M&T Bank third quarter 2023 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 Brian Klock, Head of Markets and Investor Relations. Please go ahead. Thank you, Angela, and good morning. I'd like to thank everyone for participating in M&T's third quarter 2023 earnings conference call, both by telephone and through the webcast. 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 website, www.mtb.com. Once there, you can click on the Investor Relations link and then on the Events and Presentations link. Also, before we start, I'd like to mention that today's presentation may contain forward-looking information. Cautionary statements about this information are included in today's earnings release materials and in the investor presentation, as well as our SEC filings and other investor materials. The presentation also includes non-GAAP financial measures, as identified in the earnings release and in the investor presentation. The appropriate reconciliations to GAAP are included in the appendix. Joining me on the call this morning is M&T's Senior Executive Vice President and CFO, Daryl Bible. Now, I'd like to turn the call over to Daryl. Thank you, Brian, and good morning, everyone. Let's start with our purpose, mission, and operating principles on slide three. I would like to thank our more than 22,000 M&T colleagues for all their hard work. Whether serving our customers or our communities, our employees continue to deliver on our purpose: making a difference in people's lives. This purpose drives our operating principles. We believe in local scale. That is, combining local knowledge and hands-on customer service of community bank with the resources of a large financial institution. Our 28 communities are led by on-the-ground regional presidents. Their knowledge allows us to better understand and meet the needs of our customers and communities. And importantly, this approach continues to produce strong results for our shareholders. Our local scale has led to superior credit performance, top deposit share, and high operating and capital efficiency over the long term. Moving to slide four. Our seasoned, talented, and diverse board are keys to gaining in-depth understanding of our customers' needs and expectations. We have sound technology solutions coupled with caring employees, which provide a differentiated client experience. Please turn to slide five. This slide showcases how we activate our purpose through our operating principles. When our customers and communities succeed, we all succeed. Our investments in enhancing the customer experience and delivering impactful products have fueled organic growth. We also believe in supporting small business owners who play a vital role in our communities. Despite operating in only 12 states, we are ranked as No. 6 SBA lender in the country, the 15th consecutive year M&T is ranked in the nation's top 10 SBA lenders. For the first time, we have finished as the top SBA lender in Connecticut, an important milestone following our acquisitions of People's United. Our commitment to supporting the communities we serve extends to affordable housing projects with almost $2.3 billion in financing and over 2,600 home loans for low and moderate-income residents. Additionally, M&T Bank and our charitable foundation granted over $47 million in support of our communities in 2022 and approximately $30 million so far in 2023. Please turn to slide six. Here we highlight our ongoing commitment to the environment. Last year, we invested over $230 million in renewable energy sector and have significantly reduced our Scope 1 and Scope 2 emissions since 2019. Our ESG report was published in July, but I encourage you to review this slide for some of the highlights. M&T's ESG ratings have improved at Moody's, MSCI, and Sustainalytics. Turning to slide eight. There are several successes to highlight this quarter. We continue to see growth in auto dealerships as well as specialty businesses. We continue to grow customer deposits despite increasing competition, and building on the strong liquidity position and comparative strength of our financial position in the industry allows us to continue lending in support of communities and local businesses. We remain focused on diligently managing expenses. Our third quarter results continue to reflect the strength of our core earnings power. Third quarter revenues have grown 4% compared to last year's third quarter. Pre-provision net revenues have increased 4% to $1.1 billion. Credit remains stable. Net charge-offs decreased in the third quarter, and year-to-date, we still remain below the historical long-term average. GAAP net income for the quarter was $690 million, up 7% versus like quarter in 2022. Diluted GAAP earnings per share was $3.98 for the third quarter, up 13% from last year's similar quarter. Now let's review our net operating results for the quarter on slide nine. M&T's net operating income for the third quarter, which excludes intangible amortization, was $702 million, and diluted net operating earnings per share was $4.05. Net operating return on tangible common equity was 17.41%, and tangible book value per share increased 3% compared to the end of June. On slide 10, you will see that diluted GAAP earnings per share was down 21% from linked quarter. Recall the results from the second quarter of last year, last year indicated an after-tax $157 million gain from the sale of the CIT business in April. Excluding this gain, GAAP net income and diluted earnings per share were down 3% compared to the linked quarter. On a GAAP basis, M&T's third quarter results produced an ROA and ROE of 1.33% and 10.99%, respectively. Next, we will look a little deeper into the underlying trends that generated the third quarter results. Please turn to slide 11. Taxable equivalent net interest income was $1.79 billion in the third quarter, down $23 million from linked quarter. This decline was driven largely by higher interest rates on consumer deposit funding, an unfavorable funding mix change, partially offset by higher interest rates on earning assets and one additional day. The net interest margin for the past quarter was 3.79%, down 12 basis points from linked quarter. The primary drivers of the decrease to the margin were an unfavorable deposit mix shift, which reduced margin by 7 basis points. The net impact from higher interest rates on customer deposits, net benefit from higher rates on earning assets, which we estimate reduced the margin by 6 basis points. The remaining 1 basis point was due to higher nonaccrual interest, net of the impact of one additional day. Turning to slide 12. Average earning assets increased $1.5 billion from the linked quarter, due largely to the strong deposit growth that drove the $3 billion growth at the Fed. Average loans declined $928 million, and average investment securities declined $630 million. Turn to slide 13 to talk about average loans. Total loans and leases averaged $132.6 billion for the third quarter of 2023, down 1% compared to the linked quarter. Looking at loans by category. On average basis, compared to the second quarter, C&I loans increased slightly to $44.6 billion. We continue to see growth in dealer and specialty businesses. During the third quarter, average CRE loans decreased by 2% to $44.2 billion. This decline was driven largely by our continued strategy to reduce on-balance sheet exposure to this asset class. We have chosen to modernize our suite of products and services to offer more alternatives to better serve customers, and to do so in a more capital-efficient manner possible. Average residential real estate was $23.6 billion, down 1%, largely due to portfolio paydowns. Average customer loans were down slightly to $20.2 billion. The decline was driven by lower auto loan and HELOC balances, partially offset by the growth in recreational finance and credit card loans. Turning to slide 14. Average investment securities decreased to $28 billion during the third quarter. The duration of the investment securities book at the end of September was 3.9 years, and the unrealized pre-tax of their available-for-sale portfolio was only $447 million. At the end of the third quarter, cash held at the Fed and investment securities totaled $59.2 billion, representing 28% of total assets. Turning to slide 15. We continue to focus on growing deposits with our customers, and we're pleased with the growth in both average and end-of-period customer deposits. Average total deposits grew $3.3 billion. However, consistent with our experience in prior rising rate environments, increased competition for deposits and customer behavior continues the mix shift within the deposit base to higher cost deposits. Average customer deposits increased $1 billion. The customer deposit mix to migrate to average demand deposits declined $2.3 billion in favor of commercial sweeps and customer money market savings and time deposits. Average brokered deposits increased $3.2 billion, while Federal Home Loan Bank advances decreased $2.2 billion. On average, brokered money market increased $800 million, brokered time increased $1.5 billion. Brokered deposits represent just one of the several funding vehicles that we can employ in our management of the balance sheet. At September 30th of this year, brokered deposits represented 8% of our outstanding deposits and short-term borrowings. The pace and reduction in demand deposits seem to have decreased during the quarter. Our determined focus on retaining and growing customer deposits yielded positive results during the quarter. Next, let's discuss non-interest income. Please turn to slide 16. Non-interest income totaled $560 million in the third quarter, compared to $803 million in the linked quarter. As noted earlier, the second quarter included $225 million from the sale of the CIT business. Excluding this gain, third quarter non-interest income decreased $18 million compared to the second quarter, driven predominantly by $15 million related to one month of the CIT trust revenues included in the previous quarter. Other revenues categories were largely unchanged from the linked quarter. Turning to slide 17 for expenses. Non-interest expenses were $1.28 billion in the third quarter of this year, down $15 million from the linked quarter. That decrease in expense was due to $11 million in lower compensation and benefit costs, reflecting lower average headcount, lower expenses for contracted resources and overtime. Six million lower in other costs of operations, largely reflecting lower sub-advisory fees as a result of the sale of the CIT business, lower legal related expenses, partially offset by losses associated with certain retail banking activities. The efficiency ratio, which excludes intangible amortization and merger-related expenses from the numerator and security gains or losses from a denominator, was 53.7% in the recent quarter, compared to 53.4% in the linked quarter, after excluding the gain from the sale of the CIT business. Next, let's turn to slide 18 for credit. The allowance for credit losses amounted to $2.1 billion at the end of the third quarter, up $54 million from the end of the linked quarter. In the third quarter, we recorded a $150 million provision in credit losses, which was equal to the second quarter. Net charge-offs were $96 million in the third quarter, compared to a $127 million in the linked quarter. The reserve build was primarily reflective of softening CRE values and the variability in the timing and the amount of CRE charge-offs. At the end of the third quarter, non-accrual loans were $2.3 billion, a decrease of $94 million compared to the prior quarter, and represent 1.77% of loans, down six basis points sequentially. As noted, net charge-offs for the recent quarter amounted to $96 million. Significant charge-offs were tied in four large credits: three large office buildings in Washington, D.C., Boston, and Connecticut, and one large healthcare provider operating in multiple properties in Western New York and Pennsylvania. Annualized net charge-offs as a percentage of total loans were 29 basis points for the third quarter, compared to 38 basis points in the second quarter. This brings our year-to-date net charge-off rate to 30 basis points, which is below our long-term average of 33 basis points. We continue to assess the impact on future maturities in our investor real estate portfolio due to the level of interest rates, the impact of value declines, and emerging tenancy issues. Continued targeted deep portfolio dives in office, healthcare, and multifamily portfolios are being done to identify any new emerging issues. When we file our upcoming Form 10-Q in a few weeks, we will estimate the level of criticized loans will be up to mid- to high single-digit% as compared to the end of June, largely due to increases in investor real estate. Reflective of the financial strength and portfolio diversification of the CRE borrowers, almost 90% of the criticized loans are paying as agreed. Loans 90 days past due, on which we continue to accrue interest, were $354 million at the end of this quarter, compared to $380 million sequentially. In total, 76% of these 90 days past due loans were guaranteed by government-related entities. Turning to slide 19 for capital. M&T's CET1 ratio at the end of September was an estimated 10.94%, compared to 10.59% at the end of the second quarter. The increase was due in part to the continuation of the pause of repurchasing shares. At the end of September, based upon the proposed capital rules, the negative AOCI impact on the CET1 ratio from the available-for-sale securities and pension-related components will be approximately 36 basis points. Now, turning to slide 20 for outlook. With three quarters in the books, we will focus on the outlook for the fourth quarter. First, let's talk about the economic outlook. The economic environment was supportive in the third quarter, and we were cautiously optimistic heading into the last quarter of this year. In the third quarter, the overall economy continued to expand, thanks to the strong consumer spending and steady capital expenditures by businesses, though the housing market continues to struggle in the high rate environment. Encouragingly, inflation continued to slow, and labor markets, while still tight, improved substantially with steady hiring, while wage pressures dissipated. Looking ahead to the fourth quarter, we are cautiously optimistic that the economy will continue to grow, but at a slower rate. We expect that, that slower growth will continue reducing inflation pressures. The Federal Reserve has probably reached the end of its hike cycle, given slower inflation and recent run-up in long-term rates. With that economic backdrop, let's review our net interest income outlook. We expect taxable equivalent net interest income to be in the $1.71 billion-$1.74 billion range. As we noted on the previous calls, the key driver to net interest income continues to be the ability to efficiently fund earning asset growth. We expect the continued intense competition for deposits in the face of industry-wide outflows. We remain focused on growing customer deposits. For the fourth quarter, we expect average deposits to be about the same level, with growth of interest-bearing customer deposits, but continue to decline in demand deposit balances. This is expected to translate into a through the cycle interest-bearing customer deposit beta through the fourth quarter this year to be in the mid-40% range. This deposit beta, beta excludes brokered deposits. Including brokered deposits would add 6% to the beta. While the percent of the cumulative beta is slowing, we anticipate it will continue rising into the first half of next year. Next, let's discuss the outlook for the average loan growth, which should be the main driver of earning asset growth. We expect average loans and leases balances to be slightly higher than the third quarter of $1.33 billion level. We expect the growth in C&I, but anticipate declines in CRE and residential mortgages, while consumer loan balances should be relatively flat. Turning to fees, we expect non-interest income to be essentially flat compared to the third quarter. Turning to expenses, we anticipate expenses, excluding intangible amortization and the FDIC special assessment, to be in the $1.245 billion-$1.265 billion range in the fourth quarter. Intangible amortization is expected to be in the $15 million range, and the FDIC special assessment is anticipated to be $183 million. Given the prospects of slowing revenue growth, we remain focused on diligently managing expenses. Turning to credit, we continue to expect loan losses for the full year to be near M&T's long-term average of 33 basis points, which implies fourth quarter charge-offs could be higher than the third quarter. For the fourth quarter, we expect taxable equivalent tax rate to be in the 25% range. Finally, as it relates to capital, our capital, coupled with limited investment security marks, have been a clear differentiator for M&T. M&T has proven to be a safe haven for clients and communities. The strength of our balance sheet is extraordinary. We take our responsibility to manage our shareholder's capital very seriously, and we return capital when it is appropriate to do that. Our businesses are performing very well, and we are growing new relationships each and every day. We are still evaluating the proposed capital rules so that we believe that now is not the time to be purchasing shares. That said, we are positioned to use our capital for organic growth. Buybacks have always been part of our core capital distribution strategy and will again in the future. In the meantime, our strong balance sheet will continue to differentiate us from our clients, communities, regulators, investors, and rating agencies. To conclude on slide 21, our results underscore an optimistic investment thesis. While economic uncertainty remains high, that is when M&T has historically outperformed its peers. M&T has always been a purpose-driven organization with successful business model that benefits all stakeholders, including shareholders. We have a long track record of credit outperforming through all economic cycles with growth about two times that of peers. Our strong shareholder returns include 15%-20% return on tangible common equity and robust dividend growth. Finally, our disciplined acquirer and prudent steward of capital, shareholder capital, and our integration of People's merger is completed, we are confident in our ability to realize our potential post-merger. Now, with that, I'll turn it back to our caller, and we'll briefly review the instructions. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. We will pause for a moment to allow questions to queue. Once again, if you would like to ask a question, press star one. Our first question comes from Manan Gosalia with Morgan Stanley. Please go ahead. Hi, good morning. Good morning, Manan. You spoke about a mid to high single-digit increase in criticized loans this quarter. I was wondering how is the mix changing between hotel, healthcare, and office? And it also looks like non-accrual loans tick lower this quarter. So can you talk about what the drivers are there, you know, whether there's loan sales or any other underlying drivers, and if that had any benefit to net interest income this quarter? Yeah, happy to do that. So on the criticized increase, it's really just more of the same that we're seeing. It's more increases just in our IRE portfolio, primarily on the office side for the most part. So nothing really different from trends that we're seeing. As far as non-accruals, there was one large property that was sold in New York that was a primary driver for the non-accruals. We actually had a gain in that, that helped margin probably by about $5 million in the quarter. Got it. Thank you. And then, maybe just on the buybacks. What is the criteria to resume the buybacks from here? Because it seems like we have more clarity on regulation at this point. You know, is it a function of M&T issuing, you know, more in the debt markets and then starting buybacks? Is it to do with the credit rating agencies? You know, any color you can throw there would be helpful, especially given, you know, how much excess capital M&T seems to have at this point. Yeah. So I definitely agree with you, Manan, in that we do have excess capital, but right now, you know, the economy is still kind of unpredictable. You know, rates higher for longer will probably continue to have stress on clients over the next couple of quarters if that actually comes to fruition. I think we're just trying to be conservative and cautious the same time, and it's also for us to actually have an opportunity to continue to grow organic growth in our commercial and consumer books, and trust books as well. So I think we're just trying to be cautious, and we'll know when the economy gets a little bit more comfortable, you know, we'll consider what repurchases there. It is true to our long-term strategies of capital distribution back to the shareholders. It's not going anywhere, but we just want to continue to make sure that we're strong and can grow and serve our customers right now. Great. Thank you. Thank you. The next question comes from Ebrahim Poonawala with Bank of America. Please go ahead. Hey, good morning. Good morning. I guess just a quick follow-up, Daryl, in terms of—s o your NII guide for fourth quarter is fairly clear, but we, we are hearing from some of your peers around potential for the margin NII bottoming in the fourth quarter, especially if the Fed is done. Give us your thought process around, is there something about your balance sheet why that, why that might get pushed out because of just deposits have been later to repriced, or the dynamics on your balance sheet or your markets? Any color there would be appreciated. Yeah, you know, Ebrahim, it's really, you know, the biggest driver for the net interest margin for us right now is really what happens to our non-interest-bearing deposits. You know, we were down $2.3 billion. That was better than what we thought it would be, you know, and we think that it's slowing down. We'll see how that plays out in the fourth quarter, but that is probably the biggest determining factor. When you look at our balance sheet, though, I'm actually pretty pleased with how the assets are repricing. If you look at the repricing rate on some of our fixed portfolios, if you look at this quarter, like our consumer loan portfolio was up 22 basis points. You know, we have home equity in there that is prime-related, but that's a smaller percentage. We have really good repricing in other consumer portfolios, like auto was up approximately 300 basis points in what was rolling off versus what was rolling on. If you look at our RV and boat portfolio, that was up practically 250 basis points of what was rolling off, rolling on. So I think once we get more stability in the disintermediation of deposits, I, I'm more favorable into margin stabilizing. I think the, the asset side is actually performing pretty well. Noted. And I guess just moving maybe, g ive us a mark to market in terms of commercial real estate, what you're seeing around, there, there's some concern whether if we go into next year, given where the yield goes down, we might see some more pressure flow beyond CRE office into multifamily. So one, give us a sense of, like, on CRE office, has the visibility improved around the level of marks that you might have to take as some of this works through the system, and whether or not you're seeing more pain beyond, the office complex? Yeah. So on the office side, I would tell you, our credit team, we feel really on top of what's going on there. I think we are actively looking at any credit that could be and have any issues whatsoever. We're looking at it. I'm trying to put the right valuation in there. You know, we traditionally run with a higher level of criticized assets because we have a lot of long-term clients that have been with M&T for a long time period. They have other sources of cash flow to help carry the loans and are willing to put in equity to help support the loans. You know, when we do find loans that there is not support around, you know, we'll probably move to exit those. As far as the valuations go, there's still not a whole lot of specifics out there. We did have that one sale, for us, that actually was a little bit better than what we had it marked there, but that was one big loan. So I wouldn't say that's a trend by any stretch right now, but I think we feel pretty good on where we are. As far as the other asset classes, you know, I think we just with rates higher for longer, just puts more just tougher for some of our customers. And, you know, multifamily is an area that we are looking at as well. Nothing really is popping out of anything very severe there yet, but, you know, we're just trying to stay ahead of what potentially could happen and kind of be preemptive if we see anything. So we're just preparing. Our credit team is very experienced. We've been very good with, you know, commercial real estate for a long time, and we are on top of where we are. Got it. Thank you. Yeah. The next question comes from Erika Najarian with UBS. Please go ahead. Hi, good morning. I just wanted to clarify sort of the, the responses to, Ebrahim's question, Daryl. I'm just wondering, as you think about, you know, the forward curve, as we see it, you know, at, at what point do you expect, net interest income to trough based on what we know about the curve and what we, you know, about the various puts and takes for growth and deposit action? Yeah, you know, from a framework perspective, it's really when the disintermediation slows down. I think when the disintermediation slows down, I think the asset side is performing well and will continue to reprice higher because I think we're going to have a steeper curve, you know, for a longer period of time. You know, and hopefully, that will happen in the next couple of quarters, but it's really hard to know right now. We think it's slowing, but I think we'll just see how that plays out. I'll give you guidance, you know, next earnings call on the fourth quarter on that. But, you know, conditions could be slowing down with what we're seeing right now, but, you know, one quarter is not a trend. I just want to get a couple of quarters under our belt before we really say net interest margin is going to stabilize. Got it. And as a follow-up to that, your period-end cash balance rose to $30 billion, Daryl, you know, which is awesome dry powder. And, you know, as we think about, you know, the quarters ahead, you know, on one hand, it potentially the Fed is peaking, right? And you seem to be rather asset sensitive. You know, on the other, you have all these, you know, new rules on you know, liquidity that we don't have yet, as well as, you know, treatment of AFS for regional banks. So how should we think about an absence of stronger net loan growth? You know, the puts and takes of what you're, are you just going to continue to build cash and be a little bit more asset sensitive, even though we're peaking in rates as we figure out what the final rules look like on both capital and liquidity? You know, I think, you know, we have the strong position at the Fed. That's intentional for us right now. We want to be really conservative with our cash and liquidity position. Like I said earlier, it's, you know, the economy is doing okay, but slowing down and, you know, maybe hopefully not get into a recession, but we just want to be really careful and cautious from that perspective. So I think it's intentional where we're staying there. You know, will we invest some of that, obviously, into loans? We would love to do that, support our customers, but we are not widening our credit box whatsoever. We're going to grow what the market will give us. But we do think there's opportunities to grow relationships and to potentially grow balances in some of our loan categories. So we'll see how that plays out. As far as deploying, you know, some of it, the cash into the securities portfolio, I would just say that, you know, over the next year, you might see us move a little bit to the investment portfolio, but it'll be on a gradual basis. Thank you. Thank you. The next question comes from Matt O'Connor with Deutsche Bank. Please go ahead. Good morning. First, sorry if I missed it, but did you comment on what your reserves are against your office book? So we haven't made that public, Matt, but it continues to increase, you know, where we are right now. So we had an increase in our allowance. You know, we had a little over $50 million. I'd say about half of it went to the CRE portfolio, and, you know, half of it went to the C&I portfolio. So I think we're adding it where we think it's appropriate based upon our models and performance. Okay. Yeah, that'd be helpful to get over time. I know everybody's book is a little bit different, but many of your peers are disclosing, so that'd be helpful as you think about disclosures, obviously an area of focus. You know, maybe switching gears, like, as you think about all the capital that you have and liquidity and the balance sheet flexibility, you know, what areas in lending are you leaning into? Not just kind of looking at one quarter, but the next few quarters. And is it kind of doing more business with existing customers or also trying to grow the customer footprint? I mean, this past quarter, we had growth in our dealership businesses. You know, as the strike was, you know, starting to happen, I think a lot of dealers actually stocked up on used cars, and that actually drove an increase in utilization in that one sector are a little bit earlier than normal there. You know, that will probably continue to play out, I think, into the fourth quarter, well, would be one. You know, our large corporate banking, I think, has some growth opportunities where we're positioned there. Specifically on fund banking, I think we're growing there nicely. It's a very conservative portfolio, very short-term oriented, lower risk areas. So I would say, you know, most of the growth that we're seeing is in the C&I space. Those are the highlights right now. It is very competitive in middle market C&I. We are trying to be competitive there, but, you know, right now, the higher interest rates are just putting a lot of our commercial clients to be a little bit more cautious. But when they're willing to borrow, we're trying to help them, when we're able to do that, so. Okay, thank you very much. The next question comes from Bill Carcache with Wolfe Research. Please go ahead. Thank you. Good morning. Hey, Daryl. I wanted to follow up on your comments around the higher for longer rate environment being tougher for your customers. As you look across your portfolio, do you have a good handle on the degree to which some of your customers had put on swaps, you know, maybe when we were still under reserve two to three years ago, so they haven't yet felt the pressure of higher rates? Curious about whether the rolling off of those swaps is something you worry about, you know, not really, not just in CRE, but, but really across all loan categories. Yeah, I think obviously, Bill, I mean, people that did swaps, you know, three years ago are really fortunate that they did, but it depends on the maturities when they roll off. And when they do roll off, you know, it does put pressure on some clients that basically, you know, now just have higher interest payments there. So that is impacting much broader than just office, broader than just CRE. It's impacting, I think, all of America right now, to be honest with you. I mean, it's just higher rates for longer. I think the Fed wants to slow the economy down, and we're definitely having that impact to do that, and they're accomplishing what they're achieving there. But we, like I said earlier, we are on top of the portfolios where we see, you know, maturities coming up. You know, we're looking at, you know, what we have to do, if anything. Do they have other support on it? So we're trying to stay ahead of, you know, what's coming down the pike. You know, most of the maturities and swap are lined together so that they're pretty much in balance. So when things come close to mature on loans is when, you know, we see if there's anything that needs to happen from a lending perspective. But I think the Fed's accomplishing what they're trying to do, is slow the economy down, bring inflation down, and it's definitely having that impact. Yeah, that's really helpful, Daryl. Thank you. If I could follow up. As you continue to take actions to shift more of your focus to fee income, as you reduce the credit risk associated with on-balance sheet CRE, how are you thinking about your sort of longer-term CET1 target? You know, before, you know, the, the, I guess, you know, all the developments, you know, of the last several quarters, you know, we were sort of thinking of M&T, you know, being able to get to sort of that 9% CET1 target. But I guess the inclusion of OCI volatility and regulatory capital has led to some debate over whether, you know, Category IV banks will now have to run with a little bit larger buffer versus history. I would, you know, appreciate any thoughts there? Yeah, I think as the new roles play out and as we get comfortable, you know, working within the roles, you obviously start with a higher cushion at first, and then as you get used to managing the book and everything, I think, you know, we will tighten it up over time. But my guess is that we probably have a higher buffer coming out of the blocks. You know, you have to really adjust your investment portfolio, you know, since the AFS is gonna now go through this, the regulatory capital ratios, you know, to probably run with shorter durations, either outright or, you know, invest longer with hedges that bring in the durations one way or the other, just so you have less volatility there. So it's really just getting used to how we manage all that process. But, you know, our teams are working on that now, and, you know, we're, we will start operating that way probably well before, you know, we get the roles actually implemented, from that perspective. Understood. Thank you for taking my questions. Thanks, Bill. The next question comes from Brent Erensel with Portales Partners. Please go ahead. I was gonna follow up on that, stock buyback question. Thank you, and good morning. Good morning. Just to press you on, if you were to, like, incrementally invest the capital that you're generating at 7%, you would generate half the returns that you could by buying back stock. So you need double-digit returns to equate that, if that question makes sense. So the question, I guess, is at what point will the corporate finance math drive you to resume buyback? So the corporate finance math is screaming that it's a buy right now. It's really more of our cautious, you know, position, conservative nature that we have, to make sure that we have really strong capital, strong liquidity to, to really weather what comes our way. I mean, if the Fed stays higher rates, let's say, for three years or whatever, you know, that could really have a big impact on, on the economy. We just want to be really cautious and all that. So I think we're just trying to be prudent with it, like I said earlier, the capital is not going anywhere. You know, we will, I promise you, we will deploy it in a really shareholder-friendly manner, from that. But right now, we have strong capital, strong liquidity, you know, which has been really helpful for us, you know, since the March, April time frame, and we will continue to operate and be a strong supporter of our customers and communities that we serve. Just, is there a bell that's going to go off when you guys are going to change your mind, or how should we, do we just wait and see? I will tell you, once we make that decision to go, my guess is you will find out very quickly when that decision's made. Thank you. All right. The next question comes from Gerard Cassidy with RBC. Please go ahead. Hi, Daryl. Hi, Gerard. Daryl, over the years, M&T has been very effective in making acquisitions. Obviously, the People's deal is the more recent acquisition that is now completely integrated. And we understand, you know, in talking to your peers and others, that, you know, the interest rate marks make it very difficult for M&A today. So I got a two-part question for you. First, just what is your view on M&A for M&T over the next 12 to 24 months of traditional depositories? And then second, some of the PNC in particular was recently bought some assets from the FDIC, some loans. Are you guys looking at any assets that might be for sale from the FDIC, from the failed banks that we had earlier in this year? Yeah. So we, we didn't do a press release on it, but we did buy two loans from that same purchase PNC did. I think it was a total of about $300 million in, in, commitments. It was from the FDIC. So we did participate in there, and we were able to get a couple of those loans as well. But we are constantly looking, you know, where we can grow our customer base that are good long-term customers that fit. We just don't want to do asset purchases. We want relationships, is really what we're looking for to drive our organic growth, from that. As it relates to acquisitions, you know, it's, it's just, you know, you and I have been in doing this for a long time. When I started, we had 18,000 banks, you know, in the early 1980s. Now we're up to about 4,000 banks, and it's going to continue to shrink. I think M&T has a great track record of acquiring banks over time, and that strategy hasn't changed. You know, our strategy is really to control and have lots of density in the markets that we serve. So I think if and when we do purchase acquisitions, it probably won't be a surprise in where we're going or what we're trying to do, from that perspective. So the strategy is there, and it will happen at some point down the road. The interest rates definitely make it a little bit more challenging now, just because the impact on capital. But like anything, things change over time, and, you know, we will be there when we need to and do what we've been really good at before, and we'll continue to do that. Very good. The second part, a different question as a follow-up. When, you know, M&T, of course, has developed a reputation as being a very strong underwriter, you got the numbers to prove it. And so we're not necessarily concerned about what you guys are doing specifically, but you always worry about the competitors doing foolish and stupid things that then end up having a second derivative effect on your sound underwriting decisions. Can you frame out for us, granted, I know it's not 2005 and 2006 craziness out there, but are there any concerns that you see non-bank lenders or other bank lenders doing or have done things in the last 18 to 24 months on the lending side that make you a little nervous? Or are we just in a new playing field, everybody is very rational, and we're not going to see anything really, you know, implode because of what some foolish lenders are doing? Yeah, so we have a long history of, you know, working with our clients. Client selection is really huge for us and how we look and underwrite, you know. So like in the CRE portfolio, you know, we deal with people that have been in the business for a very long time, that aren't just looking at that real estate investment that they have as an investment, but more as a long-term strategy to their company and their family from that perspective. So really don't look at, you know, trying to get out of the criticized loans. You know, you know, if somebody's not going to support it, you know, we will probably exit over time. But I don't really view, you know, how we are approaching it. I think it's a great way to, you know, develop and keep relationships over the long term. It's the right way and fair way to do it, as long as they're willing to support, you know, their properties and loans with us, from that perspective. You know, I think overall, though, I think the industry is much safer than what it has been over the last couple of decades. I think everybody's trying to do the right thing. We have the benefit that we have some really long-term, you know, customers that have been with M&T for a long period of time, and we try to bank the people that are really top in market in all the markets that we serve. Very good. I appreciate the color. Thank you. Yeah. The next question comes from John Pancari with Evercore ISI. Please go ahead. Morning, Daryl. Morning, John. Just a follow-up around the loan loss reserve. I know you had talked about the, you know, that the reserve addition was 50% for CRE and about half going to C&I. And I'm just trying to frame out, like, what about the developments in the quarter, drove the need for additional reserve additions beyond what would have already been baked into there under CECL? And then separately, can you maybe talk about the likelihood of further reserve build here, you know, just as you continue to dig through the CRE portfolio? I know you said you— a couple times that there's ongoing efforts to, sift through the exposures in that book. Yeah. So if you look at the macro factors, our macro factors, when we run our allowance models, basically were pretty steady. Actually, the CREPI Index actually improved a little bit, but the other, economic statistics were pretty stable versus the prior period. And really, what drove the increase was really softness in some of the asset values in the CRE portfolio, is what we were seeing and thought it made sense to add some more reserves in those. You know, as we get more, you know, examples of what valuations are that could help drive more or may actually—I think we feel really reserved where we are today, but we just wanna continue to have a really strong robust allowance for the needs of our, borrowers and, and make sure we comply with all the rules that we have there. But it was really just a little bit of softness in some valuations. Did that softness surprising you negatively, and then is that why it's not already in the CECL reserve? You know, it's—there's just not a lot of activity going on in some of these markets right now. So you're basically, there's a big market dislocation. A lot of the marks we're doing, as conservative as they are with a net present value cash flow perspective, and, you know, I think I went through it last time, but, you know, if something is not leased today, we assume it's not leased for three years. If something is coming off lease within the next year, we assume that there's a one-year gap period before it gets released. Those type of cash flow adjustments are kind of what we're marking to, but we don't have anything to look at. But when you get a certain example, you know, I would say then we can make an adjustment. Our bet, though, right now is that, you know, there's a lot of money waiting on the sidelines, potentially that, you know, when the Fed does decide to keep rates more stable, you know, and maybe signal, you know, rates going down at some point, I think there'll be a lot of money that will jump back into the system. Right now, there's just not a lot of going on, and there's a very wide bid-ask spread. Okay, then that's helpful. Thanks for that. One last follow-up, if I could, also on credit. Your I know your charge-off guidance for the fourth quarter, you expect it to be a low-above the 29 basis point level for the third quarter, and then full year 2023, near the long-term 33 basis points. Can you maybe help us think about what that would imply in terms of as you look into 2024? Maybe help us, I know you're not giving formal guidance yet on 2024, but how should we think about where the loss trajectory could be versus that longer-term 33? How much above that could it be? Yeah, no, that's a good question. You know, for the fourth quarter, you know, you know, it's, or it's just our gut feel that it might be higher. It could actually be the same or lower, to be honest with you right now. But, you know, just knowing, you know, what, what's going on right there, it might be higher, but we really aren't sure about that yet. You know, next year, we aren't really giving guidance, but from a framework perspective, you know, our allowance, you know, will build, you know, when either market economic conditions allow for it or you see some deterioration in customer behavior, from that perspective. But, you know, right now, I think we're really on top of what it is. Any areas, you know, that we potentially could have risk in, you know, our credit teams are all over it, looking at the reviews and the analysis that we have. You know, right now, what we feel that our reserve is adequate, and then, you know, we're in good touch with where the risks are. Got it. All right, thanks, Daryl. Appreciate it. It appears we have no further questions at this time. I will now turn the program back over to our presenters for any additional remarks. Again, thank you all for participating today. As always, if clarification of any of the items in the call or news release is necessary, please contact our investor relations department at area code 716-842-5138. Thank you, and have a good day. This does conclude today's program. Thank you for your participation. You may disconnect at any time.