Ken Usdin: Thanks. Good morning Daryl. First question on the securities book, trunk a little bit, but also the yield was flattish, let’s call it. I am just wondering how you could tell us through how you are thinking about both the size of the securities book going forward and also, what are you picking up on maturities as they are going back in if we are starting to see this kind of flattish type of yield situation. Thanks.
Daryl Bible: Yes. So, we had a couple of things going on there. So, if you look at what we have right now, we are probably going to take anywhere from $3 billion to $5 billion this year and move from cash into the securities book over time. We are going to really focus on non-convex type securities. We don’t have extension. So, if we buy something at a duration of 3 years, it stays in a 3 years perspective. Yields that we are seeing right now are probably in the mid-4s plus or minus. So, I think that’s going on pretty well. The other good benefit that we have is we have about $9 billion of U.S. treasuries. Those U.S. treasuries average a yield close to 2%. So, those are going to re-price and we are going to put those back out and probably 2-year, 3-year, 4-year type duration or maturity treasuries and we are going to re-price up over 200 basis points there.
So, I think that’s a real positive. So, we are seeing a nice uplift in the securities portfolio. The other thing to note, and I will just switch over to the loan book, Ken, if you don’t mind, is that on the consumer book, our auto didn’t really grow, but the volume we put on in our auto lending was like 250 basis points higher than what it was rolling off at. If you look at the RV portfolio, and that did grow some this past quarter. That was also up a couple of hundred basis points with a higher yield. So, we are – from a reactivity perspective, our fixed portfolios are starting to really show and perform and have much higher yields.
Ken Usdin: Yes, that’s great. Actually, it was going to be my follow-up on the loans side is, do you have a broader way of helping us think through either the proportion of that book that’s fixed and re-prices over the next year or 2 years?
Daryl Bible: It’s – I would say, it’s mainly in the consumer book is the book that’s probably going to re-price higher. From a C&I and CRE perspective, most of that is more floating because we are more like 60% floating, 40% fixed. So, if you look at it like that, mortgage portfolio, for the volume we put on in mortgage will be I think probably at attractive yields. There is not a lot of activity. We are going to originate and sell all conforming. So, we generate fee income and not put it on the balance sheet, but we will support our clients and wealth. We will support our customers that we have for moderate and low income housing. So, there will be some volumes that go on in those portfolios. So, that will re-price higher. That would just be a little bit slower because the volumes won’t be as high.
Ken Usdin: And sorry, one more final one just, you mentioned earlier the ongoing thought process of getting more of the production off balance sheet and kind of switching NII into fees. I am just wondering where you are in that process and build out and infrastructure? And within that, do you have an idea of where you think that the right commercial real estate on balance sheet concentration of the loan book should be versus the current 25%? Thanks.
Daryl Bible: Yes. So, I would say our plans right now are to bring our CRE portfolio down probably another $3 billion. If you look in the last couple of years, we have been shrinking CRE about $3 billion a year. That gives us time to basically work with our clients and meet their needs with more off-balance sheet alternatives. So, we are doing it on a measured pace so we can do it and still meet the needs of our good long-term clients from that perspective. As far as what percentage we are going to head for, I know it’s going to be lower than 25%, I can’t tell you. You got a couple of things going on, CRE shrinking and the other portfolio increasing. So, my guess is, you will probably see it drop a little bit faster than you won’t might expect [ph] if we are successful or growing C&I and some of our consumer book.
Ken Usdin: Got it. Thanks Daryl.
Daryl Bible: You’re welcome.
Operator: And we have our next question from Chris Spahr with Wells Fargo Securities.
Chris Spahr: Hi. Good afternoon. Daryl, this is about expenses and the efficiency ratio. I mean this is going back a while ago that you, at one point, M&T had a 50% to 55% efficiency target. I know you haven’t been updated in some time. I am just wondering what do you think – given that the efficiency will creep higher in ‘24 based on the guide, what do you think the efficiency will settle in with your normalized NIM?
Daryl Bible: Yes. So, when you look at efficiency ratio, it’s all about growing revenues faster than expenses. That’s really what I kind of look at from that perspective. We really have a challenging time in ‘24 growing revenue so much just because we got net interest margin coming down some. So, my hope is that it levels off ‘24 and starts to grow later in ‘24. So, we can start in ‘25 and start to have positive operating leverage from that perspective. I would tell you I am very pleased with working with the leadership team that we have here at M&T. We all agreed to come in and all business lines came in with flat expenses and basically finding cost cuts to cover their merit increases, and they kind of did that in their own businesses.
So, I think that was really well done from that perspective. We are guiding up a couple of percent just because we are making some investments and some really key projects like digital, like data. We have two transformations going on right now, one in finance, the other in commercial. We are investing in our treasury management businesses. So, we have got a lot of investments. But given our leadership team, I feel good that we will be able to contain what growth we need there and that we won’t have – the goal would be to have revenue real faster than expenses is really what we try to shoot for, and that will kind of drive good positive operating leverage.
Chris Spahr: So, as a follow-up, so do you think you can manage like a few percent growth in expenses in ‘25 and ‘26 kind of just based on kind of your budgeting experience, notwithstanding like kind of activity or volume-driven expenses.
