The paragraph is the introduction to M&T Bank's First Quarter 2025 Earnings Conference Call. The Operator announces the call's listen-only mode and that it will open for questions after the presentation. Steve Wendelboe, Senior Vice President of Investor Relations, thanks participants and notes that the earnings release and financial details are available on the bank's website. He warns of forward-looking statements and references non-GAAP measures, with reconciliations provided. Daryl Bible, the bank's Senior Executive Vice President and CFO, begins the presentation by stating the bank's purpose: to make a difference in people's lives and support customers, communities, employees, and shareholders.

In his annual shareholder letter, Rene highlights M&T's strong financial position amid constant change, emphasizing liquidity, capital strength, and transparency. This stability enables M&T to perform well through economic fluctuations. Notably, M&T received 13 Greenwich Coalition awards and was recognized by Fortune. In the first quarter, they achieved an 8 basis point increase in net interest margin and executed $662 million in share repurchases, aiming for an 11% CET1 ratio by 2025. They saw a 5% increase in fee income and improved asset quality, with reductions in commercial criticized balances and nonaccrual loans. Net charge-offs were below expectations. However, diluted GAAP earnings per share and net income decreased from the previous quarter. The first quarter also recorded an ROA of 1.14% and ROCE of 8.36%.

The paragraph discusses M&T's financial performance for the first quarter, highlighting key metrics and trends. M&T's net operating income fell to $594 million, with diluted net operating earnings per share at $3.38. Despite a decrease in taxable equivalent net interest income to $1.71 billion, the net interest margin rose to 3.66% due to favorable deposit pricing and reduced wholesale funding. Average loans and leases slightly decreased, with C&I loans growing by 1%, CRE loans declining by 6%, and consumer loans increasing by 1%. Loan yields dropped to 6.06% due to lower rates on variable loans. M&T's liquidity remains robust.

In the first quarter, total assets included $57.9 billion in investment securities and cash, accounting for 28% of the total. Investment securities grew by $0.8 billion, with yields rising by 12 basis points to 4% as new investments surpassed maturing ones. The company acquired $2.6 billion in debt securities yielding an average of 4.9%, with the portfolio's duration at 3.6 years. The available-for-sale portfolio had an unrealized pretax loss of $8 million, minimally affecting regulatory capital. Deposits averaged $161.2 billion, down 2% or $3.4 billion, with declines in broker, commercial, and business banking deposits. Noninterest-bearing deposits fell by $1.1 billion but maintained a stable mix. Interest-bearing deposit costs decreased by 27 basis points to 2.37%. Non-interest income totaled $611 million, down from $657 million the previous quarter, but showed strength in fee income categories like mortgage banking and brokerage. Adjusting for previous quarter gains, non-interest income declined by $5 million. Mortgage banking revenues slightly increased to $118 million.

In the latest quarter, residential mortgage banking revenues rose by $6 million to $82 million due to new subservicing, with expectations for a full run rate by the second quarter. Meanwhile, commercial mortgage banking revenues fell by $5 million to $36 million due to lower loan sales. Other operational revenues dropped $34 million, including a $23 million BLG distribution. Non-interest expenses increased to $1.42 billion, up $52 million from the previous quarter, with salary and benefits rising $97 million, largely due to seasonal compensation expenses. These seasonal expenses are expected to decrease by the second quarter. The efficiency ratio worsened to 60.5%. Net charge-offs were $114 million, down from the previous quarter, and nonaccrual loans decreased by $150 million to $1.5 billion, driven by payoffs, charge-offs, and upgrades.

In the fourth quarter, the company recorded a $130 million provision compared to $114 million in net charge-offs, with the allowance-to-loan ratio increasing slightly to 1.63% due to growth in consumer loan portfolios and a modestly negative macroeconomic outlook. Criticized loans are estimated to decrease to $9.4 billion, with declines in CRE criticized balances but an increase in C&I, particularly in motor vehicle and recreational finance dealers. The CRE improvement was driven by better leasing, occupancy, cash flows, and a $667 million decline in criticized balances. M&T's CET1 ratio fell to an estimated 11.5% due to increased capital distributions, including $662 million in share repurchases, although strong capital generation partly offset this. Economic conditions remain dynamic, with mixed data including strong job growth, moderated wage growth, weakening sentiment, and easing inflation.

The paragraph discusses the financial outlook and strategies of a company amid economic uncertainty affecting tariffs, equity markets, and interest rates. The company anticipates taxable equivalent net interest income between $7.05 billion and $7.15 billion, with a rising net interest margin and loan balances ranging from $135 billion to $137 billion. Deposit balances are projected to be $162 billion to $164 billion. Fee income is expected to reach the higher end of the $2.5 billion to $2.6 billion range due to a diversified product set. Noninterest expenses, including intangible amortization, are anticipated at $5.4 billion to $5.5 billion, with a focus on managing costs and supporting growth initiatives. The company projects net charge-offs to be around 40 basis points for the year and a decline in criticized loans by 2025. Additionally, the CET1 ratio is expected to reach 11% by 2025, with share repurchases dependent on RWA growth.

The paragraph discusses M&T's commitment to its four priorities, which include expanding in the New England and Long Island markets, optimizing resources through simplification, enhancing system resilience and scalability, and improving risk management capabilities. The company emphasizes its purpose-driven approach and successful business model that benefits stakeholders, including shareholders, and highlights its long track record of credit performance across economic cycles. M&T is focused on shareholder returns, consistent dividend growth, disciplined acquisitions, and prudent capital management. The conversation then shifts to a question from Ken Houston from Autonomous Research about changes in the deposit and liabilities environment and the company's approach to managing deposit growth. Daryl Bible responds, expressing confidence in achieving the higher end of the deposit growth range due to robust business growth across commercial, small business, and consumer sectors.

The paragraph discusses financial strategies and projections for future growth. The company plans to use additional deposits to pay off higher liabilities or increase liquidity through the Federal Reserve if loan growth doesn't occur. Despite not receiving a Bayview distribution in the first quarter, there's optimism about fee growth through robust performance across various businesses such as trust services, structured loan agencies, ICS, and service charges. The company anticipates significant growth in fee-based businesses in the upcoming quarters and expects positive outcomes from mortgage revenues if interest rates decrease. The recent increase in numbers is also attributed to additional subservicing, highlighting potential growth opportunities in that area.

In this exchange, Ebrahim Poonawala from Bank of America asks Daryl Bible about the impact of tariff uncertainties on customer behavior and investment decisions. Daryl Bible observes that while consumer sentiment is weak, debit card activity and spending patterns remain stable. He notes strong loan volumes in auto, marine, and RV sectors, potentially due to anticipated price increases. However, the bottom 20% of consumers continue to struggle financially. On the business side, despite a desire to invest and make acquisitions, companies are hesitant due to a lack of confidence and uncertain regulations. Nevertheless, the company has experienced growth in its Commercial and Industrial (C&I) business, particularly in the middle market sector.

The paragraph discusses the financial performance and strategy of a company, highlighting growth in fund banking, corporate institutional sectors, and dealer commercial services, while facing challenges in their CRE portfolio, which is affecting loan guidance. Ebrahim Poonawala inquires about capital sensitivity and stock performance. Daryl Bible responds by emphasizing strong capital and liquidity, with plans to resume share repurchases while monitoring market conditions and economic trends. Despite potential market volatility, the company feels prepared to proceed but will adjust based on economic developments. Gerard Cassidy then inquires about insights into the regulatory environment.

The paragraph discusses regulatory changes that could benefit regional banks. Daryl Bible mentions that their bank performs well regardless of the political administration in power. He notes that current regulatory leaders are focused on enabling the industry to positively impact economic growth. Recent actions, such as the FDIC pulling back on RRP requirements, are seen as positive. He is optimistic about potential easing of regulations concerning leverage ratios, stress testing, and reporting requirements. Overall, Bible views the current regulatory environment as an opportunity to streamline operations and improve efficiency.

In the paragraph, Daryl Bible discusses the current challenges in the commercial real estate loan portfolio, primarily due to increased competition among lenders, resulting in aggressive pricing and structuring. M&T remains disciplined in its loan practices, avoiding inadequately structured loans. Higher than expected loan payoffs have occurred, partly due to earlier than anticipated maturities. Despite these challenges, M&T has successfully remixed its portfolio, reducing office exposure and smaller credits while growing in preferred sectors like multifamily and industrial. Bible expresses optimism about future growth in their loan pipeline, although they may maintain a smaller balance sheet and focus on stock repurchases.

In the discussion, Gerard Cassidy and Daryl Bible address the early repayment of loans initially due in 2025 and 2026, which was partly influenced by market competition and some REIT customers deciding to prepay. Matt O'Connor questions why loan loss reserves were increased despite improved credit metrics and fewer loans. Daryl Bible explains that adjustments were made due to market uncertainties, slightly increasing the weight of negative economic scenarios with higher unemployment and lower GDP rates, though not projecting a recession. He mentions readiness to further adjust reserves if needed. O'Connor also inquires about interest rate assumptions impacting net interest income, and Bible acknowledges the ongoing work of their treasury team to adapt to changing rate environments.

The paragraph discusses the company's financial outlook and its sensitivity to interest rate changes. Their forecast includes four drops in rates, with the last one in December being minor. A flatter yield curve is seen as negative for net interest margin, whereas a steeper one would be beneficial. Increasing deposits could improve net interest income (NII) but might lower margins if invested in the liquidity portfolio. Despite these fluctuations, the company is optimistic about its profitability and capital generation. They believe they're relatively neutral to interest rate changes, with a deposit beta response of over 50%, and that they can handle economic shifts well. The consumer loan portfolio is currently repricing 100 to 150 basis points higher.

The paragraph discusses the financial strategies and outlook of a company. It mentions that even if interest rates flatten, there will still be a positive repricing of about 50 basis points, although the benefit would be smaller. The company's balance sheet is solid, with known factors that ensure strong margins and net interest income (NII). The company expects $4 billion in securities to reprice at a higher yield and anticipates consumer loans to do the same. The company's swap book is also expected to increase its value by up to 30 basis points. Overall, there's confidence in strong earnings, with some room for outperforming or falling slightly short. The operator then introduces Manan Gosalia from Morgan Stanley, who asks about strategies concerning securities amid a volatile yield curve. Daryl Bible responds by emphasizing the company's disciplined long-term approach and notes that the portfolio contains only government-backed securities, ensuring liquidity up to $35 billion.

The paragraph discusses a financial strategy involving the purchase of treasuries, CMBS, shorter CMOs, and seasoned MBS, with a focus on maintaining liquidity. The average portfolio duration has decreased from four years to 3.5 years in the past two years. Manan Gosalia inquires about the credit quality amid recent C&I loan growth, which is up 7% year-on-year, outperforming peers. Daryl Bible responds by expressing confidence in the CRE portfolio's performance, despite a minor exposure in the greater D.C. area. He notes the C&I portfolio saw an idiosyncratic increase due to one large customer facing challenges, but remains confident in a positive resolution without anticipated losses.

The paragraph discusses the outlook for loan growth, focusing on commercial real estate (CRE) and commercial and industrial (C&I) loans. Daryl Bible mentions that the CRE portfolio is expected to bottom out by the fourth quarter, with the pipeline starting to build, particularly in construction loans, which will take 12 to 15 months to fund. The company aims to grow the CRE portfolio with a focus on client selection and well-structured loans. For C&I loans, the discussion centers around the expected growth throughout the year, highlighting the importance of maintaining well-structured loans to withstand economic downturns.

The paragraph discusses the current state of a company's loan and deposit activities. The company is focusing on strategic growth areas, such as the C&I book portfolio, consumer sector, and residential mortgages, while ensuring that new loans are low-risk and beneficial long-term assets. Despite recessionary concerns, the company has not observed precautionary line utilizations or drawdowns by borrowers, unlike during COVID. Commercial loan utilization has decreased slightly, with no significant changes in borrower behavior. On deposits, there was notable growth at the end of the period, particularly in noninterest-bearing accounts. The first quarter typically sees low seasonal deposits, which then increase, partly due to escrow deposits linked to mortgage servicing.

The paragraph discusses the company's strategy and perspective on long-term debt and funding. Daryl Bible explains that the focus is on reducing broker deposits and Federal Home Loan Bank advances. Broker deposits have decreased from their peak 1.5 years ago, and Federal Home Loan Bank advances are minimal. The company plans to issue long-term debt as needed, depending on customer and loan growth, and might issue sub-debt in the future to maintain capital ratios. Despite market volatility affecting spreads, the company has been able to manage this in line with peers, though at a higher cost.

In the paragraph, Daryl Bible discusses M&T's financial position, noting that the company's liquidity is strong and expenses are well-controlled by its leaders. He mentions that while they have the flexibility to reduce expenses if a recession severely impacts revenue, their current strategy is to drive positive operating leverage for the year with growth in net interest income and fees. Bible highlights the completion of long-term strategic projects like the general ledger, data centers, and cyber programs as priorities. He also mentions potential strategies such as realignment, automation, and workforce adjustments for future efficiency improvements but emphasizes that these measures are not immediately necessary.

In this conversation, Peter Winter asks Daryl Bible about the impact of increased uncertainty on loan portfolios and whether any specific portfolios are being closely monitored or leading to tightened underwriting standards. Daryl mentions that retail trade, manufacturing, construction, wholesale trade, and government contractors are areas of focus, noting that some smaller credits have been downgraded. Nonprofits, particularly those focused on immigration, are also being monitored. Although there is no significant impact yet, these areas are under scrutiny. The discussion then briefly touches on net interest margins, with Daryl clarifying that they expect it to be in the mid to high 3.60s range, indicating a positive trajectory. Following this, Erika Najarian from UBS jokes about technical difficulties with unmuting before asking follow-up questions regarding growth headwinds.

The paragraph discusses the financial outlook and expectations for Net Interest Income (NII) and Net Interest Margin (NIM) amidst shifting interest rate environments, yield curves, and Federal Reserve actions. Daryl Bible acknowledges the potential for achieving a higher NIM in the [3.70s] despite it not being in their base forecast, amid market risks and uncertainties. Erika Najarian inquires about the assumptions behind the current reserve in the CECL model, particularly regarding unemployment, and asks whether the company is participating in the stress test this year, noting the Federal Reserve's plans to reevaluate the test due to changes in administrative law.

In the paragraph, Daryl Bible discusses the current status of the bank's stress testing process and capital allocation strategy. He notes that they submitted their stress test information in March or April and have not yet received feedback from the Federal Reserve. They are optimistic about potentially having a lower stress capital buffer, as last year they were one of three banks to reduce it, although they remain higher than peers. Their strategy involves de-risking their balance sheet and monitoring economic conditions, such as a possible recession, which might impact long-term capital decisions. Additionally, regarding the Current Expected Credit Loss (CECL) model, their unemployment rate estimate is around 5%, which reflects an adjustment from previous projections.

The paragraph is a conclusion of a conference call or meeting, where it is noted that the unemployment rate is not indicative of a recession despite an increase due to certain changes. Erika Najarian expresses gratitude, and Daryl Bible responds. The operator thanks participants, and Steve Wendelboe provides closing remarks, inviting participants to contact Investor Relations for further clarification, and then concludes the call.

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