All right, we're going to get started. Up next, we are pleased to once again have M&T joining us. M&T had another strong year highlighted by strong fee income growth, continued expense discipline, continued improvements in credit, and returned lots of capital, I think the most in the peer group. Here to tell us how they're going to continue this momentum is CFO Daryl Bible. Today's presentation is a fireside chat. Although for everyone here, I'm sure you saw the company did publish a slide deck last night where they reiterated their fourth quarter guidance, which we will touch upon shortly, but just wanted to make sure that everyone saw that. So welcome, Daryl. Thanks for coming again.
No, thanks for inviting us. Happy to be here. Excited to talk about 2026.
Awesome. Well, maybe before we talk about 2026, we'll kind of round out 2025 here. As I talked about, another solid year. Margins increased. You saw some pockets of loan growth. Credit continued to improve as you further de-risk, criticize, and you returned a lot of capital. There were some tweaks to NII because of softer CRE, which we'll touch upon. But maybe just with that as background, talk about what you felt was successful in 2025 and how that's positioning the bank for 2026.
Yeah, I think when you look at it and look at the pieces, you start with the balance sheet. From a lending perspective, we knew going into the year that CRE would be down early on. We thought it would grow later in the year, and that didn't happen. What was really exciting to see was the growth that we had in our consumer portfolios and residential mortgage that helped overcome that growth that we didn't see from the CRE portfolio. From a C&I perspective, we continued to do well in our specialty growth. Some of our regional markets are growing nicely. On the deposit front, I'd say our deposit growth was decent for 2025. I think that's pretty good to have. We expect that to continue and maybe have more momentum in 2026 as we move forward.
From a fee perspective, that was probably the highlight. We were up 16% year-over-year on that. That includes a couple of one-timers there, but still on a core basis, up really significantly there from that perspective. That was led by mortgage, trust, and our treasury market, our treasury management products and services. Expenses pretty much came in place on track, which is what we thought they would, and I think we're doing well there. Credit continues to surprise us, i t continues to get better, faster than what we thought it would, and our criticized levels continue to come down and non-accrual levels, so all that, I think, was really positive for 2025.
Great. So maybe to think about your strategic priorities, you've had four built around expanding certain markets, simplification, upgrading systems to be more resilient, and scale capabilities to manage risk. As you look ahead, how do you see the strategic priorities of the bank evolving over the medium- term?
Yeah, from a big picture perspective, we've been on this journey for seven or eight years now from a technology space, and we've continued to make investments. If you look at our funds, expenses that we pay in technology, it's tripled over that same time period. So I think we're doing a lot, deploying more capital into our technology spaces. I would say the last couple of years was really focused on resiliency. We were investing in projects that really give us a solid foundation. You could look at the data centers that we put in that we now have up live in Northern Virginia and outside of Chicago. If you look in finance, we're actually in production parallel in our general ledger system. We hope to turn off the old general ledger system in the first part of 2026. So that's foundational.
Exciting.
In our commercial area, the factory that actually generates how we make loans and credit decisions and all that was rebuilt, and that's finished. So all that was kind of foundational. Where I see us moving now is moving closer to the customer and the customer experience and trying to facilitate and get those systems and processes as best in class as possible. So I think we're going to continue to work on, we started a project on commercial payments that will improve our client experiences for our commercial customers there. Commercial servicing, we're looking at consumer servicing. So those are areas that will help. From a digital basis, we're looking at improving our digital experiences, not just in the consumer and business banking space, which is really core, but also to our wealth function, which is really meaningful from that perspective. So we're kind of transitioning and moving in that direction. And feel good that we'll have a good client experience and help continue to grow our company as we move forward.
So before we dig a bit deeper, let's just spend a minute talking about the fourth quarter update or reiteration that you put out. Anything in particular that you wanted to highlight or walk through about 4Q, and how does that position you guys as we kind of jump off 2025 and enter 2026?
So when you look at what we've done two months now into the fourth quarter, we actually are growing CRE. If you look at where it was in the beginning quarter where we are now, we're actually net up. So our runoff that we thought would have happened earlier is actually happening now. Our production levels continue to increase. So point to point, we'll probably be positive in CRE, which is a good thing to have. On the deposit front, we're growing our customer deposits nicely. DDA is growing, but maybe not quite at the pace that we thought, but it's still growing from that perspective. On the fee side, I think our fees are coming in really well on track with what we thought they would. Expenses are coming in maybe a little bit on the high end or being impacted by a little bit higher costs in our medical area, some of our compensation areas, and professional services, but we'll still be within the range that we had. S o just a little couple of tweaks, but really feel good, and from a credit perspective, feel really good that both criticized and non-performing will be lower again in this quarter.
So let's dig into loan growth. Maybe let's put CRE aside for a sec. Maybe just talk about where you see the opportunities to grow, whether it's C&I and consumer. And where do you see the opportunities outside of CRE to position the bank to improve growth into next year?
So as we kind of start 2026, I'll give you a little story. So some of our leaders on executive leadership, Peter D'Arcy, Eric Feldstein, talked to the leadership team and said, "We think we can do better if we really focus on," we call it teaming together, "and really focus on growing our community markets." So we've spent now the last three or four months organizing how to team better and get organized. But one of our goals for 2026 is to really bring the full capacity of the bank even better that we have to our customers and clients and communities from that. And feel really good that we'll be successful in actually growing more aggressively, maybe middle market commercial, which really has been pretty flatlined for the most part. Really important to us, but really trying to focus on that growth in that area. I think it would be important from that.
On the consumer front, it's something we can dial up, dial down, but with the growth that we are projecting and now starting to see in CRE, we'll probably take the pedal off a little bit on the consumer, and most of that in the indirect business is just an asset, so you don't really lose much except for the asset, but if we get it more in a wholesale relationship, we're better off from that perspective, but that's something we can dial back and forth from that perspective. I think there's specialty businesses within the C&I space. We continue to build out Peter's investing in more verticals and all that, so I think that will be helpful. He's really focused on kind of the large market commercial companies in our space and all that, so I think building out our capabilities to serve those clients will be very helpful.
As of the third quarter, CRE had been down 16% year- on- year, and that continued to decline. Obviously, it's good to hear that we are starting to see the inflection. Maybe just talk a little bit about what is driving this inflection, whether it's on the production side or specific areas. Maybe just talk a little bit about, do you feel this inflection is sustainable and we could continue to see growth into 2026 across CRE?
Yeah. Yeah. So we're counting on growth in 2026, to be honest with you. But when you look at our CRE space, we made loans in CRE last year. Didn't feel like it being down 16%, but we did. A lot of those were construction loans. And those construction loans, guess what? Start to get funded up in 2026 and all that. So we know that's going to happen. That's going to be in addition from that growth. We are finally seeing the slowdown in payoffs, which is what we've been projecting now for a couple of quarters. That is now actually happening. And then our production levels continue to increase. Our win rates are better. I would say M&T is back in place in the CRE space.
No, that's great to hear. Let's switch gears a little bit and talk about NII. I know we'll get guidance in January, but a couple of things. Maybe just talk about key drivers for NII growth into next year. Can the margin expand beyond 370? And do you expect NII growth to be more driven by margin expansion or balance sheet or both?
In our plan that we put together for 2026, we have both from that perspective. I say growth in lending and deposits will have a larger balance sheet, so that will help us grow NII at a net margin benefit from that, and then when you look at repricing and margin, we still have favorable things that we know will happen that should give us some lift in the low 370s. In the low 370s is probably where we'd be expecting margin to be, so similar to what we had last year, we grew six to eight basis points. I think we're continuing to grow in 2026 as well.
It sounds like you should have better balance sheet growth this year to drive it. Maybe let's just talk a little bit about rates. You've positioned the balance sheet to be neutral to cuts. You guys have been successful in bringing down deposit costs. Maybe just talk about. We're going to hear from the Fed today. Maybe just talk about your updated expectations for depository pricing and what are your expectations as we move further into the easing rate cycle?
Yeah, I think we're really pleased. Our deposit beta in this downward cycle has been in the low 50s, which is, to be honest with you, you'd expected because it was similar to that when it was going up. So no news there. It should react down from that perspective, and we are seeing that. We do expect the Fed to move today and probably have two or three moves in next year, which will be good, and feel comfortable all through next year, we should still stay in the low 50% beta range. At some point, though, you're going to get to a point where the retail deposit franchise will start to get forward out on what you can actually cut. But we're probably 100-150 basis points away before we see that happening.
All right. So you should still have good momentum in terms of bringing down deposit costs. Now, maybe let's just talk a little bit about deposit competition. If I think about M&T, sort of a hallmark of it is the density it has within its footprint as a market leader. So a lot of times you guys can have a big impact on the competition. But maybe just talk about what the deposit gathering looks like across the footprint. You talked about success. You've had a consumer. Maybe just talk about where you're seeing the good opportunities to grow deposits as you look ahead.
So if you look at our six businesses, all six businesses for 2026 are expected to grow deposits. We'll have growth in the consumer sector, business banking, and commercial. And that's kind of core where you get the operating accounts. And we go to market first and foremost to get the operating account from our clients. And if we get the operating account, then everything else will follow over time from that. But we also have growth expectations in our wealth area on deposit side and our corporate trust area through our activities that we have in M&A and escrow in that space a nd then also growth in mortgage. Mortgage, we're a big servicer of loans. We do a lot of sub-servicing. So we get a lot of escrow deposit growth there. So I think all those areas are areas that we feel comfortable will contribute positively as we move forward and support the growth of the company.
So let's shift gears a little bit and talk about fee income, and we'll start broad before we get into some of the specifics. So you've had a really robust year of fee income growth, pretty diversified across mortgage, trust, and service charges. And I think at earnings, you noted that you expect the momentum to continue into next year. So maybe just unpack for us where you see the best opportunities to grow fees and what do you see as the key drivers moving forward?
Yeah, so we had a great year in 2025 in fee income growth. I don't think we'll be going to repeat that in 2026, but I do believe we're going to grow positively, w e'll give you guidance on that in January. I'd first start off with our mortgage area. If we're able to continue to grow our sub-servicing area, that's also an area where we can grow our fees in that space very nicely at good margins because of our automation and technology that we have in that business line. It makes a lot of sense to do that. We continue to invest in our treasury management products, so that will support fees as well as DDA and other types of deposits there. So that will be a positive.
Corporate trust area will continue to grow and do well in that space, but probably not have the growth that we've seen in the last couple of years there, but still have, I think, a decent growth in that space. I think the one that surprises you, you're going to see, is our capital markets. We aren't really known for capital market fees, and I've had requests now to actually take, w e have a lot of those line items in our other fee income categories. Right now, other is too big, w e need to break it out. S o once the general ledger goes live, we will be able to readjust and show our capital market fees from that, but really expecting good growth as we build out that, whether it's customer-driven, is FX, syndications, other fee products.
It's really starting to add up, and you see the growth in the other area supporting other, so we'll actually highlight now, and that will be growth, and finally, wealth. I think wealth will be a good growth engine for us. We're starting to see positive growth in our inflow of assets, which is really good news, and I think we have a lot of referral business going back and forth as we team together to help grow that business faster.
So maybe let's dig into one or two of those. So I think you're one of the few banks that was actually able to grow mortgage this year. Obviously, your business is pretty diversified and has several different sub-businesses in there. But maybe just talk about what has driven this performance, and can this continue to be a growth driver for the bank looking ahead?
Yeah. We believe that with the investments that we've made or how we do business, we're known as being really good at servicing the hard-to-service type mortgages, FHA, State of New York, just because they have more regulations, more requirements, just more delinquencies, so in those areas are the areas where you generate more revenue. You get paid more for it. Those are the areas that we really focus on and really are aggressive to try to attract in there, so we hope to have more opportunities and be able to swing and continue to grow that space over time.
And then I wanted to dig into the trust business, which obviously is a combination of multiple businesses, wealth and corporate trust. You've had an incredibly successful year there. First, just what has been driving the growth? And then second, on the wealth side, can you maybe just talk about the strategy, particularly on expanding the focus on $5 million-$25 million of AUM, which I know has been a big focus for the bank?
Yeah. Yeah. I'll start with the wealth side first. So we break our wealth segments into less than $5 million-$2 5 million, and over $25 million. In the less than $5 million, which is really what we get through our consumer retail channel, we've actually just moved one of our leaders that was in business banking to run that business in the wealth area from that space. She's been in the job about six months, and it was growing nicely before. We're actually seeing a lift because of how she's engaging the people in the field and how just the collaborative nature we have between both of those businesses coming together is really positive.
But when you look at the $5 million-$ 25 million, I think that's really going to come from referrals from business banking and our middle market. Those are the areas that we think that we can get more referrals and help grow net asset growth in that space. It's something we're really focused on and really believe that we can have a significant difference in that space. If you go to corporate trust, corporate trust, we have about 20 different businesses within corporate trust. The businesses where we generate most of the revenue is in structured loan agency, M&A, public finance, those areas. I think those areas will continue to grow and do well. Depending on market activity, it kind of will depend on how much we can grow in that space, but really feel good that we will continue some momentum in that space, but maybe not as much as what we've seen in the last couple of years.
So let's shift and talk a little bit about credit. In your opening remarks, you had some positive commentary. We've continued to see improvement in criticized assets. They've come down from, I think they were over 14%, closer to 9% today, and I think it's faster than most of us expected. One, just talk about what is driving this, how much more room for improvement is there. And does this at all change the way you approach growth once you get there, given the run-up that you had and the period of improvement that we've been through?
Yeah. So I think there's a lot of positives. I mean, first and foremost, our customers are performing better, so they have better operating performance. So just that alone gets us over the debt service coverage threshold and improves that. We've had help from the Fed with lowering rates. We probably still think we believe we need to continue to lower rates for various reasons, but I think that will be a benefit. We've had people get refinanced away from us. A lot of times those were criticized loans, so that was the positive. And we've had people put capital and equity into it. And that really shows the quality that we have of our customer base that we serve and the commitments that we have in that perspective. So feel really positive from that perspective.
So last quarter earnings, obviously, NDFI was the big focus. If you listen to the commentary yesterday, it seems like a lot of those things truly were one-off, and you had a lot of banks talking about the confidence in their portfolios. When I think about yours, you only have 8% of your loans in this portfolio. I think it's below peers, which are closer to 11%. Maybe just talk about some of the dynamics within your book. Are there any areas of risk within that that you see as emerging? And maybe just talk to the risk characteristics of your book relative to the industry.
Yeah, so it's good that we have a general definition for this type of asset class, people out there, but within that asset class, you have a lot of different risk threshold levels from that, and we tend to be on the more conservative side, so if you look at it, we tend to lean very heavy on the mortgage space. In the mortgage space, we have a big business in mortgage warehouse, and that's really not a credit perspective. It's more of an operational risk. As long as you have good operational controls in place, you're not going to lose money in that space, and that's a positive. We also lend money to REITs. We really lend money to the REITs that are well known in the marketplace that we believe are the most secure and safe there, so from that perspective, we feel good.
We also have a concentration in private equity lending, mainly capital call lines with our fund banking operation. We don't do NAV lending, which is a more riskier type of lending from that space. So we feel good with the growth that we've had there and will continue to grow in that space. Net-net overall, I think we feel good with what we have today. It will continue to grow for us, but it's going to grow for us in the areas that we think are best and from a risk-return perspective make sense for us.
So, Daryl, on the back of this, while you didn't have any credit exposure to any of the loans that went bad, you did have some other roles in some of the Tricolor deals. Maybe just tell us, talk about your exposure there and how do you see this playing out over time.
Yeah. So we were a custody agent and trustee on a lot of transactions with Tricolor. We feel that the fraud or alleged fraud that happened with Tricolor is out there, and there will be definitely a lot of issues that will be surfaced and will be known out there. We feel good about our position and where we are, what we've done. We've just recently saw a couple of entities get sued by various fund members and all that. So I think that's going to continue. I think it's going to be something that will play out through 2026 and all that. But we feel good about what we've done and how things are situated.
So let's shift and talk about capital, capital priorities. Obviously, I know René spent a lot of time talking about this when he presented last month, although he commented that the stock.
He's all over capital.
He commented that the stock hadn't been doing well, and it's obviously done well since. So maybe you got to get him out there speaking a little more.
He wanted to be here.
No, I know.
But we're doing talent review. I didn't get to do day three of talent review, but he's there really looking at supporting all the people in our company, our future leaders of everything, which is really important for us.
Yeah. We'll put in the word that you're talented. Given where the stock valuation is right now, how are you thinking about capital priorities from here?
First and foremost, capital should be used for our clients, communities. I think we have enough capital to support that. We have a great history from a dividend record. We didn't cut the dividend in the Great Recession. Our dividend payout is in the low to mid-30s. Really good protection and making sure we can continue that in the long- term. But we increased it 11% this year. We'll continue to increase it as our earnings continue to grow from that perspective.
Next, I would say in the order is really M&A. I think M&A is, if it's available out in the marketplace and if it's a good investment for our company, culture-wise and financial-wise for our shareholders, that's where you would deploy capital next and foremost. We haven't done that since the People's United transaction a nd then share repurchase. And you heard him talk with where we're trading at now and all that. We're buying back a lot of stock. If you look at 2025, about 8.7% of our outstanding is what was repurchased in 2025, which is a fair amount. I think probably more than double anybody closest to that.
And we'll come back to M&A in a sec. Don't think you're going to get up easy. S o maybe just digging into capital a little bit further. I think you were at around 11% at the end of 3Q. I know you've guided to 10.75%-11%, which is still above your long-term target. You said that you repurchased 8.7%, which I know that you have been talking about $400 million-$900 million. Lucas is not quick enough to update the numbers for me that quickly, but I'm guessing you're somewhere in that $400 million-$900 million dollar range. But maybe just talk a little bit about what you need to see to bring down capital towards your long-term target, and how should we be thinking about buybacks in the context of what sounds like could be an improving loan growth environment?
Yeah. So we're seeing continued improvement on our balance sheet. Asset quality continues to get better. That will continue into next year. So that's a good guy, and that will be a big positive for us. Economy is still moving forward. There's not a majority of economists saying we're going into recession, although there are some saying they might have a 30% plus or minus of a recession coming forward. So it is something you have to watch and be out there. But what we see right now are, for the most part, clients are out there doing investments, spending money, and all that, s o I think net-net overall, that's positive. Our range was [11-10.75], I think, in January. We'll give you a number. It will be lower than that and feel good about it. I think our share repurchase in 2026 will be pretty significant as well.
So when we think about the footprint, you guys operate in 12 states and D.C., and I know you have great market share in around seven of them, five of them where you'd like to improve it. Maybe just talk about what you're doing to increase the density and scale in the markets, and can it be done organically?
Yeah. We definitely can grow organically, and we are growing organically. If you look in New England, that was one of our priorities the last two years. We've deployed sales teams in the mortgage area, the wealth area, business banking to really add more scale into that space and all that. And we are starting to reap some of the benefits of that. And if you look in the Boston market, we have a very small share in that space, but we show up as if we have significant share in that space, and we're starting to grow. We look back to what we did in Baltimore 20 years ago, where we were really small in Baltimore, and now we dominate Baltimore there. And we hope to do that in other cities in New England and throughout our footprint.
So maybe as a follow-up, so I know you obviously came from an institution who did an MOE because they thought they needed to do it to have scale. We'll save you on that discussion. But as I speak to investors, I think there still is a perception that the biggest banks have scale, and many of the regionals don't. So maybe just talk about within M&T, how do you define scale? D o you think M&T has the scale that it needs to succeed?
I think we continue to perform really well, and if you look at our profitability that we have, besides the largest bank in the country, we are the most efficient bank out there, so I think if there's any doubt that we don't have the scale needed to serve the clients and the communities that we are in, I'd say you just look at our results from that perspective. The focus is really getting more density in the markets that we serve and really using our community banking model to serve our clients and how we deliver our clients, so we get the whole bank coming to them and meeting the needs from that perspective.
Technology-wise, René talked about over the last seven or eight years, we've made a lot of foundational investments within technology. We continue to build that out and continue to improve that, and we get better at that each and every day from that perspective. And net-net, when I go through the budget process with my team and all that, everybody is started out to be tasked flat, even technology. But how we deploy on all these projects, you really see technology growing high single digit, low double digit because of all the investments that we're making in that space. And I think that's the playbook that you see on a continual basis.
So, I think I've asked every bank about their capital priorities, and I think you're the first one to list M&A, if not last, s o, it's good to hear. Maybe just talk about what you're looking for in terms of a partner, characteristics, size, cultural fit. What are some of the key elements that are important to M&T?
When we look at partners to partner with out there, we look at first, look at what we are and who do we want to bring to the family and all that. And so culture is really important. We have a great culture at M&T, and making another company that has a good cultural fit would be really good. I believe René believes the deposit franchise is really key and core to long-term earnings potential and all that, and we're having real customer relationships. So that's really important. Good credit culture is important. People who've had a great credit culture from that, that blended really well for us. So that was really positive. So those are the ones that I think would come together an d then obviously, we have to have good financial metrics to make sure all of our constituencies are pleased from that perspective. But it's not going to be anybody that's going to surprise you if and when we do an acquisition. It's going to be somebody that say, "Oh, that makes sense for M&T, and that's a good fit for the company."
So last month at BAAB, René talked about the challenges of doing a deal with the stock at the price it was at and sort of the conundrum between IRR and TBV earnback. I think Bill Demchak echoed similar sentiment yesterday. Can you maybe talk about how you weigh the different metrics, IRR versus EPS accretion and earnback? A nd what are some of the parameters that the management team is using to evaluate a deal? Is it TBV earnback, the CRE concentration? What are the main things that get factored into that?
Yeah, so not to be a cop-out, but we look at all of them, to be honest with you. We want all of them to be attractive for us to do the transaction, but we know that the marketplace has focus on tangible book earnback. We do spend a lot of time from a tangible earnback basis. T here are deals in there that we hypothetically model that work in our footprint, and there are other deals that don't work just because of our valuation level where we have. That's why we're buying back a lot of stock. We can't do acquisitions. We're going to buy back stock and continue to believe that that's a good long-term investment for us.
So maybe to switch gears in the last minute or two, a couple of questions. You've been heavily investing in tech. Some of the stats, I think, as you mentioned, René said you invested three times more than you did eight years ago. 60% of the tech was outsourced. Today, 80% is insourced or in-house. I still have some major projects. You talked about the GL going live, debit system, all the commercial servicing, and a couple of other things, moving stuff to the cloud. Maybe talk a little bit more about what's next and how will this help you with customer acquisition inevitably to help grow the bank?
We are really focused as we transition from resiliency-type projects to more client-focused projects. We have Krista Phillips, who joined our leadership team about a year ago from another large institution, and she's really brought, she's our customer officer of the company and really brings to the table when we meet executive leadership what we want to do to serve our client, but it's the investments that we're making to make sure the client experience and the security and safety of how they transact with us are really good. The investments that we made, not to brag a little bit, but if you look at the CrowdStrike incident that happened early this year, we were up and running by 8:30 A.M. where other people were struggling all through the weekend and all that, so our investments are paying off.
You look at our downtimes on our major systems and all that. It's very minimal from that. So we're trying to really serve and have great client experience. We will continue to invest in that. Mike Wisler and Rich McCarthy , we just pulled together all of our technology and operations all under one umbrella from that perspective, and putting that together will give us not only more efficiency, but also better ways of how we do the back office, how we can replicate, and in times of seriousness, how we can respond quicker and faster from that perspective. We call that operational excellence.
Maybe one last one. D espite all these investments, you've been able to hold costs to 3%. Talk about where you find inefficiencies, a nd I know you were talking about operating leverage. How do you balance operating leverage with making the necessary investments? And how should we think about operating leverage over time?
Yeah. It's a juggling act. If you really look at it, and to be honest with people, it's really how you set your priorities. I mean, in an easy world, everybody will say, "I'll take more money, more FTEs, and let me grow my area more." And at the end of the day, you have to continue to look at your shop, and you need to rationalize and make sure that what you're doing makes sense. And if there's a higher priority, you do that higher priority, and maybe you de-emphasize something else from that perspective. So there's always trade-offs, and our leadership team is really good at doing that. We also focus on vendor spend and our real estate, corporate real estate. And those are other areas. But our major cost is around personnel, and it's really what we do there and how we treat our clients and our employees, but really making sure it makes sense and we're focused on the right priorities.
Great. Well, we are out of time, so please join me in thanking Daryl.