The paragraph is an introduction to M&T Bank's Third Quarter 2024 Earnings Conference Call. The operator explains the call's procedure, noting it is recorded and currently in a listen-only mode with a Q&A session following the presentation. Brian Klock, Head of Market and Investor Relations, thanks participants and directs them to the bank's website for the earnings release, financial tables, and presentations. He also mentions the inclusion of forward-looking information and non-GAAP measures, which are detailed in their released materials. M&T's Senior Executive Vice President and CFO, Daryl Bible, then begins his segment, indicating that the bank's third-quarter results demonstrate its ongoing strength amid an evolving economic landscape.

M&T Bank has maintained its position as a top SBA lender in certain regions for the 16th year and recently launched a $25 million initiative for non-profits focused on financial inclusion in specific areas. They've updated their environmental goals to include using 100% renewable energy by 2030. The bank reported positive third-quarter results, with net interest margin and non-interest income growth, alongside a reduction in commercial real estate exposure and an increase in other loan categories. Additionally, M&T restarted its share repurchase program, increasing its CET1 ratio, and achieved strong non-interest income despite previous divestitures.

In the third quarter, M&T reported improved asset quality with reduced non-accrual balances and commercial credit size loans, along with net charge-offs below the annual outlook. Diluted GAAP earnings per share rose to $4.02, and net income increased by 10% to $721 million. ROA and ROCE were 1.37% and 10.26%, respectively, while the CET1 ratio grew to 11.54%, and tangible book value rose by 5%. The quarter benefited from a $14 million discrete tax gain. Net operating income reached $731 million, with diluted net operating earnings per share at $4.08 and ROTA and ROTCE at 1.45% and 15.47%. Taxable-equivalent net interest income was $1.74 billion, a 1% increase due to improved net interest margin driven by fixed asset repricing and earning asset mix, partially offset by lower non-accrual interest.

In the third quarter, non-accrual interest decreased to $12 million from $30 million. Average loans and leases increased slightly to $134.8 billion, with C&I loans growing by 3% to $59.8 billion, while CRE loans declined by 8% to $29.1 billion. Residential mortgage loans remained stable at $23 billion, and consumer loans grew by 4% to $22.9 billion. Loan yields were stable at 6.38%. The liquidity position was strong, with investment securities and cash totaling $59 billion, or 28% of total assets. The average investment securities grew by $1.3 billion, with yields increasing to 3.7%. The portfolio duration was 3.6 years, and there was a $68 million unrealized pre-tax gain on the available-for-sale portfolio.

The paragraph discusses financial performance highlights from a presentation, focusing on deposit and income changes. It notes a decline in total average loans by $2 billion to $161.5 billion, with broker and non-broker deposits both decreasing. While commercial and business banking deposits grew, consumer deposits declined. Non-interest-bearing deposits fell by $1.6 billion, and interest-bearing deposit costs dropped slightly. Non-interest income improved to $606 million, with stable trust income and increased commercial mortgage fees and service charges. Non-interest expenses rose to $1.3 billion, primarily due to higher salary and benefits costs, despite a decrease in deposit insurance costs.

The article discusses financial changes in M&T's operations, notably a $12 million increase in costs due to agreements and Visa litigation. The efficiency ratio remained stable at 55%. Net charge-offs for the quarter were $120 million, with major charge-offs involving two commercial and industrial (C&I) loans and one office commercial real estate (CRE) loan. Non-accrual loans decreased by $98 million to $1.9 billion, improving the non-accrual ratio by 8 basis points to 1.42%, due to upgrades and large payoffs. A provision of $120 million matched the net charge-offs, with the allowance to loan ratio slightly decreasing to 1.62%. There was a decline in criticized loans to $10.9 billion due to reductions in C&I and CRE loans. Specifically, improvements in motor vehicle, recreational finance, and manufacturing segments contributed to the decrease in criticized C&I loans.

The paragraph discusses recent trends in the commercial real estate (CRE) sector, noting significant declines in health care and construction, except for the office sector. Health care saw improved repayment activity due to better occupancy, rent growth, and lower long-term rates, while construction benefited from improved project performance and loan modifications. The main factor for changes versus prior quarters was the number of upgrades. The M&T CET1 ratio increased to an estimated 11.54% at the end of the third quarter, attributed to strong earnings and a significant share repurchase. The economic outlook remains resilient, with expected stronger GDP growth and a healthy labor market, although a mild recession is still possible. Inflation pressures are easing, nearing the Fed's target. The full-year financial outlook for NII, fees, expenses, and net charge-offs remains unchanged from previous forecasts.

In the fourth quarter, the company expects a taxable equivalent net interest income (NII) of at least $1.73 billion, leading to a full-year NII near the high end of their forecasted range. The net interest margin is anticipated to be in the low 3.60s, factoring in a 50 basis point rate cut. They foresee loan growth with average total loans around $136 billion, increased corporate and consumer lending, and reduced commercial real estate balances. Deposits are expected to exceed $160 billion, with a deposit beta of around 40% following rate cuts. Security balances are projected to rise, while non-interest income should reach about $600 million, driven by mortgage and trust but offset by fewer fees elsewhere. Fourth quarter expenses are estimated at $1.32 billion due to new projects, with a tax rate of 24.25% and preferred dividends at $36 million. A $200 million share repurchase is planned. M&T emphasizes its focus on shareholder returns and consistent dividend growth, highlighting a strong business model and a history of credit performance across economic cycles.

In the paragraph, Gerard Cassidy from RBC Capital Markets questions Daryl Bible about M&T's capital management strategy, highlighting its strong CET1 ratio of 11.5% and ongoing share buybacks. Daryl Bible emphasizes the bank's capital flexibility and potential for increased share repurchases into 2025, contingent on economic conditions and final Basel III regulations. He notes improvements in criticized loans and a favorable position in commercial real estate exposure, suggesting a positive outlook for returning more capital to shareholders in the coming years.

The paragraph discusses the financial strategy and outlook of a company regarding its CET1 ratio, net interest income, and interest rate impacts. The company plans to maintain an 11% CET1 ratio through buybacks in 2025, contingent on loan and risk-weighted asset growth. While they anticipate long-term targets will be clarified soon, they are optimistic about the improving trend in net interest income due to favorable repricing of assets like auto, RV, residential mortgages, and investments. If the Federal Reserve lowers rates as projected, this could enhance growth further in 2025. The company attributes their current neutral stance on net interest income to effective asset management and timing coinciding with Fed rate cuts.

In the paragraph, the speaker, Daryl Bible, discusses the positive outlook for the company's financial performance heading into 2025. They highlight strong and stable core operating deposits and note an initial downward beta of 40%, which is encouraging. Daryl also mentions improvements in their hedges, predicting cash flow hedges to increase by 55 basis points and fair value hedges by 37 basis points by 2025, assuming rates remain unchanged. They express confidence in loan growth across various sectors, despite challenges in commercial real estate (CRE). Daryl believes this positive mix will lead to improvements in net interest income and margin. Following this, Ebrahim Poonawala from Bank of America inquires about the decline of criticized loans, especially in CRE, questioning if lower interest rates could accelerate this decrease and whether updated appraisals and financials might cause a significant drop next year, along with its implications.

In the third quarter, M&T experienced significant improvements, driven by upgrades across various sectors, including healthcare, due to better occupancy, rents, and cash flow. Despite lower rates leading to more takeouts and paydowns, 91% of their criticized book remains current. The CRE construction book has also improved, motivated by interest rate dynamics and market stabilization. M&T attributes these improvements to strong client selection and commitment. Additionally, RV dealers managed to clear excess inventory, positively impacting upgrades. Overall, there's optimism for continued strong performance into the fourth quarter and beyond.

The paragraph discusses the company's loan growth and future outlook. Daryl Bible notes that while the commercial real estate (CRE) pipeline is building, it's expected to take a few quarters to reflect on the balance sheet, but significant growth in the CRE portfolio is anticipated by 2025. The company saw strong growth in their specialty business sectors and regions such as Boston, Baltimore, and New Jersey during the recent quarter, despite a slow start. Ebrahim Poonawala queries about the impact of previous acquisitions and current trends within specific loan growth categories, with Daryl expressing optimism about continued momentum into the next quarter.

In the paragraph, Ebrahim Poonawala asks if a potential lack of interest rate cuts in the fourth quarter would impact the bank's net interest income (NII) and net interest margin (NIM) outlook. Daryl Bible responds by emphasizing that the bank's balance sheet is structured in such a way that interest rate changes have little impact, allowing them to remain relatively neutral to interest rate risk. This neutrality provides confidence in an upward trajectory for margins and net interest income. Manan Gosalia then inquires about deposit betas, noting a 40% beta assumption for the fourth quarter compared to a 55% peak. Daryl Bible acknowledges the expectation of reaching a 55% beta eventually, with a focus on how quickly that point is reached, and expresses optimism about the upcoming beta repricing.

The paragraph discusses the company's approach to handling loan growth and deposit management. They plan to accelerate loan growth, particularly in CRE loans, and aim to grow deposits in line with or faster than loans to avoid relying too much on cash balances or non-core funding. The speaker, Daryl Bible, emphasizes consistently seeking customer deposits and mentions a desire to reduce non-core funding. When asked about managing securities balances as they move away from cash, there is an implied strategy of growing core deposits and paying down non-core funding.

In the paragraph, Daryl Bible discusses the company's current cash and investment strategy. The company holds about $59 billion in cash and is actively expanding its investment portfolio, which is yielding promising returns. They plan to invest $3 billion in the fourth quarter and will re-evaluate their strategy for 2025. The company maintains $25 billion at the Federal Reserve for flexibility, with a target floor of $20 billion. Chris Spahr then asks about loan portfolio trends, specifically regarding commercial real estate (CRE). Daryl indicates that CRE loan runoff will continue for a few more quarters, with stabilization potentially occurring in 2025, depending on factors like pipeline growth and loan types.

The paragraph discusses a company's strategy regarding its commercial real estate (CRE) loan portfolio, which they plan to maintain at about 20% of their total loan book going forward. The pipelines for future loans are growing, but they don’t expect the CRE balances to increase until mid-next year. Chris Spahr asks about the impact of a 200 basis point drop in interest rates on criticized loans in the CRE portfolio. Daryl Bible responds by saying that while they aim to reduce criticized loans, they will not be completely eliminated, as the company values long-term relationships with clients, even during financial stress. He expresses confidence in improving trends for the fourth quarter and into 2025, but emphasizes that having some criticized loans is part of their business approach. Dave Rochester then compliments the team's performance for the quarter.

The paragraph discusses a conversation between Daryl Bible and Dave Rochester regarding deposits and loan growth. Daryl Bible notes a slowdown in the commercial and consumer noninterest-bearing deposit segments, with some volatility expected from the ICS business balances. He feels confident about maintaining an average of 30% noninterest-bearing deposits, excluding broker deposits. However, as interest rates decrease, the value of these deposits diminishes, necessitating efforts to maintain interest rate spreads and margins. Dave Rochester then shifts the topic to loan growth, acknowledging the details Daryl Bible provided about the drivers for the third quarter and noting a slight decrease in middle market utilization.

In the paragraph, Daryl Bible discusses the commercial landscape, noting an increase in utilization due to more cars being available, although overall utilization remains down. He suggests factors like the post-election climate might be influencing this. Despite uncertainty about when growth will significantly increase, he highlights their efforts to support clients, noting that they are growing customer accounts and making more credit lines available, anticipating future draws on these lines. Frank Schiraldi asks about loan growth predictions, referencing a $136 billion average for the next quarter as a potential 1% growth. He inquires if this growth rate might continue or accelerate, considering the building pipelines and potential troughs in commercial real estate.

In the paragraph, Daryl Bible discusses his company's planning for 2025, indicating an expected growth rate averaging around 1%, although it could fluctuate slightly above or below this figure. The focus is on supporting customers and communities without altering credit levels or stretching resources. Bible promises more detailed information in the next earnings call. Frank Schiraldi then inquires about the repricing of fixed-rate loans, particularly regarding loan yield increases. Bible explains that various fixed-rate loan categories have seen average increases: C&I loans up about 1%, CRE loans up about 1.3%, mortgages up slightly over 2%, and consumer loans up about 1.4%. Overall, the blending of these categories results in a benefit of approximately 150 basis points.

In the conversation, Daryl Bible discusses the company's outlook on operating leverage and expenses for 2025. He expresses confidence in achieving positive operating leverage within the range of 150 to 200 basis points, as suggested by market expectations. He notes recent expense increases due to ongoing projects and corporate-wide incentive payouts following a strong financial performance in terms of asset quality, loan, and deposit growth. Bible is optimistic about 2025 being better than 2024, highlighting the company's positive momentum and the importance of rewarding employees for their contributions.

In the paragraph, Daryl Bible discusses the recent trends in the loan loss reserve ratio, noting a slight decline to around 162 basis points. He attributes the positive changes to improved macroeconomic factors and a reduction in criticized loans. Looking ahead, Bible mentions a shift in the loan portfolio mix toward consumer lending, which generally offers higher spreads and yields but also comes with higher net charge-offs. He emphasizes the importance of diversification in their lending categories and suggests the loan loss reserve ratio could fluctuate depending on the speed of this mix change. Overall, the company aims to optimize its balance sheet for shareholder value while managing the potential for higher charge-offs as it diversifies beyond commercial real estate.

The paragraph presents a discussion about the company's strong performance across various business segments, including consumer, commercial and industrial (C&I), commercial real estate (CRE), fee-based services like ICS, and wealth management. Nathan Stein, speaking for Matt O'Connor, inquires about the company's net interest margin (NIM) trajectory after a strong quarter. Daryl Bible expresses confidence in maintaining NIM in the low 3.60s range for the fourth quarter and anticipates further positive momentum with good deposit repricing and loan asset management. Nathan Stein also asks about "other revenue" which remained steady instead of the expected decline due to lower syndication revenues and interchange fees. Daryl Bible responds that loan syndications and merchant and card fees were significant contributors.

The paragraph discusses a conversation between financial analysts where Daryl Bible addresses questions about expenses and credit quality. Bible explains that upcoming expenses in the fourth quarter are a mix of ongoing and one-time projects, such as new data centers that will affect run rates. He anticipates positive operating leverage in 2025, with more specific guidance to be provided in January. Additionally, Bible comments on credit quality improvements and mentions that while historical charge-offs are at 34 basis points, changes in the loan portfolio mix toward more consumer loans will lead to higher allowance balances, though the overall credit quality remains strong.

In this segment of the M&T Bank third quarter 2024 earnings conference call, the discussion focuses on the importance of maintaining a good net spread and capital return on loans, emphasizing a shift towards a more diversified company. Zach Westerlind expresses gratitude for the answers to his questions. Brian Klock thanks participants and invites them to contact Investor Relations for further clarification. The call concludes with the operator thanking everyone and ending the session.

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