The M&T Bank’s Third Quarter 2023 Earnings Conference Call is being recorded and is being led by Brian Klock, Head of Market and Investor Relations. The presentation may contain forward-looking information and non-GAAP financial measures. The company's purpose is to make a difference in people's lives and their operating principles include combining local knowledge and hands-on customer service with the resources of a large financial institution. M&T's Senior Executive Vice President and CFO, Daryl Bible, is also present on the call.

The bank has 28 communities led by regional presidents who understand and meet the needs of customers and communities. This approach has led to strong results for shareholders and superior credit performance. The board is diverse and focused on understanding customer needs. The bank invests in technology and supports small business owners. They are also committed to supporting affordable housing and the environment. In 2022, they invested in renewable energy and reduced emissions.

In the third quarter, M&T's ESG ratings improved and they saw growth in auto dealerships and specialty businesses. Despite increasing competition, they were able to grow customer deposits and maintain a strong liquidity position. Expenses were managed diligently and core earnings power remained strong, with a 4% increase in revenues and pre-provision net revenues. Credit remained stable and net charge-offs decreased. GAAP net income and diluted earnings per share were up from the previous year, but down from the linked quarter due to a one-time gain in the second quarter of last year. Net operating income and earnings per share were also down compared to the linked quarter, excluding the one-time gain.

M&T's third quarter results showed an ROA of 1.33% and ROE of 10.99% on a GAAP basis. The decline in taxable equivalent net interest income was due to higher interest rates on consumer deposit funding, resulting in a decrease in net interest margin. Average earning assets increased by $1.5 billion, driven by strong deposit growth. Average loans declined by 1%, with C&I loans increasing slightly and CRE loans decreasing by 2% due to a strategy to reduce exposure to this asset class.

In the third quarter, the company focused on modernizing its products and services to better serve customers in a more capital-efficient manner. Residential real estate and customer loans decreased slightly, while investment securities and customer deposits increased. However, competition for deposits led to a mix shift towards higher cost deposits. Broker deposits, which represent 8% of the company's outstanding deposits and short-term borrowings, increased by $3.2 billion.

The pace of demand deposits has slowed down in the third quarter, but our efforts to retain and grow customer deposits have yielded positive results. Non-interest income decreased from the previous quarter, mainly due to the sale of the CIT business. Non-interest expenses also decreased, primarily due to lower compensation and benefit costs. The efficiency ratio remained relatively stable. The allowance for credit losses increased by $54 million, and a provision of $150 million was recorded for credit losses in the third quarter.

In the third quarter, net charge-offs decreased to $96 million due to a reserve build related to softening CRE values and variability in timing and amount of charge-offs. Non-accrual loans decreased by $94 million and represent 1.77% of loans. The recent quarter's charge-offs were primarily tied to four large credits, including three office buildings and one healthcare provider. The annualized net charge-off rate was 29 basis points, bringing the year-to-date rate below the long-term average. The bank continues to assess the impact of interest rates, value declines, and tenancy issues on future maturities and its investor real estate portfolio. Criticized loans are expected to increase in the upcoming Form 10-Q, with almost 90% of these loans being paid as agreed. Loans 90 days past due and still accruing interest decreased to $354 million, with 76% guaranteed by government-related entities. The bank's capital remains strong and diversified.

M&T's CIT ratio increased to 10.94% in September due to the pause in share repurchases and the negative impact of variable-for-sale securities and pension-related components. The economic outlook for the fourth quarter is cautiously optimistic, with steady growth and slowing inflation. Net interest income is expected to be in the range of $1.71 billion to $1.74 billion, driven by efficient funding of earning asset growth and intense competition for deposits. M&T remains focused on growing customer deposits.

In the fourth quarter, average deposits are expected to remain steady with growth in interest-bearing customer deposits but a decline in demand deposits. This is expected to result in a mid-40% interest-bearing customer deposit beta. Loan growth is expected to be slightly higher than the previous quarter, driven by C&I loans. Non-interest income is expected to be flat, while expenses are anticipated to be in a specific range. Loan losses for the year are expected to be in line with M&T's long-term average. The tax rate is expected to be around 25%, and M&T's capital and limited investment security marks have made it a safe option for clients and communities.

The speaker discusses the strength of the company's balance sheet and their responsibility to manage shareholders' capital. They mention that now is not the time to purchase shares due to evaluating proposed capital rules, but they are positioned for organic growth. The company has a successful business model and a long track record of outperforming peers in credit and growth. They are confident in their ability to realize potential post-merger. The speaker then reviews instructions for questions before taking a question from an analyst regarding the mix of criticized loans and non-accrual loans.

Daryl Bible discusses the drivers of the increase in criticized loans and non-accruals in M&T Bank's portfolio. He mentions that the increase is primarily in the IRE portfolio, with one large property sale in New York contributing to non-accruals. He also explains that the bank is being cautious with buybacks due to the unpredictable economy and potential future stress on clients. However, he reassures that capital distribution to shareholders is still a priority for the bank.

During a conference call, Daryl Bible, a representative from the company, answered a question from Ebrahim Poonawala about the company's net interest margin and NII guidance for the fourth quarter. Bible stated that the biggest determining factor for the net interest margin is the non-interest-bearing deposits, which were down $2.3 billion but are expected to slow down in the fourth quarter. He also mentioned that the asset side of the balance sheet is performing well, with good repricing rates for consumer loan and RV loan portfolios. Bible believes that once there is more stability in the disintermediation of deposits, the margin will stabilize.

The speaker discusses the current state of commercial real estate and the potential impact of the yield curve on the market. They mention that their credit team is actively monitoring any potential issues and making sure to accurately value assets. They also mention that they are keeping an eye on multifamily properties and preparing for any potential challenges.

Daryl Bible, the CEO of a commercial real estate company, was asked about the company's net interest income and their cash balance. He stated that the company is doing well in commercial real estate and is aware of their current position. When asked about the future of net interest income, Bible said it will depend on the slowing of intermediation and distribution, but he will provide more guidance in the next earnings call. He also mentioned that the company's cash balance has increased to $30 billion, but it is uncertain how this will affect their net loan growth due to potential changes in liquidity rules and treatment of AFS for regional banks.

The speaker discusses their company's strategy of building cash and being conservative with their liquidity position due to the slowing economy. They plan to invest some of the cash into loans, but will not widen their credit box. They may also gradually move some cash into their securities portfolio. The speaker also mentions an increase in reserves for their office book, with approximately half going to the CRE portfolio and half to the C&I portfolio. The specific amount of reserves was not mentioned.

During a recent call, Daryl Bible, a financial executive, discussed the current lending landscape and the impact of a prolonged period of high interest rates on their customers. He mentioned that their dealership businesses saw growth due to dealers stocking up on used cars before a strike, and that their large corporate banking and fund banking sectors also have growth opportunities. However, Bible noted that the middle market C&I space is highly competitive and that the current high interest rates are causing some commercial clients to be more cautious.

Daryl Bible, CFO of Wells Fargo, discusses the potential impact of rolling off swaps on customers who took them out 2-3 years ago. He notes that higher rates are affecting all industries, not just CRE, and that the Fed's goal of slowing the economy and reducing inflation is being achieved. The bank is monitoring maturities and swaps closely and taking actions to shift focus to fee income and reduce credit risk in the CRE sector.

The speaker is discussing the bank's CET1 target and whether they will have to maintain a larger buffer due to new rules. They may start with a higher buffer and then adjust over time. They are also adjusting their investment portfolio to manage volatility. The speaker also mentions that they may resume buybacks once they can generate double-digit returns.

Daryl Bible, CFO of M&T Bank, explains that while the current corporate finance math suggests it is a good time for M&T to make acquisitions, their conservative nature and focus on maintaining strong capital and liquidity is causing them to be cautious. He assures investors that the capital will be deployed in a shareholder-friendly manner when the time is right. He also mentions that the decision to make an acquisition will be made known quickly. Analyst Gerard Cassidy asks about M&T's plans for M&A in the next 12-24 months, and Bible responds that the current interest rate environment makes it difficult for M&T to pursue traditional depository acquisitions, but they are open to other opportunities, such as purchasing loans from the FDIC.

M&T Bank has recently purchased two loans from the FDIC and is constantly looking for good customer relationships to drive organic growth. The bank's strategy for acquisitions is to maintain density in their markets and they are confident in their ability to underwrite loans.

The speaker expresses concern about competitors making foolish decisions that could potentially affect their own sound underwriting decisions. However, they are confident in their client selection process and believe that the industry is currently much safer than it has been in the past. They also prioritize long-term relationships with their clients and aim to bank with top performers in their markets.

During a conference call, John Pancari from Evercore ISI asks Daryl Bible about the recent increase in loan loss reserves for CRE and C&I. Daryl explains that the increase was driven by softness in some asset values in the CRE portfolio, which was not fully accounted for under CECL. He also mentions ongoing efforts to assess the portfolio and ensure compliance with regulations. John asks if the softness was surprising and Daryl explains that it is due to market dislocation and lack of activity.

The speaker discusses how they make cash flow adjustments for leased properties and the potential for money to enter the market when interest rates stabilize. They also mention their charge-off guidance for the fourth quarter and how their allowance will build based on economic conditions and customer behavior.

The speaker believes that their credit team is effectively managing potential risks and that their reserve is adequate. They invite further clarification if needed and provide contact information for their Investor Relations department. The call has now ended.

This summary was generated with AI and may contain some inaccuracies.