're comes growth. environment, environment, the funds, also also or thinking question inflation it. the through higher you're part all And at That makes hear just thinking

all? dynamic that Thanks. does change the So, at

Darren King

balance we to -- basis. of think try of kind match-funded both on We a sheet No. the about sides

you're look sell same basis of think think on deposits so I balance it a the put sheet So relates kind from about speak, as industry, of that seeing in what we we the you'll liquidity from in some us and the is the perspective. funding lending with same math, liquidity we longer-term a -- to could one on starting match-funded the on see things perspective. the and When forward, to to on

or probably working for sheet more we talked that as and wholesale And low, forward, to out mix had building we've continue back relatively three deposit the way going sheet, the last And funding efficient, has so, different securities. we balance cash funding definitely be the balance the and a case. work been we've which four we go put think about the we in and cost that quarters, will But been we'll is then keep there. have some to I cash part as the have of of think than we

You likelihood. add could the we'll did merger. and look the all this to was and past see holding perspective, course XXXX from quarter, holding Peoples over other funding came we some at $XXX And that a liquidity replace sheet the that quarter financing then wholesale into the of balance million some company into with company, in to the fourth

Betsy Graseck

Got you. it. Thank

Operator

Your next comes from question Usdin from Ken Jefferies.

Ken Usdin

Thanks. follow-up Good morning. Darren, just a on the side. deposit

starting of You change in to we're kind beta. that just mentioned that see

over can us incrementally to around about where update in you betas expect -- on them the thoughts if your any just talk here? from thoughts And you to I different So where just just was go cumulatively cycle. terms of wondering, also, go

Darren King

up as a deposit in expecting Sure. a I betas. mentioned, of to ramp bit I guess, see little we're

expect to as largely space, space, become institutional Fed led the commercial to price the off the meaning in trust in be be start priced deposits. demand as well sensitive to funds. it of and and We the Those wealth tend most

seen movement there. we've so, some And

now. which balance We're off-balance of pressure the pricing, what's move interest-bearing as or at As more see deposits. just sheet, pressure as will cost accounts, on commercial total either what's think some on seeing checking up we sweep, we'll sheet a sheet on huge not well balance sweep, deposit look I consumer

I happening can see so, where in start a to think the interest-bearing and and up not And we're mainly categories that in portfolio. you XXX% bit that little from kind were XX% for will that's starting some checking of space to we for I movement an in that betas the are in you just see remind probably move by the that talked the range. quarter expect uptick, we us XX% quarter, are again, the deposit the CD the the last which and they fourth those We in has others maybe marketplace, at to driven the but in see quarter, about. been And looking

talked so, and last the right? rising the to the Barclays up that And a low at through we those cumulative the deposit little time. through a betas take XX% really we few on time, which should up margins X% up. period obviously, is quarters pop not will catch while for cumulative like believe over a get And they'll as fundamentally get that the the there environment. stay expect betas that is that It might Fed will look and might rate we had down market XX% slows above pricing about a the to will range, long but to of efficient, catch cycle But cycle, fundamentally basis there. we that They as still for believe

Ken Usdin

Great. right prior rise into And going year year? you Barclays based in be long was in we that point can up follow-up, my you at of next Can to throughout about, the line next margin had see now. Darren, that to go think sight of what it curve that the continue is forward to terms your made continue just how on

Darren King

reading probably, the you think think of peaks. peak about a rates there's talk lot been I've that been I and I press

into a either for a come look years year But XXXX way it's second and the since been it's or those few down compared as peak work it see level. funds pretty probably you a bit. is zero I going last where will great But coming average you XXXX go through solid next it that business we in think more and some to little XXXX. for to and into back likely at so and the long. year. to But the starts financial first we think down really we've up to Fed with exits nice dealt for the of what XXXX, But start in off to the see be be to I it its the when quarter crisis, spread versus little at bit

Ken Usdin

absolutely. Yes, lot, right, thanks All a Darren.

Operator

UBS. from from comes question The Najarian next Erika

Erika Najarian

good Hi, morning.

Darren King

Good morning, Erika.

Erika Najarian

back your sheet quarter rebalancing Could going had commercial mentioned in notional sort had interest are think investors expire should you the a deposits, loan that maybe hedge the yields the were little quarter? to talk – smaller beta from some strategy, the replacement expecting. also impacted loan in real billion strategy dynamics but to there's from how there? that at probably I of estate bit $XX lower and just third is the in about expect What's fourth the beta a the first the beta book My your net hedge book How and impact quarter. of your of income, hedging end question that in you to I of balance than less how a believe we first set third quarter

Darren King

Sure.

hedge up them the So loans those of the we've loans are CRE The the to lot the past generally unpack, are derivatives. we've And we steepness in set the a when get at started curve. as those we ones there the for excuse what in bunch the started rebuild first We particular, me quarter the in -- characteristics course in cash happened to look things of treatment at some where has the flow book. in look best talked in a when year, applied. the loans right the that and you hedges to second of accounting saw

was were at time the curve in the forward hedges implying. than than put what those the And up moved we some started on we actually as the now. the on, starting. those some they're faster spot what hedges, rates and what's And we market hedges some put curves on moved negative to those when right so of forward faster put the in in short-term, from is, happened up original rates And when because

hedging we first in down a the step notional going are Fed impacting negative what margin impact estate way. positive And million, forward quarter. moved became hedges and the probably of to hedges second And from those quarter of some range in Net-net, of may the the so in going we where go have down through negative based much with around and billion as happy as through hedges we from there, bit the on next go the in decrease real what's up we quarter on Fed, that locked those not they're that's commercial the portfolio on, to $XX That's go things loans margins into put the billion And tied portfolio. to just hedged. will to there pace billion in third. The look watching it how $XX quarter-over-quarter, and hedges fourth because out were on at moving the through $XX of increase to the the books on that estate of based put eventually, is of well. real the little curve the impact rates Fed that will year. kind the XXXX. we fourth when notional. a on today, we're we look if as and in is and what's in $XX about actually We amount the that is, are starting quarter, on And rates into as quarter will we're catch But the and really up world what's that faster, to the we forward kind the expect And and about the of negative they start go will commercial continues the look. negative the you curves. that's place today, if the those spot the a But with given where away. additional the be a that's on well the the fourth And kind so

Erika Najarian

one, lot two-parter. what about My sort is, peaking on a back of a of follow-up four question to you confirming of it. was fixed there book is the is X.X%. follow-up in meant down. the Number about going And in then at the NIM just as Ken, received marketplace rate second question a remaining the Got debate terms

wanted third $X.X fourth versus the are of quarter I assets flat assume in I about get NIM to that. to a me XXX and four that to billion. to So earning clarify of If sort quarter that get will

some that all understand have I February, so back back saying the go in we in and if in then then we you expansion down. that think And do in the stops, in quarter year-end. us February. think a Fed we then peak with that case, forward to second rates I stops raising some first to that's in Are we margin quarter, NIM we're we the And the if the get get will guess Fed curve, about, that NIM four in clarify do XXXX? trying what below the three And first handle do point at quarter? by implication

Darren King

Right.

in be. solid. is So fourth your kind of things That's thought process of the where we to expect pretty on range the quarter

year, into that you than fourth point – the so fact that been being -- Fed the still for really, but when to next the that And as we we've when quarter long quarter into see, expect that funds period time. earlier the we'll XXX%. betas XXXX. of into above is X% anticipated pointed are do early expect obviously out, are And to in and right expansion go they're thing a the that we increases and and out look trying unless We fourth question to back moving, given now not into XXXX, stayed some I the you is think

margin We sustainably sustainably haven't seen X%. above --

to said, we that don't our we the second don't M&T. it I about I part trying Will the We will. And exactly expect up communicate base how our not capital it quarter. the X% so think, XXXX, think it bank goes. to be the What's set of timing? levels and And to live is shouldn't bank believe and -- where expense guess we that I and in forever. is what third know how case quarter, we and the we're we that at we're about It's assuming turn? plus it think will sometime, think, I like trying

will Some probably peak what quickly in over by its funding go It what four does bank, looks deposit be start of and it year? to move inch term, in But you. back on it's guess. probably betas depend way like XXXX my the the how that could reach have of start that to but down. its the direction it end the long XXXX Does below not would going to beyond and move until the at

Erika Najarian

you. Thank

Operator

Our Carcache comes from Wolfe next Bill Research. question from

Bill Carcache

color could on ask concerns conversations your office exposure Darren, geographic CRE give wanted morning. can downgrades an us on Good any the with any customers, particularly if give having over update potential to And you that side? you I your different across on you're regions?

Darren King

Yes, sure.

our online. of to think never in as driven hotel in belief continued well in lo at here retail. and early in there So and an the behold, that online was seen space it back a anyone all store, in the would back improvement I XXXX, shopping be would mix we we've be in again, sales. look the And similar mainly as are CRE by improvements we general, retail, criticized, When in-person

And happened, steady paid been have has that on so as rents a basis.

The have experience continue we out and customers cash There – of see for hotel is in the so estate performance come been real assets, strong, of lot the we've a that's has in overall, landlords improved, those the system. And twofold. documented that similar in assisted eye sector. staffing. of retail those living, hotel. those flows obviously that in and very And and challenges improvement capacity seen particular. is to places But places having the we at in in the industry are One in general when are well got challenges and in independent look some on improvements those It's our staffing healthcare. we've living with

with the They're having of the clients some doing to short term, to our there. in staffing. they've discussions in been with so use help agencies And

in is coverage. But the cost the increasing short we're the really portfolio, their service still at about debt that's which we LTVs. so challenging term, the good looking And feel

in loss there. increases seeing not content. in rates some And have seen continuing far, so occupancy lot a so, And we

the I little concerning. So some as feeling office the office that point in place the are that folks hybrid okay to remote we're full-time and stabilizing you as where, now. describe and to it a and portfolio. is would But situations. And key still trends of overall, And positive what's office really with some time -- full are see we're watching mix return kind about of out, focused happening

in in renegotiated, not look particular, XXXX plus. our lease and XXXX have we really we when of date in pricing there. being of beyond. and we a so eliminated. but our see portfolio XX% XXXX bit XXXX little leases really leases is of And expirations portfolio that the an of There's expiration are plus our some portfolio about on portfolio would seeing The exposure much percentage pressure has the the at But and of XX% sits

them stable And understand and the square per what's the rates on and what how so actively are the to rents coverage cash and But down therefore, some our flow. we current LTV occupancy debt values decrease likelihood to seen going are, ability so foot haven't their obviously asset engaged sit. of near understand seen service obviously, while the come we've anywhere in we're renewals, in office, those where clients. with

you would keep it working with that anything got where challenge it's where to more And sure them them portfolio actively engaged clients make I in the that and we're over with to some shifted on. the call time, than a we've wouldn't normal business. of it's eye so the we're lens has our expect

Bill Carcache

how That's other or in a modestly settle range? the to And reserve rate the color up rate optimistic sort your scenarios, were reserve -- the your more increase you on on fund following your you're to to versus less of X%, expect baseline sequential where them helpful. go the little weighting should macro say, forecast. due Can expect compares very give you'd X.X% where employment and how we to, bit

Darren King

depending is kind we as are we we situation So economic where better worse the of a one. the the a wait in baseline on the differently. We the cycle, of scenarios, as weight. them consider And bulk well weight when

good, are is the things would feel get if we that they better, likelihood So less.

would And a the true. weight little so The be reverse more we put bit downside. on

quarter million this portfolios happened the the tend two sheet had drove came change was growth of to And from. this bit our growth be the look in of because at change and what balance the the just $XX-odd where There on little you were The one-third things it that in consumer consumer a mix more portfolios. We addition. quarter. and dated. If longer about

CECL amount aside that the longer-dated the is for with assets. put so And more you methodology,

the of the in And And function two-thirds so, assumptions. macroeconomic a-third then, about other the really of was that changes a increase. the drove just

X.X% a just driver you I an sense, macroeconomic biggest unemployment to so, from X%. give think it's increase linear. to was the And in rate the assumption don't But our in

go it, XX don't did so, to that basis up call points of added, by And X%. But $XX math, I you million. if to linear. you it's kind X.X think get times

or the drivers, you've So it $XXX of high, GDP -- also keep but of another there. on what's goes one that portfolio, add mix $XXX if maybe it the so, million, bunch biggest you got right? there's a in of sorry, million right? the factors And depends That's And so, in to mind.

estate. both values asset well consumers, got for commercial mortgages, real for as You've as for

a in at and of obviously, things number one the ones. is those unemployment key there's changes model And is to play. factors so, sensitive of But, the

Bill Carcache

it’s -- very that’s explanation. Appreciate complex Thanks. topic, questions. a Well, you clear very my clear taking but

Operator

RBC Cassidy comes question from Gerard next The from Capital.

Gerard Cassidy

Hi, Darren.

Darren King

Gerard. morning, are Good you? How

Gerard Cassidy

Good. for questions you. couple A of

well but you margin X%, interest kept stays was of of over XXXX, the back X% coming Is net the into funds and X%. to reference to where rate say. the the First, rate made an margin say, let's Fed pre-XXXX thinking the chooses of your for period Fed terminal which on time, extended middle let's a there

from it XX stabilize, margin your XXX, spot but the thinking the on thoughts put the over they to I'm trickle is X%, then touch of you not to after down you they the more for get does in maybe XXXX, months. going So and XX in. there don't give the interested what Can XXX, spring say I'm us

Darren King

never but I Gerard, feel putting shied on being the me spot. I’ve you're spot, on the Well, Sure. like that's from okay, away

which anymore, Fed a LIBOR, correlated very, very is higher prices of not so have to so to it have for the book of off some MTB, funds. funds, So margin Fed right? to well, asset much Because highly helps

spread over what reference affects kind once yield that got is side. a And And competition what's a reference the asset loan from over the the of perspective, so spread how so, you've the rate? -- rate, and really so are really little on And right? loan-to-deposit lot deposit takes loan-to-deposit your the One off side, the in deposit of which a ratios two-fold. pressure low, system on is, it's pricing. liquidity a what's there's on ratio, of bit so And and the still

happened versus pricing other how customer spread. in a retail a been mix banking, particularly in change The the just thing works last years, and in lot there's of fees the that's few

come bit competed I other have industry the fees, overdraft and maintenance about fees a what down. little think think in And see so, service about about fees been come have that is, away. fees, think down Think as you

at starts fast a and savings might accounts on rates and least on I put high how the think pressure go little -- that new on accounts. to how

I industry. viewed deposits time in are as generally almost asset the think discretionary a

some core clients deposits is core little view a that's of about your and the it account, M&T. one of benefits products try and funding our your all customer, we And margin, definite manage that base, sure commercial is you've in it's differently. based bank we core experience relationship big business, decisions a a on a Our it's in a great base, giving convenience. the mix overall checking it that element make small funding core account to to ability that when gives rate But a is that. about part that profitability. whether critical need it's provide is of and that and a what the a and make on of we're you consumer, whether products funding to whether the it's of the rate-sensitive other those you base interest-sensitive transactions operating got to other fair the price and And general, And then bit the

margin up you for normalized in of deposits I point time what funding mix of or in where But, it terms to place what it's the and back up, And keep know that to not across matter like, obviously, little going funds. guess that's time, in we the And and Fed long around that, haven't the lot as and normalize. us terms have industry that's We margins a seemed of like the doesn't the lot when a things to what's been industry, so, the for going was that in folks general got Gerard, competition the in getting veteran if and just that were you, a sage especially a attention, euphoric percentage long is is just going old a a happen been we're just a funded. that, look case. industry pressures your core margin, and of coming things

Gerard Cassidy

up the will then And as get you along? an enticement follow-up, guess then and just us to open this I as pay deal your Flattery receive update trend night is last with mailbox on of an if about, or moving I cost the guys me. But, was. in you is of that you my account, charges territory, of charges, expense they line the And update can us one-time the to talked a on just happened part that don't new to mind, know, you charges? an that marketing an savings. one-time can I how second, give Darren, don't everywhere it is since People's $XXX, part you me, cost, And one-time then ongoing would that

Darren King

Sure.

a you're Gerard, So special very prospect.

most important only prospects. get So, to our we $XXX

Gerard Cassidy

Thank you.

Darren King

Yeah.

Okay.

cut sarcasm. my You

bunch in a there. of things So,

completed when that progressing through with of Day to have through good the less been the like a for the where you access individual whenever access really everyone the basic we're We tools say clients a been they change some with those things understand things spent a things. we're all system integration, how with have while nearly Labor go look that looking million conversion to they that than their September X%. perform stabilizing gone. on that, Tape is they're feel sure the and And that, working along make one-on-one we've stabilizing obviously, working this, Even the on with Day As able we a basis I for. has always how hiccups, have that and And not solve overall, massive customers. But they're confusion. over really the functions to basis. clients there they have issues. And convert there's until there's been have about And some happy some we complaints work

month of as conversion. the a from as And we really, the beyond would in so, it look operating we would one-time the expense marketing, much at think think one-time marketing about a perspective, And that, we when then of pretty expense.

incentives, purchase think existing product you basis. we when we quarter, promos so don't we'll And do look to what them in to part of up about bit and M&T marketing a and as markets the can folks to to we're other us clients little products talked become as bonus obviously, as think well their ongoing marketing, very some expense of pricing. is those those those in then well because provide know hopefully what when our And an who competitive to our like to well you set us about with the stay at as our spending cash entice reconfirm those decision introduce that we'll to on on ourselves fourth including ramp

so stabilizing completely fine. then was of you'll some effects stabilize see actually some folks And the of fourth acquisition of quarter. what or and you'll the to stabilizing But salary when the just and more line. into look, the the shouldn't They've doing I The say little are impact in will will And systems as thing see the and the that. linger you systems of that of benefit some is It's worked some expected. see conversions. systems. exactly the start be lingering expectations you cleanup the completing other

starting And the so dislocations the plus typically And And dislocation system conversion the then time have we or days, XX at the XX, after XX. some closed those we we date conversion. always deal. are have

folks, no decisions. so change those there's in And those

some in in decline any to fourth the would and But change, line of thought stay separate. salary originally with In we're and elected that to going it when expectation people overall, where were be fact, to be quarter. benefit in to is if line the start have we up show they there's the going will what

Gerard Cassidy

Great. Thank much. you so

Darren King

We you look Thanks a forward being Gerard. customer. to

Gerard Cassidy

Okay.

Operator

over I End to We remarks. closing for call reached our Brian will allotted back have of Klock Q&A time. turn the now

Brian Klock

necessary, will Relations Investor today. thank release call news in that is those you Investor for all the still items feel on Again, in the always, the contact a clarification group Thank and you free are at And Relations reach have of to for the if any And participating area out good Department code or queue. day. as any XXX-XXX-XXXX.

Operator

ladies conference. you, today's concludes gentlemen. Thank This and

You may now disconnect.

M&T Bank (MTB) 19 Oct 222022 Q3 Earnings call transcript