M&T Bank Corporation

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Please stand by, your meeting is about to begin. Welcome to the M&T Bank first 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 Rajiv Ranjan, Head of Investor Relations and Corporate Development. Please go ahead.

Thank you, Angela, and good morning. I would like to thank everyone for participating in M&T's first 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 would 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, Darrell Bible. Now, I would like to turn the call over to Darrell.

Thank you, Rajiv, and good morning, everybody. As we move into the next earnings season, I want to start with what continues to define M&T. Our purpose is to make a difference in people's lives. We do this by helping our customers grow, enabling commerce, and supporting our communities. We value building long-term relationships and being the source of strength and stability to our stakeholders through various economic cycles. We are committed to investing in places we serve. In this quarter alone, we recently launched a new Baltimore Ravens College Track Center, a state-of-the-art learning support space for local high school scholars. In New York City, we opened a new full-service branch in the Bronx. And just this week, we announced our work with the Boston Foundation on a multimillion-dollar program with the City of Boston to accelerate the city's innovation ecosystem. Looking ahead to 2026, our priorities remain clear. Operational excellence, that is building simpler, more consistent, and resilient operations, and teaming for growth, which is about working more seamlessly to deepen relationships and expand the opportunity in our markets. We enter this season with the same relentless commitment to discipline execution and long-term performance. To that end, before we get started into the results this quarter, let me start by underscoring some longstanding qualities that have come to characterize M&T's performance. M&T has always maintained a strong balance sheet, starting with a very high quality loan portfolio, proven asset quality performance over the long term, strong level and quality of capital, and ample liquidity. Regardless of the business environment, we remain steadfast in our disciplined approach to underwriting, pricing, and risk management. At times, that results in focus growth in some loan categories while remaining vigilant on others, as was the case last year and this quarter. I would rather say no to a transaction than compromise on structure and pricing. We chose to be selective with to be preserving the high quality and low volatility of our revenue and earnings stream. Those tenants serve us well, and I'm confident that we will see growth in all loan categories this year, but in a manner that delivers progress while protecting all of our constituents, including customers, communities, and investors. As the industry navigates some new uncertainties from current events, we have chosen to be cautious with our NIM expectations but we remain confident in delivering the performance we expected when we started the year. Our pipelines remain strong, but we chose not to chase growth or yield if a transaction doesn't fit underwriting and our return standards. We have one of the highest quality risk-adjusted NIMs in the peer group, and we will maintain that while delivering strong results driven by well-diversified revenue streams. We are starting with a strong year-over-year fee income momentum, and those fee income growth contributors are of high quality and low volatility. Asset quality has been improving notably. Our strong capital levels as well as our consistent capital generation gives us flexibility for share repurchases. In combination, these factors will allow us to produce strong pre-tax, pre-provision revenue and earnings in line and with a possibility of exceeding expectations. As we go through the presentation today, I will highlight strengths and diversification of M&T's balance sheet, capital, asset quality, and revenue, which enables M&T to outperform consistently across cycles. Turn to slide five. We continue to receive recognition for our performance, including the impact of our charitable team and our engagement with investors, reflecting dedication of our teams across M&T. Now let's turn to slide seven, which shows the results for the first quarter. Our results represent a strong start to the year with several successes to highlight. Net interest margin expanded two basis points, reflecting continued fixed rate asset repricing and deposit cost discipline. CNI growth was strong, with average CNI loans growing at $1.5 billion, the fourth quarter, including a pickup in middle market growth. Fee income remains a bright spot, growing 13% from the first quarter of 2025 with a solid year-over-year growth in each of our fee categories. Credit continues to perform well with more than $700 million reduction in criticized balances and net charge-offs of 31 basis points. We brought our capital levels within our operating range and executed $1.25 billion in share repurchases, representing over 3.5% of shares outstanding as of the end of 2025. Diluted GAAP earnings per share were $4.13, down from $4.67 in the prior quarter. Net income was $664 million compared to $759 million in the linked quarter. M&T's first quarter results produced an ROA and ROCE of 1.26% and 9.67% respectively. Slide 8 includes supplemental reporting of M&T's results on net operating or tangible basis. M&T's net operating income was $671 million compared to $767 million in the linked quarter. Diluted net operating earnings per share were $4.18, down from $4.72 in the prior quarter. Net operating income yielded an ROTA and an ROTCE of 1.33% and 14.51% for the recent quarter. Next, we will look a little deeper into the underlying trends that generated our first quarter results. Please turn to slide nine. Taxable equivalent net interest income was 1.76 billion, a decrease of 27 million, or 2%, from the linked quarter. Net interest margin was 3.71%, an increase of two basis points from the prior quarter. This improvement was driven by a positive eight basis points from the higher spread, driven by fixed asset repricing, remixing of cash to securities, deposit pricing discipline, and a favorable impact on our swap portfolio. That was partially offset by a negative six basis points from a lower contribution of fee funds driven by share repurchases and the impact of lower rates on the value of free funds. Turning to slide 11 to talk about average loans. Average loans and leases increased 0.8 billion to 138.4 billion. Higher commercial loans were partially offset by lower CRE and consumer balances. Commercial loans increased $1.5 billion to $63.8 billion, aided by growth in middle market, business banking, and several of our specialty businesses. Higher middle market loans reflected uptick in utilization in the first quarter. CRE loans declined 3% to $23.5 billion, reflecting a somewhat moderating paydown, but softer volume, particularly in January and February. However, we saw strong CRE origination activity in March. Residential mortgage loans were largely unchanged at $24.8 billion. Consumer loans declined 1% to $26.3 billion from lower recreational finance and auto loans due to poor weather early in the year. Loan yields decreased 14 basis points to 5.86%, reflecting lower rates on variable rate loans, partially offset by fixed rate loan repricing, and eliminating the negative carry on our swaps. Turning to slide 12, our liquidity remains strong. The end of the first quarter investment securities and cash held at the Fed totaled 53.1 billion, representing 25% of total assets. Average investment securities increased 1.1 billion, to $37.8 billion. The yield on investment securities increased nine basis points to 4.26%. The duration of the investment portfolio at the end of the quarter was 3.8 years, and the unrealized pre-tax gain on the available for sale portfolio was $9 million. While not subject to the LCR requirements, M&T estimates that its LCR at the quarter end was 107%, exceeding the regulatory minimum standards that would be applicable if we were a Category 3 institution. Turning to slide 13. Average total deposits declined $0.8 billion to $164.3 billion. Non-interest-bearing deposits increased $0.4 billion to $44.6 billion, aided by institutional services. Interest-bearing deposit costs decreased 1.3%, $2 billion to $119.7 billion driven by lower broker deposits. Interest-bearing deposit costs decreased 21 basis points to 1.96% with lower deposit costs across each of our segments. We have been able to grow customer deposits and maintain deposit cost discipline. Since the first quarter of 2025, we have more than funded our loan growth. with average customer deposits outpacing loan growth by more than $1 billion. We grew customer deposits while we were maintaining deposit cost discipline reflected in a 56% interest-bearing deposit beta since the start of the cutting cycle in 2024. Continuing on slide 14, non-interest income was $689 million compared to $696 million in the linked quarter. Mortgage banking revenues were $127 million, down from $155 million in the fourth quarter. Residential mortgage revenues decreased $16 million to $89 million, mostly related to the MSR time decay now being recognized as a contra-fee item rather than an expense. Commercial mortgage banking decreased $12 million to $38 million, driven by lower volumes compared to the fourth quarter. Other revenues from operations increased $24 million to $187 million from a $33 million Bayview distribution, partially offset by lower merchant discounts. Turning to slide 15, non-interest expense for the quarter were $1.44 billion, increase of $59 million from the prior quarter. Salary and benefits increased $105 million to $914 million reflecting approximately $115 million in seasonal compensation. Professional services decreased $12 million to $93 million, reflecting lower legal and review costs. FDIC expense increased $31 million, primarily related to a $29 million reduction of estimated special assessment expense in the fourth quarter. Other costs of operations decreased $50 million to $101 million, from the previously mentioned changes related to the accounting for the MSR portfolio and a $50 million charitable contribution in the prior quarter. The efficiency ratio was 58.3% compared to 55.1% in the linked quarter. Next, let's turn to slide 16 and 17 for credit. Asset quality was strong with lower net charge-offs and continued improvement in non-accruals and criticized loans. The level of criticized loans was $6.6 billion compared to $7.3 billion at the end of December. The improvement from the length order was driven by $400 million decline in CRE and $306 million decline in CNI criticized. Non-accrual loans decreased slightly to $1.2 billion, and the non-accrual ratio decreased one basis point to 89 basis points. Net charge-offs for the quarter totaled $105 million at 31 basis points, decreasing from 54 basis points in the linked quarter. Net charge-offs were granular, with no single net charge-off greater than $10 million. In the first quarter, we reported a provision for credit losses of $140 million compared to charge-offs of $105 million. The allowance for loan losses as a percent of total loans was unchanged at 1.53%. Slide 18 has a summary of our NDFI portfolio. Our NDFI portfolio remains a smaller percentage of total loans compared to our peer group. Three portfolios, which are longstanding and relatively well understood by the market, comprise over two-thirds of the NDFI loans. Those portfolios include fund banking or subscription lines, residential mortgage warehouse lending, and institutional CRE, which is primarily lending to REITs. We've also included additional information on business credit intermediaries on slide 19. This portion of the NDFI consists of 0.7 billion of wholesale lender finance, 0.6 billion of business leasing, and 0.4 billion of loans to BDCs. Across the NDFI portfolio, advance rates vary but are calibrated to asset quality, historical recovery data, and collateral performance. Visibility into collateral is strong, with frequent reporting, borrowing bases, independent valuations, and field exams. Diversification is a key minigate, both within the structures and across the broader NDFI portfolio. For example, software exposure within our BDC portfolio is less than 15%. Turning to slide 20 for capital, M&T's CET1 ratio was an estimated 10.33%, decline of 51 basis points from the fourth quarter. The lower CET1 ratio reflects 1.25 billion share repurchases and increased risk-weighted assets, partially offset by continued strong capital generation. In March, the Federal Reserve issued regulatory capital framework proposals. Based on our initial estimate, we estimate an approximate 90 basis point benefit to our CET1 related to lower risk-weighted assets under the standardized approach. If we were to opt in to the expanded risk-based approach, we estimate an incremental 10 to 20 basis point benefit. The proposal also has a phase-in inclusion of AFF securities and pension-related AOCI in the regulatory capitals. At the end of the year, this would be four basis point benefit to the CET1 ratio on a fully phased-in basis. We are well positioned for these proposals given the current capital levels, AOCI, loan mix, discipline credit underwriting, and relatively straightforward business model. Now turning to outlook on 21. First, let's begin with the economic backdrop. The economy continues to hold up well despite the ongoing concerns and uncertainty regarding tariffs and other policies. The situation in Iran poses new risks to the U.S. and global economies through energy prices and uncertainty. Consumer spending has slowed but continues to grow in aggregate. However, there is a growing divide between higher and lower income households, often called the K-shaped economy. the higher-end consumer continues to be stronger and is spending, while the lower-end consumer has not declined but maintained and is vulnerable to the risks in the environment. U.S. GDP growth has slowed, reflecting slower consumer spending among the impacts. Encouragingly, the underlying details for the first quarter shows continued strength in equipment investment by firms. The weak labor market in 2025 is showing possible signs of bottoming out, but we remain attuned to the risks from the geopolitical conflict. We remain well positioned for a dynamic economic environment. Now turning to Outlook. Our full year expectations are unchanged from the ranges we discussed in January's earnings call, but I'll discuss some of the current trends we are seeing. NI is trending toward the bottom half of NI Outlook, of 7.2 to 7.35, which translates into a NIM into the high 360s. We started the year with slower CRE and consumer growth than our initial expectations. Though this has been partially offset by strength in CNI, we saw stronger CRE origination volume in March. NII will continue to be dependent on the shape of the curve and loan and deposit balances. we expect both fee income and expenses to trend toward the top of their respective ranges. This reflects strength in both fee income categories and additional subservicing balances, which I expect to bring in the second half of the year. We continue to manage PP&R well within the range implied by our January guidance. Our taxable equivalent tax rate is expected to be approximately 24%, compared to the prior outlook at 24 to 24.5%. We are also moving to the bottom end of the CET1 ratio of 10%, giving continued asset quality improvement and our strong performance. Overall performance remains on track with our initial expectations. To conclude on slide 22, our results underscore an optimistic investment thesis. M&T has always been a purpose-driven organization with successful business 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. And finally, we are a disciplined acquirer and prudent steward of shareholder capital. As we close, I want to thank my M&T colleagues who work tirelessly each day to make a difference in people's lives. Because of you, M&T is able to support all of our communities. Thank you. Now, let me turn the call over to questions.

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star 1 to ask a question. And our first question today comes from Manon Gasalia with Morgan Stanley. Your line is open. Please go ahead.

Hi. Good morning, Daryl. Good morning. Really appreciate all the detail on the capital side, so maybe I'll start there. First, you're saying ERBA is a positive. I just wanted to clarify that you're saying that you will be adopting that, or is it still something you're deciding on and maybe there's a higher expense impact from opting in or anything else that we might not be considering? And the second on ERBA is what is driving that benefit? How are you thinking about credit risk and op risk?

So Manan, thank you for the question. So, you know, this proposal just came out. It has to go through, obviously, the comment process and then it has to go through the approval process. I can't really commit to you that we will adopt the ERV, but what I can tell you is if there's an advantage that we see here today, if that doesn't change, I think it's up to us to make good decisions for our shareholders, which means we would opt in probably. I mean, let's see how things play out, but if you're going to get that much of an advantage, we can put processes in place that should more than be able to pay for that.

Got it. All right. Perfect. And then you did a pretty significant buyback this quarter and you're bringing down the CET1 guide. Now that we have the new capital proposals and assuming they go through as they're written, what would the right normalized CET1 level be for M&T over the longer term after the RWA benefit? And what's going to determine how quickly you get there?

So, I mean, if it goes as a proposal, you know, it's just you use round numbers. So, if we adopt it, you know, our CET1 measure goes up 100 basis points. Keep it simple. You know, we'd have to really see what other constituencies, primarily the rating agencies, to see what they would think about that because there is actually capital coming out of the system. But they also use RWA in a lot of their calculations and how they measure that. So I think we need to have more measurement there, but my guess is whether you get the full benefit or not, you probably will trend down lower and you probably see that easily in the tangible equity ratio.

Got it. Thank you.

Thank you. Our next question comes from Scott Seifert with Piper Sandler. Your line is now open.

Morning. Thanks for taking the question.

Darrell, I was just hoping you could sort of expand on what's causing the margin to come in a little below your prior expectations. I think you mentioned in your prepared remarks that you were just sort of choosing to be a little cautious on the guide, simply trying to figure out if anything has changed or if it is indeed sort of approaching with an abundance of caution.

Yeah, so it's a combination of two things. You know, obviously, you know, we didn't come out of the blocks really strong in the consumer indirect. That's an important portfolio to us because it has higher yields. And it was really more of a weather event from that perspective. We believe that we're going to be able to catch that up and make progress on that. But until that happens or whatever, I think we're just being cautious from that standpoint. And then from a CRE perspective, seasonally it always kind of drops off in the first quarter. But we had over a billion dollars in originations in March, really, really strong. We're off to a great start in the second quarter. So we have a lot of confidence that CRE is going to get on track and start to grow this year and do really well, just a matter of when that happens, and that would be a benefit. The only other thing I would weigh in is with higher rates, it's harder to get growth in our DDA accounts. And You know, that's something that we were hoping to grow a little bit more than what we thought. But we'll see if rates actually stay flat or actually go down or who knows right now. But we're just being cautious from what we're seeing out there. We don't want to overcommit.

Okay. Perfect. Thank you. And then one sort of tick-tock one. Maybe if you could discuss the overall level of borrowings. I think, you know, mostly as I look at it, sort of the end-of-period short-term borrowings, it's about as high as I can remember at some time, and it didn't look like it was obviously seasonality-related or anything like that. I'm just curious if there's anything going on there we should be aware of.

Yeah, I think we're just trying to manage to our short-term ratios, and we also have a lot of volatility and deposits within our ICS business. So we have it for a while, and then it goes away, and we have to try to replace it. So we just have that volatility, and we're really good at keeping our lines open in a So we can always have access. Big believer in leaving lines in place. And then if we need to draw upon them and increase them more, we can do it immediately, same day. So it's just how we manage our balance sheet to try to minimize the size of it. We don't want it to be too large or whatever. We want to operate at an optimal balance sheet size.

Got it. All right. Perfect. Thank you very much. You're welcome.

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

Hi, Daryl.

Hey, Gerard.

Daryl, circling back to the NDFI portfolio, which you give us obviously very good detail, and based upon M&T's history as being one of the better credit underwriters in your institution, similar to your peers, have all grown these portfolios quite rapidly over the last five years. Can you share with us what the catalyst, when you turn back the clock, and just why has there been such material growth for you folks in this category of lending versus other categories within the loan portfolio? Are there one or two reasons that you can identify, whether it's better capital treatment of the loans or something else that's driven the growth here?

When I look at the bulk of our NDFI portfolio, it's three primary businesses. Mortgage warehouse lending is a core business for us. It's a really safe credit business. You have to make sure you do really good from an operations perspective and perfection of collateral. But we run it, and it's a very efficient and very profitable business. Lending to REITs, I think we've done that for a long period of time. That is also another very sound way of growing. And as we have opportunities there, that is a portfolio that's been growing nicely from that perspective. And then our fund banking and capital call lines, that's a business we acquired from Webster. And we like the business from a credit perspective. and believe it's a good fit for us, and we've been growing it to right size for the size of our company rather than people's size, what they had when we first got it. So those three are really our core ones that we have. Everything else is relatively small, but we feel very comfortable in growing what we have.

Very good. And speaking of growth, I think you touched on in your comments that commercial real estate, mortgages in March started to pick up, or if I heard that correctly, can you expand upon what you're thinking for commercial real estate lending, C&I lending? Of course, many investors anticipate that will continue to do well as capital expenditures hopefully continue to grow this year. But on the CRE side, what are you guys seeing there, and what's kind of the outlook there?

Yeah, so when you look at our CRE business, Gerard, We have a really great platform. We have one of the best, I believe, in the industry. We have five distinct business lines that we have in CRE. The first one is kind of core to us. It's our regional portfolio from a CRE perspective, and that's been shrinking for a while. We are now very active in the markets in those regions, generating more production there and seeing a lot of really nice things happen. So we believe our regional businesses will continue to grow from that perspective. Several years ago, we got into the originate and sell business with RCC. RCC is a great other way of serving our clients. You have to remember, we do a business with clients on balance sheet and off balance sheet. Last year, we had the same amount of originations in 2025 in RCC as we had on balance sheet. So we're serving a lot of clients, just some of it doesn't go on the balance sheet, but we still get paid for it in free income. And that business continues to perform very, very well. Last year it had record performance. We also have the institutional CRE business that we talked about in REITs. That's been growing very nicely for us. That will continue to grow. Some of the new ones that we have formed is we've gotten really serious and have a business line dedicated to affordable housing. Affordable housing tends to be a more complicated type underwriting. We thought putting everything together there will be able to generate more consistent volume and build good relationships with many customers throughout our footprint. And then lastly, we have the warehouse business, which is also a nice business to have. So I would say that our platform that we have in CRE and how we perform, our leaders that we have there are the best in the business. We feel really positive that that's going to continue to grow, and you're going to see loan growth net out of that. Also, remember, we're making a lot of fee income, too, so it's a much bigger business than just the balance sheet. It's a combination of both of that.

That's very helpful. And then just lastly, you've done a very good job of bringing down those criticized loans in CRE from a year ago. You showed that in your slides, of course. What were the factors of the success? Is it that customers are paying down their balances? Cash flows have improved? What have been some of the drivers of this nice decline in CRE, criticized loans?

You know, it's broad-based. We've definitely seen improvement, you know, in operating. But some people are paying off and going elsewhere as well. So it's a combination thereof. But it's nice to see good progress there. And, you know, we're making more and more customers and having more capacity. And for us, you know, the improvement in credit quality has a nice driver for us that we feel comfortable that we can continue to bring down our capital levels and You see that in our share repurchases.

Great. Thank you again.

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

Hey, everyone. This is Nate Stein on behalf of Matt O'Connor. I wanted to drill down on the CRE comments. So we heard you say that commercial real estate originations picked up in March, but Is it fair to say that CRE loan balances can grow in 2Q and beyond?

You know, I've been saying that for a couple quarters, Nate. So, you know, you probably don't believe me anymore. So I'm not going to really commit to that. But I will tell you is we have a lot of momentum. We are growing. Are we getting more customers? You know, whether we grow average or point-to-point second quarter, I'm not concerned about that. I know it's going to grow this year. We've got everything going in the right direction. Our teams are working hard, but they're having fun. I mean, they're actually fun out there working with customers and working on developing all these projects. And, you know, we will have a very successful, great business, and it will be very positive from a revenue perspective, both fees and balances.

Okay, thank you.

And then quick question on maybe just the use of excess capital. So, one cue – buybacks were really strong, more than double the quarterly pace in the second half of last year. And we heard your comments that the rules proposals are directionally supportive of capital. So how could this translate to the pace of buybacks for the rest of the year?

You know, what we did is we widened the range. You know, we went from 10.5 to 10.25 to 10.5 to 10. You know, and the reason we widened the range is that We continue to have really good improvement in asset quality. So we feel comfortable. Our long-term CET1 ratio that the board approved for the company is 10%. We feel comfortable going there at that point now. The reason we left 10 and a half out there is there was a lot of risk in the system, a lot of geopolitical risk. We have no idea what's going to happen and all that. You know, if we see signs of stress out in the marketplace or whatever, we'll just stop buyback and accrete capital. On any given quarter, if we don't do share repurchases, net a dividend, we'll still accrete back about 25 basis points. So we can accrete it back very quickly. But right now, we feel very good, and we're going to continue to move our ratios down. And if we see something that we don't like, we will stop and pause and start accreting capital back.

Thank you.

Thank you.

We'll go next to Chris McGrady with KBW. Your line is now open.

Hello, good morning. How are you doing? I'm interested in your comments on deposit competition. I don't think you've touched on it yet, but any specific geographies or markets given the industry is putting up a little bit better loan growth? Thanks.

Yeah, you know, Chris, you know, we – We have a lot of ability to grow customer deposits. I mean, we've been growing customer deposits pretty consistently, you know, for many, many years. And, you know, we always want to pay competitive rates to our customers. We aren't usually the highest in the market, definitely not the lowest in the market, but we definitely get our fair share and all that. I wouldn't view the competition any worse than what it's been in any other environment, to be honest with you. It's always competitive. But, you know, we get our fair share of those deposits. So, you know, we had nice growth this past quarter. I think that's going to continue throughout the whole year. Net-net, on my prepared remarks, we actually have grown customer deposits more than we've grown loans the last couple of years. And we will continue to do that if we have to and continue to shrink non-core funding. So, you know, I would say, you know, we're competitive and we're growing and doing a nice thing. One of the things about M&T that's really important and really what we're true to is all of our businesses first start to get, they want to get the operating account, get the checking account, and work really, really hard to do that. Once we get that operating account, then that opens the door for other businesses and increases the wallet of what we can do with that customer. So everybody is fully incented to get that. And one of our businesses, Business Banking, It has a ratio of three times more deposits than loans. And of the deposits they have, 80% of them are operating, which is really, really strong. And they're having a tremendous business. I mean, they're growing their deposits. They have huge loan pipelines as well right now. Business banking is probably performing as good as I've ever seen it, to be honest with you.

Great commentary. Thank you. And then on credit spreads, we see different asset classes, but any comments about incremental credit spreads, whether it be CRE and your increased originations or CNI spreads?

Thanks. Credit spreads are moving around a little bit. With the conflict in Iran, they probably widened out a touch a little from that perspective. But it's also very competitive. So Sometimes it's a little wider, sometimes a little narrower. It's probably net-net about the same would be my take right now. But we try to be competitive and want to make sure we get paid for the risk that we're taking at the end of the day.

Great. Thank you.

Thank you. Our next question comes from Ken Usden with Autonomous Research. Your line is now open.

Thanks. Hey, Daryl, just as you talk about the fee growth and the high end for the year, I know the first quarter had the BLG benefit, but can you just flush out a little bit more about your thoughts about the magnitude of those mortgage servicing books that you think you can bring on and how big of an opportunity is that? And just give it a little more color on where you expect fees to grow. Thanks.

Yeah, so we have tremendous momentum, you know, in our fee businesses, Ken, and You know, we have a really good, great specialized subservicing business that really specializes in more FHA because we get paid a little bit more because it's higher to service from that perspective. You know, we think that other additional servicing will start to come back on to our run rate in the second half of the year with an annual run rate in the $30 to $40 million range from a revenue perspective. It operates with about a 50% margin. So it's a really good piece of business for us, something that we like to do and have there. But we're also seeing really good growth in our trust businesses, both wealth and corporate trust. Corporate trust also brings in nice deposits. That's going on really well. If you look in our commercial area, treasure management is performing really well, high single-digit growth in that space. And then if you look at our capital markets, though we're at a very low base, capital market fees are – continuing to increase. And now that we have our general ledger converted over this past weekend, you know, our accounting team, finance folks will work on getting that broken out. So you guys will see that in the next quarter or two from that perspective. So really feel that our fees are going to continue to outperform. You know, my guess, Ken, to be honest with you, is we may actually exceed our range that we have there and all that. So we've got a lot of good things going on.

Got it. Okay. And then you mentioned that your avenues for deposit growth are really strong and you've been kind of outstripping the loan. So I guess with that, your decision tree between, especially in a higher, longer environment, leaving some of that money in cash or putting it in a securities book, it looks like you're biased towards a securities book. Can you kind of just remind us where you want that to live and how you expect that to go? Thanks.

Yeah, it was just more of a little bit more fine-tuning of the balance sheet. You know, we thought we had a little bit of ability to have a little bit less cash at the Fed and that we put a little bit more in the securities portfolio. It just means we'll do a little bit less hedging because we have more fixed rate assets on our balance sheet. So it's pretty much still a real neutral interest rate risk position. I think we're positioned pretty well. Rates go in either direction. And, you know, we will continue to do what we do from that perspective.

Okay. Right. Thanks, Aaron.

Thank you. Our next question comes from John Pancari with Evercore ISI. Your line is now open.

Morning, Daryl.

Morning. I know you indicated in your prepared remarks some selectivity and underwriting in certain areas. What are you seeing right now that's making you say that? Is it on pricing? Is it terms? And then what areas? Are you seeing returns pressured in a certain asset class, certain lending product where you've decided to be more selective?

It's really competitive on the lending side, both commercial, consumer, CRE. It's competitive across the board. As we talk to our leaders out there and our people out there talking to customers and whatever, I probably leaned a little bit more to structure than to pricing, but maybe 60-40% you know, a little bit more tilt to structure. And, you know, structure is not something you really want to give on, to be honest with you. You know, maybe for good customers, you're a stretch on a pricing perspective from that perspective. But, you know, it's just competitive out there. And, you know, we aren't in any hurry to put a lot of loans on our books. We're going to do it the right way. And we're going to make sure we get paid back and have good earnings streams. I mean, if you look at our performance, we're performing really well. And we're generating a lot of capital and returning a lot of that back to you and the other investors out there. So, you know, we aren't really under any pressure. We're trying to do the right things in the marketplace and continue to be in here for the long term, which is what you'd expect out of M&T.

Got it. All right, thanks. And then I appreciate all the capital color and the commentary around the CET1 range in the M&A, I mean, in the buyback side. I guess on the M&A side, can you... Maybe just give us updated thoughts there, just giving a backdrop, giving the activity we're seeing out there. Maybe you can just update us on where you stand in terms of M&A interest, both bank and non-bank.

Yeah. I think the nice thing to know is that M&T is very consistent. We have a long history and track record on M&A and shareholder returns. You can judge that for yourself. On an M&A front, we've always been very selective. And anything we consider that you know will meet both our strategic, which means it's in footprint, as well as our financial criteria. You know, we will continue to focus and run the company really well within the market conditions that we have. And if something fits from an M&A perspective, you know, we will consider doing that. But we aren't going to stretch or do anything from that perspective.

There's no need to. Got it. All right. Thank you, Darrell. Yep.

Thank you. We'll go next to Ibrahim Poonawalla with Bank of America Securities. Your line is now open.

Hey, good morning, Daryl.

Good morning.

I guess maybe this first question, you talked about the GL update. I think it gets completed this year. Just give us a sense of what the tech spend and what projects are upcoming over the next year or two after this as we think about this infrastructure upgrade at the bank?

Yeah, Ibrahim, you give me an opportunity to call out. We actually went live on our general ledger this past weekend. It's performing really well, and that's pretty much behind us. But hats off to the team that actually put that together. We had hundreds of people working on that with technology, business people, and finance folks and all that. We had a great partner with E&Y that was with us for the three years and did a great job getting us to where we needed to be from that perspective. As far as tech spend goes, tech spend just gets reallocated to another priority project. Our priority projects that we have right now for this year is Teaming for Growth, which is more getting deeper wallet from our customers in our regions. But operational excellence is really working on all the operational areas that we have and trying to simplify and automate it using AI and other automation tools and all that, and we're off to a good start. We plan to continue to invest in that. That's going to be a multi-year project. So as things fall off, like our general ledger, we have other things that just kind of fill in the space. And, you know, we have a really good process of how we do our planning. You know, we kind of know what we want to spend and how we allocate it. And it seems to be working really well and, you know, balancing our returns, which are still good for the investors, as well as still getting a lot done in the company. It's a good balance there and we're having a lot of success.

Got it. That's helpful, Darrell. And just, A follow-up on the capital, it's not unique to M&T, but the roughly 100 basis points benefit that you could get from these proposals if more or less they get firmed up this way. How do you think about if these rules go effective? I'm not sure, is it 1st Jan 27 or 1st Jan 28? How do you think about that 100 basis points in a world where your CET1 target ratio remains the same? I know you mentioned the rating agencies, but do you start getting more active on buybacks. I'm just wondering how should we think about the deployment of that 100 basis points where you would have the green signal to start thinking about that as truly excess capital?

I think we'd have to wait until we get there. I'm kind of dodging the question, Ibrahim, but I think we just have to see what the actual results are after we go through the comment period and what gets passed. It's definitely in the right direction. The RWA's You know, with the LTVs, you know, we're a really conservative lender. We have a huge lift because of our LTVs. Take advantage of that. That will continue to be core to us from that. But it's too early to really say how we're going to deploy that capital and all. We want to serve all constituencies, and we'll try to figure that out as we know more down the road.

And anything in there in the comment period, Daryl, that you expect to, like, advocate where you think, either technically or something that may not quite truly reflect the risk of the balance sheet in the way the Fed proposed these rules?

No, I think it's a fair assessment of what they went through. They went through what is data-driven and came up with RWAs for standardized that directionally seem in the right direction. And from the other approach that's out there, the enhanced approach, You know, there's definitely a good advantage to move forward for us because of our LTVs that we have. And the other thing we have, if you look at our fee businesses, you know, if those fee businesses stay to be favored, our Wilmington Trust businesses, you know, basically they'll benefit from that as well. So from our perspective, we seem to have a good business mix to actually really benefit from what we're seeing right now.

Thank you.

Thank you. Thank you. We'll go next to David Chiaverini with Jefferies. Your line is now open.

Hey, guys. Brooks Dutton on for Dave today. I just wanted to touch on deposit betas going forward. You guys reported a 56% beta through the cycle so far. How much additional beta do you guys expect if rates stay higher for longer? And if you guys could please touch on modest curve steepening or lower short-term rates and how that would translate through NIM and NII, given your current balance sheet positioning. Thank you.

Yeah, the way I try to simplify this is when rates were going up, we had a deposit beta in the low to mid-50s. Rates are coming down. Right now, we're in the mid-50s coming down. We'll probably stay in the low to mid-50s coming down. At some point, if you go down maybe 50 to 100 basis points more, the consumer portfolio basically hits a 4% and then that beta starts to shrink, but we're still a ways away from that. But, you know, it's not rocket science. It should go up as much as it goes down if you're really disciplined in how you price these deposits.

Great. Thank you very much.

Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to our presenters for any additional or closing remarks.

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