M&T’s Net Interest Income Growth Stalled

The Tip Desk · October 16, 2026 · 3 min read

M&T’s net interest margin fell 5 bps to 3.65% in the third quarter despite continued growth in average loans.

M&T Bank Corporation (MTB), the Buffalo-based banking and trust group, saw net interest income growth stall in the third quarter after a second-quarter rebound. Taxable-equivalent net interest income was $1.805 billion against $1.804 billion in the preceding quarter, following a $41 million sequential increase in that earlier period. Average loans grew while taxable-equivalent net interest income was nearly unchanged, and expenses and credit costs increased.

The margin decline marked the change in direction. Net interest margin narrowed 5 bps, from 3.70% to 3.65%. The cost of interest-bearing liabilities was 2.44%, while earning assets yielded 5.41%. M&T attributed the nominal sequential increase in taxable-equivalent net interest income to an additional day, partly offset by lower interest income on nonaccrual loans. The company also described loan growth funded by interest-bearing deposits while it reduced average short-term borrowings.

Average loans rose 2% QoQ to $143.296 billion, with commercial real estate accounting for the largest portion of the sequential increase. Consumer and residential real estate lending also contributed. Average deposits were $166.777 billion, and average short-term borrowings were $5.248 billion. The loan figures excluded loans held for sale, which M&T began presenting separately during the quarter; the current release’s comparative balances reflected that presentation. Commercial and industrial loans, meanwhile, averaged $65.887 billion, making them the largest lending category.

Fee income offered little additional lift overall, although mortgage servicing changed its composition. Noninterest income totaled $743 million. Mortgage banking revenue increased to $152 million from $127 million in the second quarter, which M&T attributed to higher residential mortgage subservicing income after it began subservicing additional loans in June. Trust and investment services generated $230 million, while capital markets and advisory revenue was $32 million. M&T said lower loan-syndication fees, commercial-customer swap revenue, and a smaller Bayview Lending Group distribution offset much of the mortgage improvement.

Expenses moved in the opposite direction from the nearly flat revenue lines. Noninterest expense increased to $1.393 billion from $1.349 billion in the second quarter. M&T attributed higher software and data-processing costs to maintenance and technology infrastructure enhancements, while professional services supported infrastructure work and other enterprise initiatives. An additional working day also increased personnel costs, partly offset by lower payroll taxes. Against that expense backdrop and higher credit provisioning, net income was $775 million, or $5.04 a share.

Credit costs added another restraint on earnings. Net charge-offs increased to $127 million from $80 million in the second quarter, and the annualized charge-off rate was 35 bps. The credit-loss provision totaled $135 million, while the allowance for loan losses stood at $2.179 billion. Chief Financial Officer Daryl N. Bible nevertheless characterized credit as stable. That assessment accompanied a quarter in which realized losses increased sequentially, rather than an uninterrupted improvement in every credit measure.

Nonaccrual loans were $1.298 billion at September 30, below $1.512 billion a year earlier. M&T attributed that year-over-year reduction to commercial and industrial and commercial real estate nonaccrual loans. Accruing loans at least 90 days past due totaled $570 million and consisted predominantly of government-guaranteed residential mortgages.

Buybacks totaled $323 million during the quarter. M&T estimated its quarter-end CET1 ratio at 10.16%. Alongside the repurchases, accumulated other comprehensive income declined $588 million, reflecting rising interest rates. M&T attributed the pressure on tangible common equity relative to tangible assets to loan growth, repurchases, and unrealized losses on available-for-sale securities.