M&T Bank Q2 Earnings Call Highlights
Key Points
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- M Bank posted a record second quarter, with diluted EPS of $5.32 and net income of $818 million, helped by broad loan growth, record fee income excluding prior notable items, and improving credit quality.
- Loan growth was broad-based across the portfolio, with average loans up $3 billion to $141.4 billion; commercial, CRE, mortgage, and consumer lending all increased, while deposits improved late in the quarter despite lower average balances.
- Credit metrics continued to strengthen, as criticized loans fell for the ninth straight quarter and net charge-offs dropped to 23 basis points; M also kept its 2026 outlook intact, including NIM in the high 3.60% range and full-year net charge-offs of 37 basis points.
M Bank (NYSE:MTB) reported a stronger second quarter of 2026, with Chief Financial Officer Daryl Bible telling analysts that the bank posted the highest quarterly diluted earnings per share in its history, supported by broad-based loan growth, record fee income excluding prior notable items and continued improvement in credit metrics.
Diluted GAAP earnings per share were $5.32, up from $4.13 in the first quarter. Net income rose to $818 million from $664 million in the linked quarter. The bank generated a return on assets of 1.51% and a return on common equity of 12.3%.
On an operating basis, net operating income was $823 million, up from $671 million in the prior quarter. Diluted operating earnings per share were $5.35, compared with $4.18 in the first quarter. Operating return on tangible common equity was 18.57%.
Loan Growth Broadens Across Portfolios
Bible said M’s second-quarter earnings strength was “broad-based,” with taxable-equivalent net interest income rising 2% from the prior quarter to $1.8 billion. The net interest margin was unchanged at 3.70%, as higher earning asset yields were offset by increased funding levels to support loan growth.
Average loans increased $3 billion to $141.4 billion, with growth across each major portfolio. Commercial loans rose $2.3 billion to $66 billion, helped by middle-market lending, business banking and specialty businesses. Bible said middle-market balances benefited from higher utilization rates.
Commercial real estate also returned to growth. Average CRE loans increased $57 million to $23.6 billion, while end-of-period CRE balances rose $1.1 billion from March to $24.5 billion, driven mainly by multifamily and industrial lending. Bible said the second-quarter finish in CRE was strong enough to support “really strong average balance growth” in the third quarter.
Average residential mortgage loans rose 1% to $25.1 billion, while consumer loans increased 2% to $26.7 billion, led by recreational finance and home equity line of credit portfolios.
In response to analyst questions, Bible said loan growth in the second quarter was unusually broad, with about 90% of commercial businesses growing quarter over quarter. He said C growth may moderate in the third quarter as pipelines rebuild, but the bank remains optimistic about momentum into the fourth quarter and 2027.
Deposits Decline on Average but Improve Late in Quarter
Average total deposits declined $700 million to $163.5 billion. Non-interest-bearing deposits decreased $600 million to $43.9 billion, with lower institutional services and commercial deposits partly offset by growth in consumer and business banking. Interest-bearing deposits were largely unchanged at $119.6 billion.
Bible said M shifted its deposit mix by shedding higher-cost money market deposits and replacing them with lower-cost time deposits. Interest-bearing deposit costs declined 2 basis points to 1.95%. He said the bank’s cumulative interest-bearing deposit beta since the beginning of the rate-cutting cycle in 2024 was 56%.
The bank saw stronger deposit trends later in the quarter, with end-of-period deposits rising to $168.9 billion. Bible said M typically sees more deposit growth in the second half of the year and expects that trend to continue. He also said short-term borrowings, which were elevated during the quarter, had already declined by a couple billion dollars as deposits improved.
Asked about funding loan growth, Bible said the bank is focused on core deposits across consumer, business banking, commercial, wealth, corporate trust and mortgage escrow channels. He said M has other funding options, including securitizations in auto, recreational vehicle and small-ticket leasing portfolios, as well as debt issuance or Federal Home Loan Bank advances, but emphasized the priority is to fund core loan demand with core deposits.
Fee Income Rises, Expenses Fall From Seasonal First-Quarter Levels
Non-interest income increased to $740 million from $689 million in the first quarter. Mortgage banking revenue was unchanged at $127 million, with residential mortgage revenue rising $7 million to $96 million on higher servicing fee income, offset by a $7 million decline in commercial mortgage revenue to $31 million because of lower origination volume.
Service charges rose $5 million to $144 million, reflecting higher consumer transaction volume. Trust income increased $14 million to $197 million, supported by seasonal tax preparation fees and growth in institutional services and wealth fee income. Derivatives and trading revenue increased $8 million to $22 million on interest rate swap transactions with commercial customers.
Other revenue from operations rose $26 million to $213 million. That included a $47 million Bayview distribution, compared with $33 million in the prior quarter, along with higher credit card and merchant discount revenue. Bible said Bayview distributions can vary in timing, but described the investment as a “meaningful and recurring contributor” to annual earnings.
In the second half of the year, the bank expects approximately $35 million of additional revenue from newly boarded residential mortgage sub-servicing loans. Bible said M recently added 214,000 sub-servicing loans, with costs already largely in the run rate.
Non-interest expense fell $89 million from the prior quarter to $1.35 billion. Salaries and benefits decreased $88 million to $826 million, reflecting lower seasonal compensation and staffing levels, partly offset by an additional working day and the full-quarter impact of annual merit increases. Outside data processing and software costs increased $10 million as M continued investing in technology infrastructure and cybersecurity. The efficiency ratio improved to 52.8% from 58.3%.
Credit Metrics Continue to Improve
M reported continued improvement in asset quality. Criticized commercial loans declined to $5.9 billion from $6.6 billion at the end of March, marking the ninth consecutive quarterly decline. The improvement included a $590 million decline in criticized CRE loans, driven mainly by upgrades in multifamily and office, and a $110 million decline in criticized C loans.
Non-accrual loans decreased 3% to $1.2 billion, and the non-accrual ratio fell 5 basis points to 84 basis points. Net charge-offs totaled $80 million, or 23 basis points, down from 31 basis points in the first quarter. Bible said charge-offs were granular, with no single net charge-off greater than $10 million.
The provision for credit losses was $120 million, compared with net charge-offs of $80 million. The allowance for loan losses declined 1 basis point to 1.52% of total loans.
Bible said the non-accrual ratio is likely near a two-decade low and may “bounce around” current levels. However, he said there remains room for criticized loans to decline, particularly in office CRE, where about 24% of the portfolio remained criticized.
Outlook Calls for Loan Growth and NIM in the High 3.60% Range
M maintained expectations for 2026 net interest income in the lower half of its $7.2 billion to $7.35 billion range, with full-year net interest margin in the high 3.60% range. The bank expects average loans of $141 billion to $143 billion for the year and deposits of $165 billion to $167 billion.
Fee income is expected to be $2.8 billion to $2.85 billion, reflecting year-to-date strength, the second-quarter Bayview distribution and higher sub-servicing fee income beginning in the third quarter. Expenses are expected at the high end of the $5.5 billion to $5.6 billion range as the bank continues enterprise investments while maintaining expense discipline.
Given first-half credit performance and collateral positions, M now expects full-year net charge-offs of 37 basis points. The bank expects to operate with a common equity tier 1 ratio in the lower part of its 10% to 10.5% range unless market conditions deteriorate. Its estimated CET1 ratio was 10.19% at quarter-end, down 14 basis points from the first quarter, reflecting $465 million in share repurchases and higher risk-weighted assets from loan growth.
Bible said future buybacks will depend on risk-weighted asset growth from lending, with the bank targeting capital around current levels.
About M Bank (NYSE:MTB)
M Bank Corporation is a bank holding company headquartered in Buffalo, New York, that provides a broad range of banking and financial services to individuals, businesses and institutions. The company operates a commercial and retail banking franchise that includes deposit-taking, lending, and payment services delivered through branch networks, digital channels and commercial banking teams. M serves customers across the northeastern and mid‑Atlantic United States and has expanded its geographic footprint through strategic acquisitions.
Its core businesses include commercial banking for middle‑market and community businesses, consumer and retail banking, mortgage origination and servicing, treasury and cash management, and wealth management and trust services.
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