M&T Bank Corporation Q2 FY2026 earnings call

### Strategic & Community Initiatives - Launched new innovation ecosystem partnerships in Boston with the city and Boston Foundation, and expanded collaboration with the Spanish government and ICEX to connect international life science firms to Boston's innovation network - Celebrated the 5-year anniversary of the Seneca One tech hub in Buffalo, which has grown into a core center for technology development supporting M&T's digital transformation and scaling customer service capabilities

### Financial Performance Highlights - Achieved record high diluted GAAP earnings per share of $5.32, with ROA of 1.51% and ROCE of 12.3%, the highest quarterly NII since 2023 and record fee income (adjusted for prior period notable items) - Posted the strongest quarterly loan growth since 2012 (excluding acquisitions and COVID-era PPP), with CRE returning to growth for the first time since 2021 (excluding acquisitions) - Maintained a stable 3.7% NIM against strong loan growth, and improved the efficiency ratio to 52.8% from 58.3% quarter-over-quarter

### Balance Sheet & Liquidity - Total liquidity (investment securities + Fed cash) stood at $53.9 billion at quarter-end, representing 25% of total assets, with an estimated LCR of 106%, exceeding applicable regulatory minimums - Average total deposits declined $0.7 billion to $163.5 billion, but end-of-period deposits increased to $168.9 billion later in the quarter with strong growth in commercial, business banking, and trust demand deposits - Remixed interest-bearing deposit portfolio by replacing higher-cost money market deposits with lower-cost time deposits, reducing average interest-bearing deposit cost by 2 basis points to 1.95%

### Asset Quality & Capital - Asset quality remained strong: criticized commercial loans declined to $5.9 billion from $6.6 billion, non-accrual loans decreased 3% to $1.2 billion, and net charge-offs fell to 23 basis points from 31 basis points quarter-over-quarter, with no single net charge-off exceeding $10 million - Estimated CET1 ratio was 10.19%, with share repurchases of $465 million during the quarter and continued strong internal capital generation offsetting higher risk-weighted assets from loan growth - Enhanced earnings release disclosures to add more granular loan balance detail by industry, CRE property type, and consumer portfolio segment

M&T Bank reports overall net income of $818 million for Q2 2026, up from $664 million in the prior linked quarter. For loan segments: - Commercial loans: Average balance of $66 billion, an increase of $2.3 billion from the prior quarter, led by growth in middle market, business banking, and specialty commercial segments, contributing ~46.7% of total average loans - Commercial Real Estate (CRE): Average balance of $23.6 billion, an increase of $57 million from the prior quarter, with end-of-period balances up $1.1 billion to $24.5 billion driven by multifamily and industrial growth, contributing ~16.7% of total average loans - Residential mortgage loans: Average balance of $25.1 billion, a 1% increase from the prior quarter, contributing ~17.8% of total average loans - Consumer loans: Average balance of $26.7 billion, a 2% increase from the prior quarter, with growth in recreational finance and HELOC portfolios, contributing ~18.9% of total average loans

On the revenue side: - Taxable equivalent net interest income (NII): $1.8 billion, up $41 million (2%) quarter-over-quarter, with net interest margin (NIM) holding steady at 3.7% - Non-interest income: $740 million, up from $689 million quarter-over-quarter, with breakdown: mortgage banking revenues flat at $127 million, service charges up $5 million to $144 million, trust income up $14 million to $197 million, derivatives and trading up $8 million to $22 million, other operating revenues up $26 million to $213 million

- Full-year 2026 net interest income (NII) is expected to land in the lower half of the prior 7.2 billion to 7.35 billion range, with full-year net interest margin (NIM) expected in the high 360s basis points - Full-year average total loans are projected to be between $141 billion to $143 billion, reflecting upward momentum from broad commercial loan growth, the CRE inflection, and continued consumer portfolio expansion - Full-year average total deposits are expected to remain in the $165 billion to $167 billion range, with cumulative interest-bearing deposit beta projected in the low to mid 50% range, and management expects stronger deposit growth in the second half of 2026 - Full-year fee income is guided to 2.8 billion to 2.85 billion, reflecting broad-based fee strength, the Q2 Bayview distribution, and higher new subservicing fee income starting in Q3 2026 - Full-year non-interest expenses are expected to land at the high end of the 5.5 billion to 5.6 billion range, driven by ongoing enterprise technology and infrastructure investments while maintaining overall expense discipline - Full-year net charge-offs are now projected to be 37 basis points, driven by stronger-than-expected first-half credit performance and favorable collateral positions - Management expects to operate the CET1 ratio in the lower part of the 10% to 10.5% range barring material deterioration in market conditions, with share repurchases adjusting to balance loan-driven RWA growth - Medium-term NIM is expected to stabilize in the 360s basis points range over time, depending on yield curve shape and balance sheet dynamics

- Persistently higher energy prices from the ongoing energy shock are creating pressure on household consumer spending, which has slowed U.S. GDP growth - Geopolitical conflicts remain unresolved, creating macroeconomic uncertainty that could impact growth and credit performance - Rising industry-wide costs for technology, cybersecurity, and infrastructure are creating upward pressure on operating expenses - If the Federal Reserve holds interest rates steady instead of cutting as initially expected, deposit betas may result in slightly higher deposit costs than originally projected - While criticized loan levels have improved notably, particularly for CRE office, there remains a modest overhang of criticized commercial and CNI loans that may experience gradual rather than rapid improvement

Q: NII guidance is targeting the lower half of the prior range with higher loan growth guidance implying NIM compression in H2. What factors are baked into this outlook for deposit pricing and loan pricing? A: Loan growth had very strong broad-based momentum in Q2, with gains across middle market, specialty commercial, CRE, and consumer segments. Strong June origination activity sets up solid CRE average balance growth for Q3. Deposit growth was soft early in Q2 but rebounded sharply, with end-of-period deposits up $3.4 billion from Q2 averages, creating strong momentum going forward. Cumulative deposit betas remain in the mid-50s and may drift lower to the low 50s, and management is prioritizing growing loans with core deposit funding.

Q: What gives management confidence the recent CRE growth inflection will be sustained, how selective is the bank still, and what is the growth outlook for CNI? A: CRE has a very robust pipeline after a strong Q2 finish that will carry into Q3, with originations across nearly all segments except most office. The strongest growth is in multifamily and industrial, with additional contributions from retail, hotel, and construction lending that is now funding after originations over the past year. CNI had an exceptional broad-based quarter with 90% of business lines growing quarter-over-quarter; CNI growth will likely be more modest in Q3 as pipelines rebuild, with management expecting strong momentum through the end of the year and into 2027.

Q: How should we think about the drivers of growing residential mortgage subservicing volumes, and what is the future revenue outlook for this business? A: M&T just closed on a new portfolio of 214,000 subservicing loans, with subservicing business coming from both Bayview and other third-party customers. The new portfolio will add approximately $35 million in incremental revenue in H2 2026, with costs already in the operating run rate from prior hiring and expansion. M&T specializes in servicing harder-to-manage FHA loans, which creates competitive advantage and drives continued new business wins.

Q: How has the CRE business model transformed, and what is the outlook for off-balance sheet and fee-based CRE activity? A: M&T's CRE business has shifted from a purely on-balance sheet lending model to a diversified model with multiple lines of business. In 2025, M&T originated the same volume of loans for sale through its RCC segment as it held on its balance sheet, serving customer needs by arranging permanent financing with agencies, insurance companies, and other third parties. A new CRE warehouse lending business has been launched, and the expanded model allows M&T to serve far more customers than the historical balance sheet-only approach, driving both fee and on-balance sheet growth.