M&T Bank Q3 2026 Earnings Call Transcript

M&T Bank (NYSE:MTB) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

M&T Bank reported third-quarter 2026 earnings with diluted GAAP EPS of $5.04, down from $5.32 in the previous quarter, and net income of $775 million compared to $818 million.

The company experienced solid loan growth, particularly in commercial real estate and consumer segments, and increased deposits by $3.3 billion, reducing reliance on short-term borrowings.

M&T Bank’s net interest margin slightly declined by 5 basis points to 3.65% due to increased funding costs, while net interest income remained stable at $1.8 billion.

The bank maintained strong liquidity with investment securities and cash totaling $52.2 billion, and a CET1 ratio of 10.16% despite share repurchases.

Strategically, M&T Bank focused on AI adoption, enhancing productivity, and risk management, while also investing in branch network expansion and maintaining its position as a top SBA lender.

Fourth-quarter guidance includes modest loan growth, net interest income between $1.83 and $1.85 billion, and continued focus on optimizing overall funding costs and mix.

Management remains optimistic about future returns and aims to achieve a 17% ROTCE in 2027, while maintaining flexibility for share repurchases pending regulatory developments.

Full Transcript

Angela, OPERATOR

Welcome to the M&T Bank third quarter 2026 earnings conference call. All lines have been placed on listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star then the number one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. When posing your question, we ask that you please pick up your handset to allow for optimal sound quality.

Lastly, if you should require operator assistance, please press star zero. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Steve Windelboe, Senior Vice President of Investor Relations. Please go ahead.

Steve Windelboe, Senior Vice President of Investor Relations

Thank you, Angela, and good morning. I’d like to thank everyone for participating in M&T’s third quarter 2026 earnings conference call. If you have not read the earnings release we issued this morning, you may access it along with the financial tables and schedules by going to our investor relations website at ir.mtb.com. Also, before we start, I’d like to mention that today’s presentation may contain forward-looking information. Cautionary statements about this information are included in today’s earnings release materials and in the investor presentation, as well as our SEC filings and other investor materials.

The presentation also includes non-GAAP financial measures as identified in the earnings release and investor presentation. The appropriate reconciliations to GAAP are included in the appendix. Joining me on the call this morning is M&T’s Senior Executive Vice President and CFO, Daryl Bible. Now I’d like to turn the call over to Daryl.

Daryl Bible, Sr EVP & Chief Financial Officer

Thank you, Steve, and good morning, everyone. Before discussing our results, I’d like to begin with what continues to define M&T Bank: our purpose to make a difference in people’s lives. That purpose informs how we serve customers, invest in our company, and create long-term value. At a recent conference, we discussed our focus on teaming for growth and operational excellence. Those priorities continue to guide our work across M&T Bank. We are investing in technology, simplifying processes, and creating more capacity for our teams to serve customers and support growth.

These efforts build on what has always differentiated M&T Bank: strong relationships and disciplined execution. You can see that approach across our company. During the quarter, more than 100 M&T colleagues participated in the Pan-Mass Challenge. Overall, we raised more than $850,000 for cancer research and treatment. We also continued investing in our branch network, opening new locations in Torrington and Waterbury, Connecticut, to serve our customers.

And for the 18th consecutive year, we ranked among the nation’s top SBA lenders. We were again number one across our footprint and improved to number five nationally for 7(a) loans by volume for SBA’s 2026 fiscal year. Together, these efforts reflect the connections we build with customers, communities, and institutions across our footprint. Slides 20 and 21 provide additional context on M&T’s approach to AI. We are seeing AI help automate, augment, and reinvent work across the bank.

In the near term, AI is helping employees make better decisions, reduce manual work, find information faster, and identify risks earlier. Growing engagements across the organization, including hundreds of tracked use cases, shows strong interest in moving quickly from ideas to execution. These efforts are improving productivity, risk management, and customer experience while enabling greater scalability. Turning to slide 5, we were pleased to see continued recognition of our people during the quarter.

American Banker, Fast Company, and Investment News recognized M&T’s leaders for their contributions to our bank, customers, and industry. These honors reflect the strength of our talent and culture. Now let’s turn to slide 8 and our third quarter results. Diluted GAAP earnings per share were $5.04 compared to $5.32 in the prior quarter. Net income was $775 million compared to $818 million in the linked quarter. M&T’s third quarter results produced ROA and ROCE of 1.4% and 11.44%, respectively.

Our results continue to reflect a disciplined approach to generating attractive returns, delivering consistent balance sheet and earnings growth, and continuing to generate and preserve capital. Loan growth remained solid and deposit growth more than funded the increase, allowing us to reduce our reliance on short-term borrowings while maintaining strong net interest margin. We also continue to grow earnings per share, with year-to-date net operating earnings per share increasing 17% from the same period in 2025.

We delivered net earnings growth while maintaining return discipline. Third quarter net operating ROTA and ROTCE were 1.47% and 17.29%, both exceeding the targets established for our long-term incentive structure. Our focus on capital generation and preservation is also reflected in our decision to transfer $8.3 billion of residential mortgage-backed securities from available for sale to held to maturity. That action reflects our continued discipline to protecting tangible capital and positioning us well with potential regulatory framework that includes AFS-related AOCI in regulatory capital.

Turning to slide 9, we provided supplemental reporting of our results on a net operating or tangible basis. Net operating income totaled $780 million compared to $823 million in the linked quarter, while diluted net operating earnings per share were $5.08 compared to $5.35. Next, we look a little deeper into the underlying trends that drove the third quarter results. Please turn to slide 10. Taxable-equivalent net interest income was $1.8 billion, largely unchanged from the linked quarter, as the benefits from one additional day, earning asset growth, and fixed asset repricing were muted by lower nonaccrual interest and higher funding costs, in line with the outlook we provided in July and September. Net interest margin was 3.65%, down 5 basis points from the prior quarter, mostly reflecting those same factors that impacted NII. As I mentioned last quarter, we remain disciplined in evaluating the trade-offs between NII and net interest margin, with a focus on optimizing overall returns. Turn to slide 12 to talk about average loans. Average loans held for investment increased $2.6 billion, or 2%, to $143.3 billion.

This quarter’s growth was driven by commercial real estate and consumer. C&I loans were largely unchanged at $65.9 billion, with growth in institutional CRE offset by lower dealer commercial services. Average CRE loans increased $1.6 billion, or 7%, to $24.9 billion, reflecting continuation of the origination strength we saw late in the second quarter and relatively stable payoffs and paydowns. Average residential mortgage loans increased $0.4 billion, or 1%, to $25.2 billion.

Consumer loans increased $0.6 billion, or 2%, to $27.3 billion, with growth in recreational finance and HELOC portfolios. Loan yields decreased 3 basis points to 5.86%, reflecting lower nonaccrual-related interest. For context, third quarter results reflect a $15 million reduction in interest income recognized on commercial loans that were previously in nonaccrual status. Turning to slide 13, our liquidity remains strong. At the end of the third quarter, investment securities and cash held at the Fed totaled $52.2 billion, representing 24% of total assets.

Average investment securities decreased modestly to $38.6 billion. The yield on investment securities increased 4 basis points to 4.33% as reinvestment rates continue to exceed the yields on maturing balances. In the third quarter, we purchased $0.9 billion in debt securities with a yield of 5.12%. The investment portfolio had a duration of 4.1 years, and the unrealized pretax loss on the available for sale portfolio was $745 million. While not subject to LCR requirements, M&T estimates its LCR at quarter end was 107%, exceeding the regulatory minimum standards that would be applicable if M&T was a Category 3 bank.

Turning to slide 14, average total deposits rose $3.3 billion to $166.8 billion. Noninterest-bearing deposits decreased $256 million to $43.7 billion, primarily from lower trust demand deposits. Interest-bearing deposits increased $3.5 billion to $123.1 billion. Growth was driven by commercial, mortgage, business banking, and time deposits. Interest-bearing deposit costs increased 10 basis points to 2.05%. The increase was driven by several factors, including 2 basis points related to the impact of the September rate hike and 4 basis points related to the growth and repricing of the time portfolio, the remainder largely attributed to growth in other interest-bearing deposit categories. Importantly, the deposit growth allowed us to reduce our reliance on borrowings, with average short-term borrowing decreasing by $2.8 billion to $5.2 billion. As a result, total interest-bearing liability cost increased less than the interest-bearing deposit cost, reflecting our continued focus on optimizing overall funding costs and mix. Continuing on slide 15, noninterest income was $743 million compared to $740 million in the linked quarter.

Higher residential servicing fee income was largely offset by lower capital markets and advisory and other revenues from operations. Mortgage banking revenues increased $25 million to $152 million. The primary driver was residential mortgage, which increased $23 million to $119 million from higher servicing fee income, reflecting $63 billion of subservicing balances added in June. Trust and investment services decreased $5 million to $230 million, mostly related to seasonal tax preparation fees in the second quarter.

Capital markets and advisory decreased $9 million to $32 million from lower interest rate swap transactions with commercial customers and lower loan syndication activity. Other revenues from operations decreased $10 million, mostly reflecting a $31 million Bayview distribution, compared to $47 million in the prior quarter. Turning to slide 16, noninterest expenses for the quarter were $1.39 billion, an increase of $44 million from the prior quarter.

Salary and benefits increased $6 million to $832 million, mainly from one additional working day in the quarter. Outside data processing and software costs increased $19 million, and professional services increased $8 million, reflecting higher software maintenance, enhancements to our technology infrastructure, and other enterprise initiatives. Other costs from operations increased $6 million, primarily from the Visa-related litigation obligations.

Our efficiency ratio was 54.4% in the third quarter, up from 52.8% in the linked quarter. Year to date, however, efficiency continues to improve, with the ratio improving to 55.1% from 56.3% last year. Next, let’s turn to slides 17 and 18 for credits. Asset quality remained relatively stable this quarter, with net charge-offs below our initial year expectations and nonaccrual loans remaining near cyclical lows. Criticized loans increased $245 million to $6.1 billion.

The increase was driven by a $213 million increase in C&I criticized and a $32 million increase in CRE. Nonaccrual loans increased $90 million to $1.3 billion, and the nonaccrual ratio increased 5 basis points to 90 basis points. The increase was driven by higher commercial nonaccrual loans, mostly related to office and assisted living credits. Net charge-offs for the quarter totaled $127 million, or 35 basis points. Five credits accounted for approximately $40 million in the net charge-offs and were mostly in the leveraged lending and franchise portfolios.

In the third quarter, we recorded a provision for credit losses of $135 million. The allowance for loan losses as a percent of total loans declined 2 basis points to 1.51%. Turning to slide 19 for capital, M&T’s estimated CET1 ratio was 10.16%, a decline of 3 basis points from the second quarter. The decline reflected $323 million share repurchases and higher risk-weighted assets associated with $2.2 billion of loan growth. These factors were partially offset by continued strong capital generation.

If included in regulatory capital, AFS and pension-related AOCI would have decreased the CET1 ratio by 29 basis points. Now turning to slide 22 for the outlook. First, let’s begin with the economic backdrop. The U.S. economy continues to expand despite multiple shocks and heightened uncertainty. Although geopolitical conflicts have not been fully resolved, we are cautiously optimistic with an outlook of continued growth. Gasoline prices remain high, but consumer spending has held up well in spite of energy shocks.

We see households as having managed the shock by reducing spending in other areas. The build-out of artificial intelligence infrastructure is helping drive overall construction and capex, while other sectors are more subdued. While we do not see evidence of energy shock seeping into core inflation, we expect overall inflation to decelerate going forward. Labor market remains in a low-hire, low-fire environment, with slow job growth and low unemployment rate, with very little wage pressure.

We remain well positioned for a dynamic economic environment. Now turning to the outlook. With three quarters of the year complete, we will focus on the fourth quarter. We expect taxable-equivalent NII to be $1.83 to $1.85 billion and net interest margin to be in the mid-360s. Our forecast reflects one rate hike in December. We expect modest loan growth, with average loans of $145 to $146 billion, and growth in C&I, CRE, and consumer. Average deposits are expected to increase to $169 to $170 billion, with continued focus on growing customer deposits at a reasonable cost.

Our outlook for the fourth quarter noninterest income is $710 to $730 million, reflecting stable to modest growth across most fee income categories, except for other revenues from operations, given the benefit of Bayview distribution in the third quarter. Fourth quarter expenses, including intangible amortization, are expected to be $1.39 to $1.41 billion, reflecting continued investment in the enterprise initiatives and well-managed noninvestment spend.

Net charge-offs for the fourth quarter are expected to be 35 to 40 basis points. We plan to continue to operate a CET1 ratio of 10 to 10.25% for the remainder of the year. To conclude, on slide 23, our results underscore an optimistic investment thesis. M&T Bank has always been a purpose-driven organization with successful business model that benefits all stakeholders, including shareholders. We have a long track record of credit outperforming through all economic cycles.

While growing within the markets we serve, we remain focused on shareholder returns and consistent dividend growth. Finally, we are a disciplined acquirer and prudent steward of shareholder capital. The strength and diversification of M&T’s balance sheet, asset quality, and revenue will continue to allow M&T to outperform consistently across cycles. As we close, I want to thank all of my M&T colleagues whose dedication and hard work make a difference every day for our customers, communities, and one another.

Because of your commitment, M&T continues to create lasting value for everyone we serve. Now let’s open the call up to questions, before which Angela will briefly review the instructions.

Angela, OPERATOR

Thank you. If you’d like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. Our first question today comes from Daniel Tamayo with Raymond James. Your line is now open.

Daniel Tamayo, Analyst at Raymond James

Thank you. Good morning, Daryl.

Daryl Bible, Sr EVP & Chief Financial Officer

Good morning, Danny.

Daniel Tamayo, Analyst at Raymond James

Maybe just starting on the funding side. You mentioned the mix shift from borrowings to deposits in the quarter and the benefit that had. Is there any benefit left from this mix shift? And then just diving into the increase in deposit costs, just curious if that was more related to competition or how much of that came from, was impacted by, the rate hike in September. Thanks.

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, thanks, Danny. Let me start with the deposit one first. So our deposit costs were up 10 basis points quarter over quarter. When you kind of decompose that, four basis points of that increase was really attributable to time deposits that we put on. Towards the end of the second quarter and early third quarter we had a promotion that we were running. We were doing 12- and 18-month maturities and at that time we put on a 4.05 rate on those CDs.

Not knowing that rates were going to go up a whole lot, we just thought it was a good time to issue, get more term funding, and pay down borrowings. With the rate increase that we saw late in the third quarter, you know, we’re now close to the overnight rate with this term money. We think now that’s acting really well and that will stay stable. So if you take that away, our costs were really up around 6 basis points. And that’s just normal repricing that we saw that we had to as we start to implement increases with the higher funds rate.

From that perspective on the funding side, you know, we were always looking on the balance sheet for ways to be optimized and do things better. And, you know, I’m sure we aren’t fully optimized yet and we’ll continue to work on trying to become more optimal. I feel very optimistic on the outlook for net interest income and net interest margin. So I think we’ll find other things that we can do down the road over the next year or so that will help us continue to maintain and have really strong performance in this space.

Daniel Tamayo, Analyst at Raymond James

Great, thank you. And then maybe just a longer-term question, kind of similar topic though: given your focus on growing the operating accounts, but the pressure that we’re seeing in the industry on funding on the deposit side, how are you thinking about the trade-off between maintaining deposit pricing discipline and then funding loan growth going forward? And just your thoughts on if the deposit pricing could ultimately become a bigger constraint on growth than maybe demand for loans going forward.

Daryl Bible, Sr EVP & Chief Financial Officer

So as you know, Danny, all of our businesses, whether it’s consumer, business banking, commercial, wealth, we always go to market to get the operating account that we believe is the most important thing to have. The relationship starts with that. And once we get that, we have other opportunities to kind of deepen our relationship with our customers. That’s not going to change. And that’s really good. If you look at business banking, I said this before, but it has more deposits than loans, three to one.

Eighty percent of those deposits are operating accounts. So that’s just a pure way you can see how focused we really are on getting those operating accounts. You know, as far as pricing goes, yes, it’s competitive out in the marketplace, you know, and there is loan demand. You know, we’ll see how much loan demand we have in 2027 with rates increasing. My guess is we’ll have loan demand but probably at a little bit more modest pace. And I think we’ll be able to manage the funding of that, you know, effectively.

You know, if we go out to term funding, you know, M&T issues very well in the capital markets, so we can do that if we need to. But first and foremost, we’re going to try to fund our loan growth with our deposit growth.

Daniel Tamayo, Analyst at Raymond James

Terrific. Thanks so much for taking my questions, Daryl.

Daryl Bible, Sr EVP & Chief Financial Officer

Thank you.

Angela, OPERATOR

Thank you. We’ll go next to Scott Siefer with TD Cowen. Your line is now open.

Bill Young, Analyst at TD Cowen

Hey, good morning, guys. This is actually Bill Young on for Scott. How are you?

Daryl Bible, Sr EVP & Chief Financial Officer

Hey, Bill. Hi.

Bill Young, Analyst at TD Cowen

My first question, you had some very strong pull-through on CRE this quarter, which was expected. And it looks like the outlook for 4Q growth is also looking pretty solid. But as we look out over the next year and given the evolving higher-rate environment, what are your updated thoughts on a positive commercial growth inflection story balanced against the rate outlook?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, it’s a great question, Bill. I spent a lot of time talking to Tim Gallagher this week preparing for this call. He runs our CRE space and him and his team have worked really, really hard to start growing our CRE portfolio again. And we have two quarters in a row now where it’s grown really nicely. Higher rates just by definition are going to make it more challenging for projects to actually basically true out from a financial perspective. But we’re still optimistic.

I think Tim and his team have worked hard to get growing and even in a more challenging environment, we still feel confident we’re going to be able to grow probably maybe mid-single-digit, plus or minus, in that neighborhood is kind of our expectations. But, you know, we were really good at CRE and, to be honest with you, it’s always not all what’s on the balance sheet. We also have a lot of off-balance-sheet alternatives, too. And we really want to serve our customers and meet their needs whether that’s on or off balance sheet.

So I think both ways we will be successful in what we need to do. Great.

Bill Young, Analyst at TD Cowen

Very helpful. And then a separate topic. Given the slight uptick in criticized assets this quarter and some of the uncertainties you flagged on the macro in your prepared remarks, do you see criticized asset levels perhaps stabilizing at these levels? How do you kind of think about that as well in the backdrop of a higher-rate environment?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah. So when you look at, or at least near-term projections for, criticized balances, we still think the overall portfolio will still be down a little bit. Look at CRE, you know, that’s where most of the improvement has been over the last year. That’s probably where you’re going to continue to see it near term. You know, as you go out into next year, you know, and if rates stay higher, that could put pressure on debt service coverage ratios and that could have some creep maybe starting back into the portfolio there.

The C&I portfolio has been up and down a little bit on a criticized basis. So we don’t think that’s going to necessarily have a downward trajectory but kind of bounce along up and down a little bit throughout the next several quarters. But net-net, overall, I think we’re optimistic that it’s still at least short-term down in criticized and we’ll see how much rates impact our customers going forward. As you know, as we underwrite our customers, we stress test them under a lot higher interest rates and they will perform well because of that stress testing and renewal.

So we aren’t concerned about losses coming in with this higher interest rates, but you might see a little creep in the criticized side.

Bill Young, Analyst at TD Cowen

Perfect. Thank you for taking my questions. Appreciate it.

Daryl Bible, Sr EVP & Chief Financial Officer

Thank you.

Angela, OPERATOR

Thank you. We’ll go next to John Pancari with Evercore. Your line is now open.

Geroy Sweeney, Analyst at Evercore ISI

Hey, good morning, this is Geroy Sweeney on for John. Just revisiting the criticized loans on the auto leasing credit, the auto leasing company credit that you flagged. Can you provide a little more color on this in terms of was this something you had some prior visibility into? And then if you think this is driven by broader macro or industry pressures, or for this credit was a little more idiosyncratic? Thank you.

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, we believe it was idiosyncratic. It was in our NDFI portfolio. This company was an auto leasing vehicle remarketing and used car platform. We knew this was coming down the path. We also have a feel for nonaccrual next quarter as well and we think that’s going to be flat to up a little bit as well. So we’re just bouncing at the bottom right now and there’s a couple credits that we see out there that we think will go into nonaccrual. But as loans go nonaccrual, we do have some curing as well.

Net-net, we were up a little bit this quarter, but we’re still having a lot of our customers also cure in this portfolio. But we’re at really low periods for M&T, very close to the bottom. So we’re going to bounce along the bottom for a while, I believe.

Geroy Sweeney, Analyst at Evercore ISI

Thank you. Then one more just back on the lending side, revisiting pricing there given broader competitiveness. What have you observed in loan spreads in 3Q, and have you seen any changes in recent weeks as credit spreads across the industry have widened?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, when you look at the commercial portfolio, include CRE or whatever, we’re actually up 10 basis points from what we had run off versus what we put on the books this past quarter. So I wouldn’t say that you can say that’s going to stay that way, but I would say relatively flat right now. We’re showing a little bit positive bias from that perspective. So I think that’s good. You know, it’s competitive out there, but, you know, we’re willing to, you know, give a little bit on pricing if we have really good structure.

We don’t want to sacrifice on structure. Structure is really what’s important to us and that’s something that we aren’t going to change from that perspective. But right now we think what we’re putting on the books is still meeting our returns in pretty much most of the situations that we are able to do.

Geroy Sweeney, Analyst at Evercore ISI

Understood. Thank you very much.

Daryl Bible, Sr EVP & Chief Financial Officer

Thank you.

Angela, OPERATOR

Thank you. Our next question comes from Ryan Kinney with Morgan Stanley. Your line is now open.

UNKNOWN, Analyst

Hey, good morning. So on the fee income side, it’s been a strength for M&T Bank for several quarters. Can you walk through what you expect to see in terms of higher rates, impact on the fee businesses, and maybe how that trajectory would vary across the major line items?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, so the easy ones are, you know, higher interest rates on the yield curve are definitely going to slow down our residential mortgage business. And you’re seeing that now, obviously, with new home rates above seven and a half to eight, in that range, bouncing along. Right now our RCC business, which is our originate-and-sell business in the commercial real estate space, is also higher and has lower volumes just because it’s hard to pencil out and get the economics that we need for our customers in that space.

So those would be softer. One of the countercyclical items we have is our mortgage servicing/subservicing businesses. What we have there is most of our subservicing businesses are in government servicing, FHA, when loans are delinquent, and then when we’re able to cure loans, we actually get paid a reward fee for that. So not wishing our customers to have issues, but if they do have issues, we generate more revenue, and when we’re able to cure them, we get paid for that even more.

So that’s more countercyclical. Corporate Trust. Corporate Trust business is a great fee business, but it’s also a good deposit business for us. And if market activity slows down in the capital markets series, we’ll see that space there. We now broke out our line items on capital markets and commercial. You know, that’s going to probably do well in most situations, just because we’re putting more resources and more people in that space. We’re coming off, you know, pretty much very low bottoms.

So we’re very optimistic as we push more into that space and offer it more to our customers. You know, even in tougher environments, I think we’ll be able to hold our own and still have success growing in that area. So net-net, overall we’re very optimistic on fees, about 28% of our revenue. You know, we’re going to continue to push hard and we still have strong net interest income and margin. But trying to get the fee revenue up into the 30s would be a great objective for us to achieve.

UNKNOWN, Analyst

Thank you. Very clear, and appreciate the enhanced disclosure around fees. And then, separately, on the M&A question: Any updated thoughts on the board’s appetite for potentially expanding inorganically given the movement in rates? Does higher rates limit the pool of available sellers because of unrealized losses, or does it make high-quality deposit franchises more attractive? If you could just walk through the puts and takes there.

Daryl Bible, Sr EVP & Chief Financial Officer

Thanks. Yeah, I mean higher rates definitely change the mark of the balance sheet, and that’s real. But, you know, what we look at, to be honest with you, deposit franchise is one of the most important things we look at no matter what the conditions are, because it’s hard to really have a bank that funds with operating transaction accounts and have that mindset. When you find those, there’s really a lot of value there, you know. So we’re still actively talking to a lot of people in our footprint, and something may happen at some point down the road.

There’s nothing imminent from that perspective, but, you know, René knows all the CEOs in our marketplace plus, and he has good dialogue. And when somebody maybe wants to partner with us, they reach out to us. And at that point, you know, we will engage and see if it can work for both parties from that perspective.

UNKNOWN, Analyst

Thank you.

Angela, OPERATOR

Thank you. Our next question comes from David Schiavarini with Jefferies. Your line is now open.

David Schiavarini, Analyst at Jefferies

Hi. Thanks for taking the questions. Wanted to follow up on the loan side of things. So CRE and consumer drove the growth, but C&I was muted. Can you talk through why C&I was muted and the outlook from here on the C&I side?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, C&I is a big business for us. We have lots of businesses within C&I now. I’ll just cut to the chase. So it was flat this quarter. We had actually nice growth in our institutional CRE kind of REIT lending. We had good growth in our large corporate institutional. We actually had good growth in three of our four major regions in our regional C&I space. What offset us was, seasonally, dealer commercial services is at a point now where there’s less inventory cars on the platform, so that went down.

And then if you look at owner-occupied, that was the other one that kind of decreased. Net-net, it added to pretty flat. Our outlook, though, for C&I is very optimistic and good, you know, for next quarter. In my prepared remarks, we said we’d have growth in commercial, CRE as well as consumer, so all three portfolios. And we believe that’s going to happen. It may be a little bit more challenging with higher rates next year and all that. But, you know, our teams are really good.

We have great relationships with our customers, so we will hold our own. And I’m sure we’ll have good loan growth and still continue to perform really well as we get into ’27 and beyond.

David Schiavarini, Analyst at Jefferies

Great. Thanks for that. And then on the net interest margin, you’re guiding mid-360s for the fourth quarter. Should we think of that as a sustainable level for multiple quarters? And can you also remind us of the sensitivity to rates on the NIM for M&T Bank going forward?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah. Okay, so let me do sensitivity first. So sensitivity on the short end, we’re relatively neutral, maybe a touch liability-sensitive, but pretty relatively neutral in that space. The curve is steeper and that’s a good guy for us. So I feel very comfortable where we’re operating in the mid-360s. We aren’t going to give ’27 guidance. But when you look at where the shape of the curve is, if that holds, if you look at where our asset repricing is, we have really good asset repricing in a lot of our portfolios.

Our investment portfolio for the next 12 months will reprice $6 billion up, easily over 100 basis points. You look at loans over the next 12 months, we have about $10 billion of fixed-rate loans going off that should reprice up for about 75 basis points. Look at our swap book. It’s come down in the last quarter or two. It starts to go back up again in the second quarter next year and climbs out of that. So I feel good on our swap book giving us momentum as you get into the middle and later part of ’27.

So I’m actually pretty optimistic, David, that we’re going to continue to have a strong net interest margin for our company and have good loan growth and see how that plays out. But we’re really performing really well, all the businesses, and I think you’re going to see that performance continue.

David Schiavarini, Analyst at Jefferies

Very helpful.

Daryl Bible, Sr EVP & Chief Financial Officer

Thank you.

Angela, OPERATOR

Thank you. Our next question comes from Christopher McGratty with KBW. Your line is now open.

Chris O’Connell, Analyst at KBW

Hi, thanks. This is Chris O’Connell for Christopher McGratty. I was just hoping to touch on some of the pricing dynamics on the loan and the securities side — maybe just post-hike — where the average pipeline origination yields are coming on for the C&I and CRE books.

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, I mentioned it earlier. But on the commercial side, when you look at the roll-on/roll-off, we’re up about 10 basis points in the third quarter in that space. That kind of bounces around — I don’t know what it will be, you know, next quarter — but net-net, overall, you know, it’s competitive in that space. We’re really, you know, not giving on our structure, and we’re getting the pricing, and I would say the vast majority of the loans we put on our books are meeting our hurdles, and that’s what’s really important from that perspective.

You know, as far as the pricing of securities, I mentioned that just a minute ago, but we have good momentum. We’re going to be able to reprice that portfolio up. It went up 4 basis points this quarter. I would say that will continue to be up for the next several quarters, each quarter.

Chris O’Connell, Analyst at KBW

Okay, great. Thank you. And then on the capital side, I mean you guys are pretty close to your capital targets now and expected to stay in that range for Q4. As you kind of move into Q4 into next year, and given the Basel III proposals, any change, do you think, in the level of buybacks going forward?

Daryl Bible, Sr EVP & Chief Financial Officer

So we first want to get the rules out there and know what they are. We’ll look at what actually is out there. There’s three regulations that will probably be out by the end of the year — Basel III, tailoring, and liquidity — you know, and I think all of them will have some positives. Maybe not as much as what everybody wants, but still positives in each of them to some extent. I think we’ll just have to evaluate, you know, what the new rules are, what we have.

But yeah, I think where we are now, we feel really good at that. You know, with an increase in AOCI, we are being very careful with our tangible equity and all that. So that’s why we moved those $8.3 billion into held to maturity. The other caveat out there in the marketplace is rating agencies. Rating agencies — we don’t want to get downgraded. So we have to see how they interpret the new rules as well. But net-net, overall, we’re optimistic that we’ll have some flexibility there and continue to do really well.

Chris O’Connell, Analyst at KBW

Great. Appreciate the detail. Thanks for taking my questions.

Angela, OPERATOR

Thank you. Our next question comes from Matt O’Connor with Deutsche Bank. Your line is now open.

Nate Stein, Analyst at Deutsche Bank

Hey, this is Nate Stein on behalf of Matt O’Connor. I actually wanted to ask about the decision to break out new fee line items like capital markets and advisory and card fees. What drove the decision to start breaking all that out versus lumping a lot of items into other income previously? And separately, I noticed a reclassification of C&I, CRE, and resi mortgage loans, and I didn’t see any footnotes highlighting it — in case I missed it, could you just elaborate more on this?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, let me take your second question first. We didn’t change any classification of our loans, with the exception that we broke out available for sale/held for sale out there. And that was really for our two portfolios in residential mortgage and in our RCC CRE business. So those will actually show that there. Other than that, the balance sheet didn’t change. That’s the only thing we had. And we’re averaging a little less than a billion dollars in that new held for sale line item.

As far as the fees go, you know, we had a very large other revenue category. It was either the largest or second largest out there. And we just had a lot of, we believe, good news within that other category. So we wanted to break it out and show more transparency there. So we created those new buckets — like in capital markets and card fees and other things — and just bucketed things how we thought it would be and consistent. It was that way for a long, long time.

We would have changed it earlier, but we were putting in a general ledger, and we just didn’t want to change our line items and have to redo kind of our new system all over again. So we waited till the new system was in and working, and then we broke it out. So you may see a little bit more changes positively over the next quarter or two as well, just trying to enhance and improve our transparency and information that we share with you guys.

Nate Stein, Analyst at Deutsche Bank

Well, I’ll just reiterate another person’s comments that the increased transparency is definitely appreciated, so thank you for that. And then I wanted to ask also about ROTC. So you called out a 17.3% operating ROTC in 3Q, which is a little above the high end of your 15% to 17% medium-term range. And in the past you’ve said 17% next year is achievable. Is that still a fair assumption, or is there maybe upside to this target?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, Nate, we believe we’re on track with what we shared with the board. We believe that 17 is attainable for 2027 for us and will be challenging. It won’t be easy, especially with higher rates. Might have a little bit softer economy because of that. That said, our businesses are performing well. All of our people know our clients, customers really well. We will compete, I think really well against others in the marketplace. And I think we’re all focused and I think we’re going to achieve our goals that we’re setting out. But a year from now you kind of know if we’re there or not. But I think that’s the objective and that’s what we’re going to try to execute too.

Angela, OPERATOR

Thank you. Our next question comes from Gerard Cassidy with RBC Capital. Your line is now open.

Gerard Cassidy, Analyst at RBC Capital Markets

Hi Daryl, how are you?

Daryl Bible, Sr EVP & Chief Financial Officer

I’m doing good. And you, Gerard?

Gerard Cassidy, Analyst at RBC Capital Markets

Good. I got a bigger picture question for you. There’s been a lot of talk lately about the Enjed Inc. AI agents coming in and maybe moving deposits around on the consumer deposit accounts, thereby pressuring deposit rates for banks like yours and others. What’s your guys take on this news and other types of AI agents?

Daryl Bible, Sr EVP & Chief Financial Officer

So I mean, you know, you’ve been in the industry a long time. I mean information’s gotten a lot better over the last 30 years. You know, people can move money to higher rates. You get information out there very easily. These agents will make it easier out there. I think it’s going to come down to trust. To be honest with you, where our customers really trust to let their agents allow them. They have all their credentials come in and have the ability to move money to other places and have that agent decide where that money is going to move and understand that really well.

So I mean we’ve been, if you look at our center that we have now, agents are coming in every day. We have tons of that coming in. But we aren’t really seeing much impact of actually money being moved out or anything yet. But it’s happening today and we’re monitoring that very closely. But net net, I think it’s going to take time for people to get comfortable with that and have an access to move money around. But it will probably become more efficient over time.

But right now I just think it’s going to be not as much of a big deal over time. If people get comfortable and actually trust these agents with all their money and move it to other places, then you know, you’ve, you know, it’s purely mobile at that point down the road.

Gerard Cassidy, Analyst at RBC Capital Markets

Sure. Okay. Thank you. And then you guys and you have had good insights into the private credit market. What are the, you know, trends that you’re seeing? Obviously the beginning of the year there was some real concerns about credit quality in that market. Are you seeing increased competition from the spring or what are you folks seeing?

Daryl Bible, Sr EVP & Chief Financial Officer

I’d say private credit, including BDCs and that, it’s just a little bit softer. They’ve had, I wouldn’t say issues, but they’ve had to address some of their liability side of their balance sheets. So the funding that they have now probably isn’t as robust at what it had a few years ago. From that perspective, we actually like to partner with those if it makes sense for us and maybe support them and help them doing what they’re doing or split a customer up or take a senior position or take a more subordinated position.

So I think net net overall it’s not having a negative impact for us. If anything, it’s neutral to slightly positive for us.

Gerard Cassidy, Analyst at RBC Capital Markets

Got it. Thank you. Appreciate the color.

Angela, OPERATOR

Our next question comes from Ken Houston with Autonomous Research. Your line is now open.

Moksha, Analyst at Autonomous Research

Hi, good morning, Daryl. This is Moksha on for Ken. Could you just talk through the trade-off between AEA growth and NIM? I think you briefly touched on it in the comments. But just going into the higher-for-longer rate environment, how do you guys think about just the trade-off between the two?

Daryl Bible, Sr EVP & Chief Financial Officer

Yeah, I would say if you’re purely minded to get the maximum net interest margin, you probably won’t optimize your return performance and your revenue growth. And to be honest with you, you probably aren’t solving all of your customers’ needs in the marketplaces. So there’s a balance there that our goal is to support customers and communities first and foremost. We need to have the ability to have balance there. So we look at can they hurdle and can they get the right returns is really what we’re looking for.

Can they get a 17% return on tangible relationship? If that requires a lower spread, so be it. Maybe we make it up in fee income or balances as well. So net net overall it’s more about getting the right returns is really what we’re focused on and that sometimes could be margin, sometimes it’s getting more NII. Right now we’re leaning into trying to be as open as we can with customers and try to bring in more of the relationship that way and seems to be working right now and I think we’ll continue to exercise it and do that.

Moksha, Analyst at Autonomous Research

Okay, got it. And then just one on fees. You guys had this nice subservicing add this quarter, but how are you guys thinking about the opportunity to continue selling originations and subservicing capabilities over the medium term?

Daryl Bible, Sr EVP & Chief Financial Officer

So our servicing subservicing business in mortgage is really important to us. We have good systems, we have good people that are trained in there. We perform really well in that space. We actually like the hard-to-service type business there just because we think we’re really good at it. So that’s something that we’re in and going to continue to stay in that space. And as we have opportunities to grow it some more and compete competitively, we will.

That requires continuation of investment in technology. We’re prepared to do whatever we need to in that space. But it’s a good important fee income line item. It’s countercyclical for us which is also really good from a diversification perspective. So George Taylor, who runs that function for us, is doing a great job with that and we’ll continue to grow and do well and take advantage of opportunities when they come our way.

Moksha, Analyst at Autonomous Research

Great. Thanks for your question. Thanks for your answers.

Angela, OPERATOR

Thank you. At this time there are no further questions in queue. I will now turn the meeting back to Steve Windelboe for closing remarks.

Steve Windelboe, Senior Vice President of Investor Relations

Thank you all for participating today and, as always, if any clarification is needed, please contact our Investor Relations team at 716-842-5138. Thank you.

Angela, OPERATOR

Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

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