M &T B A N K C O R P O R AT I O N 2 0 1 4 A N N U A L R E P O R T
C O V E R A R T : An internationally renowned fiber artist, Sheila Hicks earned her BFA and MFA degrees from Yale University. As a young
Fulbright Scholar in South America during the late 1950s, she developed a passion for using fibers in her art. Thread Bas-Relief was created
in her Paris studio in 1972. Measuring 36 by 12 feet and mounted onto 11 separate panels, the intricate tapestry is made of cords of linen
wrapped with gold and brightly colored threads, hand-wound by the artist using a modern approach to the ancient Passementrie technique.
Specially commissioned for Wilmington Trust, the tapestry was originally installed in the Brandywine Building branch office in Delaware.
In May 2011, Wilmington Trust became part of M&T Bank Corporation. In May 2014, Thread Bas-Relief was moved to M&T corporate
headquarters, located at One M&T Plaza, Buffalo, NY.
Sheila Hicks, Thread Bas-Relief, 1972, 36 X 12 ft., One M&T Plaza.
M & T B A N K C O R P O R A T I O N
C O N T E N T S
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Message to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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iv
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxvii
United States Securities and Exchange Commission (SEC) Form 10-K . . . .
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A N N U A L M E E T I N G
The annual meeting of shareholders will take place at 11:00 a.m. on
April 21, 2015 at One M&T Plaza in Buffalo.
P R O F I L E
M&T Bank Corporation is a bank holding company headquartered in
Buffalo, New York, which had assets of $96.7 billion at December 31, 2014.
M&T Bank Corporation’s subsidiaries include M&T Bank and Wilmington
Trust, National Association.
M&T Bank has banking offices in New York State, Pennsylvania,
Maryland, Delaware, Virginia, West Virginia and the District of Columbia.
Major subsidiaries include:
M&T Insurance Agency, Inc.
M&T Securities, Inc.
M&T Real Estate Trust
Wilmington Trust Company
M&T Realty Capital Corporation
Wilmington Trust Investment Advisors, Inc.
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M & T B A N K C O R P O R A T I O N A N D S U B S I D I A R I E S
Financial Highlights
For the year
Performance
Per common share data
Net income (thousands) . . . . . . . . . . .
Net income available to common
shareholders — diluted (thousands) . . .
Return on
Average assets . . . . . . . . . . . . . . . . .
Average common equity . . . . . . . . . .
Net interest margin . . . . . . . . . . . . . .
Net charge-offs/average loans . . . . . . .
Basic earnings . . . . . . . . . . . . . . . . .
Diluted earnings . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . .
2014
2013
Change
$ 1,066,246
$ 1,138,480
978,581
1,062,496
-
-
6%
8%
1.16%
9.08%
3.31%
.19%
$ 7.47
7.42
2.80
1.36%
10.93%
3.65%
.28%
$ 8.26
8.20
2.80
- 10%
- 10%
—
Net operating (tangible) results(a) Net operating income (thousands) . . . .
$ 1,086,903
$ 1,174,635
-
7%
Diluted net operating earnings
per common share . . . . . . . . . . . . . .
Net operating return on
Average tangible assets . . . . . . . . . . .
Average tangible common equity . . . . .
Efficiency ratio(b). . . . . . . . . . . . . . . .
7.57
8.48
- 11%
1.23%
13.76%
60.48%
1.47%
17.79%
57.05%
At December 31
Balance sheet data (millions) Loans and leases,
Loan quality
Capital
net of unearned discount . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . .
Common shareholders’ equity . . . . . . .
$ 66,669
96,686
73,582
12,336
11,102
Allowance for credit losses to total loans .
Nonaccrual loans ratio . . . . . . . . . . . .
1.38%
1.20%
Tier 1 risk-based capital ratio . . . . . . .
Total risk-based capital ratio . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . .
Tier 1 common ratio . . . . . . . . . . . . .
Total equity/total assets . . . . . . . . . . . .
Common equity (book value) per share . .
Tangible common equity per share . . . .
Market price per share
Closing . . . . . . . . . . . . . . . . . . . . .
High . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . .
12.47%
15.21%
10.17%
9.83%
12.76%
$ 83.88
57.06
125.62
128.96
109.16
$ 64,073
85,162
67,119
11,306
10,421
1.43%
1.36%
12.00%
15.07%
10.78%
9.22%
13.28%
$ 79.81
52.45
116.42
119.54
95.68
+ 4%
+ 14%
+ 10%
+ 9%
+ 7%
+ 5%
+ 9%
+ 8%
(a) Excludes amortization and balances related to goodwill and core deposit and other intangible assets and merger-related expenses which,
except in the calculation of the efficiency ratio, are net of applicable income tax effects. A reconciliation of net income and net operating
income appears in Item 7, Table 2 in Form 10-K.
(b) Excludes impact of merger-related expenses and net securities gains or losses.
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DILUTED EARNINGS
PER COMMON SHARE
SHAREHOLDERS’ EQUITY
PER COMMON SHARE AT YEAR-END
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
$5.84
$5.69
$6.55
$6.35
$7.88
$7.54
$8.48
$8.20
$7.57
$7.42
Diluted net operating(a)
Diluted
$63.54
$33.26
$66.82
$37.79
$72.73
$44.61
$79.81 $83.88
$52.45 $57.06
Shareholders’ equity per common share
at year-end
Tangible shareholders’ equity per common
share at year-end
NET INCOME
In millions
RETURN ON AVERAGE COMMON
SHAREHOLDERS’ EQUITY
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
$755.2 $884.3 $1,072.5 $1,174.6 $1,086.9
$736.2 $859.5 $1,029.5 $1,138.5 $1,066.2
18.95% 17.96% 19.42% 17.79% 13.76%
9.08%
9.67% 10.96% 10.93%
9.30%
Net operating income(a)
Net income
Net operating return on average tangible
common shareholders’ equity(a)
Return on average common shareholders’
equity
(a) Excludes merger-related gains and expenses and amortization of intangible assets, net of applicable income tax effects.
A reconciliation of net operating (tangible) results with net income is included in Item 7, Table 2 in Form 10-K.
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M E S S AG E T O S H A R E H O L D E R S
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T
he year past was far from a typical one, either for U.S. banking
or at M&T. The evolving nature of financial industry regulation, the
attention paid to infrastructure and regulatory compliance, and the
uneven character of the economic recovery, all merit attention.
M&T’s 2014 earnings did not match the record level of the
previous year. Nonetheless, they remained strong despite elevated
expenses, a consequence of investments in our infrastructure and the
costs and complexity of responding to evolving regulatory compliance
requirements. Our headway in such an environment reflects the core
strength and resilience of the company.
Net income prepared in accordance with generally accepted
accounting principles (“GAAP”) was $1.07 billion for the past year,
down 6% from $1.14 billion in the year prior. Diluted earnings per
common share totaled $7.42 in 2014, a decline of 10% from the earlier
period. Last year’s net income, expressed as a return on average total
assets and average common equity, was 1.16% and 9.08%, respectively.
Comparable figures for 2013 were 1.36% and 10.93%.
Taxable-equivalent net interest income, which is comprised of
interest received on loans and investments, less interest paid on deposits
and borrowings, was $2.7 billion for 2014, a very slight increase from 2013,
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owing in part to the continued low interest rate environment, which has
remained in place for some 24 quarters. At the end of 2014, total loans were
$66.7 billion, an increase of 4% from the end of the previous year. Average
interest-earning assets rose by 10% last year, to $81.7 billion. The largest
component of that increase was a $4.9 billion or 74% higher level of
average investment securities. New regulations require banks like M&T to
hold more government-backed securities as a “liquid asset buffer” for times
of economic stress. Investment securities made up 13% of total assets at the
end of 2014, compared with 10% of assets at the end of the previous year.
Those lower yielding investments, purchased with $3.2 billion of borrowings
raised in the debt capital markets, were additive to net interest income but
negatively impacted our net interest margin. Taxable-equivalent net interest
income expressed as a percentage of average earning assets – an important
measure of balance sheet efficiency – was 3.31%, a decrease of 34 basis
points (hundredths of one percent) from the year before.
As the economy continued to improve during the year, so did the
repayment performance of M&T’s loan portfolio. Net charge-offs were
$121 million, an improvement from $183 million in 2013. Net charge-offs
expressed as a percentage of average loans outstanding were 0.19%, which
is the lowest figure we’ve seen since the 0.16% level recorded in 2006,
immediately prior to the last financial crisis. M&T’s allowance for losses on
loans and leases stood at $920 million as of December 31, 2014, representing
1.38% of loans outstanding. The modest $3 million increase in the allowance
from the end of the previous year reflects a provision for loan losses of $124
million for 2014, less the $121 million of net charge-offs.
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Income from fees and other sources totaled $1.78 billion in 2014, a
decrease of $86 million from 2013. The previous year was marked by net
securities and securitization gains of $110 million, as M&T repositioned its
balance sheet in preparation for our first-time participation in the Federal
Reserve’s 2014 Comprehensive Capital Analysis and Review (“CCAR”)
program. Those gains did not reoccur in 2014. Revenues from mortgage
banking increased by 10% to $363 million over the past year and trust
revenues increased by 2% to $508 million.
As a result of increased expenses arising from our ongoing efforts
to upgrade M&T’s bank secrecy and anti-money laundering (“BSA/AML”)
compliance program, in addition to other key investments that position
M&T for the new regulatory and operating environment, non-interest
expenses increased to $2.74 billion last year, 4% higher than $2.64 billion
in the previous year. Contributing to the higher level of expenses was a 4%
increase in employee salaries and benefits as well as a 9% increase in other
costs of operations.
We continued to grow our capital base in 2014. M&T’s Tier 1
common capital ratio, which is the one most closely followed by both
regulators and the investment community, increased to 9.83% at the end of
the year, an improvement of 61 basis points from 9.22% at the end of 2013,
effectively closing the gap with our peer regional and super-regional banks.
Our tangible book value per share was $57.06 at December 31, 2014, an
increase of 9% from the end of 2013.
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PARDON OUR DUST
In the wake of our investments of the past two years, it is tempting to
borrow a slogan one sees at stores changing their inventories or displays:
“pardon our dust.” It implies that change, in some ways difficult and
inconvenient, is underway – but that something better is taking shape.
That’s certainly indicative of what’s been going on at M&T.
The year 2014 will be remembered as one in which we turned our
focus inward, enhanced our infrastructure and broadened our knowledge
base. As discussed in these pages last year, a great deal of work was begun
in 2013 to address heightened demands from our regulators. We continued
to invest considerable time, money, thought and labor in 2014 to make
substantial progress on those efforts, while simultaneously working to build
a better, stronger M&T Bank. We have worked on improving technology,
risk management and business processes while adding to our ranks of
talented personnel. We hired top professionals with expertise in emerging
areas of focus. Our technology and banking operations division alone was
fortified by key hires with responsibilities spanning development, security,
architecture and connectivity. Those additions included a Chief Technology
Officer and an Enterprise Security Officer – new positions that embody the
changing nature of our bank and our industry. Fundamentally, we know
more about more topics than last year, and collectively we are acutely aware
of the path required to succeed in tomorrow’s banking industry.
There is no denying that the work undertaken thus far has not
been optional – it’s work that had to be done. We spent $266 million in
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2014 in a broad swath of efforts that will help M&T fulfill its regulatory
obligations – an unprecedented amount in unprecedented times. However,
our construction efforts have not been limited to regulatory matters, nor
does 2014 mark the end of such expenditures. We will continue to invest
heavily in data, technology and personnel in 2015 and beyond; these
are investments that will enable our colleagues to serve our clients more
efficiently while providing the products and services needed to achieve
their financial objectives.
The notion of strengthening our foundation is not foreign. There
have been seminal moments in our history when we have paused to make
significant investments driven by customer needs or movement into new
markets. Whenever we grow by way of acquisition, we then busy ourselves
by digesting what we’ve become while trying to make it better. Think of
the work we’re doing now in much the same way, though in this case we
are improving because we expect to continue to grow.
RISK MANAGEMENT INFRASTRUCTURE: Enhancing our BSA/AML
program consumed significant time, energy and money with investments
of $151 million last year, in addition to the $60 million spent in the prior
year. The systems we began building in 2013 were deployed to great effect
this past year. The expanse and depth of our new BSA/AML program is
both imposing and remarkable; it ensures that the risk profile of every
customer of the bank, old and new, is understood and properly managed.
In 2014, M&T fully implemented a new Know Your Customer
program to better assess the potential risks presented by each of our
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3.6 million customers and their 5.4 million accounts. This program, which
has been in operation for nearly one full year, has been used with 149,065
new customers. We have obtained appropriate additional information, or
conducted remediation, as the jargon of BSA/AML would have it, on 671,502
customers and remediated 95% of the existing customers whom our models
identified as requiring a higher level of scrutiny. A year ago, the team
responsible for researching customers with higher risk profiles reviewed an
average of 77 per day; that figure reached a peak of 327, a fourfold increase,
stemming from additional resources, as well as enhanced processes and
efficiency as the group became seasoned at their task. Our integrated BSA/
AML program spans all business units, and no corner of the enterprise lacks
oversight or accountability. A rigorous, customized training curriculum was
developed to ensure each employee is properly positioned to perform his or
her respective duties. Collectively, they spent 91,834 hours in classrooms,
person-to-person training and online courses about BSA/AML and related
regulations. Each one of our employees understands his or her part in
executing this program.
Along with investments in systems and processes, we also invested
in talent to support and oversee these efforts. In 2014, 630 colleagues were
dedicated to this program, as well as over 300 contractors and consultants;
together they occupied nearly 10% of our total office space in downtown
Buffalo, where we are already the largest private sector employer.
Our efforts in 2013 were characterized by intensive preparation for
the inaugural participation in the CCAR process – which requires each
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participating organization to project its revenues, credit losses and capital
levels under five hypothetical scenarios, two internally developed and
three provided by the Federal Reserve. These scenarios include levels of
economic indicators such as the real and nominal Gross Domestic Product,
the Consumer Price Index, the U.S. unemployment rate, the CoreLogic
U.S. House Price Index, the Federal Reserve Board’s U.S. Commercial Real
Estate Price Index; interest rates: 3-month Treasury rate, 5-year Treasury
yield, 10-year Treasury yield, BBB corporate yield, Mortgage rate and Prime
rate; the Dow Jones Total Stock Market Index and the Market Volatility
Index, which may be seen in distressed, recessionary environments.
It was heartening to receive no objection to our first CCAR
submission when the final results were released by the Federal Reserve in
March of last year. Continued investment in 2014 was devoted to making
our methodology more comprehensive and efficient. We are keenly
aware that the regulatory bar continues to rise – and what was deemed
satisfactory one year may not pass muster the next. Hence, we continued to
strengthen intellectual capital by directing talent to the CCAR effort, while
adding specialized skill sets from outside the organization where needed.
This team, dedicated to stress testing and the capital planning process, now
includes 91 professionals – an increase of 32% over the team that supported
the first submission.
We continue to work on ensuring that our risk management and
capital planning practices are comprehensive, that they permeate all parts
of our day-to-day business activities and, therefore, are commensurate
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with our risk profile. During 2014, 292 individuals across the organization,
including the CCAR team, were involved in stress testing-related activities
– an increase of 56% over the prior year. Given the quantitative emphasis
of the exercise, nearly half of the 75 models that support our work were
upgraded in response to evolving standards of the Federal Reserve and
self-identified areas for improvement. The key governing committees met
74 times during the year to discuss capital and stress test-related topics,
compared to 38 times in 2013 – prior to our initial CCAR submission.
In addition to BSA/AML and CCAR, we have invested heavily to
comply with other elements of the Federal Reserve’s enhanced prudential
standards for bank holding companies. Our growing Risk Management
division – which numbers 727 colleagues – is more than five times as large
as it was in 2009 and 56% larger than in 2013 – at a cost of $181 million,
an 84% increase over 2013.
New regulatory standards also require more formal, structured risk
management governance; which is furthered by the new systems, models,
procedures and policies that allow us to better document the process used
to manage risk. Taken together, 190 committees produce nearly 7,600 pages
of meeting minutes annually – more than twice that of five years ago.
Last year, the Risk Committee of our Board of Directors met 18 times,
while reviewing 4,445 pages of presentation materials.
These are investments befitting an institution of broader size,
geography and business model than M&T is currently, and which will
undoubtedly serve to meet our own operational and strategic needs for
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years to come. But they are far from unrelated to problems and challenges
faced by the financial services industry as a whole – to protect it from the
collateral damage that can be inflicted by opaque systems and transactions,
as well as from a growing wave of external security threats.
DATA, TECHNOLOGY AND CYBERSECURITY: Looking back at the last
financial crisis, it is evident that transparency and integrity of data on
products, portfolios and services within the banking system and their
attendant risks were seriously deficient. In its aftermath, governing bodies
are requiring banks to provide data on their operations frequently and
often on an “on demand” basis. The magnitude of requests has grown
significantly since the crisis and now, in addition to just providing answers,
work papers and supporting documentation must be made available as well.
Answers to regulatory-related questions can involve an array of
bits and bytes, which can be extremely time consuming to fulfill, coming
from different corners of the enterprise. Beyond the demands of regulation,
it is also clear to us that in the information age, data is the lifeblood of
an organization – for customer service, marketing, finance, risk and
other functions.
In 2013, business needs, regulations, as well as common sense,
stimulated us to begin implementation of an enterprise data warehouse.
Beyond the $25 million we have already invested in getting the integrated
warehouse up and running, we will continue to work on making the data
it houses much more comprehensive and accessible, spending perhaps an
additional $20 million annually for the next three years. It will enhance
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our ability to analyze data for our own use and to better serve our
customers, while allowing us to provide better information to regulators.
Today, much of this information is maintained in “vertical silos.”
Banks are increasingly being defined by their “plumbing,” the
technology they deploy to serve their customers. In the past year, we have
invested in our online banking platform and mobile banking application,
enhanced commercial and mortgage lending capabilities and began work on
upgrading the operating system that resides on 27,333 personal computers
and servers, requiring an investment of $19 million. Investments like these
will mean a simpler approach for our clients and an easier experience for
our colleagues.
Improving that experience is but one of the priorities for our
technology investments. Almost daily we are reminded that the threat of
attacks on the systems that have created unprecedented convenience and
efficiency, has also left us at risk of novel forms of crime. Indeed, cybercrime
is a new global growth industry. A recent report by the Center for Strategic
and International Studies estimates that global cybercrime inflicts losses
of up to $400 billion each year, which is almost as much as the estimated
cost of drug trafficking. In 2013, more than 40 million individuals in the
U.S. experienced the theft of their personal information. Cybercrime, it is
estimated, extracts between 15% and 20% of the $2 trillion to $3 trillion in
value created by the Internet.
A vast apparatus of nefarious, increasingly complex activities
continues to manifest itself in a growing number of ways, threatening the
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viability of the systems the world uses to conduct commerce. From
the petty criminal on a home computer, to organized networks
of dedicated hackers, to foreign government-sponsored threats,
the various forms of cybercrime are growing rapidly. Government
Accountability Office (“GAO”) testimony before Congress revealed
that in 2007, US-CERT (Computer Emergency Readiness Team) received
almost 12,000 information security incident reports. That number
had more than doubled by 2009, according to statistics from the GAO,
and it had quintupled by 2013. Based upon one study, the number of
reported retail customer accounts compromised due to data breaches
increased from less than one million in 2012 to over 60 million in 2014.
In 2012, M&T reissued 6,955 debit cards to cardholders who had
been compromised because of identity theft, either as individuals or
because a retailer had been hacked. In 2014, that number had grown to
294,415. Over the same timeframe, the number of cyberattacks on our
systems that we have blocked has gone up by 27% and the number of
“phishing sites,” those set up by fraudsters to trick customers into
believing they are logging onto the M&T website, increased by 36%.
A recent article in The New York Times on cyberattacks quoted law
enforcement officials as saying that the threat of hacking was particularly
acute for the health care and financial services sectors, and that the
FBI now ranks cybercrime as one of its top law enforcement priorities.
Scarcely a week goes by, it seems, without headlines about a cyberattack
on a major U.S. corporation.
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The payments system, the infrastructure that enables money to
move through a modern economy, is a prime target of cybercriminals.
Unfortunately, America has fallen behind much of the developed world in
modernizing this core system. Money is increasingly moved electronically
rather than through the traditional means of checks or cash. As of 2012,
while check transactions in the U.S. declined to 15.5% of non-cash payment
transactions, in mature markets like Europe they only account for 4.8%.
Technology companies, retailers and service businesses have stepped in
to attach to the existing payments infrastructure, providing convenient
new ways of making payment transactions to their customers. While the
innovation that is happening outside the banking industry has the potential
to benefit the public, these non-bank entities are not regulated to the same
high standards as banks and, ultimately, it is the banking industry that
is held responsible for the safety and soundness of the payments system.
As such, it behooves the entire banking industry, behemoth banks and
community banks alike, to work together with regulators to ensure that
America has a payments system that is highly secure and maintains the
public trust, yet is open to many forms of innovation.
It has always been our prime objective to secure our clients’ financial
assets and the bank itself. Not so long ago, ensuring security primarily
involved guards, armored carriers and vaults. We still need them, but the
focus has shifted decisively to protecting our customers’ data and M&T’s
technological infrastructure from electronic attack. To that end, we added
senior cybersecurity experts last year, increasing our staff by more than
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20%. We are also partnering with colleges to bring in a pipeline of young
talent with the right education in security. We have invested significantly
in enterprise fraud technology and enhanced online security – efforts
that comprised just a portion of the 46% increase in investment in
cybersecurity last year – an investment that will undoubtedly continue to
grow in an attempt to stay ahead of rapidly expanding and varied threats.
In an era in which the risks of poor cybersecurity are plain, high security
standards are no luxury. Indeed, they are crucial to our operations.
NEW JERSEY: There are any number of reasons why it has long made sense
for M&T to look to New Jersey should we choose to expand via acquisition.
Quite simply, doing so is in keeping with the character of our past three
decades of mergers and acquisitions, which have consistently brought us
into markets similar to, and contiguous with, those we have served and
with which we are familiar – and where a branch network providing our
broad range of services would improve the banking options available to
households and businesses. By most counts, New Jersey is an attractive
market. Its median household income ranks third in the United States,
while its median household net worth ranks seventh. Middle market and
small businesses, the core of M&T’s clientele, are 20% higher per capita
than the national average.
The attractiveness of this market underpinned our August 2012
decision to enter into a merger agreement with Hudson City Bancorp
(“Hudson City”), believing that we had identified a transaction which
made good sense for both parties – and for New Jersey, where Hudson
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City’s branch network is concentrated. Although the effort to complete
this transaction has proven to be more of a marathon than a sprint, we’re
nonetheless dedicated to crossing the finish line – even if it’s a bit farther
out than we thought. In December, we announced an extension of our
merger agreement – the third time we’ve done so. Still, everything that
made our respective organizations a good fit in the summer of 2012
remains true today. Hudson City’s credit culture was always consistent
with our own conservative approach to credit. The passage of time is
proving that to be even more true; in the two and a half years since we
announced the merger, the credit characteristics of that portfolio have
improved further. The economic benefits that we expected to accrue
to both institutions’ shareholders hold the same promise. Delays are
admittedly frustrating, but this is a merger to which both parties remain
deeply committed.
Despite the delay, considerable progress has been made in bringing
M&T’s community banking model to New Jersey. We opened three new
offices there in 2014, in addition to the four already in place. These offices
house 129 customer facing employees responsible for commercial banking,
residential mortgages, investment securities and wealth management.
M&T now has a portfolio of $1.3 billion in loans to small and large
companies, commercial real estate developers, auto dealers and residential
mortgage customers in the state. It is interesting to note that there are
already 34 of our colleagues serving on 83 not-for-profit boards, which is
typical of M&T’s community involvement. We are in New Jersey to stay.
xviii
So it is that we continue our work in earnest, heartened by the
prospects of building a better bank for a better tomorrow. While one can
be optimistic, indeed excited, about our future, the realities of the present
environment must also be acknowledged. M&T has long been a community
bank focused on its customers, employees and shareholders. Our core
tenets of serving the financial needs of people in our communities through
simple, easily understood products, strong credit standards and an efficient
operating model, remain our mission.
Our task now is to complete these transformational efforts and
to evolve without sacrificing those guiding tenets that are our hallmark.
Rest assured that we will go about them diligently like every other endeavor
in our history. We remain confident in M&T’s ability to adapt, even as the
environment changes around us.
COMPLEXITY NOT SIZE – CONTRASTING BUSINESS MODELS
Although our defining character as a bank that serves its communities
may be clear to us, it is no longer the yardstick against which we’re
measured. There are 33 banks with more than $50 billion in assets in the
United States; M&T is the ninth smallest of those banks. Because it exceeds
that asset threshold, it is held to many of the same standards as banks
with much more complex business models and intricate global exposures.
We’re expected to maintain a regulatory infrastructure on a scale similar
to the large banks – in a sense constructing a super highway to get through
a small city. In this context, it seems worthwhile to point out that M&T’s
estimated annual cost of regulatory compliance rose to $441 million,
xix
16.3% of our total operating expense, an amount that is over four and a
half times the level of a mere three years ago. The number of regulatory
exams at M&T in 2014, conducted by nine different government agencies,
was over 45% higher than in 2012. Our total operating expenses, which
excludes intangible amortization and merger-related expenses, increased
by 5% in 2014, outpacing our peers significantly, which in turn has led to
substantial erosion, temporarily one hopes, of our traditional operating
efficiency advantage.
We remain confident that our essential community-oriented business
model will continue to serve both our customers and investors well. It is of
concern, however, that the distinctive virtues of that traditional model of
banking as practiced not just by M&T but the majority of American banks
are less than fully appreciated in some important quarters. The imperative
of distinguishing between what might be called Main Street and Wall Street
banks has been discussed previously in this Message, but it bears repetition,
analysis and specific illustration. Simply put, the 6,482 community and
regional banks of Main Street have a very different business model than
the five large U.S. banks that dominate the activities traditionally associated
with Wall Street.
Main Street banks gather deposits and make loans; they are the
primary providers of finance to local businesses in the neighborhoods
they serve. Loans comprise 61% of assets at regional banks compared
with just 31% for the five large, complex and globally interconnected U.S.
bank holding companies. Perhaps no other measure illustrates this point
xx
better than the comparison of lending to small businesses. It is interesting
to note that last year those five large banks funded 4% of Small Business
Administration loans, a subset of loans made to small businesses, while the
rest, Main Street banks, funded 96%. Core deposits fund 64% of assets at
regional banks; the comparable figure for large banks is just 32%. Here at
M&T, some 69% of our assets are simple lending agreements made in the
interest of funding commerce and industry as well as the personal needs
of individuals, particularly mortgages for their homes and financing for
their automobiles. Core deposits fund 75% of our assets. Those five large
banks have limited branch networks in smaller and rural communities.
Just 55% of these large bank branch offices can be found outside the ten
largest metropolitan areas, compared with 73% for regional banks.
Beyond these distinctions, the key feature that differentiates the
operating model of most large banks is their involvement in the trading and
manufacturing of derivatives – instruments that have long bred complexity
and confusion. In fact, five banks accounted for 95% of the $304 trillion of
U.S. banking sector derivatives outstanding at the end of September 2014.
To put it in perspective, that figure amounts to 16 times the U.S. GDP and
19 times the total banking system assets in the U.S. – eye popping indeed.
Even after the crisis and subsequent adoption of the Volcker rule, the five
large banks in 2014 still accounted for 90% of total U.S. bank trading
revenue while the remaining 6,482 banks accounted for 10%.
The American public’s relationship with derivatives is long and well
chronicled. Since their creation in 1848, derivatives markets have been
xxi
afflicted by speculation, lack of transparency and manipulation. Noting
the price distortions that wreaked financial havoc on America’s agricultural
sector during the Great Depression and caused widespread public
hardship, President Roosevelt said, “…it should be our national policy to
restrict, as far as possible, the use of these [futures] exchanges for purely
speculative operations.” The Commodity Exchange Act (“CEA”) in 1936
required that futures contracts be traded on regulated exchanges, which
facilitated transparent price discovery, identification of buyers and sellers,
standardization of contracts and adequate capital to support the fulfilment
of contractual commitments. Since the use of swap contracts came into
being some 34 years ago, they have been progressively exempt from
regulation. In 1993, they were officially excluded from the purview of the
exchange trading provision of the CEA with its attendant requirements of
transparency and adequate capitalization. It is no surprise this was followed
by events such as the bankruptcy filing of Orange County, California in
1994, after losing $1.5 billion on poorly understood interest rate swaps, and
losses through derivatives by such major corporations as Gibson Greetings
and Procter & Gamble. In 2000, the passage of the Commodity Futures
Modernization Act effectively removed the swaps market from almost
all pertinent federal regulatory oversight and preempted state rules and
regulations. The outcome: the bankruptcy of Jefferson County, Alabama,
also a consequence of interest rate swaps, which resulted in increases in
sewer rates to its citizens of 7.9% annually; losses incurred by the City of
Detroit, which later filed for bankruptcy, on swap contracts connected with
pension debt; and payments required to be made by the Denver public
xxii
school system to terminate complex derivative transactions originally
executed with the promise of bolstering its pension fund, among many
other instances of large scale impact on the taxpaying public.
Use of credit default swaps (“CDS”) to place bets that homeowners
would default on their mortgages had devastating consequences to the
American public during the last crisis. These “naked trades” by parties with
no exposures to the underlying mortgage loans significantly outweighed
the actual amount of mortgage debt outstanding. In 2014, we saw that such
wagers were alive and well in other areas of our economy and continued to
provide participants with lucrative opportunity for speculation. As a well-
known electronics retailer teetered on the brink of bankruptcy, bets made
on its eventual fate through the medium of CDS stood at $23.5 billion,
dwarfing by 16.8 times the $1.4 billion in debt that the company actually
owed to its creditors. These wagers, on whether and when the firm would
default on its debt, were facilitated by hedge fund managers, who first sold
high premium insurance to those who believed that the company’s demise
was imminent. Then, they turned around and provided temporary life
support in the form of “rescue financing” to keep it alive long enough to
pocket the premium. Lack of transparency in these markets makes it very
difficult to ascertain the true economic motives and exposure of any parties
involved with CDS. One can only sound a sigh of relief that those involved
were outside the banking industry, were adequately capitalized and were not
wagering with depositors’ funds. Such was not the case in 2012, when one of
these same hedge fund managers was on the winning side of the “London
xxiii
Whale” trades that resulted in notable losses for one large bank and sparked
outrage from regulators and the general public.
The disruptive forces that exist in the derivatives markets will most
assuredly endure. Despite their usefulness as a risk management tool to
assist those engaged in commerce and industry, derivatives have been a
vehicle for speculation and price manipulation almost since their inception.
In the absence of effective regulation, their use for speculative endeavors
continues to have the potential to damage our financial system.
It is comforting that in the aftermath of the crisis, government
agencies have regained the required authority to supervise this $304 trillion
market, particularly as it relates to bank holding companies. An indication
of the breadth and depth of the regulatory effort is provided by seven federal
agencies: the U.S. Securities and Exchange Commission, the Commodity
Futures Trading Commission, the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Federal Housing Finance Agency, and the
Farm Credit Administration, which together issued 81 final rules and an
additional 35 proposed rules, totaling by one estimate 11,844 pages in the
Federal Register over four years. The complexity, opacity and potential
of derivatives to again seriously damage our economy are clearly too great
to be ignored.
Even with the benefit of the regulatory efforts mentioned above, one
of the hallmarks of derivatives remains their lack of transparency; it is
difficult for regulators, investors and others to understand the true exposure
xxiv
of the banks that dominate trading in derivatives and the extent of their
interconnectedness. Even with an average of 13 pages of footnotes in the
financial statements of the five large trading banks, one is left with far more
questions than answers. For example: How does the value of the derivatives
change over time? Who are the counterparties and what is their level of
creditworthiness? How do the counterparties’ risk exposures interconnect
them with each other in different global markets? How will the payments
and the associated sequence work in the case of a default? Can such
mind-boggling numbers even be managed or do the derivatives portfolios
ultimately manage us?
Although complexity is often equated with size, that equation is a
spurious one – one of the largest U.S. banks has an operating model that
is much more akin to Main Street banks than the other large banks. Loans
to individuals and commercial borrowers comprise 52% of its assets while
62% of those assets are funded with core deposits and 70% of its branches
are located outside the ten largest metropolitan areas. Trading activities
comprised just 2% of its revenue last year, yet it has $1.7 trillion of assets.
It is interesting to note that this bank was the only one among the largest
six U.S. banks whose plan to manage an orderly disposition in the event of
distress, was accepted by the regulators – an indication of the simplicity of
its business model.
It is only logical that the sophistication and granularity of the
quantitative modeling and analytical capabilities required to manage a
large trading portfolio, where values change on a daily basis, and traders’
xxv
compensation systems offer large payouts for short-term performance,
differ extremely from those required for a regional bank, whose loan
portfolios are held to maturity rather than traded on a daily basis,
where the quantity of leverage is transparent, the bearer of risk of loss
is clearly identifiable and loan officer compensation programs are
more mainstream.
Indeed, rules intended to increase transparency, require adequate
capital to honor commitments, and ensure identification of the parties
involved through a central clearing system so that failures can be resolved
in an orderly manner, are not just logical but long overdue. So the question
is not whether, but how. How does one effectively regulate institutions
whose defining characteristic is complexity, a feature derived significantly
from their domination of the business of manufacturing, trading and
selling derivatives in the United States, without burdening the rest of
the banking system that is critical to facilitating much-needed economic
growth? It seems abundantly evident that in order to maximize effectiveness,
regulation should be based on the complexity of business model, and not
on the size of institutions.
A TIERED APPROACH TO REGULATION
While banks’ business models are different, government’s regulation
of them is similar. At the same time, compliance has become ever more
central to the business of banking.
When the Dodd-Frank Act was written, the principle that size
correlates to riskiness was not outlandish. After all, it was the failure
xxvi
(or potential failure) of the largest institutions that threatened the financial
system and the economy at large. Size makes for a simple, perhaps too
convenient barometer – a bank either has over $50 billion in assets or it
doesn’t. The complexity and systemic importance of an institution, on the
other hand, is far more difficult to ascertain. To avoid subjective debates
about which regulations should apply to which institutions, using size as a
primary determinant was, perhaps, a practical starting point. However, it
is now time to review the objectives of the enhanced prudential standards
and allow for the varying supervision needs of organizations with differing
levels of complexity. After all, the goal of legislation and regulation is to
protect consumers and the economy while facilitating commerce, not
hampering it. Indeed, further adaptation of the regulations may be in store
based on recent comments made by a member of the Board of Governors
of the Federal Reserve System. In suggesting the possibility of a “tiered
approach to regulation and supervision of community banks,” the Governor
noted, “[such banks] have a smaller balance sheet across which to amortize
compliance costs.”
Adoption of a “tiered approach,” based on complexity as opposed to
simply size, would be a welcome change while preserving the core intent
of the Dodd-Frank regulations to minimize risks to U.S. financial stability.
Banks over $50 billion in size are required to go through semiannual stress
tests, as well as to annually create so-called Living Wills – instructions on
how to effectively wind down an institution if the capital and liquidity rules
are insufficient to prevent its demise. Many CCAR standards are better
xxvii
suited to assess, monitor and estimate complex exposures and activities such
as trading, derivatives and counterparty risk, which carry a higher level of
volatility in stressed environments. Using a standardized approach across
the entire banking industry in these areas creates a risk that banks with
simpler business models are not rewarded with lower infrastructure cost.
As an alternative to the current approach, the annual CCAR exercise could
be replaced with a review of the capital planning program through the
normal supervisory teams dedicated to institutions with lower risk operations.
This would allow for a more customized approach to determining capital
planning and adequacy, commensurate with the complexity of the bank.
For the most part, regional and community banks do not exhibit
the maze of interconnectedness through derivative transactions that
characterize the largest banks, and have much simpler legal structures,
which make them much easier to deal with in case of failure through the
traditional and time tested FDIC process. A publication of The Clearing
House Association noted, “If you were to add up the legal entities of all
of America’s regional banks, the total would still be less than the number
of legal entities under America’s single largest bank holding company.”
Simple regional banks could be required to update their plan for disposition
only if a significant acquisition or other change meaningfully altered their
legal structure.
Banks with assets greater than $50 billion are required to hold large
stocks of liquid securities under the Liquidity Coverage Ratio (“LCR”)
rule to satisfy hypothetical funding needs calculated using standardized
xxviii
assumptions provided by the regulators. Unlike large trading banks with
volatile balance sheets that rely upon short-term wholesale funding, the
balance sheets of regional and community banks are predominantly funded
with stable core customer deposits. Given the lower liquidity risk presented
by regional banks, it would seem appropriate for the LCR to substantially
differentiate them from trading banks with respect to the amount of
securities required to be held, and the granularity, frequency and amount
of data to be provided to the regulators. Such a tailored approach would
satisfy the objective of improving the banking system’s ability to withstand
increased liquidity needs during stressful economic environments without
placing an outsized burden on Main Street banks.
At the heart of the last crisis were incentive compensation systems
that encouraged traders to take on undue risk, to earn large sums of money,
without having to forfeit any previously earned compensation on trades that
subsequently turned out to be excessively risky. In 2014, the average salary
and benefits per employee at the five large trading banks was $212,665.
While at the rest of the domestic banks with total assets of over $50 billion
it was $101,724, or 52% less. One large institution’s personnel earned
$379,402 per person or nearly four times more than the rest of the banks
that did not specialize in Wall Street activities.
Given compensation systems with huge payouts at trading banks,
regulators have rightly enacted a series of rules to ensure that incentive
programs do not tempt employees into actions that expose banks to undue
risk. However, while these policies are essential to preventing excessive risk-
xxix
taking by traders, the rules are burdensome for regional bank employees
who have little ability to take risk positions that could bring down the bank.
By way of example, last year, 2,461 individuals, or 16% of M&T’s employee
base, fell within the purview of these provisions, requiring that their
compensation packages be subject to heightened review. Allowing regional
banks to restrict the applicability of these provisions to their executive
management team and a handful of other employees, would reduce the
burden of compliance, and focus more scrutiny on those individuals within
the company who actually have the ability to subject the organization to
material risk.
While these are a few examples of what could be done, it is time to
review all the impediments to community lending and economic growth
that regulations predicated on size, rather than complexity, have created
for the banking industry. Complexity, not size, is the defining contributor
of significant risk to the financial system and taxpayers. The enhanced
prudential standards adopted by the Federal Reserve in February 2014
are not only a logical consequence of the recent financial crisis – they
were necessary. Now, regulators and industry together should assess what
we have learned since the crisis in an effort to hone the effectiveness of
regulating complexity, without burdening simpler business models with
disproportionately higher costs of compliance. After all, our economic
recovery is still very uneven, and people and communities are still suffering;
regional banks need to be supported in their efforts to encourage the type
of activity that fosters local economic growth.
xxx
ECONOMY – THE BEST OF TIMES AND THE WORST OF TIMES
As focused as one must be on the bank’s business and internal operations,
one must not forget the larger economy which we are chartered to serve.
For some, it is true; the economy has turned, at least for now. To an extent,
the financial crisis may seem like a faded memory. On an annualized basis,
U.S. real GDP growth has topped the 3% long-term average in four of the
past six quarters – the strongest period of sustained growth since 2006.
U.S. private sector employers created 2.5 million jobs in 2014 – the strongest
year-over-year increase since 1999. The low interest rate environment
established by the Federal Reserve, along with the efforts of ordinary
people trying to minimize their financial risk, have reduced household
debt service burdens to generational lows.
Despite these ostensibly positive trends, for far too many
Americans the recovery is something about which they read – a
phenomenon affecting other people in other places. While metropolitan
areas are doing much better, rural areas continue to struggle. Over the
past decade, U.S. employment growth has varied widely between larger
urban areas and rural communities. Collectively, U.S. metropolitan areas
experienced a 12% increase in private sector employment from 2003-2013
while non-metropolitan areas recorded just a 5.4% gain. This trend can
also be seen in upstate New York, where from January 2003 to November
2014, private employment in metropolitan areas rose by 2.5% compared
to just a 0.2% increase in non-metropolitan areas.
xxxi
More worrisome is the impact of the current, uneven recovery
on the economy’s future. Tomorrow’s generation faces a number of
headwinds that will forestall their ability to contribute to the next wave
of economic growth. Aggregate student loan debt stands at more than
$1.1 trillion, trailing only mortgage debt as the largest form of consumer
indebtedness. One consequence of this rising student debt burden is
deferment of home ownership – the percentage of 18-to-34 year olds who
own homes has continued to decline and stands at 13% compared to over
17% before the crisis.
Contrary to their portrayals in popular media as a group of
swashbuckling entrepreneurs, Millennials have actually become less
inclined to launch new businesses – the percentage of business owners in
that demographic has not been this low since the early nineties. Since 2007,
the average net worth of those under 30 has fallen by almost half. Young
people who are now entering the workforce with limited professional,
financial and entrepreneurial opportunities may unfortunately be losing
the most vital and economically productive years of their lives. It follows,
then, that the total rate of business creation from 2012 to 2013 continued
the downward trend that started in 2011. These are not the signs of the
kind of America for which we strive and aspire – one in which opportunity,
prosperity and growth are broadly shared.
It is against such a backdrop that one must weigh the unintended
consequences of regulation, which burden the institutions that power
the core of our local economies in America. One cannot question the
xxxii
applicability or utility of these regulations in improving transparency and
reducing opacity in the financial services industry. However, there is a need
for balance, where supervision is commensurate with the complexity of an
institution’s business model.
It is hard not to see the situation in this way: regulators, under the
most extreme sort of pressure from elected officials, train their sights on
traditional banks, while capital heads elsewhere and with it, the sort of
risks Dodd-Frank was meant to mitigate. At the same time, the traditional,
so-called real economy recovers in fits and starts and American businesses
and consumers struggle to get the credit they need. M&T has been and
remains dedicated to serving those credit needs. Doing so will depend, in
part, on a supportive regulatory environment, one that is simpler and more
predictable, tailored for different types of banks, and premised on a balance
between costs and benefits – not for banks or banking but, rather, for the
American economy as a whole. The time has come to allow America’s
community banks to serve their traditional roles of taking deposits and
making prudent loans to the friends and neighbors they know, and not
allow misplaced animus and a one-size-fits-all approach to regulation to
hinder the American economic recovery finally underway.
In thinking about the banking industry in the overall context
of the economy, we should pause to remind ourselves of history. Just as
John Maynard Keynes presciently saw that the draconian terms of the
Treaty of Versailles could be the harbingers of international instability –
and which opened a Pandora’s Box from which came economic stagnation,
xxxiii
hyperinflation and social instability – so must we be open to similar
possibilities when it comes to financial regulation. An overly harsh
undifferentiated response could plant the seeds of new problems. As a
long time banker, I am hopeful for a return to an intelligible milieu where
banks are able to energetically fulfill their roles as facilitators of commerce
and of the quality of life in the local communities across our country.
Those of us in the industry share the common goal of legislators and
regulators, to create the safest financial system in the world. It pains me to
see excessive regulation that might stifle innovation, drive society’s best and
brightest away from our industry or discourage bankers from fulfilling their
role in the economy out of fear of being inordinately fined and sanctioned.
Much of what has been done is right, but it can be made better and more
effective. The whole system will be better off if all constituents can get past
their entrenched positions to just “make it right.”
OUR COLLEAGUES
Once again, the 15,782 M&T employees I’m proud to call colleagues
demonstrated an ability to adapt to changing circumstances and rise up
to conquer new challenges. We asked more of our employees than ever
before and they delivered in a way that inspires awe, gratitude and respect.
A talented legion of veteran M&T colleagues aided by a corps of newly
hired reinforcements worked tirelessly to build a better M&T, often working
late into the night or through to the morning no matter the day of the
week. Even a historic November storm that battered our home market just
before Thanksgiving, dumping almost eight feet of snow in some of our
xxxiv
communities and rendering roads impassable, could not keep employees
from the office – dozens of the dedicated stayed in downtown hotel rooms
and made sure the work got done, not because they were asked to, but
because they have a deep, inspiring sense of personal responsibility.
Of course, our colleagues’ extraordinary efforts were not limited
to the office. We refer here to their commitment, as citizen volunteers
and leaders, in our communities. Time and again, they band together to
help friends and neighbors – through work in schools, churches, civic
organizations, environmental initiatives and many more organizations too
numerous to list. The colleagues whom I thank here do not understand
such service as a burden, nor as unrelated to their ordinary activities – it
is a part of who they are and what they do. Their selfless work defines our
company and goes to the heart of what M&T is and will continue to be:
a community bank predicated upon the notion of the collective success
of our clients and our colleagues. They are the face of our bank – for our
customers and for our communities. They act as owners – in no small part
because many are – and their sense of ownership is evident in the quality
of and dedication to their work.
A PERSONAL NOTE
Following the Annual Meeting of the Shareholders on April 21, 2015,
Jorge G. Pereira will retire as the Vice Chairman of the Boards of Directors
of M&T Bank Corporation and M&T Bank. I would be remiss not to offer
my special thanks to Jorge for his service. Jorge joined the boards of what
were then known as First Empire State Corporation and M&T Bank with
xxxv
me in 1982, and although not an employee or member of management,
he has been my close partner and colleague over the past 33 years. At the
beginning of that partnership, it was his faith in me that helped provide
the combination of confidence and guidance that I needed in my new role
as chief executive. Over the years, I was fortunate to be able to rely on his
judgment and wisdom; he helped to shape and refine our vision of M&T
as a bank whose business would be built on communities and customers,
employees and shareholders. In his service on the boards, Jorge gave of his
time in a wide range of roles. As M&T’s largest individual, non-management
shareholder, Jorge added an independent voice to the board’s consideration of
executive compensation and corporate governance matters, while serving as
the lead independent director. We have been supremely fortunate to draw on
Jorge’s advice and guidance, not least during the challenging years of the past
decade. We extend our heartfelt gratitude for his long service, wise counsel
and valuable contributions to the success of this company. I will miss him
as a colleague – but continue to cherish him as a friend.
Robert G. Wilmers
Chairman of the Board
and Chief Executive Officer
February 20, 2015
xxxvi
M & T B A N K C O R P O R A T I O N
Officers and Directors
OFFICERS
DIRECTORS
Robert G. Wilmers
Chairman of the Board
and Chief Executive Officer
Robert G. Wilmers
Chairman of the Board
and Chief Executive Officer
Mark J. Czarnecki
President and Chief
Operating Officer
Robert J. Bojdak
Executive Vice President
and Chief Credit Officer
Stephen J. Braunscheidel
Executive Vice President
William J. Farrell II
Executive Vice President
Richard S. Gold
Executive Vice President
and Chief Risk Officer
Brian E. Hickey
Executive Vice President
Jorge G. Pereira
Vice Chairman of the Board
Private Investor
Brent D. Baird
Private Investor
C. Angela Bontempo
Former President and
Chief Executive Officer
Saint Vincent Health System
Robert T. Brady
Former Executive Chairman
Moog Inc.
T. Jefferson Cunningham III
Former Chairman of the Board
and Chief Executive Officer
Premier National Bancorp, Inc.
René F. Jones
Executive Vice President
and Chief Financial Officer
Mark J. Czarnecki
President and Chief
Operating Officer
Darren J. King
Executive Vice President
Gino A. Martocci
Executive Vice President
Kevin J. Pearson
Executive Vice President
Gary N. Geisel
Former Chairman of the Board
and Chief Executive Officer
Provident Bankshares Corporation
John D. Hawke, Jr.
Senior Counsel
Arnold & Porter LLP
Michele D. Trolli
Executive Vice President and
Chief Information Officer
Patrick W.E. Hodgson
President
Cinnamon Investments Limited
D. Scott N. Warman
Executive Vice President
and Treasurer
John L. D’Angelo
Senior Vice President
and General Auditor
Drew J. Pfirrman
Senior Vice President
and General Counsel
Michael R. Spychala
Senior Vice President
and Controller
Richard G. King
Chairman of the
Executive Committee
Utz Quality Foods, Inc.
Melinda R. Rich
Vice Chairman
Rich Products Corporation
and President
Rich Entertainment Group
Robert E. Sadler, Jr.
Former President and
Chief Executive Officer
M&T Bank Corporation
Herbert L. Washington
President
H.L.W. Fast Track, Inc.
xxxvii
Melinda R. Rich
Vice Chairman
Rich Products Corporation
and President
Rich Entertainment Group
Robert E. Sadler, Jr.
Former President and
Chief Executive Officer
M&T Bank Corporation
Herbert L. Washington
President
H.L.W. Fast Track, Inc.
DIRECTORS
Robert G. Wilmers
Chairman of the Board
and Chief Executive Officer
Jorge G. Pereira
Vice Chairman of the Board
Private Investor
Brent D. Baird
Private Investor
C. Angela Bontempo
Former President and
Chief Executive Officer
Saint Vincent Health System
Robert T. Brady
Former Executive Chairman
Moog Inc.
T. Jefferson Cunningham III
Former Chairman of the Board
and Chief Executive Officer
Premier National Bancorp, Inc.
Mark J. Czarnecki
President and Chief
Operating Officer
Gary N. Geisel
Former Chairman of the Board
and Chief Executive Officer
Provident Bankshares Corporation
John D. Hawke, Jr.
Senior Counsel
Arnold & Porter LLP
Patrick W.E. Hodgson
President
Cinnamon Investments Limited
Richard G. King
Chairman of the
Executive Committee
Utz Quality Foods, Inc.
M & T B A N K
Officers and Directors
OFFICERS
Robert G. Wilmers
Chairman of the Board
and Chief Executive Officer
Mark J. Czarnecki
President and Chief
Operating Officer
Vice Chairmen
Richard S. Gold
René F. Jones
Kevin J. Pearson
Executive Vice Presidents
Robert J. Bojdak
Stephen J. Braunscheidel
Janet M. Coletti
John F. Cook
William J. Farrell II
Mark A. Graham
Brian E. Hickey
Darren J. King
Gino A. Martocci
Michael J. Todaro
Michele D. Trolli
D. Scott N. Warman
Senior Vice Presidents
Jeffrey L. Barbeau
Carol H. Bartosz
John M. Beeson, Jr.
Keith M. Belanger
Deborah A. Bennett
Peter M. Black
Daniel M. Boscarino
Ira A. Brown
Daniel J. Burns
Nicholas L. Buscaglia
Noel Carroll
Mark I. Cartwright
David K. Chamberlain
August J. Chiasera
Jerome W. Collier
Cynthia L. Corliss
R. Joe Crosswhite
John L. D’Angelo
Peter G. D’Arcy
Carol A. Dalton
Ayan DasGupta
Shelley C. Drake
Michael A. Drury
Gary D. Dudish
Donald I. Dussing, Jr.
Peter J. Eliopoulos
Ralph W. Emerson, Jr.
Jeffrey A. Evershed
Tari L. Flannery
James M. Frank
R. S. Fraundorf
Timothy E. Gillespie
Robert S. Graber
Sam Guerrieri, Jr.
Harish A. Holla
Neil Hosty
Carl W. Jordan
Michael T. Keegan
Nicholas P. Lambrow
Michele V. Langdon
Lon P. LeClair
Robert G. Loughrey
Alfred F. Luhr III
Rex P. Macey
Christopher R. Madel
Paula Mandell
Louis P. Mathews, Jr.
Richard J. McCarthy
Donna McClure
William McKenna
Mark J. Mendel
Christopher R. Morphew
Michael S. Murchie
Allen J. Naples
Drew J. Pfirrman
Eileen M. Pirson
Paul T. Pitman
Michael J. Quinlivan
Christopher D. Randall
Daniel J. Ripienski
John F. Robbins
M. Julieta Ross
Anthony M. Roth
John P. Rumschik
Charles Russella, Jr.
Mahesh Sankaran
Jack D. Sawyer
Jean-Christophe Schroeder
Susan F. Sciarra
Douglas A. Sheline
Michael J. Shryne
Sabeth Siddique
Glenn R. Small
Philip M. Smith
Deepa Soni
Michael R. Spychala
David W. Stender
Kemp C. Stickney
John R. Taylor
Christopher E. Tolomeo
Patrick M. Trainor
Scott B. Vahue
Michael P. Wallace
Linda J. Weinberg
Jeffrey A. Wellington
Tracy S. Woodrow
xxxviii
M & T B A N K
Regional Management and Directors Advisory Councils
REGIONAL PRESIDENTS
Jeffrey A. Wellington
Western New York
Allen J. Naples
Central New York
Stephen A. Foreman
Central/Western Pennsylvania
Robert H. Newton, Jr.
Central Virginia
Nicholas P. Lambrow
Delaware
August J. Chiasera
Baltimore and Chesapeake
Peter M. Black
Greater Washington
Michael T. Keegan
Albany/Hudson Valley North
Peter G. D’Arcy
New York City/Long Island
Philip H. Johnson
Northern Pennsylvania
Ira A. Brown
Philadelphia
Daniel J. Burns
Rochester
Peter G. Newman
Southern New York
R. Joe Crosswhite
Southeast Pennsylvania
Paula Mandell
Tarrytown/New Jersey
DIRECTORS
ADVISORY COUNCILS
New York State
Central New York Division
Aminy I. Audi
James V. Breuer
Carl V. Byrne
Mara Charlamb
Richard W. Cook
James A. Fox
Richard R. Griffith
Robert H. Linn
Nicholas O. Matt
Margaret O’Connell
M. Catherine Richardson
Richard J. Zick
Hudson Valley Division
Elizabeth P. Allen
Kevin M. Bette
Nancy E. Carey Cassidy
T. Jefferson Cunningham III
Michael H. Graham
Christopher Madden
William Murphy
Lewis J. Ruge
Albert K. Smiley
Archibald A. Smith III
Thomas G. Struzzieri
Charles C. Tallardy III
Peter Van Kleeck
Alan Yassky
Jamestown Division
Sebastian A. Baggiano
John R. Churchill
Steven A. Godfrey
Joseph C. Johnson
Stan Lundine
Kim Peterson
Allen Short
Michael J. Wellman
New York City/Long Island
Division
Earle S. Altman
Jay I. Anderson
Brent D. Baird
Louis Brause
Patrick J. Callan
Anthony J. Dowd
Lloyd M. Goldman
Peter Hauspurg
Gary Jacob
Mickey Rabina
Don M. Randel
Michael D. Sullivan
Alair A. Townsend
Rochester Division
William A. Buckingham
R. Carlos Carballada
Timothy D. Fournier
Jocelyn Goldberg-Schaible
Laurence Kessler
Anne M. Kress
Joseph M. Lobozzo II
Mark S. Peterson
Carolyn A. Portanova
John K. Purcell
Victor E. Salerno
Derace L. Schaffer
Amy L. Tait
Linda Cornell Weinstein
Southern New York Division
George Akel, Jr.
Daniel R. Babcock
Lee P. Bearsch
Richard J. Cole
Joseph W. Donze
Albert Nocciolino
Robert R. Sprole III
Frank H. Suits, Jr.
Terry R. Wood
Pennsylvania / Delaware /
Maryland / Virginia /
West Virginia
Baltimore-Washington
Division
Thomas S. Bozzuto
Daniel J. Canzoniero
Robert A. Chrencik
Jeffrey S. Detwiler
Scott E. Dorsey
Steve Dubin
Kevin R. Dunbar
Gary N. Geisel
John F. Jaeger
Warner P. Mason
Thomas R. Mullen
John H. Phelps
Marc B. Terrill
Central
Pennsylvania Division
Christopher M. Cicconi
Mark X. DiSanto
Rolen E. Ferris
Martin G. Lane, Jr.
Ronald M. Leitzel
John P. Massimilla
Craig J. Nitterhouse
Ivo V. Otto III
William F. Rothman
Lynn C. Rotz
Herbert E. Sandifer
John D. Sheridan
Frank R. Sourbeer
Daniel K. Sunderland
Sondra Wolfe Elias
Central Virginia Division
Toni R. Ardabell
Otis L. Brown
Robert J. Clark
Daniel Loftis
Bart H. Mitchell
Robert Wayne Ohly, Jr.
Michael Patrick
Charles W. Payne, Jr.
Brian R. Pitney
Frank L. Robinson
Katheryn E. Surface Burks
Debbie L. Sydow
Chesapeake Upper
Shore Division
Richard Bernstein
Hugh E. Grunden
William W. McAllister, Jr.
Lee McMahan
Chesapeake Lower
Shore Division
Michael G. Abercrombie, Jr.
John H. Harrison
John M. McClellan
James F. Morris
John M. Stern
Eastern
Pennsylvania Division
Paul J. Datte
Richard E. Fehr
Steven I. Field
Roy A. Heim
Donald E. Jacobs
Joseph H. Jones, Jr.
David C. Laudeman
Eric M. Mika
Stephen M. Moyer
Jeanne Boyer Porter
Robert P. Powell
Greg Allen Stewart
Larry A. Wittig
Northeast
Mid-Atlantic Division
Richard Alter
Clarence C. Boyle, Jr.
Nicole A. Funk
James Lambdin
Thomas C. Mottley
Paul T. Muddiman
John D. Pursell, Jr.
John Thomas Sadowski, Jr.
Kimberly L. Wagner
Craig A. Ward
Northeastern
Pennsylvania Division
Richard S. Bishop
Christopher L. Borton
Maureen M. Bufalino
Stephen N. Clemente
Robert Gill
Thomas F. Torbik
Murray Ufberg
Northern
Pennsylvania Division
Sherwin O. Albert, Jr.
Jeffrey A. Cerminaro
Clifford R. Coldren
James E. Douthat
Charlene A. Friedman
Steven P. Johnson
Kenneth R. Levitzky
Robert E. More
John D. Rinehart
J. David Smith
Donald E. Stringfellow
Paul M. Walison
Philadelphia Division
Steven A. Berger
Edward M. D’Alba
Linda Ann Galante
Ruth S. Gehring
Eli A. Kahn
Mark Nicoletti
Robert N. Reeves, Jr.
Robert W. Sorrell
Steven L. Sugarman
Christina Wagoner
Western
Pennsylvania Division
Jodi L. Cessna
Paul I. Detweiler III
Philip E. Devorris
Michael A. Fiore
Joseph A. Grappone
Daniel R. Lawruk
Gerald E. Murray
Robert F. Pennington
Joseph S. Sheetz
William T. Ward
J. Douglas Wolf
xxxix
S E C F O R M 1 0 - K
xl
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
or
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-9861
M&T BANK CORPORATION
(Exact name of registrant as specified in its charter)
New York
(State of incorporation)
One M&T Plaza, Buffalo, New York
(Address of principal executive offices)
16-0968385
(I.R.S. Employer Identification No.)
14203
(Zip Code)
Registrant’s telephone number, including area code:
716-635-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.50 par value
6.375% Cumulative Perpetual Preferred Stock,
Series A, $1,000 liquidation preference per share
6.375% Cumulative Perpetual Preferred Stock,
Series C, $1,000 liquidation preference per share
Warrants to purchase shares of Common Stock
(expiring December 23, 2018)
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
8.234% Capital Securities of M&T Capital Trust I
(and the Guarantee of M&T Bank Corporation with respect thereto)
(Title of class)
8.234% Junior Subordinated Debentures of
M&T Bank Corporation
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes Í
Act. Yes ‘
No ‘
No Í
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past
90 days. Yes Í
No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes Í
No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer Í
Non-accelerated filer ‘
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Accelerated filer ‘
Smaller reporting company ‘
Act). Yes ‘
No Í
Aggregate market value of the Common Stock, $0.50 par value, held by non-affiliates of the registrant, computed by reference to
the closing price as of the close of business on June 30, 2014: $14,427,352,292.
Number of shares of the Common Stock, $0.50 par value, outstanding as of the close of business on February 13, 2015:
132,912,535 shares.
Documents Incorporated By Reference:
(1) Portions of the Proxy Statement for the 2015 Annual Meeting of Shareholders of M&T Bank Corporation in Parts II and III.
M & T B A N K C O R P O R A T I O N
F o r m 1 0 - K f o r t h e y e a r e n d e d D e c e m b e r 3 1 , 2 0 1 4
C R O S S - R E F E R E N C E S H E E T
Item 1. Business
Statistical disclosure pursuant to Guide 3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I. Distribution of assets, liabilities, and shareholders’ equity; interest rates
P A R T I
and interest differential
A.
B.
Average balance sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income/expense and resulting yield or rate on average
interest-earning assets (including non-accrual loans) and interest-
bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate/volume variances
C.
Investment portfolio
A.
B.
C.
Year-end balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity schedule and weighted average yield . . . . . . . . . . . . . . . . .
Aggregate carrying value of securities that exceed ten percent of
shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan portfolio
A.
B.
C.
Year-end balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities and sensitivities to changes in interest rates . . . . . . . . . .
Risk elements
Nonaccrual, past due and renegotiated loans . . . . . . . . . . . . . . . . .
Actual and pro forma interest on certain loans .
. . . . . . . . . . . . . . .
Nonaccrual policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan concentrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary of loan loss experience
A.
Analysis of the allowance for loan losses . . . . . . . . . . . . . . . . . . . . .
Factors influencing management’s judgment concerning the
adequacy of the allowance and provision . . . . . . . . . . . . . . . . . . . . .
Allocation of the allowance for loan losses . . . . . . . . . . . . . . . . . . . .
II.
III.
IV.
B.
V. Deposits
A.
B.
Average balances and rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity schedule of domestic time deposits with balances of
$100,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VI. Return on equity and assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VII.
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K
Page
4
47
47
23
21,109
79
110
21, 113
77
60, 115-119
115,123
104,105
69
58,120-125
57-69, 105, 120-125
68,120,124-125
47
80
23,42,83,85
129
23-32
32
32-33
33
33
34-35
P A R T I I
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal market
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A.
Market prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approximate number of holders at year-end . . . . . . . . . . . . . . . . . .
B.
35-38
35
93
21
2
C.
D.
E.
Frequency and amount of dividends declared . . . . . . . . . . . . . . . . .
Restrictions on dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities authorized for issuance under equity compensation
plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F.
Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected consolidated year-end balances . . . . . . . . . . . . . . . . . . . . .
A.
Consolidated earnings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B.
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and
E.
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . .
Item 8.
Report on Internal Control Over Financial Reporting . . . . . . . . . .
A.
Report of Independent Registered Public Accounting Firm . . . . . .
B.
Consolidated Balance Sheet — December 31, 2014 and 2013 . . . .
C.
Consolidated Statement of Income — Years ended December 31,
D.
2014, 2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Comprehensive Income — Years
ended December 31, 2014, 2013 and 2012 . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows — Years ended December
31, 2014, 2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Changes in Shareholders’ Equity —
Years ended December 31, 2014, 2013 and 2012 . . . . . . . . . . . . . . .
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarterly Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H.
I.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
G.
F.
B.
A.
Conclusions of principal executive officer and principal financial
officer regarding disclosure controls and procedures . . . . . . . . . . .
Management’s annual report on internal control over financial
reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attestation report of the registered public accounting firm . . . . . .
Changes in internal control over financial reporting . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C.
D.
P A R T I I I
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11.
Security Ownership of Certain Beneficial Owners and Management and
Item 12.
Related Stockholder Matters
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director
Item 14.
Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P A R T I V
Form 10-K
Page
22-23, 93, 102
9-14
35-36
37
38
38
21
22
38-94
95
95
96
97
98
99
100
101
102
103-169
93
170
170
170
170
170
170
170
170
170
171
171
171
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
171
172-173
174-176
3
Item 1.
Business.
PART I
M&T Bank Corporation (“Registrant” or “M&T”) is a New York business corporation which is registered as
a financial holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”) and as
a bank holding company (“BHC”) under Article III-A of the New York Banking Law (“Banking Law”). The
principal executive offices of M&T are located at One M&T Plaza, Buffalo, New York 14203. M&T was
incorporated in November 1969. M&T and its direct and indirect subsidiaries are collectively referred to
herein as the “Company.” As of December 31, 2014 the Company had consolidated total assets of $96.7
billion, deposits of $73.6 billion and shareholders’ equity of $12.3 billion. The Company had 14,609 full-
time and 1,173 part-time employees as of December 31, 2014.
At December 31, 2014, M&T had two wholly owned bank subsidiaries: M&T Bank and Wilmington
Trust, National Association (“Wilmington Trust, N.A.”). The banks collectively offer a wide range of retail
and commercial banking, trust and wealth management, and investment services to their customers. At
December 31, 2014, M&T Bank represented 99% of consolidated assets of the Company.
The Company from time to time considers acquiring banks, thrift institutions, branch offices of
banks or thrift institutions, or other businesses within markets currently served by the Company or in other
locations that would complement the Company’s business or its geographic reach. The Company has
pursued acquisition opportunities in the past, continues to review different opportunities, including the
possibility of major acquisitions, and intends to continue this practice.
Subsidiaries
M&T Bank is a banking corporation that is incorporated under the laws of the State of New York. M&T
Bank is a member of the Federal Reserve System and the Federal Home Loan Bank System, and its deposits
are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable limits. M&T acquired
all of the issued and outstanding shares of the capital stock of M&T Bank in December 1969. The stock of
M&T Bank represents a major asset of M&T. M&T Bank operates under a charter granted by the State of
New York in 1892, and the continuity of its banking business is traced to the organization of the
Manufacturers and Traders Bank in 1856. The principal executive offices of M&T Bank are located at One
M&T Plaza, Buffalo, New York 14203. As of December 31, 2014, M&T Bank had 693 domestic banking
offices located in New York State, Pennsylvania, Maryland, Delaware, Virginia, West Virginia, and the
District of Columbia, a full-service commercial banking office in Ontario, Canada, and an office in George
Town, Cayman Islands. As of December 31, 2014, M&T Bank had consolidated total assets of $95.9 billion,
deposits of $74.8 billion and shareholder’s equity of $11.5 billion. The deposit liabilities of M&T Bank are
insured by the FDIC through its Deposit Insurance Fund (“DIF”). As a commercial bank, M&T Bank offers
a broad range of financial services to a diverse base of consumers, businesses, professional clients,
governmental entities and financial institutions located in its markets. Lending is largely focused on
consumers residing in New York State, Pennsylvania, Maryland, Virginia, Delaware and Washington, D.C.,
and on small and medium-size businesses based in those areas, although loans are originated through
lending offices in other states and in Ontario, Canada. In addition, the Company conducts lending activities
in various states through other subsidiaries. Trust and other fiduciary services are offered by M&T Bank and
through its wholly owned subsidiary, Wilmington Trust Company. M&T Bank and certain of its subsidiaries
also offer commercial mortgage loans secured by income producing properties or properties used by
borrowers in a trade or business. Additional financial services are provided through other operating
subsidiaries of the Company.
Wilmington Trust, N.A., a national banking association and a member of the Federal Reserve System
and the FDIC, commenced operations on October 2, 1995. The deposit liabilities of Wilmington Trust, N.A.
are insured by the FDIC through the DIF. The main office of Wilmington Trust, N.A. is located at 1100
North Market Street, Wilmington, Delaware, 19890. Wilmington Trust, N.A. offers various trust and wealth
management services. Historically, Wilmington Trust, N.A. offered selected deposit and loan products on a
nationwide basis, through direct mail, telephone marketing techniques and the Internet. As of December 31,
2014, Wilmington Trust, N.A. had total assets of $2.8 billion, deposits of $2.2 billion and shareholder’s
equity of $436 million.
Wilmington Trust Company, a wholly owned subsidiary of M&T Bank, was incorporated as a
Delaware bank and trust company in March 1901 and amended its charter in July 2011 to become a
nondepository trust company. Wilmington Trust Company provides a variety of Delaware based trust,
4
fiduciary and custodial services to its clients. As of December 31, 2014, Wilmington Trust Company had
total assets of $1.0 billion and shareholder’s equity of $542 million. Revenues of Wilmington Trust
Company were $116 million in 2014. The headquarters of Wilmington Trust Company are located at 1100
North Market Street, Wilmington, Delaware 19890.
M&T Life Insurance Company (“M&T Life Insurance”), a wholly owned subsidiary of M&T, was
incorporated as an Arizona business corporation in January 1984. M&T Life Insurance is a credit reinsurer
which reinsures credit life and accident and health insurance purchased by the Company’s consumer loan
customers. As of December 31, 2014, M&T Life Insurance had assets of $17 million and shareholder’s equity
of $16 million. M&T Life Insurance recorded revenues of $421 thousand during 2014. Headquarters of
M&T Life Insurance are located at 101 North First Avenue, Phoenix, Arizona 85003.
M&T Insurance Agency, Inc. (“M&T Insurance Agency”), a wholly owned insurance agency
subsidiary of M&T Bank, was incorporated as a New York corporation in March 1955. M&T Insurance
Agency provides insurance agency services principally to the commercial market. As of December 31, 2014,
M&T Insurance Agency had assets of $29 million and shareholder’s equity of $15 million. M&T Insurance
Agency recorded revenues of $28 million during 2014. The headquarters of M&T Insurance Agency are
located at 285 Delaware Avenue, Buffalo, New York 14202.
M&T Mortgage Reinsurance Company, Inc. (“M&T Reinsurance”), a wholly owned subsidiary of
M&T Bank, was incorporated as a Vermont business corporation in July 1999. M&T Reinsurance enters into
reinsurance contracts with insurance companies who insure against the risk of a mortgage borrower’s
payment default in connection with M&T Bank-related mortgage loans. M&T Reinsurance receives a share
of the premium for those policies in exchange for accepting a portion of the insurer’s risk of borrower
default. As of December 31, 2014, M&T Reinsurance had assets of $17 million and shareholder’s equity of
$14 million. M&T Reinsurance recorded approximately $1 million of revenue during 2014. M&T
Reinsurance’s principal and registered office is at 148 College Street, Burlington, Vermont 05401.
M&T Real Estate Trust (“M&T Real Estate”) is a Maryland Real Estate Investment Trust that was
formed through the merger of two separate subsidiaries, but traces its origin to the incorporation of M&T
Real Estate, Inc. in July 1995. M&T Real Estate engages in commercial real estate lending and provides loan
servicing to M&T Bank. As of December 31, 2014, M&T Real Estate had assets of $19.1 billion, common
shareholder’s equity of $16.6 billion, and preferred shareholders’ equity, consisting of 9% fixed-rate
preferred stock (par value $1,000), of $1 million. All of the outstanding common stock and 89% of the
preferred stock of M&T Real Estate is owned by M&T Bank. The remaining 11% of M&T Real Estate’s
outstanding preferred stock is owned by officers or former officers of the Company. M&T Real Estate
recorded $769 million of revenue in 2014. The headquarters of M&T Real Estate are located at M&T Center,
One Fountain Plaza, Buffalo, New York 14203.
M&T Realty Capital Corporation (“M&T Realty Capital”), a wholly owned subsidiary of M&T Bank,
was incorporated as a Maryland corporation in October 1973. M&T Realty Capital engages in multifamily
commercial real estate lending and provides loan servicing to purchasers of the loans it originates. As of
December 31, 2014, M&T Realty Capital serviced $11.3 billion of commercial mortgage loans for non-
affiliates and had assets of $656 million and shareholder’s equity of $115 million. M&T Realty Capital
recorded revenues of $90 million in 2014. The headquarters of M&T Realty Capital are located at 25 South
Charles Street, Baltimore, Maryland 21202.
M&T Securities, Inc. (“M&T Securities”) is a wholly owned subsidiary of M&T Bank that was
incorporated as a New York business corporation in November 1985. M&T Securities is registered as a
broker/dealer under the Securities Exchange Act of 1934, as amended, and as an investment advisor under
the Investment Advisors Act of 1940, as amended (the “Investment Advisors Act”). M&T Securities is
licensed as a life insurance agent in each state where M&T Bank operates branch offices and in a number of
other states. It provides securities brokerage, investment advisory and insurance services. As of
December 31, 2014, M&T Securities had assets of $43 million and shareholder’s equity of $32 million. M&T
Securities recorded $106 million of revenue during 2014. The headquarters of M&T Securities are located at
One M&T Plaza, Buffalo, New York 14203.
Wilmington Trust Investment Advisors, Inc. (“WT Investment Advisors”), a wholly owned
subsidiary of M&T Bank, was incorporated as a Maryland corporation on June 30, 1995. WT Investment
Advisors, a registered investment advisor under the Investment Advisors Act, serves as an investment
advisor to the Wilmington Funds, a family of proprietary mutual funds, and institutional clients. As of
December 31, 2014, WT Investment Advisors had assets of $41 million and shareholder’s equity of $35
million. WT Investment Advisors recorded revenues of $49 million in 2014. The headquarters of WT
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Investment Advisors are located at 100 East Pratt Street, Baltimore, Maryland 21202.
Wilmington Funds Management Corporation (“Wilmington Funds Management”) is a wholly
owned subsidiary of M&T that was incorporated in September 1981 as a Delaware corporation. Wilmington
Funds Management is registered as an investment advisor under the Investment Advisors Act and serves as
an investment advisor to the Wilmington Funds. Wilmington Funds Management had assets of $13 million
and shareholder’s equity of $12 million as of December 31, 2014. Wilmington Funds Management recorded
revenues of $18 million in 2014. The headquarters of Wilmington Funds Management are located at 1100
North Market Street, Wilmington, Delaware 19890.
Wilmington Trust Investment Management, LLC (“WTIM”) is a wholly owned subsidiary of M&T
and was incorporated in December 2001 as a Georgia limited liability company. WTIM is a registered
investment advisor under the Investment Advisors Act and provides investment management services to
clients, including certain private funds. As of December 31, 2014, WTIM has assets of $25 million and
shareholder’s equity of $25 million. WTIM recorded revenues of $6 million in 2014. WTIM’s headquarters
is located at Terminus 27th Floor, 3280 Peachtree Road N.E., Atlanta, Georgia 30305.
The Registrant and its banking subsidiaries have a number of other special-purpose or inactive
subsidiaries. These other subsidiaries did not represent, individually and collectively, a significant portion of
the Company’s consolidated assets, net income and shareholders’ equity at December 31, 2014.
Segment Information, Principal Products/Services and Foreign Operations
Information about the Registrant’s business segments is included in note 22 of Notes to Financial
Statements filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data” and is further
discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.” The Registrant’s reportable segments have been determined based upon its internal
profitability reporting system, which is organized by strategic business unit. Certain strategic business units
have been combined for segment information reporting purposes where the nature of the products and
services, the type of customer and the distribution of those products and services are similar. The reportable
segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio,
Residential Mortgage Banking and Retail Banking. The Company’s international activities are discussed in
note 17 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements and
Supplementary Data.”
The only activities that, as a class, contributed 10% or more of the sum of consolidated interest
income and other income in any of the last three years were interest on loans and trust income. The amount
of income from such sources during those years is set forth on the Company’s Consolidated Statement of
Income filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data.”
Supervision and Regulation of the Company
M&T and its subsidiaries are subject to the comprehensive regulatory framework applicable to bank and
financial holding companies and their subsidiaries. Regulation of financial institutions such as M&T and its
subsidiaries is intended primarily for the protection of depositors, the FDIC’s Deposit Insurance Fund and
the banking and financial system as a whole, and generally is not intended for the protection of
shareholders, investors or creditors other than insured depositors. Described below are material elements of
selected laws and regulations applicable to M&T and its subsidiaries. The descriptions are not intended to be
complete and are qualified in their entirety by reference to the full text of the statutes and regulations
described.
Overview
M&T is registered with the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”)
as a BHC under the BHCA. As such, M&T and its subsidiaries are subject to the supervision, examination
and reporting requirements of the BHCA and the regulations of the Federal Reserve Board.
In general, the BHCA limits the business of a BHC to banking, managing or controlling banks, and
other activities that the Federal Reserve Board has determined to be so closely related to banking as to be a
proper incident thereto. In addition, bank holding companies that qualify and elect to be financial holding
companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity,
that is either (i) financial in nature or incidental to such financial activity (as determined by the Federal
Reserve Board, by regulation or order, in consultation with the Secretary of the Treasury) or
(ii) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of
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depository institutions or the financial system generally (as solely determined by the Federal Reserve Board).
Activities that are financial in nature include securities underwriting and dealing, insurance underwriting
and making merchant banking investments.
To maintain financial holding company status, a financial holding company and all of its depository
institution subsidiaries must be “well capitalized” and “well managed.” M&T became a financial holding
company on March 1, 2011. The failure to meet such requirements could result in material restrictions on
the activities of M&T and may also adversely affect the Company’s ability to enter into certain transactions
or obtain necessary approvals in connection therewith, as well as loss of financial holding company status.
In order for a financial holding company to commence any new activity or to acquire a company
engaged in any activity pursuant to the financial holding company provisions of the BHCA, each insured
depository institution subsidiary of the financial holding company also must have at least a “satisfactory”
rating under the Community Reinvestment Act of 1977 (the “CRA”). See the section captioned
“Community Reinvestment Act” included elsewhere in this item.
Current federal law also establishes a system of functional regulation under which, in addition to the
broad supervisory authority that the Federal Reserve Board has over both the banking and non-banking
activities of bank holding companies, the federal banking agencies regulate the banking activities of bank
holding companies, banks and savings associations and subsidiaries of the foregoing, the U.S. Securities and
Exchange Commission (“SEC”) regulates their securities activities, and state insurance regulators regulate
their insurance activities.
Recent Developments
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or “Dodd-
Frank”), which was enacted in July 2010, significantly restructures the financial regulatory regime in the
United States and provides for enhanced supervision and prudential standards for, among other things,
bank holding companies, like M&T, that have total consolidated assets of $50 billion or more. Not all of the
rules required or expected to be implemented under the Dodd-Frank Act have been proposed or adopted,
and certain of the rules that have been proposed or adopted under the Dodd-Frank Act are subject to phase-
in or transitional periods. The ultimate implications of the Dodd-Frank Act for the Company’s businesses
will depend to a large extent on the manner in which rules adopted pursuant to the Dodd-Frank Act are
implemented by the primary U.S. financial regulatory agencies as well as potential changes in market
practices and structures in response to the requirements of the Dodd-Frank Act and financial reforms in
other jurisdictions.
The Dodd-Frank Act broadened the base for FDIC insurance assessments. Beginning in the second
quarter of 2011, assessments are based on average consolidated total assets less average Tier 1 capital and
certain allowable deductions of a financial institution. The Dodd-Frank Act also permanently increased the
maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per
depositor.
The legislation also requires that publicly traded companies give shareholders a non-binding vote on
executive compensation and “golden parachute” payments, and authorizes the Securities and Exchange
Commission to promulgate rules that would allow shareholders to nominate their own candidates using a
company’s proxy materials. The Dodd-Frank Act also directs the Federal Reserve Board to promulgate rules
prohibiting excessive compensation paid to bank holding company executives, regardless of whether the
company is publicly traded.
The Dodd-Frank Act established a new Bureau of Consumer Financial Protection (“CFPB”) with broad
powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a
wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to
prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority
over all banks and savings institutions with more than $10 billion in assets.
In addition, the Dodd-Frank Act, among other things:
Š weakened the federal preemption rules that have been applicable for national banks and gives state
attorneys general the ability to enforce federal consumer protection laws;
Š amended the Electronic Fund Transfer Act (“EFTA”) which resulted in, among other things, the
Federal Reserve Board issuing rules aimed at limiting debit-card interchange fees;
Š applied the same leverage and risk-based capital requirements that apply to insured depository
institutions to most bank holding companies;
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Š provided for an increase in the FDIC assessment for depository institutions with assets of $10 billion
or more and increased the minimum reserve ratio for the deposit insurance fund from 1.15% to
1.35%;
Š imposed comprehensive regulation of the over-the-counter derivatives market, which would include
certain provisions that would effectively prohibit insured depository institutions from conducting
certain derivatives businesses in the institution itself;
Š repealed the federal prohibitions on the payment of interest on demand deposits, thereby permitting
depository institutions to pay interest on business transaction and other accounts;
Š provided mortgage reform provisions regarding a customer’s ability to repay, restricting variable-rate
lending by requiring the ability to repay to be determined for variable-rate loans by using the
maximum rate that will apply during the first five years of a variable-rate loan term, and making
more loans subject to provisions for higher cost loans, new disclosures, and certain other
revisions; and
Š created the Financial Stability Oversight Council, which will recommend to the Federal Reserve
Board increasingly strict rules for capital, leverage, liquidity, risk management and other
requirements as companies grow in size and complexity.
Enhanced Supervision and Prudential Standards
Section 165 of the Dodd-Frank Act directed the Federal Reserve Board to enact enhanced prudential
standards applicable to foreign banking organizations and bank holding companies with total consolidated
assets of $50 billion or more, such as M&T. On February 18, 2014, the Federal Reserve Board adopted
amendments to Regulation YY to implement certain of the required enhanced prudential standards. These
enhanced prudential standards, which are intended to help increase the resiliency of the operations of these
organizations, include liquidity requirements, requirements for overall risk management (including
establishing a risk committee), and a 15-to-1 debt-to-equity limit for companies that the Financial Stability
Oversight Council has determined pose a grave threat to financial stability. The liquidity requirements and
risk management requirements became effective as to M&T on January 1, 2015. The Federal Reserve Board
has not yet adopted final single counterparty credit limits or early remediation requirements.
The rule addresses a diverse array of regulatory areas, each of which is highly complex. In some
instances they implement new financial regulatory requirements and in other instances they overlap with
regulatory reforms currently in existence (such as the Basel III capital and liquidity reforms discussed later
in this section). M&T is analyzing the impact of the final rule on its businesses; however, the full impact will
not be known until the rule and other regulatory initiatives that overlap with the final rule can be analyzed.
Volcker Rule
The Dodd-Frank Act requires the federal financial regulatory agencies to adopt rules that prohibit banks and
their affiliates from engaging in proprietary trading and investing in and sponsoring certain unregistered
investment companies (defined as hedge funds and private equity funds). The statutory provision is
commonly called the “Volcker Rule.” On December 10, 2013, the federal banking regulators and the SEC
adopted final rules to implement the Volcker Rule. The Company believes that it does not engage in any
significant amount of proprietary trading as defined in the Volcker Rule and that, although it may be
required by the covered funds provisions to divest certain investments by the end of the compliance period,
the Volcker Rule is not expected to have a significant effect on M&T’s financial condition or its results of
operations. Although the Volcker Rule became effective on July 21, 2012 and the final rules became effective
on April 1, 2014, in connection with the adoption of the final rules on December 10, 2013 by the responsible
agencies, the Federal Reserve issued an order extending the period during which institutions have to
conform their investments to the requirements of the Volcker Rule to July 2016.
8
Dividends
M&T is a legal entity separate and distinct from its banking and other subsidiaries. Historically, the majority
of M&T’s revenue has been from dividends paid to M&T by its subsidiary banks. M&T Bank and
Wilmington Trust, N.A. are subject, under one or more of the banking laws, to restrictions on the amount
of dividends they may declare and pay. Future dividend payments to M&T by its subsidiary banks will be
dependent on a number of factors, including the earnings and financial condition of each such bank, and
are subject to the limitations referred to in note 23 of Notes to Financial Statements filed herewith in Part II,
Item 8, “Financial Statements and Supplementary Data,” and to other statutory powers of bank regulatory
agencies.
An insured depository institution is prohibited from making any capital distribution to its owner,
including any dividend, if, after making such distribution, the depository institution fails to meet the
required minimum level for any relevant capital measure, including the risk-based capital adequacy and
leverage standards discussed herein.
Dividend payments by M&T to its shareholders and stock repurchases by M&T are subject to the
oversight of the Federal Reserve Board. As described below in this section under “Stress Testing and Capital
Plan Review,” dividends and stock repurchases (net of any new stock issuances as per a capital plan)
generally may only be paid or made under a capital plan as to which the Federal Reserve Board has not
objected.
Supervision and Regulation of M&T Bank’s Subsidiaries
M&T Bank has a number of subsidiaries. These subsidiaries are subject to the laws and regulations of both
the federal government and the various states in which they conduct business. For example, M&T Securities
is regulated by the SEC, the Financial Industry Regulatory Authority and state securities regulators.
Capital Requirements
M&T and its subsidiary banks are required to comply with applicable capital adequacy standards established
by the federal banking agencies. The risk-based capital standards that were applicable to M&T and its
subsidiary banks through December 31, 2014 were based on the 1988 Capital Accord, known as Basel I, of
the Basel Committee on Banking Supervision (the “Basel Committee”). However, in July 2013, the Federal
Reserve Board, the OCC and the FDIC approved final rules (the “New Capital Rules”) establishing a new
comprehensive capital framework for U.S. banking organizations. These rules went into effect as to M&T
and its subsidiary banks on January 1, 2015, subject to phase-in periods for certain components and other
provisions.
Basel III and the New Capital Rules. The New Capital Rules generally implement the Basel
Committee’s December 2010 final capital framework referred to as “Basel III” for strengthening
international capital standards. The New Capital Rules substantially revise the risk-based capital
requirements applicable to bank holding companies and their depository institution subsidiaries, including
M&T, M&T Bank and Wilmington Trust, N.A., as compared to the U.S. general risk-based capital rules that
were applicable to the Company through December 31, 2014. The New Capital Rules revise the definitions
and the components of regulatory capital, as well as address other issues affecting the numerator in banking
institutions’ regulatory capital ratios. The New Capital Rules also address asset risk weights and other
matters affecting the denominator in banking institutions’ regulatory capital ratios. In addition, the New
Capital Rules implement certain provisions of the Dodd-Frank Act, including the requirements of
Section 939A to remove references to credit ratings from the federal agencies’ rules.
Among other matters, the New Capital Rules: (i) introduce a new capital measure called “Common
Equity Tier 1” (“CET1”) and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that
Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised
requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to
CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and
adjustments to capital as compared to the previous regulations. Under the New Capital Rules, for most
banking organizations, including M&T, the most common form of Additional Tier 1 capital is non-
cumulative perpetual preferred stock and the most common forms of Tier 2 capital are subordinated notes
and a portion of the allowance for loan and lease losses, in each case, subject to the New Capital Rules’
specific requirements.
9
Pursuant to the New Capital Rules, the minimum capital ratios as of January 1, 2015 are as follows:
Š 4.5% CET1 to risk-weighted assets;
Š 6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;
Š 8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and
Š 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements
(known as the “leverage ratio”).
The New Capital Rules also introduce a new “capital conservation buffer,” composed entirely of
CET1, on top of these minimum risk-weighted asset ratios. The capital conservation buffer is designed to
absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted
assets above the minimum but below the capital conservation buffer will face constraints on dividends,
equity and other capital instrument repurchases and compensation based on the amount of the shortfall.
Thus, when fully phased-in on January 1, 2019, the capital standards applicable to M&T will include an
additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios inclusive of
the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-
weighted assets of at least 8.5%; (iii) Total capital to risk-weighted assets of at least 10.5% and (iv) a
minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average assets. In addition, M&T is
also subject to the Federal Reserve Board’s capital plan rule and supervisory Capital Analysis and Review
(“CCAR”) process, pursuant to which its ability to make capital distributions and repurchase or redeem
capital securities may be limited unless M&T is able to demonstrate its ability to meet applicable minimum
capital ratios and currently a 5% minimum Tier 1 common equity ratio, as well as other requirements, over
a nine quarter planning horizon under a “severely adverse” macroeconomic scenario generated yearly by the
federal bank regulators. See “Stress Testing and Capital Plan Review” below.
The New Capital Rules provide for a number of deductions from and adjustments to CET1. These
include, for example, the requirement that mortgage servicing rights, deferred tax assets arising from
temporary differences that could not be realized through net operating loss carrybacks and significant
investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such
category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1.
In addition, under the risk-based capital rules applicable to the Company through December 31,
2014, the effects of accumulated other comprehensive income or loss (“AOCI”) items included in
shareholders’ equity (for example, marks-to-market of securities held in the available-for-sale portfolio)
under U.S. GAAP were reversed for the purposes of determining regulatory capital ratios. Pursuant to the
New Capital Rules, the effects of certain AOCI items are not excluded; however, non-advanced approaches
banking organizations, including M&T, may make a one-time permanent election to continue to exclude
these items. The New Capital Rules also preclude certain hybrid securities, such as trust preferred securities,
from inclusion in bank holding companies’ Tier 1 capital, subject to phase-out in the case of bank holding
companies, such as M&T, that had $15 billion or more in total consolidated assets as of December 31, 2009.
As a result, beginning in 2015 25% of M&T’s trust preferred securities became includable in Tier 1 capital,
and in 2016, none of M&T’s trust preferred securities will be includable in Tier 1 capital. Trust preferred
securities no longer included in M&T’s Tier 1 capital may nonetheless be included as a component of Tier 2
capital on a permanent basis without phase-out and irrespective of whether such securities otherwise meet
the revised definition of Tier 2 capital set forth in the New Capital Rules. Management believes that M&T is
in compliance with the targeted capital ratios. More specifically, management estimates that M&T’s ratio of
CET1 to risk-weighted assets under the New Capital Rules on a fully phased-in basis was approximately
9.62% as of December 31, 2014, reflecting an estimate of the computation of CET1 and M&T’s risk-
weighted assets under the methodologies set forth in the New Capital Rules.
M&T’s regulatory capital ratios under risk-based capital rules in effect through December 31, 2014
are presented in note 23 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial
Statements and Supplementary Data.”
Liquidity Ratios under Basel III. Historically, regulation and monitoring of bank and BHC liquidity
has been addressed as a supervisory matter, both in the U.S. and internationally, without required formulaic
measures. On September 3, 2014, the Federal Reserve and other banking regulators adopted final rules
(“Final LCR Rule”) implementing a U.S. version of the Basel Committee’s Liquidity Coverage Ratio
10
requirement (“LCR”). The LCR is intended to ensure that banks hold sufficient amounts of so-called “high
quality liquid assets” (“HQLA”) to cover the anticipated net cash outflows during a hypothetical acute 30-
day stress scenario. The LCR is the ratio of an institution’s amount of HQLA (the numerator) over projected
net cash out-flows over the 30-day horizon (the denominator), in each case, as calculated pursuant to the
Final LCR Rule. Once fully phased-in, a subject institution must maintain an LCR equal to at least 100% in
order to satisfy this regulatory requirement. Only specific classes of assets, including U.S. Treasury securities,
other U.S. government obligations and agency mortgaged-backed securities, qualify under the rule as
HQLA, with classes of assets deemed relatively less liquid and/or subject to greater degree of credit risk
subject to certain haircuts and caps for purposes of calculating the numerator under the Final LCR Rule.
The total net cash outflows amount is determined under the rule by applying certain hypothetical outflow
and inflow rates, which reflect certain standardized stressed assumptions, against the balances of the banking
organization’s funding sources, obligations, transactions and assets over the 30-day stress period. Inflows
that can be included to offset outflows are limited to 75% of outflows (which effectively means that banking
organizations must hold high-quality liquid assets equal to 25% of outflows even if outflows perfectly match
inflows over the stress period). The total net cash outflow amount for the modified LCR applicable to M&T
is capped at 70% of the outflow rate that applies to the full LCR. The initial compliance date for the
modified LCR will be January 2016, with the requirement fully phased-in by January 2017.
The Basel III framework also included a second standard, referred to as the net stable funding ratio
(“NSFR”), which is designed to promote more medium-and long-term funding of the assets and activities of
banks over a one-year time horizon. Although the Basel Committee finalized its formulation of the NSFR in
2014, the U.S. banking agencies have not yet proposed an NSFR for application to U.S. banking
organizations or addressed the scope of banking organizations to which it will apply. The Basel Committee’s
final NSFR document states that the NSFR applies to internationally active banks, as did its final LCR
document as to that ratio.
Capital Requirements of Subsidiary Depository Institutions. M&T Bank and Wilmington Trust, N.A.
are subject to substantially similar capital requirements as those applicable to M&T. As of December 31,
2014, both M&T Bank and Wilmington Trust, N.A. were in compliance with applicable minimum capital
requirements. None of M&T, M&T Bank or Wilmington Trust, N.A. has been advised by any federal
banking agency of a failure to meet any specific minimum capital ratio requirement applicable to it as of
December 31, 2014. Failure to meet capital guidelines could subject a bank to a variety of enforcement
remedies, including the termination of deposit insurance by the FDIC, and to certain restrictions on its
business. See “Regulatory Remedies under the FDIA” below.
Stress Testing and Capital Plan Review
As part of the enhanced prudential requirements applicable to systemically important financial institutions,
the Federal Reserve Board conducts annual analyses of bank holding companies with at least $50 billion in
assets, such as M&T, to determine whether the companies have sufficient capital on a consolidated basis
necessary to absorb losses in three economic and financial scenarios generated by the Federal Reserve Board:
baseline, adverse and severely adverse scenarios. M&T is also required to conduct its own semi-annual stress
analysis (together with the Federal Reserve Board’s stress analysis, the “stress tests”) to assess the potential
impact on M&T of the economic and financial conditions used as part of the Federal Reserve Board’s annual
stress analysis. The Federal Reserve Board may also use, and require companies to use, additional
components in the adverse and severely adverse scenarios or additional or more complex scenarios designed
to capture salient risks to specific business groups. M&T Bank is also required to conduct annual stress
testing using the same economic and financial scenarios as M&T and report the results to the Federal
Reserve Board. A summary of results of the Federal Reserve Board’s analysis under the adverse and severely
adverse stress scenarios will be publicly disclosed, and the bank holding companies subject to the rules,
including M&T, must disclose a summary of the company-run severely adverse stress test results. M&T is
required to include in its disclosure a summary of the severely adverse scenario stress test conducted by
M&T Bank.
In addition, bank holding companies with total consolidated assets of $50 billion or more, such as
M&T, must submit annual capital plans for approval as part of the Federal Reserve Board’s CCAR process.
Covered bank holding companies may execute capital actions, such as paying dividends and repurchasing
stock, only in accordance with a capital plan that has been reviewed and approved by the Federal Reserve
Board (or any approved amendments to such plan). The comprehensive capital plans include a view of
capital adequacy under four scenarios — a BHC-defined baseline scenario, a baseline scenario provided by
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the Federal Reserve Board, at least one BHC-defined stress scenario, and a stress scenario provided by the
Federal Reserve Board. The CCAR process is intended to help ensure that these bank holding companies
have robust, forward-looking capital planning processes that account for each company’s unique risks and
that permit continued operations during times of economic and financial stress. Each of the bank holding
companies participating in the CCAR process is also required to collect and report certain related data to the
Federal Reserve Board on a quarterly basis to allow the Federal Reserve Board to monitor progress against
the approved capital plans. Each capital plan must include a view of capital adequacy under the stress test
scenarios described above. The Federal Reserve Board may object to a capital plan if the plan does not show
that the covered bank holding company will maintain a Tier 1 common equity ratio (as defined under the
Basel I framework) of at least 5% on a pro forma basis under expected and stressful conditions throughout
the nine-quarter planning horizon covered by the capital plan. Even if such quantitative thresholds are met,
the Federal Reserve Board could object to a capital plan for qualitative reasons, including inadequate
assumptions in the plan, other unresolved supervisory issues or an insufficiently robust capital adequacy
process, or if the capital plan would otherwise constitute an unsafe or unsound practice or violate law. The
rules also provide that a covered BHC may not make a capital distribution unless after giving effect to the
distribution it will meet all minimum regulatory capital ratios and have a ratio of Tier 1 common equity to
risk-weighted assets of at least 5%. The CCAR rules, consistent with prior Federal Reserve Board guidance,
also provide that capital plans contemplating dividend payout ratios exceeding 30% of net income will
receive particularly close scrutiny. M&T’s most recent CCAR capital plan was filed with the Federal Reserve
Board on January 5, 2015.
In October 2014, the Federal Reserve Board amended its capital planning and stress testing rules to,
among other things, generally limit a BHC’s ability to make quarterly capital distributions – that is,
dividends and share repurchases – commencing April 1, 2015 if the amount of the BHC’s actual cumulative
quarterly capital issuances of instruments that qualify as regulatory capital are less than the BHC had
indicated in its submitted capital plan as to which it received a non-objection from the Federal Reserve
Board. For example, if the BHC issued a smaller amount of additional common stock than it had stated in
its capital plan, it would be required to reduce common dividends and/or the amount of common stock
repurchases so that the dollar amount of capital distributions, net of the dollar amount of additional
common stock issued (“net distributions”), is no greater than the dollar amount of net distributions relating
to its common stock included in its capital plan, as measured on an aggregate basis beginning in the third
quarter of the nine-quarter planning horizon through the end of the then current quarter. However, not
raising sufficient amounts of common stock as planned would not affect distributions related to Additional
Tier 1 Capital instruments and/ or Tier 2 Capital. These limitations also contain several important
qualifications and exceptions, including that scheduled dividend payments on (as opposed to repurchases
of) a BHC’s Additional Tier 1 Capital and Tier 2 Capital instruments are not restricted if the BHC fails to
issue a sufficient amount of such instruments as planned, as well as provisions for certain de minimis excess
distributions.
In addition, these amendments also revise the timeline for a BHC’s annual capital plan and company
and supervisory- run stress testing processes generally by pushing back the various deadlines by one quarter
beginning with the capital planning cycle commencing such that the Company’s annual capital planning
submission will be due by April 5 (instead of January 5) and the Federal Reserve will publish the results of its
supervisory CCAR review of the Company’s capital plan by June 30 (instead of March 31) of each year.
Safety and Soundness Standards
Guidelines adopted by the federal bank regulatory agencies pursuant to the Federal Deposit Insurance Act,
as amended (the “FDIA”), establish general standards relating to internal controls and information systems,
internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and
compensation, fees and benefits. In general, these guidelines require, among other things, appropriate
systems and practices to identify and manage the risk and exposures specified in the guidelines. Additionally,
the agencies adopted regulations that authorize, but do not require, an agency to order an institution that
has been given notice by an agency that it is not satisfying any of such safety and soundness standards to
submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance
plan or fails in any material respect to implement an acceptable compliance plan, the agency must issue an
order directing action to correct the deficiency and may issue an order directing other actions of the types to
which an undercapitalized institution is subject under the “prompt corrective action” provisions of the
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FDIA. See “Regulatory Remedies under the FDIA” below. If an institution fails to comply with such an
order, the agency may seek to enforce such order in judicial proceedings and to impose civil money
penalties.
Regulatory Remedies under the FDIA
The FDIA establishes a system of regulatory remedies to resolve the problems of undercapitalized
institutions, referred to as the prompt corrective action. The federal banking regulators have established five
capital categories (“well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly
undercapitalized” and “critically undercapitalized”) and must take certain mandatory supervisory actions,
and are authorized to take other discretionary actions, with respect to institutions which are
undercapitalized, significantly undercapitalized or critically undercapitalized. The severity of these
mandatory and discretionary supervisory actions depends upon the capital category in which the institution
is placed. Generally, subject to a narrow exception, the FDIA requires the banking regulator to appoint a
receiver or conservator for an institution that is critically undercapitalized. The FDIC has specified by
regulation the relevant capital levels for each category, which are printed below. The Federal Reserve Board
and the OCC have specified the same or similar levels for each category.
“Well-Capitalized”
Leverage Ratio of 5%,
Tier 1 Capital ratio of 6%,
Total Capital ratio of 10%, and
Not subject to a written agreement, order,
capital directive or regulatory remedy
directive requiring a specific capital level.
“Undercapitalized”
Leverage Ratio less than 4%,
Tier 1 Capital ratio less than 4%, or
Total Capital ratio less than 8%.
“Critically undercapitalized”
Tangible equity to total assets less than 2%.
“Adequately Capitalized”
Leverage Ratio of 4%,
Tier 1 Capital ratio of 4%, and
Total Capital ratio of 8%.
“Significantly Undercapitalized”
Leverage Ratio less than 3%,
Tier 1 Capital ratio less than 3%, or
Total Capital ratio less than 6%.
For purposes of these regulations, the term “tangible equity” includes core capital elements counted
as Tier 1 Capital for purposes of the risk-based capital standards plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible assets with certain exceptions.
An institution that is classified as well-capitalized based on its capital levels may be classified as
adequately capitalized, and an institution that is adequately capitalized or undercapitalized based upon its
capital levels may be treated as though it were undercapitalized or significantly undercapitalized,
respectively, if the appropriate federal banking agency, after notice and opportunity for hearing, determines
that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment.
An institution that is categorized as undercapitalized, significantly undercapitalized or critically
undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal
banking regulator. Under the FDIA, in order for the capital restoration plan to be accepted by the
appropriate federal banking agency, a BHC must guarantee that a subsidiary depository institution will
comply with its capital restoration plan, subject to certain limitations. The BHC must also provide
appropriate assurances of performance. The obligation of a controlling BHC under the FDIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized subsidiary’s assets or the
amount required to meet regulatory capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions, establishing any branches or
engaging in any new line of business, except in accordance with an accepted capital restoration plan or with
the approval of the FDIC. Institutions that are significantly undercapitalized or undercapitalized and either
fail to submit an acceptable capital restoration plan or fail to implement an approved capital restoration
plan may be subject to a number of requirements and restrictions, including orders to sell sufficient voting
stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of
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deposits from correspondent banks. Critically undercapitalized depository institutions failing to submit or
implement an acceptable capital restoration plan are subject to appointment of a receiver or conservator.
Effective January 1, 2015, the New Capital Rules revised the prompt corrective action requirements
in effect through December 31, 2014 by (i) introducing a CET1 ratio requirement at each level (other than
critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status;
(ii) increasing the minimum Tier 1 capital ratio requirement for each category (other than critically
undercapitalized), with the minimum Tier 1 capital ratio for well-capitalized status being 8% (as compared
to the former 6%); and (iii) eliminating the provision that provided that a bank with a composite
supervisory rating of 1 may have a 3% leverage ratio and still be adequately capitalized. The New Capital
Rules do not change the total risk-based capital requirement for any prompt corrective action category.
Support of Subsidiary Banks
Under longstanding Federal Reserve Board policy which has been codified by the Dodd-Frank Act, M&T is
expected to act as a source of financial strength to, and to commit resources to support, its subsidiary banks.
This support may be required at times when M&T may not be inclined or able to provide it. In addition, any
capital loans by a BHC to a subsidiary bank are subordinate in right of payment to deposits and to certain
other indebtedness of such subsidiary bank. In the event of a BHC’s bankruptcy, any commitment by the
BHC to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the
bankruptcy trustee and entitled to a priority of payment.
Cross-Guarantee Provisions
Each insured depository institution “controlled” (as defined in the BHCA) by the same BHC can be held
liable to the FDIC for any loss incurred, or reasonably expected to be incurred, by the FDIC due to the
default of any other insured depository institution controlled by that holding company and for any
assistance provided by the FDIC to any of those banks that are in danger of default. The FDIC’s claim under
the cross-guarantee provisions is superior to claims of shareholders of the insured depository institution or
its holding company and to most claims arising out of obligations or liabilities owed to affiliates of the
institution, but is subordinate to claims of depositors, secured creditors and holders of subordinated debt
(other than affiliates) of the commonly controlled insured depository institution. The FDIC may decline to
enforce the cross-guarantee provisions if it determines that a waiver is in the best interest of the DIF.
Transactions with Affiliates
There are various legal restrictions on the extent to which M&T and its non-bank subsidiaries may borrow
or otherwise obtain funding from M&T Bank and Wilmington Trust, N.A. In general, Sections 23A and 23B
of the Federal Reserve Board Act and Federal Reserve Board Regulation W require that any “covered
transaction” by M&T Bank and Wilmington Trust, N.A. (or any of their respective subsidiaries) with an
affiliate must in certain cases be secured by designated amounts of specified collateral and must be limited as
follows: (a) in the case of any single such affiliate, the aggregate amount of covered transactions of the
insured depository institution and its subsidiaries may not exceed 10% of the capital stock and surplus of
such insured depository institution, and (b) in the case of all affiliates, the aggregate amount of covered
transactions of an insured depository institution and its subsidiaries may not exceed 20% of the capital stock
and surplus of such insured depository institution. The Dodd-Frank Act significantly expanded the coverage
and scope of the limitations on affiliate transactions within a banking organization, including for example,
the requirement that the 10% of capital limit on covered transactions begin to apply to financial
subsidiaries. “Covered transactions” are defined by statute to include, among other things, a loan or
extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless
otherwise exempted by the Federal Reserve Board) from the affiliate, certain derivative transactions that
create a credit exposure to an affiliate, the acceptance of securities issued by the affiliate as collateral for a
loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. All covered
transactions, including certain additional transactions (such as transactions with a third party in which an
affiliate has a financial interest), must be conducted on market terms.
FDIC Insurance Assessments
Deposit Insurance Assessments. M&T Bank and Wilmington Trust, N.A. pay deposit insurance premiums to
the FDIC based on an assessment rate established by the FDIC. Deposit insurance assessments are based on
average total assets minus average tangible equity. For larger institutions, such as M&T Bank, the FDIC uses
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a performance score and a loss-severity score that are used to calculate an initial assessment rate. In
calculating these scores, the FDIC uses a bank’s capital level and supervisory ratings (its “CAMELS ratings”)
and certain financial measures to assess an institution’s ability to withstand asset-related stress and funding-
related stress. The FDIC has the ability to make discretionary adjustments to the total score based upon
significant risk factors that are not adequately captured in the calculations.
The initial base assessment rate ranges from 5 to 35 basis points on an annualized basis. After the
effect of potential base-rate adjustments, the total base assessment rate could range from 2.5 to 45 basis
points on an annualized basis. As the DIF reserve ratio grows, the rate schedule will be adjusted downward.
Additionally, an institution must pay an additional premium equal to 50 basis points on every dollar (above
3% of an institution’s Tier 1 capital) of long-term, unsecured debt held that was issued by another insured
depository institution (excluding debt guaranteed under the Temporary Liquidity Guarantee Program).
In October 2010, the FDIC adopted a new DIF restoration plan to ensure the designated reserve ratio
reaches 1.35% by September 2020. The FDIC will, at least semi-annually, update its income and loss
projections for the DIF and, if necessary, propose rules to further increase assessment rates.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue
operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
FICO Assessments. In addition, the Deposit Insurance Funds Act of 1996 authorized the Financing
Corporation (“FICO”) to impose assessments on DIF applicable deposits in order to service the interest on
FICO’s bond obligations from deposit insurance fund assessments. The amount assessed on individual
institutions by FICO is in addition to the amount, if any, paid for deposit insurance according to the FDIC’s
risk-related assessment rate schedules. FICO assessment rates may be adjusted quarterly to reflect a change
in assessment base. M&T Bank recognized $5 million of expense related to its FICO assessments and
Wilmington Trust, N.A. recognized $69 thousand of such expense in 2014.
Acquisitions
The BHCA requires every BHC to obtain the prior approval of the Federal Reserve Board before: (1) it may
acquire direct or indirect ownership or control of any voting shares of any bank or savings and loan
association, if after such acquisition, the BHC will directly or indirectly own or control 5% or more of the
voting shares of the institution; (2) it or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of any bank or savings and loan association; or (3) it may merge or consolidate
with any other BHC. Since July 2011, financial holding companies and bank holding companies with
consolidated assets exceeding $50 billion, such as M&T, have been required to (i) obtain prior approval
from the Federal Reserve Board before acquiring certain nonbank financial companies with assets exceeding
$10 billion and (ii) provide prior written notice to the Federal Reserve Board before acquiring direct or
indirect ownership or control of any voting shares of any company having consolidated assets of $10 billion
or more. Since July 2011, bank holding companies seeking approval to complete an acquisition have been
required to be well-capitalized and well-managed.
The BHCA further provides that the Federal Reserve Board may not approve any transaction that
would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or
that in any other manner would be in restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the convenience and needs of the
community to be served. The Federal Reserve Board is also required to consider the financial and
managerial resources and future prospects of the bank holding companies and banks concerned and the
convenience and needs of the community to be served. Consideration of financial resources generally
focuses on capital adequacy, and consideration of convenience and needs issues includes the parties’
performance under the CRA and compliance with consumer protection laws. The Federal Reserve Board
must take into account the institutions’ effectiveness in combating money laundering. In addition, pursuant
to the Dodd-Frank Act, the BHCA was amended to require the Federal Reserve Board, when evaluating a
proposed transaction, to consider the extent to which the transaction would result in greater or more
concentrated risks to the stability of the United States banking or financial system.
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Executive and Incentive Compensation
Guidelines adopted by the federal banking agencies pursuant to the FDIA prohibit excessive compensation
as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are
unreasonable or disproportionate to the services performed by an executive officer, employee, director or
principal stockholder. In June 2010, the Federal Reserve Board issued comprehensive guidance on incentive
compensation policies (the “Incentive Compensation Guidance”) intended to ensure that the incentive
compensation policies of banking organizations do not undermine the safety and soundness of such
organizations by encouraging excessive risk-taking. The Incentive Compensation Guidance, which covers all
employees that have the ability to materially affect the risk profile of an organization, either individually or
as part of a group, is based upon the key principles that a banking organization’s incentive compensation
arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s
ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk
management, and (iii) be supported by strong corporate governance, including active and effective oversight
by the organization’s board of directors. These three principles are incorporated into the proposed joint
compensation regulations under the Dodd-Frank Act, discussed below. Any deficiencies in compensation
practices that are identified may be incorporated into the organization’s supervisory ratings, which can
affect its ability to make acquisitions or perform other actions. The Incentive Compensation Guidance
provides that enforcement actions may be taken against a banking organization if its incentive
compensation arrangements or related risk-management control or governance processes pose a risk to the
organization’s safety and soundness and the organization is not taking prompt and effective measures to
correct the deficiencies.
The Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint
regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities,
such as M&T and M&T Bank, having at least $1 billion in total assets that encourage inappropriate risks by
providing an executive officer, employee, director or principal shareholder with excessive compensation,
fees, or benefits or that could lead to material financial loss to the entity. In addition, these regulators must
establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based
compensation arrangements. The agencies proposed such regulations in April 2011, and if the final
regulations are adopted in the form initially proposed, they will impose limitations on the manner in which
M&T may structure compensation for its executives.
The scope and content of the U.S. banking regulators’ policies on incentive compensation are
continuing to develop and are likely to continue evolving in the future. It cannot be determined at this time
whether compliance with such policies will adversely affect the ability of M&T and its subsidiaries to hire,
retain and motivate their key employees.
Resolution Planning
Bank holding companies with consolidated assets of $50 billion or more, such as M&T, are required to
report periodically to regulators a resolution plan for their rapid and orderly resolution in the event of
material financial distress or failure. M&T’s resolution plan must, among other things, ensure that its
depository institution subsidiaries are adequately protected from risks arising from its other subsidiaries.
The regulation adopted by the Federal Reserve and FDIC sets specific standards for the resolution plans,
including requiring a strategic analysis of the plan’s components, a description of the range of specific
actions the company proposes to take in resolution, and a description of the company’s organizational
structure, material entities, interconnections and interdependencies, and management information systems,
among other elements. In addition, insured depository institutions with $50 billion or more in total assets,
such as M&T Bank, are required to submit to the FDIC periodic plans for resolution in the event of the
institution’s failure. M&T and M&T Bank submitted their resolution plans on December 16, 2014.
Insolvency of an Insured Depository Institution or a Bank Holding Company
If the FDIC is appointed as conservator or receiver for an insured depository institution such as M&T Bank
or Wilmington Trust, N.A., upon its insolvency or in certain other events, the FDIC has the power:
Š to transfer any of the depository institution’s assets and liabilities to a new obligor, including a newly
formed “bridge” bank without the approval of the depository institution’s creditors;
Š to enforce the terms of the depository institution’s contracts pursuant to their terms without regard
to any provisions triggered by the appointment of the FDIC in that capacity; or
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Š to repudiate or disaffirm any contract or lease to which the depository institution is a party, the
performance of which is determined by the FDIC to be burdensome and the disaffirmance or
repudiation of which is determined by the FDIC to promote the orderly administration of the
depository institution.
In addition, under federal law, the claims of holders of domestic deposit liabilities and certain claims
for administrative expenses against an insured depository institution would be afforded a priority over other
general unsecured claims against such an institution, including claims of debt holders of the institution, in
the “liquidation or other resolution” of such an institution by any receiver. As a result, whether or not the
FDIC ever sought to repudiate any debt obligations of M&T Bank or Wilmington Trust, N.A., the debt
holders would be treated differently from, and could receive, if anything, substantially less than, the
depositors of the bank. The Dodd-Frank Act created a new resolution regime (known as “orderly liquidation
authority”) for systemically important financial companies, including bank holding companies and their
affiliates. Under the orderly liquidation authority, the FDIC may be appointed as receiver for the
systemically important institution, and its failed subsidiaries, for purposes of liquidating the entity if, among
other conditions, it is determined at the time of the institution’s failure that it is in default or in danger of
default and the failure poses a risk to the stability of the U.S. financial system.
If the FDIC is appointed as receiver under the orderly liquidation authority, then the powers of the
receiver, and the rights and obligations of creditors and other parties who have dealt with the institution,
would be determined under the Dodd-Frank Act provisions, and not under the insolvency law that would
otherwise apply. The powers of the receiver under the orderly liquidation authority were based on the
powers of the FDIC as receiver for depository institutions under the FDIA. However, the provisions
governing the rights of creditors under the orderly liquidation authority were modified in certain respects to
reduce disparities with the treatment of creditors’ claims under the U.S. Bankruptcy Code as compared to
the treatment of those claims under the new authority. Nonetheless, substantial differences in the rights of
creditors exist as between these two regimes, including the right of the FDIC to disregard the strict priority
of creditor claims in some circumstances, the use of an administrative claims procedure to determine
creditors’ claims (as opposed to the judicial procedure utilized in bankruptcy proceedings), and the right of
the FDIC to transfer claims to a “bridge” entity.
An orderly liquidation fund will fund such liquidation proceedings through borrowings from the
Treasury Department and risk-based assessments made, first, on entities that received more in the resolution
than they would have received in liquidation to the extent of such excess, and second, if necessary, on bank
holding companies with total consolidated assets of $50 billion or more, such as M&T. If an orderly
liquidation is triggered, M&T could face assessments for the orderly liquidation fund.
The FDIC has developed a strategy under the orderly liquidation authority referred to as the “single
point of entry” strategy, under which the FDIC would resolve a failed financial holding company by
transferring its assets (including shares of its operating subsidiaries) and, potentially, very limited liabilities
to a “bridge” holding company; utilize the resources of the failed financial holding company to recapitalize
the operating subsidiaries; and satisfy the claims of unsecured creditors of the failed financial holding
company and other claimants in the receivership by delivering securities of one or more new financial
companies that would emerge from the bridge holding company. Under this strategy, management of the
failed financial holding company would be replaced and shareholders and creditors of the failed financial
holding company would bear the losses resulting from the failure. The FDIC issued a notice in December
2013 describing some elements of this single point of entry strategy and seeking public comment to further
develop the strategy. The orderly liquidation authority provisions of the Dodd-Frank Act became effective
upon enactment. However, a number of rulemakings are required under the terms of Dodd-Frank, and a
number of provisions of the new authority require clarification.
Depositor Preference
Under federal law, depositors and certain claims for administrative expenses and employee compensation
against an insured depository institution would be afforded a priority over other general unsecured claims
against such an institution in the “liquidation or other resolution” of such an institution by any receiver. If
an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have
priority in payment ahead of unsecured, non-deposit creditors, including depositors whose deposits are
payable only outside of the United States and the parent BHC, with respect to any extensions of credit they
have made to such insured depository institution.
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Financial Privacy
The federal banking regulators have adopted rules that limit the ability of banks and other financial
institutions to disclose non-public information about consumers to non-affiliated third parties. These
limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers
to prevent disclosure of certain personal information to a non-affiliated third party. These regulations affect
how consumer information is transmitted through diversified financial companies and conveyed to outside
vendors. In addition, consumers may also prevent disclosure of certain information among affiliated
companies that is assembled or used to determine eligibility for a product or service, such as that shown on
consumer credit reports and asset and income information from applications. Consumers also have the
option to direct banks and other financial institutions not to share information about transactions and
experiences with affiliated companies for the purpose of marketing products or services.
Consumer Protection Laws
In connection with their respective lending and leasing activities, M&T Bank, Wilmington Trust, N.A. and
certain of their subsidiaries, are each subject to a number of federal and state laws designed to protect
borrowers and promote lending to various sectors of the economy. These laws include the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, the Truth in
Lending Act, the Home Mortgage Disclosure Act, and the Real Estate Settlement Procedures Act, and
various state law counterparts.
In addition, federal law currently contains extensive customer privacy protection provisions. Under
these provisions, a financial institution must provide to its customers, at the inception of the customer
relationship and annually thereafter, the institution’s policies and procedures regarding the handling of
customers’ nonpublic personal financial information. These provisions also provide that, except for certain
limited exceptions, a financial institution may not provide such personal information to unaffiliated third
parties unless the institution discloses to the customer that such information may be so provided and the
customer is given the opportunity to opt out of such disclosure. Federal law makes it a criminal offense,
except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature
by fraudulent or deceptive means.
Since July 1, 2010, a federal banking rule under the Electronic Fund Transfer Act prohibits financial
institutions from charging consumers fees for paying overdrafts on automated teller machines (“ATM”) and
one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those
type of transactions. If a consumer does not opt in, any ATM transaction or debit that overdraws the
consumer’s account will be denied. Overdrafts on the payment of checks and regular electronic bill
payments are not covered by this rule. Before opting in, the consumer must be provided a notice that
explains the financial institution’s overdraft services, including the fees associated with the service, and the
consumer’s choices. Financial institutions must provide consumers who do not opt in with the same
account terms, conditions and features (including pricing) that they provide to consumers who do opt in.
Consumer Financial Protection Bureau Supervision
M&T Bank and Wilmington Trust, N.A. are supervised by the CFPB for certain consumer protection
purposes. The CFPB has focused on:
Š risks to consumers and compliance with the federal consumer financial laws, when it evaluates the
policies and practices of a financial institution;
Š the markets in which firms operate and risks to consumers posed by activities in those markets;
Š depository institutions that offer a wide variety of consumer financial products and services;
Š depository institutions with a more specialized focus; and
Š non-depository companies that offer one or more consumer financial products or services.
Community Reinvestment Act
M&T Bank and Wilmington Trust, N.A. are subject to the provisions of the CRA. Under the terms of the
CRA, each appropriate federal bank regulatory agency is required, in connection with its examination of a
bank, to assess such bank’s record in assessing and meeting the credit needs of the communities served by
that bank, including low- and moderate-income neighborhoods. During these examinations, the regulatory
agency rates such bank’s compliance with the CRA as “Outstanding,” “Satisfactory,” “Needs to Improve” or
“Substantial Noncompliance.” The regulatory agency’s assessment of the institution’s record is part of the
regulatory agency’s consideration of applications to acquire, merge or consolidate with another banking
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institution or its holding company, or to open or relocate a branch office. Currently, M&T Bank has a CRA
rating of “Outstanding” and Wilmington Trust, N.A. has a CRA rating of “Satisfactory.” In the case of a
BHC applying for approval to acquire a bank or BHC, the Federal Reserve Board will assess the record of
each subsidiary bank of the applicant BHC in considering the application, and such records may be the basis
for denying the application. The Banking Law contains provisions similar to the CRA which are applicable
to New York-chartered banks. Currently, M&T Bank has a CRA rating of “Outstanding” as determined by
the New York State Department of Financial Services.
USA Patriot Act
The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (the “USA Patriot Act”) imposes obligations on U.S. financial institutions,
including banks and broker/dealer subsidiaries, to implement and maintain appropriate policies, procedures
and controls which are reasonably designed to prevent, detect and report instances of money laundering and
the financing of terrorism and to verify the identity of their customers. In addition, provisions of the USA
Patriot Act require the federal financial institution regulatory agencies to consider the effectiveness of a
financial institution’s anti-money laundering activities when reviewing bank mergers and BHC acquisitions.
Failure of a financial institution to maintain and implement adequate programs to combat money
laundering and terrorist financing could have serious legal and reputational consequences for the
institution. As a result of an inspection by the Federal Reserve Bank of New York (“Federal Reserve Bank”),
M&T and M&T Bank entered into a written agreement with the Federal Reserve Bank related to M&T
Bank’s Bank Secrecy Act/Anti-Money Laundering Program. Additional information is included in Part II,
Item 7 under the caption “Corporate Profile and Significant Developments.”
Office of Foreign Assets Control Regulation
The United States has imposed economic sanctions that affect transactions with designated foreign
countries, nationals and others. These are typically known as the “OFAC” rules based on their
administration by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”). The OFAC-
administered sanctions targeting countries take many different forms. Generally, however, they contain one
or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country,
including prohibitions against direct or indirect imports from and exports to a sanctioned country and
prohibitions on “U.S. persons” engaging in financial transactions relating to making investments in, or
providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in
which the government or specially designated nationals of the sanctioned country have an interest, by
prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control
of U.S. persons). Blocked assets (e.g. property and bank deposits) cannot be paid out, withdrawn, set off or
transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have
serious legal and reputational consequences.
Regulation of Insurers and Insurance Brokers
The Company’s operations in the areas of insurance brokerage and reinsurance of credit life insurance are
subject to regulation and supervision by various state insurance regulatory authorities. Although the scope
of regulation and form of supervision may vary from state to state, insurance laws generally grant broad
discretion to regulatory authorities in adopting regulations and supervising regulated activities. This
supervision generally includes the licensing of insurance brokers and agents and the regulation of the
handling of customer funds held in a fiduciary capacity. Certain of M&T’s insurance company subsidiaries
are subject to extensive regulatory supervision and to insurance laws and regulations requiring, among other
things, maintenance of capital, record keeping, reporting and examinations.
Governmental Policies
The earnings of the Company are significantly affected by the monetary and fiscal policies of governmental
authorities, including the Federal Reserve Board. Among the instruments of monetary policy used by the
Federal Reserve Board to implement these objectives are open-market operations in U.S. Government
securities and federal funds, changes in the discount rate on member bank borrowings and changes in
reserve requirements against member bank deposits. These instruments of monetary policy are used in
varying combinations to influence the overall level of bank loans, investments and deposits, and the interest
rates charged on loans and paid for deposits. The Federal Reserve Board frequently uses these instruments of
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monetary policy, especially its open-market operations and the discount rate, to influence the level of
interest rates and to affect the strength of the economy, the level of inflation or the price of the dollar in
foreign exchange markets. The monetary policies of the Federal Reserve Board have had a significant effect
on the operating results of banking institutions in the past and are expected to continue to do so in the
future. It is not possible to predict the nature of future changes in monetary and fiscal policies, or the effect
which they may have on the Company’s business and earnings.
Competition
The Company competes in offering commercial and personal financial services with other banking
institutions and with firms in a number of other industries, such as thrift institutions, credit unions,
personal loan companies, sales finance companies, leasing companies, securities firms and insurance
companies. Furthermore, diversified financial services companies are able to offer a combination of these
services to their customers on a nationwide basis. The Company’s operations are significantly impacted by
state and federal regulations applicable to the banking industry. Moreover, the provisions of the Gramm-
Leach-Bliley Act of 1999, the Interstate Banking Act and the Banking Law have allowed for increased
competition among diversified financial services providers.
Other Legislative and Regulatory Initiatives
Proposals may be introduced in the United States Congress and state legislatures, as well as by regulatory
agencies. Such initiatives may include proposals to expand or contract the powers of bank holding
companies and depository institutions or proposals to substantially change the financial institution
regulatory system. Such legislation could change banking statutes and the operating environment of the
Company in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the
cost of doing business, limit or expand permissible activities or affect the competitive balance among banks,
savings associations, credit unions, and other financial institutions. A change in statutes, regulations or
regulatory policies applicable to M&T or any of its subsidiaries could have a material effect on the business,
financial condition or results of operations of the Company.
Other Information
Through a link on the Investor Relations section of M&T’s website at www.mtb.com, copies of M&T’s
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are
made available, free of charge, as soon as reasonably practicable after electronically filing such material with,
or furnishing it to, the SEC. Copies of such reports and other information are also available at no charge to
any person who requests them or at www.sec.gov. Such requests may be directed to M&T Bank
Corporation, Shareholder Relations Department, One M&T Plaza, 8th Floor, Buffalo, NY 14203-2399
(Telephone: (716) 842-5138).
Corporate Governance
M&T’s Corporate Governance Standards and the following corporate governance documents are also
available on M&T’s website at the Investor Relations link: Disclosure and Regulation FD Policy; Executive
Committee Charter; Nomination, Compensation and Governance Committee Charter; Audit Committee
Charter; Risk Committee Charter; Financial Reporting and Disclosure Controls and Procedures Policy;
Code of Ethics for CEO and Senior Financial Officers; Code of Business Conduct and Ethics; Employee
Complaint Procedures for Accounting and Auditing Matters; and Excessive or Luxury Expenditures Policy.
Copies of such governance documents are also available, free of charge, to any person who requests them.
Such requests may be directed to M&T Bank Corporation, Shareholder Relations Department, One M&T
Plaza, 8th Floor, Buffalo, NY 14203-2399 (Telephone: (716) 842-5138).
Statistical Disclosure Pursuant to Guide 3
See cross-reference sheet for disclosures incorporated elsewhere in this Annual Report on Form 10-K.
Additional information is included in the following tables.
20
Table 1
SELECTED CONSOLIDATED YEAR-END BALANCES
2014
2013
2012
(In thousands)
2011
2010
Interest-bearing deposits at banks . . . . . . $ 6,470,867 $ 1,651,138 $
Federal funds sold . . . . . . . . . . . . . . . . . . .
Trading account . . . . . . . . . . . . . . . . . . . .
Investment securities
99,573
376,131
83,392
308,175
129,945 $
3,000
488,966
154,960 $
2,850
561,834
101,222
25,000
523,834
U.S. Treasury and federal agencies . . .
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,042,390
7,770,767
4,007,725
5,200,489
4,177,783
157,159
793,993
180,495
845,235
203,004
1,863,632
228,949
2,243,716
251,544
2,721,213
Total investment securities . . . . . . .
12,993,542
8,796,497
6,074,361
7,673,154
7,150,540
Loans and leases
Commercial, financial, leasing, etc. . . .
Real estate — construction . . . . . . . . .
Real estate — mortgage . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . .
19,617,253
5,061,269
31,250,968
10,969,879
18,876,166
4,457,650
30,711,440
10,280,527
17,973,140
3,772,413
33,494,359
11,550,274
15,952,105
4,203,324
28,202,217
12,020,229
13,645,600
4,332,618
22,854,160
11,483,564
Total loans and leases . . . . . . . . . . . .
Unearned discount . . . . . . . . . . . . . . . .
66,899,369
(230,413)
64,325,783
(252,624)
66,790,186
(219,229)
60,377,875
(281,870)
52,315,942
(325,560)
Loans and leases, net of unearned
discount . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . .
66,668,956
(919,562)
64,073,159
(916,676)
66,570,957
(925,860)
60,096,005
(908,290)
51,990,382
(902,941)
Loans and leases, net . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible
assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate and other assets owned . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest-bearing deposits
. . . . . . . . .
NOW accounts . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . . . . .
Total deposits . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . .
Table 2
65,749,394
3,524,625
63,156,483
3,524,625
65,645,097
3,524,625
59,187,715
3,524,625
51,087,441
3,524,625
35,027
63,635
96,685,535
26,947,880
2,307,815
41,085,803
3,063,973
176,582
73,582,053
192,676
9,006,959
84,349,639
12,335,896
68,851
66,875
85,162,391
24,661,007
1,989,441
36,621,580
3,523,838
322,746
67,118,612
260,455
5,108,870
73,856,859
11,305,532
115,763
104,279
83,008,803
24,240,802
1,979,619
33,783,947
4,562,366
1,044,519
65,611,253
1,074,482
4,607,758
72,806,210
10,202,593
176,394
156,592
77,924,287
20,017,883
1,912,226
31,001,083
6,107,530
355,927
59,394,649
782,082
6,686,226
68,653,078
9,271,209
125,917
220,049
68,021,263
14,557,568
1,393,349
26,431,281
5,817,170
1,605,916
49,805,284
947,432
7,840,151
59,663,568
8,357,695
SHAREHOLDERS, EMPLOYEES AND OFFICES
Number at Year-End
2014
2013
2012
2011
2010
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,551
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,782
766
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,015
15,893
796
15,623
14,943
799
15,959
15,666
849
12,773
13,365
778
21
Table 3
CONSOLIDATED EARNINGS
2014
2013
2012
2011
2010
(In thousands)
Interest income
Loans and leases, including fees . . . . . . . . . . . . . . . . . . . $2,596,586 $2,734,708 $2,704,156 $2,522,567 $2,394,082
88
Deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
404
Resell agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
615
Investment securities
13,361
64
—
1,119
5,201
104
10
1,265
2,934
57
132
1,198
1,221
21
—
1,126
Fully taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exempt from federal taxes . . . . . . . . . . . . . . . . . . . . .
340,391
5,356
209,244
6,802
227,116
8,045
256,057
9,142
324,695
9,869
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . 2,956,877 2,957,334 2,941,685 2,792,087 2,729,795
Interest expense
NOW accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . .
1,404
45,465
15,515
699
101
217,247
280,431
1,287
54,948
26,439
1,018
430
199,983
284,105
1,343
68,011
46,102
1,130
1,286
225,297
343,169
1,145
84,314
71,014
962
1,030
243,866
402,331
850
85,226
100,241
1,368
3,006
271,578
462,269
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,676,446 2,673,229 2,598,516 2,389,756 2,267,526
368,000
Provision for credit losses
. . . . . . . . . . . . . . . . . . . . . . .
270,000
204,000
185,000
124,000
Net interest income after provision for credit losses . . . 2,552,446 2,488,229 2,394,516 2,119,756 1,899,526
Other income
Mortgage banking revenues . . . . . . . . . . . . . . . . . . . . . .
Service charges on deposit accounts . . . . . . . . . . . . . . .
Trust income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokerage services income . . . . . . . . . . . . . . . . . . . . . . .
Trading account and foreign exchange gains . . . . . . . .
Gain on bank investment securities . . . . . . . . . . . . . . . .
Total other-than-temporary impairment (“OTTI”)
losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portion of OTTI losses recognized in other
comprehensive income (before taxes) . . . . . . . . . . . .
362,912
427,956
508,258
67,212
29,874
—
331,265
446,941
496,008
65,647
40,828
56,457
349,064
446,698
471,852
59,059
35,634
9
166,021
455,095
332,385
56,470
27,224
150,187
184,625
478,133
122,613
49,669
27,286
2,770
—
—
(1,884)
(32,067)
(72,915)
(115,947)
(7,916)
(15,755)
(4,120)
29,666
Net OTTI losses recognized in earnings . . . . . . . . . . . .
Equity in earnings of Bayview Lending Group LLC . . .
Other revenues from operations . . . . . . . . . . . . . . . . . .
—
(16,672)
399,733
(9,800)
(16,126)
453,985
(47,822)
(21,511)
374,287
(77,035)
(24,231)
496,796
(86,281)
(25,768)
355,053
Total other income . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,779,273 1,865,205 1,667,270 1,582,912 1,108,100
Other expense
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . 1,404,950 1,355,178 1,314,540 1,203,993
249,514
Equipment and net occupancy . . . . . . . . . . . . . . . . . . .
Printing, postage and supplies . . . . . . . . . . . . . . . . . . . .
40,917
Amortization of core deposit and other intangible
264,327
39,557
269,299
38,201
257,551
41,929
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs of operations . . . . . . . . . . . . . . . . . . . . . . . .
33,824
55,531
941,052
46,912
69,584
860,327
60,631
101,110
733,499
61,617
100,230
821,797
999,709
216,064
33,847
58,103
79,324
527,790
Total other expense . . . . . . . . . . . . . . . . . . . . . . . . . . 2,742,857 2,635,885 2,509,260 2,478,068 1,914,837
. . . . . . . . . . . . . . . . . . . . . 1,588,862 1,717,549 1,552,526 1,224,600 1,092,789
356,628
Income before income taxes
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
523,028
579,069
365,121
522,616
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,066,246 $1,138,480 $1,029,498 $ 859,479 $ 736,161
Dividends declared
Common . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 371,137 $ 365,171 $ 357,862 $ 350,196 $ 335,502
40,225
Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75,878
53,450
53,450
48,203
22
Table 4
Per share
Net income
COMMON SHAREHOLDER DATA
2014
2013
2012
2011
2010
$ 7.57
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.47
7.54
7.42
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.80
2.80
Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . .
72.73
83.88
Common shareholders’ equity at year-end . . . . . . . . . . .
57.06
Tangible common shareholders’ equity at year-end . . . .
44.61
37.49% 33.94% 36.98% 44.15% 48.98%
Dividend payout ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6.37
6.35
2.80
66.82
37.79
$ 8.26
8.20
2.80
79.81
52.45
$ 5.72
5.69
2.80
63.54
33.26
Table 5
CHANGES IN INTEREST INCOME AND EXPENSE(a)
2014 Compared with 2013
Resulting from
Changes in:
2013 Compared with 2012
Resulting from
Changes in:
Volume
Rate
Volume
Rate
Total
Change
Total
Change
(Increase (decrease) in thousands)
Interest income
Loans and leases, including fees . . . . . . . . . . . . . $(138,676) (16,282) (122,394) $ 29,624 100,052 (70,428)
55
Deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . .
Federal funds sold and agreements to resell
3,980
7,938
3,925
8,160
222
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Trading account
Investment securities
U.S. Treasury and federal agencies . . . . . . . . .
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(50)
(101)
(29)
(27)
(21)
(74)
93
88
128
(298)
(35)
386
138,299 158,630
(20,331)
15,379
19,078
(3,699)
(1,884)
(1,395)
(7,534) (19,986)
(489)
12,452
(1,639)
(1,339)
(33,296) (30,940)
(300)
(2,356)
Total interest income . . . . . . . . . . . . . . . . . . . $
(1,786)
$ 14,229
Interest expense
Interest-bearing deposits
NOW accounts . . . . . . . . . . . . . . . . . . . . . . . . $
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . .
117
(9,483)
(10,924)
(319)
(329)
17,264
117
5,494
(4,401)
(319)
(149)
84,315
— $
(14,977)
(6,523)
—
(180)
(67,051)
110
(56)
(13,063)
(19,663)
(112)
(856)
(166)
5,798 (18,861)
(9,849)
(9,814)
111
(223)
(286)
(570)
(1,642)
(25,314) (23,672)
Total interest expense . . . . . . . . . . . . . . . . . . . $
(3,674)
$(59,064)
(a)
Interest income data are on a taxable-equivalent basis. The apportionment of changes resulting from the
combined effect of both volume and rate was based on the separately determined volume and rate changes.
Item 1A. Risk Factors.
M&T and its subsidiaries could be adversely impacted by various risks and uncertainties which are difficult
to predict. As a financial institution, the Company has significant exposure to market risk, including
interest-rate risk, liquidity risk and credit risk, among others. Adverse experience with these or other risks
could have a material impact on the Company’s financial condition and results of operations, as well as on
the value of the Company’s financial instruments in general, and M&T’s common stock, in particular.
23
Weakness in the economy has adversely affected the Company in the past and may adversely affect the Company
in the future.
Poor business and economic conditions in general or specifically in markets served by the Company could
have one or more of the following adverse effects on the Company’s business:
Š A decrease in the demand for loans and other products and services offered by the Company.
Š A decrease in net interest income derived from the Company’s lending and deposit gathering
activities.
Š A decrease in the value of the Company’s investment securities, loans held for sale or other assets
secured by residential or commercial real estate.
Š Other-than-temporary impairment of investment securities in the Company’s investment securities
portfolio.
Š A decrease in fees from the Company’s brokerage and trust businesses associated with declines or
lack of growth in stock market prices.
Š Potential higher FDIC assessments due to the DIF falling below minimum required levels.
Š An impairment of certain intangible assets, such as goodwill.
Š An increase in the number of customers and counterparties who become delinquent, file for
protection under bankruptcy laws or default on their loans or other obligations to the Company. An
increase in the number of delinquencies, bankruptcies or defaults could result in higher levels of
nonperforming assets, net charge-offs, provision for credit losses and valuation adjustments on loans
held for sale.
The Company’s business and financial performance is impacted significantly by market interest rates and
movements in those rates. The monetary, tax and other policies of governmental agencies, including the Federal
Reserve, have a significant impact on interest rates and overall financial market performance over which the
Company has no control and which the Company may not be able to anticipate adequately.
As a result of the high percentage of the Company’s assets and liabilities that are in the form of interest-
bearing or interest-related instruments, changes in interest rates, in the shape of the yield curve or in spreads
between different market interest rates, can have a material effect on the Company’s business and
profitability and the value of the Company’s assets and liabilities. For example:
Š Changes in interest rates or interest rate spreads can affect the difference between the interest that the
Company earns on assets and the interest that the Company pays on liabilities, which impacts the
Company’s overall net interest income and profitability.
Š Such changes can affect the ability of borrowers to meet obligations under variable or adjustable rate
loans and other debt instruments, and can, in turn, affect the Company’s loss rates on those assets.
Š Such changes may decrease the demand for interest rate based products and services, including loans
and deposits.
Š Such changes can also affect the Company’s ability to hedge various forms of market and interest rate
risk and may decrease the profitability or protection or increase the risk or cost associated with such
hedges.
Š Movements in interest rates also affect mortgage prepayment speeds and could result in the
impairment of capitalized mortgage servicing assets, reduce the value of loans held for sale and
increase the volatility of mortgage banking revenues, potentially adversely affecting the Company’s
results of operations.
The monetary, tax and other policies of the government and its agencies, including the Federal
Reserve, have a significant impact on interest rates and overall financial market performance. These
governmental policies can thus affect the activities and results of operations of banking companies such as
the Company. An important function of the Federal Reserve is to regulate the national supply of bank credit
and certain interest rates. The actions of the Federal Reserve influence the rates of interest that the Company
charges on loans and that the Company pays on borrowings and interest-bearing deposits and can also affect
the value of the Company’s on-balance sheet and off-balance sheet financial instruments. Also, due to the
impact on rates for short-term funding, the Federal Reserve’s policies also influence, to a significant extent,
the Company’s cost of such funding. In addition, the Company is routinely subject to examinations from
various governmental taxing authorities. Such examinations may result in challenges to the tax return
treatment applied by the Company to specific transactions. Management believes that the assumptions and
24
judgment used to record tax-related assets or liabilities have been appropriate. Should tax laws change or the
tax authorities determine that management’s assumptions were inappropriate, the result and adjustments
required could have a material effect on the Company’s results of operations. M&T cannot predict the
nature or timing of future changes in monetary, tax and other policies or the effect that they may have on
the Company’s business activities, financial condition and results of operations.
The Company’s business and performance is vulnerable to the impact of volatility in debt and equity markets.
As most of the Company’s assets and liabilities are financial in nature, the Company’s performance tends to
be sensitive to the performance of the financial markets. Turmoil and volatility in U.S. and global financial
markets can be a major contributory factor to overall weak economic conditions, leading to some of the
risks discussed herein, including the impaired ability of borrowers and other counterparties to meet
obligations to the Company. Financial market volatility also can have some of the following adverse effects
on the Company and its business, including adversely affecting the Company’s financial condition and
results of operations:
Š It can affect the value or liquidity of the Company’s on-balance sheet and off-balance sheet financial
instruments.
Š It can affect the value of capitalized servicing assets.
Š It can affect M&T’s ability to access capital markets to raise funds. Inability to access capital markets
if needed, at cost effective rates, could adversely affect the Company’s liquidity and results of
operations.
Š It can affect the value of the assets that the Company manages or otherwise administers or services
for others. Although the Company is not directly impacted by changes in the value of such assets,
decreases in the value of those assets would affect related fee income and could result in decreased
demand for the Company’s services.
Š In general, it can impact the nature, profitability or risk profile of the financial transactions in which
the Company engages.
Volatility in the markets for real estate and other assets commonly securing financial products has
been and may continue to be a significant contributor to overall volatility in financial markets.
The Company’s regional concentrations expose it to adverse economic conditions in its primary retail banking
office footprint.
The Company’s core banking business is largely concentrated within the Company’s retail banking office
network footprint, located principally in New York, Pennsylvania, Maryland, Delaware, Virginia, West
Virginia and the District of Columbia. Therefore, the Company is, or in the future may be, particularly
vulnerable to adverse changes in economic conditions in the Northeast and Mid-Atlantic regions.
Risks Relating to the Regulatory Environment
The Company is subject to extensive government regulation and supervision and this regulatory environment is
being significantly impacted by the financial regulatory reform initiatives in the United States, including the
Dodd-Frank Act and related regulations.
The Company is subject to extensive federal and state regulation and supervision. Banking regulations are
primarily intended to protect depositors’ funds, federal deposit insurance funds and the financial system as a
whole, not security holders. These regulations and supervisory guidance affect the Company’s lending
practices, capital structure, amounts of capital, investment practices, dividend policy and growth, among
other things. Failure to comply with laws, regulations, policies or supervisory guidance could result in civil
or criminal penalties, including monetary penalties, the loss of FDIC insurance, the revocation of a banking
charter, other sanctions by regulatory agencies, and/or reputation damage, which could have a material
adverse effect on the Company’s business, financial condition and results of operations. In this regard,
government authorities, including the bank regulatory agencies, are pursuing aggressive enforcement
actions with respect to compliance and other legal matters involving financial activities, which heightens the
risks associated with actual and perceived compliance failures and may also adversely affect the Company’s
ability to enter into certain transactions or engage in certain activities, or obtain necessary regulatory
approvals in connection therewith.
25
The United States government and others have recently undertaken major reforms of the regulatory
oversight structure of the financial services industry. M&T expects to face increased regulation of its
industry as a result of current and possible future initiatives. M&T also expects more intense scrutiny in the
examination process and more aggressive enforcement of regulations on both the federal and state levels.
Compliance with these new regulations and supervisory initiatives will likely increase the Company’s costs,
reduce its revenue and may limit its ability to pursue certain desirable business opportunities.
Not all of the rules required or expected to be implemented under the Dodd-Frank Act have been
proposed or adopted, and certain of the rules that have been proposed or adopted under the Dodd-Frank
Act are subject to phase-in or transitional periods. Reforms, both under the Dodd-Frank Act and otherwise,
will have a significant effect on the entire financial services industry. Although it is difficult to predict the
magnitude and extent of these effects, M&T believes compliance with new regulations and other initiatives
will likely negatively impact revenue and increase the cost of doing business, both in terms of transition
expenses and on an ongoing basis, and may also limit M&T’s ability to pursue certain desirable business
opportunities. Any new regulatory requirements or changes to existing requirements could require changes
to the Company’s businesses, result in increased compliance costs and affect the profitability of such
businesses. Additionally, reform could affect the behaviors of third parties that the Company deals with in
the course of its business, such as rating agencies, insurance companies and investors. Heightened regulatory
practices, requirements or expectations could affect the Company in substantial and unpredictable ways,
and, in turn, could have a material adverse effect on the Company’s business, financial condition and results
of operations.
New capital and liquidity standards adopted by the U.S. banking regulators will result in banks and bank
holding companies needing to maintain more and higher quality capital and greater liquidity than has
historically been the case.
New capital standards, both as a result of the Dodd-Frank Act and the new U.S. Basel III-based capital rules
will have a significant effect on banks and bank holding companies, including M&T. The new U.S. capital
rules require bank holding companies and their bank subsidiaries to maintain substantially more capital,
with a greater emphasis on common equity. For additional information, see “Capital Requirements” under
Part I, Item 1 “Business.”
The need to maintain more and higher quality capital, as well as greater liquidity, going forward than
historically has been required, and generally increased regulatory scrutiny with respect to capital levels,
could limit the Company’s business activities, including lending, and its ability to expand, either organically
or through acquisitions. It could also result in M&T being required to take steps to increase its regulatory
capital that may be dilutive to shareholders or limit its ability to pay dividends or otherwise return capital to
shareholders, or sell or refrain from acquiring assets, the capital requirements for which are not justified by
the assets’ underlying risks.
In addition, the new U.S. final Basel III-based liquidity coverage ratio requirement that will come
into effect, subject to certain phase-in requirements, in 2016 and the liquidity-related provisions of the
Federal Reserve’s liquidity-related enhanced prudential supervision requirements adopted pursuant to
Section 165 of Dodd-Frank will require the Company to hold increased levels of unencumbered highly
liquid investments, thereby reducing the Company’s ability to invest in other longer-term assets even if
deemed more desirable from a balance sheet management perspective. Moreover, although these new
requirements are being phased in over time, U.S. federal banking agencies have been taking into account
expectations regarding the ability of banks to meet these new requirements, including under stressed
conditions, in approving actions that represent uses of capital, such as dividend increases, share repurchases
and acquisitions.
The effect of resolution plan requirements may have a material adverse impact on M&T.
Bank holding companies with consolidated assets of $50 billion or more, such as M&T, are required to
report periodically to regulators a resolution plan for their rapid and orderly resolution in the event of
material financial distress or failure. M&T’s resolution plan must, among other things, ensure that its
depository institution subsidiaries are adequately protected from risks arising from its other subsidiaries.
The regulation adopted by the Federal Reserve and FDIC sets specific standards for the resolution plans,
including requiring a strategic analysis of the plan’s components, a description of the range of specific
26
actions the Company proposes to take in resolution, and a description of the Company’s organizational
structure, material entities, interconnections and interdependencies, and management information systems,
among other elements. To address effectively any shortcomings in the Company’s resolution plan, the
Federal Reserve and the FDIC could require the Company to change its business structure or dispose of
businesses, which could have a material adverse effect on its liquidity and ability to pay dividends on its
stock or interest and principal on its debt.
Risks Relating to the Company’s Business
Deteriorating credit quality could adversely impact the Company.
As a lender, the Company is exposed to the risk that customers will be unable to repay their loans in
accordance with the terms of the agreements, and that any collateral securing the loans may be insufficient
to assure full repayment. Credit losses are inherent in the business of making loans.
Factors that influence the Company’s credit loss experience include overall economic conditions
affecting businesses and consumers, generally, but also residential and commercial real estate valuations, in
particular, given the size of the Company’s real estate loan portfolios. Factors that can influence the
Company’s credit loss experience include: (i) the impact of residential real estate values on loans to
residential real estate builders and developers and other loans secured by residential real estate; (ii) the
concentrations of commercial real estate loans in the Company’s loan portfolio; (iii) the amount of
commercial and industrial loans to businesses in areas of New York State outside of the New York City
metropolitan area and in central Pennsylvania that have historically experienced less economic growth and
vitality than many other regions of the country; (iv) the repayment performance associated with first and
second lien loans secured by residential real estate; and (v) the size of the Company’s portfolio of loans to
individual consumers, which historically have experienced higher net charge-offs as a percentage of loans
outstanding than loans to other types of borrowers.
Commercial real estate valuations can be highly subjective as they are based upon many assumptions.
Such valuations can be significantly affected over relatively short periods of time by changes in business
climate, economic conditions, interest rates and, in many cases, the results of operations of businesses and
other occupants of the real property. Similarly, residential real estate valuations can be impacted by housing
trends, the availability of financing at reasonable interest rates, governmental policy regarding housing and
housing finance and general economic conditions affecting consumers.
The Company maintains an allowance for credit losses which represents, in management’s judgment,
the amount of losses inherent in the loan and lease portfolio. The allowance is determined by management’s
evaluation of the loan and lease portfolio based on such factors as the differing economic risks associated
with each loan category, the current financial condition of specific borrowers, the economic environment in
which borrowers operate, the level of delinquent loans, the value of any collateral and, where applicable, the
existence of any guarantees or indemnifications. The effects of probable decreases in expected principal cash
flows on acquired loans are also considered in the establishment of the allowance for credit losses.
Management believes that the allowance for credit losses appropriately reflects credit losses inherent
in the loan and lease portfolio. However, there is no assurance that the allowance will be sufficient to cover
such credit losses, particularly if housing and employment conditions worsen or the economy experiences a
downturn. In those cases, the Company may be required to increase the allowance through an increase in
the provision for credit losses, which would reduce net income.
The Company must maintain adequate sources of funding and liquidity.
The Company must maintain adequate funding sources in the normal course of business to support its
operations and fund outstanding liabilities, as well as meet regulatory expectations. The Company primarily
relies on deposits to be a low cost and stable source of funding for the loans it makes and the operations of
its business. Core customer deposits, which include noninterest-bearing deposits, interest-bearing
transaction accounts, savings deposits and time deposits of $250,000 or less, have historically provided the
Company with a sizeable source of relatively stable and low-cost funds. In addition to customer deposits,
sources of liquidity include borrowings from third party banks, securities dealers, various Federal Home
Loan Banks and the Federal Reserve Bank of New York.
The Company’s liquidity and ability to fund and run the business could be materially adversely
affected by a variety of conditions and factors, including financial and credit market disruptions and
27
volatility or a lack of market or customer confidence in financial markets in general, which may result in a
loss of customer deposits or outflows of cash or collateral and/or ability to access capital markets on
favorable terms.
Other conditions and factors that could materially adversely affect the Company’s liquidity and
funding include a lack of market or customer confidence in, or negative news about, the Company or the
financial services industry generally which also may result in a loss of deposits and/or negatively affect the
ability to access the capital markets; the loss of customer deposits to alternative investments; inability to sell
or securitize loans or other assets; and downgrades in one or more of the Company’s credit ratings. A
downgrade in the Company’s credit ratings, which could result from general industry-wide or regulatory
factors not solely related to the Company, could adversely affect the Company’s ability to borrow funds and
raise the cost of borrowings substantially and could cause creditors and business counterparties to raise
collateral requirements or take other actions that could adversely affect M&T’s ability to raise capital. Many
of the above conditions and factors may be caused by events over which M&T has little or no control. There
can be no assurance that significant disruption and volatility in the financial markets will not occur in the
future.
Recent regulatory changes relating to liquidity and risk management may also negatively impact the
Company’s results of operations and competitive position. These regulations address, among other matters,
liquidity stress testing, minimum liquidity requirements and restrictions on short-term debt issued by top-
tier holding companies.
If the Company is unable to continue to fund assets through customer bank deposits or access
funding sources on favorable terms or if the Company suffers an increase in borrowing costs or otherwise
fails to manage liquidity effectively, the Company’s liquidity, operating margins, financial condition and
results of operations may be materially adversely affected.
The financial services industry is highly competitive and creates competitive pressures that could adversely affect
the Company’s revenue and profitability.
The financial services industry in which the Company operates is highly competitive. The Company
competes not only with commercial and other banks and thrifts, but also with insurance companies, mutual
funds, hedge funds, securities brokerage firms and other companies offering financial services in the U.S.,
globally and over the Internet. The Company competes on the basis of several factors, including capital,
access to capital, revenue generation, products, services, transaction execution, innovation, reputation and
price. Over time, certain sectors of the financial services industry have become more concentrated, as
institutions involved in a broad range of financial services have been acquired by or merged into other firms.
These developments could result in the Company’s competitors gaining greater capital and other resources,
such as a broader range of products and services and geographic diversity. The Company may experience
pricing pressures as a result of these factors and as some of its competitors seek to increase market share by
reducing prices or paying higher rates of interest on deposits. Finally, technological change is influencing
how individuals and firms conduct their financial affairs and changing the delivery channels for financial
services, with the result that the Company may have to contend with a broader range of competitors
including many that are not located within the geographic footprint of its banking office network.
M&T may be adversely affected by the soundness of other financial institutions.
Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other
relationships. The Company has exposure to many different industries and counterparties, and routinely
executes transactions with counterparties in the financial services industry, including commercial banks,
brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose the
Company to credit risk in the event of a default by a counterparty or client. In addition, the Company’s
credit risk may be exacerbated when the collateral held by the Company cannot be realized or is liquidated
at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company.
Any such losses could have a material adverse effect on the Company’s financial condition and results of
operations.
M&T relies on dividends from its subsidiaries for its liquidity.
M&T is a separate and distinct legal entity from its subsidiaries. M&T typically receives substantially all of its
revenue from subsidiary dividends. These dividends are the principal source of funds to pay dividends on
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M&T stock and interest and principal on its debt. Various federal and/or state laws and regulations, as well
as regulatory expectations, limit the amount of dividends that M&T’s banking subsidiaries and certain
nonbank subsidiaries may pay. Regulatory scrutiny of capital levels at bank holding companies and insured
depository institution subsidiaries has increased in recent years and has resulted in increased regulatory
focus on all aspects of capital planning, including dividends and other distributions to shareholders of
banks, such as parent bank holding companies. See “Item 1. Business — Dividends” for a discussion of
regulatory and other restrictions on dividend declarations. Also, M&T’s right to participate in a distribution
of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of that subsidiary’s
creditors. Limitations on M&T’s ability to receive dividends from its subsidiaries could have a material
adverse effect on its liquidity and ability to pay dividends on its stock or interest and principal on its debt.
M&T’s ability to pay dividends on common stock may be adversely affected by market and other factors outside
of its control and will depend, in part, on a review of its capital plan by the Federal Reserve.
The Federal Reserve recently amended its capital planning and stress testing rules to, among other things,
generally limit a bank holding company’s ability to make quarterly capital distributions – that is, dividends
and share repurchases – commencing April 1, 2015 if the amount of actual cumulative quarterly capital
issuances of instruments that qualify as regulatory capital are less than the bank holding company had
indicated in its submitted capital plan as to which it received a non-objection from the Federal Reserve.
Under these new rules, for example, if a bank holding company issued a smaller amount of additional
common stock than it had stated in its capital plan, it would be required to reduce common dividends and/
or the amount of common stock repurchases so that the dollar amount of capital distributions, net of the
dollar amount of additional common stock issued (“net distributions”), is no greater than the dollar
amount of net distributions relating to its common stock included in its capital plan, as measured on an
aggregate basis beginning in the third quarter of the nine-quarter planning horizon through the end of the
then current quarter. As such, M&T’s ability to declare and pay dividends on its common stock, as well as
the amount of such dividends, will depend, in part, on its ability to issue stock as per its capital plan or to
otherwise remain in compliance with its capital plan, which may be adversely affected by market and other
factors outside of M&T’s control.
The Company is subject to operational risk.
Like all businesses, the Company is subject to operational risk, which represents the risk of loss resulting
from human error, inadequate or failed internal processes and systems, and external events. Operational risk
also encompasses reputational risk and compliance and legal risk, which is the risk of loss from violations of,
or noncompliance with, laws, rules, regulations, prescribed practices or ethical standards, as well as the risk
of noncompliance with contractual and other obligations. The Company is also exposed to operational risk
through outsourcing arrangements, and the effect that changes in circumstances or capabilities of its
outsourcing vendors can have on the Company’s ability to continue to perform operational functions
necessary to its business. In addition, along with other participants in the financial services industry, the
Company frequently attempts to introduce new technology-driven products and services that are aimed at
allowing the Company to better serve customers and to reduce costs. The Company may not be able to
effectively implement new technology-driven products and services that allows it to remain competitive or
be successful in marketing these products and services to its customers. Although the Company seeks to
mitigate operational risk through a system of internal controls that are reviewed and updated, no system of
controls, however well designed and maintained, is infallible. Control weaknesses or failures or other
operational risks could result in charges, increased operational costs, harm to the Company’s reputation or
foregone business opportunities.
Changes in accounting standards could impact the Company’s financial condition and results of operations.
The accounting standard setters, including the Financial Accounting Standards Board (“FASB”), the SEC
and other regulatory bodies, periodically change the financial accounting and reporting standards that
govern the preparation of the Company’s consolidated financial statements. These changes can be hard to
predict and can materially impact how the Company records and reports its financial condition and results
of operations. In some cases, the Company could be required to apply a new or revised standard
retroactively, which would result in the restating of the Company’s prior period financial statements.
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M&T’s accounting policies and processes are critical to the reporting of the Company’s financial condition and
results of operations. They require management to make estimates about matters that are uncertain.
Accounting policies and processes are fundamental to the Company’s reported financial condition and
results of operations. Some of these policies require use of estimates and assumptions that may affect the
reported amounts of assets or liabilities and financial results. Several of M&T’s accounting policies are
critical because they require management to make difficult, subjective and complex judgments about
matters that are inherently uncertain and because it is likely that materially different amounts would be
reported under different conditions or using different assumptions. Pursuant to generally accepted
accounting principles (“GAAP”), management is required to make certain assumptions and estimates in
preparing the Company’s financial statements. If assumptions or estimates underlying the Company’s
financial statements are incorrect, the Company may experience material losses.
Management has identified certain accounting policies as being critical because they require
management’s judgment to ascertain the valuations of assets, liabilities, commitments and contingencies. A
variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an
expense, recovering an asset, valuing an asset or liability, or recognizing or reducing a liability. M&T has
established detailed policies and control procedures that are intended to ensure these critical accounting
estimates and judgments are well controlled and applied consistently. In addition, the policies and
procedures are intended to ensure that the process for changing methodologies occurs in an appropriate
manner. Because of the uncertainty surrounding judgments and the estimates pertaining to these matters,
M&T could be required to adjust accounting policies or restate prior period financial statements if those
judgments and estimates prove to be incorrect. For additional information, see Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Critical
Accounting Estimates” and Note 1, “Significant Accounting Policies,” of Notes to Financial Statements in
Part II, Item 8.
Difficulties in combining the operations of acquired entities with the Company’s own operations may prevent
M&T from achieving the expected benefits from its acquisitions.
M&T has regularly considered opportunities to expand and improve its business through acquisition of
other financial institutions. Inherent uncertainties exist when integrating the operations of an acquired
entity. M&T may not be able to fully achieve its strategic objectives and planned operating efficiencies in an
acquisition. In addition, the markets and industries in which the Company and its potential acquisition
targets operate are highly competitive. The Company may lose customers or fail to retain the customers of
acquired entities as a result of an acquisition. Future acquisition and integration activities may require M&T
to devote substantial time and resources, and as a result M&T may not be able to pursue other business
opportunities.
After completing an acquisition, the Company may not realize the expected benefits of the
acquisition due to lower financial results pertaining to the acquired entity. For example, the Company could
experience higher credit losses than originally anticipated related to an acquired loan portfolio.
M&T could suffer if it fails to attract and retain skilled personnel.
M&T’s success depends, in large part, on its ability to attract and retain key individuals. Competition for
qualified candidates in the activities and markets that the Company serves is significant and the Company
may not be able to hire these candidates and retain them. Growth in the Company’s business, including
through acquisitions, may increase its need for additional qualified personnel. If the Company is not able to
hire or retain these key individuals, it may be unable to execute its business strategies and may suffer adverse
consequences to its business, financial condition and results of operations.
The federal banking agencies have issued joint guidance on executive compensation designed to help
ensure that a banking organization’s incentive compensation policies do not encourage imprudent risk
taking and are consistent with the safety and soundness of the organization. In addition, the Dodd-Frank
Act required those agencies, along with the SEC, to adopt rules to require reporting of incentive
compensation and to prohibit certain compensation arrangements. If as a result of complying with such
rules the Company is unable to attract and retain qualified employees, or do so at rates necessary to
maintain its competitive position, or if the compensation costs required to attract and retain employees
become more significant, the Company’s performance, including its competitive position, could be
materially adversely affected.
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Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact the
Company’s business.
Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a
significant impact on the Company’s ability to conduct business. Such events could affect the stability of the
Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of
collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the
Company to incur additional expenses. Although the Company has established disaster recovery plans and
procedures, and monitors for significant environmental effects on its properties or its investments, the
occurrence of any such event could have a material adverse effect on the Company.
The Company’s information systems may experience interruptions or breaches in security.
The Company relies heavily on communications and information systems to conduct its business. Any
failure, interruption or breach in security of these systems could result in disruptions to its accounting,
deposit, loan and other systems, and adversely affect the Company’s customer relationships. While the
Company has policies and procedures designed to prevent or limit the effect of these possible events, there
can be no assurance that any such failure, interruption or security breach will not occur or, if any does
occur, that it can be sufficiently remediated.
There have been increasing efforts on the part of third parties, including through cyber attacks, to
breach data security at financial institutions or with respect to financial transactions. There have been
several recent instances involving financial services and consumer-based companies reporting the
unauthorized disclosure of client or customer information or the destruction or theft of corporate data. In
addition, because the techniques used to cause such security breaches change frequently, often are not
recognized until launched against a target and may originate from less regulated and remote areas around
the world, the Company may be unable to proactively address these techniques or to implement adequate
preventative measures. The ability of the Company’s customers to bank remotely, including online and
through mobile devices, requires secure transmission of confidential information and increases the risk of
data security breaches.
The occurrence of any failure, interruption or security breach of the Company’s systems, particularly
if widespread or resulting in financial losses to customers, could damage the Company’s reputation, result in
a loss of customer business, subject it to additional regulatory scrutiny, or expose it to civil litigation and
financial liability.
The Company is or may become involved from time to time in suits, legal proceedings, information-gathering
requests, investigations and proceedings by governmental and self-regulatory agencies that may lead to adverse
consequences.
Many aspects of the Company’s business involve substantial risk of legal liability. M&T and/or its
subsidiaries have been named or threatened to be named as defendants in various lawsuits arising from its or
its subsidiaries’ business activities (and in some cases from the activities of companies M&T has acquired).
In addition, from time to time, M&T is, or may become, the subject of governmental and self-regulatory
agency information-gathering requests, reviews, investigations and proceedings and other forms of
regulatory inquiry, including by bank regulatory agencies, the SEC and law enforcement authorities. The
SEC has announced a policy of seeking admissions of liability in certain settled cases, which could adversely
impact the defense of private litigation. M&T is also at risk when it has agreed to indemnify others for losses
related to legal proceedings, including litigation and governmental investigations and inquiries, they face,
such as in connection with the purchase or sale of a business or assets. The results of such proceedings could
lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgments,
settlements, fines, injunctions, restrictions on the way in which the Company conducts its business, or
reputational harm.
Although the Company establishes accruals for legal proceedings when information related to the
loss contingencies represented by those matters indicates both that a loss is probable and that the amount of
loss can be reasonably estimated, the Company does not have accruals for all legal proceedings where it faces
a risk of loss. In addition, due to the inherent subjectivity of the assessments and unpredictability of the
outcome of legal proceedings, amounts accrued may not represent the ultimate loss to the Company from
the legal proceedings in question. Thus, the Company’s ultimate losses may be higher, and possibly
significantly so, than the amounts accrued for legal loss contingencies, which could adversely affect the
Company’s financial condition and results of operations.
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M&T relies on other companies to provide key components of the Company’s business infrastructure.
Third parties provide key components of the Company’s business infrastructure such as banking services,
processing, and Internet connections and network access. Any disruption in such services provided by these
third parties or any failure of these third parties to handle current or higher volumes of use could adversely
affect the Company’s ability to deliver products and services to clients and otherwise to conduct business.
Technological or financial difficulties of a third party service provider could adversely affect the Company’s
business to the extent those difficulties result in the interruption or discontinuation of services provided by
that party. The Company may not be insured against all types of losses as a result of third party failures and
insurance coverage may be inadequate to cover all losses resulting from system failures or other disruptions.
Failures in the Company’s business infrastructure could interrupt the operations or increase the costs of
doing business.
Detailed discussions of the specific risks outlined above and other risks facing the Company are
included within this Annual Report on Form 10-K in Part I, Item 1 “Business,” and Part II, Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Furthermore,
in Part II, Item 7 under the heading “Forward-Looking Statements” is included a description of certain risks,
uncertainties and assumptions identified by management that are difficult to predict and that could
materially affect the Company’s financial condition and results of operations, as well as the value of the
Company’s financial instruments in general, and M&T common stock, in particular.
In addition, the market price of M&T common stock may fluctuate significantly in response to a
number of other factors, including changes in securities analysts’ estimates of financial performance,
volatility of stock market prices and volumes, rumors or erroneous information, changes in market
valuations of similar companies and changes in accounting policies or procedures as may be required by the
FASB or other regulatory agencies.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Properties.
Both M&T and M&T Bank maintain their executive offices at One M&T Plaza in Buffalo, New York. This
twenty-one story headquarters building, containing approximately 300,000 rentable square feet of space, is
owned in fee by M&T Bank and was completed in 1967. M&T, M&T Bank and their subsidiaries occupy
approximately 98% of the building and the remainder is leased to non-affiliated tenants. At December 31,
2014, the cost of this property (including improvements subsequent to the initial construction), net of
accumulated depreciation, was $12.0 million.
M&T Bank owns an additional facility in Buffalo, New York with approximately 395,000 rentable
square feet of space. Approximately 89% of this facility, known as M&T Center, is occupied by M&T Bank
and its subsidiaries, with the remainder leased to non-affiliated tenants. At December 31, 2014, the cost of
this building (including improvements subsequent to acquisition), net of accumulated depreciation, was
$8.8 million.
M&T Bank also owns and occupies two separate facilities in the Buffalo area which support certain
back-office and operations functions of the Company. The total square footage of these facilities
approximates 225,000 square feet and their combined cost (including improvements subsequent to
acquisition), net of accumulated depreciation, was $18.1 million at December 31, 2014.
M&T Bank also owns a facility in Syracuse, New York with approximately 160,000 rentable square
feet of space. Approximately 47% of this facility is occupied by M&T Bank. At December 31, 2014, the cost
of this building (including improvements subsequent to acquisition), net of accumulated depreciation, was
$2.8 million.
M&T Bank owns facilities in Wilmington, Delaware, with approximately 340,000 (known as
Wilmington Center) and 295,000 (known as Wilmington Plaza) rentable square feet of space, respectively.
M&T Bank occupies approximately 92% of Wilmington Center. Wilmington Plaza is 100% occupied by a
tenant. At December 31, 2014, the cost of these buildings (including improvements subsequent to
acquisition), net of accumulated depreciation, was $43.0 million and $13.3 million, respectively.
M&T Bank also owns facilities in Harrisburg, Pennsylvania and Millsboro, Delaware with
approximately 220,000 and 325,000 rentable square feet of space, respectively. M&T Bank occupies
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approximately 30% and 89% of these respective facilities. At December 31, 2014, the cost of these buildings
(including improvements subsequent to acquisition), net of accumulated depreciation, was $10.7 million
and $6.9 million, respectively.
No other properties owned by M&T Bank have more than 100,000 square feet of space. The cost, net
of accumulated depreciation and amortization, of the Company’s premises and equipment is detailed in
note 6 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements and
Supplementary Data.” Of the 695 domestic banking offices of the Registrant’s subsidiary banks at
December 31, 2014, 291 are owned in fee and 404 are leased.
Item 3.
Legal Proceedings.
M&T and its subsidiaries are subject in the normal course of business to various pending and threatened
legal proceedings in which claims for monetary damages are asserted. On an on-going basis management,
after consultation with legal counsel, assesses the Company’s liabilities and contingencies in connection with
such legal proceedings. For those matters where it is probable that the Company will incur losses and the
amounts of the losses can be reasonably estimated, the Company records an expense and corresponding
liability in its consolidated financial statements. To the extent the pending or threatened litigation could
result in exposure in excess of that liability, the amount of such excess is not currently estimable. Although
not considered probable, the range of reasonably possible losses for such matters in the aggregate, beyond
the existing recorded liability, was between $0 and $40 million. Although the Company does not believe that
the outcome of pending litigations will be material to the Company’s consolidated financial position, it
cannot rule out the possibility that such outcomes will be material to the consolidated results of operations
for a particular reporting period in the future.
Wilmington Trust Corporation Investigative and Litigation Matters
M&T’s Wilmington Trust Corporation (“Wilmington Trust”) subsidiary is the subject of a governmental
investigation arising from actions undertaken by Wilmington Trust prior to M&T’s acquisition of
Wilmington Trust and its subsidiaries, as set forth below.
DOJ Investigation: Prior to M&T’s acquisition of Wilmington Trust, the Department of Justice
(“DOJ”) commenced an investigation of Wilmington Trust, relating to Wilmington Trust’s financial
reporting and securities filings, as well as certain commercial real estate lending relationships involving its
subsidiary bank, Wilmington Trust Company, all of which relate to filings and activities occurring prior to
the acquisition of Wilmington Trust by M&T. Counsel for Wilmington Trust has met with the DOJ to
discuss the DOJ investigation. The DOJ investigation is ongoing.
This investigation could lead to administrative or legal proceedings resulting in potential civil and/or
criminal remedies, or settlements, including, among other things, enforcement actions, fines, penalties,
restitution or additional costs and expenses.
In Re Wilmington Trust Securities Litigation (U.S. District Court, District of Delaware, Case No. 10-CV-
0990-SLR): Beginning on November 18, 2010, a series of parties, purporting to be class representatives,
commenced a putative class action lawsuit against Wilmington Trust, alleging that Wilmington Trust’s
financial reporting and securities filings were in violation of securities laws. The cases were consolidated and
Wilmington Trust moved to dismiss. The court issued an order denying Wilmington Trust’s motion to
dismiss on March 20, 2014. The parties are currently engaged in the discovery phase of the lawsuit.
Due to their complex nature, it is difficult to estimate when litigation and investigatory matters such
as these may be resolved. As set forth in the introductory paragraph to this Item 3 — Legal Proceedings,
losses from current litigation and regulatory matters which the Company is subject to that are not currently
considered probable are within a range of reasonably possible losses for such matters in the aggregate,
beyond the existing recorded liability, and are included in the range of reasonably possible losses set forth
above.
Item 4. Mine Safety Disclosures.
Not applicable.
33
Executive Officers of the Registrant
Information concerning the Registrant’s executive officers is presented below as of February 20, 2015. The
year the officer was first appointed to the indicated position with the Registrant or its subsidiaries is shown
parenthetically. In the case of each entity noted below, officers’ terms run until the first meeting of the board
of directors after such entity’s annual meeting, which in the case of the Registrant takes place immediately
following the Annual Meeting of Shareholders, and until their successors are elected and qualified.
Robert G. Wilmers, age 80, is chief executive officer (2007), chairman of the board (2000) and a
director (1982) of the Registrant. From April 1998 until July 2000, he served as president and chief executive
officer of the Registrant and from July 2000 until June 2005 he served as chairman, president (1988) and
chief executive officer (1983) of the Registrant. He is chief executive officer (2007), chairman of the board
(2005) and a director (1982) of M&T Bank, and previously served as chairman of the board of M&T Bank
from March 1983 until July 2003 and as president of M&T Bank from March 1984 until June 1996.
Mark J. Czarnecki, age 59, is president (2007), chief operating officer (2014) and a director (2007) of
the Registrant and of M&T Bank. Previously, he was an executive vice president of the Registrant (1999) and
M&T Bank (1997) and was responsible for the M&T Investment Group and the Company’s Retail Banking
network. Mr. Czarnecki is chairman of the board, president and chief executive officer (2007) and a director
(2005) of Wilmington Trust, N.A.
Robert J. Bojdak, age 59, is an executive vice president and chief credit officer (2004) of the
Registrant and M&T Bank. In addition to managing the Company’s credit risk, Mr. Bojdak was also
responsible for managing the Company’s enterprise-wide risk, including operational, compliance and
investment risk, until February 2013. From April 2002 to April 2004, Mr. Bojdak served as senior vice
president and credit deputy for M&T Bank. He is an executive vice president and a director of Wilmington
Trust, N.A. (2004).
Stephen J. Braunscheidel, age 58, is an executive vice president (2004) of the Registrant and M&T
Bank, and is in charge of the Company’s Human Resources Division. Mr. Braunscheidel previously served as
senior vice president of M&T Bank and has held a number of management positions within M&T Bank
since 1978.
William J. Farrell II, age 57, is an executive vice president (2011) of the Registrant and M&T Bank,
and is responsible for managing M&T’s Wealth and Institutional Services Division, which includes Wealth
Advisory Services, Institutional Client Services, Asset Management, M&T Securities and M&T Insurance
Agency. Mr. Farrell joined M&T through the Wilmington Trust acquisition. He joined Wilmington Trust in
1976 and held a number of senior management positions, most recently as executive vice president and head
of the Corporate Client Services business. Mr. Farrell is president, chief executive officer and a director
(2012) of Wilmington Trust Company, an executive vice president and a director (2011) of Wilmington
Trust, N.A. and a director (2013) of M&T Securities.
Richard S. Gold, age 54, is an executive vice president (2007) and chief risk officer (2014) of the
Registrant. He is a vice chairman and chief risk officer of M&T Bank (2014). Mr. Gold is responsible for
managing the Company’s enterprise-wide risk, including operational, compliance and investment risk. He is
also responsible for the Office of Regulatory Projects. Previously, Mr. Gold was responsible for managing the
Company’s Residential Mortgage and Business Banking Divisions. Mr. Gold served as senior vice president
of M&T Bank from 2000 to 2006, most recently responsible for the Retail Banking Division, including M&T
Securities. Mr. Gold is an executive vice president (2006) and chief risk officer (2014) of Wilmington Trust,
N.A.
Brian E. Hickey, age 62, is an executive vice president of the Registrant (1997) and M&T Bank
(1996). He is a member of the Directors Advisory Council (1994) of the Rochester Division of M&T Bank.
Mr. Hickey is responsible for managing all of the non-retail segments in Upstate New York and in the
Northern and Central/Western Pennsylvania regions. Mr. Hickey is also responsible for the Auto Floor Plan
lending business.
René F. Jones, age 50, is an executive vice president (2006) and chief financial officer (2005) of the
Registrant. He is a vice chairman (2014) and chief financial officer (2005) of M&T Bank. Mr. Jones is also
responsible for Wilmington Trust’s wealth and institutional services businesses and for M&T’s Treasury
Division. Previously, Mr. Jones was a senior vice president in charge of the Financial Performance
Measurement department within M&T Bank’s Finance Division. Mr. Jones has held a number of
management positions within M&T Bank’s Finance Division since 1992. Mr. Jones is an executive vice
president and chief financial officer (2005) and a director (2007) of Wilmington Trust, N.A., and he is
chairman of the board, president (2009) and a trustee (2005) of M&T Real Estate. He is chairman of the
34
board and a director (2014) of Wilmington Trust Investment Advisors, and is a director of M&T Insurance
Agency (2007) and M&T Securities (2005). Mr. Jones is chairman of the board (2014), chief financial officer
(2012) and a director (2014) of Wilmington Trust Company.
Darren J. King, age 45, is an executive vice president of the Registrant (2010) and M&T Bank (2009),
and is in charge of the Retail Banking Division, the Consumer Lending Division, the Business Banking
Division and the Marketing and Communications Division. Mr. King previously served as senior vice
president of M&T Bank and has held a number of management positions within M&T Bank since 2000.
Mr. King is an executive vice president of Wilmington Trust, N.A. (2009).
Gino A. Martocci, age 49, is an executive vice president of the Registrant and M&T Bank (2014), and
is responsible for M&T’s New York City, Baltimore and Washington, D.C. metropolitan markets. He also is
responsible for M&T’s specialty businesses, commercial planning and analysis, commercial payment
systems, and M&T Realty Capital. Mr. Martocci served as senior vice president of M&T Bank from 2002 to
2013, serving in a number of management positions. He is a director (2009) of M&T Realty Capital, and an
executive vice president of M&T Real Estate. Mr. Martocci is also the chairman of the Directors Advisory
Council (2013) of the New York City/Long Island Division of M&T Bank.
Kevin J. Pearson, age 53, is an executive vice president (2002) of the Registrant and is a vice chairman
(2014) of M&T Bank. He is a member of the Directors Advisory Council (2006) of the New York City/Long
Island Division of M&T Bank. Mr. Pearson is responsible for managing all of M&T Bank’s commercial
banking lines of business. Previously, he was responsible for all of the non-retail segments in the New York
City, Philadelphia, Connecticut, New Jersey, Tarrytown, Greater Washington D.C. and Northern Virginia,
Southern Pennsylvania and Delaware markets of M&T Bank, as well as the Company’s commercial real
estate business, Commercial Marketing and Treasury Management. He is an executive vice president
(2003) and a trustee (2014) of M&T Real Estate, chairman of the board (2009) and a director (2003) of
M&T Realty Capital, and an executive vice president and a director of Wilmington Trust, N.A. (2014).
Mr. Pearson served as senior vice president of M&T Bank from 2000 to 2002.
Michele D. Trolli, age 53, is an executive vice president and chief information officer of the Registrant
and M&T Bank (2005). She is in charge of the Company’s Banking Services, Technology, Alternative
Banking and Global Sourcing groups. Previously, Ms. Trolli was in charge of the Technology and Banking
Operations Division, the Retail Banking Division and the Corporate Services Group of M&T Bank.
D. Scott N. Warman, age 49, is an executive vice president (2009) and treasurer (2008) of the
Registrant and M&T Bank. He is responsible for managing the Company’s Treasury Division. Mr. Warman
previously served as senior vice president of M&T Bank and has held a number of management positions
within M&T Bank since 1995. He is an executive vice president and treasurer of Wilmington Trust, N.A.
(2008), a trustee of M&T Real Estate (2009), and is treasurer of Wilmington Trust Company (2012).
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
M&T’s common stock is traded under the symbol MTB on the New York Stock Exchange. See cross-
reference sheet for disclosures incorporated elsewhere in this Annual Report on Form 10-K for market
prices of M&T’s common stock, approximate number of common shareholders at year-end, frequency and
amounts of dividends on common stock and restrictions on the payment of dividends.
During the fourth quarter of 2014, M&T did not issue any shares of its common stock that were not
registered under the Securities Act of 1933.
Equity Compensation Plan Information
The following table provides information as of December 31, 2014 with respect to shares of common stock that
may be issued under M&T’s existing equity compensation plans. M&T’s existing equity compensation plans
include the M&T Bank Corporation 2001 Stock Option Plan, the 2005 Incentive Compensation Plan, which
replaced the 2001 Stock Option Plan, and the 2009 Equity Incentive Compensation Plan, each of which has
been previously approved by shareholders, and the M&T Bank Corporation 2008 Directors’ Stock Plan and the
M&T Bank Corporation Deferred Bonus Plan, each of which did not require shareholder approval.
35
The table does not include information with respect to shares of common stock subject to
outstanding options and rights assumed by M&T in connection with mergers and acquisitions of the
companies that originally granted those options and rights. Footnote (1) to the table sets forth the total
number of shares of common stock issuable upon the exercise of such assumed options and rights as of
December 31, 2014, and their weighted-average exercise price.
Plan Category
Number of
Securities
to be Issued Upon
Exercise of
Outstanding
Options or Rights
(A)
Weighted-Average
Exercise Price of
Outstanding
Options or Rights
(B)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column A)
(C)
Equity compensation plans approved by
security holders:
2001 Stock Option Plan . . . . . . . . . . . . . . . . .
2005 Incentive Compensation Plan . . . . . . . .
2009 Equity Incentive Compensation Plan . .
Equity compensation plans not approved by
security holders:
2008 Directors’ Stock Plan . . . . . . . . . . . . . . .
Deferred Bonus Plan . . . . . . . . . . . . . . . . . . .
149,452
3,215,487
3,500
3,384
29,297
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,401,120
$101.78
104.92
72.89
125.62
65.45
$104.42
—
3,374,586
1,023,910
84,898
—
4,483,394
(1) As of December 31, 2014, a total of 76,464 shares of M&T common stock were issuable upon exercise of
outstanding options or rights assumed by M&T in connection with merger and acquisition transactions. The
weighted-average exercise price of those outstanding options or rights is $129.04 per common share.
Equity compensation plans adopted without the approval of shareholders are described below:
2008 Directors’ Stock Plan. M&T maintains a plan for non-employee members of the Board of
Directors of M&T and the members of its Directors Advisory Council, and the non-employee members of
the Board of Directors of M&T Bank and the members of its regional Directors Advisory Councils, which
allows such directors, advisory directors and members of regional Directors Advisory Councils to receive all
or a portion of their directorial compensation in shares of M&T common stock.
Deferred Bonus Plan. M&T maintains a deferred bonus plan which was frozen effective January 1,
2010 and did not allow any deferrals after that date. Prior to January 1, 2010, the plan allowed eligible
officers of M&T and its subsidiaries to elect to defer all or a portion of their annual incentive compensation
awards and allocate such awards to several investment options, including M&T common stock. At the time
of the deferral election, participants also elected the timing of distributions from the plan. Such distributions
are payable in cash, with the exception of balances allocated to M&T common stock which are distributable
in the form of shares of common stock.
36
Performance Graph
The following graph contains a comparison of the cumulative shareholder return on M&T common stock
against the cumulative total returns of the KBW Bank Index, compiled by Keefe, Bruyette & Woods, Inc.,
and the S&P 500 Index, compiled by Standard & Poor’s Corporation, for the five-year period beginning on
December 31, 2009 and ending on December 31, 2014. The KBW Bank Index is a market capitalization
index consisting of 24 companies representing leading national money centers and regional banks or thrifts.
Comparison of Five-Year Cumulative Return*
$300
$250
$200
$150
$100
$50
$0
2009
2010
2011
2012
2013
2014
M&T Bank Corporation
KBW Bank Index
S&P 500 Index
M&T Bank Corporation
KBW Bank Index
S&P 500 Index
Shareholder Value at Year End*
2009
100
100
100
2010
135
123
115
2011
122
95
117
2012
163
126
136
2013
198
174
180
2014
218
190
205
* Assumes a $100 investment on December 31, 2009 and reinvestment of all dividends.
In accordance with and to the extent permitted by applicable law or regulation, the information set
forth above under the heading “Performance Graph” shall not be incorporated by reference into any future
filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act and shall not
be deemed to be “soliciting material” or to be “filed” with the SEC under the Securities Act or the Exchange
Act.
37
Issuer Purchases of Equity Securities
In February 2007, M&T announced that it had been authorized by its Board of Directors to purchase up to
5,000,000 shares of its common stock. M&T did not repurchase any shares pursuant to such plan during
2014.
During the fourth quarter of 2014, M&T purchased shares of its common stock as follows:
Period
(a)Total
Number
of Shares
(or Units)
Purchased(1)
October 1 - October 31, 2014 . . . . . . . . . . . . . . . . . . . . .
November 1 - November 30, 2014 . . . . . . . . . . . . . . . . .
December 1 - December 31, 2014 . . . . . . . . . . . . . . . . . .
586
3,819
9,276
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,681
(c)Total
Number
of Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
—
—
—
—
(b)Average
Price Paid
per Share
(or Unit)
$121.57
124.83
127.03
$126.19
(d)Maximum
Number (or
Approximate
Dollar
Value)
of Shares
(or Units)
that may yet
be Purchased
Under the
Plans or
Programs(2)
2,181,500
2,181,500
2,181,500
(1) The total number of shares purchased during the periods indicated reflects shares deemed to have been received
from employees who exercised stock options by attesting to previously acquired common shares in satisfaction of
the exercise price or shares received from employees upon the vesting of restricted stock awards in satisfaction of
applicable tax withholding obligations, as is permitted under M&T’s stock-based compensation plans.
(2) On February 22, 2007, M&T announced a program to purchase up to 5,000,000 shares of its common stock. No
shares were purchased under such program during the periods indicated.
Item 6.
Selected Financial Data.
See cross-reference sheet for disclosures incorporated elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Corporate Profile and Significant Developments
M&T Bank Corporation (“M&T”) is a bank holding company headquartered in Buffalo, New York with
consolidated assets of $96.7 billion at December 31, 2014. The consolidated financial information presented
herein reflects M&T and all of its subsidiaries, which are referred to collectively as “the Company.” M&T’s
wholly owned bank subsidiaries are M&T Bank and Wilmington Trust, National Association (“Wilmington
Trust, N.A.”).
M&T Bank, with total assets of $95.9 billion at December 31, 2014, is a New York-chartered
commercial bank with 693 domestic banking offices in New York State, Pennsylvania, Maryland, Delaware,
Virginia, West Virginia, and the District of Columbia, a full-service commercial banking office in Ontario,
Canada, and an office in the Cayman Islands. M&T Bank and its subsidiaries offer a broad range of financial
services to a diverse base of consumers, businesses, professional clients, governmental entities and financial
institutions located in their markets. Lending is largely focused on consumers residing in New York State,
Pennsylvania, Maryland, Virginia, Delaware and Washington, D.C., and on small and medium size
businesses based in those areas, although loans are originated through lending offices in other states and in
Ontario, Canada. Certain lending activities are also conducted in other states through various subsidiaries.
Trust and other fiduciary services are offered by M&T Bank and through its wholly owned subsidiary,
Wilmington Trust Company. Other subsidiaries of M&T Bank include: M&T Real Estate Trust, a
commercial mortgage lender; M&T Realty Capital Corporation, a multifamily commercial mortgage lender;
M&T Securities, Inc., which provides brokerage, investment advisory and insurance services; Wilmington
Trust Investment Advisors, Inc., which serves as an investment advisor to the Wilmington Funds, a family of
proprietary mutual funds, and other funds and institutional clients; and M&T Insurance Agency, Inc., an
insurance agency.
38
Wilmington Trust, N.A., with total assets of $2.8 billion at December 31, 2014, is a national bank
with offices in Wilmington, Delaware and Oakfield, New York. Wilmington Trust, N.A. and its subsidiaries
offer various trust and wealth management services. Wilmington Trust, N.A. also offered selected deposit
and loan products on a nationwide basis, largely through telephone, Internet and direct mail marketing
techniques.
On August 27, 2012, M&T announced that it had entered into a definitive agreement with Hudson
City Bancorp, Inc. (“Hudson City”), headquartered in Paramus, New Jersey, under which Hudson City
would be acquired by M&T. Pursuant to the terms of the agreement, Hudson City common shareholders
will receive consideration for each common share of Hudson City in an amount valued at .08403 of an M&T
share in the form of either M&T common stock or cash, based on the election of each Hudson City
shareholder, subject to proration as specified in the merger agreement (which provides for an aggregate split
of total consideration of 60% common stock of M&T and 40% cash). The estimated purchase price
considering the closing price of M&T’s common stock of $125.62 on December 31, 2014 was $5.4 billion.
As of December 31, 2014, Hudson City reported $36.6 billion of assets, including $21.7 billion of
loans (predominantly residential real estate loans) and $7.9 billion of investment securities, and $31.8 billion
of liabilities, including $19.4 billion of deposits. The merger has received the approval of the common
shareholders of M&T and Hudson City. However, the merger is subject to a number of conditions,
including regulatory approvals.
On June 17, 2013, M&T and M&T Bank entered into a written agreement with the Federal Reserve
Bank of New York. Under the terms of the agreement, M&T and M&T Bank are required to submit to the
Federal Reserve Bank of New York a revised compliance risk management program designed to ensure
compliance with the Bank Secrecy Act and anti-money-laundering laws and regulations (“BSA/AML”) and
to take certain other steps to enhance their compliance practices. The Company commenced a major
initiative, including the hiring of outside consulting firms, intended to fully address those regulator
concerns. M&T and M&T Bank continue to make progress towards completing this initiative. In view of the
timeframe required to implement this initiative, demonstrate its efficacy to the satisfaction of the regulators
and otherwise meet any other regulatory requirements that may be imposed in connection with these
matters, M&T and Hudson City have extended the date after which either party may elect to terminate the
merger agreement if the merger has not yet been completed to April 30, 2015. Nevertheless, M&T’s pending
acquisition of Hudson City remains subject to regulatory approval, including approval by the Federal
Reserve, and certain other closing conditions and, as a result, there can be no assurances that the merger will
be completed by that date.
Recent Legislative Developments
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) that was signed
into law on July 21, 2010 has and will continue to significantly change the bank regulatory structure and
affect the lending, deposit, investment, trading and operating activities of financial institutions and their
holding companies, and the system of regulatory oversight of the Company. The Dodd-Frank Act requires
various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare
numerous studies and reports for Congress. Not all of the rules required or expected to be implemented
under the Dodd-Frank Act have been proposed or adopted, and certain of the rules that have been proposed
or adopted under the Dodd-Frank Act are subject to phase-in or transitional periods. The implications of
the Dodd-Frank Act for the Company’s businesses continue to depend to a large extent on the
implementation of the legislation by the Federal Reserve and other agencies. A discussion of the provisions
of the Dodd-Frank Act is included in Part I, Item 1 of this Form 10-K.
In July 2013, the Federal Reserve, the Office of the Comptroller of the Currency and the Federal
Deposit Insurance Corporation approved final rules (the “New Capital Rules”) establishing a new
comprehensive capital framework for U.S. banking organizations. These rules went into effect as to M&T on
January 1, 2015. The New Capital Rules generally implement the Basel Committee on Banking Supervision’s
(the “Basel Committee”) December 2010 final capital framework for strengthening international capital
standards (referred to as “Basel III”) and are intended to ensure that banking organizations have adequate
capital levels given the risk levels of assets and off-balance sheet obligations. The New Capital Rules
substantially revise the risk-based capital requirements applicable to bank holding companies and their
depository institution subsidiaries, including M&T and M&T Bank, as compared to the U.S. general risk-
based capital rules that were applicable to M&T and M&T Bank through December 31, 2014.
39
The New Capital Rules also preclude certain hybrid securities, such as trust preferred securities, from
inclusion in bank holding companies’ Tier 1 capital, subject to phase-out in the case of bank holding
companies, such as M&T, that had $15 billion or more in total consolidated assets as of December 31, 2009.
As a result, beginning in 2015, 25% of M&T’s trust preferred securities will be includable in Tier 1 capital,
and in 2016 and thereafter, none of M&T’s trust preferred securities will be includable in Tier 1 capital.
Trust preferred securities no longer included in M&T’s Tier 1 capital may nonetheless be included as a
component of Tier 2 capital on a permanent basis without phase-out and irrespective of whether such
securities otherwise meet the revised definition of Tier 2 capital set forth in the New Capital Rules. In the
first quarter of 2014, M&T redeemed $350 million of 8.50% junior subordinated debentures associated with
the trust preferred capital securities of M&T Capital Trust IV and issued a like amount of 6.45% preferred
stock that qualifies as Tier 1 regulatory capital. A detailed discussion of the New Capital Rules is included in
Part I, Item 1 of this Form 10-K under the heading “Capital Requirements.”
Management believes that the Company is in compliance with the revised capital adequacy
requirements. More specifically, management estimates that the Company’s ratio of Common Equity Tier 1
(“CET1”) to risk-weighted assets under the New Capital Rules (and as defined therein) on a fully phased-in
basis was approximately 9.62% as of December 31, 2014, reflecting an estimate of the computation of CET1
and the Company’s risk-weighted assets under the methodologies set forth in the New Capital Rules.
The Company’s regulatory capital ratios under risk-based capital rules in effect through
December 31, 2014 are presented in note 23 of Notes to Financial Statements.
On December 10, 2013, the Federal Reserve, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation and the Securities and Exchange Commission adopted the final
version of the Volcker Rule, which was mandated under the Dodd-Frank Act. The Volcker Rule is intended
to reduce risks posed to banking entities from proprietary trading activities and investments in or
relationships with covered funds. Banking entities are generally prohibited from engaging in proprietary
trading. Under the Volcker Rule, the Company was required to be in compliance with the prohibition on
proprietary trading and the requirement to develop an extensive compliance program by July 2015;
however, in December 2014, the Federal Reserve extended the compliance period to July 2016 for
investments in and relationships with covered funds that were in place prior to December 31, 2013. The
Federal Reserve has indicated that it intends to further extend the compliance period to July 2017.
The Company does not believe that it engages in any significant amount of proprietary trading as
defined in the Volcker Rule and that any impact would be minimal. In addition, a review of the Company’s
investments was undertaken to determine if any meet the Volcker Rule’s definition of “covered funds.”
Based on that review, the Company believes that any impact related to investments considered to be covered
funds would not have a material effect on the Company’s financial condition or its results of operations.
Nevertheless, the Company may be required to divest certain investments subject to the Volker Rule.
On September 3, 2014, the Federal Reserve and other banking regulators adopted final rules (“Final
LCR Rule”) implementing a U.S. version of the Basel Committee’s Liquidity Coverage Ratio requirement
(“LCR”) including the modified version applicable to bank holding companies, such as M&T, with $50
billion in total consolidated assets that are not “advanced approaches” institutions. The LCR is intended to
ensure that banks hold a sufficient amount of so-called “high quality liquid assets” (“HQLA”) to cover the
anticipated net cash outflows during a hypothetical acute 30-day stress scenario. The LCR is the ratio of an
institution’s amount of HQLA (the numerator) over projected net cash out-flows over the 30-day horizon
(the denominator), in each case, as calculated pursuant to the Final LCR Rule. Once fully phased-in, a
subject institution must maintain an LCR equal to at least 100% in order to satisfy this regulatory
requirement. Only specific classes of assets, including U.S. Treasury securities, other U.S. government
obligations and agency mortgaged-backed securities, qualify under the rule as HQLA, with classes of assets
deemed relatively less liquid and/or subject to greater degree of credit risk subject to certain haircuts and
caps for purposes of calculating the numerator under the Final LCR Rule.
The initial compliance date for the modified LCR is January 2016, with the requirement fully phased-
in by January 2017. The Company intends to comply with the LCR when it becomes effective. A detailed
discussion of the LCR and its requirements is included in Part I, Item 1 of this Form 10-K under the heading
“Liquidity Ratios under Basel III.”
40
Critical Accounting Estimates
The Company’s significant accounting policies conform with GAAP and are described in note 1 of Notes to
Financial Statements. In applying those accounting policies, management of the Company is required to
exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized.
Certain of the critical accounting estimates are more dependent on such judgment and in some cases may
contribute to volatility in the Company’s reported financial performance should the assumptions and
estimates used change over time due to changes in circumstances. Some of the more significant areas in
which management of the Company applies critical assumptions and estimates include the following:
Š Accounting for credit losses — The allowance for credit losses represents the amount that in
management’s judgment appropriately reflects credit losses inherent in the loan and lease portfolio as
of the balance sheet date. A provision for credit losses is recorded to adjust the level of the allowance
as deemed necessary by management. In estimating losses inherent in the loan and lease portfolio,
assumptions and judgment are applied to measure amounts and timing of expected future cash
flows, collateral values and other factors used to determine the borrowers’ abilities to repay
obligations. Historical loss trends are also considered, as are economic conditions, industry trends,
portfolio trends and borrower-specific financial data. In accounting for loans acquired at a discount,
which are initially recorded at fair value with no carry-over of an acquired entity’s previously
established allowance for credit losses, the cash flows expected at acquisition in excess of estimated
fair value are recognized as interest income over the remaining lives of the loans. Subsequent
decreases in the expected principal cash flows require the Company to evaluate the need for additions
to the Company’s allowance for credit losses. Subsequent improvements in expected cash flows result
first in the recovery of any applicable allowance for credit losses and then in the recognition of
additional interest income over the remaining lives of the loans. Changes in the circumstances
considered when determining management’s estimates and assumptions could result in changes in
those estimates and assumptions, which may result in adjustment of the allowance or, in the case of
acquired loans, increases in interest income in future periods. A detailed discussion of facts and
circumstances considered by management in determining the allowance for credit losses is included
herein under the heading “Provision for Credit Losses” and in note 5 of Notes to Financial
Statements.
Š Valuation methodologies — Management of the Company applies various valuation methodologies
to assets and liabilities which often involve a significant degree of judgment, particularly when liquid
markets do not exist for the particular items being valued. Quoted market prices are referred to when
estimating fair values for certain assets, such as trading assets, most investment securities, and
residential real estate loans held for sale and related commitments. However, for those items for
which an observable liquid market does not exist, management utilizes significant estimates and
assumptions to value such items. Examples of these items include loans, deposits, borrowings,
goodwill, core deposit and other intangible assets, and other assets and liabilities obtained or
assumed in business combinations; capitalized servicing assets; pension and other postretirement
benefit obligations; estimated residual values of property associated with leases; and certain derivative
and other financial instruments. These valuations require the use of various assumptions, including,
among others, discount rates, rates of return on assets, repayment rates, cash flows, default rates,
costs of servicing and liquidation values. The use of different assumptions could produce
significantly different results, which could have material positive or negative effects on the
Company’s results of operations. In addition to valuation, the Company must assess whether there
are any declines in value below the carrying value of assets that should be considered other than
temporary or otherwise require an adjustment in carrying value and recognition of a loss in the
consolidated statement of income. Examples include investment securities, other investments,
mortgage servicing rights, goodwill, core deposit and other intangible assets, among others. Specific
assumptions and estimates utilized by management are discussed in detail herein in management’s
discussion and analysis of financial condition and results of operations and in notes 1, 3, 4, 7, 8, 12,
18, 19 and 20 of Notes to Financial Statements.
Š Commitments, contingencies and off-balance sheet arrangements — Information regarding the
Company’s commitments and contingencies, including guarantees and contingent liabilities arising
from litigation, and their potential effects on the Company’s results of operations is included in note
21 of Notes to Financial Statements. In addition, the Company is routinely subject to examinations
from various governmental taxing authorities. Such examinations may result in challenges to the tax
41
return treatment applied by the Company to specific transactions. Management believes that the
assumptions and judgment used to record tax-related assets or liabilities have been appropriate. Should
tax laws change or the tax authorities determine that management’s assumptions were inappropriate,
the result and adjustments required could have a material effect on the Company’s results of
operations. Information regarding the Company’s income taxes is presented in note 13 of Notes to
Financial Statements. The recognition or de-recognition in the Company’s consolidated financial
statements of assets and liabilities held by so-called variable interest entities is subject to the
interpretation and application of complex accounting pronouncements or interpretations that require
management to estimate and assess the relative significance of the Company’s financial interests in
those entities and the degree to which the Company can influence the most important activities of the
entities. Information relating to the Company’s involvement in such entities and the accounting
treatment afforded each such involvement is included in note 19 of Notes to Financial Statements.
Overview
The Company recorded net income during 2014 of $1.07 billion or $7.42 of diluted earnings per common
share, down 6% and 10%, respectively, from $1.14 billion or $8.20 of diluted earnings per common share in
2013. Basic earnings per common share decreased 10% to $7.47 in 2014 from $8.26 in 2013. Net income in
2012 totaled $1.03 billion, while diluted and basic earnings per common share were $7.54 and $7.57,
respectively. The after-tax impact of merger-related expenses associated with acquisition transactions was
$8 million ($12 million pre-tax) or $.06 of basic and diluted earnings per common share in 2013, compared
with $6 million ($10 million pre-tax) or $.05 of basic and diluted earnings per common share in 2012. The
2013 merger-related expenses were associated with the pending acquisition of Hudson City and the 2012
expenses related to the May 16, 2011 acquisition of Wilmington Trust Corporation (“Wilmington Trust”).
There were no merger-related expenses in 2014. Expressed as a rate of return on average assets, net income
in 2014 was 1.16%, compared with 1.36% in 2013 and 1.29% in 2012. The return on average common
shareholders’ equity was 9.08% in 2014, 10.93% in 2013 and 10.96% in 2012.
The Company’s financial performance in 2014 as compared with 2013 reflected a significantly lower
provision for credit losses and higher mortgage banking revenues, offset by lower net gains from investment
securities and loan securitization transactions and higher operating expenses largely resulting from increased
costs for professional services and salaries. During 2013, the Company sold the majority of its privately
issued mortgage-backed securities that had been held in the available-for-sale investment securities portfolio
for an after-tax loss of $28 million ($46 million pre-tax), or $.22 per diluted common share. In addition, the
Company’s holdings of Visa and MasterCard shares were sold for an after-tax gain of $62 million ($103
million pre-tax), or $.48 per diluted common share. Also reflected in 2013’s results were after-tax gains from
loan securitization transactions of $38 million ($63 million pre-tax), or $.29 per diluted common share. The
Company securitized during the second and third quarters of 2013 approximately $1.3 billion of one-to-
four family residential real estate loans previously held in the Company’s loan portfolio into guaranteed
mortgage-backed securities with Ginnie Mae and recognized gains of $42 million. The Company retained
the substantial majority of those securities in its investment securities portfolio. In addition, the Company
securitized and sold in September 2013 approximately $1.4 billion of automobile loans held in its loan
portfolio, resulting in a gain of $21 million. As compared with 2012, the positive impact of the 2013
securities transactions and gains on securitization activities were partially offset by higher operating
expenses largely attributable to increased costs for professional services and salaries.
Taxable-equivalent net interest income totaled $2.70 billion in each of 2014 and 2013. Average
earning assets grew $7.7 billion, or 10%, in 2014 due to higher balances of investment securities and
interest-bearing deposits at banks. Offsetting the impact of higher earning assets was a 34 basis point
(hundredths of one percent) narrowing of the net interest margin, or taxable-equivalent net interest income
divided by average earning assets, from 3.65% in 2013 to 3.31% in 2014. Taxable-equivalent net interest
income rose $73 million or 3% in 2013 as compared with 2012, resulting from a $2.4 billion, or 4%, increase
in average loans and leases. The net interest margin in 2013 was 8 basis points lower than in 2012.
The provision for credit losses in 2014 declined 33% to $124 million from $185 million in 2013. The
Company experienced significant improvement in credit quality during 2014. Net charge-offs of $121
million in 2014 were down from $183 million in the prior year. Net charge-offs as a percentage of average
loans and leases were .19% and .28% in 2014 and 2013, respectively. The provision for credit losses in 2013
was $19 million or 9% lower than $204 million in 2012. Net charge-offs in 2012 were $186 million, or .30%
of average loans and leases.
42
Other income aggregated $1.78 billion in 2014, compared with $1.87 billion in 2013 and $1.67 billion
in 2012. Included in other income in 2013 were net gains on investment securities of $47 million, compared
with net losses on investment securities of $48 million in 2012. There were no gains or losses on investment
securities in 2014. Excluding gains and losses on investment securities and the previously noted $63 million
of gains from loan securitization transactions in 2013, other income in 2014 was up $24 million from $1.76
billion in 2013. Higher mortgage banking revenues and trust income in 2014 were partially offset by a
decline in service charges on deposit accounts. After excluding investment securities gains and losses and the
loan securitization transactions, other income in 2013 was $40 million or 2% above $1.72 billion in 2012. In
that comparison, higher trust, brokerage services and credit card interchange income in 2013 were partially
offset by lower mortgage banking revenues. Reflected in gains and losses on investment securities were
other-than-temporary impairment charges of $10 million and $48 million in 2013 and 2012, respectively, on
certain privately issued collateralized mortgage obligations (“CMOs”).
Other expense increased 4% to $2.74 billion in 2014 from $2.64 billion in 2013. During 2012, other
expense totaled $2.51 billion. Included in those amounts are expenses considered by M&T to be
“nonoperating” in nature, consisting of amortization of core deposit and other intangible assets of $34
million, $47 million and $61 million in 2014, 2013 and 2012, respectively, and merger-related expenses of
$12 million and $10 million in 2013 and 2012, respectively. Exclusive of those nonoperating expenses,
noninterest operating expenses aggregated $2.71 billion in 2014, compared with $2.58 billion in 2013 and
$2.44 billion in 2012. The increase in such expenses in 2014 as compared with 2013 was largely attributable
to higher costs for professional services and salaries associated with BSA/AML activities, compliance, capital
planning and stress testing, and risk management activities. The rise in noninterest operating expenses from
2012 to 2013 was largely attributable to higher costs for professional services and salaries, partially offset by
lower FDIC assessments. In addition, the Company reached a legal settlement of a previously disclosed
lawsuit related to issues that were alleged to occur at Wilmington Trust prior to its acquisition by M&T that
led to a $40 million loss accrual as of December 31, 2013. That accrual was partially offset by the reversal of
an accrual for a contingent compensation obligation assumed in the May 2011 acquisition of Wilmington
Trust that expired, resulting in a $26 million reduction of “other costs of operations” in 2013.
The efficiency ratio measures the relationship of operating expenses to revenues. The Company’s
efficiency ratio, or noninterest operating expenses (as previously defined) divided by the sum of taxable-
equivalent net interest income and noninterest income (exclusive of gains and losses from bank investment
securities), was 60.5% in 2014, compared with 57.0% and 56.2% in 2013 and 2012, respectively. The
calculations of the efficiency ratio are presented in table 2.
43
Table 1
Increase (Decrease)(a)
2013 to 2014 2012 to 2013
Amount % Amount %
EARNINGS SUMMARY
Dollars in millions
2014
2013
2012
2011
2010
Compound
Growth Rate
5 Years
2009 to 2014
$
(1.8) — $
14.2 — Interest income(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,980.5 2,982.3 2,968.1 2,817.9 2,753.8
2%
(3.7) (1)
(59.1) (17) Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
280.4
284.1
343.2
402.3
462.3
1.9 —
73.3
3 Net interest income(b) . . . . . . . . . . . . . . . . . . . . . . . .
2,700.1 2,698.2 2,624.9 2,415.6 2,291.5
(61.0) (33)
(19.0)
(9) Less: provision for credit losses . . . . . . . . . . . . . . . . .
124.0
185.0
204.0
270.0
368.0
(46.7) —
94.5 — Gain (loss) on bank investment securities(c) . . . . . .
— 46.7
(47.8)
73.2
(83.5)
(39.2) (2)
103.4
6 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,779.3 1,818.5 1,715.1 1,509.8 1,191.6
Less:
49.8
57.2
4
4
40.6
86.0
3
7
Salaries and employee benefits . . . . . . . . . . . . . . . .
1,405.0 1,355.2 1,314.6 1,204.0
999.7
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,337.9 1,280.7 1,194.7 1,274.1
915.1
(130.0) (7)
163.6
10 Income before income taxes . . . . . . . . . . . . . . . . . . . .
1,612.5 1,742.5 1,578.9 1,250.5 1,116.8
Less:
(1.3) (5)
(1.4)
(5)
Taxable-equivalent adjustment(b) . . . . . . . . . . . . .
23.7
25.0
26.4
25.9
24.0
(56.4) (10)
56.0
11
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
522.6
579.0
523.0
365.1
356.6
(16)
5
(27)
—
8
7
6
24
2
30
$
(72.3) (6) $ 109.0
11 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,066.2 1,138.5 1,029.5
859.5
736.2
23%
(a) Changes were calculated from unrounded amounts.
(b)
Interest income data are on a taxable-equivalent basis. The taxable-equivalent adjustment represents additional
income taxes that would be due if all interest income were subject to income taxes. This adjustment, which is
related to interest received on qualified municipal securities, industrial revenue financings and preferred equity
securities, is based on a composite income tax rate of approximately 39%.
Includes other-than-temporary impairment losses, if any.
(c)
Supplemental Reporting of Non-GAAP Results of Operations
As a result of business combinations and other acquisitions, the Company had intangible assets consisting of
goodwill and core deposit and other intangible assets totaling $3.6 billion at each of December 31, 2014,
2013 and 2012. Included in such intangible assets was goodwill of $3.5 billion at each of those dates.
Amortization of core deposit and other intangible assets, after tax effect, totaled $21 million, $29 million and
$37 million during 2014, 2013 and 2012, respectively.
M&T consistently provides supplemental reporting of its results on a “net operating” or “tangible”
basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible
assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable
deferred tax amounts) and gains and expenses associated with merging acquired operations into the
Company, since such items are considered by management to be “nonoperating” in nature. Those merger-
related expenses generally consist of professional services and other temporary help fees associated with the
actual or planned conversion of systems and/or integration of operations; costs related to branch and office
consolidations; costs related to termination of existing contractual arrangements to purchase various
services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers;
severance for former employees; incentive compensation costs; travel costs; and printing, supplies and other
costs of completing the transactions and commencing operations in new markets and offices. Although “net
operating income” as defined by M&T is not a GAAP measure, M&T’s management believes that this
information helps investors understand the effect of acquisition activity in reported results.
Net operating income was $1.09 billion in 2014, compared with $1.17 billion in 2013. Diluted net
operating earnings per common share in 2014 were $7.57, compared with $8.48 in 2013. Net operating income
and diluted net operating earnings per common share were $1.07 billion and $7.88, respectively, in 2012.
44
Table 2
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
2014
2013
2012
Income statement data
In thousands, except per share
Net income
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of core deposit and other intangible assets(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,066,246
20,657
—
$1,138,480
28,644
7,511
$1,029,498
37,011
6,001
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,086,903
$1,174,635
$1,072,510
Earnings per common share
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of core deposit and other intangible assets(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Diluted net operating earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7.42
.15
—
7.57
$
$
8.20
.22
.06
8.48
$
$
7.54
.29
.05
7.88
Other expense
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,742,857
(33,824)
—
$2,635,885
(46,912)
(12,364)
$2,509,260
(60,631)
(9,879)
Noninterest operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,709,033
$2,576,609
$2,438,750
Merger-related expenses
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and net occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing, postage and supplies
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
—
—
—
—
$
836
690
1,825
9,013
$
4,997
15
—
4,867
$
12,364
$
9,879
Efficiency ratio
Noninterest operating expense (numerator) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,709,033
$2,576,609
$2,438,750
Taxable-equivalent net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Gain on bank investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net OTTI losses recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,700,088
1,779,273
—
—
2,698,200
1,865,205
56,457
(9,800)
2,624,907
1,667,270
9
(47,822)
Denominator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,479,361
$4,516,748
$4,339,990
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60.48%
57.05%
56.19%
Balance sheet data
In millions
Average assets
Average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average common equity
Average total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average tangible common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At end of year
Total assets
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total common equity
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undeclared dividends — cumulative preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common equity, net of undeclared cumulative preferred dividends
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
$
92,143
(3,525)
(50)
15
88,583
12,097
(1,192)
10,905
(3,525)
(50)
15
7,345
96,686
(3,525)
(35)
11
93,137
12,336
(1,231)
(3)
11,102
(3,525)
(35)
11
$
$
$
$
$
$
$
83,662
(3,525)
(90)
27
80,074
10,722
(878)
9,844
(3,525)
(90)
27
6,256
85,162
(3,525)
(69)
21
81,589
11,306
(882)
(3)
10,421
(3,525)
(69)
21
$
$
$
$
$
$
$
79,983
(3,525)
(144)
42
76,356
9,703
(869)
8,834
(3,525)
(144)
42
5,207
83,009
(3,525)
(116)
34
79,402
10,203
(873)
(3)
9,327
(3,525)
(116)
34
Total tangible common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7,553
$
6,848
$
5,720
(a) After any related tax effect.
45
Net operating income expressed as a rate of return on average tangible assets was 1.23% in 2014,
compared with 1.47% in 2013 and 1.40% in 2012. Net operating income represented a return on average
tangible common equity of 13.76% in 2014, compared with 17.79% and 19.42% in 2013 and 2012,
respectively.
Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in table 2.
Net Interest Income/Lending and Funding Activities
Taxable-equivalent net interest income aggregated $2.70 billion in each of 2014 and 2013. Growth in average
earning assets in 2014 was offset by a narrowing of the net interest margin. Average earning assets rose 10%
to $81.7 billion in 2014 from $74.0 billion in 2013, the result of higher average balances of investment
securities and interest-bearing deposits at the Federal Reserve Bank of New York. The net interest margin
narrowed to 3.31% in 2014 from 3.65% in 2013. Contributing to that decline was a 19 basis point reduction
in the average yield on loans and leases and the lower yielding cash balances on deposit with the Federal
Reserve Bank of New York.
Average loans and leases declined $388 million or 1% to $64.7 billion in 2014 from $65.1 billion in
2013. Commercial loans and leases averaged $18.9 billion in 2014, $1.1 billion or 6% higher than in the
prior year. That growth reflected increased demand by customers. Average balances of commercial real
estate loans increased 1% or $379 million to $26.5 billion in 2014 from $26.1 billion in 2013. Average
residential real estate balances declined to $8.7 billion in 2014 from $10.1 billion in the preceding year.
Included in that portfolio were loans originated for sale, which averaged $403 million in 2014 and $909
million in 2013. Excluding loans held for sale, average residential real estate loans decreased $911 million
from 2013 to 2014, resulting largely from the full-year impact of the securitizations during mid-2013 of $1.3
billion of loans held in the loan portfolio. Average consumer loans totaled $10.6 billion in 2014, down $480
million or 4% from $11.1 billion in 2013 due to the full-year impact of the $1.4 billion automobile loan
securitization transaction completed during the third quarter of 2013.
Net interest income on a taxable-equivalent basis increased $73 million or 3% in 2013 from $2.62
billion in 2012. That improvement resulted from a 5% rise in average earning assets, to $74.0 billion in 2013
from $70.3 billion in 2012. The increase in average earning assets was the result of higher average loans and
leases and interest-bearing deposits held at the Federal Reserve Bank of New York. The net interest margin
declined 8 basis points in 2013 from 3.73% in 2012. That narrowing was largely due to an 11 basis point
reduction in the average yield on loans and leases and the lower yielding cash balances on deposit at the
Federal Reserve Bank of New York.
Average balances of loans and leases increased $2.4 billion or 4% in 2013 from $62.7 billion in 2012.
Commercial loans and leases averaged $17.7 billion in 2013, up $1.4 billion or 9% from $16.3 billion in
2012. Average commercial real estate loans increased $1.2 billion or 5% to $26.1 billion in 2013 from $24.9
billion in the preceding year. The growth in commercial loans and commercial real estate loans reflected
higher loan demand by customers. Residential real estate loan balances rose $409 million or 4% to $10.1
billion in 2013 from $9.7 billion in 2012, resulting from the impact of the Company retaining for portfolio
during the first eight months of 2012 a majority of originated residential real estate loans, partially offset by
the mid-2013 securitizations noted earlier. Consumer loans averaged $11.1 billion in 2013, down $635
million or 5% from $11.7 billion in 2012 due, in part, to the impact of the third quarter 2013 automobile
loan securitization transaction.
46
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47
Table 4 summarizes average loans and leases outstanding in 2014 and percentage changes in the
major components of the portfolio over the past two years.
Table 4
AVERAGE LOANS AND LEASES
(Net of unearned discount)
Percent Increase
(Decrease) from
2014
2013 to 2014
2012 to 2013
Commercial, financial, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate — commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate — consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In millions)
$18,867
26,461
8,719
1,675
5,747
314
2,882
Total consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,618
6 %
1
(14)
(23)
—
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5
(4)
9%
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(3)
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3
(5)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$64,665
(1)%
4%
Commercial loans and leases, excluding loans secured by real estate, aggregated $19.5 billion at
December 31, 2014, representing 29% of total loans and leases. Table 5 presents information on commercial
loans and leases as of December 31, 2014 relating to geographic area, size, borrower industry and whether
the loans are secured by collateral or unsecured. Of the $19.5 billion of commercial loans and leases
outstanding at the end of 2014, approximately $17.0 billion, or 87%, were secured, while 44%, 25% and 18%
were granted to businesses in New York State, Pennsylvania and the Mid-Atlantic area (which includes
Maryland, Delaware, Virginia, West Virginia and the District of Columbia), respectively. The Company
provides financing for leases to commercial customers, primarily for equipment. Commercial leases
included in total commercial loans and leases at December 31, 2014 aggregated $1.2 billion, of which 50%
were secured by collateral located in New York State, 17% were secured by collateral in Pennsylvania and
another 12% were secured by collateral in the Mid-Atlantic area.
48
Table 5
COMMERCIAL LOANS AND LEASES, NET OF UNEARNED DISCOUNT
(Excludes Loans Secured by Real Estate)
December 31, 2014
Automobile dealerships . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . . . .
Financial and insurance . . . . . . . . . . .
Transportation, communications,
utilities . . . . . . . . . . . . . . . . . . . . . . .
Real estate investors . . . . . . . . . . . . . . .
Health services . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . .
Retail
. . . . . . . . . . . . . . . . . . . . . . . . . .
Public administration . . . . . . . . . . . . .
Agriculture, forestry, fishing,
mining, etc.
. . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
New York
Pennsylvania
Mid-Atlantic
Other
Total
Percent of Total
$1,518
1,109
1,475
887
754
$ 792
682
855
444
228
427
673
515
394
208
160
404
207
168
279
231
84
(Dollars in millions)
$ 817
377
454
253
40
$ 363
914
283
414
357
167
163
329
159
88
46
255
101
45
56
115
1
$ 3,490
3,082
3,067
1,998
1,379
1,253
1,144
1,057
888
642
291
18%
16
16
10
7
6
6
5
5
3
2
26
425
$8,571
127
284
$4,785
32
247
$3,562
2
27
$2,543
187
983
$19,461
1
5
100%
Percent of total . . . . . . . . . . . . . . . . . . .
44%
25%
18%
13%
100%
Percent of dollars outstanding
Secured . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . .
Leases . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of dollars outstanding by size
of loan
Less than $1 million . . . . . . . . . . . . . . .
$1 million to $5 million . . . . . . . . . . . .
$5 million to $10 million . . . . . . . . . . .
$10 million to $20 million . . . . . . . . . .
$20 million to $30 million . . . . . . . . . .
$30 million to $50 million . . . . . . . . . .
Greater than $50 million . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
82%
11
7
100%
22%
21
15
16
10
11
5
100%
79%
17
4
100%
19%
24
19
23
13
1
1
100%
83%
13
4
100%
29%
20
14
19
7
8
3
100%
81%
9
10
100%
11%
22
26
23
10
8
—
100%
81%
13
6
100%
21%
22
17
19
10
8
3
100%
49
International loans included in commercial loans and leases totaled $167 million and $170 million at
December 31, 2014 and 2013, respectively. Included in such loans were $61 million and $72 million,
respectively, of loans at M&T Bank’s commercial branch in Ontario, Canada.
Loans secured by real estate, including outstanding balances of home equity loans and lines of credit
which the Company classifies as consumer loans, represented approximately 64% of the loan and lease
portfolio during 2014, compared with 65% in 2013 and 66% in 2012. At December 31, 2014, the Company
held approximately $27.6 billion of commercial real estate loans, $8.7 billion of consumer real estate loans
secured by one-to-four family residential properties (including $435 million of loans originated for sale) and
$6.0 billion of outstanding balances of home equity loans and lines of credit, compared with $26.1 billion,
$8.9 billion and $6.1 billion, respectively, at December 31, 2013. Included in total loans and leases were
amounts due from builders and developers of residential real estate aggregating $1.5 billion and $1.3 billion
at December 31, 2014 and 2013, respectively, substantially all of which were classified as commercial real
estate loans.
Commercial real estate loans originated by the Company include fixed-rate instruments with
monthly payments and a balloon payment of the remaining unpaid principal at maturity, in many cases five
years after origination. For borrowers in good standing, the terms of such loans may be extended by the
customer for an additional five years at the then-current market rate of interest. The Company also
originates fixed-rate commercial real estate loans with maturities of greater than five years, generally having
original maturity terms of approximately seven to ten years, and adjustable-rate commercial real estate
loans. Adjustable-rate commercial real estate loans represented approximately 65% of the commercial real
estate loan portfolio at the 2014 year-end. Table 6 presents commercial real estate loans by geographic area,
type of collateral and size of the loans outstanding at December 31, 2014. New York City metropolitan area
commercial real estate loans totaled $9.2 billion at December 31, 2014. The $7.1 billion of investor-owned
commercial real estate loans in the New York City metropolitan area were largely secured by multifamily
residential properties, retail space, and office space. The Company’s experience has been that office, retail
and service-related properties tend to demonstrate more volatile fluctuations in value through economic
cycles and changing economic conditions than do multifamily residential properties. Approximately 44% of
the aggregate dollar amount of New York City-area loans were for loans with outstanding balances of $10
million or less, while loans of more than $50 million made up approximately 11% of the total.
50
Table 6
COMMERCIAL REAL ESTATE LOANS, NET OF UNEARNED DISCOUNT
December 31, 2014
Metropolitan
New York
City
Other
New York
State
Pennsylvania
Mid-
Atlantic
Other
Total
Percent of
Total
(Dollars in millions)
Investor-owned
Permanent finance by property type
Retail/Service . . . . . . . . . . . . . . . . . . . . . .
Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Apartments/Multifamily . . . . . . . . . . . . .
Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial/Warehouse . . . . . . . . . . . . . . . .
Health facilities . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,488
1,229
1,533
737
286
48
112
Total permanent . . . . . . . . . . . . . . . .
5,433
Construction/Development
Commercial
Construction . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Land/Land development
Residential builder and developer
Construction . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Land/Land development
Total construction/development . . .
Total investor-owned . . . . . . . . . . . . . . . . . . . .
Owner-occupied by industry(a)
Health services . . . . . . . . . . . . . . . . . . . . .
Other services . . . . . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . .
Real estate investors . . . . . . . . . . . . . . . . .
Automobile dealerships . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
608
512
569
11
1,700
7,133
866
264
166
122
156
126
87
283
$ 508
828
591
356
203
41
16
2,543
529
24
2
21
576
3,119
521
335
177
185
200
66
85
177
$ 407
471
289
304
216
21
12
1,720
290
45
64
67
$ 869
868
524
347
275
19
30
2,932
695
122
126
277
466
2,186
1,220
4,152
319
256
218
225
162
155
61
217
568
497
285
155
90
140
125
302
Total owner-occupied . . . . . . . . . . .
2,070
1,746
1,613
2,162
$ 659
346
507
366
206
10
20
$ 3,931
3,742
3,444
2,110
1,186
139
190
2,114
14,742
228
64
190
138
620
2,350
767
951
514
4,582
2,734
19,324
2,593
1,392
907
818
640
537
362
995
319
40
61
131
32
50
4
16
653
14%
14
12
8
4
1
1
54%
9%
3
3
2
17%
71%
9%
5
3
3
2
2
1
4
8,244
29%
Total commercial real estate . . . . . . . . . . . . . . .
$9,203
$4,865
$3,799
$6,314
$3,387
$27,568
100%
Percent of total
. . . . . . . . . . . . . . . . . . . . . . . . .
33%
18%
14%
23%
12%
100%
Percent of dollars outstanding by size of loan
Less than $1 million . . . . . . . . . . . . . . . . . . . . .
$1 million to $5 million . . . . . . . . . . . . . . . . . .
$5 million to $10 million . . . . . . . . . . . . . . . . .
$10 million to $30 million . . . . . . . . . . . . . . . .
$30 million to $50 million . . . . . . . . . . . . . . . .
$50 million to $100 million . . . . . . . . . . . . . . .
Greater than $100 million . . . . . . . . . . . . . . . .
5%
22
17
34
11
9
2
21%
36
20
21
2
—
—
19%
32
18
26
3
2
—
15%
27
16
21
11
10
—
7%
18
15
32
10
18
—
12%
26
18
27
8
8
1
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
100%
100%
100%
100%
(a)
Includes $428 million of construction loans.
51
Commercial real estate loans secured by properties located in other parts of New York State,
Pennsylvania and the Mid-Atlantic area tend to have a greater diversity of collateral types and include a
significant amount of lending to customers who use the mortgaged property in their trade or business
(owner-occupied). Approximately 77% of the aggregate dollar amount of commercial real estate loans in
New York State secured by properties located outside of the metropolitan New York City area were for loans
with outstanding balances of $10 million or less. Of the outstanding balances of commercial real estate loans
in Pennsylvania and the Mid-Atlantic area, approximately 69% and 58%, respectively, were for loans with
outstanding balances of $10 million or less.
Commercial real estate loans secured by properties located outside of Pennsylvania, the Mid-Atlantic
area, New York State and areas of states neighboring New York considered to be part of the New York City
metropolitan area, comprised 12% of total commercial real estate loans as of December 31, 2014.
Commercial real estate construction and development loans made to investors presented in table 6
totaled $4.6 billion at December 31, 2014, or 7% of total loans and leases. Approximately 95% of those
construction loans had adjustable interest rates. Included in such loans at the 2014 year-end were $1.5
billion of loans to developers of residential real estate properties. Information about the credit performance
of the Company’s loans to builders and developers of residential real estate properties is included herein
under the heading “Provision For Credit Losses.” The remainder of the commercial real estate construction
loan portfolio was comprised of loans made for various purposes, including the construction of office
buildings, multifamily residential housing, retail space and other commercial development.
M&T Realty Capital Corporation, a commercial real estate lending subsidiary of M&T Bank,
participates in the Delegated Underwriting and Servicing (“DUS”) program of Fannie Mae, pursuant to
which commercial real estate loans are originated in accordance with terms and conditions specified by
Fannie Mae and sold. Under this program, loans are sold with partial credit recourse to M&T Realty Capital
Corporation. The amount of recourse is generally limited to one-third of any credit loss incurred by the
purchaser on an individual loan, although in some cases the recourse amount is less than one-third of the
outstanding principal balance. The Company’s maximum credit risk for recourse associated with sold
commercial real estate loans was approximately $2.4 billion and $2.3 billion at December 31, 2014 and 2013,
respectively. There have been no material losses incurred as a result of those recourse arrangements.
Commercial real estate loans held for sale at December 31, 2014 and 2013 aggregated $308 million and $68
million, respectively. At December 31, 2014 and 2013, commercial real estate loans serviced for other
investors by the Company were $11.3 billion and $11.4 billion, respectively. Those serviced loans are not
included in the Company’s consolidated balance sheet.
Real estate loans secured by one-to-four family residential properties were $8.7 billion at
December 31, 2014, including approximately 41% secured by properties located in New York State, 13%
secured by properties located in Pennsylvania and 25% secured by properties located in the Mid-Atlantic
area. At December 31, 2014, $435 million of residential real estate loans had been originated for sale,
compared with $401 million at December 31, 2013. The Company’s portfolio of alternative (“Alt-A”)
residential real estate loans held for investment at December 31, 2014 declined to $351 million from $396
million at December 31, 2013. Alt-A loans represent loans that at origination typically included some form
of limited borrower documentation requirements as compared with more traditional residential real estate
loans. Loans in the Company’s Alt-A portfolio were originated by the Company prior to 2008. Loans to
individuals to finance the construction of one-to-four family residential properties totaled $35 million at
December 31, 2014 and $34 million at December 31, 2013, or approximately .1% of total loans and leases at
each of those dates. Information about the credit performance of the Company’s Alt-A loans and other
residential real estate loans is included herein under the heading “Provision For Credit Losses.”
Consumer loans comprised approximately 16% of total loans and leases at each of December 31,
2014 and 2013. Outstanding balances of home equity lines of credit represent the largest component of the
consumer loan portfolio. Such balances represented approximately 9% of total loans and leases at each of
December 31, 2014 and 2013. No other consumer loan product represented at least 4% of loans outstanding
at December 31, 2014. Approximately 41% of home equity lines of credit outstanding at December 31, 2014
were secured by properties in New York State, and 21% and 36% were secured by properties in Pennsylvania
and the Mid-Atlantic area, respectively. Outstanding automobile loan balances rose to nearly $2.0 billion at
December 31, 2014 from $1.4 billion at December 31, 2013. That increase reflects higher consumer demand
for motor vehicles.
52
Table 7 presents the composition of the Company’s loan and lease portfolio at the end of 2014,
including outstanding balances to businesses and consumers in New York State, Pennsylvania, the Mid-
Atlantic area and other states. Approximately 45% of total loans and leases at December 31, 2014 were to
New York State customers, while 18% and 23% were to Pennsylvania and the Mid-Atlantic area customers,
respectively.
Table 7
December 31, 2014
LOANS AND LEASES, NET OF UNEARNED DISCOUNT
New York
State
Outstandings
(In millions)
Percent of Dollars Outstanding
Pennsylvania
Mid-Atlantic
Other
Real estate
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial
$ 8,657
27,568
Total real estate . . . . . . . . . . . . . . . . . . . . . . .
Commercial, financial, etc. . . . . . . . . . . . . . . . . . .
Consumer
Home equity lines . . . . . . . . . . . . . . . . . . . . . . .
Home equity loans . . . . . . . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other secured or guaranteed . . . . . . . . . . . . . .
Other unsecured . . . . . . . . . . . . . . . . . . . . . . . .
36,225
18,272
5,747
275
1,979
2,263
719
Total consumer . . . . . . . . . . . . . . . . . . . . . . .
10,983
Total loans . . . . . . . . . . . . . . . . . . . . . . . .
Commercial leases . . . . . . . . . . . . . . . . . . . . . . . .
65,480
1,189
Total loans and leases . . . . . . . . . . . . . . . .
$66,669
41%
51(a)
49%
44%
41%
13
31
24
40
34%
45%
49%
45%
13%
14
14%
25%
21%
28
23
14
23
21%
18%
17%
18%
25%
23
23%
19%
36%
53
23
17
34
30%
23%
12%
23%
21%
12
14%
12%
2%
6
23
45
3
15%
14%
22%
14%
(a)
Includes loans secured by properties located in neighboring states generally considered to be within commuting
distance of New York City.
Average balances of investment securities were $11.5 billion in 2014, up from $6.6 billion and $7.0
billion in 2013 and 2012, respectively. The significant rise in such balances in 2014 reflects the net effect of
purchases of mortgage-backed securities during 2013 and 2014 and the impact of investment securities sales
and securitizations in 2013 as described below. Beginning in the second quarter of 2013, the Company
undertook certain actions to improve its regulatory capital and liquidity positions in response to evolving
regulatory requirements. As a result, in the second quarter of 2013 approximately $1.0 billion of privately
issued mortgage-backed securities held in the available-for-sale portfolio were sold, as were the Company’s
holdings of Visa and MasterCard common stock. In the second and third quarters of 2013, the Company
securitized approximately $1.3 billion of residential real estate loans guaranteed by the Federal Housing
Authority (“FHA”) that were held in its loan portfolio. A substantial majority of the Ginnie Mae securities
resulting from those securitizations were retained by the Company. During the second quarter of 2013, the
Company also began originating FHA residential real estate loans for purposes of securitizing such loans
into Ginnie Mae mortgage-backed securities to be retained in the Company’s investment securities
portfolio. Approximately $1.6 billion of such loans were originated and securitized during 2013. Finally, the
Company purchased approximately $1.9 billion of Ginnie Mae securities and $250 million of Fannie Mae
securities that were added to the investment securities portfolio during 2013, and another $4.6 billion of
Fannie Mae securities and $602 million of Ginnie Mae securities were purchased during 2014. The Company
has increased its holdings of investment securities in response to changing regulatory requirements.
53
The investment securities portfolio is largely comprised of residential mortgage-backed securities,
debt securities issued by municipalities, trust preferred securities issued by certain financial institutions, and
shorter-term U.S. Treasury and federal agency notes. When purchasing investment securities, the Company
considers its liquidity position and its overall interest-rate risk profile as well as the adequacy of expected
returns relative to risks assumed, including prepayments. In managing its investment securities portfolio,
the Company occasionally sells investment securities as a result of changes in interest rates and spreads,
actual or anticipated prepayments, credit risk associated with a particular security, or as a result of
restructuring its investment securities portfolio in connection with a business combination. As noted above,
in 2013 the Company sold investment securities to reduce its exposure to higher risk securities in response
to changing regulatory capital and liquidity standards.
The Company regularly reviews its investment securities for declines in value below amortized cost
that might be characterized as “other than temporary.” Nevertheless, there were no other-than-temporary
impairment charges recognized in 2014. Pre-tax other-than-temporary impairment charges of $10 million
and $48 million were recognized during 2013 and 2012, respectively, related to certain privately issued
mortgage-backed securities. Persistently high unemployment, loan delinquencies and foreclosures that led
to a backlog of homes held for sale by financial institutions and others were significant factors contributing
to the recognition of the other-than-temporary impairment charges related to those securities. As noted
earlier, substantially all of the privately issued mortgage-backed securities held in the available-for-sale
portfolio were sold in the second quarter of 2013. The impairment charges recognized during 2013 and 2012
related to a subset of those sold securities. Based on management’s assessment of future cash flows
associated with individual investment securities as of December 31, 2014, the Company concluded that
declines in value below amortized cost associated with the investment securities portfolio were temporary in
nature. A further discussion of fair values of investment securities is included herein under the heading
“Capital.” Additional information about the investment securities portfolio is included in notes 3 and 20 of
Notes to Financial Statements.
Other earning assets include interest-bearing deposits at the Federal Reserve Bank of New York and
other banks, trading account assets, federal funds sold and agreements to resell securities. Those other
earning assets in the aggregate averaged $5.5 billion in 2014, $2.3 billion in 2013 and $628 million in 2012.
Interest-bearing deposits at banks averaged $5.3 billion in 2014, compared with $2.1 billion and $528
million in 2013 and 2012, respectively. The higher levels of average interest-bearing deposits at banks in
2014 and 2013 were due, in part, to higher Wilmington Trust-related customer deposits. The amounts of
investment securities and other earning assets held by the Company are influenced by such factors as
demand for loans, which generally yield more than investment securities and other earning assets, ongoing
repayments, the levels of deposits, and management of liquidity and balance sheet size and resulting capital
ratios.
The most significant source of funding for the Company is core deposits. The Company considers
noninterest-bearing deposits, interest-bearing transaction accounts, savings deposits and time deposits of
$250,000 or less as core deposits. The Company’s branch network is its principal source of core deposits,
which generally carry lower interest rates than wholesale funds of comparable maturities. Average core
deposits totaled $69.1 billion in 2014, up from $63.8 billion in 2013 and $59.1 billion in 2012. The growth in
core deposits from 2012 to 2014 was due, in part, to higher deposits of trust customers and the lack of
attractive alternative investments available to the Company’s customers resulting from lower interest rates
and from the economic environment in the U.S. The low interest rate environment has resulted in a shift in
customer savings trends, as average time deposits have continued to decline, while average noninterest-
bearing deposits and savings deposits have generally increased. Funding provided by core deposits
represented 85% of average earning assets in 2014, compared with 86% and 84% in 2013 and 2012,
respectively. Table 8 summarizes average core deposits in 2014 and percentage changes in the components
of such deposits over the past two years. Core deposits aggregated $72.0 billion and $65.4 billion at
December 31, 2014 and 2013, respectively.
54
Table 8
AVERAGE CORE DEPOSITS
Percentage Increase
(Decrease) from
2014
2013 to 2014
2012 to 2013
NOW accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In millions)
$ 1,010
39,440
2,921
25,715
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$69,086
12%
10
(15)
8
8%
8%
10
(18)
9
8%
The Company has additional funding sources, including branch-related time deposits over $250,000,
deposits associated with the Company’s Cayman Islands office, and brokered deposits. Time deposits over
$250,000, excluding brokered certificates of deposit, averaged $366 million in 2014, $325 million in 2013
and $410 million in 2012. Cayman Islands office deposits averaged $327 million in 2014, $496 million in
2013 and $605 million in 2012. Brokered time deposits averaged $4 million in 2014, compared with $279
million in 2013 and $741 million in 2012. There were no brokered time deposits outstanding at
December 31, 2014. At December 31, 2013, such deposits totaled $26 million. The Company also had
brokered NOW and brokered money-market deposit accounts, which in the aggregate averaged $1.1 billion
in each of 2014, 2013 and 2012. The levels of brokered NOW and brokered money-market deposit accounts
reflect the demand for such deposits, largely resulting from the desire of brokerage firms to earn reasonable
yields while ensuring that customer deposits are fully insured. The level of Cayman Islands office deposits
are also reflective of customer demand. Additional amounts of Cayman Islands office deposits or brokered
deposits may be added in the future depending on market conditions, including demand by customers and
other investors for those deposits, and the cost of funds available from alternative sources at the time.
The Company also uses borrowings from banks, securities dealers, various Federal Home Loan
Banks, the Federal Reserve Bank of New York and others as sources of funding. Average short-term
borrowings totaled $215 million in 2014, $390 million in 2013 and $839 million in 2012. Included in short-
term borrowings were unsecured federal funds borrowings, which generally mature on the next business
day, that averaged $156 million, $284 million and $669 million in 2014, 2013 and 2012, respectively.
Overnight federal funds borrowings represented the largest component of average short-term borrowings
and totaled $135 million at December 31, 2014 and $169 million at December 31, 2013.
Long-term borrowings averaged $7.5 billion in 2014, $4.9 billion in 2013 and $5.5 billion in 2012.
During the first quarter of 2013, M&T Bank initiated a Bank Note Program whereby M&T Bank may offer
unsecured senior and subordinated notes. Average balances of notes issued under that program were $2.9
billion in 2014 and $657 million in 2013. During March 2013, $300 million of three-year floating rate senior
notes and $500 million of fixed rate senior notes were issued. During 2014, M&T Bank issued $550 million
of three-year floating rate, $1.25 billion of three-year fixed rate and $1.4 billion of five-year fixed rate senior
notes. The proceeds of the issuances have been predominantly utilized to purchase additional liquid
investments that will meet the regulatory liquidity requirements. In addition, in February 2015 M&T Bank
issued $1.5 billion of senior notes of which $750 million mature in 2020 and $750 million mature in 2025.
Also included in average long-term borrowings were amounts borrowed from the Federal Home Loan
Banks of New York, Atlanta and Pittsburgh of $692 million in 2014, $30 million in 2013 and $768 million in
2012, and subordinated capital notes of $1.6 billion in each of 2014 and 2013 and $2.0 billion in 2012.
During the second quarter of 2014, M&T Bank borrowed approximately $1.1 billion from the Federal Home
Loan Bank (“FHLB”) of New York. Those borrowings were split between three-year and five-year terms at
fixed rates of interest. On November 1, 2014, M&T Bank redeemed $50 million of 9.50% subordinated notes
that were due to mature in 2018. On April 15, 2013, $250 million of 4.875% subordinated notes of the
Company matured and were redeemed. On July 2, 2012, M&T Bank redeemed $400 million of subordinated
capital notes that were due to mature in 2013, as such notes ceased to qualify as regulatory capital during the
one-year period before their contractual maturity date. Junior subordinated debentures associated with trust
preferred securities that were included in average long-term borrowings were $889 million in 2014 and
55
$1.2 billion in each of 2013 and 2012. M&T redeemed $350 million of 8.50% junior subordinated
debentures associated with trust preferred securities in the first quarter of 2014. Additional information
regarding junior subordinated debentures, as well as information regarding contractual maturities of long-
term borrowings, is provided in note 9 of Notes to Financial Statements. Also included in long-term
borrowings were agreements to repurchase securities, which averaged $1.4 billion during each of 2014, 2013
and 2012. The agreements have various repurchase dates through 2017, however, the contractual maturities
of the underlying securities extend beyond such repurchase dates. The Company has utilized interest rate
swap agreements to modify the repricing characteristics of certain components of long-term debt. As of
December 31, 2014, interest rate swap agreements were used to hedge approximately $1.4 billion of
outstanding fixed rate long-term borrowings. Further information on interest rate swap agreements is
provided in note 18 of Notes to Financial Statements.
Changes in the composition of the Company’s earning assets and interest-bearing liabilities, as
discussed herein, as well as changes in interest rates and spreads, can impact net interest income. Net interest
spread, or the difference between the taxable-equivalent yield on earning assets and the rate paid on interest-
bearing liabilities, was 3.12% in 2014, compared with 3.43% in 2013 and 3.48% in 2012. The yield on the
Company’s earning assets declined 38 basis points to 3.65% in 2014 from 4.03% in 2013, while the rate paid
on interest-bearing liabilities decreased 7 basis points to .53% in 2014 from .60% in 2013. The yield on
earning assets during 2013 decreased 19 basis points from 4.22% in 2012, while the rate paid on interest-
bearing liabilities declined 14 basis points from .74% in 2012. The declines in yields on earning assets and
rates on interest-bearing liabilities reflect the impact of actions taken by the Federal Reserve to maintain the
target range for the federal funds rate of 0% to .25% and to control the level of interest rates in general.
Net interest-free funds consist largely of noninterest-bearing demand deposits and shareholders’
equity, partially offset by bank owned life insurance and non-earning assets, including goodwill and core
deposit and other intangible assets. Net interest-free funds averaged $28.8 billion in 2014, compared with
$26.5 billion in 2013 and $23.7 billion in 2012. The significant increases in average net interest-free funds in
2014 and 2013 were largely the result of higher balances of noninterest-bearing deposits, which averaged
$25.7 billion in 2014, $23.7 billion in 2013 and $21.8 billion in 2012. Goodwill and core deposit and other
intangible assets averaged $3.6 billion in each of 2014 and 2013 and $3.7 billion in 2012. The cash surrender
value of bank owned life insurance averaged $1.7 billion in 2014 and $1.6 billion in each of 2013 and 2012.
Increases in the cash surrender value of bank owned life insurance are not included in interest income, but
rather are recorded in “other revenues from operations.” The contribution of net interest-free funds to net
interest margin was .19% in 2014, .22% in 2013 and .25% in 2012.
Reflecting the changes to the net interest spread and the contribution of net interest-free funds as
described herein, the Company’s net interest margin was 3.31% in 2014, 3.65% in 2013 and 3.73% in 2012.
Future changes in market interest rates or spreads, as well as changes in the composition of the Company’s
portfolios of earning assets and interest-bearing liabilities that result in reductions in spreads, could
adversely impact the Company’s net interest income and net interest margin. In particular, the relatively low
interest rate environment continues to exert downward pressure on yields on loans, investment securities
and other earning assets.
Management assesses the potential impact of future changes in interest rates and spreads by
projecting net interest income under several interest rate scenarios. In managing interest rate risk, the
Company has utilized interest rate swap agreements to modify the repricing characteristics of certain
portions of its interest-bearing liabilities. Periodic settlement amounts arising from these agreements are
reflected in the rates paid on interest-bearing liabilities. The notional amount of interest rate swap
agreements entered into for interest rate risk management purposes was $1.4 billion at each of December 31,
2014 and 2013. Under the terms of those swap agreements, the Company received payments based on the
outstanding notional amount of the agreements at fixed rates and made payments at variable rates. Those
swap agreements were designated as fair value hedges of certain fixed rate long-term borrowings. There were
no interest rate swap agreements designated as cash flow hedges at those respective dates.
In a fair value hedge, the fair value of the derivative (the interest rate swap agreement) and changes in
the fair value of the hedged item are recorded in the Company’s consolidated balance sheet with the
corresponding gain or loss recognized in current earnings. The difference between changes in the fair value
of the interest rate swap agreements and the hedged items represents hedge ineffectiveness and is recorded in
“other revenues from operations” in the Company’s consolidated statement of income. The amounts of
hedge ineffectiveness recognized in 2014, 2013 and 2012 were not material to the Company’s results of
operations. The estimated aggregate fair value of interest rate swap agreements designated as fair value
56
hedges represented gains of approximately $73 million at December 31, 2014 and $103 million at
December 31, 2013. The fair values of such swap agreements were substantially offset by changes in the fair
values of the hedged items. The changes in the fair values of the interest rate swap agreements and the
hedged items primarily result from the effects of changing interest rates and spreads. The Company’s credit
exposure as of December 31, 2014 with respect to the estimated fair value of interest rate swap agreements
used for managing interest rate risk has been substantially mitigated through master netting arrangements
with trading account interest rate contracts with the same counterparty as well as counterparty postings of
$49 million of collateral with the Company. Additional information about swap agreements and the items
being hedged is included in note 18 of Notes to Financial Statements. The average notional amounts of
interest rate swap agreements entered into for interest rate risk management purposes, the related effect on
net interest income and margin, and the weighted-average interest rates paid or received on those swap
agreements are presented in table 9.
Table 9
INTEREST RATE SWAP AGREEMENTS
Year Ended December 31
2014
2013
2012
Amount
Rate(a)
Amount
Rate(a)
Amount
Rate(a)
(Dollars in thousands)
Increase (decrease) in:
Interest income . . . . . . . . . . . . . . . . . . $
Interest expense . . . . . . . . . . . . . . . . . .
—
(44,996)
—% $
(.09)
—
(41,326)
—% $
(.09)
—
(36,368)
Net interest income/margin . . . . . . . . $
44,996
.06% $
41,326
.06% $ 36,368
Average notional amount . . . . . . . . . . . . $1,400,000
Rate received(b) . . . . . . . . . . . . . . . . . . .
Rate paid(b) . . . . . . . . . . . . . . . . . . . . . . .
4.42%
1.19%
$1,160,274
$900,000
5.03%
1.47%
—%
(.08)
.05%
6.07%
2.03%
(a) Computed as a percentage of average earning assets or interest-bearing liabilities.
(b) Weighted-average rate paid or received on interest rate swap agreements in effect during year.
Provision for Credit Losses
The Company maintains an allowance for credit losses that in management’s judgment appropriately
reflects losses inherent in the loan and lease portfolio. A provision for credit losses is recorded to adjust the
level of the allowance as deemed necessary by management. The provision for credit losses was $124 million
in 2014, compared with $185 million in 2013 and $204 million in 2012. Net loan charge-offs aggregated
$121 million in 2014, $183 million in 2013 and $186 million in 2012. Net loan charge-offs as a percentage of
average loans outstanding were .19% in 2014, compared with .28% in 2013 and .30% in 2012. A summary of
the Company’s loan charge-offs, provision and allowance for credit losses is presented in table 10 and in
note 5 of Notes to Financial Statements.
57
Table 10
LOAN CHARGE-OFFS, PROVISION AND ALLOWANCE FOR CREDIT LOSSES
2014
2013
2012
2011
2010
(Dollars in thousands)
Allowance for credit losses beginning
balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $916,676
$925,860
$908,290
$902,941
$878,022
Charge-offs during year
Commercial, financial, leasing, etc.
. . . . . . .
Real estate — construction . . . . . . . . . . . . . .
Real estate — mortgage . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . .
58,943
1,882
33,527
84,390
109,329
9,137
49,079
85,965
41,148
27,687
58,572
103,348
55,021
63,529
81,691
109,246
91,650
86,603
108,500
125,593
Total charge-offs . . . . . . . . . . . . . . . . . . . .
178,742
253,510
230,755
309,487
412,346
Recoveries during year
. . . . . . .
Commercial, financial, leasing, etc.
Real estate — construction . . . . . . . . . . . . . .
Real estate — mortgage . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,188
4,725
14,640
16,075
Total recoveries . . . . . . . . . . . . . . . . . . . . .
57,628
11,773
18,800
13,718
26,035
70,326
11,375
3,693
8,847
20,410
44,325
10,224
5,930
10,444
18,238
44,836
26,621
4,975
10,954
23,963
66,513
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . .
Allowance related to loans sold or
securitized . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidation of loan securitization trusts . . .
121,114
124,000
183,184
185,000
186,430
204,000
264,651
270,000
345,833
368,000
—
—
(11,000)
—
—
—
—
—
—
2,752
Allowance for credit losses ending balance . . . $919,562
$916,676
$925,860
$908,290
$902,941
Net charge-offs as a percent of:
Provision for credit losses . . . . . . . . . . . . . . .
Average loans and leases, net of unearned
discount . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses as a percent of
loans and leases, net of unearned discount,
at year-end . . . . . . . . . . . . . . . . . . . . . . . . . . .
97.67%
99.02%
91.39%
98.02%
93.98%
.19%
.28%
.30%
.47%
.67%
1.38%
1.43%
1.39%
1.51%
1.74%
Loans acquired in connection with acquisition transactions subsequent to 2008 were recorded at fair
value with no carry-over of any previously recorded allowance for credit losses. Determining the fair value of
the acquired loans required estimating cash flows expected to be collected on the loans and discounting
those cash flows at then-current interest rates. The excess of expected cash flows over the carrying value of
the loans is recognized as interest income over the lives of the loans. The difference between contractually
required payments and the cash flows expected to be collected is referred to as the nonaccretable balance
and is not recorded on the consolidated balance sheet. The nonaccretable balance reflects estimated future
credit losses and other contractually required payments that the Company does not expect to collect. The
Company regularly evaluates the reasonableness of its cash flow projections. Any decreases to the expected
cash flows require the Company to evaluate the need for an additional allowance for credit losses and could
lead to charge-offs of acquired loan balances. Any significant increases in expected cash flows result in
additional interest income to be recognized over the then-remaining lives of the loans. The carrying amount
of loans obtained in acquisitions subsequent to 2008 was $2.6 billion and $4.0 billion at December 31, 2014
and 2013, respectively. The portion of the nonaccretable balance related to remaining principal losses as well
as life-to-date principal losses charged against the nonaccretable balance since acquisition date as of
December 31, 2014 and 2013 are presented in table 11. The Company regularly reviews its cash flow
58
projections for acquired loans, including its estimates of lifetime principal losses. During each of the last
three years, based largely on improving economic conditions, the Company’s estimates of cash flows
expected to be generated by acquired loans improved, resulting in increases in the accretable yield. In 2014,
estimated cash flows expected to be generated by acquired loans increased by $98 million, or approximately
2%. That improvement reflected a lowering of estimated principal losses by approximately $47 million,
primarily due to a $41 million decrease in expected principal losses in the acquired commercial real estate
portfolios, as well as interest and other recoveries. Similarly, in 2013 the estimates of cash flows expected to
be generated by acquired loans increased by approximately 3%, or $179 million. That improvement also
reflected a lowering of estimated principal losses, largely driven by a $160 million decrease in expected
principal losses in the acquired commercial real estate portfolios. In 2012, estimated cash flows expected to
be generated by acquired loans increased by $178 million, or approximately 2%. That improvement was also
largely driven by a reduction of estimated principal losses, including a $132 million decrease in expected
principal losses in the acquired commercial real estate portfolios.
Table 11
NONACCRETABLE BALANCE — PRINCIPAL
Remaining Balance
Life-to-date Charges
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
(In thousands)
Commercial, financing, leasing, etc. . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . .
Residential real estate . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 19,589
70,261
15,958
29,582
$ 31,931
110,984
23,201
33,989
$ 78,736
276,681
59,552
77,819
$ 69,772
277,222
54,177
74,039
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$135,390
$200,105
$492,788
$475,210
Nonaccrual loans totaled $799 million or 1.20% of outstanding loans and leases at December 31,
2014, compared with $874 million or 1.36% at December 31, 2013 and $1.01 billion or 1.52% at
December 31, 2012. The decline in nonaccrual loans at the 2014 year-end as compared with December 31,
2013 was largely due to lower commercial real estate and residential real estate loans on nonaccrual status.
As compared with the end of 2012, the decline in nonaccrual loans at December 31, 2013 was largely due to
lower commercial loans and commercial real estate loans classified as nonaccrual. Since December 31, 2012,
additions to nonaccrual loans were more than offset by the impact on such loans from payments received
and charge-offs. Improving economic conditions in the U.S. continue to have a favorable impact on
borrower repayment performance.
Accruing loans past due 90 days or more (excluding acquired loans) totaled $245 million or .37% of
total loans and leases at December 31, 2014, compared with $369 million or .58% at December 31, 2013 and
$358 million or .54% at December 31, 2012. Those loans included loans guaranteed by government-related
entities of $218 million, $298 million and $316 million at December 31, 2014, 2013 and 2012, respectively.
Such guaranteed loans included one-to-four family residential mortgage loans serviced by the Company that
were repurchased to reduce servicing costs, including a requirement to advance principal and interest
payments that had not been received from individual mortgagors. Despite the loans being purchased by the
Company, the insurance or guarantee by the applicable government-related entity remains in force. The
outstanding principal balances of the repurchased loans that are guaranteed by government-related entities
totaled $196 million at December 31, 2014, $255 million at December 31, 2013 and $294 million at
December 31, 2012. The remaining accruing loans past due 90 days or more not guaranteed by government-
related entities were loans considered to be with creditworthy borrowers that were in the process of
collection or renewal. A summary of nonperforming assets and certain past due, renegotiated and impaired
loan data and credit quality ratios is presented in table 12.
59
Table 12
NONPERFORMING ASSET AND PAST DUE, RENEGOTIATED AND IMPAIRED LOAN DATA
December 31
2014
2013
2012
2011
2010
(Dollars in thousands)
Nonaccrual loans . . . . . . . . . . . . . . . . . . . $799,151
63,635
Real estate and other foreclosed assets . . .
$874,156
66,875
$1,013,176
104,279
$1,097,581
156,592
$1,139,740
220,049
Total nonperforming assets . . . . . . . . . . . $862,786
$941,031
$1,117,455
$1,254,173
$1,359,789
Accruing loans past due 90 days or
more(a) . . . . . . . . . . . . . . . . . . . . . . . . . $245,020
$368,510
$ 358,397
$ 287,876
$ 250,705
Government guaranteed loans included
in totals above:
Nonaccrual loans . . . . . . . . . . . . . . . . . $ 69,095
Accruing loans past due 90 days or
$ 63,647
$
57,420
$
40,529
$
39,883
more . . . . . . . . . . . . . . . . . . . . . . . . .
217,822
297,918
316,403
252,503
207,243
Renegotiated loans . . . . . . . . . . . . . . . . . . $202,633
$257,092
$ 271,971
$ 214,379
$ 233,342
Acquired accruing loans past due 90 days
or more(b) . . . . . . . . . . . . . . . . . . . . . . $110,367
$130,162
$ 166,554
$ 163,738
$
91,022
Purchased impaired loans(c):
Outstanding customer balance . . . . . . $369,080
197,737
Carrying amount
. . . . . . . . . . . . . . . . .
$579,975
330,792
$ 828,571
447,114
$1,267,762
653,362
$ 219,477
97,019
Nonaccrual loans to total loans and
leases, net of unearned discount
. . . . .
Nonperforming assets to total net loans
and leases and real estate and other
foreclosed assets . . . . . . . . . . . . . . . . . .
Accruing loans past due 90 days or
more(a) to total loans and leases, net
of unearned discount . . . . . . . . . . . . . .
1.20%
1.36%
1.52%
1.83%
2.19%
1.29%
1.47%
1.68%
2.08%
2.60%
.37%
.58%
.54%
.48%
.48%
(a) Excludes acquired loans. Predominantly residential mortgage loans.
(b) Acquired loans that were recorded at fair value at acquisition date. This category does not include purchased
impaired loans that are presented separately.
(c) Accruing loans that were impaired at acquisition date and recorded at fair value.
Purchased impaired loans are loans obtained in acquisition transactions subsequent to 2008 that as
of the acquisition date were specifically identified as displaying signs of credit deterioration and for which
the Company did not expect to collect all outstanding principal and contractually required interest
payments. Those loans were impaired at the date of acquisition, were recorded at estimated fair value and
were generally delinquent in payments, but, in accordance with GAAP, the Company continues to accrue
interest income on such loans based on the estimated expected cash flows associated with the loans. The
carrying amount of such loans was $198 million at December 31, 2014, or .3% of total loans. Purchased
impaired loans totaled $331 million at December 31, 2013. The decline in such loans during 2014 was
predominantly the result of payments received from customers.
Acquired accruing loans past due 90 days or more are loans that could not be specifically identified as
impaired as of the acquisition date, but were recorded at estimated fair value as of such date. Such loans
totaled $110 million at December 31, 2014 and $130 million at December 31, 2013.
In an effort to assist borrowers, the Company modified the terms of select loans. If the borrower was
experiencing financial difficulty and a concession was granted, the Company considered such modifications
as troubled debt restructurings. Loan modifications included such actions as the extension of loan maturity
60
dates and the lowering of interest rates and monthly payments. The objective of the modifications was to
increase loan repayments by customers and thereby reduce net charge-offs. In accordance with GAAP, the
modified loans are included in impaired loans for purposes of determining the level of the allowance for
credit losses. Information about modifications of loans that are considered troubled debt restructurings is
included in note 4 of Notes to Financial Statements.
Residential real estate loans modified under specified loss mitigation programs prescribed by
government guarantors have not been included in renegotiated loans because the loan guarantee remains in
full force and, accordingly, the Company has not granted a concession with respect to the ultimate
collection of the original loan balance. Such loans totaled $149 million and $206 million at December 31,
2014 and December 31, 2013, respectively.
Charge-offs of commercial loans and leases, net of recoveries, were $37 million in 2014, $98 million
in 2013 and $30 million in 2012. Reflected in net charge-offs of commercial loans and leases in 2013 were
$49 million of charge-offs for a relationship with a motor vehicle-related parts wholesaler. Commercial
loans and leases in nonaccrual status aggregated $177 million at December 31, 2014, $111 million at
December 31, 2013 and $152 million at December 31, 2012. The increase in such loans from the 2013 year-
end to December 31, 2014 was not concentrated in any particular industry group and no individual
borrower relationship exceeded $14 million of the increase in nonaccrual commercial loans and leases.
Net charge-offs of commercial real estate loans during 2014, 2013 and 2012 totaled $3 million, $12
million and $36 million, respectively. Reflected in such charge-offs in 2014 and 2013 were net recoveries of
$2 million and $12 million, respectively, of loans to residential real estate builders and developers, compared
with net charge-offs of $23 million in 2012. Commercial real estate loans classified as nonaccrual aggregated
$239 million at December 31, 2014, compared with $305 million at December 31, 2013 and $412 million at
December 31, 2012. The decline in such nonaccrual loans as compared with December 31, 2013 was due, in
part, to improving economic conditions and reflected lower loans in nonaccrual status to residential
builders and developers. The decrease in nonaccrual commercial real estate loans from December 31, 2012
to the 2013 year-end was predominantly due to lower nonaccrual loans to residential builders and
developers. At December 31, 2014 and 2013, commercial real estate loans to residential builders and
developers classified as nonaccrual aggregated $72 million and $96 million, respectively, compared with
$182 million at December 31, 2012. Information about the location of nonaccrual and charged-off loans to
residential real estate builders and developers as of and for the year ended December 31, 2014 is presented in
table 13.
Table 13
RESIDENTIAL BUILDER AND DEVELOPER LOANS, NET OF UNEARNED DISCOUNT
December 31, 2014
Year Ended
December 31, 2014
Nonaccrual
Net Charge-offs (Recoveries)
Outstanding
Balances(a)
Balances
Percent of
Outstanding
Balances
Balances
Percent of Average
Outstanding
Balances
New York . . . . . . . . . . . . . . . . . . . . . . . . . $ 590,093
133,459
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . .
409,882
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . .
357,910
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,435
38,255
12,389
15,370
(Dollars in thousands)
1.43% $
28.66
3.02
4.29
140
(80)
(2,108)
(144)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,491,344
$74,449
4.99% $(2,192)
.03 %
(.06)
(.45)
(.05)
(.16)%
(a)
Includes approximately $26 million of loans not secured by real estate, of which approximately $2 million are in
nonaccrual status.
Net charge-offs of residential real estate loans totaled $13 million in each of 2014 and 2013 and $38
million in 2012. The lower net charge-offs of such loans in 2014 and 2013 as compared with 2012 reflect
lower Alt-A loan charge-offs and generally improved economic conditions and residential real estate
valuations. Residential real estate loans in nonaccrual status at December 31, 2014 totaled $258 million,
compared with $334 million and $345 million at December 31, 2013 and 2012, respectively. The decrease in
61
residential real estate loans classified as nonaccrual from December 31, 2013 to the 2014 year-end was
predominantly related to the payoff during the second quarter of 2014 of $64 million of loans to one
customer that were secured by residential real estate. Net charge-offs of Alt-A first mortgage loans were $4
million in 2014, $8 million in 2013 and $20 million in 2012. Nonaccrual Alt-A first mortgage loans
aggregated $78 million at December 31, 2014, compared with $81 million and $96 million at December 31,
2013 and 2012, respectively. Residential real estate loans past due 90 days or more and accruing interest
(excluding acquired loans) totaled $216 million, $295 million and $313 million at December 31, 2014, 2013
and 2012, respectively. A substantial portion of such amounts related to guaranteed loans repurchased from
government-related entities. Information about the location of nonaccrual and charged-off residential real
estate loans as of and for the year ended December 31, 2014 is presented in table 14.
Consumer loan net charge-offs during 2014 were $68 million, compared with $60 million in 2013
and $83 million in 2012. Included in net charge-offs of consumer loans were: automobile loans of $14
million in 2014, $11 million in 2013 and $14 million in 2012; recreational vehicle loans of $13 million, $15
million and $18 million during 2014, 2013 and 2012, respectively; and home equity loans and lines of credit
secured by one-to-four family residential properties of $19 million in 2014, $12 million in 2013 and $31
million in 2012. Reflected in net charge-offs of home equity loans and lines of credit in 2013 were $9 million
of recoveries of previously charged-off loans related to a portfolio of loans acquired in 2007. Nonaccrual
consumer loans totaled $125 million at each of December 31, 2014 and 2013, compared with $104 million at
December 31, 2012. Included in nonaccrual consumer loans at the 2014, 2013 and 2012 year-ends were:
automobile loans of $18 million, $21 million and $25 million, respectively; recreational vehicle loans of $11
million, $12 million and $10 million, respectively; and outstanding balances of home equity loans and lines
of credit, including junior lien Alt-A loans, of $89 million, $79 million and $58 million, respectively.
Information about the location of nonaccrual and charged-off home equity loans and lines of credit as of
and for the year ended December 31, 2014 is presented in table 14.
62
Table 14
SELECTED RESIDENTIAL REAL ESTATE-RELATED LOAN DATA
December 31, 2014
Nonaccrual
Outstanding
Balances
Balances
Percent of
Outstanding
Balances
Balances
(Dollars in thousands)
Residential mortgages
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,536,476
1,121,520
2,059,114
1,566,363
$ 66,365
20,286
35,210
56,632
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8,283,473
$178,493
Residential construction loans
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alt-A first mortgages
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
6,785
3,628
10,512
13,615
34,540
56,922
10,596
67,686
204,084
$
134
676
34
938
$
1,782
$ 17,502
2,908
11,296
45,998
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 339,288
$ 77,704
Alt-A junior lien
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First lien home equity loans
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other.
$
$
$
1,098
356
3,009
6,830
11,293
18,280
59,022
77,572
2,934
$
$
$
45
35
114
559
753
2,212
3,768
1,162
453
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 157,808
$
7,595
First lien home equity lines
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,372,566
843,980
869,926
38,947
$ 15,129
6,380
3,193
1,486
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,125,419
$ 26,188
Junior lien home equity loans
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
14,878
18,790
63,786
8,029
$
4,440
963
1,194
697
1.88%
1.81
1.71
3.62
2.15%
1.97%
18.64
.33
6.89
5.16%
30.75%
27.44
16.69
22.54
22.90%
4.10%
9.55
3.79
8.18
6.67%
12.10%
6.38
1.50
15.42
4.81%
1.10%
.76
.37
3.81
.84%
29.85%
5.13
1.87
8.68
$ 3,494
1,461
2,679
1,222
$ 8,856
$
$
$
(10)
236
—
(45)
181
871
30
1,045
1,789
$ 3,735
$
273
24
246
826
$ 1,369
$
$
131
301
284
110
826
$ 1,646
874
645
150
$ 3,315
$
512
(57)
378
944
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 105,483
$
7,294
6.92%
$ 1,777
Junior lien home equity lines
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 956,282
394,075
1,202,227
69,297
$ 31,185
4,785
9,762
1,729
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,621,881
$ 47,461
3.26%
1.21
.81
2.50
1.81%
$ 6,527
1,521
2,660
720
$11,428
Year Ended
December 31, 2014
Net Charge-offs
Percent of
Average
Outstanding
Balances
.10%
.13
.13
.08
.11%
(.14)%
10.31
—
(.28)
.54%
1.45%
.27
1.47
.82
1.04%
22.37%
5.95
7.54
10.96
11.03%
.61%
.43
.32
3.80
.45%
.12%
.10
.07
.44
.11%
2.92%
(.26)
.52
10.79
1.48%
.68%
.39
.22
1.04
.44%
63
Information about past due and nonaccrual loans as of December 31, 2014 is also included in note 4
of Notes to Financial Statements.
Real estate and other foreclosed assets totaled $64 million at December 31, 2014, compared with $67
million at December 31, 2013 and $104 million at December 31, 2012. The decline in real estate and other
foreclosed assets during 2013 reflects sales of such assets. Gains or losses resulting from sales of real estate
and other foreclosed assets were not material in 2014, 2013 or 2012. At December 31, 2014, the Company’s
holding of residential real estate-related properties comprised approximately 79% of foreclosed assets.
Management determined the allowance for credit losses by performing ongoing evaluations of the
loan and lease portfolio, including such factors as the differing economic risks associated with each loan
category, the financial condition of specific borrowers, the economic environment in which borrowers
operate, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any
guarantees or indemnifications. Management evaluated the impact of changes in interest rates and overall
economic conditions on the ability of borrowers to meet repayment obligations when quantifying the
Company’s exposure to credit losses and the allowance for such losses as of each reporting date. Factors also
considered by management when performing its assessment, in addition to general economic conditions
and the other factors described above, included, but were not limited to: (i) the impact of residential real
estate values on the Company’s portfolio of loans to residential real estate builders and developers and other
loans secured by residential real estate; (ii) the concentrations of commercial real estate loans in the
Company’s loan portfolio; (iii) the amount of commercial and industrial loans to businesses in areas of New
York State outside of the New York City metropolitan area and in central Pennsylvania that have historically
experienced less economic growth and vitality than the vast majority of other regions of the country; (iv) the
repayment performance associated with the Company’s first and second lien loans secured by residential
real estate; and (v) the size of the Company’s portfolio of loans to individual consumers, which historically
have experienced higher net charge-offs as a percentage of loans outstanding than other loan types. The level
of the allowance is adjusted based on the results of management’s analysis.
Management cautiously and conservatively evaluated the allowance for credit losses as of
December 31, 2014 in light of: (i) residential real estate values and the level of delinquencies of loans secured
by residential real estate; (ii) economic conditions in the markets served by the Company; (iii) continuing
weakness in industrial employment in upstate New York and central Pennsylvania; (iv) the significant
subjectivity involved in commercial real estate valuations; and (v) the amount of loan growth experienced
by the Company. While there has been general improvement in economic conditions, concerns continue to
exist about the strength and sustainability of such improvements; the troubled state of financial and credit
markets, including the impact international economic conditions could have on the U.S. economy; Federal
Reserve positioning of monetary policy; low levels of workforce participation; and continued stagnant
population growth in the upstate New York and central Pennsylvania regions (approximately 60% of the
Company’s loans are to customers in New York State and Pennsylvania).
The Company utilizes a loan grading system which is applied to all commercial and commercial real
estate loans. Loan grades are utilized to differentiate risk within the portfolio and consider the expectations
of default for each loan. Commercial loans and commercial real estate loans with a lower expectation of
default are assigned one of ten possible “pass” loan grades and are generally ascribed lower loss factors when
determining the allowance for credit losses. Loans with an elevated level of credit risk are classified as
“criticized” and are ascribed a higher loss factor when determining the allowance for credit losses. Criticized
loans may be classified as “nonaccrual” if the Company no longer expects to collect all amounts according to
the contractual terms of the loan agreement or the loan is delinquent 90 days or more. Criticized
commercial loans and commercial real estate loans were $1.8 billion at each of December 31, 2014 and 2013.
Loan officers with the support of loan review personnel in different geographic locations are responsible to
continuously review and reassign loan grades to pass and criticized loans based on their detailed knowledge
of individual borrowers and their judgment of the impact on such borrowers resulting from changing
conditions in their respective geographic regions. On a quarterly basis, the Company’s centralized loan
review department reviews all criticized commercial and commercial real estate loans greater than $1 million
to determine the appropriateness of the assigned loan grade, including whether the loan should be reported
as accruing or nonaccruing. For criticized nonaccrual loans, additional meetings are held with loan officers
and their managers, workout specialists and senior management to discuss each of the relationships. In
analyzing criticized loans, borrower-specific information is reviewed, including operating results, future
cash flows, recent developments and the borrower’s outlook, and other pertinent data. The timing and
extent of potential losses, considering collateral valuation and other factors, and the Company’s potential
64
courses of action are reviewed. To the extent that these loans are collateral-dependent, they are evaluated
based on the fair value of the loan’s collateral as estimated at or near the financial statement date. As the
quality of a loan deteriorates to the point of classifying the loan as “criticized,” the process of obtaining
updated collateral valuation information is usually initiated, unless it is not considered warranted given
factors such as the relative size of the loan, the characteristics of the collateral or the age of the last valuation.
In those cases where current appraisals may not yet be available, prior appraisals are utilized with
adjustments, as deemed necessary, for estimates of subsequent declines in value as determined by line of
business and/or loan workout personnel in the respective geographic regions. Those adjustments are
reviewed and assessed for reasonableness by the Company’s loan review department. Accordingly, for real
estate collateral securing larger commercial and commercial real estate loans, estimated collateral values are
based on current appraisals and estimates of value. For non-real estate loans, collateral is assigned a
discounted estimated liquidation value and, depending on the nature of the collateral, is verified through
field exams or other procedures. In assessing collateral, real estate and non-real estate values are reduced by
an estimate of selling costs. With regard to residential real estate loans, the Company’s loss identification
and estimation techniques make reference to loan performance and house price data in specific areas of the
country where collateral that was securing the Company’s residential real estate loans was located. For
residential real estate-related loans, including home equity loans and lines of credit, the excess of the loan
balance over the net realizable value of the property collateralizing the loan is charged-off when the loan
becomes 150 days delinquent. That charge-off is based on recent indications of value from external parties
that are generally obtained shortly after a loan becomes nonaccrual. At December 31, 2014, approximately
55% of the Company’s home equity portfolio consisted of first lien loans and lines of credit. Of the
remaining junior lien loans in the portfolio, approximately 73% (or approximately 32% of the aggregate
home equity portfolio) consisted of junior lien loans that were behind a first lien mortgage loan that was not
owned or serviced by the Company. To the extent known by the Company, if a senior lien loan would be on
nonaccrual status because of payment delinquency, even if such senior lien loan was not owned by the
Company, the junior lien loan or line that is owned by the Company is placed on nonaccrual status. At
December 31, 2014, the balance of junior lien loans and lines that were in nonaccrual status solely as a result
of first lien loan performance was $24 million, compared with $30 million at December 31, 2013. In
monitoring the credit quality of its home equity portfolio for purposes of determining the allowance for
credit losses, the Company reviews delinquency and nonaccrual information and considers recent charge-off
experience. Additionally, the Company generally evaluates home equity loans and lines of credit that are
more than 150 days past due for collectibility on a loan-by-loan basis and the excess of the loan balance over
the net realizable value of the property collateralizing the loan is charged-off at that time. In determining the
amount of such charge-offs, if the Company does not know the amount of the remaining first lien mortgage
loan (typically because the Company does not own or service the first lien loan), the Company assumes that
the first lien mortgage loan has had no principal amortization since the origination of the junior lien loan.
Similarly, data used in estimating incurred losses for purposes of determining the allowance for credit losses
also assumes no reductions in outstanding principal of first lien loans since the origination of the junior lien
loan. Home equity line of credit terms vary but such lines are generally originated with an open draw period
of ten years followed by an amortization period of up to twenty years. At December 31, 2014, approximately
92% of all outstanding balances of home equity lines of credit related to lines that were still in the draw
period, the weighted-average remaining draw periods were approximately five years, and approximately
17% were making contractually allowed payments that do not include any repayment of principal.
Factors that influence the Company’s credit loss experience include overall economic conditions
affecting businesses and consumers, generally, but also residential and commercial real estate valuations, in
particular, given the size of the Company’s real estate loan portfolios. Commercial real estate valuations can
be highly subjective, as they are based upon many assumptions. Such valuations can be significantly affected
over relatively short periods of time by changes in business climate, economic conditions, interest rates, and,
in many cases, the results of operations of businesses and other occupants of the real property. Similarly,
residential real estate valuations can be impacted by housing trends, the availability of financing at
reasonable interest rates, and general economic conditions affecting consumers.
In determining the allowance for credit losses, the Company estimates losses attributable to specific
troubled credits identified through both normal and detailed or intensified credit review processes and also
estimates losses inherent in other loans and leases. In quantifying incurred losses, the Company considers
the factors and uses the techniques described herein and in note 5 of Notes to Financial Statements. For
purposes of determining the level of the allowance for credit losses, the Company segments its loan and lease
65
portfolio by loan type. The amount of specific loss components in the Company’s loan and lease portfolios is
determined through a loan-by-loan analysis of commercial loans and commercial real estate loans in
nonaccrual status. Measurement of the specific loss components is typically based on expected future cash
flows, collateral values or other factors that may impact the borrower’s ability to pay. Losses associated with
residential real estate loans and consumer loans are generally determined by reference to recent charge-off
history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors
including near-term forecasted loss estimates developed by the Company’s credit department. These forecasts
give consideration to overall borrower repayment performance and current geographic region changes in
collateral values using third party published historical price indices or automated valuation methodologies.
With regard to collateral values, the realizability of such values by the Company contemplates repayment of
any first lien position prior to recovering amounts on a junior lien position. Approximately 45% of the
Company’s home equity portfolio consists of junior lien loans and lines of credit. Except for consumer loans
and residential real estate loans that are considered smaller balance homogeneous loans and are evaluated
collectively and loans obtained in acquisition transactions, the Company considers a loan to be impaired when,
based on current information and events, it is probable that the Company will be unable to collect all amounts
according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more and has
been placed in nonaccrual status. Those impaired loans are evaluated for specific loss components. Modified
loans, including smaller balance homogenous loans, that are considered to be troubled debt restructurings are
evaluated for impairment giving consideration to the impact of the modified loan terms on the present value of
the loan’s expected cash flows. Loans less than 90 days delinquent are deemed to have a minimal delay in
payment and are generally not considered to be impaired. Loans acquired in connection with acquisition
transactions subsequent to 2008 were recorded at fair value with no carry-over of any previously recorded
allowance for credit losses. Determining the fair value of the acquired loans required estimating cash flows
expected to be collected on the loans and discounting those cash flows at then-current interest rates. The
impact of estimated future credit losses represents the predominant difference between contractually required
payments at acquisition and the cash flows expected to be collected at acquisition. Subsequent decreases to
those expected cash flows require the Company to evaluate the need for an additional allowance for credit
losses and could lead to charge-offs of acquired loan balances.
The inherent base level loss components of the Company’s allowance for credit losses are generally
determined by applying loss factors to specific loan balances based on loan type and management’s
classification of such loans under the Company’s loan grading system. The Company utilizes a loan grading
system which is applied to all commercial loans and commercial real estate loans. As previously described,
loan officers are responsible for continually assigning grades to these loans based on standards outlined in
the Company’s Credit Policy. Internal loan grades are also extensively monitored by the Company’s loan
review department to ensure consistency and strict adherence to the prescribed standards. Loan balances
utilized in the inherent base level loss component computations exclude loans and leases for which specific
allocations are maintained. Loan grades are assigned loss component factors that reflect the Company’s loss
estimate for each group of loans and leases. Factors considered in assigning loan grades and loss component
factors include borrower-specific information related to expected future cash flows and operating results,
collateral values, financial condition, payment status, and other information; levels of and trends in
portfolio charge-offs and recoveries; levels of and trends in portfolio delinquencies and impaired loans;
changes in the risk profile of specific portfolios; trends in volume and terms of loans; effects of changes in
credit concentrations; and observed trends and practices in the banking industry. In determining the
allowance for credit losses, management also gives consideration to such factors as customer, industry and
geographic concentrations, as well as national and local economic conditions, including: (i) the
comparatively poorer economic conditions and unfavorable business climate in many market regions served
by the Company, including upstate New York and central Pennsylvania, that result in such regions generally
experiencing significantly poorer economic growth and vitality as compared with much of the rest of the
country; (ii) portfolio concentrations regarding loan type, collateral type and geographic location, in
particular the large concentrations of commercial real estate loans secured by properties in the New York
City metropolitan area and other areas of New York State; and (iii) risk associated with the Company’s
portfolio of consumer loans, in particular automobile loans and leases, which generally have higher rates of
loss than other types of collateralized loans.
The inherent base level loss components related to residential real estate loans and consumer loans
are generally determined by applying loss factors to portfolio balances after consideration of payment
performance and recent loss experience and trends, which are mainly driven by current collateral values in
66
the market place as well as the amount of loan defaults. Loss rates for loans secured by residential real estate,
including home equity loans and lines of credit, are determined by reference to recent charge-off history and
are evaluated (and adjusted if deemed appropriate) through consideration of other factors as previously
described.
In evaluating collateral, the Company relies on internally and externally prepared valuations.
Residential real estate valuations are usually based on sales of comparable properties in the respective
location. Commercial real estate valuations also refer to sales of comparable properties but oftentimes are
based on calculations that utilize many assumptions and, as a result, can be highly subjective. Specifically,
commercial real estate values can be significantly affected over relatively short periods of time by changes in
business climate, economic conditions and interest rates, and, in many cases, the results of operations of
businesses and other occupants of the real property. Additionally, management is aware that there is
oftentimes a delay in the recognition of credit quality changes in loans and, as a result, in changes to
assigned loan grades due to time delays in the manifestation and reporting of underlying events that impact
credit quality. Accordingly, loss estimates derived from the inherent base level loss component computation
are adjusted for current national and local economic conditions and trends. The Federal Reserve stated in
January 2015 that economic activity is expanding at a “solid pace” with strong job gains and a lower
unemployment rate. Economic indicators in the most significant market regions served by the Company
continued to improve in 2014. For example, during 2014, private sector employment in most market areas
served by the Company rose by 1.1%, but trailed the 2.2% U.S. average. Private sector employment in 2014
increased 0.6% in upstate New York, 0.7% in areas of Pennsylvania served by the Company, 0.8% in
Maryland, 0.6% in Greater Washington D.C. and 2.7% in the State of Delaware. In New York City, private
sector employment increased by 2.6% in 2014, however, unemployment rates there remain elevated and are
expected to continue at above historical levels during 2015. The Federal Reserve continues to monitor
inflation developments closely, and has hinted at wariness regarding slow global growth, a strong U.S. dollar
and international market turbulence.
The specific loss components and the inherent base level loss components together comprise the total
base level or “allocated” allowance for credit losses. Such allocated portion of the allowance represents
management’s assessment of losses existing in specific larger balance loans that are reviewed in detail by
management and pools of other loans that are not individually analyzed. In addition, the Company has
always provided an inherent unallocated portion of the allowance that is intended to recognize probable
losses that are not otherwise identifiable. The inherent unallocated allowance includes management’s
subjective determination of amounts necessary for such things as the possible use of imprecise estimates in
determining the allocated portion of the allowance and other risks associated with the Company’s loan
portfolio which may not be specifically allocable.
A comparative allocation of the allowance for credit losses for each of the past five year-ends is
presented in table 15. Amounts were allocated to specific loan categories based on information available to
management at the time of each year-end assessment and using the methodology described herein.
Variations in the allocation of the allowance by loan category as a percentage of those loans reflect changes
in management’s estimate of specific loss components and inherent base level loss components, including
the impact of delinquencies and nonaccrual loans. As described in note 5 of Notes to Financial Statements,
loans considered impaired were $762 million and $889 million at December 31, 2014 and December 31,
2013, respectively. The allocated portion of the allowance for credit losses related to impaired loans totaled
$83 million at December 31, 2014 and $93 million at December 31, 2013. The unallocated portion of the
allowance for credit losses was equal to .11% and .12% of gross loans outstanding at December 31, 2014 and
2013, respectively. Considering the inherent imprecision in the many estimates used in the determination of
the allocated portion of the allowance, management deliberately remained cautious and conservative in
establishing the overall allowance for credit losses. Given the Company’s high concentration of real estate
loans and considering the other factors already discussed herein, management considers the allocated and
unallocated portions of the allowance for credit losses to be prudent and reasonable. Furthermore, the
Company’s allowance is general in nature and is available to absorb losses from any loan or lease category.
Additional information about the allowance for credit losses is included in note 5 of Notes to Financial
Statements.
67
Table 15
ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES TO LOAN CATEGORIES
December 31
2014
2013
2012
2011
2010
Commercial, financial, leasing, etc.
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . $288,038
369,837
186,033
75,654
(Dollars in thousands)
$246,759
425,908
179,418
73,775
$234,022
459,552
143,121
71,595
$273,383
403,634
164,644
75,015
$212,579
486,913
133,067
70,382
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $919,562
$916,676
$925,860
$908,290
$902,941
As a Percentage of Gross Loans
and Leases Outstanding
Commercial, financial, leasing, etc.
. . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.47%
1.02
1.70
1.45%
1.15
1.60
1.37%
1.14
1.55
1.47%
1.42
1.19
1.56%
1.79
1.16
Management believes that the allowance for credit losses at December 31, 2014 appropriately
reflected credit losses inherent in the portfolio as of that date. The allowance for credit losses was $920
million or 1.38% of total loans and leases at December 31, 2014, compared with $917 million or 1.43% at
December 31, 2013 and $926 million or 1.39% at December 31, 2012. The ratio of the allowance to total
loans and leases at each respective year-end reflects the impact of loans obtained in acquisition transactions
subsequent to 2008 that have been recorded at estimated fair value based on estimated future cash flows
expected to be received on those loans. Those cash flows reflect the impact of expected defaults on customer
repayment performance. As noted earlier, GAAP prohibits any carry-over of an allowance for credit losses
for acquired loans recorded at fair value. The decline in the ratio of the allowance to total loans and leases
from December 31, 2013 to the 2014 year-end reflects the impact of improvement in the levels of criticized
and nonaccrual loans, net charge-offs and overall repayment performance by customers. During 2013, the
allowance for credit losses was reduced by $11 million as a result of the $1.4 billion automobile loan
securitization previously noted. The increase in the ratio of the allowance to total loans and leases from the
2012 year-end to December 31, 2013 was largely due to the automobile loan securitization and the
securitization of $1.3 billion of FHA guaranteed residential real estate loans. The level of the allowance
reflects management’s evaluation of the loan and lease portfolio using the methodology and considering the
factors as described herein. Should the various credit factors considered by management in establishing the
allowance for credit losses change and should management’s assessment of losses inherent in the loan
portfolios also change, the level of the allowance as a percentage of loans could increase or decrease in future
periods. The ratio of the allowance to nonaccrual loans at the end of 2014, 2013 and 2012 was 115%, 105%
and 91%, respectively. Given the Company’s position as a secured lender and its practice of charging-off
loan balances when collection is deemed doubtful, that ratio and changes in that ratio are generally not an
indicative measure of the adequacy of the Company’s allowance for credit losses, nor does management rely
upon that ratio in assessing the adequacy of the allowance. The level of the allowance reflects management’s
evaluation of the loan and lease portfolio as of each respective date.
In establishing the allowance for credit losses, management follows the methodology described
herein, including taking a conservative view of borrowers’ abilities to repay loans. The establishment of the
allowance is extremely subjective and requires management to make many judgments about borrower,
industry, regional and national economic health and performance. In order to present examples of the
possible impact on the allowance from certain changes in credit quality factors, the Company assumed the
following scenarios for possible deterioration of credit quality:
Š For consumer loans and leases considered smaller balance homogenous loans and evaluated
collectively, a 50 basis point increase in loss factors;
Š For residential real estate loans and home equity loans and lines of credit, also considered smaller
balance homogenous loans and evaluated collectively, a 25% increase in estimated inherent losses;
and
Š For commercial loans and commercial real estate loans, a migration of loans to lower-ranked risk
grades resulting in a 25% increase in the balance of classified credits in each risk grade.
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For possible improvement in credit quality factors, the scenarios assumed were:
Š For consumer loans and leases, a 20 basis point decrease in loss factors;
Š For residential real estate loans and home equity loans and lines of credit, a 10% decrease in
estimated inherent losses; and
Š For commercial loans and commercial real estate loans, a migration of loans to higher-ranked risk
grades resulting in a 5% decrease in the balance of classified credits in each risk grade.
The scenario analyses resulted in an additional $72 million that could be identifiable under the
assumptions for credit deterioration, whereas under the assumptions for credit improvement a $24 million
reduction could occur. These examples are only a few of numerous reasonably possible scenarios that could
be utilized in assessing the sensitivity of the allowance for credit losses based on changes in assumptions and
other factors.
The Company had no concentrations of credit extended to any specific industry that exceeded 10%
of total loans at December 31, 2014. Outstanding loans to foreign borrowers were $213 million at
December 31, 2014, or .3% of total loans and leases.
Other Income
Other income totaled $1.78 billion and $1.87 billion in 2014 and 2013, respectively. Reflected in such
income in 2013 were net gains on investment securities (including other-than-temporary impairment
losses) of $47 million. There were no gains or losses on investment securities in 2014. Also reflected in
noninterest income in 2013 were gains from securitization activities of $63 million. Excluding the specific
items mentioned above, noninterest income in 2014 was up $24 million from $1.76 billion in 2013. Higher
residential mortgage banking revenues and trust income in 2014 were partially offset by lower service
charges on deposit accounts and trading account and foreign exchange gains.
Other income in 2013 was 12% higher than the $1.67 billion earned in 2012. As noted above,
reflected in other income in 2013 were net gains on bank investment securities of $47 million, compared
with net losses of $48 million in 2012. Excluding the impact of securities gains and losses from both years
and the $63 million of gains from securitization activities in 2013, other income in 2013 was up $40 million
from $1.72 billion in 2012. Higher levels of trust, brokerage services and credit card interchange income in
2013 were partially offset by lower mortgage banking revenues.
Mortgage banking revenues totaled $363 million in 2014, $331 million in 2013 and $349 million in
2012. Mortgage banking revenues are comprised of both residential and commercial mortgage banking
activities. The Company’s involvement in commercial mortgage banking activities includes the origination,
sales and servicing of loans under the multifamily loan programs of Fannie Mae, Freddie Mac and the U.S.
Department of Housing and Urban Development.
Residential mortgage banking revenues, consisting of realized gains from sales of residential real
estate loans and loan servicing rights, unrealized gains and losses on residential real estate loans held for sale
and related commitments, residential real estate loan servicing fees, and other residential real estate loan-
related fees and income, were $287 million in 2014, $251 million in 2013 and $264 million in 2012. The
increase in residential mortgage banking revenues from 2013 to 2014 reflected a significant increase in
revenues from servicing residential real estate loans for others, partially offset by lower gains from
origination activities due to decreased volumes of loans originated for sale. The decline in revenue from
2012 to 2013 was due to narrower margins on loans originated for sale.
New commitments to originate residential real estate loans to be sold totaled approximately $3.2
billion in 2014, compared with $5.6 billion in 2013 and $5.1 billion in 2012. Included in those commitments
to originate residential real estate loans to be sold were commitments of approximately $337 million in
2014, $1.1 billion in 2013 and $1.8 billion in 2012 related to the U.S. government’s Home Affordable
Refinance Program (“HARP 2.0”), which began in December 2011 and allows homeowners to refinance
their Fannie Mae or Freddie Mac mortgages when the value of their home has fallen such that they have
little or no equity. The HARP 2.0 program was set to expire December 31, 2013, but was extended and will
now be available to borrowers through December 31, 2015. Nevertheless, volumes associated with that
program have declined since mid-2013. Realized gains from sales of residential real estate loans and loan
servicing rights (net of the impact of costs associated with obligations to repurchase real estate loans
originated for sale) and recognized net unrealized gains or losses attributable to residential real estate loans
held for sale, commitments to originate loans for sale and commitments to sell loans totaled to a gain of $75
million in 2014, compared with gains of $123 million in 2013 and $157 million in 2012.
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The Company is contractually obligated to repurchase previously sold loans that do not ultimately
meet investor sale criteria related to underwriting procedures or loan documentation. When required to do
so, the Company may reimburse loan purchasers for losses incurred or may repurchase certain loans. The
Company reduces residential mortgage banking revenues for losses related to its obligations to loan
purchasers. The amount of those charges varies based on the volume of loans sold, the level of
reimbursement requests received from loan purchasers and estimates of losses that may be associated with
previously sold loans. Residential mortgage banking revenues during 2014, 2013 and 2012 were reduced by
approximately $4 million, $17 million and $28 million, respectively, related to the actual or anticipated
settlement of repurchase obligations.
Loans held for sale that are secured by residential real estate totaled $435 million and $401 million at
December 31, 2014 and 2013, respectively. Commitments to sell residential real estate loans and
commitments to originate residential real estate loans for sale at pre-determined rates were $717 million and
$432 million, respectively, at December 31, 2014, $725 million and $470 million, respectively, at
December 31, 2013 and $2.3 billion and $1.6 billion, respectively, at December 31, 2012. Net recognized
unrealized gains on residential real estate loans held for sale, commitments to sell loans and commitments to
originate loans for sale were $19 million and $20 million at December 31, 2014 and 2013, respectively, and
$83 million at December 31, 2012. Changes in such net unrealized gains and losses are recorded in mortgage
banking revenues and resulted in net decreases in revenue of $1 million and $63 million in 2014 and 2013,
respectively, and a net increase in revenue of $77 million in 2012.
Revenues from servicing residential real estate loans for others rose to $212 million in 2014, up from
$128 million in 2013 and $107 million in 2012. Residential real estate loans serviced for others totaled $67.2
billion at December 31, 2014, $72.4 billion a year earlier and $35.9 billion at December 31, 2012 and
included certain small-balance commercial real estate loans. Reflected in residential real estate loans serviced
for others were loans sub-serviced for others of $42.1 billion, $46.6 billion and $12.5 billion at December 31,
2014, 2013 and 2012, respectively. Revenues earned for sub-servicing loans were $116 million in 2014, $35
million in 2013 and $12 million in 2012. The contractual servicing rights associated with loans sub-serviced
by the Company were predominantly held by affiliates of Bayview Lending Group LLC (“BLG”). During the
third quarter of 2013, the Company added approximately $38 billion of residential real estate loans to its
portfolio of loans sub-serviced for affiliates of BLG. Capitalized residential mortgage servicing assets, net of
any applicable valuation allowance for possible impairment, totaled $111 million at December 31, 2014,
compared with $129 million and $108 million at December 31, 2013 and 2012, respectively. Included in
capitalized residential mortgage servicing assets noted above were purchased servicing rights associated with
the small-balance commercial real estate loans. Additional information about the Company’s capitalized
residential mortgage servicing assets, including information about the calculation of estimated fair value, is
presented in note 7 of Notes to Financial Statements.
Commercial mortgage banking revenues were $76 million in 2014, $80 million in 2013 and $85
million in 2012. Included in such amounts were revenues from loan origination and sales activities of $41
million in 2014, $48 million in 2013 and $59 million in 2012. Commercial real estate loans originated for
sale to other investors totaled approximately $1.5 billion in 2014, compared with $1.9 billion in 2013 and
$2.5 billion in 2012. Loan servicing revenues totaled $35 million in 2014, $32 million in 2013 and $26
million in 2012. Capitalized commercial mortgage servicing assets aggregated $73 million at December 31,
2014, $72 million at December 31, 2013 and $60 million at December 31, 2012. Commercial real estate loans
serviced for other investors totaled $11.3 billion at December 31, 2014, $11.4 billion at December 31, 2013
and $10.6 billion at December 31, 2012, and included $2.4 billion, $2.3 billion and $2.0 billion, respectively,
of loan balances for which investors had recourse to the Company if such balances are ultimately
uncollectible. Commitments to sell commercial real estate loans and commitments to originate commercial
real estate loans for sale were $520 million and $212 million, respectively, at December 31, 2014, $130
million and $62 million, respectively, at December 31, 2013 and $340 million and $140 million, respectively,
at December 31, 2012. Commercial real estate loans held for sale totaled $308 million, $68 million and $200
million at December 31, 2014, 2013 and 2012, respectively.
Service charges on deposit accounts were $428 million in 2014, compared with $447 million in each
of 2013 and 2012. The decline from 2013 to 2014 resulted from lower consumer service charges, largely
overdraft fees and ATM interchange fees.
Trust income includes fees related to two significant businesses. The Institutional Client Services
(“ICS”) business provides a variety of trustee, agency, investment management and administrative services
for corporations and institutions, investment bankers, corporate tax, finance and legal executives, and other
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institutional clients who: (i) use capital markets financing structures; (ii) use independent trustees to hold
retirement plan and other assets; and (iii) need investment and cash management services. The Wealth
Advisory Services (“WAS”) business helps high net worth clients grow their wealth, protect it, and transfer it
to their heirs. A comprehensive array of wealth management services are offered, including asset
management, fiduciary services and family office services. Trust income increased to $508 million in 2014
from $496 million in 2013 and $472 million in 2012. Revenues attributable to the ICS business were
approximately $244 million in 2014 and $234 million in 2013. Revenues attributable to WAS were
approximately $224 million and $214 million in 2014 and 2013, respectively. Prior to 2013, certain other
trust operations of the Company were not combined with the respective ICS and WAS activities. Revenues
associated with the ICS and WAS businesses in 2012 were $193 million and $153 million, respectively. Total
trust assets, which include assets under management and assets under administration, aggregated $287.9
billion at December 31, 2014, compared with $266.1 billion at December 31, 2013. Trust assets under
management were $68.2 billion and $65.1 billion at December 31, 2014 and 2013, respectively. The
Company’s proprietary mutual funds had assets of $13.3 billion and $12.7 billion at December 31, 2014 and
2013, respectively. The Company has agreed to sell in 2015 the trade processing business of a subsidiary of
Wilmington Trust, N.A. Revenues related to that business reflected in trust income (in the ICS business)
during 2014, 2013 and 2012 were approximately $40 million, $45 million and $52 million, respectively. After
considering related expenses, including the portion of those revenues paid to sub-advisors, net income
attributable to the business being sold during those years was not material to the consolidated results of
operations of the Company. The Company expects to realize a gain from the sale.
Brokerage services income, which includes revenues from the sale of mutual funds and annuities and
securities brokerage fees, totaled $67 million in 2014, $66 million in 2013 and $59 million in 2012. The
increase over the past two years reflects higher sales of annuity products. Trading account and foreign
exchange activity resulted in gains of $30 million in 2014, $41 million in 2013 and $36 million in 2012. The
variation in such gains from 2012 through 2014 largely reflects changes in the interest rate swap transactions
executed on behalf of commercial customers. The decline in those gains in 2014 was also due to decreased
market values of trading account assets held in connection with deferred compensation arrangements. The
Company enters into interest rate and foreign exchange contracts with customers who need such services
and concomitantly enters into offsetting trading positions with third parties to minimize the risks involved
with these types of transactions. Information about the notional amount of interest rate, foreign exchange
and other contracts entered into by the Company for trading account purposes is included in note 18 of
Notes to Financial Statements and herein under the heading “Liquidity, Market Risk, and Interest Rate
Sensitivity.”
Including other-than-temporary impairment losses, the Company recognized net gains on
investment securities of $47 million during 2013, compared with net losses of $48 million in 2012. There
were no gains or losses on investment securities in 2014. During 2013, the Company sold its holdings of Visa
Class B shares for a gain of approximately $90 million and its holdings of MasterCard Class B shares for a
gain of $13 million. The shares of Visa and MasterCard were sold as a result of favorable market conditions
and to enhance the Company’s capital and liquidity. In addition, the Company sold substantially all of its
privately issued mortgage-backed securities held in the available-for-sale investment securities portfolio. In
total, $1.0 billion of such securities were sold for a net loss of approximately $46 million. The mortgage-
backed securities were sold to reduce the Company’s exposure to such relatively higher risk securities in
favor of lower risk Ginnie Mae securities in response to changing regulatory capital and liquidity standards.
Realized gains and losses from sales of investment securities were not significant in 2012. Other-than-
temporary impairment losses of $10 million and $48 million were recorded in 2013 and 2012, respectively.
Those losses related to a subset of the privately issued mortgage-backed securities that were sold in 2013.
There were no other-than-temporary impairment losses in 2014. Each reporting period the Company
reviews its investment securities for other-than-temporary impairment. For equity securities, the Company
considers various factors to determine if the decline in value is other than temporary, including the duration
and extent of the decline in value, the factors contributing to the decline in fair value, including the financial
condition of the issuer as well as the conditions of the industry in which it operates, and the prospects for a
recovery in fair value of the equity security. For debt securities, the Company analyzes the creditworthiness
of the issuer or reviews the credit performance of the underlying collateral supporting the bond. For debt
securities backed by pools of loans, such as privately issued mortgage-backed securities, the Company
estimates the cash flows of the underlying loan collateral using forward-looking assumptions for default
rates, loss severities and prepayment speeds. Estimated collateral cash flows are then utilized to estimate
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bond-specific cash flows to determine the ultimate collectibility of the bond. If the present value of the cash
flows indicates that the Company should not expect to recover the entire amortized cost basis of a bond or if
the Company intends to sell the bond or it more likely than not will be required to sell the bond before
recovery of its amortized cost basis, an other-than-temporary impairment loss is recognized. If an other-
than-temporary impairment loss is deemed to have occurred, the investment security’s cost basis is adjusted,
as appropriate for the circumstances. Additional information about other-than-temporary impairment
losses is included herein under the heading “Capital.”
M&T’s share of the operating losses of BLG was $17 million in 2014, compared with $16 million and
$22 million in 2013 and 2012, respectively. The operating losses of BLG in the respective years reflect
provisions for losses associated with securitized loans and other loans held by BLG and loan servicing and
other administrative costs. Under GAAP, such losses are required to be recognized by BLG despite the fact that
many of the securitized loan losses will ultimately be borne by the underlying third party bond holders. As
these loan losses are realized through later foreclosure and still later sale of real estate collateral, the underlying
bonds will be charged-down leading to BLG’s future recognition of debt extinguishment gains. The timing of
such debt extinguishment is difficult to predict and given ongoing loan loss provisioning, it is not possible to
project when BLG will return to profitability. As a result of credit and liquidity disruptions, BLG ceased its
originations of small-balance commercial real estate loans in 2008. However, as a result of past securitization
activities, BLG is entitled to cash flows from mortgage assets that it owns or that are owned by its affiliates and
is also entitled to receive distributions from affiliates that provide asset management and other services.
Accordingly, the Company believes that BLG is capable of realizing positive cash flows that could be available
for distribution to its owners, including M&T, despite a lack of positive GAAP-earnings from its core mortgage
activities. To this point, BLG’s affiliates have largely reinvested their earnings to generate additional servicing
and asset management activities, further contributing to the value of those affiliates. Information about the
Company’s relationship with BLG and its affiliates is included in note 24 of Notes to Financial Statements.
Other revenues from operations totaled $400 million in 2014, compared with $454 million in 2013
and $374 million in 2012. Reflected in such revenues in 2013 were gains from securitization transactions of
$63 million. During 2013, the Company securitized approximately $1.3 billion of one-to-four family
residential real estate loans held in the Company’s loan portfolio in guaranteed mortgage securitizations
with Ginnie Mae and recognized gains of $42 million. In addition, during the third quarter of 2013 the
Company securitized and sold approximately $1.4 billion of automobile loans held in its loan portfolio,
resulting in a gain of $21 million. The Company securitized those loans to improve its regulatory capital
ratios and strengthen its liquidity and risk profile as a result of changing regulatory requirements. Loan
servicing fees associated with the mortgage loan securitizations are included in mortgage banking revenues,
but servicing fees associated with the automobile loan securitization are included in other revenues from
operations. Reflecting a full year of activity in 2014, those latter fees increased $7 million from 2013.
Included in other revenues from operations were the following significant components. Letter of credit
and other credit-related fees were $129 million, $132 million and $127 million in 2014, 2013 and 2012,
respectively. Tax-exempt income earned from bank owned life insurance totaled $50 million in 2014,
compared with $56 million in 2013 and $51 million in 2012. Such income includes increases in cash surrender
value of life insurance policies and benefits received. Revenues from merchant discount and credit card fees
were $96 million in 2014, $84 million in 2013 and $77 million in 2012. The continued trend of higher revenues
in 2014 and 2013 was largely attributable to increased transaction volumes related to merchant activity and
usage of the Company’s credit card products. Insurance-related sales commissions and other revenues totaled
$42 million in each of 2014 and 2013, compared with $44 million in 2012. Automated teller machine usage fees
aggregated $15 million, $17 million and $19 million in 2014, 2013 and 2012, respectively.
Other Expense
Other expense totaled $2.74 billion in 2014, compared with $2.64 billion in 2013 and $2.51 billion in 2012.
Included in such amounts are expenses considered to be “nonoperating” in nature consisting of
amortization of core deposit and other intangible assets of $34 million, $47 million and $61 million in 2014,
2013 and 2012, respectively, and merger-related expenses of $12 million in 2013 and $10 million in 2012.
Exclusive of those nonoperating expenses, noninterest operating expenses aggregated $2.71 billion in 2014,
$2.58 billion in 2013 and $2.44 billion in 2012. The increase in such expenses in 2014 as compared with 2013
was largely attributable to higher costs for professional services and salaries associated with BSA/AML
activities, compliance, capital planning and stress-testing, and risk management initiatives, partially offset by
lower FDIC assessments. The rise in noninterest operating expenses in 2013 as compared with 2012 was also
largely attributable to higher costs for professional services and salaries, partially offset by lower FDIC
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assessments and the reversal in 2013 of a $26 million accrual for a contingent compensation obligation
assumed in the May 2011 acquisition of Wilmington Trust that expired. In addition, the Company reached a
legal settlement of a lawsuit related to issues that were alleged to occur at Wilmington Trust prior to its
acquisition by M&T that led to a $40 million litigation-related accrual as of December 31, 2013.
Salaries and employee benefits expense in 2014 aggregated $1.40 billion, compared with $1.36 billion
and $1.31 billion in 2013 and 2012, respectively. The increase in such expenses in 2014 as compared with
2013 was primarily due to costs involving the Company’s initiatives related to BSA/AML activities,
compliance, capital planning and stress testing, and risk management. The rise in salaries and employee
benefits expense in 2013 from 2012 was predominantly due to higher salaries expenses that reflected an
increase in the Company’s loan servicing capacity to accommodate sub-servicing arrangements entered into
during 2013 and costs related to the operational initiatives noted above. The higher expenses in 2014 and
2013 were partially offset by lower pension-related costs. Stock-based compensation totaled $65 million in
2014, $55 million in 2013 and $57 million in 2012. The number of full-time equivalent employees was
15,312 at December 31, 2014, compared with 15,368 and 14,404 at December 31, 2013 and 2012,
respectively.
The Company provides pension and other postretirement benefits (including a retirement savings
plan) for its employees. Expenses related to such benefits totaled $63 million in 2014, $87 million in 2013
and $105 million in 2012. The Company sponsors both defined benefit and defined contribution pension
plans. Pension benefit expense for those plans was $28 million in 2014, $53 million in 2013 and $69 million
in 2012. Included in those amounts are $22 million in 2014, $21 million in 2013 and $17 million in 2012 for
a defined contribution pension plan that the Company began on January 1, 2006. The decline in pension
and other postretirement benefits expense in 2014 as compared with 2013 was largely reflective of a $27
million decrease in amortization of actuarial losses accumulated in the defined benefit pension plans. The
decline in pension and other postretirement benefits expense in 2013 as compared with 2012 reflects the
impact on the qualified defined benefit pension plan of favorable investment returns and higher balances of
invested assets. The Company made a $200 million contribution to that plan in the third quarter of 2012.
No contributions were required or made to the qualified defined benefit pension plan in 2014 or 2013. The
determination of pension expense and the recognition of net pension assets and liabilities for defined benefit
pension plans requires management to make various assumptions that can significantly impact the actuarial
calculations related thereto. Those assumptions include the expected long-term rate of return on plan assets,
the rate of increase in future compensation levels and the discount rate. Changes in any of those
assumptions will impact the Company’s pension expense. The expected long-term rate of return assumption
is determined by taking into consideration asset allocations, historical returns on the types of assets held and
current economic factors. Returns on invested assets are periodically compared with target market indices
for each asset type to aid management in evaluating such returns. The discount rate used by the Company to
determine the present value of the Company’s future benefit obligations reflects specific market yields for a
hypothetical portfolio of highly rated corporate bonds that would produce cash flows similar to the
Company’s benefit plan obligations and the level of market interest rates in general as of the year-end. In
addition, in 2014 the Society of Actuaries released new mortality tables that were used in the determination
of the benefit obligation as of December 31, 2014. The impact of that revision was to increase the benefit
obligations of the qualified and non-qualified defined benefit pension plans by approximately $122 million
and $10 million, respectively. Other factors used to estimate the projected benefit obligations include
actuarial assumptions for turnover rate, retirement age and disability rate. Those other factors do not tend
to change significantly over time. The Company reviews its pension plan assumptions annually to ensure
that such assumptions are reasonable and adjusts those assumptions, as necessary, to reflect changes in
future expectations. The Company utilizes actuaries and others to aid in that assessment.
The Company’s 2014 pension expense for its defined benefit plans was determined using the
following assumptions: a long-term rate of return on assets of 6.50%; a rate of future compensation increase
of 4.42%; and a discount rate of 4.75%. To demonstrate the sensitivity of pension expense to changes in the
Company’s pension plan assumptions, 25 basis point increases in: the rate of return on plan assets would
have resulted in a decrease in pension expense of $4 million; the rate of increase in compensation would
have resulted in an increase in pension expense of $300,000; and the discount rate would have resulted in a
decrease in pension expense of $6 million. Decreases of 25 basis points in those assumptions would have
resulted in similar changes in amount, but in the opposite direction from the changes presented in the
preceding sentence. The accounting guidance for defined benefit pension plans reflects the long-term nature
of benefit obligations and the investment horizon of plan assets, and has the effect of reducing expense
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volatility related to short-term changes in interest rates and market valuations. Actuarial gains and losses
include the impact of plan amendments, in addition to various gains and losses resulting from changes in
assumptions and investment returns which are different from that which was assumed. As of December 31,
2014, the Company had cumulative unrecognized actuarial losses of approximately $512 million that could
result in an increase in the Company’s future pension expense depending on several factors, including
whether such losses at each measurement date exceed ten percent of the greater of the projected benefit
obligation or the market-related value of plan assets. In accordance with GAAP, net unrecognized gains or
losses that exceed that threshold are required to be amortized over the expected service period of active
employees, and are included as a component of net pension cost. Amortization of those net unrealized losses
had the effect of increasing the Company’s pension expense by approximately $14 million in 2014, $41
million in 2013 and $37 million in 2012. The increase in the cumulative unrecognized actuarial losses from
$191 million at December 31, 2013 is predominantly attributable to a 75 basis point reduction in the
discount rate and the revised mortality tables used to determine the benefit obligation as of December 31,
2014.
GAAP requires an employer to recognize in its balance sheet as an asset or liability the overfunded or
underfunded status of a defined benefit postretirement plan, measured as the difference between the fair
value of plan assets and the benefit obligation. For a pension plan, the benefit obligation is the projected
benefit obligation; for any other postretirement benefit plan, such as a retiree health care plan, the benefit
obligation is the accumulated postretirement benefit obligation. Gains or losses and prior service costs or
credits that arise during the period, but are not included as components of net periodic benefit cost, are to
be recognized as a component of other comprehensive income. As of December 31, 2014, the combined
benefit obligations of the Company’s defined benefit postretirement plans exceeded the fair value of the
assets of such plans by approximately $375 million. Of that amount, $203 million was related to the non-
qualified pension and other postretirement benefit plans that are generally not funded until benefits are
paid. In the Company’s qualified defined benefit pension plan, the projected benefit obligation exceeded the
fair value of assets by approximately $172 million as of December 31, 2014. At the prior year-end, the fair
value of that plan’s assets exceeded the projected benefit obligation by approximately $140 million. Relative
to that plan, the main factors contributing to the change in the funded status were the decrease in the
discount rate used to measure the projected benefit obligations to 4.00% at December 31, 2014 from 4.75%
at December 31, 2013 and the use of the newly updated actuarial mortality tables issued by the Society of
Actuaries reflecting longer life expectancy of the plan’s participants. The Company was required to have a
net pension and postretirement benefit liability for the pension and other postretirement benefit plans that
was equal to $375 million at December 31, 2014. Accordingly, as of December 31, 2014 the Company
recorded an additional postretirement benefit adjustment of $503 million. After applicable tax effect, that
adjustment reduced accumulated other comprehensive income (and thereby shareholders’ equity) by $306
million. The result of this was a year-over-year increase of $341 million to the additional minimum
postretirement benefit liability from the $162 million recorded at December 31, 2013. After applicable tax
effect, the $341 million increase in the additional required liability adjustment decreased other
comprehensive income in 2014 by $207 million from the prior year-end amount of $98 million. As
previously noted, the decrease in the discount rate and the use of the newly updated mortality tables
reflecting longer life expectancy of the plan’s participants were the predominant factors leading to the
change in the minimum liability from December 31, 2013. In determining the benefit obligation for defined
benefit postretirement plans the Company used a discount rate of 4.00% at December 31, 2014 and 4.75% at
December 31, 2013. A 25 basis point decrease in the assumed discount rate as of December 31, 2014 to
3.75% would have resulted in increases in the combined benefit obligations of all defined benefit
postretirement plans (including pension and other plans) of $73 million. Under that scenario, the minimum
postretirement liability adjustment at December 31, 2014 would have been $576 million, rather than the
$503 million that was actually recorded, and the corresponding after tax-effect charge to accumulated other
comprehensive income at December 31, 2014 would have been $350 million, rather than the $306 million
that was actually recorded. A 25 basis point increase in the assumed discount rate to 4.25% would have
decreased the combined benefit obligations of all defined benefit postretirement plans by $69 million. Under
this latter scenario, the aggregate minimum liability adjustment at December 31, 2014 would have been $434
million rather than the $503 million actually recorded and the corresponding after tax-effect charge to
accumulated other comprehensive income would have been $264 million rather than $306 million.
Information about the Company’s pension plans, including significant assumptions utilized in completing
actuarial calculations for the plans, is included in note 12 of Notes to Financial Statements.
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The Company also provides a retirement savings plan (“RSP”) that is a defined contribution plan in
which eligible employees of the Company may defer up to 50% of qualified compensation via contributions
to the plan. The Company makes an employer matching contribution in an amount equal to 75% of an
employee’s contribution, up to 4.5% of the employee’s qualified compensation. RSP expense totaled $32
million in each of 2014 and 2013, and $31 million in 2012.
Expenses associated with the defined benefit and defined contribution pension plans and the RSP
totaled $60 million in 2014, $85 million in 2013 and $100 million in 2012. Expenses associated with
providing medical and other postretirement benefits were $2 million in each of 2014 and 2013, and $5
million in 2012.
Excluding the nonoperating expense items already noted, nonpersonnel operating expenses totaled
$1.30 billion in 2014, compared with $1.22 billion in 2013. The higher level of such expenses was
predominantly the result of increased costs for professional services, reflecting the Company’s investments
in BSA/AML activities, compliance, capital planning and stress testing, risk management, and other
operational initiatives. Those higher expenses were partially offset by lower FDIC assessments.
Nonpersonnel operating expenses were $1.13 billion in 2012. Higher expenses in 2013 were largely
associated with the initiatives noted above and the previously noted $40 million increase in the litigation-
related accrual, partially offset by lower FDIC assessments and the reversal of the contingent compensation
accrual related to Wilmington Trust.
Income Taxes
The provision for income taxes was $523 million in each of 2014 and 2012 and $579 million in 2013. The
effective tax rates were 32.9% in 2014 and 33.7% in each of 2013 and 2012. During the second quarter of
2014, the Company resolved with tax authorities previously uncertain tax positions associated with pre-
acquisition activities of M&T’s Wilmington Trust entities, resulting in a reduction of the provision for
income taxes of $8 million. Excluding that reduction of income tax expense, the effective tax rate for 2014
would have been 33.4%. The effective tax rate is affected by the level of income earned that is exempt from
tax relative to the overall level of pre-tax income, the level of income allocated to the various state and local
jurisdictions where the Company operates, because tax rates differ among such jurisdictions, and the impact
of any large but infrequently occurring items.
The Company’s effective tax rate in future periods will be affected by the results of operations
allocated to the various tax jurisdictions within which the Company operates, any change in income tax laws
or regulations within those jurisdictions, and interpretations of income tax regulations that differ from the
Company’s interpretations by any of various tax authorities that may examine tax returns filed by M&T or
any of its subsidiaries. Information about amounts accrued for uncertain tax positions and a reconciliation
of income tax expense to the amount computed by applying the statutory federal income tax rate to pre-tax
income is provided in note 13 of Notes to Financial Statements.
International Activities
The Company’s net investment in international assets totaled $232 million at December 31, 2014 and $226
million at December 31, 2013. Such assets included $213 million and $192 million, respectively, of loans to
foreign borrowers. Deposits in the Company’s office in the Cayman Islands totaled $177 million at
December 31, 2014 and $323 million at December 31, 2013. The Company uses such deposits to facilitate
customer demand and as an alternative to short-term borrowings when the costs of such deposits seem
reasonable. Loans and deposits at M&T Bank’s commercial branch in Ontario, Canada as of December 31,
2014 were $93 million and $41 million, respectively, compared with $94 million and $25 million,
respectively, at December 31, 2013. The Company also offers trust-related services in Europe and the
Cayman Islands. Revenues from providing such services during 2014, 2013 and 2012 were approximately
$31 million, $26 million and $24 million, respectively.
Liquidity, Market Risk, and Interest Rate Sensitivity
As a financial intermediary, the Company is exposed to various risks, including liquidity and market risk.
Liquidity refers to the Company’s ability to ensure that sufficient cash flow and liquid assets are available to
satisfy current and future obligations, including demands for loans and deposit withdrawals, funding
operating costs, and other corporate purposes. Liquidity risk arises whenever the maturities of financial
instruments included in assets and liabilities differ.
75
The most significant source of funding for the Company is core deposits, which are generated from a
large base of consumer, corporate and institutional customers. That customer base has, over the past several
years, become more geographically diverse as a result of acquisitions and expansion of the Company’s
businesses. Nevertheless, the Company faces competition in offering products and services from a large
array of financial market participants, including banks, thrifts, mutual funds, securities dealers and others.
Core deposits financed 83% of the Company’s earning assets at December 31, 2014, compared with 88%
and 86% at December 31, 2013 and 2012, respectively.
The Company supplements funding provided through core deposits with various short-term and
long-term wholesale borrowings, including federal funds purchased and securities sold under agreements to
repurchase, brokered deposits, Cayman Islands office deposits and longer-term borrowings. At
December 31, 2014, M&T Bank had short-term and long-term credit facilities with the FHLBs aggregating
$8.1 billion. Outstanding borrowings under FHLB credit facilities totaled $1.2 billion and $29 million at
December 31, 2014 and 2013, respectively. Such borrowings were secured by loans and investment
securities. During the second quarter of 2014, M&T Bank borrowed approximately $1.1 billion from the
FHLB of New York. Those borrowings were split between three-year and five-year terms at fixed rates of
interest. M&T Bank and Wilmington Trust, N.A. had available lines of credit with the Federal Reserve Bank
of New York that aggregated approximately $13.1 billion at December 31, 2014. The amounts of those lines
are dependent upon the balances of loans and securities pledged as collateral. There were no borrowings
outstanding under such lines of credit at December 31, 2014 or December 31, 2013. During the first quarter
of 2013, M&T Bank instituted a Bank Note Program whereby M&T Bank may issue unsecured senior and
subordinated notes. Notes issued under that program aggregated $4.0 billion and $800 million at
December 31, 2014 and 2013, respectively. In addition, in February 2015 M&T Bank issued an additional
$1.5 billion of fixed rate senior notes, of which $750 million mature in 2020 and $750 million mature in
2025.
From time to time, the Company has issued subordinated capital notes and junior subordinated
debentures associated with trust preferred securities to provide liquidity and enhance regulatory capital
ratios. Such notes generally qualify under the Federal Reserve Board’s current risk-based capital guidelines
for inclusion in the Company’s capital. However, pursuant to the Dodd-Frank Act, the Company’s junior
subordinated debentures associated with trust preferred securities will be phased-out of the definition of
Tier 1 capital. Effective January 1, 2015, 75% of such securities are excluded from the Company’s Tier 1
capital, and beginning January 1, 2016, 100% will be excluded. The amounts excluded from Tier 1 capital
are includable in total capital. Information about the Company’s borrowings is included in note 9 of Notes
to Financial Statements. In February 2014, the Company redeemed $350 million of 8.50% junior
subordinated debentures associated with trust preferred securities and issued $350 million of preferred stock
that qualifies as regulatory capital.
The Company has informal and sometimes reciprocal sources of funding available through various
arrangements for unsecured short-term borrowings from a wide group of banks and other financial
institutions. Short-term federal funds borrowings were $135 million and $169 million at December 31, 2014
and 2013, respectively. In general, those borrowings were unsecured and matured on the next business day.
In addition to satisfying customer demand, Cayman Islands office deposits may be used by the Company as
an alternative to short-term borrowings. Cayman Islands office deposits totaled $177 million and $323
million at December 31, 2014 and 2013, respectively. The Company has brokered NOW and brokered
money-market deposit accounts which totaled $1.1 billion and $1.0 billion at December 31, 2014 and 2013,
respectively. Brokered time deposits were not a significant source of funding as of those dates.
The Company’s ability to obtain funding from these or other sources could be negatively impacted
should the Company experience a substantial deterioration in its financial condition or its debt ratings, or
should the availability of short-term funding become restricted due to a disruption in the financial markets.
The Company attempts to quantify such credit-event risk by modeling scenarios that estimate the liquidity
impact resulting from a short-term ratings downgrade over various grading levels. Such impact is estimated
by attempting to measure the effect on available unsecured lines of credit, available capacity from secured
borrowing sources and securitizable assets. Information about the credit ratings of M&T and M&T Bank is
presented in table 16. Additional information regarding the terms and maturities of all of the Company’s
short-term and long-term borrowings is provided in note 9 of Notes to Financial Statements. In addition to
deposits and borrowings, other sources of liquidity include maturities of investment securities and other
earning assets, repayments of loans and investment securities, and cash generated from operations, such as
fees collected for services.
76
Table 16
DEBT RATINGS
Moody’s
Standard
and Poor’s
Fitch
M&T Bank Corporation
Senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A3
Baa1
A–
BBB+
M&T Bank
Short-term deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prime-1
A2
Long-term deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A2
Senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A3
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A-1
A
A
A–
A–
BBB+
F1
A
A–
BBB+
Certain customers of the Company obtain financing through the issuance of variable rate demand
bonds (“VRDBs”). The VRDBs are generally enhanced by letters of credit provided by M&T Bank. M&T
Bank oftentimes acts as remarketing agent for the VRDBs and, at its discretion, may from time-to-time own
some of the VRDBs while such instruments are remarketed. When this occurs, the VRDBs are classified as
trading account assets in the Company’s consolidated balance sheet. Nevertheless, M&T Bank is not
contractually obligated to purchase the VRDBs. There were no VRDBs in the Company’s trading account at
December 31, 2014, while the value of VRDBs in the Company’s trading account at December 31, 2013
totaled $25 million. The total amount of VRDBs outstanding backed by M&T Bank letters of credit was $2.0
billion and $1.7 billion at December 31, 2014 and 2013, respectively. M&T Bank also serves as remarketing
agent for most of those bonds.
Table 17
MATURITY DISTRIBUTION OF SELECTED LOANS(a)
December 31, 2014
Demand
2015
2016-2019
After 2019
(In thousands)
Commercial, financial, etc.
Real estate — construction . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $6,811,488
337,772
$2,876,207
2,132,485
$7,528,436
2,180,564
$ 890,316
311,342
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,149,260
$5,008,692
$9,709,000
$1,201,658
Floating or adjustable interest rates . . . . . . . . . . . . . .
Fixed or predetermined interest rates . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) The data do not include nonaccrual loans.
$8,166,968
1,542,032
$ 853,349
348,309
$9,709,000
$1,201,658
The Company enters into contractual obligations in the normal course of business which require
future cash payments. The contractual amounts and timing of those payments as of December 31, 2014 are
summarized in table 18. Off-balance sheet commitments to customers may impact liquidity, including
commitments to extend credit, standby letters of credit, commercial letters of credit, financial guarantees
and indemnification contracts, and commitments to sell real estate loans. Because many of these
commitments or contracts expire without being funded in whole or in part, the contract amounts are not
necessarily indicative of future cash flows. Further discussion of these commitments is provided in note 21
of Notes to Financial Statements. Table 18 summarizes the Company’s other commitments as of
December 31, 2014 and the timing of the expiration of such commitments.
77
Table 18
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
December 31, 2014
Less Than One
Year
One to Three
Years
Three to Five
Years
Over Five
Years
Total
(In thousands)
Payments due for contractual
obligations
Time deposits . . . . . . . . . . . . . . . $ 2,111,652
Deposits at Cayman Islands
office . . . . . . . . . . . . . . . . . . . .
176,582
$ 590,235
$ 355,277
$
6,809
$ 3,063,973
—
—
—
176,582
Federal funds purchased and
agreements to repurchase
securities . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . .
Operating leases . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . .
192,676
6,444
87,063
47,050
—
4,513,326
153,423
38,737
—
2,695,358
101,103
14,336
—
1,791,831
113,390
49,637
192,676
9,006,959
454,979
149,760
Total
. . . . . . . . . . . . . . . . . . . . . . $ 2,621,467
$5,295,721
$3,166,074
$1,961,667
$13,044,929
Other commitments
Commitments to extend
credit . . . . . . . . . . . . . . . . . . . . $ 9,428,384
1,811,047
12,812
Standby letters of credit . . . . . . .
Commercial letters of credit . . . .
Financial guarantees and
$5,767,919
1,162,503
152
$4,574,826
594,375
34,001
$3,507,950
138,963
—
$23,279,079
3,706,888
46,965
indemnification contracts . . .
113,729
249,776
502,491
1,624,054
2,490,050
Commitments to sell real estate
loans . . . . . . . . . . . . . . . . . . . .
1,221,590
15,704
—
—
1,237,294
Total
. . . . . . . . . . . . . . . . . . . . . . $12,587,562
$7,196,054
$5,705,693
$5,270,967
$30,760,276
M&T’s primary source of funds to pay for operating expenses, shareholder dividends and treasury
stock repurchases has historically been the receipt of dividends from its banking subsidiaries, which are
subject to various regulatory limitations. Dividends from any banking subsidiary to M&T are limited by the
amount of earnings of the banking subsidiary in the current year and the two preceding years. For purposes
of that test, at December 31, 2014 approximately $1.5 billion was available for payment of dividends to M&T
from banking subsidiaries. These historic sources of cash flow have been augmented in the past by the
issuance of trust preferred securities and senior notes payable. Information regarding trust preferred
securities and the related junior subordinated debentures is included in note 9 of Notes to Financial
Statements.
78
Table 19
MATURITY AND TAXABLE-EQUIVALENT YIELD OF INVESTMENT SECURITIES
December 31, 2014
Investment securities available for sale(a)
U.S. Treasury and federal agencies
One Year
or Less
One to Five
Years
Five to Ten
Years
Over Ten
Years
Total
(Dollars in thousands)
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
4,887
1.34%
Obligations of states and political subdivisions
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
366
7.03%
$ 157,060
$
1.20%
2,932
7.09%
— $
—
— $
—
161,947
1.20%
2,392
2.49%
2,508
3.95%
8,198
4.78%
Mortgage-backed securities(b)
Government issued or guaranteed
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
414,495
1,764,450
2,466,132
4,086,046
8,731,123
2.75%
2.75%
2.75%
2.73%
2.74%
Privately issued
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
3.12%
Other debt securities
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,215
1.92%
Equity securities
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
69
4.44%
5,348
3.52%
—
—
—
—
—
—
103
4.00%
1,185
4.28%
163,056
171,804
7.12%
6.92%
—
—
—
—
83,757
.45%
Total investment securities available for sale
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
421,997
1,929,859
2,469,709
4,251,610
9,156,932
2.73%
2.63%
2.75%
2.90%
2.77%
Investment securities held to maturity
Obligations of states and political subdivisions
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,107
3.71%
84,112
5.15%
41,742
5.88%
—
—
148,961
5.13%
Mortgage-backed securities(b)
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . .
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued
99,700
437,594
626,878
1,985,148
3,149,320
2.79%
2.79%
2.80%
2.77%
2.78%
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,710
2.46%
27,575
2.48%
36,531
130,917
201,733
2.52%
2.72%
2.64%
Other debt securities
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
7,854
4.52%
7,854
4.52%
Total investment securities held to maturity
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment securities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Total investment securities
129,517
549,281
705,151
2,123,919
3,507,868
2.94%
3.14%
—
2.96%
2.77%
2.87%
—
—
328,742
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$551,514
$2,479,140
$3,174,860
$6,375,529
$12,993,542
2.78%
2.74%
2.80%
2.86%
2.73%
(a)
Investment securities available for sale are presented at estimated fair value. Yields on such securities are based on
amortized cost.
(b) Maturities are reflected based upon contractual payments due. Actual maturities are expected to be significantly
shorter as a result of loan repayments in the underlying mortgage pools.
79
Table 20
MATURITY OF DOMESTIC CERTIFICATES OF DEPOSIT AND TIME DEPOSITS
WITH BALANCES OF $100,000 OR MORE
Under 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2014
(In thousands)
$188,870
157,895
184,801
346,844
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$878,410
Management closely monitors the Company’s liquidity position on an ongoing basis for compliance
with internal policies and believes that available sources of liquidity are adequate to meet funding needs
anticipated in the normal course of business. Management does not anticipate engaging in any activities,
either currently or in the long-term, for which adequate funding would not be available and would therefore
result in a significant strain on liquidity at either M&T or its subsidiary banks. Banking regulators have
finalized rules requiring a banking company to maintain a minimum amount of liquid assets to withstand a
standardized supervisory liquidation stress scenario. The effective date for those rules for the Company is
January 1, 2016, subject to a two-year phase-in period. The Company has taken steps as noted herein to
enhance its liquidity and will take further action, as necessary, to comply with the regulations when they take
effect.
Market risk is the risk of loss from adverse changes in the market prices and/or interest rates of the
Company’s financial instruments. The primary market risk the Company is exposed to is interest rate risk.
Interest rate risk arises from the Company’s core banking activities of lending and deposit-taking, because
assets and liabilities reprice at different times and by different amounts as interest rates change. As a result,
net interest income earned by the Company is subject to the effects of changing interest rates. The Company
measures interest rate risk by calculating the variability of net interest income in future periods under
various interest rate scenarios using projected balances for earning assets, interest-bearing liabilities and
derivatives used to hedge interest rate risk. Management’s philosophy toward interest rate risk management
is to limit the variability of net interest income. The balances of financial instruments used in the projections
are based on expected growth from forecasted business opportunities, anticipated prepayments of loans and
investment securities, and expected maturities of investment securities, loans and deposits. Management
uses a “value of equity” model to supplement the modeling technique described above. Those supplemental
analyses are based on discounted cash flows associated with on- and off-balance sheet financial instruments.
Such analyses are modeled to reflect changes in interest rates and provide management with a long-term
interest rate risk metric. The Company has entered into interest rate swap agreements to help manage
exposure to interest rate risk. At December 31, 2014, the aggregate notional amount of interest rate swap
agreements entered into for interest rate risk management purposes was $1.4 billion. Information about
interest rate swap agreements entered into for interest rate risk management purposes is included herein
under the heading “Net Interest Income/Lending and Funding Activities” and in note 18 of Notes to
Financial Statements.
The Company’s Asset-Liability Committee, which includes members of senior management,
monitors the sensitivity of the Company’s net interest income to changes in interest rates with the aid of a
computer model that forecasts net interest income under different interest rate scenarios. In modeling
changing interest rates, the Company considers different yield curve shapes that consider both parallel (that
is, simultaneous changes in interest rates at each point on the yield curve) and non-parallel (that is, allowing
interest rates at points on the yield curve to vary by different amounts) shifts in the yield curve. In utilizing
the model, projections of net interest income calculated under the varying interest rate scenarios are
compared to a base interest rate scenario that is reflective of current interest rates. The model considers the
impact of ongoing lending and deposit-gathering activities, as well as interrelationships in the magnitude
and timing of the repricing of financial instruments, including the effect of changing interest rates on
expected prepayments and maturities. When deemed prudent, management has taken actions to mitigate
exposure to interest rate risk through the use of on- or off-balance sheet financial instruments and intends
80
to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and
deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to,
modifying or terminating existing interest rate swap agreements or other financial instruments used for
interest rate risk management purposes.
Table 21 displays as of December 31, 2014 and 2013 the estimated impact on net interest income
from non-trading financial instruments in the base scenario resulting from parallel changes in interest rates
across repricing categories during the first modeling year.
Table 21
SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES
Changes in Interest Rates
Calculated Increase
(Decrease) in Projected
Net Interest Income
December 31
2014
2013
(In thousands)
+ 200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 246,028
134,393
+ 100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(74,634)
– 100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(109,261)
– 200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 245,089
134,188
(72,755)
(100,543)
The Company utilized many assumptions to calculate the impact that changes in interest rates may
have on net interest income. The more significant of those assumptions included the rate of prepayments of
mortgage-related assets, cash flows from derivative and other financial instruments held for non-trading
purposes, loan and deposit volumes and pricing, and deposit maturities. In the scenarios presented, the
Company also assumed gradual changes in rates during a twelve-month period of 100 and 200 basis points,
as compared with the assumed base scenario. In the event that a 100 or 200 basis point rate change cannot
be achieved, the applicable rate changes are limited to lesser amounts such that interest rates cannot be less
than zero. The assumptions used in interest rate sensitivity modeling are inherently uncertain and, as a
result, the Company cannot precisely predict the impact of changes in interest rates on net interest income.
Actual results may differ significantly from those presented due to the timing, magnitude and frequency of
changes in interest rates and changes in market conditions and interest rate differentials (spreads) between
maturity/repricing categories, as well as any actions, such as those previously described, which management
may take to counter such changes.
Table 22 presents cumulative totals of net assets (liabilities) repricing on a contractual basis within
the specified time frames, as adjusted for the impact of interest rate swap agreements entered into for
interest rate risk management purposes. Management believes that this measure does not appropriately
depict interest rate risk since changes in interest rates do not necessarily affect all categories of earning assets
and interest-bearing liabilities equally nor, as assumed in the table, on the contractual maturity or repricing
date. Furthermore, this static presentation of interest rate risk fails to consider the effect of ongoing lending
and deposit gathering activities, projected changes in balance sheet composition or any subsequent interest
rate risk management activities the Company is likely to implement.
81
Table 22
CONTRACTUAL REPRICING DATA
December 31, 2014
Three Months
or Less
Four to Twelve
Months
One to
Five Years
After
Five Years
Total
Loans and leases, net . . . . . . . . . . . $42,431,506
498,480
Investment securities . . . . . . . . . . .
6,615,008
Other earning assets . . . . . . . . . . . .
$4,090,188
428,676
700
(Dollars in thousands)
$10,705,851
2,666,209
—
$ 9,441,411
9,400,177
—
$66,668,956
12,993,542
6,615,708
Total earning assets . . . . . . . . . . .
49,544,994
4,519,564
13,372,060
18,841,588
86,278,206
NOW accounts . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands
office . . . . . . . . . . . . . . . . . . . . . .
2,307,815
41,085,803
668,735
—
—
1,442,917
—
—
945,512
—
2,307,815
— 41,085,803
3,063,973
6,809
167,510
9,072
—
—
176,582
Total interest-bearing deposits . .
44,229,863
1,451,989
945,512
6,809
46,634,173
Short-term borrowings . . . . . . . . .
Long-term borrowings . . . . . . . . . .
192,676
1,404,831
—
405,402
—
6,323,819
—
872,907
192,676
9,006,959
Total interest-bearing
liabilities . . . . . . . . . . . . . . . . .
45,827,370
1,857,391
7,269,331
879,716
55,833,808
Interest rate swap agreements . . . .
(1,400,000)
—
1,400,000
—
—
Periodic gap . . . . . . . . . . . . . . . . . . $ 2,317,624
Cumulative gap . . . . . . . . . . . . . . .
2,317,624
Cumulative gap as a % of total
$2,662,173
4,979,797
$ 7,502,729
12,482,526
$17,961,872
30,444,398
earning assets . . . . . . . . . . . . . . .
2.7%
5.8%
14.5%
35.3%
Changes in fair value of the Company’s financial instruments can also result from a lack of trading
activity for similar instruments in the financial markets. That impact is most notable on the values assigned
to some of the Company’s investment securities. Information about the fair valuation of investment
securities is presented herein under the heading “Capital” and in notes 3 and 20 of Notes to Financial
Statements.
The Company engages in trading account activities to meet the financial needs of customers and to
fund the Company’s obligations under certain deferred compensation plans. Financial instruments utilized
in trading account activities consist predominantly of interest rate contracts, such as swap agreements, and
forward and futures contracts related to foreign currencies. The Company generally mitigates the foreign
currency and interest rate risk associated with trading account activities by entering into offsetting trading
positions that are also included in the trading account. The fair values of the offsetting positions associated
with interest rate contracts and foreign currency and other option and futures contracts are presented in
note 18 of Notes to Financial Statements. The amounts of gross and net positions, as well as the type of
trading account activities conducted by the Company, are subject to a well-defined series of potential loss
exposure limits established by management and approved by M&T’s Board of Directors. However, as with
any non-government guaranteed financial instrument, the Company is exposed to credit risk associated
with counterparties to the Company’s trading account activities.
The notional amounts of interest rate contracts entered into for trading account purposes totaled
$17.6 billion at December 31, 2014 and $17.4 billion at December 31, 2013. The notional amounts of foreign
currency and other option and futures contracts entered into for trading account purposes were $1.3 billion
and $1.4 billion at December 31, 2014 and 2013, respectively. Although the notional amounts of these
contracts are not recorded in the consolidated balance sheet, the fair values of all financial instruments used
for trading account activities are recorded in the consolidated balance sheet. The fair values of all trading
account assets and liabilities were $308 million and $203 million, respectively, at December 31, 2014 and
82
$376 million and $250 million, respectively, at December 31, 2013. Included in trading account assets at
December 31, 2014 and 2013 were $27 million and $29 million, respectively, of assets related to deferred
compensation plans. Changes in the fair value of such assets are recorded as “trading account and foreign
exchange gains” in the consolidated statement of income. Included in “other liabilities” in the consolidated
balance sheet at December 31, 2014 and 2013 were $30 million and $31 million, respectively, of liabilities
related to deferred compensation plans. Changes in the balances of such liabilities due to the valuation of
allocated investment options to which the liabilities are indexed are recorded in “other costs of operations”
in the consolidated statement of income.
Given the Company’s policies, limits and positions, management believes that the potential loss
exposure to the Company resulting from market risk associated with trading account activities was not
material, however, as previously noted, the Company is exposed to credit risk associated with counterparties
to transactions related to the Company’s trading account activities. Additional information about the
Company’s use of derivative financial instruments in its trading account activities is included in note 18 of
Notes to Financial Statements.
Capital
Shareholders’ equity was $12.3 billion at December 31, 2014 and represented 12.76% of total assets, compared
with $11.3 billion or 13.28% at December 31, 2013 and $10.2 billion or 12.29% at December 31, 2012.
Included in shareholders’ equity was preferred stock with financial statement carrying values of $1.2
billion at December 31, 2014 and $882 million at December 31, 2013. On February 11, 2014, M&T issued
350,000 shares of Series E Perpetual Fixed-to-Floating Rate Non-cumulative Preferred Stock, par value $1.00
per share and liquidation preference of $1,000 per share. Dividends, if declared, will be paid semi-annually
at a rate of 6.45% through February 14, 2024 and thereafter will be paid quarterly at a rate of the three-
month London Interbank Offered Rate plus 361 basis points. The shares are redeemable in whole or in part
on or after February 15, 2024. Notwithstanding M&T’s option to redeem the shares, if an event occurs such
that the shares no longer qualify as Tier 1 regulatory capital, M&T may redeem all of the shares within 90
days following that occurrence. Further information concerning M&T’s preferred stock can be found in
note 10 of Notes to Financial Statements.
Common shareholders’ equity was $11.1 billion, or $83.88 per share, at December 31, 2014,
compared with $10.4 billion, or $79.81 per share, at December 31, 2013 and $9.3 billion, or $72.73 per share,
at December 31, 2012. Tangible equity per common share, which excludes goodwill and core deposit and
other intangible assets and applicable deferred tax balances, was $57.06 at December 31, 2014, compared
with $52.45 and $44.61 at December 31, 2013 and 2012, respectively. The Company’s ratio of tangible
common equity to tangible assets was 8.11% at December 31, 2014, compared with 8.39% and 7.20% at
December 31, 2013 and 2012, respectively. Reconciliations of total common shareholders’ equity and
tangible common equity and total assets and tangible assets as of December 31, 2014, 2013 and 2012 are
presented in table 2. During 2014, 2013 and 2012, the ratio of average total shareholders’ equity to average
total assets was 13.13%, 12.82% and 12.13%, respectively. The ratio of average common shareholders’ equity
to average total assets was 11.83%, 11.77% and 11.04% in 2014, 2013 and 2012, respectively.
Shareholders’ equity reflects accumulated other comprehensive income or loss, which includes the
net after-tax impact of unrealized gains or losses on investment securities classified as available for sale,
unrealized losses on held-to-maturity securities for which an other-than-temporary impairment charge has
been recognized, gains or losses associated with interest rate swap agreements designated as cash flow
hedges, foreign currency translation adjustments and adjustments to reflect the funded status of defined
benefit pension and other postretirement plans. Net unrealized gains on investment securities, net of
applicable tax effect, were $127 million or $.96 per common share at December 31, 2014, compared with $34
million or $.26 per common share at December 31, 2013 and $37 million or $.29 per common share at
December 31, 2012. Information about unrealized gains and losses as of December 31, 2014 and 2013 is
included in note 3 of Notes to Financial Statements.
Reflected in net unrealized gains at December 31, 2014 were pre-tax effect unrealized losses of $21
million on available-for-sale investment securities with an amortized cost of $191 million and pre-tax effect
unrealized gains of $259 million on securities with an amortized cost of $8.7 billion. The pre-tax effect
unrealized losses reflect $19 million of losses on trust preferred securities issued by financial institutions
having an amortized cost of $125 million and an estimated fair value of $106 million (generally considered
Level 2 valuations). Further information concerning the Company’s valuations of available-for-sale
investment securities is provided in note 20 of Notes to Financial Statements.
83
In the second quarter of 2013, the Company sold substantially all of its privately issued residential
mortgage-backed securities that were classified as available for sale and recorded a pre-tax loss of $46
million. Those privately issued mortgage-backed securities previously held by the Company were generally
collateralized by prime and Alt-A residential mortgage loans. The sales, which were in response to changing
regulatory capital and liquidity standards, resulted in improved liquidity and regulatory capital ratios for the
Company. Further information on the sales is provided in note 3 of Notes to Financial Statements.
The Company assesses impairment losses on privately issued mortgage-backed securities in the held-
to-maturity portfolio by performing internal modeling to estimate bond-specific cash flows considering
recent performance of the mortgage loan collateral and utilizing assumptions about future defaults and loss
severity. These bond specific cash flows also reflect the placement of the bond in the overall securitization
structure and the remaining subordination levels. In total, at December 31, 2014 and 2013, the Company
had in its held-to-maturity portfolio privately issued mortgage-backed securities with an amortized cost
basis of $202 million and $220 million, respectively, and a fair value of $158 million and $159 million,
respectively. At December 31, 2014, 87% of the mortgage-backed securities were in the most senior tranche
of the securitization structure with 31% being independently rated as investment grade. The mortgage-
backed securities are generally collateralized by residential and small-balance commercial real estate loans
originated between 2004 and 2008 and had a weighted-average credit enhancement of 17% at December 31,
2014, calculated by dividing the remaining unpaid principal balance of bonds subordinate to the bonds
owned by the Company plus any overcollateralization remaining in the securitization structure by the
remaining unpaid principal balance of all bonds in the securitization structure. All mortgage-backed
securities in the held-to-maturity portfolio had a current payment status as of December 31, 2014. The
weighted-average default percentage and loss severity assumptions utilized in the Company’s internal
modeling were 34% and 74%, respectively. The Company has concluded that as of December 31, 2014, its
privately issued mortgage-backed securities were not other-than-temporarily impaired. Nevertheless, it is
possible that adverse changes in the future performance of mortgage loan collateral underlying such
securities could impact the Company’s conclusions.
During the first quarter of 2013, the Company recognized $10 million (pre-tax) of other-than-
temporary impairment losses related to privately issued mortgage-backed securities held in the available-for-
sale portfolio. In assessing impairment losses for debt securities, the Company performed internal modeling
to estimate bond-specific cash flows, which considered the placement of the bond in the overall
securitization structure and the remaining levels of subordination. During 2012, the Company recognized
$48 million (pre-tax), of other-than-temporary losses related to privately issued mortgage-backed securities.
As of December 31, 2014, based on a review of each of the remaining securities in the investment
securities portfolio, the Company concluded that the declines in the values of any securities containing an
unrealized loss were temporary and that any additional other-than-temporary impairment charges were not
appropriate. It is likely that the Company will be required to sell certain of its collateralized debt obligations
backed by trust preferred securities held in the available-for-sale portfolio to comply with the provisions of
the Volcker Rule. However, the amortized cost and fair value of those collateralized debt obligations were
$25 million and $32 million, respectively, at December 31, 2014 and the Company did not expect that it
would realize any material losses if it ultimately was required to sell such securities. As of that date, the
Company did not intend to sell nor is it anticipated that it would be required to sell any of its other impaired
securities, that is, where fair value is less than the cost basis of the security. The Company intends to
continue to closely monitor the performance of its securities because changes in their underlying credit
performance or other events could cause the cost basis of those securities to become other-than-temporarily
impaired. However, because the unrealized losses on available-for-sale investment securities have generally
already been reflected in the financial statement values for investment securities and shareholders’ equity,
any recognition of an other-than-temporary decline in value of those investment securities would not have a
material effect on the Company’s consolidated financial condition. Any other-than-temporary impairment
charge related to held-to-maturity securities would result in reductions in the financial statement values for
investment securities and shareholders’ equity. Additional information concerning fair value measurements
and the Company’s approach to the classification of such measurements is included in note 20 of the Notes
to Financial Statements.
Adjustments to reflect the funded status of defined benefit pension and other postretirement plans,
net of applicable tax effect, reduced accumulated other comprehensive income by $306 million, or $2.31 per
common share, at December 31, 2014, $98 million, or $.75 per common share, at December 31, 2013, and
$277 million, or $2.16 per common share, at December 31, 2012. The increase in such adjustment at
84
December 31, 2014 as compared with December 31, 2013 was the result of two main factors: a 75 basis point
decrease in the discount rate used to measure the benefit obligations of the defined benefit plans at
December 31, 2014 as compared with a year earlier and the use of updated mortality tables for the U.S.
published in 2014 by the Society of Actuaries. The decrease in the adjustment at December 31, 2013 as
compared with December 31, 2012 was predominantly the result of a 100 basis point increase in the
discount rate used to measure the benefit obligations of the defined benefit plans at December 31, 2013 as
compared with a year earlier and actual investment returns in the qualified defined benefit pension plan that
were higher than expected returns. Information about the funded status of the Company’s pension and
other postretirement benefit plans is included in note 12 of Notes to Financial Statements.
Cash dividends declared on M&T’s common stock totaled $371 million in 2014, compared with $365
million and $358 million in 2013 and 2012, respectively. Dividends per common share totaled $2.80 in each
of 2014, 2013 and 2012. Dividends of $76 million in 2014 and $53 million in each of 2013 and 2012 were
declared on preferred stock in accordance with the terms of each series. The Company did not repurchase
any shares of its common stock in 2014, 2013 or 2012.
The regulatory capital requirements applicable to M&T and its bank subsidiaries as of December 31,
2014 are presented in note 23 of Notes to Financial Statements. At December 31, 2014, Tier 1 capital, as
defined in the regulations, included trust preferred securities of approximately $800 million as described in
note 9 of Notes to Financial Statements and total capital further included subordinated capital notes of $1.2
billion. Pursuant to the Dodd-Frank Act, trust preferred securities will be phased-out of the definition of
Tier 1 capital of bank holding companies, such that 25% of the securities will be includable in Tier 1 capital
in 2015 and, beginning in 2016, no amount of the securities will be includable. On February 27, 2014, M&T
redeemed $350 million of Enhanced Trust Preferred Securities and the associated junior subordinated
debentures. In addition, on November 1, 2014 M&T Bank redeemed $50 million of 9.50% subordinated
notes that were due to mature in 2018. The capital ratios of the Company and its banking subsidiaries as of
December 31, 2014 and 2013 are presented in note 23 of Notes to Financial Statements.
Effective January 1, 2015, new regulatory capital rules became effective. The new rules substantially
revise the risk-based capital requirements applicable to bank holding companies and banks. M&T and its
subsidiary banks expect to be able to comply with the revised capital adequacy requirements. A detailed
discussion of the new regulatory capital rules is included in Part I, Item 1 of this Form 10-K under the
heading “Capital Requirements.”
Fourth Quarter Results
Net income during the fourth quarter of 2014 was $278 million, up from $221 million in the year-earlier
quarter. Diluted and basic earnings per common share were $1.92 and $1.93, respectively, in the final
quarter of 2014, compared with $1.56 and $1.57 of diluted and basic earnings per common share,
respectively, in the similar quarter of 2013. The annualized rates of return on average assets and average
common shareholders’ equity for the final 2014 quarter were 1.12% and 9.10%, respectively, compared with
1.03% and 7.99%, respectively, in the year-earlier quarter.
Net operating income totaled $282 million in the fourth quarter of 2014, compared with $228
million in 2013’s final quarter. Diluted net operating earnings per common share were $1.95 and $1.61 in
the fourth quarters of 2014 and 2013, respectively. The annualized net operating returns on average tangible
assets and average tangible common equity in the fourth quarter of 2014 were 1.18% and 13.55%,
respectively, compared with 1.11% and 12.67%, respectively, in the corresponding quarter of 2013. Core
deposit and other intangible asset amortization, after tax effect, totaled $4 million and $6 million in the final
quarters of 2014 and 2013 ($.03 and $.05 per diluted common share), respectively. Reconciliations of GAAP
results with non-GAAP results for the quarterly periods of 2014 and 2013 are provided in table 24.
Net interest income on a taxable-equivalent basis totaled $688 million in the final 2014 quarter, up
2% from $673 million in the year-earlier quarter. Growth in average earning assets of $12.9 billion was
partially offset by a 46 basis point narrowing of the net interest margin to 3.10% in the recent quarter from
3.56% in 2013’s fourth quarter. The rise in average earning assets was attributable to a $6.1 billion increase
in average interest-bearing deposits held at the Federal Reserve Bank of New York, higher average
investment securities balances of $4.6 billion, and a $2.2 billion increase in average loans and leases. The
increase in the investment securities portfolio from the year-earlier quarter reflects the impact of purchases
of Fannie Mae and Ginnie Mae residential mortgage-backed securities, partially offset by maturities and
paydowns of mortgage-backed securities. Average commercial loan and lease balances were $19.1 billion in
the recent quarter, up $1.0 billion or 6% from $18.1 billion in the final quarter of 2013. Commercial real
85
estate loans averaged $27.1 billion in the fourth quarter of 2014, up $833 million or 3% from $26.2 billion in
the year-earlier quarter. The growth in commercial loans and commercial real estate loans reflects higher
loan demand by customers. Average residential real estate loans outstanding declined $336 million to $8.7
billion in the recent quarter from $9.0 billion in the fourth quarter of 2013. Included in the residential real
estate loan portfolio were average balances of loans held for sale, which totaled $435 million in the recent
quarter, compared with $463 million in the fourth quarter of 2013. Consumer loans averaged $10.9 billion
in the recent quarter, up $700 million from $10.2 billion in the fourth quarter of 2013. That increase was
largely due to higher average balances of automobile loans. Total loans at December 31, 2014 increased $1.1
billion to $66.7 billion from $65.6 billion at September 30, 2014. That growth was predominantly
attributable to increases in commercial real estate loans and in commercial loans, due largely to seasonally-
higher automobile dealer floor plan balances. The decline in the net interest margin from the final 2013
quarter reflects a 16 basis point decrease in the yield on loans, a 50 basis point decline in the yield on
investment securities and the impact of higher balances of interest-bearing deposits at the Federal Reserve
Bank of New York and investment securities which have lower yields than loans. The yield on earning assets
in the fourth quarter of 2014 was 3.44%, a 48 basis point decline from the year-earlier quarter. The rate paid
on interest-bearing liabilities declined 4 basis points to .52% in the recent quarter from .56% in the fourth
quarter of 2013. The resulting net interest spread was 2.92% in the final quarter of 2014, 44 basis points
lower than 3.36% in the year-earlier quarter. That compression was largely due to the changed mix in
earning assets already noted and the 16 basis point decline in loan yields. The contribution of net interest-
free funds to the Company’s net interest margin was .18% in the recent quarter, compared with .20% in the
year-earlier quarter. As a result, the Company’s net interest margin narrowed to 3.10% in the fourth quarter
of 2014 from 3.56% in the similar 2013 period.
The provision for credit losses was $33 million during the final 2014 quarter, compared with $42
million in the year-earlier period. Net charge-offs of loans totaled $32 million in the fourth quarter of 2014,
representing an annualized .19% of average loans and leases outstanding, compared with $42 million or
.26% during the fourth quarter of 2013. Net charge-offs included: commercial loans of $9 million and $21
million in 2014 and 2013, respectively; commercial real estate loans of less than $1 million in 2014,
compared with $8 million a year earlier; residential real estate loans of $3 million in each of the fourth
quarters of 2014 and 2013; and consumer loans of $19 million in the recent quarter, compared with $10
million in the 2013’s fourth quarter. Reflected in net charge-offs of consumer loans for the fourth quarter of
2013 were recoveries of previously charged-off home equity line of credit balances of $9 million related to a
portfolio acquired in 2007.
Other income totaled $452 million in the recent quarter, up from $446 million in the final quarter of
2013. That improvement resulted from higher residential mortgage banking revenues associated with loan
servicing activities, partially offset by declines in trading account and foreign exchange gains and service
charges on deposit accounts.
Other expense in the fourth quarter of 2014 aggregated $680 million, compared with $743 million in
the year-earlier quarter. Included in such amounts are expenses considered to be “nonoperating” in nature
consisting of amortization of core deposit and other intangible assets of $7 million and $10 million in the
fourth quarters of 2014 and 2013, respectively. Exclusive of those nonoperating expenses, noninterest
operating expenses were $673 million in the fourth quarter of 2014, down from $733 million in the similar
quarter of 2013. The lower operating expenses in the recently completed quarter reflect a decline in
professional services costs and a $40 million litigation-related accrual in the fourth quarter of 2013. The
Company’s efficiency ratio during the fourth quarters of 2014 and 2013 was 59.1% and 65.5%, respectively.
Table 24 includes a reconciliation of other expense to noninterest operating expense and the calculation of
the efficiency ratio for each of the quarters of 2014 and 2013.
Segment Information
In accordance with GAAP, the Company’s reportable segments have been determined based upon its
internal profitability reporting system, which is organized by strategic business unit. Certain strategic
business units have been combined for segment information reporting purposes where the nature of the
products and services, the type of customer, and the distribution of those products and services are similar.
The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate,
Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.
The financial information of the Company’s segments was compiled utilizing the accounting policies
described in note 22 of Notes to Financial Statements. The management accounting policies and processes
86
utilized in compiling segment financial information are highly subjective and, unlike financial accounting,
are not based on authoritative guidance similar to GAAP. As a result, reported segments and the financial
information of the reported segments are not necessarily comparable with similar information reported by
other financial institutions. Furthermore, changes in management structure or allocation methodologies
and procedures may result in changes in reported segment financial data. Financial information about the
Company’s segments is presented in note 22 of Notes to Financial Statements.
The Business Banking segment provides a wide range of services to small businesses and professionals
within markets served by the Company through the Company’s branch network, business banking centers
and other delivery channels such as telephone banking, Internet banking and automated teller machines.
Services and products offered by this segment include various business loans and leases, including loans
guaranteed by the Small Business Administration, business credit cards, deposit products, and financial
services such as cash management, payroll and direct deposit, merchant credit card and letters of credit. The
Business Banking segment recorded net income of $120 million in 2014, up 8% from $111 million in 2013.
That improvement reflects: an $8 million decrease in the provision for credit losses, due to lower net charge
offs; higher merchant and credit card fees of $4 million; a lower FDIC assessment of $3 million; and other
decreased operating costs. Those favorable items were partially offset by lower net interest income of $8
million, reflecting a 23 basis point narrowing of the net interest margin on deposits offset, in part, by
increases in average outstanding deposit (predominantly noninterest-bearing) and loan balances of $381
million and $200 million, respectively. Net income contributed by the Business Banking segment totaled
$147 million in 2012. The 24% decrease in net income in 2013 as compared with 2012 reflected: lower net
interest income of $22 million; increased costs associated with the allocation of operating expenses related to
BSA/AML compliance, risk management and other operational initiatives across the Company; a $6 million
increase in personnel costs; and a $4 million increase in the provision for credit losses. The lower net interest
income reflected a 43 basis point decline in the net interest margin on deposits, partially offset by a $418
million increase in average deposit balances (predominantly noninterest-bearing).
The Commercial Banking segment provides a wide range of credit products and banking services for
middle-market and large commercial customers, mainly within the markets served by the Company.
Services provided by this segment include commercial lending and leasing, letters of credit, deposit
products, and cash management services. Net income for the Commercial Banking segment increased 5% to
$411 million in 2014 from $391 million in 2013. The improved results were largely due to a $44 million
decrease in the provision for credit losses, reflecting lower net charge-offs, and a lower FDIC assessment of
$14 million. The significant decline in net charge-offs was predominantly the result of $49 million of loans
charged-off in 2013 for a relationship with a motor vehicle-related parts wholesaler. Those favorable items
were offset, in part, by a $13 million decline in net interest income resulting from a narrowing of the net
interest margin on deposits of 27 basis points and on loans of 8 basis points, partially offset by higher
average outstanding balances of loans and deposits of $1.2 billion and $884 million, respectively. Net
income for the Commercial Banking segment in 2012 was $431 million. The 9% decline in net income in
2013 as compared with 2012 was largely due to a $61 million increase in the provision for credit losses, the
result of higher net charge-offs in 2013 predominantly related to the relationship with the motor vehicle-
related parts wholesaler noted above.
The Commercial Real Estate segment provides credit and deposit services to its customers. Real estate
securing loans in this segment is generally located in the New York City metropolitan area, upstate New
York, Pennsylvania, Maryland, the District of Columbia, Delaware, Virginia, West Virginia, and the
northwestern portion of the United States. Commercial real estate loans may be secured by apartment/
multifamily buildings; office, retail and industrial space; or other types of collateral. Activities of this
segment also include the origination, sales and servicing of commercial real estate loans through the Fannie
Mae DUS program and other programs. The Commercial Real Estate segment contributed net income of
$316 million in 2014, 2% below the $322 million recorded in 2013. That modest decline was attributable to
the following factors: lower net interest income of $31 million, resulting from the narrowing of the net
interest margin on loans and deposits of 13 basis points and 31 basis points, respectively, offset, in part, by a
$14 million decrease in the provision for credit losses and a lower FDIC assessment. Net income for the
Commercial Real Estate segment in 2012 was $309 million. The improved results in 2013 as compared to
2012 were largely attributable to a $39 million increase in net interest income, resulting from growth in
average loan and deposit balances of $694 million and $466 million, respectively, and a 17 basis point
widening of the net interest margin on loans, partially offset by a 31 basis point narrowing of the net interest
margin on deposits. The higher net interest income was offset, in part, by: a $3 million increase in the
87
provision for credit losses; a $3 million decrease in mortgage banking revenues; and increased other
operating expenses that reflect costs associated with the allocation of operating expenses relating to
BSA/AML compliance, risk management, and other operational initiatives across the Company.
The Discretionary Portfolio segment includes investment and trading account securities, residential
real estate loans and other assets; short-term and long-term borrowed funds; brokered deposits; and
Cayman Islands office deposits. This segment also provides foreign exchange services to customers. Included
in the assets of the Discretionary Portfolio segment are the Company’s portfolio of Alt-A mortgage loans
and, prior to the second quarter of 2013, were most of the investment securities for which the Company had
recognized other-than-temporary impairment charges. The Discretionary Portfolio segment recorded net
income of $48 million in 2014 and $30 million in 2013, compared with a net loss of $33 million in 2012.
Included in this segment’s results for 2013 were net pre-tax losses of $46 million associated with the sale of
approximately $1.0 billion of privately issued mortgage-backed securities that had been held in the available-
for-sale investment securities portfolio. Also reflected in securities gains or losses were other-than-
temporary impairment charges, predominantly related to certain privately issued mortgage-backed
securities, of $10 million in 2013 and $48 million in 2012. There were no securities gains or losses in 2014.
Excluding securities gains and losses, net income for the Discretionary Portfolio segment was $63 million in
2013, compared with a net loss of $5 million in 2012. On that basis, the decline in net income in 2014 as
compared with 2013 was largely due to $42 million of gains recorded in 2013 from securitization
transactions associated with one-to-four family residential real estate loans previously held in the
Company’s loan portfolio. Partially offsetting that impact was an $8 million increase in net interest income
that was attributable to a $4.9 billion increase in average balances of investment securities and a 16 basis
point widening of the net interest margin on loans, partially offset by a $639 million decrease in average
outstanding loan balances. Excluding the impact of securities gains and losses, the most significant
contributors to the favorable performance in 2013 as compared with 2012 included: the $42 million of gains
from the securitization transactions; a $28 million decline in the provision for credit losses, predominantly
the result of lower net charge-offs; and a $31 million decrease in intersegment charges due to a lower
proportion of residential real estate loans being retained for portfolio rather than being sold.
The Residential Mortgage Banking segment originates and services residential mortgage loans and
sells substantially all of those loans in the secondary market to investors or to the Discretionary Portfolio
segment. This segment had also originated and serviced loans to builders and developers of residential real
estate properties, although that origination activity has been significantly curtailed. In addition to the
geographic regions served by or contiguous with the Company’s branch network, the Company maintains
mortgage loan origination offices in several states throughout the western United States. The Company
periodically purchases the rights to service mortgage loans and also sub-services residential real estate loans
for others. Residential real estate loans held for sale are included in this segment. The Residential Mortgage
Banking segment’s net income declined 4% to $95 million in 2014 from $99 million in 2013. That decline
was due to the following factors: a $71 million decrease in loan origination and sales revenues (including
intersegment revenues) due to lower volumes of loans originated for sale; a $9 million increase in the
provision for credit losses, as 2013 included $12 million of net recoveries of previously charged-off loans to
residential real estate builders and developers; and an $8 million decline in net interest income. The lower
net interest income was attributable to a $582 million decrease in average loan balances and a 25 basis point
narrowing of the net interest margin on deposits. Largely offsetting those unfavorable factors was an $80
million rise in revenues from servicing residential real estate loans (including intersegment revenues),
predominantly the result of sub-servicing activities. Net income for this segment aggregated $135 million in
2012. The decrease in net income in 2013 as compared to 2012 was largely due to a $97 million decline in
revenues from residential mortgage origination and sales activities (including intersegment revenues), due
to lower origination volumes, and increased personnel and professional services costs associated with
expanded residential mortgage loan sub-servicing activities. Those unfavorable factors were offset, in part,
by: a $29 million decline in the provision for credit losses reflecting net recoveries in 2013 of previously
charged-off loans to real estate builders and developers of $12 million; a $20 million rise in net interest
income, the result of a $139 million increase in average outstanding loan balances and a 63 basis point
widening of the net interest margin on loans due to higher loan yields; and a $16 million rise in revenues
from servicing residential real estate loans (including intersegment revenues).
The Retail Banking segment offers a variety of services to consumers through several delivery
channels which include branch offices, automated teller machines, telephone banking and Internet banking.
The Company has branch offices in New York State, Pennsylvania, Maryland, Virginia, the District of
88
Columbia, West Virginia, and Delaware. Credit services offered by this segment include consumer
installment loans, automobile loans (originated both directly and indirectly through dealers), home equity
loans and lines of credit and credit cards. The segment also offers to its customers deposit products,
including demand, savings and time accounts; investment products, including mutual funds and annuities;
and other services. Net income for the Retail Banking segment was $120 million in 2014, down 34% from
$182 million in 2013. That decline was attributable to the following significant factors: a $69 million
decrease in net interest income, largely due to a 20 basis point narrowing of the net interest margin on
deposits and a decrease in average outstanding loans of $537 million; a $21 million gain recognized in 2013
on the securitization and sale of approximately $1.4 billion of automobile loans previously held in the
Company’s loan portfolio; a $17 million decline in service charges on deposit accounts; and a $5 million
increase in the provision for credit losses, due to higher net charge-offs. This segment’s net income declined
17% in 2013 from $221 million in 2012. The primary contributor to that decline was a $93 million decrease
in net interest income, largely due to a 33 basis point narrowing of the net interest margin on deposits and a
decrease in average outstanding loans of $682 million, partially offset by a 16 basis point widening of the net
interest margin on loans and a $720 million increase in average outstanding deposit balances. Also
contributing to the lower net income in 2013 were higher noninterest operating expenses, including costs
related to BSA/AML compliance, risk management, and other operational initiatives. Those unfavorable
factors were offset, in part, by the $21 million gain on the securitization and sale of automobile loans and a
$23 million decline in the provision for credit losses, largely due to lower net charge-offs.
The “All Other” category reflects other activities of the Company that are not directly attributable to
the reported segments. Reflected in this category are the amortization of core deposit and other intangible
assets resulting from the acquisitions of financial institutions, M&T’s share of the operating losses of BLG,
merger-related gains and expenses resulting from acquisitions and the net impact of the Company’s
allocation methodologies for internal transfers for funding charges and credits associated with the earning
assets and interest-bearing liabilities of the Company’s reportable segments and the provision for credit
losses. The “All Other” category also includes the trust income of the Company that reflects the ICS and
WAS business activities. The various components of the “All Other” category resulted in net losses of $44
million and $181 million in 2014 and 2012, respectively, compared with net income of $3 million in 2013.
Results for the 2013 period included realized gains on the sale of the Company’s holdings of Visa and
MasterCard shares totaling $103 million and the reversal of an accrual for a contingent compensation
obligation of $26 million assumed in the May 2011 acquisition of Wilmington Trust that expired. Partially
offsetting those factors were higher litigation-related charges in 2013 that reflected a $40 million litigation-
related accrual in the fourth quarter of 2013. Also contributing to the unfavorable performance in 2014 as
compared to 2013 were increases in personnel-related and professional service costs related to BSA/AML
and other company-wide initiatives offset, in part, by higher trust income of $12 million and the favorable
impact from the Company’s allocation methodologies for internal transfers for funding and other charges of
the Company’s reportable segments and the provision for credit losses. The improved performance in 2013
as compared with 2012, in addition to those items noted above that were recorded in 2013, was due to
higher trust income of $24 million and the favorable impact from the Company’s allocation methodologies
for internal transfers for funding and other charges of the Company’s reportable segments and the provision
for credit losses.
Recent Accounting Developments
In August 2014, the Financial Accounting Standards Board (“FASB”) issued amended accounting guidance
for the classification of certain government-guaranteed mortgage loans upon foreclosure. This guidance
requires that a mortgage loan be derecognized and that a separate other receivable be recognized upon
foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separable
from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real
estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover
under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis
of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured
based upon the amount of the loan balance (principal and interest) expected to be recovered from the
guarantor. This guidance is effective for annual periods, and interim periods within those annual periods,
beginning after December 15, 2014. This guidance should be applied using a prospective transition method
or a modified retrospective transition method. The Company expects that the adoption of this guidance in
2015 will not have a significant effect on the Company’s financial position or results of operations.
89
In June 2014, the FASB issued amended accounting guidance for share-based payments when the
terms of an award provide that a performance target could be achieved after the requisite service period. The
amended guidance requires that a performance target that affects vesting and that could be achieved after
the requisite service period be treated as a performance condition. The performance target should not be
reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the
period in which it becomes probable that the performance target will be achieved and should represent the
compensation cost attributable to the period(s) for which the requisite service has already been rendered. If
the performance target becomes probable of being achieved before the end of the requisite service period,
the remaining unrecognized compensation cost should be recognized prospectively over the remaining
requisite service period. The total amount of compensation cost recognized during and after the requisite
service period should reflect the number of awards that are expected to vest and should be adjusted to reflect
those awards that ultimately vest. The requisite service period ends when the employee can cease rendering
service and still be eligible to vest in the award if the performance target is achieved. This guidance is
effective for annual periods and interim periods within those annual periods beginning after December 31,
2015, with earlier adoption permitted. The Company does not expect the amended guidance published by
the FASB to have a material impact on its financial position or results of operations.
In June 2014, the FASB issued amended accounting guidance for repurchase-to-maturity
transactions and repurchase financings. The amended accounting guidance changes the accounting for
repurchase-to-maturity transactions to secured borrowing accounting, which is consistent with the
accounting for other repurchase agreements. Further, for repurchase financing arrangements, the
amendments require separate accounting for a transfer of a financial asset executed contemporaneously with
a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for
the repurchase agreement. The amendments require new disclosures on transfers accounted for as sales in
transactions that are economically similar to repurchase agreements and about the types of collateral
pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The
accounting changes in this guidance are effective for the first interim or annual period beginning after
December 15, 2014. Changes in accounting for transactions outstanding on the effective date should be
presented as a cumulative-effect adjustment to retained earnings as of the beginning of the period of
adoption. The disclosure guidance for certain transactions accounted for as a sale is required to be presented
for interim and annual periods beginning after December 15, 2014, and the disclosure guidance for
repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted
for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014,
and for interim periods beginning after March 15, 2015. The Company does not currently have repurchase-
to-maturity transactions or transfers of a financial asset executed contemporaneously with a repurchase
agreement with the same counterparty. The Company will make the required disclosures when the guidance
becomes effective.
In May 2014, the FASB issued amended accounting and disclosure guidance for revenue from
contracts with customers. The core principle of the accounting guidance is that an entity should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve
that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer;
(2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the
transaction price to the performance obligations in the contract; (5) recognize revenue when (or as) the
entity satisfies a performance obligation. The guidance also specifies the accounting for some costs to obtain
or fulfill a contract with a customer. The amended disclosure guidance requires sufficient information to
enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers. The amended guidance is effective for annual
reporting periods beginning after December 15, 2016, including interim periods within that reporting
period. The guidance should be applied either retrospectively to each prior reporting period presented or
retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial
application. The Company is still evaluating the impact the guidance could have on its consolidated
financial statements.
In January 2014, the FASB issued amended accounting and disclosure guidance for reclassification of
residential real estate collateralized consumer mortgage loans upon foreclosure. The amended guidance
clarifies that an in-substance repossession or foreclosure occurs and a creditor is considered to have received
physical possession of residential real estate property collateralizing a consumer mortgage loan
90
upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a
foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to
satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.
The amended guidance also requires interim and annual disclosure of both (1) the amount of foreclosed
residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage
loans collateralized by residential real estate that are in the process of foreclosure according to local
requirements of the applicable jurisdiction. This guidance is effective for annual periods, and interim
periods within those annual periods, beginning after December 15, 2014. This guidance should be applied
using a prospective transition method or a modified retrospective transition method. The Company expects
that the adoption of this guidance in 2015 will not have a significant effect on the Company’s financial
position or results of operations.
In January 2014, the FASB issued amended accounting guidance permitting an accounting policy
election to account for investments in qualified affordable housing projects using the proportional
amortization method if certain conditions are met. Under the proportional amortization method, an entity
amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received
and recognizes the net investment performance in the income statement as a component of income tax
expense. The decision to apply the proportional amortization method of accounting is an accounting policy
election that should be applied consistently to all qualifying affordable housing project investments. This
guidance is effective for annual periods, and interim reporting periods within those annual periods,
beginning after December 15, 2014. This guidance should be applied retrospectively to all periods presented.
The Company expects that the adoption of this guidance in 2015 will not have a significant effect on the
Company’s financial position or results of operations, but will result in the restatement of consolidated
financial statements for 2014 and earlier years to remove losses associated with qualified affordable housing
projects from “other costs of operations” and include the amortization of the initial cost of the investment
in income tax expense. Those restatements are not expected to have a material impact on the Company’s
previously reported net income for 2014 and earlier years.
Forward-Looking Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections
of this Annual Report contain forward-looking statements that are based on current expectations, estimates
and projections about the Company’s business, management’s beliefs and assumptions made by
management. Forward-looking statements are typically identified by words such as “believe,” “expect,”
“anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future
conditional verbs such as “will,” “would,” “should,” “could,” or “may,” or by variations of such words or by
similar expressions. These statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions (“Future Factors”) which are difficult to predict. Therefore, actual outcomes
and results may differ materially from what is expressed or forecasted in such forward-looking statements.
Forward-looking statements speak only as of the date they are made and the Company assumes no duty to
update forward-looking statements.
Future Factors include changes in interest rates, spreads on earning assets and interest-bearing
liabilities, and interest rate sensitivity; prepayment speeds, loan originations, credit losses and market values
of loans, collateral securing loans and other assets; sources of liquidity; common shares outstanding;
common stock price volatility; fair value of and number of stock-based compensation awards to be issued in
future periods; the impact of changes in market values on trust-related revenues; legislation and/or
regulation affecting the financial services industry as a whole, and M&T and its subsidiaries individually or
collectively, including tax legislation or regulation; regulatory supervision and oversight, including monetary
policy and capital requirements; changes in accounting policies or procedures as may be required by the
FASB or regulatory agencies; increasing price and product/service competition by competitors, including
new entrants; rapid technological developments and changes; the ability to continue to introduce
competitive new products and services on a timely, cost-effective basis; the mix of products/services;
containing costs and expenses; governmental and public policy changes; protection and validity of
intellectual property rights; reliance on large customers; technological, implementation and cost/financial
risks in large, multi-year contracts; the outcome of pending and future litigation and governmental
proceedings, including tax-related examinations and other matters; continued availability of financing;
financial resources in the amounts, at the times and on the terms required to support M&T and its
subsidiaries’ future businesses; and material differences in the actual financial results of merger, acquisition
91
and investment activities compared with M&T’s initial expectations, including the full realization of
anticipated cost savings and revenue enhancements.
These are representative of the Future Factors that could affect the outcome of the forward-looking
statements. In addition, such statements could be affected by general industry and market conditions and
growth rates, general economic and political conditions, either nationally or in the states in which M&T and
its subsidiaries do business, including interest rate and currency exchange rate fluctuations, changes and
trends in the securities markets, and other Future Factors.
92
Table 23
QUARTERLY TRENDS
Earnings and dividends
Fourth
Third
Second
First
Fourth
Third
Second
First
2014 Quarters
2013 Quarters
Amounts in thousands, except per share
Interest income (taxable-equivalent basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $762,619 $748,864 $740,139 $728,897 $740,665 $748,791 $756,424 $736,425
73,925
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,964
74,772
65,176
66,519
67,982
69,578
72,620
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxable-equivalent adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
687,847
33,000
451,643
680,108
426,382
142,826
6,007
674,900
29,000
451,111
679,284
417,727
136,542
5,841
674,963
30,000
456,412
681,194
420,181
129,996
5,849
662,378
32,000
420,107
702,271
348,214
113,252
5,945
672,683
42,000
446,246
743,072
333,857
106,236
6,199
679,213
48,000
477,388
658,626
449,975
149,391
6,105
683,804
57,000
508,689
598,591
536,902
182,219
6,217
662,500
38,000
432,882
635,596
421,786
141,223
6,450
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $277,549 $275,344 $284,336 $229,017 $221,422 $294,479 $348,466 $274,113
Net income available to common shareholders-diluted . . . . . . . . . . . . . . . . . . . . $254,239 $251,917 $260,695 $211,731 $203,451 $275,356 $328,557 $255,096
Per common share data
Basic earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.93 $
1.92
.70 $
1.92 $
1.91
.70 $
1.99 $
1.98
.70 $
1.63 $
1.61
.70 $
1.57 $
1.56
.70 $
2.13 $
2.11
.70 $
2.56 $
2.55
.70 $
2.00
1.98
.70
Average common shares outstanding
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
131,450
132,278
131,265
132,128
130,856
131,828
130,212
131,126
129,497
130,464
129,171
130,265
128,252
129,017
127,669
128,636
Performance ratios, annualized
Return on
Average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average common shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest margin on average earning assets (taxable-equivalent basis) . . . . . .
Nonaccrual loans to total loans and leases, net of unearned discount . . . . . . . . .
Net operating (tangible) results(a)
Net operating income (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $281,929 $279,838 $289,974 $235,162 $227,797 $300,968 $360,734 $285,136
Diluted net operating income per common share . . . . . . . . . . . . . . . . . . . . . . . .
2.06
Annualized return on
1.12% 1.17% 1.27% 1.07% 1.03% 1.39% 1.68% 1.36%
9.10% 9.18% 9.79% 8.22% 7.99% 11.06% 13.78% 11.10%
3.10% 3.23% 3.40% 3.52% 3.56% 3.61% 3.71% 3.71%
1.20% 1.29% 1.36% 1.39% 1.36% 1.44% 1.46% 1.60%
2.16
1.95
1.94
2.02
1.66
1.61
2.65
Average tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average tangible common shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
Efficiency ratio(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance sheet data
In millions, except per share
Average balances
1.18% 1.24% 1.35% 1.15% 1.11% 1.48% 1.81% 1.48%
13.55% 13.80% 14.92% 12.76% 12.67% 17.64% 22.72% 18.71%
59.06% 59.67% 59.39% 63.95% 65.48% 56.03% 50.92% 55.88%
Total assets(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,644 $ 93,245 $ 89,873 $ 86,665 $ 85,330 $ 84,011 $ 83,352 $ 81,913
78,311
Total tangible assets(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,339
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,803
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,852
Loans and leases, net of unearned discount
. . . . . . . . . . . . . . . . . . . . . . . . . . .
64,540
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,448
Common shareholders’ equity(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,846
Tangible common shareholders’ equity(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95,093
87,965
12,978
65,767
75,515
11,211
7,660
83,096
76,288
9,265
63,763
67,327
10,576
7,007
80,427
74,667
6,979
64,858
66,232
10,003
6,419
86,311
79,556
10,959
64,343
69,659
10,808
7,246
89,689
82,776
12,780
64,763
70,772
11,015
7,459
81,754
75,049
8,354
63,550
67,212
10,228
6,652
79,760
73,960
5,293
65,979
65,680
9,687
6,095
At end of quarter
Total assets(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,686 $ 97,228 $ 90,835 $ 88,530 $ 85,162 $ 84,427 $ 83,229 $ 82,812
79,215
Total tangible assets(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,543
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,661
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,924
Loans and leases, net of unearned discount
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,090
Common shareholders’ equity, net of undeclared cumulative preferred
79,641
73,927
5,211
65,972
65,661
93,674
86,751
13,348
65,572
74,342
87,276
80,062
12,120
64,748
69,829
84,965
77,950
10,364
64,135
68,699
80,847
74,085
8,310
63,659
66,552
93,137
86,278
12,994
66,669
73,582
81,589
74,706
8,796
64,073
67,119
dividends(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible common shareholders’ equity(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible equity per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,102
7,553
83.88
57.06
11,099
7,545
83.99
57.10
10,934
7,375
82.86
55.89
10,652
7,087
81.05
53.92
10,421
6,848
79.81
52.45
10,133
6,553
77.81
50.32
9,836
6,248
75.98
48.26
9,545
5,948
73.99
46.11
Market price per common share
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 128.96 $ 128.69 $ 125.90 $ 123.04 $ 117.29 $ 119.54 $ 112.01 $ 105.90
99.59
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103.16
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116.10
124.05
112.42
125.62
118.51
123.29
109.16
121.30
109.23
116.42
109.47
111.92
95.68
111.75
(a) Excludes amortization and balances related to goodwill and core deposit and other intangible assets and merger-related expenses which, except in the calculation of
the efficiency ratio, are net of applicable income tax effects. A reconciliation of net income and net operating income appears in Table 24.
(b) Excludes impact of merger-related expenses and net securities gains or losses.
(c) The difference between total assets and total tangible assets, and common shareholders’ equity and tangible common shareholders’ equity, represents goodwill, core
deposit and other intangible assets, net of applicable deferred tax balances. A reconciliation of such balances appears in Table 24.
93
Table 24
RECONCILIATION OF QUARTERLY GAAP TO NON-GAAP MEASURES
2014 Quarters
2013 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
Income statement data
In thousands, except per share
Net income
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 277,549 $ 275,344 $ 284,336 $ 229,017 $ 221,422 $ 294,479 $ 348,466 $ 274,113
Amortization of core deposit and other intangible
assets(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses(a) . . . . . . . . . . . . . . . . . . . . . . . . . .
4,380
—
4,494
—
5,638
—
6,145
—
6,375
—
6,489
—
7,632
4,636
8,148
2,875
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 281,929 $ 279,838 $ 289,974 $ 235,162 $ 227,797 $ 300,968 $ 360,734 $ 285,136
Earnings per common share
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . $
Amortization of core deposit and other intangible
assets(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related expenses(a) . . . . . . . . . . . . . . . . . . . . . . . . . .
1.92 $
1.91 $
1.98 $
1.61 $
1.56 $
2.11 $
2.55 $
.03
—
.03
—
.04
—
.05
—
.05
—
.05
—
.06
.04
Diluted net operating earnings per common share . . . . . $
1.95 $
1.94 $
2.02 $
1.66 $
1.61 $
2.16 $
2.65 $
1.98
.06
.02
2.06
Other expense
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 680,108 $ 679,284 $ 681,194 $ 702,271 $ 743,072 $ 658,626 $ 598,591 $ 635,596
(13,343)
(7,358)
Amortization of core deposit and other intangible assets
. .
(4,732)
—
Merger-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,439)
—
(10,062)
—
(10,628)
—
(12,502)
(7,632)
(7,170)
—
(9,234)
—
Noninterest operating expense . . . . . . . . . . . . . . . . . . . . . $ 672,938 $ 671,926 $ 671,960 $ 692,209 $ 732,633 $ 647,998 $ 578,457 $ 617,521
Merger-related expenses
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . $
Equipment and net occupancy . . . . . . . . . . . . . . . . . . . . . . .
Printing, postage and supplies . . . . . . . . . . . . . . . . . . . . . . .
Other costs of operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
—
—
—
— $
— $
—
—
—
— $
— $
—
—
—
— $
— $
—
—
—
— $
— $
—
—
—
— $
— $
—
—
—
— $
300 $
489
998
5,845
7,632 $
536
201
827
3,168
4,732
Efficiency ratio
Noninterest operating expense (numerator) . . . . . . . . . . . . $ 672,938 $ 671,926 $ 671,960 $ 692,209 $ 732,633 $ 647,998 $ 578,457 $ 617,521
Taxable-equivalent net interest income . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Gain on bank investment securities . . . . . . . . . . . . . . .
Net OTTI losses recognized in earnings . . . . . . . . . . . .
687,847
451,643
—
—
674,900
451,111
—
—
674,963
456,412
—
—
662,378
420,107
—
—
672,683
446,246
—
—
679,213
477,388
—
—
683,804
508,689
56,457
—
662,500
432,882
—
(9,800)
Denominator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,139,490 $1,126,011 $1,131,375 $1,082,485 $1,118,929 $1,156,601 $1,136,036 $1,105,182
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59.06%
59.67%
59.39%
63.95%
65.48%
56.03%
50.92%
55.88%
Balance sheet data
In millions
Average assets
Average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Core deposit and other intangible assets
. . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
98,644 $
(3,525)
(38)
12
93,245 $
(3,525)
(45)
14
89,873 $
(3,525)
(53)
16
86,665 $
(3,525)
(64)
20
85,330 $
(3,525)
(74)
23
84,011 $
(3,525)
(84)
25
83,352 $
(3,525)
(95)
28
81,913
(3,525)
(109)
32
Average tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $
95,093 $
89,689 $
86,311 $
83,096 $
81,754 $
80,427 $
79,760 $
78,311
Average common equity
Average total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,442 $
(1,231)
12,247 $
(1,232)
12,039 $
(1,231)
11,648 $
(1,072)
11,109 $
(881)
10,881 $
(878)
10,563 $
(876)
Average common equity . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Core deposit and other intangible assets
. . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,211
(3,525)
(38)
12
11,015
(3,525)
(45)
14
10,808
(3,525)
(53)
16
10,576
(3,525)
(64)
20
10,228
(3,525)
(74)
23
10,003
(3,525)
(84)
25
9,687
(3,525)
(95)
28
10,322
(874)
9,448
(3,525)
(109)
32
Average tangible common equity . . . . . . . . . . . . . . . . . . . $
7,660 $
7,459 $
7,246 $
7,007 $
6,652 $
6,419 $
6,095 $
5,846
At end of quarter
Total assets
Total assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Core deposit and other intangible assets
. . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
96,686 $
(3,525)
(35)
11
97,228 $
(3,525)
(42)
13
90,835 $
(3,525)
(49)
15
88,530 $
(3,525)
(59)
19
85,162 $
(3,525)
(69)
21
84,427 $
(3,525)
(79)
24
83,229 $
(3,525)
(90)
27
82,812
(3,525)
(102)
30
Total tangible assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
93,137 $
93,674 $
87,276 $
84,965 $
81,589 $
80,847 $
79,641 $
79,215
Total common equity
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undeclared dividends-cumulative preferred stock . . . . . . . .
Common equity, net of undeclared cumulative
preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . .
Core deposit and other intangible assets
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,336 $
(1,231)
(3)
12,333 $
(1,232)
(2)
12,169 $
(1,232)
(3)
11,887 $
(1,232)
(3)
11,306 $
(882)
(3)
11,016 $
(879)
(4)
10,716 $
(877)
(3)
10,423
(875)
(3)
11,102
(3,525)
(35)
11
11,099
(3,525)
(42)
13
10,934
(3,525)
(49)
15
10,652
(3,525)
(59)
19
10,421
(3,525)
(69)
21
10,133
(3,525)
(79)
24
9,836
(3,525)
(90)
27
9,545
(3,525)
(102)
30
Total tangible common equity . . . . . . . . . . . . . . . . . . . . . . . $
7,553 $
7,545 $
7,375 $
7,087 $
6,848 $
6,553 $
6,248 $
5,948
(a) After any related tax effect.
94
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Incorporated by reference to the discussion contained in Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” under the captions “Liquidity, Market Risk, and
Interest Rate Sensitivity” (including Table 21) and “Capital.”
Item 8.
Financial Statements and Supplementary Data.
Financial Statements and Supplementary Data consist of the financial statements as indexed and presented
below and Table 23 “Quarterly Trends” presented in Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”
Index to Financial Statements and Financial Statement Schedules
Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet — December 31, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Income — Years ended December 31, 2014, 2013 and 2012 . . . . . . . . . . . . .
Consolidated Statement of Comprehensive Income — Years ended December 31, 2014, 2013 and
96
97
98
99
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Consolidated Statement of Cash Flows — Years ended December 31, 2014, 2013 and 2012 . . . . . . . . . . 101
Consolidated Statement of Changes in Shareholders’ Equity — Years ended December 31, 2014, 2013
and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
95
Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial
reporting at M&T Bank Corporation and subsidiaries (“the Company”). Management has assessed the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 based on
criteria described in “Internal Control — Integrated Framework (2013)” issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded
that the Company maintained effective internal control over financial reporting as of December 31, 2014.
The consolidated financial statements of the Company have been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, that was engaged to
express an opinion as to the fairness of presentation of such financial statements. PricewaterhouseCoopers
LLP was also engaged to assess the effectiveness of the Company’s internal control over financial reporting.
The report of PricewaterhouseCoopers LLP follows this report.
M&T BANK CORPORATION
ROBERT G. WILMERS
Chairman of the Board and Chief Executive Officer
RENÉ F. JONES
Executive Vice President and Chief Financial Officer
96
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
M&T Bank Corporation
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
income, comprehensive income, cash flows, and changes in shareholders’ equity present fairly, in all
material respects, the financial position of M&T Bank Corporation and its subsidiaries (the “Company”) at
December 31, 2014 and December 31, 2013, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2014 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these
financial statements, for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these
financial statements and on the Company’s internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Buffalo, New York
February 20, 2015
97
M & T B A N K C O R P O R A T I O N A N D S U B S I D I A R I E S
Consolidated Balance Sheet
(Dollars in thousands, except per share)
Assets
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account
Investment securities (includes pledged securities that can be sold or repledged of
$1,631,267 at December 31, 2014; $1,696,438 at December 31, 2013)
Available for sale (cost: $8,919,324 at December 31, 2014; $4,444,365 at
December 31
2014
2013
$ 1,289,965
6,470,867
83,392
308,175
$ 1,573,361
1,651,138
99,573
376,131
December 31, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,156,932
4,531,786
Held to maturity (fair value: $3,538,282 at December 31, 2014; $3,860,127 at
December 31, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,507,868
3,966,130
Other (fair value: $328,742 at December 31, 2014; $298,581 at December 31,
2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
328,742
12,993,542
298,581
8,796,497
Loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and leases, net of unearned discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and leases, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets
66,899,369
(230,413)
66,668,956
(919,562)
65,749,394
612,984
3,524,625
35,027
5,617,564
$96,685,535
Liabilities
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOW accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal funds purchased and agreements to repurchase securities . . . . . . . . . . . . . . .
Accrued interest and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity
Preferred stock, $1.00 par, 1,000,000 shares authorized; Issued and outstanding:
Liquidation preference of $1,000 per share: 731,500 shares at December 31, 2014;
381,500 shares at December 31, 2013; Liquidation preference of $10,000 per
share: 50,000 shares at December 31, 2014 and December 31, 2013 . . . . . . . . . . . .
Common stock, $.50 par, 250,000,000 shares authorized, 132,312,931 shares issued
at December 31, 2014; 130,516,364 shares issued at December 31, 2013 . . . . . . . .
Common stock issuable, 41,330 shares at December 31, 2014; 47,231 shares at
December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss), net . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
See accompanying notes to financial statements.
98
64,325,783
(252,624)
64,073,159
(916,676)
63,156,483
633,520
3,524,625
68,851
5,282,212
$85,162,391
$24,661,007
1,989,441
36,621,580
3,523,838
322,746
67,118,612
260,455
1,368,922
5,108,870
73,856,859
$26,947,880
2,307,815
41,085,803
3,063,973
176,582
73,582,053
192,676
1,567,951
9,006,959
84,349,639
1,231,500
881,500
66,157
65,258
2,608
3,409,506
7,807,119
(180,994)
12,335,896
$96,685,535
2,915
3,232,014
7,188,004
(64,159)
11,305,532
$85,162,391
M & T B A N K C O R P O R A T I O N A N D S U B S I D I A R I E S
Consolidated Statement of Income
(In thousands, except per share)
Interest income
Year Ended December 31
2014
2013
2012
Loans and leases, including fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Agreements to resell securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities
$2,596,586
13,361
64
—
1,119
$2,734,708
5,201
104
10
1,265
$2,704,156
1,221
21
—
1,126
Fully taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exempt from federal taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
340,391
5,356
209,244
6,802
227,116
8,045
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,956,877
2,957,334
2,941,685
Interest expense
NOW accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,404
45,465
15,515
699
101
217,247
280,431
1,287
54,948
26,439
1,018
430
199,983
284,105
1,343
68,011
46,102
1,130
1,286
225,297
343,169
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,676,446
124,000
2,673,229
185,000
2,598,516
204,000
Net interest income after provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . .
2,552,446
2,488,229
2,394,516
Other income
Mortgage banking revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service charges on deposit accounts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokerage services income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account and foreign exchange gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on bank investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other-than-temporary impairment (“OTTI”) losses . . . . . . . . . . . . . . . . . . .
Portion of OTTI losses recognized in other comprehensive income (before
362,912
427,956
508,258
67,212
29,874
—
—
taxes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Net OTTI losses recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of Bayview Lending Group LLC . . . . . . . . . . . . . . . . . . . . . . . .
Other revenues from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(16,672)
399,733
331,265
446,941
496,008
65,647
40,828
56,457
(1,884)
(7,916)
(9,800)
(16,126)
453,985
349,064
446,698
471,852
59,059
35,634
9
(32,067)
(15,755)
(47,822)
(21,511)
374,287
Total other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,779,273
1,865,205
1,667,270
Other expense
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and net occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing, postage and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of core deposit and other intangible assets . . . . . . . . . . . . . . . . . . . .
FDIC assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,404,950
269,299
38,201
33,824
55,531
941,052
1,355,178
264,327
39,557
46,912
69,584
860,327
1,314,540
257,551
41,929
60,631
101,110
733,499
Total other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,742,857
2,635,885
2,509,260
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,588,862
522,616
1,717,549
579,069
1,552,526
523,028
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,066,246
$1,138,480
$1,029,498
Net income available to common shareholders
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 978,531
978,581
$1,062,429
1,062,496
$ 953,390
953,429
Net income per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7.47
7.42
$
8.26
8.20
$
7.57
7.54
See accompanying notes to financial statements.
99
M & T B A N K C O R P O R A T I O N A N D S U B S I D I A R I E S
Consolidated Statement of Comprehensive Income
(In thousands)
Year Ended December 31
2014
2013
2012
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,066,246 $1,138,480 $1,029,498
Other comprehensive income, net of tax and reclassification
adjustments:
Net unrealized gains (losses) on investment securities . . . . . . . . . .
Cash flow hedges adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans liability adjustments . . . . . . . . . . . . . . . . . . .
93,275
(96)
(2,607)
(207,407)
(2,865)
—
381
178,589
114,825
(112)
519
945
Total other comprehensive income (loss) . . . . . . . . . . . . . . . .
(116,835)
176,105
116,177
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 949,411 $1,314,585 $1,145,675
See accompanying notes to financial statements.
100
M & T B A N K C O R P O R A T I O N A N D S U B S I D I A R I E S
Consolidated Statement of Cash Flows
(In thousands)
Cash flows from operating activities
Year Ended December 31
2014
2013
2012
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,066,246 $ 1,138,480 $ 1,029,498
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of capitalized servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of core deposit and other intangible assets
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on sales of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in accrued interest receivable, payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in other accrued income and expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in loans originated for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in trading account assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124,000
96,496
68,410
33,824
92,848
6,593
(6,859)
15,163
(68,722)
(350,581)
21,623
185,000
91,469
65,354
46,912
139,785
17,918
(127,890)
(10,523)
71,523
(674,062)
(11,642)
204,000
84,375
59,555
60,631
131,858
63,790
(6,868)
(13,898)
(200,704)
(924,839)
12,583
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,099,041
932,324
499,981
Cash flows from investing activities
Proceeds from sales of investment securities
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
23,445
1,081,802
13,172
49,528
78,071
Proceeds from maturities of investment securities
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
998,413
468,999
1,034,564
287,837
1,585,260
329,279
Purchases of investment securities
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (increase) decrease in loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (increase) decrease in interest-bearing deposits at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in loan servicing advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
(5,347,145)
(21,283)
(53,606)
(2,421,162)
(4,819,729)
(73,161)
(484,689)
19,531
(197,931)
(1,977,064)
(9,105)
123,120
(1,521,193)
(129,563)
(1,004,923)
95,706
(28,161)
(285,125)
(13,833)
(5,672,747)
25,015
(91,519)
(69,084)
32,458
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11,710,371)
(2,203,578)
(4,060,858)
Cash flows from financing activities
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid — common . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid — preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
6,466,697
(67,779)
4,345,478
(426,275)
(371,199)
(70,234)
346,500
88,565
1,513,884
(814,027)
799,760
(261,212)
(365,349)
(53,450)
—
137,967
6,230,391
292,422
—
(2,080,167)
(357,717)
(53,450)
—
63,616
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,311,753
957,573
4,095,095
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(299,577)
1,672,934
(313,681)
1,986,615
534,218
1,452,397
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,373,357 $ 1,672,934 $ 1,986,615
Supplemental disclosure of cash flow information
Interest received during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,893,153 $ 2,894,699 $ 2,931,409
371,887
Interest paid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
405,598
Income taxes paid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257,553
411,912
301,734
389,008
Supplemental schedule of noncash investing and financing activities
Securitization of residential mortgage loans allocated to
Available-for-sale investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Held-to-maturity investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate acquired in settlement of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134,698 $ 1,690,490 $
— 1,245,444
30,879
44,804
1,760
43,821
—
—
—
48,932
See accompanying notes to financial statements.
101
M & T B A N K C O R P O R A T I O N A N D S U B S I D I A R I E S
Consolidated Statement of Changes in Shareholders’ Equity
(In thousands, except per share)
Preferred
Stock
Common
Stock
Common
Stock
Issuable
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss),
Net
2012
Balance — January 1, 2012 . . . . . . . . . . . . . . . . . . . . . $ 864,585
—
Total comprehensive income . . . . . . . . . . . . . . . . . . .
—
Preferred stock cash dividends . . . . . . . . . . . . . . . . . .
Amortization of preferred stock discount . . . . . . . . . .
7,915
Stock-based compensation plans:
62,842
—
—
—
4,072
—
—
—
2,828,986 5,867,165
— 1,029,498
— (53,450)
— (7,915)
(356,441)
116,177
—
—
Compensation expense, net . . . . . . . . . . . . . . . . . . .
Exercises of stock options, net . . . . . . . . . . . . . . . . .
Stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . .
Directors’ stock plan . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation plans, net, including
dividend equivalents . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock cash dividends — $2.80 per share . . .
—
—
—
—
—
—
—
229
928
75
9
5
—
—
—
—
—
—
(599)
—
—
47,937
135,017
10,042
1,471
—
—
—
—
593
1,474
(160)
—
— (357,862)
—
—
—
—
—
—
—
Total
9,271,209
1,145,675
(53,450)
—
48,166
135,945
10,117
1,480
(161)
1,474
(357,862)
64,088
3,473
3,025,520 6,477,276
(240,264)
10,202,593
Balance — December 31, 2012 . . . . . . . . . . . . . . . . . . $ 872,500
2013
Total comprehensive income . . . . . . . . . . . . . . . . . . .
Preferred stock cash dividends . . . . . . . . . . . . . . . . . .
Amortization of preferred stock discount . . . . . . . . . .
Exercise of 407,542 Series C stock warrants into
—
—
9,000
186,589 shares of common stock . . . . . . . . . . . . . . .
Exercise of 69,127 Series A stock warrants into
25,427 shares of common stock . . . . . . . . . . . . . . . .
Stock-based compensation plans:
Compensation expense, net . . . . . . . . . . . . . . . . . . .
Exercises of stock options, net . . . . . . . . . . . . . . . . .
Directors’ stock plan . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation plans, net, including
dividend equivalents . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock cash dividends — $2.80 per share . . .
—
—
—
—
—
—
—
—
Balance — December 31, 2013 . . . . . . . . . . . . . . . . . . $ 881,500
2014
Total comprehensive income . . . . . . . . . . . . . . . . . . .
Preferred stock cash dividends . . . . . . . . . . . . . . . . . .
Issuance of Series E preferred stock . . . . . . . . . . . . . . .
Exercise of 427,905 Series A stock warrants into
—
—
350,000
169,543 shares of common stock . . . . . . . . . . . . . . .
Stock-based compensation plans:
Compensation expense, net . . . . . . . . . . . . . . . . . . .
Exercises of stock options, net . . . . . . . . . . . . . . . . .
Stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . .
Directors’ stock plan . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation plans, net, including
dividend equivalents . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock cash dividends — $2.80 per share . . .
—
—
—
—
—
—
—
—
—
—
—
93
13
137
914
8
5
—
—
—
—
—
85
128
633
43
7
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 1,138,480
— (53,450)
— (9,000)
176,105
—
—
1,314,585
(53,450)
—
(93)
(13)
37,890
163,891
1,636
—
—
—
—
—
(558)
—
—
575
2,608
(131)
—
— (365,171)
—
—
—
—
—
—
—
—
—
—
38,027
164,805
1,644
(109)
2,608
(365,171)
— 1,066,246
— (75,878)
—
(3,500)
(116,835)
—
—
(85)
45,306
122,476
9,545
1,658
—
—
—
—
—
(307)
—
—
345
1,747
(116)
—
— (371,137)
—
—
—
—
—
—
—
—
949,411
(75,878)
346,500
—
45,434
123,109
9,588
1,665
(75)
1,747
(371,137)
65,258
2,915
3,232,014 7,188,004
(64,159)
11,305,532
Balance — December 31, 2014 . . . . . . . . . . . . . . . . . . $1,231,500
66,157
2,608
3,409,506 7,807,119
(180,994)
12,335,896
See accompanying notes to financial statements.
102
M & T B A N K C O R P O R A T I O N A N D S U B S I D I A R I E S
Notes to Financial Statements
Significant accounting policies
1.
M&T Bank Corporation (“M&T”) is a bank holding company headquartered in Buffalo, New York.
Through subsidiaries, M&T provides individuals, corporations and other businesses, and institutions with
commercial and retail banking services, including loans and deposits, trust, mortgage banking, asset
management, insurance and other financial services. Banking activities are largely focused on consumers
residing in New York State, Pennsylvania, Maryland, Delaware, Virginia and the District of Columbia and
on small and medium-size businesses based in those areas. Banking services are also provided in West
Virginia and New Jersey, while certain subsidiaries also conduct activities in other areas.
The accounting and reporting policies of M&T and subsidiaries (“the Company”) conform to
generally accepted accounting principles (“GAAP”) and to general practices within the banking industry.
The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. The more significant
accounting policies are as follows:
Consolidation
The consolidated financial statements include M&T and all of its subsidiaries. All significant intercompany
accounts and transactions of consolidated subsidiaries have been eliminated in consolidation. The financial
statements of M&T included in note 25 report investments in subsidiaries under the equity method.
Information about some limited purpose entities that are affiliates of the Company but are not included in
the consolidated financial statements appears in note 19.
Consolidated Statement of Cash Flows
For purposes of this statement, cash and due from banks and federal funds sold are considered cash and
cash equivalents.
Securities purchased under agreements to resell and securities sold under agreements to repurchase
Securities purchased under agreements to resell and securities sold under agreements to repurchase are
treated as collateralized financing transactions and are recorded at amounts equal to the cash or other
consideration exchanged. It is generally the Company’s policy to take possession of collateral pledged to
secure agreements to resell.
Trading account
Financial instruments used for trading purposes are stated at fair value. Realized gains and losses and
unrealized changes in fair value of financial instruments utilized in trading activities are included in “trading
account and foreign exchange gains” in the consolidated statement of income.
Investment securities
Investments in debt securities are classified as held to maturity and stated at amortized cost when
management has the positive intent and ability to hold such securities to maturity. Investments in other debt
securities and equity securities having readily determinable fair values are classified as available for sale and
stated at estimated fair value. Amortization of premiums and accretion of discounts for investment
securities available for sale and held to maturity are included in interest income.
Other securities are stated at cost and include stock of the Federal Reserve Bank of New York and the
Federal Home Loan Bank (“FHLB”) of New York.
The cost basis of individual securities is written down through a charge to earnings when declines in
value below amortized cost are considered to be other than temporary. In cases where fair value is less than
amortized cost and the Company intends to sell a debt security, it is more likely than not to be required to
sell a debt security before recovery of its amortized cost basis, or the Company does not expect to recover
the entire amortized cost basis of a debt security, an other-than-temporary impairment is considered to have
occurred. If the Company intends to sell the debt security or more likely than not will be required to sell the
103
security before recovery of its amortized cost basis, the other-than-temporary impairment is recognized in
earnings equal to the entire difference between the debt security’s amortized cost basis and its fair value. If
the Company does not expect to recover the entire amortized cost basis of the security, the Company does
not intend to sell the security and it is not more likely than not that the Company will be required to sell the
security before recovery of its amortized cost basis, the other-than-temporary impairment is separated into
(a) the amount representing the credit loss and (b) the amount related to all other factors. The amount of
the other-than-temporary impairment related to the credit loss is recognized in earnings while the amount
related to other factors is recognized in other comprehensive income, net of applicable taxes. Subsequently,
the Company accounts for the other-than-temporarily impaired debt security as if the security had been
purchased on the measurement date of the other-than-temporary impairment at an amortized cost basis
equal to the previous amortized cost basis less the other-than-temporary impairment recognized in
earnings. The cost basis of individual equity securities is written down to estimated fair value through a
charge to earnings when declines in value below cost are considered to be other than temporary. Realized
gains and losses on the sales of investment securities are determined using the specific identification
method.
Loans and leases
The Company’s accounting methods for loans depends on whether the loans were originated by the
Company or were acquired in a business combination.
Originated loans and leases
Interest income on loans is accrued on a level yield method. Loans are placed on nonaccrual status and
previously accrued interest thereon is charged against income when principal or interest is delinquent 90 days,
unless management determines that the loan status clearly warrants other treatment. Nonaccrual commercial
loans and commercial real estate loans are returned to accrual status when borrowers have demonstrated an
ability to repay their loans and there are no delinquent principal and interest payments. Consumer loans not
secured by residential real estate are returned to accrual status when all past due principal and interest
payments have been paid by the borrower. Loans secured by residential real estate are returned to accrual
status when they are deemed to have an insignificant delay in payments of 90 days or less. Loan balances are
charged off when it becomes evident that such balances are not fully collectible. For commercial loans and
commercial real estate loans, charge-offs are recognized after an assessment by credit personnel of the capacity
and willingness of the borrower to repay, the estimated value of any collateral, and any other potential sources
of repayment. A charge-off is recognized when, after such assessment, it becomes evident that the loan balance
is not fully collectible. For loans secured by residential real estate, the excess of the loan balances over the net
realizable value of the property collateralizing the loan is charged-off when the loan becomes 150 days
delinquent. Consumer loans are generally charged-off when the loans are 91 to 180 days past due, depending
on whether the loan is collateralized and the status of repossession activities with respect to such collateral.
Loan fees and certain direct loan origination costs are deferred and recognized as an interest yield adjustment
over the life of the loan. Net deferred fees have been included in unearned discount as a reduction of loans
outstanding. Commitments to sell real estate loans are utilized by the Company to hedge the exposure to
changes in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for sale
recorded in the consolidated balance sheet includes changes in estimated fair market value during the hedge
period, typically from the date of close through the sale date. Valuation adjustments made on these loans and
commitments are included in “mortgage banking revenues.”
Except for consumer and residential mortgage loans that are considered smaller balance homogenous
loans and are evaluated collectively, the Company considers a loan to be impaired for purposes of applying
GAAP when, based on current information and events, it is probable that the Company will be unable to
collect all amounts according to the contractual terms of the loan agreement or the loan is delinquent 90 days.
Regardless of loan type, the Company considers a loan to be impaired if it qualifies as a troubled debt
restructuring. Impaired loans are classified as either nonaccrual or as loans renegotiated at below market rates
which continue to accrue interest, provided that a credit assessment of the borrower’s financial condition
results in an expectation of full repayment under the modified contractual terms. Certain loans greater than
90 days delinquent are not considered impaired if they are well-secured and in the process of collection. Loans
less than 90 days delinquent are deemed to have an insignificant delay in payment and are generally not
considered impaired. Impairment of a loan is measured based on the present value of expected future cash
flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of
104
collateral if the loan is collateral-dependent. Interest received on impaired loans placed on nonaccrual status is
generally applied to reduce the carrying value of the loan or, if principal is considered fully collectible,
recognized as interest income.
Residual value estimates for commercial leases are generally determined through internal or external
reviews of the leased property. The Company reviews commercial lease residual values at least annually and
recognizes residual value impairments deemed to be other than temporary.
Loans and leases acquired in a business combination
Loans acquired in a business combination subsequent to December 31, 2008 are recorded at fair value with
no carry-over of an acquired entity’s previously established allowance for credit losses. The excess of cash
flows expected at acquisition over the estimated fair value of acquired loans is recognized as interest income
over the remaining lives of the loans. Subsequent decreases in the expected principal cash flows require the
Company to evaluate the need for additions to the Company’s allowance for credit losses. Subsequent
improvements in expected cash flows result first in the recovery of any related allowance for credit losses
and then in recognition of additional interest income over the then-remaining lives of the loans.
Purchased impaired loans represent specifically identified loans with evidence of credit deterioration
for which it was probable at acquisition that the Company would be unable to collect all contractual
principal and interest payments.
Allowance for credit losses
The allowance for credit losses represents, in management’s judgment, the amount of losses inherent in the
loan and lease portfolio as of the balance sheet date. The allowance is determined by management’s
evaluation of the loan and lease portfolio based on such factors as the differing economic risks associated
with each loan category, the current financial condition of specific borrowers, the economic environment in
which borrowers operate, the level of delinquent loans, the value of any collateral and, where applicable, the
existence of any guarantees or indemnifications. The effects of probable decreases in expected principal cash
flows on acquired loans are also considered in the establishment of the allowance for credit losses.
Assets taken in foreclosure of defaulted loans
Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real
property and are included in “other assets” in the consolidated balance sheet. Upon acquisition of assets
taken in satisfaction of a defaulted loan, the excess of the remaining loan balance over the asset’s estimated
fair value less costs to sell is charged-off against the allowance for credit losses. Subsequent declines in value
of the assets are recognized as “other costs of operations” in the consolidated statement of income.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed
principally using the straight-line method over the estimated useful lives of the assets.
Capitalized servicing rights
Capitalized servicing assets are included in “other assets” in the consolidated balance sheet. Separately
recognized servicing assets are initially measured at fair value. The Company uses the amortization method
to subsequently measure servicing assets. Under that method, capitalized servicing assets are charged to
expense in proportion to and over the period of estimated net servicing income.
To estimate the fair value of servicing rights, the Company considers market prices for similar assets
and the present value of expected future cash flows associated with the servicing rights calculated using
assumptions that market participants would use in estimating future servicing income and expense. Such
assumptions include estimates of the cost of servicing loans, loan default rates, an appropriate discount rate,
and prepayment speeds. For purposes of evaluating and measuring impairment of capitalized servicing
rights, the Company stratifies such assets based on the predominant risk characteristics of the underlying
financial instruments that are expected to have the most impact on projected prepayments, cost of servicing
and other factors affecting future cash flows associated with the servicing rights. Such factors may include
financial asset or loan type, note rate and term. The amount of impairment recognized is the amount by
which the carrying value of the capitalized servicing rights for a stratum exceeds estimated fair value.
Impairment is recognized through a valuation allowance.
105
Sales and securitizations of financial assets
Transfers of financial assets for which the Company has surrendered control of the financial assets are
accounted for as sales. Interests in a sale of financial assets that continue to be held by the Company,
including servicing rights, are measured at fair value. The fair values of retained debt securities are generally
determined through reference to independent pricing information. The fair values of retained servicing
rights and any other retained interests are determined based on the present value of expected future cash
flows associated with those interests and by reference to market prices for similar assets.
Securitization structures typically require the use of special-purpose trusts that are considered
variable interest entities. A variable interest entity is included in the consolidated financial statements if the
Company has the power to direct the activities that most significantly impact the variable interest entity’s
economic performance and has the obligation to absorb losses or the right to receive benefits of the variable
interest entity that could potentially be significant to that entity.
Goodwill and core deposit and other intangible assets
Goodwill represents the excess of the cost of an acquired entity over the fair value of the identifiable net
assets acquired. Goodwill is not amortized, but rather is tested for impairment at least annually at the
reporting unit level, which is either at the same level or one level below an operating segment. Other
acquired intangible assets with finite lives, such as core deposit intangibles, are initially recorded at estimated
fair value and are amortized over their estimated lives. Core deposit and other intangible assets are generally
amortized using accelerated methods over estimated useful lives of five to ten years. The Company
periodically assesses whether events or changes in circumstances indicate that the carrying amounts of core
deposit and other intangible assets may be impaired.
Derivative financial instruments
The Company accounts for derivative financial instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable
cash flows of a forecasted transaction or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign currency
denominated forecasted transaction.
The Company utilizes interest rate swap agreements as part of the management of interest rate risk to
modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-bearing
liabilities. For such agreements, amounts receivable or payable are recognized as accrued under the terms of
the agreement and the net differential is recorded as an adjustment to interest income or expense of the
related asset or liability. Interest rate swap agreements may be designated as either fair value hedges or cash
flow hedges. In a fair value hedge, the fair values of the interest rate swap agreements and changes in the fair
values of the hedged items are recorded in the Company’s consolidated balance sheet with the
corresponding gain or loss recognized in current earnings. The difference between changes in the fair values
of interest rate swap agreements and the hedged items represents hedge ineffectiveness and is recorded in
“other revenues from operations” in the consolidated statement of income. In a cash flow hedge, the
effective portion of the derivative’s unrealized gain or loss is initially recorded as a component of other
comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects
earnings. The ineffective portion of the unrealized gain or loss is reported in “other revenues from
operations” immediately.
The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in the
fair value of real estate loans held for sale. Commitments to originate real estate loans to be held for sale and
commitments to sell real estate loans are generally recorded in the consolidated balance sheet at estimated
fair market value.
Derivative instruments not related to mortgage banking activities, including financial futures
commitments and interest rate swap agreements, that do not satisfy the hedge accounting requirements are
recorded at fair value and are generally classified as trading account assets or liabilities with resultant
changes in fair value being recognized in “trading account and foreign exchange gains” in the consolidated
statement of income.
106
Stock-based compensation
Stock-based compensation expense is recognized over the vesting period of the stock-based grant based on
the estimated grant date value of the stock-based compensation that is expected to vest, except that the
recognition of compensation costs is accelerated for stock-based awards granted to retirement-eligible
employees and employees who will become retirement-eligible prior to full vesting of the award because the
Company’s incentive compensation plan allows for vesting at the time an employee retires.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax effects attributable to differences between
the financial statement value of existing assets and liabilities and their respective tax bases and
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates and laws.
The Company evaluates uncertain tax positions using the two-step process required by GAAP. The
first step requires a determination of whether it is more likely than not that a tax position will be sustained
upon examination, including resolution of any related appeals or litigation processes, based on the technical
merits of the position. Under the second step, a tax position that meets the more-likely-than-not
recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of
being realized upon ultimate settlement.
Earnings per common share
Basic earnings per common share exclude dilution and are computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding (exclusive of shares
represented by the unvested portion of restricted stock and restricted stock unit grants) and common shares
issuable under deferred compensation arrangements during the period. Diluted earnings per common share
reflect shares represented by the unvested portion of restricted stock and restricted stock unit grants and the
potential dilution that could occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that then shared in earnings.
Proceeds assumed to have been received on such exercise or conversion are assumed to be used to purchase
shares of M&T common stock at the average market price during the period, as required by the “treasury
stock method” of accounting.
GAAP requires that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) shall be considered participating securities and
shall be included in the computation of earnings per common share pursuant to the two-class method. The
Company has issued stock-based compensation awards in the form of restricted stock and restricted stock
units that contain such rights and, accordingly, the Company’s earnings per common share are calculated
using the two-class method.
Treasury stock
Repurchases of shares of M&T common stock are recorded at cost as a reduction of shareholders’ equity.
Reissuances of shares of treasury stock are recorded at average cost.
2. Acquisitions
On August 27, 2012, M&T announced that it had entered into a definitive agreement with Hudson City
Bancorp, Inc. (“Hudson City”), headquartered in Paramus, New Jersey, under which Hudson City would be
acquired by M&T. Pursuant to the terms of the agreement, Hudson City shareholders will receive
consideration for each common share of Hudson City in an amount valued at .08403 of an M&T share in
the form of either M&T common stock or cash, based on the election of each Hudson City shareholder,
subject to proration as specified in the merger agreement (which provides for an aggregate split of total
consideration of 60% common stock of M&T and 40% cash). As of December 31, 2014 total consideration
to be paid was valued at approximately $5.4 billion.
At December 31, 2014, Hudson City had $36.6 billion of assets, including $21.7 billion of loans and
$7.9 billion of investment securities, and $31.8 billion of liabilities, including $19.4 billion of deposits. The
merger has received the approval of the common shareholders of M&T and Hudson City. However, the
merger is subject to a number of other conditions, including regulatory approvals.
On June 17, 2013, M&T and Manufacturers and Traders Trust Company (“M&T Bank”), M&T’s
principal banking subsidiary, entered into a written agreement with the Federal Reserve Bank of New York
107
(“Federal Reserve Bank”). Under the terms of the agreement, M&T and M&T Bank are required to submit
to the Federal Reserve Bank a revised compliance risk management program designed to ensure compliance
with the Bank Secrecy Act and anti-money-laundering laws and regulations and to take certain other steps
to enhance their compliance practices. The Company commenced a major initiative, including the hiring of
outside consulting firms, intended to fully address the Federal Reserve Bank’s concerns. In view of the
timeframe required to implement this initiative, demonstrate its efficacy to the satisfaction of the Federal
Reserve Bank and otherwise meet any other regulatory requirements that may be imposed in connection
with these matters, M&T and Hudson City have extended the date after which either party may elect to
terminate the merger agreement if the merger has not yet been completed to April 30, 2015. Nevertheless,
there can be no assurances that the merger will be completed by that date.
The Company incurred merger-related expenses in 2013 associated with the pending Hudson City
acquisition and in 2012 associated with the May 16, 2011 acquisition of Wilmington Trust Corporation
(“Wilmington Trust”) related to actual or planned systems conversions and other costs of integrating and
conforming acquired operations with and into the Company. Those expenses consisted largely of
professional services and other temporary help fees associated with the actual or planned conversion of
systems and/or integration of operations; costs related to branch and office consolidations; costs related to
termination of existing contractual arrangements for various services; initial marketing and promotion
expenses designed to introduce M&T Bank to its new customers; severance (for former employees of
Wilmington Trust) and incentive compensation costs; travel costs; and printing, postage, supplies and other
costs of planning for or completing the transactions and commencing operations in new markets and
offices.
There were no merger-related expenses during 2014. A summary of merger-related expenses
included in the consolidated statement of income for the years ended December 31, 2013 and 2012 follows:
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Equipment and net occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing, postage and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
2012
(In thousands)
836
690
1,825
9,013
$4,997
15
—
4,867
$12,364
$9,879
108
Investment securities
3.
The amortized cost and estimated fair value of investment securities were as follows:
December 31, 2014
Investment securities available for sale:
U.S. Treasury and federal agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(In thousands)
Estimated
Fair Value
161,408 $
8,027
544 $
224
5 $
53
161,947
8,198
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,507,571
104
30,073
138,240
73,901
223,889
2
21,276
1,896
11,020
337
3
1,033
18,648
1,164
8,731,123
103
50,316
121,488
83,757
Investment securities held to maturity:
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities:
8,919,324
258,851
21,243
9,156,932
148,961
2,551
189
151,323
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,149,320
201,733
7,854
78,485
1,143
—
7,000
44,576
—
3,220,805
158,300
7,854
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
328,742
—
—
328,742
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,755,934 $341,030 $ 73,008 $13,023,956
3,507,868
82,179
51,765
3,538,282
December 31, 2013
Investment securities available for sale:
U.S. Treasury and federal agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities:
37,396 $
10,484
382 $
333
2 $
6
37,776
10,811
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,123,435
1,468
42,274
137,828
91,480
61,001
387
21,666
1,722
41,842
19,350
5
857
19,465
227
4,165,086
1,850
63,083
120,085
133,095
Investment securities held to maturity:
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities:
4,444,365
127,333
39,912
4,531,786
169,684
3,744
135
173,293
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,567,905
219,628
8,913
16,160
65,149
— 60,623
—
—
3,518,916
159,005
8,913
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
298,581
—
—
298,581
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,709,076 $147,237 $165,819 $ 8,690,494
3,966,130
19,904
125,907
3,860,127
109
No investment in securities of a single non-U.S. Government or government agency issuer exceeded
ten percent of shareholders’ equity at December 31, 2014.
As of December 31, 2014, the latest available investment ratings of all obligations of states and
political subdivisions, privately issued mortgage-backed securities, collateralized debt obligations and other
debt securities were:
Amortized
Cost
Estimated
Fair Value
Average Credit Rating of Fair Value Amount
A or Better
BBB
BB
B or Less Not Rated
(In thousands)
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . $156,988 $159,521 $137,606 $ — $ — $
— $21,915
Privately issued mortgage-backed
securities . . . . . . . . . . . . . . . . . . . . . . . . 201,837
30,073
Collateralized debt obligations . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . 146,094
158,403
50,316
129,342
48,368
6,629
12,352
19
1,273
5,488
58,481 29,028
— 109,949
36,926
20,400
67
—
9,081
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $534,992 $497,582 $204,955 $63,988 $30,301 $167,275 $31,063
The amortized cost and estimated fair value of collateralized mortgage obligations included in
mortgage-backed securities were as follows:
December 31
2014
2013
(In thousands)
Collateralized mortgage obligations:
Amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $209,107
165,860
Estimated fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$231,040
171,100
Gross realized gains from sales of investment securities were $116,490,000 in 2013. During 2013, the
Company sold its holdings of Visa Class B shares for a gain of $89,545,000 and its holdings of MasterCard
Class B shares for a gain of $13,208,000. Gross realized losses on investment securities were $60,033,000 in
2013. The Company sold substantially all of its privately issued mortgage-backed securities held in the
available-for-sale investment securities portfolio during 2013. In total, $1.0 billion of such securities were
sold for a net loss of approximately $46,302,000. Gross realized gains and losses from sales of investment
securities were not significant in 2014 or 2012.
The Company recognized $10 million and $48 million of pre-tax other-than-temporary impairment
losses related to privately issued mortgage-backed securities in 2013 and 2012, respectively. The impairment
charges were recognized in light of deterioration of real estate values and a rise in delinquencies and charge-
offs of underlying mortgage loans collateralizing those securities. The other-than-temporary impairment
losses represented management’s estimate of credit losses inherent in the debt securities considering
projected cash flows using assumptions for delinquency rates, loss severities, and other estimates of future
collateral performance. There were no other-than-temporary impairment losses in 2014.
110
At December 31, 2014, the amortized cost and estimated fair value of debt securities by contractual
maturity were as follows:
Amortized
Cost
Estimated
Fair Value
(In thousands)
Debt securities available for sale:
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after five years through ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,412 $
164,412
3,524
162,400
7,468
165,340
3,577
165,564
Mortgage-backed securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
337,748
8,507,675
341,949
8,731,226
$8,845,423 $9,073,175
Debt securities held to maturity:
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after five years through ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,107 $
84,112
41,742
7,854
23,254
85,457
42,612
7,854
Mortgage-backed securities held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
156,815
3,351,053
159,177
3,379,105
$3,507,868 $3,538,282
111
A summary of investment securities that as of December 31, 2014 and 2013 had been in a continuous
unrealized loss position for less than twelve months and those that had been in a continuous unrealized loss
position for twelve months or longer follows:
Less Than 12 Months
12 Months or More
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
(In thousands)
December 31, 2014
Investment securities available for sale:
U.S. Treasury and federal agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities:
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities held to maturity:
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities:
6,505 $
1,785
(5) $
(52)
— $
121
—
(1)
39,001
—
2,108
14,017
2,138
(186)
—
(696)
(556)
(1,164)
5,555
65
5,512
92,661
—
(151)
(3)
(337)
(18,092)
—
65,554
(2,659)
103,914
(18,584)
29,886
(184)
268
(5)
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137,413
—
(361)
446,780
— 127,512
(6,639)
(44,576)
167,299
(545)
574,560
(51,220)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 232,853 $ (3,204) $678,474 $(69,804)
December 31, 2013
Investment securities available for sale:
U.S. Treasury and federal agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities:
745 $
—
(2) $
—
— $
558
—
(6)
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,697,094
—
—
1,428
159
(19,225)
—
—
(4)
(227)
5,815
98
6,257
103,602
—
(125)
(5)
(857)
(19,461)
—
Investment securities held to maturity:
Obligations of states and political subdivisions . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities:
1,699,426
(19,458)
116,330
(20,454)
13,517
(120)
1,558
(15)
Government issued or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,629,950
—
(65,149)
—
— 159,005
—
(60,623)
2,643,467
(65,269)
160,563
(60,638)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,342,893 $(84,727) $276,893 $(81,092)
The Company owned 296 individual investment securities with aggregate gross unrealized losses of
$73 million at December 31, 2014. Based on a review of each of the securities in the investment securities
portfolio at December 31, 2014, the Company concluded that it expected to recover the amortized cost basis
112
of its investment. As of December 31, 2014, the Company does not intend to sell nor is it anticipated that it
would be required to sell any of its impaired investment securities at a loss. At December 31, 2014, the
Company has not identified events or changes in circumstances which may have a significant adverse effect
on the fair value of the $329 million of cost method investment securities.
At December 31, 2014, investment securities with a carrying value of $3,825,003,000, including
$2,905,457,000 of investment securities available for sale, were pledged to secure borrowings from various
FHLBs, repurchase agreements, governmental deposits, interest rate swap agreements and available lines of
credit as described in note 9.
Investment securities pledged by the Company to secure obligations whereby the secured party is
permitted by contract or custom to sell or repledge such collateral totaled $1,631,267,000 at December 31,
2014. The pledged securities included securities of the U.S. Treasury and federal agencies and mortgage-
backed securities.
4. Loans and leases
Total loans and leases outstanding were comprised of the following:
December 31
2014
2013
(In thousands)
Loans
Commercial, financial, etc.
Real estate:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,280,049 $17,477,238
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,636,794
22,614,174
5,061,269
10,969,879
8,911,554
21,799,886
4,457,650
10,280,527
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,562,165
62,926,855
Leases
Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,337,204
1,398,928
Total loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: unearned discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,899,369
(230,413)
64,325,783
(252,624)
Total loans and leases, net of unearned discount . . . . . . . . . . . . . . . . . . . . . . . . . . $66,668,956 $64,073,159
One-to-four family residential mortgage loans held for sale were $435 million at December 31, 2014
and $401 million at December 31, 2013. Commercial real estate loans held for sale were $308 million at
December 31, 2014 and $68 million at December 31, 2013.
During 2013, the Company securitized approximately $1.3 billion of one-to-four family residential
real estate loans previously held in the Company’s loan portfolio into guaranteed mortgage-backed
securities with the Government National Mortgage Association (“Ginnie Mae”) and recognized gains of
$42,382,000. In addition, the Company securitized and sold in 2013 approximately $1.4 billion of
automobile loans held in its loan portfolio, resulting in a gain of $20,683,000.
As of December 31, 2014, approximately $2.4 billion of commercial real estate loan balances serviced
for others had been sold with recourse in conjunction with the Company’s participation in the Fannie Mae
Delegated Underwriting and Servicing (“DUS”) program. At December 31, 2014, the Company estimated
that the recourse obligations described above were not material to the Company’s consolidated financial
position. There have been no material losses incurred as a result of those credit recourse arrangements.
In addition to recourse obligations, as described in note 21, the Company is contractually obligated
to repurchase previously sold residential real estate loans that do not ultimately meet investor sale criteria
related to underwriting procedures or loan documentation. When required to do so, the Company may
reimburse loan purchasers for losses incurred or may repurchase certain loans. Charges incurred for such
obligation, which are recorded as a reduction of mortgage banking revenues, were $4 million, $17 million
and $28 million in 2014, 2013 and 2012, respectively.
113
The outstanding principal balance and the carrying amount of acquired loans that were recorded at
fair value at the acquisition date that is included in the consolidated balance sheet were as follows:
December 31
2014
2013
(In thousands)
Outstanding principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,070,268
Carrying amount:
$4,656,811
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial, financial, leasing, etc.
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247,820
961,828
453,360
933,537
580,685
1,541,368
576,473
1,308,926
$2,596,545
$4,007,452
Purchased impaired loans included in the table above totaled $198 million at December 31, 2014 and
$331 million at December 31, 2013, representing less than 1% of the Company’s assets as of each date. A
summary of changes in the accretable yield for acquired loans for the years ended December 31, 2014, 2013
and 2012 follows:
For Year Ended December 31,
2014
2013
2012
Purchased
Impaired
Other
Acquired
Purchased
Impaired
Other
Acquired
Purchased
Impaired
Other
Acquired
Balance at beginning of period . . $ 37,230
(21,263)
Interest income . . . . . . . . . . . . . .
Reclassifications from
nonaccretable balance, net . . .
Other(a) . . . . . . . . . . . . . . . . . . .
60,551
—
(In thousands)
$ 538,633
(178,670)
$ 42,252
(36,727)
$ 638,272
(247,295)
$ 30,805
(40,551)
$ 807,960
(295,654)
24,907
12,509
31,705
—
149,595
(1,939)
51,998
—
148,490
(22,524)
Balance at end of period . . . . . . . $ 76,518
$ 397,379
$ 37,230
$ 538,633
$ 42,252
$ 638,272
(a) Other changes in expected cash flows including changes in interest rates and prepayment assumptions.
114
A summary of current, past due and nonaccrual loans as of December 31, 2014 and 2013 follows:
90 Days or More Past
Due and Accruing
Current
30-89 Days
Past Due
Non-
acquired Acquired(a)
Purchased
Impaired(b) Nonaccrual
Total
(In thousands)
December 31, 2014
Commercial, financial,
leasing, etc. . . . . . . . . . . . . . $19,228,265 $ 37,246 $
1,805 $
6,231 $ 10,300 $177,445 $19,461,292
Real estate:
Commercial
Residential builder and
. . . . . . . . . . . . 22,208,491
118,704
22,170
14,662
51,312
141,600
22,556,939
developer . . . . . . . . . . . .
1,273,607
11,827
492
9,350
98,347
71,517
1,465,140
Other commercial
construction . . . . . . . . . .
. . . . . . . . . . . . .
Residential
Residential Alt-A . . . . . . . .
Consumer:
Home equity lines and
loans . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . .
3,484,932
17,678
7,640,368 226,932
11,774
249,810
—
216,489
—
— 17,181
18,223
25,699
180,275
— 77,704
35,726
—
3,545,490
8,318,013
339,288
5,859,378
1,931,138
2,909,791
42,945
30,500
33,295
— 27,896
133
—
16,369
4,064
2,374
89,291
— 17,578
— 18,042
6,021,884
1,979,349
2,981,561
Total . . . . . . . . . . . . . . . . . . . . $64,785,780 $530,901 $245,020 $110,367 $197,737 $799,151 $66,668,956
December 31, 2013
Commercial, financial,
leasing, etc. . . . . . . . . . . . . . $18,489,474 $ 77,538 $
4,981 $
6,778 $ 15,706 $110,739 $18,705,216
Real estate:
Commercial
Residential builder and
. . . . . . . . . . . . 21,236,071
145,749
63,353
35,603
88,034
173,048
21,741,858
developer . . . . . . . . . . . .
1,025,984
8,486
141
7,930
137,544
96,427
1,276,512
Other commercial
construction . . . . . . . . . .
Residential
. . . . . . . . . . . . .
Residential Alt-A . . . . . . . .
Consumer:
Home equity lines and
loans . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . .
2,986,598
42,234
7,630,368 295,131
18,009
283,253
— 8,031
43,700
—
294,649
—
57,707
29,184
35,268
252,805
— 81,122
3,129,838
8,545,837
382,384
5,972,365
1,314,246
2,726,522
40,537
29,144
47,830
— 27,754
366
—
—
5,386
2,617
78,516
— 21,144
— 25,087
6,121,789
1,364,900
2,804,825
Total . . . . . . . . . . . . . . . . . . . . $61,664,881 $704,658 $368,510 $130,162 $330,792 $874,156 $64,073,159
(a) Acquired loans that were recorded at fair value at acquisition date. This category does not include purchased
impaired loans that are presented separately.
(b) Accruing loans that were impaired at acquisition date and were recorded at fair value.
If nonaccrual and renegotiated loans had been accruing interest at their originally contracted terms,
interest income on such loans would have amounted to $58,314,000 in 2014, $62,010,000 in 2013 and
$69,054,000 in 2012. The actual amounts included in interest income during 2014, 2013 and 2012 on such
loans were $28,492,000, $31,987,000 and $30,484,000, respectively.
115
During the normal course of business, the Company modifies loans to maximize recovery efforts. If
the borrower is experiencing financial difficulty and a concession is granted, the Company considers such
modifications as troubled debt restructurings and classifies those loans as either nonaccrual loans or
renegotiated loans. The types of concessions that the Company grants typically include principal deferrals
and interest rate concessions, but may also include other types of concessions.
The table below summarizes the Company’s loan modification activities that were considered
troubled debt restructurings for the year ended December 31, 2014:
Recorded Investment
Financial Effects of
Modification
Pre-
modifica-
tion
Post-
modifica-
tion
Recorded
Investment
(a)
Interest
(b)
Number
(Dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Real estate:
Commercial
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Residential builder and developer
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other commercial construction
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Residential Alt-A
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Consumer:
Home equity lines and loans
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Automobile
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Other
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
95
3
7
39
1
1
7
2
4
28
11
1
30
6
21
3
6
47
208
9
42
81
33
4
1
70
$ 29,035
29,912
19,167
$ 23,628
31,604
19,030
$(5,407)
1,692
(137)
$ —
—
(20)
19,077
255
650
1,152
18,997
252
—
1,198
1,639
1,639
6,703
6,611
2,710
1,146
188
4,211
880
3,806
280
535
5,031
3,293
152
255
1,189
245
293
45
2,502
2,905
1,222
188
4,287
963
3,846
280
535
5,031
3,293
152
255
1,189
245
293
45
2,502
(80)
(3)
(650)
46
—
(92)
195
76
—
76
83
40
—
—
—
—
—
—
—
—
—
—
—
—
(48)
—
(264)
—
—
—
(152)
—
(483)
—
(386)
—
(120)
(560)
—
(12)
—
(100)
—
(63)
—
(761)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
760
$134,351
$130,190
$(4,161)
$(2,969)
(a) Financial effects impacting the recorded investment included principal payments or advances, charge-offs and
capitalized escrow arrearages.
(b) Represents the present value of interest rate concessions discounted at the effective rate of the original loan.
116
The table below summarizes the Company’s loan modification activities that were considered
troubled debt restructurings for the year ended December 31, 2013:
Commercial, financial, leasing, etc.
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Real estate:
Commercial
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Residential builder and developer
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Other commercial construction
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Residential Alt-A
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Consumer:
Home equity lines and loans
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Automobile
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Other
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . . . . .
Recorded Investment
Financial Effects of
Modification
Pre-
modifica-
tion
Post-
modifica-
tion
Recorded
Investment
(a)
Interest
(b)
Number
(Dollars in thousands)
79
1
4
11
27
2
9
18
1
3
3
32
1
61
10
19
10
1
1
28
460
15
78
225
36
1
2
120
$ 16,389
104
50,433
6,229
$ 16,002
335
50,924
5,578
$ (387)
231
491
(651)
$ —
(54)
—
(458)
40,639
449
2,649
21,423
4,039
15,580
40,464
475
3,040
20,577
3,888
15,514
(175)
26
391
(846)
(151)
(66)
—
—
(250)
—
—
(535)
590
521
(69)
—
3,556
195
73,940
1,900
2,826
859
99
106
2,190
6,148
235
339
2,552
332
12
14
4,248
3,821
195
70,854
1,880
3,148
861
99
106
2,190
6,148
235
339
2,552
332
12
14
4,248
265
—
(3,086)
(20)
322
2
—
—
—
—
—
—
—
—
—
—
—
—
—
(924)
—
(790)
—
(8)
—
(270)
—
(22)
—
(191)
—
(2)
—
(1,187)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,258
$258,075
$254,352
$(3,723)
$(4,691)
(a) Financial effects impacting the recorded investment included principal payments or advances, charge-offs and
capitalized escrow arrearages.
(b) Represents the present value of interest rate concessions discounted at the effective rate of the original loan.
117
The table below summarizes the Company’s loan modification activities that were considered
troubled debt restructurings for the year ended December 31, 2012:
Recorded Investment
Financial Effects of
Modification
Pre-
modifica-
tion
Post-
modifica-
tion
Recorded
Investment
(a)
Interest
(b)
Number
(Dollars in thousands)
Commercial, financial, leasing, etc.
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . .
Real estate:
Commercial
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . .
Residential builder and developer
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . .
Other commercial construction
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . .
Residential Alt-A
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . .
Consumer:
Home equity lines and loans
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . .
Automobile
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . .
Other
Principal deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate reduction . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination of concession types . . . . . . . . . . . . . . . . .
61
3
5
24
2
7
23
7
6
36
1
62
7
38
15
1
29
618
22
67
375
80
22
13
84
$
23,888
2,967
628
$
22,456
3,052
740
$ (1,432)
85
112
$
—
—
(102)
22,855
665
1,637
36,868
37,602
23,059
708
1,656
34,740
36,148
204
43
19
(2,128)
(1,454)
81,062
79,312
(1,750)
4,643
109
12,886
968
8,525
1,285
144
2,332
8,347
328
300
5,857
1,201
515
54
1,015
4,808
109
13,146
989
8,717
1,285
144
2,332
8,347
328
300
5,857
1,201
515
54
1,015
165
—
260
21
192
—
—
—
—
—
—
—
—
—
—
—
—
(129)
(351)
—
—
—
—
(20)
(657)
—
(159)
—
(6)
(368)
—
(24)
—
(684)
—
(85)
—
(268)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,608
$256,681
$251,018
$(5,663)
$(2,853)
(a) Financial effects impacting the recorded investment included principal payments or advances, charge-offs and
capitalized escrow arrearages.
(b) Represents the present value of interest rate concessions discounted at the effective rate of the original loan.
Troubled debt restructurings are considered to be impaired loans and for purposes of establishing the
allowance for credit losses are evaluated for impairment giving consideration to the impact of the modified
loan terms on the present value of the loan’s expected cash flows. Impairment of troubled debt
restructurings that have subsequently defaulted may also be measured based on the loan’s observable market
price or the fair value of collateral if the loan is collateral-dependent. Charge-offs may also be recognized on
118
troubled debt restructurings that have subsequently defaulted. Loans that were modified as troubled debt
restructurings during the twelve months ended December 31, 2014, 2013 and 2012 and for which there was
a subsequent payment default during the respective period were not material.
Borrowings by directors and certain officers of M&T and its banking subsidiaries, and by associates
of such persons, exclusive of loans aggregating less than $120,000, amounted to $49,799,000 and
$135,512,000 at December 31, 2014 and 2013, respectively. During 2014, new borrowings by such persons
amounted to $12,327,000 (including any borrowings of new directors or officers that were outstanding at
the time of their election) and repayments and other reductions (including reductions resulting from
retirements) were $98,040,000.
At December 31, 2014, approximately $10.4 billion of commercial loans and leases, $9.7 billion of
commercial real estate loans, $5.3 billion of one-to-four family residential real estate loans, $4.3 billion of
home equity loans and lines of credit and $2.9 billion of other consumer loans were pledged to secure
outstanding borrowings from the FHLB of New York and available lines of credit as described in note 9.
The Company’s loan and lease portfolio includes commercial lease financing receivables consisting of
direct financing and leveraged leases for machinery and equipment, railroad equipment, commercial trucks
and trailers, and aircraft. A summary of lease financing receivables follows:
December 31
2014
2013
(In thousands)
Commercial leases:
Direct financings:
Lease payments receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,022,133
79,525
Estimated residual value of leased assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(103,777)
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,052,214
85,595
(114,101)
Investment in direct financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
997,881
1,023,708
Leveraged leases:
Lease payments receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated residual value of leased assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102,457
133,089
(44,288)
127,821
133,298
(47,188)
Investment in leveraged leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
191,258
213,931
Total investment in leases.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,189,139
$1,237,639
Deferred taxes payable arising from leveraged leases . . . . . . . . . . . . . . . . . . . . . . . . $ 169,101
$ 172,296
Included within the estimated residual value of leased assets at December 31, 2014 and 2013 were $48
million and $54 million, respectively, in residual value associated with direct financing leases that are
guaranteed by the lessees or others.
At December 31, 2014, the minimum future lease payments to be received from lease financings were as
follows:
Year ending December 31:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 268,086
242,248
177,539
127,985
92,205
216,527
$1,124,590
119
5. Allowance for credit losses
Changes in the allowance for credit losses for the years ended December 31, 2014, 2013 and 2012 were as
follows:
Commercial,
Financial,
Leasing, etc.
Real Estate
Commercial
Residential
Consumer
Unallocated
Total
(In thousands)
$ 273,383
51,410
$324,978
(13,779)
$ 78,656
(3,974)
$ 164,644
89,704
$75,015
639
$ 916,676
124,000
2014
Beginning balance . . . . . . . . . .
Provision for credit losses . . . .
Net charge-offs . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . .
2013
Beginning balance . . . . . . . . . .
Provision for credit losses . . . .
Allowance related to loans
sold or securitized . . . . . . . .
Net charge-offs
(58,943)
22,188
(14,058)
10,786
(21,351)
8,579
(84,390)
16,075
—
—
—
(178,742)
57,628
(121,114)
Net charge-offs . . . . . . . . . . . .
(36,755)
(3,272)
(12,772)
(68,315)
Ending balance . . . . . . . . . . . .
$ 288,038
$307,927
$ 61,910
$ 186,033
$75,654
$ 919,562
$ 246,759
124,180
$337,101
275
$ 88,807
3,149
$ 179,418
56,156
$73,775
1,240
$ 925,860
185,000
—
—
—
(11,000)
—
—
—
—
(11,000)
(253,510)
70,326
(183,184)
Charge-offs . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . .
(109,329)
11,773
(34,595)
22,197
(23,621)
10,321
(85,965)
26,035
Net charge-offs . . . . . . . . . . . .
(97,556)
(12,398)
(13,300)
(59,930)
Ending balance . . . . . . . . . . . .
$ 273,383
$324,978
$ 78,656
$ 164,644
$75,015
$ 916,676
2012
Beginning balance . . . . . . . . . .
Provision for credit losses . . . .
Net charge-offs
$ 234,022
42,510
$367,637
5,211
$ 91,915
34,864
$ 143,121
119,235
$71,595
2,180
$ 908,290
204,000
Charge-offs . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . .
(41,148)
11,375
(41,945)
6,198
(44,314)
6,342
(103,348)
20,410
Net charge-offs . . . . . . . . . . . .
(29,773)
(35,747)
(37,972)
(82,938)
—
—
—
(230,755)
44,325
(186,430)
Ending balance . . . . . . . . . . . .
$ 246,759
$337,101
$ 88,807
$ 179,418
$73,775
$ 925,860
Despite the above allocation, the allowance for credit losses is general in nature and is available to
absorb losses from any loan or lease type.
In establishing the allowance for credit losses, the Company estimates losses attributable to specific
troubled credits identified through both normal and detailed or intensified credit review processes and also
estimates losses inherent in other loans and leases on a collective basis. For purposes of determining the level
of the allowance for credit losses, the Company evaluates its loan and lease portfolio by loan type. The
amounts of loss components in the Company’s loan and lease portfolios are determined through a loan by
loan analysis of larger balance commercial and commercial real estate loans that are in nonaccrual status
and by applying loss factors to groups of loan balances based on loan type and management’s classification
of such loans under the Company’s loan grading system. Measurement of the specific loss components is
typically based on expected future cash flows, collateral values and other factors that may impact the
borrower’s ability to pay. In determining the allowance for credit losses, the Company utilizes a loan grading
system which is applied to commercial and commercial real estate credits on an individual loan basis. Loan
officers are responsible for continually assigning grades to these loans based on standards outlined in the
Company’s Credit Policy. Internal loan grades are also monitored by the Company’s loan review
department to ensure consistency and strict adherence to the prescribed standards. Loan grades are assigned
120
loss component factors that reflect the Company’s loss estimate for each group of loans and leases. Factors
considered in assigning loan grades and loss component factors include borrower-specific information
related to expected future cash flows and operating results, collateral values, geographic location, financial
condition and performance, payment status, and other information; levels of and trends in portfolio charge-
offs and recoveries; levels of and trends in portfolio delinquencies and impaired loans; changes in the risk
profile of specific portfolios; trends in volume and terms of loans; effects of changes in credit concentrations;
and observed trends and practices in the banking industry. As updated appraisals are obtained on individual
loans or other events in the market place indicate that collateral values have significantly changed, individual
loan grades are adjusted as appropriate. Changes in other factors cited may also lead to loan grade changes at
any time. Except for consumer and residential real estate loans that are considered smaller balance
homogenous loans and acquired loans that are evaluated on an aggregated basis, the Company considers a
loan to be impaired for purposes of applying GAAP when, based on current information and events, it is
probable that the Company will be unable to collect all amounts according to the contractual terms of the
loan agreement or the loan is delinquent 90 days. Regardless of loan type, the Company considers a loan to
be impaired if it qualifies as a troubled debt restructuring. Modified loans, including smaller balance
homogenous loans, that are considered to be troubled debt restructurings are evaluated for impairment
giving consideration to the impact of the modified loan terms on the present value of the loan’s expected
cash flows.
121
The following tables provide information with respect to loans and leases that were considered
impaired as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012.
December 31, 2014
December 31, 2013
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment
(In thousands)
Unpaid
Principal
Balance
Related
Allowance
With an allowance recorded:
Commercial, financial, leasing, etc.
. . . . . . . . . . . . . .
$132,340
$165,146
$31,779
$ 90,293
$ 112,092
$24,614
Real estate:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential builder and developer . . . . . . . . . . . . .
Other commercial construction . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,955
17,632
5,480
88,970
Residential Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . .
101,137
Consumer:
Home equity lines and loans . . . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,771
30,317
18,973
96,209
22,044
6,484
107,343
114,565
20,806
30,317
18,973
14,121
113,570
132,325
19,520
805
900
4,296
11,000
6,213
8,070
5,459
33,311
86,260
96,508
111,911
13,672
40,441
17,660
55,122
90,515
114,521
124,528
14,796
40,441
17,660
4,379
4,022
7,146
14,000
3,312
11,074
4,541
498,575
581,887
82,643
603,626
702,000
92,608
With no related allowance recorded:
Commercial, financial, leasing, etc.
. . . . . . . . . . . . . .
73,978
81,493
Real estate:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential builder and developer . . . . . . . . . . . . .
Other commercial construction . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,777
58,820
20,738
16,815
26,752
78,943
96,722
41,035
26,750
46,964
263,880
371,907
Total:
—
—
—
—
—
—
—
28,093
33,095
65,271
72,366
7,369
84,144
28,357
84,333
104,768
11,493
95,358
52,211
285,600
381,258
—
—
—
—
—
—
—
Commercial, financial, leasing, etc.
. . . . . . . . . . . . . .
206,318
246,639
31,779
118,386
145,187
24,614
Real estate:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150,732
Residential builder and developer . . . . . . . . . . . . .
Other commercial construction . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer:
Home equity lines and loans . . . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,452
26,218
105,785
127,889
19,771
30,317
18,973
175,152
118,766
47,519
134,093
161,529
20,806
30,317
18,973
14,121
805
900
4,296
11,000
6,213
8,070
5,459
178,841
105,677
93,629
180,652
140,268
13,672
40,441
17,660
216,658
159,890
102,008
209,879
176,739
14,796
40,441
17,660
19,520
4,379
4,022
7,146
14,000
3,312
11,074
4,541
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$762,455
$953,794
$82,643
$889,226
$1,083,258
$92,608
122
Year Ended
December 31, 2014
Year Ended
December 31, 2013
Average
Recorded
Investment
Interest Income
Recognized
Total
Cash
Basis
Average
Recorded
Investment
Interest Income
Recognized
Total
Cash
Basis
(In thousands)
Commercial, financial, leasing,
etc.
. . . . . . . . . . . . . . . . . . . . . . . . .
$181,932
$ 2,251
$ 2,251
$ 155,188
$ 7,197
$ 7,197
Real estate:
Commercial . . . . . . . . . . . . . . . . . .
Residential builder and
184,773
4,029
4,029
197,533
4,852
4,852
developer . . . . . . . . . . . . . . . . . .
91,149
142
142
147,288
1,043
796
Other commercial
construction . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . .
Residential Alt-A . . . . . . . . . . . . . .
62,734
126,005
133,800
Consumer:
Home equity lines and loans . . . . .
Automobile . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
18,083
35,173
18,378
1,893
9,180
6,613
750
2,251
690
1,893
6,978
2,546
248
295
191
96,475
183,059
149,461
12,811
44,116
15,710
5,248
6,203
6,784
683
2,916
634
5,248
4,111
2,341
183
515
208
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
$852,027
$27,799
$18,573
$1,001,641
$35,560
$25,451
Year Ended
December 31, 2012
Interest Income
Recognized
Commercial, financial, leasing, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 151,314
Real estate:
Average
Recorded
Investment
Total
(In thousands)
$ 2,938
Cash
Basis
$ 2,938
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential builder and developer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other commercial construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
Residential Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer:
Home equity lines and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
185,171
249,191
99,672
132,888
171,546
11,322
51,650
11,028
2,834
1,563
5,020
5,284
7,175
663
3,470
472
2,834
1,102
5,020
3,300
2,226
179
724
197
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,063,782
$29,419
$18,520
In accordance with the previously described policies, the Company utilizes a loan grading system that
is applied to all commercial loans and commercial real estate loans. Loan grades are utilized to differentiate
risk within the portfolio and consider the expectations of default for each loan. Commercial loans and
commercial real estate loans with a lower expectation of default are assigned one of ten possible “pass” loan
grades and are generally ascribed lower loss factors when determining the allowance for credit losses. Loans
with an elevated level of credit risk are classified as “criticized” and are ascribed a higher loss factor when
determining the allowance for credit losses. Criticized loans may be classified as “nonaccrual” if the
Company no longer expects to collect all amounts according to the contractual terms of the loan agreement
or the loan is delinquent 90 days or more. All larger balance criticized commercial loans and commercial
123
real estate loans are individually reviewed by centralized loan review personnel each quarter to determine
the appropriateness of the assigned loan grade, including whether the loan should be reported as accruing or
nonaccruing. Smaller balance criticized loans are analyzed by business line risk management areas to ensure
proper loan grade classification. Furthermore, criticized nonaccrual commercial loans and commercial real
estate loans are considered impaired and, as a result, specific loss allowances on such loans are established
within the allowance for credit losses to the extent appropriate in each individual instance. The following
table summarizes the loan grades applied to the various classes of the Company’s commercial loans and
commercial real estate loans.
Commercial,
Financial,
Leasing, etc
Commercial
Real Estate
Residential
Builder and
Developer
Other
Commercial
Construction
(In thousands)
December 31, 2014
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,695,440
588,407
Criticized accrual
. . . . . . . . . . . . . . . . . . . . . . . . . .
177,445
Criticized nonaccrual . . . . . . . . . . . . . . . . . . . . . . .
$21,837,022
578,317
141,600
$1,347,778
45,845
71,517
$3,347,522
172,269
25,699
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,461,292
$22,556,939
$1,465,140
$3,545,490
December 31, 2013
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,894,592
699,885
Criticized accrual
. . . . . . . . . . . . . . . . . . . . . . . . . .
110,739
Criticized nonaccrual . . . . . . . . . . . . . . . . . . . . . . .
$20,972,257
596,553
173,048
$1,107,144
72,941
96,427
$3,040,106
54,464
35,268
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,705,216
$21,741,858
$1,276,512
$3,129,838
In determining the allowance for credit losses, residential real estate loans and consumer loans are
generally evaluated collectively after considering such factors as payment performance and recent loss
experience and trends, which are mainly driven by current collateral values in the market place as well as the
amount of loan defaults. Loss rates on such loans are determined by reference to recent charge-off history
and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including
near-term forecasted loss estimates developed by the Company’s Credit Department. In arriving at such
forecasts, the Company considers the current estimated fair value of its collateral based on geographical
adjustments for home price depreciation/appreciation and overall borrower repayment performance. With
regard to collateral values, the realizability of such values by the Company contemplates repayment of any
first lien position prior to recovering amounts on a second lien position. However, residential real estate
loans and outstanding balances of home equity loans and lines of credit that are more than 150 days past
due are generally evaluated for collectibility on a loan-by-loan basis giving consideration to estimated
collateral values. The carrying value of residential real estate loans and home equity loans and lines of credit
for which a partial charge-off has been recognized aggregated $63 million and $18 million, respectively, at
December 31, 2014 and $58 million and $18 million, respectively, at December 31, 2013. Residential real
estate loans and home equity loans and lines of credit that were more than 150 days past due but did not
require a partial charge-off because the net realizable value of the collateral exceeded the outstanding
customer balance totaled $27 million and $28 million, respectively, at December 31, 2014 and $26 million
and $21 million, respectively, at December 31, 2013.
The Company also measures additional losses for purchased impaired loans when it is probable that
the Company will be unable to collect all cash flows expected at acquisition plus additional cash flows
expected to be collected arising from changes in estimates after acquisition. The determination of the
allocated portion of the allowance for credit losses is very subjective. Given that inherent subjectivity and
potential imprecision involved in determining the allocated portion of the allowance for credit losses, the
Company also provides an inherent unallocated portion of the allowance. The unallocated portion of the
allowance is intended to recognize probable losses that are not otherwise identifiable and includes
management’s subjective determination of amounts necessary to provide for the possible use of imprecise
estimates in determining the allocated portion of the allowance. Therefore, the level of the unallocated
portion of the allowance is primarily reflective of the inherent imprecision in the various calculations used
124
in determining the allocated portion of the allowance for credit losses. Other factors that could also lead to
changes in the unallocated portion include the effects of expansion into new markets for which the
Company does not have the same degree of familiarity and experience regarding portfolio performance in
changing market conditions, the introduction of new loan and lease product types, and other risks
associated with the Company’s loan portfolio that may not be specifically identifiable.
The allocation of the allowance for credit losses summarized on the basis of the Company’s
impairment methodology was as follows:
Commercial,
Financial,
Leasing, etc.
Real Estate
Commercial
Residential
Consumer
Total
(In thousands)
December 31, 2014
Individually evaluated for impairment . . . . . .
Collectively evaluated for impairment . . . . . .
Purchased impaired . . . . . . . . . . . . . . . . . . . . .
$ 31,779
251,607
4,652
$ 15,490
291,244
1,193
$14,703
45,061
2,146
$ 19,742
165,140
1,151
$ 81,714
753,052
9,142
Allocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$288,038
$307,927
$61,910
$186,033
843,908
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2013
Individually evaluated for impairment . . . . . .
Collectively evaluated for impairment . . . . . .
Purchased impaired . . . . . . . . . . . . . . . . . . . . .
75,654
$919,562
$ 24,614
246,096
2,673
$ 27,563
296,781
634
$21,127
55,864
1,665
$ 18,927
144,210
1,507
$ 92,231
742,951
6,479
Allocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$273,383
$324,978
$78,656
$164,644
841,661
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75,015
$916,676
The recorded investment in loans and leases summarized on the basis of the Company’s impairment
methodology was as follows:
Commercial,
Financial,
Leasing, etc.
Real Estate
Commercial
Residential
Consumer
Total
(In thousands)
December 31, 2014
Individually evaluated for impairment . . . . $
Collectively evaluated for impairment
Purchased impaired . . . . . . . . . . . . . . . . . . .
206,318 $
252,347 $ 232,398 $
69,061 $
. . . . 19,244,674
10,300
27,148,382
166,840
8,406,680 10,911,359
2,374
18,223
760,124
65,711,095
197,737
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,461,292 $27,567,569 $8,657,301 $10,982,794 $66,668,956
December 31, 2013
Individually evaluated for impairment . . . . $
Collectively evaluated for impairment
Purchased impaired . . . . . . . . . . . . . . . . . . .
118,386 $
376,339 $ 320,360 $
71,773 $
. . . . 18,571,124
15,706
25,488,584
283,285
8,578,677 10,217,124
2,617
29,184
886,858
62,855,509
330,792
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,705,216 $26,148,208 $8,928,221 $10,291,514 $64,073,159
125
6. Premises and equipment
The detail of premises and equipment was as follows:
December 31
2014
2013
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings — owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings — capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements
Furniture and equipment — owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and equipment — capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82,335
406,522
1,131
219,152
586,429
18,853
$
84,220
402,065
1,131
208,947
547,824
17,703
Less: accumulated depreciation and amortization
Owned assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,314,422
1,261,890
686,372
15,066
701,438
617,228
11,142
628,370
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 612,984
$ 633,520
Net lease expense for all operating leases totaled $104,297,000 in 2014, $103,297,000 in 2013 and
$102,924,000 in 2012. Minimum lease payments under noncancelable operating leases are presented in
note 21. Minimum lease payments required under capital leases are not material.
7. Capitalized servicing assets
Changes in capitalized servicing assets were as follows:
For Year Ended December 31,
2014
2013
2012
2014
2013
2012
Residential Mortgage Loans
Commercial Mortgage Loans
Beginning balance . . . . . . . . . . . . . $126,377
28,285
Originations . . . . . . . . . . . . . . . . .
289
Purchases . . . . . . . . . . . . . . . . . . . .
Recognized in loan securitization
transactions . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . .
—
(45,080)
Valuation allowance . . . . . . . . . . .
109,871
—
(In thousands)
$104,855
52,375
272
$131,264
14,577
109
$ 72,499
15,922
730
$ 59,978
26,754
—
$ 51,250
19,653
—
13,696
(44,821)
126,377
(300)
—
(41,095)
104,855
(4,500)
—
(16,212)
—
(14,233)
—
(10,925)
72,939
—
72,499
—
59,978
—
Ending balance, net
. . . . . . . . . . . $109,871
$126,077
$100,355
$ 72,939
$ 72,499
$ 59,978
For Year Ended December 31,
2014
Beginning balance . . . . . . . . . . . . . $ 11,225
—
Originations . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . .
—
Recognized in loan securitization
transactions . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . .
—
(7,118)
Valuation allowance . . . . . . . . . . .
4,107
—
Other
2013
2012
2014
(In thousands)
Total
2013
2012
$
8,143
—
—
$ 15,678
—
—
$210,101
44,207
1,019
$172,976
79,129
272
$198,192
34,230
109
9,382
(6,300)
11,225
—
—
(7,535)
8,143
—
—
(68,410)
186,917
—
23,078
(65,354)
210,101
(300)
—
(59,555)
172,976
(4,500)
Ending balance, net
. . . . . . . . . . . $
4,107
$ 11,225
$
8,143
$186,917
$209,801
$168,476
126
Residential mortgage loans serviced for others were $64.4 billion at December 31, 2014, $69.1 billion
at December 31, 2013 and $32.1 billion at December 31, 2012. Reflected in residential mortgage loans
serviced for others were loans sub-serviced for others of $42.1 billion, $46.6 billion and $12.5 billion at
December 31, 2014, 2013, and 2012, respectively. Commercial mortgage loans serviced for others were $11.3
billion at December 31, 2014, $11.4 billion at December 31, 2013 and $10.6 billion at December 31, 2012.
Other loans serviced for others include small-balance commercial mortgage loans and automobile loans
totaling $3.5 billion, $4.4 billion and $3.8 billion at December 31, 2014, 2013 and 2012, respectively.
Changes in the valuation allowance for capitalized residential mortgage servicing assets were not
significant in 2014, 2013 or 2012. The estimated fair value of capitalized residential mortgage loan servicing
assets was approximately $228 million at December 31, 2014 and $266 million at December 31, 2013. The
fair value of capitalized residential mortgage loan servicing assets was estimated using weighted-average
discount rates of 11.9% and 9.3% at December 31, 2014 and 2013, respectively, and contemporaneous
prepayment assumptions that vary by loan type. At December 31, 2014 and 2013, the discount rate
represented a weighted-average option-adjusted spread (“OAS”) of 1065 basis points (hundredths of one
percent) and 770 basis points, respectively, over market implied forward London Interbank Offered Rates
(“LIBOR”). The estimated fair value of capitalized residential mortgage loan servicing rights may vary
significantly in subsequent periods due to changing interest rates and the effect thereof on prepayment
speeds. The estimated fair value of capitalized commercial mortgage loan servicing assets was approximately
$87 million and $85 million at December 31, 2014 and 2013, respectively. An 18% discount rate was used to
estimate the fair value of capitalized commercial mortgage loan servicing rights at December 31, 2014 and
2013 with no prepayment assumptions because, in general, the servicing agreements allow the Company to
share in customer loan prepayment fees and thereby recover the remaining carrying value of the capitalized
servicing rights associated with such loan. The Company’s ability to realize the carrying value of capitalized
commercial mortgage servicing rights is more dependent on the borrowers’ abilities to repay the underlying
loans than on prepayments or changes in interest rates.
The key economic assumptions used to determine the fair value of significant portfolios of
capitalized servicing rights at December 31, 2014 and the sensitivity of such value to changes in those
assumptions are summarized in the table that follows. Those calculated sensitivities are hypothetical and
actual changes in the fair value of capitalized servicing rights may differ significantly from the amounts
presented herein. The effect of a variation in a particular assumption on the fair value of the servicing rights
is calculated without changing any other assumption. In reality, changes in one factor may result in changes
in another which may magnify or counteract the sensitivities. The changes in assumptions are presumed to
be instantaneous.
Residential
Commercial
Weighted-average prepayment speeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.22%
Impact on fair value of 10% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . . $ (8,001,000)
(15,364,000)
Impact on fair value of 20% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . .
10.65%
Weighted-average OAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact on fair value of 10% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,959,000)
Impact on fair value of 20% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . .
(13,492,000)
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact on fair value of 10% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact on fair value of 20% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . .
18.00%
$(3,671,000)
(7,092,000)
As described in note 19, during 2013 the Company securitized approximately $1.3 billion of one-to-
four family residential mortgage loans formerly held in the Company’s loan portfolio in guaranteed
mortgage securitizations with Ginnie Mae and securitized and sold approximately $1.4 billion of automobile
loans. In conjunction with these transactions, the Company retained the servicing rights to the loans.
127
8. Goodwill and other intangible assets
In accordance with GAAP, the Company does not amortize goodwill, however, core deposit and other
intangible assets are amortized over the estimated life of each respective asset. Total amortizing intangible
assets were comprised of the following:
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
(In thousands)
December 31, 2014
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$755,794
177,268
$730,188
167,847
$25,606
9,421
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$933,062
$898,035
$35,027
December 31, 2013
Core deposit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$755,794
177,268
$705,518
158,693
$50,276
18,575
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$933,062
$864,211
$68,851
Amortization of core deposit and other intangible assets was generally computed using accelerated
methods over original amortization periods of five to ten years. The weighted-average original amortization
period was approximately eight years. The remaining weighted-average amortization period as of
December 31, 2014 was approximately two years. Amortization expense for core deposit and other
intangible assets was $33,824,000, $46,912,000 and $60,631,000 for the years ended December 31, 2014, 2013
and 2012, respectively. Estimated amortization expense in future years for such intangible assets is as
follows:
Year ending December 31:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$20,938
10,052
3,303
734
$35,027
In accordance with GAAP, the Company completed annual goodwill impairment tests as of
October 1, 2014, 2013 and 2012. For purposes of testing for impairment, the Company assigned all recorded
goodwill to the reporting units originally intended to benefit from past business combinations, which has
historically been the Company’s core relationship business reporting units. Goodwill was generally assigned
based on the implied fair value of the acquired goodwill applicable to the benefited reporting units at the
time of each respective acquisition. The implied fair value of the goodwill was determined as the difference
between the estimated incremental overall fair value of the reporting unit and the estimated fair value of the
net assets assigned to the reporting unit as of each respective acquisition date. To test for goodwill
impairment at each evaluation date, the Company compared the estimated fair value of each of its reporting
units to their respective carrying amounts and certain other assets and liabilities assigned to the reporting
unit, including goodwill and core deposit and other intangible assets. The methodologies used to estimate
fair values of reporting units as of the acquisition dates and as of the evaluation dates were similar. For the
Company’s core customer relationship business reporting units, fair value was estimated as the present value
of the expected future cash flows of the reporting unit. Based on the results of the goodwill impairment tests,
the Company concluded that the amount of recorded goodwill was not impaired at the respective testing
dates.
128
A summary of goodwill assigned to each of the Company’s reportable segments as of December 31,
2014 and 2013 for purposes of testing for impairment is as follows.
Business Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discretionary Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential Mortgage Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 748,907
907,524
349,197
—
—
1,144,404
374,593
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,524,625
9. Borrowings
The amounts and interest rates of short-term borrowings were as follows:
Federal Funds
Purchased
and
Repurchase
Agreements
Other
Short-term
Borrowings
Total
(Dollars in thousands)
At December 31, 2014
Amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 192,676
0.07%
— $ 192,676
—
0.07%
For the year ended December 31, 2014
Highest amount at a month-end . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily-average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 280,350
214,736
0.05%
—
— $ 214,736
—
0.05%
At December 31, 2013
Amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 260,455
0.04%
— $ 260,455
—
0.04%
For the year ended December 31, 2013
Highest amount at a month-end . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily-average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 563,879
390,034
0.11%
—
— $ 390,034
—
0.11%
At December 31, 2012
Amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,074,482
0.11%
— $1,074,482
—
0.11%
For the year ended December 31, 2012
Highest amount at a month-end . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily-average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,224,194
822,859
$50,016
16,043
$ 838,902
0.15%
0.57%
0.15%
Short-term borrowings have a stated maturity of one year or less at the date the Company enters into
the obligation. In general, federal funds purchased and short-term repurchase agreements outstanding at
December 31, 2014 matured on the next business day following year-end.
129
At December 31, 2014, the Company had lines of credit under formal agreements as follows:
M&T Bank
Wilmington
Trust, N.A.
(In thousands)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding borrowings
Unused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,161,475
19,825,036
—
$
275,414
At December 31, 2014, M&T Bank had borrowing facilities available with the FHLBs whereby M&T
Bank could borrow up to approximately $8.1 billion. Additionally, M&T Bank and Wilmington Trust,
National Association (“Wilmington Trust, N.A.”), a wholly owned subsidiary of M&T, had available lines of
credit with the Federal Reserve Bank of New York totaling approximately $13.1 billion at December 31,
2014. M&T Bank and Wilmington Trust, N.A. are required to pledge loans and investment securities as
collateral for these borrowing facilities.
Long-term borrowings were as follows:
December 31,
2014
2013
(In thousands)
Senior notes of M&T Bank:
Variable rate due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable rate due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.25% due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.40% due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.45% due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.25% due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.30% due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 300,000
550,000
499,969
749,756
503,118
648,243
748,965
$ 300,000
—
—
—
502,479
—
—
Advances from FHLB:
Fixed rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Agreements to repurchase securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated notes of Wilmington Trust Corporation
(a wholly owned subsidiary of M&T):
8.50% due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,161,514
1,400,000
29,079
1,400,000
218,883
224,067
Subordinated notes of M&T Bank:
6.625% due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.50% due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.585% due 2020, variable rate commencing 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.629% due 2021, variable rate commencing 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated debentures of M&T associated with preferred capital securities:
Fixed rates:
M&T Capital Trust I — 8.234%, due 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
M&T Capital Trust II — 8.277%, due 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
M&T Capital Trust III — 9.25%, due 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BSB Capital Trust I — 8.125%, due 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provident Trust I — 8.29%, due 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southern Financial Statutory Trust I — 10.60%, due 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
M&T Capital Trust IV — 8.50%, due 2068 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable rates:
First Maryland Capital I — due 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Maryland Capital II — due 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allfirst Asset Trust — due 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BSB Capital Trust III — due 2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provident Trust III — due 2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southern Financial Capital Trust III — due 2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
428,627
—
400,846
538,961
154,640
103,093
65,784
15,612
25,405
6,550
—
145,179
146,627
96,204
15,464
52,692
7,816
23,011
437,582
50,000
392,964
559,378
154,640
103,093
66,109
15,589
25,051
6,521
350,010
144,641
145,964
96,059
15,464
52,176
7,747
30,257
$9,006,959
$5,108,870
130
During the first quarter of 2013, M&T Bank instituted a Bank Note Program pursuant to which it has
issued senior notes in 2014 and 2013. The floating rate notes pay interest quarterly at rates that are indexed
to the three-month LIBOR. The contractual interest rates for the floating rate senior notes ranged from
0.54% to 0.61% at December 31, 2014 and were 0.54% at December 31, 2013. The weighted-average
contractual interest rate payable was 0.56% at December 31, 2014.
Long-term fixed rate advances from the FHLB had contractual interest rates ranging from 1.17% to
7.32% at December 31, 2014 and from 3.48% to 7.32% at December 31, 2013. The weighted-average
contractual interest rates payable were 1.68% at December 31, 2014 and 4.60% at December 31, 2013.
Advances from the FHLB mature at various dates through 2035 and are secured by residential real estate
loans, commercial real estate loans and investment securities.
Long-term agreements to repurchase securities had contractual interest rates that ranged from 3.61%
to 4.30% at each of December 31, 2014 and 2013 with a weighted-average contractual interest rate of 3.90%.
The agreements reflect various repurchase dates through 2017, however, the contractual maturities of the
underlying investment securities extend beyond such repurchase dates. The agreements are subject to legally
enforceable master netting arrangements, however, the Company has not offset any amounts related to these
agreements in its consolidated financial statements. The Company posted collateral of $1.5 billion and $1.6
billion at December 31, 2014 and 2013, respectively.
The subordinated notes of M&T Bank and Wilmington Trust Corporation are unsecured and are
subordinate to the claims of other creditors of those entities.
The fixed and floating rate junior subordinated deferrable interest debentures of M&T (“Junior
Subordinated Debentures”) are held by various trusts and were issued in connection with the issuance by
those trusts of preferred capital securities (“Capital Securities”) and common securities (“Common
Securities”). The proceeds from the issuances of the Capital Securities and the Common Securities were used
by the trusts to purchase the Junior Subordinated Debentures. The Common Securities of each of those
trusts are wholly owned by M&T and are the only class of each trust’s securities possessing general voting
powers. The Capital Securities represent preferred undivided interests in the assets of the corresponding
trust. Under the Federal Reserve Board’s current risk-based capital guidelines, the Capital Securities were
includable in M&T’s Tier 1 capital through December 31, 2014. In 2015, only 25% of then-outstanding
securities are included in Tier 1 capital and beginning in 2016 none of the securities will be included in Tier
1 capital. The variable rate Junior Subordinated Debentures pay interest quarterly at rates that are indexed to
the three-month LIBOR. Those rates ranged from 1.08% to 3.58% at December 31, 2014 and from 1.09% to
3.59% at December 31, 2013. The weighted-average variable rates payable on those Junior Subordinated
Debentures were 1.66% at December 31, 2014 and 1.67% at December 31, 2013.
Holders of the Capital Securities receive preferential cumulative cash distributions unless M&T
exercises its right to extend the payment of interest on the Junior Subordinated Debentures as allowed by the
terms of each such debenture, in which case payment of distributions on the respective Capital Securities
will be deferred for comparable periods. During an extended interest period, M&T may not pay dividends or
distributions on, or repurchase, redeem or acquire any shares of its capital stock. In general, the agreements
governing the Capital Securities, in the aggregate, provide a full, irrevocable and unconditional guarantee by
M&T of the payment of distributions on, the redemption of, and any liquidation distribution with respect to
the Capital Securities. The obligations under such guarantee and the Capital Securities are subordinate and
junior in right of payment to all senior indebtedness of M&T.
The Capital Securities will remain outstanding until the Junior Subordinated Debentures are repaid
at maturity, are redeemed prior to maturity or are distributed in liquidation to the trusts. The Capital
Securities are mandatorily redeemable in whole, but not in part, upon repayment at the stated maturity
dates (ranging from 2027 to 2033) of the Junior Subordinated Debentures or the earlier redemption of the
Junior Subordinated Debentures in whole upon the occurrence of one or more events set forth in the
indentures relating to the Capital Securities, and in whole or in part at any time after an optional
redemption prior to contractual maturity contemporaneously with the optional redemption of the related
Junior Subordinated Debentures in whole or in part, subject to possible regulatory approval. In February
2014, M&T redeemed all of the issued and outstanding 8.5% $350 million trust preferred securities issued by
M&T Capital Trust IV and the related Junior Subordinated Debentures held by M&T Capital Trust IV.
131
Long-term borrowings at December 31, 2014 mature as follows:
Year ending December 31:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$
6,444
1,105,540
3,407,786
723,516
1,971,842
1,791,831
$9,006,959
Shareholders’ equity
10.
M&T is authorized to issue 1,000,000 shares of preferred stock with a $1.00 par value per share. Preferred
shares outstanding rank senior to common shares both as to dividends and liquidation preference, but have
no general voting rights.
Issued and outstanding preferred stock of M&T is presented below:
December 31, 2014
December 31, 2013
Shares
Issued and
Outstanding
Carrying
Value
Shares
Issued and
Outstanding
Carrying
Value
(Dollars in thousands)
Series A(a)
Fixed Rate Cumulative Perpetual Preferred Stock, Series A,
$1,000 liquidation preference per share . . . . . . . . . . . . . . . . . . . . 230,000 $230,000 230,000 $230,000
Series C(a)
Fixed Rate Cumulative Perpetual Preferred Stock, Series C,
$1,000 liquidation preference per share . . . . . . . . . . . . . . . . . . . . 151,500
151,500 151,500
151,500
Series D(b)
Fixed Rate Non-cumulative Perpetual Preferred Stock, Series D,
$10,000 liquidation preference per share . . . . . . . . . . . . . . . . . . .
50,000
500,000
50,000
500,000
Series E(c)
Fixed-to-Floating Rate Non-cumulative Perpetual Preferred
Stock, Series E, $1,000 liquidation preference per share . . . . . . . 350,000
350,000
—
—
(a) Dividends, if declared, were paid quarterly at a rate of 5% per year through November 14, 2013 and are paid at
6.375% thereafter. Warrants to purchase M&T common stock were issued in connection with the Series A and C
preferred stock (Series A — 1,218,522 common shares at $73.86 per share; Series C — 407,542 common shares at
$55.76 per share). In March 2013, the Series C warrant were exercised in a “cashless” exercise, resulting in the
issuance of 186,589 common shares. During 2014 and 2013, 427,905 and 69,127, respectively, of the Series A
warrants were exercised in “cashless” exercises, resulting in the issuance of 169,543 and 25,427 common shares.
Remaining outstanding Series A warrants were 721,490 at December 31, 2014.
(b) Dividends, if declared, will be paid semi-annually at a rate of 6.875% per year. The shares are redeemable in
whole or in part on or after June 15, 2016. Notwithstanding M&T’s option to redeem the shares, if an event
occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all of the shares within 90 days
following that occurrence.
(c) Dividends, if declared, will be paid semi-annually at a rate of 6.45% through February 14, 2024 and thereafter
will be paid quarterly at a rate of the three-month LIBOR plus 361 basis points (hundredths of one percent). The
shares are redeemable in whole or in part on or after February 15, 2024. Notwithstanding M&T’s option to
redeem the shares, if an event occurs such that the shares no longer qualify as Tier 1 capital, M&T may redeem all
of the shares within 90 days following that occurrence.
132
In addition to the Series A and Series C warrants mentioned in (a) above, a ten-year warrant to
purchase 95,383 shares of M&T common stock at $518.96 per share was outstanding at each of
December 31, 2014 and 2013. The obligation under that warrant was assumed by M&T in an acquisition.
Stock-based compensation plans
11.
Stock-based compensation expense was $65 million in 2014, $55 million in 2013 and $57 million in 2012.
The Company recognized income tax benefits related to stock-based compensation of $31 million in 2014,
$29 million in 2013 and $30 million in 2012.
The Company’s equity incentive compensation plan allows for the issuance of various forms of
stock-based compensation, including stock options, restricted stock, restricted stock units and performance-
based awards. At December 31, 2014 and 2013, respectively, there were 4,398,496 and 4,874,542 shares
available for future grant under the Company’s equity incentive compensation plan.
Restricted stock awards
Restricted stock awards are comprised of restricted stock and restricted stock units. Restricted stock awards
granted in 2014 vest over three years. Restricted stock awards granted prior to 2014 generally vest over four
years. A portion of restricted stock awards granted in 2014 require a performance condition to be met before
such awards vest. Unrecognized compensation expense associated with restricted stock was $19 million as of
December 31, 2014 and is expected to be recognized over a weighted-average period of approximately one
year. The Company may issue restricted shares from treasury stock to the extent available or issue new
shares. The number of restricted shares issued was 221,822 in 2014, 269,755 in 2013 and 453,908 in 2012,
with a weighted-average grant date fair value of $24,765,000 in 2014, $27,716,000 in 2013 and $36,969,000 in
2012. Unrecognized compensation expense associated with restricted stock units was $7 million as of
December 31, 2014 and is expected to be recognized over a weighted-average period of approximately one
year. During 2014, 2013 and 2012 the number of restricted stock units issued was 299,525, 315,316 and
278,505, respectively, with a weighted-average grant date fair value of $33,406,000, $32,380,000 and
$22,139,000, respectively.
A summary of restricted stock and restricted stock unit activity follows:
Restricted
Stock Units
Outstanding
Weighted-
Average
Grant Price
Restricted
Stock
Outstanding
Weighted-
Average
Grant Price
Unvested at January 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
770,830
299,525
(279,747)
(1,197)
$ 89.58
111.53
84.95
103.25
862,695
221,822
(295,438)
(27,434)
$ 87.29
111.64
81.32
96.70
Unvested at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . .
789,411
$ 99.53
761,645
$ 96.36
Stock option awards
Stock options issued generally vest over four years and are exercisable over terms not exceeding ten years
and one day. The Company used an option pricing model to estimate the grant date present value of stock
options granted. Stock options granted in 2014, 2013 and 2012 were not significant.
A summary of stock option activity follows:
Stock
Options
Outstanding
Weighted-Average
Exercise
Price
Life
(In Years)
Aggregate
Intrinsic Value
(In thousands)
Outstanding at January 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,880,761 $105.48
200
111.51
(1,372,113) 101.55
(75,978) 184.15
Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . .
3,432,870 $105.31
Exercisable at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . .
3,432,470 $105.31
2.1
2.1
$71,418
$71,408
133
For 2014, 2013 and 2012, M&T received $127 million, $172 million and $153 million, respectively, in
cash and realized tax benefits from the exercise of stock options of $9 million, $12 million and $8 million,
respectively. The intrinsic value of stock options exercised during those periods was $26 million, $34 million
and $21 million, respectively. As of December 31, 2014, the amount of unrecognized compensation cost
related to non-vested stock options was not significant. The total grant date fair value of stock options
vested during 2014 and 2013 was not significant, and for 2012 was $17 million. Upon the exercise of stock
options, the Company may issue shares from treasury stock to the extent available or issue new shares.
Stock purchase plan
The stock purchase plan provides eligible employees of the Company with the right to purchase shares of
M&T common stock at a discount through accumulated payroll deductions. In connection with the
employee stock purchase plan, 2,500,000 shares of M&T common stock were authorized for issuance under
a plan adopted in 2013. There were 85,761 shares issued in 2014, no shares issued in 2013 and 151,014 shares
issued in 2012 under a previous plan. For 2014 and 2012, M&T received $8,607,000 and $10,117,000,
respectively, in cash for shares purchased through the employee stock purchase plan. Compensation expense
recognized for the stock purchase plan was not significant in 2014, 2013 or 2012.
Deferred bonus plan
The Company provided a deferred bonus plan pursuant to which eligible employees could elect to defer all
or a portion of their annual incentive compensation awards and allocate such awards to several investment
options, including M&T common stock. Participants could elect the timing of distributions from the plan.
Such distributions are payable in cash with the exception of balances allocated to M&T common stock
which are distributable in the form of M&T common stock. Shares of M&T common stock distributable
pursuant to the terms of the deferred bonus plan were 29,297 and 33,046 at December 31, 2014 and 2013,
respectively. The obligation to issue shares is included in “common stock issuable” in the consolidated
balance sheet.
Directors’ stock plan
The Company maintains a compensation plan for non-employee members of the Company’s boards of
directors and directors advisory councils that allows such members to receive all or a portion of their
compensation in shares of M&T common stock. Through December 31, 2014, 211,655 shares had been
issued in connection with the directors’ stock plan.
Through acquisitions, the Company assumed obligations to issue shares of M&T common stock
related to deferred directors compensation plans. Shares of common stock issuable under such plans were
12,033 and 14,185 at December 31, 2014 and 2013, respectively. The obligation to issue shares is included in
“common stock issuable” in the consolidated balance sheet.
12. Pension plans and other postretirement benefits
The Company provides defined benefit pension and other postretirement benefits (including health care
and life insurance benefits) to qualified retired employees. The Company uses a December 31 measurement
date for all of its plans.
Net periodic pension expense for defined benefit plans consisted of the following:
Year Ended December 31
2014
2013
2012
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,520
69,162
Interest cost on benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(91,568)
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,552)
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,494
Recognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 24,360
60,130
(87,353)
(6,556)
41,076
$ 29,549
62,037
(70,511)
(6,559)
37,386
Net periodic pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,056
$ 31,657
$ 51,902
134
Net other postretirement benefits expense for defined benefit plans consisted of the following:
Year Ended December 31
2014
2013
2012
(In thousands)
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognized net actuarial loss
605
2,778
(1,359)
—
$
742
2,691
(1,359)
360
$ 668
3,737
21
530
Net other postretirement benefits expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,024
$ 2,434
$4,956
Data relating to the funding position of the defined benefit plans were as follows:
Pension Benefits
Other
Postretirement Benefits
2014
2013
2014
2013
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year . . . . . . . . . . . . $1,484,193
20,520
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,162
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . .
—
4,619
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
300,444
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medicare Part D reimbursement . . . . . . . . . . . . . . . . .
—
(65,529)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,644,567
24,360
60,130
—
—
(184,181)
—
(60,683)
$ 60,592
605
2,778
3,498
—
7,793
495
(8,259)
$ 74,966
742
2,691
3,069
—
(12,830)
509
(8,555)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . .
1,813,409
1,484,193
67,502
60,592
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . .
Medicare Part D reimbursement . . . . . . . . . . . . . . . . .
Benefits and other payments . . . . . . . . . . . . . . . . . . . .
1,506,684
56,430
8,076
—
—
(65,529)
1,408,771
150,795
7,801
—
—
(60,683)
—
—
4,266
3,498
495
(8,259)
—
—
4,977
3,069
509
(8,555)
Fair value of plan assets at end of year . . . . . . . . . . . . .
1,505,661
1,506,684
—
—
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (307,748)
$
22,491
$(67,502)
$(60,592)
Assets and liabilities recognized in the consolidated
balance sheet were:
Net prepaid asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $ 139,576
(117,085)
(307,748)
$
— $
(67,502)
—
(60,592)
Amounts recognized in accumulated other
comprehensive income (“AOCI”) were:
Net loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 512,473
(5,728)
Net prior service cost
. . . . . . . . . . . . . . . . . . . . . . . . . .
$ 191,386
(16,899)
$ 6,737
(10,455)
$ (1,056)
(11,814)
Pre-tax adjustment to AOCI . . . . . . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
506,745
(198,897)
174,487
(68,486)
(3,718)
1,459
(12,870)
5,051
Net adjustment to AOCI.
. . . . . . . . . . . . . . . . . . . . . . . $ 307,848
$ 106,001
$ (2,259)
$ (7,819)
135
The Company has an unfunded supplemental pension plan for certain key executives and others. The
projected benefit obligation and accumulated benefit obligation included in the preceding data related to
such plan were $135,891,000 as of December 31, 2014 and $117,085,000 as of December 31, 2013.
The accumulated benefit obligation for all defined benefit pension plans was $1,782,387,000 and
$1,460,498,000 at December 31, 2014 and 2013, respectively.
GAAP requires an employer to recognize in its balance sheet as an asset or liability the overfunded or
underfunded status of a defined benefit postretirement plan, measured as the difference between the fair
value of plan assets and the benefit obligation. For a pension plan, the benefit obligation is the projected
benefit obligation; for any other postretirement benefit plan, such as a retiree health care plan, the benefit
obligation is the accumulated postretirement benefit obligation. Gains or losses and prior service costs or
credits that arise during the period, but are not included as components of net periodic benefit expense, are
recognized as a component of other comprehensive income. As indicated in the preceding table, as of
December 31, 2014 the Company recorded a minimum liability adjustment of $503,027,000 ($506,745,000
related to pension plans and $(3,718,000) related to other postretirement benefits) with a corresponding
reduction of shareholders’ equity, net of applicable deferred taxes, of $305,589,000. In aggregate, the benefit
plans realized a net loss during 2014 that resulted from actual experience differing from the plan
assumptions utilized and from changes in actuarial assumptions. The main factors contributing to that loss
were a decrease in the discount rate used in the measurement of the benefit obligations to 4.00% at
December 31, 2014 from 4.75% at December 31, 2013 and the migration to updated actuarial mortality
tables issued by the Society of Actuaries reflecting longer life expectancy of the plan’s participants. As a
result, the Company increased its minimum liability adjustment from that which was recorded at
December 31, 2013 by $341,410,000 with a corresponding decrease to shareholders’ equity that, net of
applicable deferred taxes, was $207,407,000. The table below reflects the changes in plan assets and benefit
obligations recognized in other comprehensive income related to the Company’s postretirement benefit
plans.
Pension Plans
Other
Postretirement
Benefit Plans
(In thousands)
Total
2014
Net loss
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 335,581
4,619
6,552
(14,494)
$ 7,793
—
1,359
—
$ 343,374
4,619
7,911
(14,494)
Total recognized in other comprehensive income, pre-tax . . . . . . .
$ 332,258
$ 9,152
$ 341,410
2013
Net gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(247,622)
6,556
(41,076)
$(12,830)
1,359
(360)
$(260,452)
7,915
(41,436)
Total recognized in other comprehensive income, pre-tax . . . . . . .
$(282,142)
$(11,831)
$(293,973)
The following table reflects the amortization of amounts in accumulated other comprehensive income
expected to be recognized as components of net periodic benefit expense during 2015:
Pension Plans
Other
Postretirement
Benefit Plans
(In thousands)
Amortization of net prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (6,005)
44,653
$(1,359)
91
The Company also provides a qualified defined contribution pension plan to eligible employees who
were not participants in the defined benefit pension plan as of December 31, 2005 and to other employees
who have elected to participate in the defined contribution plan. The Company makes contributions to the
136
defined contribution plan each year in an amount that is based on an individual participant’s total
compensation (generally defined as total wages, incentive compensation, commissions and bonuses) and
years of service. Participants do not contribute to the defined contribution pension plan. Pension expense
recorded in 2014, 2013 and 2012 associated with the defined contribution pension plan was approximately
$22 million, $21 million and $17 million, respectively.
Assumptions
The assumed weighted-average rates used to determine benefit obligations at December 31 were:
Pension
Benefits
Other
Postretirement
Benefits
2014
2013
2014
2013
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.00% 4.75% 4.00% 4.75%
Rate of increase in future compensation levels . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.39% 4.42% —
—
The assumed weighted-average rates used to determine net benefit expense for the years ended
December 31 were:
Pension Benefits
Other
Postretirement Benefits
2014
2013
2012
2014
2013
2012
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.75% 3.75% 4.25% 4.75% 3.75% 4.25%
Long-term rate of return on plan assets . . . . . . . . . . . . . . . . . . . 6.50% 6.50% 6.50% —
Rate of increase in future compensation levels . . . . . . . . . . . . . . 4.42% 4.50% 4.50% —
—
—
—
—
The expected long-term rate of return assumption as of each measurement date was developed
through analysis of historical market returns, current market conditions, anticipated future asset allocations,
the funds’ past experience, and expectations on potential future market returns. The expected rate of return
assumption represents a long-term average view of the performance of the plan assets, a return that may or
may not be achieved during any one calendar year.
For measurement of other postretirement benefits, a 7.00% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 2015. The rate was assumed to decrease to 5.00% over
28 years. A one-percentage point change in assumed health care cost trend rates would have had the
following effects:
+1%
-1%
(In thousands)
Increase (decrease) in:
Service and interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accumulated postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97
3,005
$
(88)
(2,678)
Plan Assets
The Company’s policy is to invest the pension plan assets in a prudent manner for the purpose of providing
benefit payments to participants and mitigating reasonable expenses of administration. The Company’s
investment strategy is designed to provide a total return that, over the long-term, places a strong emphasis
on the preservation of capital. The strategy attempts to maximize investment returns on assets at a level of
risk deemed appropriate by the Company while complying with applicable regulations and laws. The
investment strategy utilizes asset diversification as a principal determinant for establishing an appropriate
risk profile while emphasizing total return realized from capital appreciation, dividends and interest income.
The target allocations for plan assets are generally 45 to 80 percent equity securities, 5 to 40 percent debt
securities, and 5 to 30 percent money-market funds/cash equivalents and other investments, although
holdings could be more or less than these general guidelines based on market conditions at the time and
actions taken or recommended by the investment managers providing advice to the Company. Equity
securities include investments in large-cap and mid-cap companies located in the United States and equity
mutual funds with domestic and international investments, and, to a lesser extent, direct investments in
137
foreign-based companies. Debt securities include corporate bonds of companies from diversified industries,
mortgage-backed securities guaranteed by government agencies, U.S. Treasury securities, and mutual funds
that invest in debt securities. Additionally, the Company’s defined benefit pension plan held $172,026,000
(11.4% of total assets) of real estate, private equity and other investments at December 31, 2014. Returns on
invested assets are periodically compared with target market indices for each asset type to aid management
in evaluating such returns. Furthermore, management regularly reviews the investment policy and may, if
deemed appropriate, make changes to the target allocations noted above.
The fair values of the Company’s pension plan assets at December 31, 2014, by asset category, were as
follows:
Fair Value Measurement of Plan Assets At December 31, 2014
Quoted Prices
in Active
Markets
for Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(In thousands)
Total
Asset category:
Money-market funds
Equity securities:
. . . . . . . . . . . . . . . . . . . . . . $
29,458
$
29,458
$
M&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International(b) . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds:
154,252
214,127
16,170
Domestic(a) . . . . . . . . . . . . . . . . . . . . . . . . . .
International(b) . . . . . . . . . . . . . . . . . . . . . .
305,817
381,101
154,252
214,127
16,170
305,817
381,101
1,071,467
1,071,467
Debt securities:
Corporate(c) . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Government
International
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds:
102,848
92,772
7,196
Domestic(d) . . . . . . . . . . . . . . . . . . . . . . . . .
27,847
Other:
Diversified mutual fund . . . . . . . . . . . . . . . . . .
Private real estate . . . . . . . . . . . . . . . . . . . . . . . .
Private equity . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
230,663
96,936
2,162
6,234
66,694
—
—
—
27,847
27,847
96,936
—
—
42,430
172,026
139,366
—
—
—
—
—
—
—
102,848
92,772
7,196
—
202,816
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,162
6,234
24,264
32,660
Total(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,503,614
$1,268,138
$202,816
$32,660
138
The fair values of the Company’s pension plan assets at December 31, 2013, by asset category, were as
follows:
Fair Value Measurement of Plan Assets At December 31, 2013
Quoted Prices
in Active
Markets
for Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(In thousands)
Total
Asset category:
Money-market funds
Equity securities:
. . . . . . . . . . . . . . . . . . . . . . $
37,952
$
37,952
$
M&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International(b) . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds:
142,955
271,203
24,053
Domestic(a) . . . . . . . . . . . . . . . . . . . . . . . . . .
International(b) . . . . . . . . . . . . . . . . . . . . . .
194,099
413,685
142,955
271,203
24,053
194,099
413,685
1,045,995
1,045,995
—
—
—
—
—
—
—
Debt securities:
Corporate(c) . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Government
. . . . . . . . . . . . . . . . . . . . . . . . . . .
International
Mutual funds:
Domestic(d) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
International
63,196
75,043
2,443
68,280
43,742
—
—
—
68,280
43,742
63,196
75,043
2,443
—
—
252,704
112,022
140,682
$ —
—
—
—
—
—
—
—
—
—
—
—
—
Other:
Diversified mutual fund . . . . . . . . . . . . . . . . . .
Private real estate . . . . . . . . . . . . . . . . . . . . . . . .
Private equity . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93,055
3,123
6,199
65,663
93,055
—
—
41,489
168,040
134,544
—
—
—
—
—
—
3,123
6,199
24,174
33,496
Total(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,504,691
$1,330,513
$140,682
$33,496
(a) This category is comprised of equities of companies primarily within the mid-cap and large-cap sectors of the U.S.
economy and range across diverse industries.
(b) This category is comprised of equities in companies primarily within the mid-cap and large-cap sectors of
international markets mainly in developed markets in Europe and the Pacific Rim.
(c) This category represents investment grade bonds of U.S. issuers from diverse industries.
(d) Approximately 55% of the mutual funds were invested in investment grade bonds of U.S. issuers and 45% in
high-yielding bonds at December 31, 2014. Approximately 35% of the mutual funds were invested in investment
grade bonds of U.S. issuers and 65% in high-yielding bonds at December 31, 2013. The holdings within the funds
were spread across diverse industries.
(e) Excludes dividends and interest receivable totaling $2,047,000 and $1,993,000 at December 31, 2014 and 2013,
respectively.
Pension plan assets included common stock of M&T with a fair value of $154,252,000 (10.2% of total
plan assets) at December 31, 2014 and $142,955,000 (9.5% of total plan assets) at December 31, 2013. No
139
other investment in securities of a non-U.S. Government or government agency issuer exceeded ten percent
of plan assets at December 31, 2014. Assets subject to Level 3 valuations did not constitute a significant
portion of plan assets at December 31, 2014 or December 31, 2013.
The changes in Level 3 pension plan assets measured at estimated fair value on a recurring basis
during the year ended December 31, 2014 were as follows:
Balance –
January 1,
2014
Sales
Total
Realized/
Unrealized
Gains
Balance –
December 31,
2014
(In thousands)
Other
Private real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,123
6,199
24,174
$(1,167)
(905)
(513)
$ 206
940
603
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$33,496
$(2,585)
$1,749
$ 2,162
6,234
24,264
$32,660
The Company makes contributions to its funded qualified defined benefit pension plan as required
by government regulation or as deemed appropriate by management after considering factors such as the
fair value of plan assets, expected returns on such assets, and the present value of benefit obligations of the
plan. Subject to the impact of actual events and circumstances that may occur in 2015, the Company may
make contributions to the qualified defined benefit pension plan in 2015, but the amount of any such
contribution has not yet been determined. The Company did not make any contributions to the plan in
2014 or 2013. The Company regularly funds the payment of benefit obligations for the supplemental defined
benefit pension and postretirement benefit plans because such plans do not hold assets for investment.
Payments made by the Company for supplemental pension benefits were $8,076,000 and $7,801,000 in 2014
and 2013, respectively. Payments made by the Company for postretirement benefits were $4,266,000 and
$4,977,000 in 2014 and 2013, respectively. Payments for supplemental pension and other postretirement
benefits for 2015 are not expected to differ from those made in 2014 by an amount that will be material to
the Company’s consolidated financial position.
Estimated benefits expected to be paid in future years related to the Company’s defined benefit pension
and other postretirement benefits plans are as follows:
Pension
Benefits
Other
Postretirement
Benefits
(In thousands)
Year ending December 31:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,107
73,169
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77,294
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81,231
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,027
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
497,177
2020 through 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,830
5,719
5,554
5,412
5,281
24,190
The Company has a retirement savings plan (“RSP”) that is a defined contribution plan in which
eligible employees of the Company may defer up to 50% of qualified compensation via contributions to the
plan. The Company makes an employer matching contribution in an amount equal to 75% of an employee’s
contribution, up to 4.5% of the employee’s qualified compensation. Employees’ accounts, including
employee contributions, employer matching contributions and accumulated earnings thereon, are at all
times fully vested and nonforfeitable. Employee benefits expense resulting from the Company’s
contributions to the RSP totaled $32,466,000, $31,797,000 and $31,305,000 in 2014, 2013 and 2012,
respectively.
140
Income taxes
13.
The components of income tax expense were as follows:
Year Ended December 31
2014
2013
2012
(In thousands)
Current
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $378,978
50,790
State and city . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$371,249
68,035
$309,156
82,014
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
429,768
439,284
391,170
Deferred
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and city . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,503
27,345
106,537
33,248
117,229
14,629
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92,848
139,785
131,858
Total income taxes applicable to pre-tax income . . . . . . . . . . . . . . . $522,616
$579,069
$523,028
The Company files a consolidated federal income tax return reflecting taxable income earned by all
domestic subsidiaries. In prior years, applicable federal tax law allowed certain financial institutions the
option of deducting as bad debt expense for tax purposes amounts in excess of actual losses. In accordance
with GAAP, such financial institutions were not required to provide deferred income taxes on such excess.
Recapture of the excess tax bad debt reserve established under the previously allowed method will result in
taxable income if M&T Bank fails to maintain bank status as defined in the Internal Revenue Code or
charges are made to the reserve for other than bad debt losses. At December 31, 2014, M&T Bank’s tax bad
debt reserve for which no federal income taxes have been provided was $79,121,000. No actions are planned
that would cause this reserve to become wholly or partially taxable.
Income taxes attributable to gains or losses on bank investment securities were an expense of
$18,313,000 in 2013 and a benefit of $18,766,000 in 2012. There were no gains or losses on bank investment
securities in 2014. No alternative minimum tax expense was recognized in 2014, 2013 or 2012.
Total income taxes differed from the amount computed by applying the statutory federal income tax
rate to pre-tax income as follows:
Year Ended December 31
2014
2013
2012
Income taxes at statutory federal income tax rate . . . . . . . . . . . . . . . . . . . $556,102
Increase (decrease) in taxes:
(In thousands)
$601,142
$543,384
Tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and city income taxes, net of federal income tax effect . . . . . . . .
Low income housing and other credits . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(31,752)
50,788
(49,526)
(2,996)
(34,747)
65,834
(49,206)
(3,954)
(33,890)
62,818
(42,074)
(7,210)
$522,616
$579,069
$523,028
141
Deferred tax assets (liabilities) were comprised of the following at December 31:
2014
2013
2012
Losses on loans and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 605,273
34,052
Postretirement and other employee benefits . . . . . . . . . . . . . . . . . .
36,450
Incentive compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79,147
Interest on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120,222
Retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,017
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,527
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,999
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 645,713
30,023
37,772
100,725
—
63,101
1,404
121,561
$ 809,033
34,517
50,067
72,278
91,980
69,874
12,130
103,027
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,043,687
1,000,299
1,242,906
Leasing transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized investment gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on subordinated note exchange . . . . . . . . . . . . . . . . . . . . . .
Retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(280,596)
(82,065)
(46,393)
(3,125)
—
(63,814)
(284,370)
(21,779)
(46,041)
(6,075)
(9,397)
(49,450)
(291,524)
(23,574)
(20,348)
(8,794)
—
(61,410)
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(475,993)
(417,112)
(405,650)
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 567,694
$ 583,187
$ 837,256
The Company believes that it is more likely than not that the deferred tax assets will be realized
through taxable earnings or alternative tax strategies.
The income tax credits shown in the statement of income of M&T in note 25 arise principally from
operating losses before dividends from subsidiaries.
142
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
Federal,
State and
Local Tax
Accrued
Interest
Unrecognized
Income Tax
Benefits
(In thousands)
Gross unrecognized tax benefits at January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,333
$ 9,277
$ 27,610
Increases in unrecognized tax benefits as a result of tax positions taken during 2012 . . . . . . . . . . .
Increases in unrecognized tax benefits as a result of tax positions taken in prior years . . . . . . . . . .
860
—
Decreases in unrecognized tax benefits as a result of settlements with taxing authorities . . . . . . . .
(1,002)
—
4,514
—
Decreases in unrecognized tax benefits because applicable returns are no longer subject to
examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,643)
(1,412)
Gross unrecognized tax benefits at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in unrecognized tax benefits as a result of tax positions taken during 2013 . . . . . . . . . . .
Increases in unrecognized tax benefits as a result of tax positions taken in prior years . . . . . . . . . .
16,548
2,267
—
Decreases in unrecognized tax benefits as a result of settlements with taxing authorities . . . . . . . .
(1,854)
12,379
—
4,429
(487)
Decreases in unrecognized tax benefits because applicable returns are no longer subject to
examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,350)
(1,625)
Gross unrecognized tax benefits at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,611
14,696
Increases in unrecognized tax benefits as a result of tax positions taken during 2014 . . . . . . . . . . .
Increases in unrecognized tax benefits as a result of tax positions taken in prior years . . . . . . . . . .
769
—
—
453
860
4,514
(1,002)
(3,055)
28,927
2,267
4,429
(2,341)
(3,975)
29,307
769
453
Decreases in unrecognized tax benefits as a result of settlements with taxing authorities . . . . . . . .
(4,668)
(11,280)
(15,948)
Gross unrecognized tax benefits at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,712
$ 3,869
14,581
Less: Federal, state and local income tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrecognized tax benefits at December 31, 2014 that, if recognized, would impact the
effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,103)
$ 9,478
The Company’s policy is to recognize interest and penalties, if any, related to unrecognized tax
benefits in income taxes in the consolidated statement of income. The balance of accrued interest at
December 31, 2014 is included in the table above. The Company’s federal, state and local income tax returns
are routinely subject to examinations from various governmental taxing authorities. Such examinations may
result in challenges to the tax return treatment applied by the Company to specific transactions.
Management believes that the assumptions and judgment used to record tax-related assets or liabilities have
been appropriate. Should determinations rendered by tax authorities ultimately indicate that management’s
assumptions were inappropriate, the result and adjustments required could have a material effect on the
Company’s results of operations. Under statute, the Company’s federal income tax returns for the years
2010 through 2013 could be adjusted by the Internal Revenue Service, although examinations for those tax
years have been largely concluded. The Company also files income tax returns in over forty states and
numerous local jurisdictions. Substantially all material state and local matters have been concluded for years
through 2010. It is not reasonably possible to estimate when examinations for any subsequent years will be
completed.
143
14. Earnings per common share
The computations of basic earnings per common share follow:
Year Ended December 31
2014
2013
2012
(In thousands, except per share)
Income available to common shareholders:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,066,246
(75,878)
Less: Preferred stock dividends(a) . . . . . . . . . . . . . . . . . . . . . . . . .
—
Amortization of preferred stock discount(a) . . . . . . . . . . . .
$1,138,480
(54,120)
(7,942)
$1,029,498
(53,450)
(8,026)
Net income available to common equity . . . . . . . . . . . . . . . . . . .
Less: Income attributable to unvested stock-based
990,368
1,076,418
968,022
compensation awards . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11,837)
(13,989)
(14,632)
Net income available to common shareholders . . . . . . . . . . . . . . . . $ 978,531
Weighted-average shares outstanding:
$1,062,429
$ 953,390
Common shares outstanding (including common stock
issuable) and unvested stock-based compensation awards . . .
Less: Unvested stock-based compensation awards . . . . . . . . . . . .
132,532
(1,582)
130,354
(1,700)
127,793
(1,929)
Weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . $
130,950
7.47
128,654
8.26
$
125,864
7.57
$
(a)
Including impact of not as yet declared cumulative dividends.
The computations of diluted earnings per common share follow:
Year Ended December 31
2014
2013
2012
Net income available to common equity . . . . . . . . . . . . . . . . . . . . . . . . $990,368
(In thousands, except per share)
$1,076,418
$968,022
Less: Income attributable to unvested stock-based
compensation awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11,787)
(13,922)
(14,593)
Net income available to common shareholders . . . . . . . . . . . . . . . . . . . $978,581
Adjusted weighted-average shares outstanding:
$1,062,496
$953,429
Common and unvested stock-based compensation awards . . . . . . .
. . . . . . . . . . . . . .
Less: Unvested stock-based compensation awards
Plus: Incremental shares from assumed conversion of stock-based
compensation awards and warrants to purchase common
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
132,532
(1,582)
130,354
(1,700)
127,793
(1,929)
894
949
541
Adjusted weighted-average shares outstanding . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
131,844
7.42
129,603
8.20
$
126,405
7.54
$
GAAP defines unvested share-based awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) as participating securities that shall be included in the
computation of earnings per common share pursuant to the two-class method. The Company has issued
stock-based compensation awards in the form of restricted stock and restricted stock units, which, in
accordance with GAAP, are considered participating securities.
Stock-based compensation awards and warrants to purchase common stock of M&T representing
approximately 2,017,000, 3,847,000 and 8,905,000 common shares during 2014, 2013 and 2012, respectively,
were not included in the computations of diluted earnings per common share because the effect on those
years would have been antidilutive.
144
15. Comprehensive income
The following tables display the components of other comprehensive income (loss) and amounts reclassified
from accumulated other comprehensive income (loss) to net income.
Investment Securities
With
OTTI
All
Other
Defined
Benefit
Plans
Total
Amount
Before Tax
Other
(In thousands)
Income
Tax
Net
Balance — January 1, 2014 . . . . . . . . . . . $ 37,255 18,450 (161,617)
Other comprehensive income before
115 (105,797)
41,638 $ (64,159)
reclassifications:
Unrealized holding gains (losses),
net . . . . . . . . . . . . . . . . . . . . . . . . . .
(29,818)180,005
— — 150,187
(58,962)
91,225
Foreign currency translation
adjustment . . . . . . . . . . . . . . . . . . . .
Unrealized losses on cash flow
hedges . . . . . . . . . . . . . . . . . . . . . . .
Current year benefit plans losses . . . .
—
—
—
Total other comprehensive income
—
— (4,039)
(4,039)
1,432
(2,607)
—
(165)
— (165)
— (347,993) — (347,993)
65
(100)
136,587 (211,406)
(loss) before reclassifications . . . . . . .
(29,818)180,005 (347,993)(4,204)(202,010)
79,122 (122,888)
Amounts reclassified from accumulated
other comprehensive income that
(increase) decrease net income:
Accretion of unrealized holding losses
on held-to-maturity (“HTM”)
securities . . . . . . . . . . . . . . . . . . . . .
Accretion of losses on terminated
cash flow hedges . . . . . . . . . . . . . . .
Amortization of prior service
credit . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial losses . . . . .
Total reclassifications . . . . . . . . . . . . . . .
1
3,373
— — 3,374(a)
(1,324)
2,050
—
—
—
1
—
—
7
7(d)
(3)
4
— (7,911) — (7,911)(e)
— 14,494 — 14,494(e)
3,105
(5,689)
(4,806)
8,805
3,373
6,583
7
9,964
(3,911)
6,053
Total gain (loss) during the period . . . . .
(29,817)183,378 (341,410)(4,197)(192,046)
75,211 (116,835)
Balance — December 31, 2014 . . . . . . . . $ 7,438 201,828 (503,027)(4,082)(297,843)
116,849 $(180,994)
145
Investment Securities
With
OTTI
All
Other
Defined
Benefit
Plans
Total
Amount
Before Tax
Other
Income
Tax
Net
(In thousands)
Balance — January 1, 2013 . . . . . . . . . . $ (91,835) 152,199 (455,590) (431) (395,657)
Other comprehensive income before
155,393 $(240,264)
reclassifications:
Unrealized holding gains (losses),
net . . . . . . . . . . . . . . . . . . . . . . . . .
77,794 (129,628)
— — (51,834)
20,311
(31,523)
Foreign currency translation
adjustment
Current year benefit plans gains
. . . . . . . . . . . . . . . . . .
. . .
—
—
—
546
— 546
— 260,452 — 260,452
(165)
381
(102,227) 158,225
Total other comprehensive income
(loss) before reclassifications . . . . . .
77,794 (129,628) 260,452
546
209,164
(82,081) 127,083
Amounts reclassified from
accumulated other comprehensive
income that (increase) decrease net
income:
Accretion of unrealized holding
losses on HTM securities . . . . . . .
279
4,008
— — 4,287(a)
(1,683)
2,604
OTTI charges recognized in net
income . . . . . . . . . . . . . . . . . . . . . .
9,800
—
— — 9,800(b)
(3,847)
5,953
Losses (gains) realized in net
income . . . . . . . . . . . . . . . . . . . . . .
41,217
(8,129)
— — 33,088(c)
(12,987)
20,101
Amortization of prior service
credit . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial losses . . . .
—
—
— (7,915) — (7,915)(e)
— 41,436 — 41,436(e)
3,107
(16,264)
(4,808)
25,172
Total reclassifications . . . . . . . . . . . . . .
51,296
(4,121) 33,521 — 80,696
(31,674)
49,022
Total gain (loss) during the period . . . 129,090 (133,749) 293,973
546
289,860
(113,755) 176,105
Balance —December 31, 2013 . . . . . . . $ 37,255
18,450 (161,617) 115 (105,797)
41,638 $ (64,159)
146
Investment Securities
With
OTTI
All
Other
Defined
Benefit
Plans
Total
Amount
Before Tax
Other
Income
Tax
Net
Balance — January 1, 2012 . . . . . . . . . . $(138,319)
Other comprehensive income before
reclassifications:
Unrealized holding gains (losses),
(In thousands)
9,757 (457,145)(1,062)(586,769)
230,328 $(356,441)
net . . . . . . . . . . . . . . . . . . . . . . . . .
(2,998)137,921
— — 134,923
(52,905)
82,018
Foreign currency translation
adjustment . . . . . . . . . . . . . . . . . . .
Current year benefit plans losses . . .
Total other comprehensive income
—
—
—
809
— 809
— (29,823) — (29,823)
(290)
11,705
519
(18,118)
(loss) before reclassifications . . . . . .
(2,998)137,921 (29,823)
809 105,909
(41,490)
64,419
Amounts reclassified from
accumulated other comprehensive
income that (increase) decrease net
income:
Accretion of unrealized holding
losses on HTM securities . . . . . . .
1,660
4,530
— — 6,190(a)
(2,430)
3,760
OTTI charges recognized in net
income . . . . . . . . . . . . . . . . . . . . . .
Gains realized in net income . . . . . .
Amortization of gains on terminated
cash flow hedges . . . . . . . . . . . . . .
Amortization of prior service
credit . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial losses . . . .
47,822
—
—
—
—
—
(9)
—
— — 47,822(b) (18,770)
4
— —
(9)(c)
29,052
(5)
— (178)
(178)(d)
66
(112)
— (6,538) — (6,538)(e)
2,566
— 37,916 — 37,916(e) (14,881)
(3,972)
23,035
Total reclassifications . . . . . . . . . . . . . .
49,482
4,521
31,378
(178) 85,203
(33,445)
51,758
Total gain during the period . . . . . . . . .
46,484 142,442
1,555
631 191,112
(74,935) 116,177
Balance —December 31, 2012 . . . . . . . $ (91,835)152,199 (455,590) (431)(395,657)
155,393 $(240,264)
(a)
(b)
(c)
(d)
(e)
Included in interest income.
Included in OTTI losses recognized in earnings.
Included in gain (loss) on bank investment securities.
Included in interest expense.
Included in salaries and employee benefits expense.
147
Accumulated other comprehensive income (loss), net consisted of unrealized gains (losses) as follows:
Investment Securities
With OTTI
All Other
Balance at January 1, 2012 . . . . . . . . . . . . . . .
Net gain (loss) during 2012 . . . . . . . . . . . . . .
$(84,029)
28,239
$
5,995
86,586
Balance at December 31, 2012 . . . . . . . . . . . .
Net gain (loss) during 2013 . . . . . . . . . . . . . .
Balance at December 31, 2013 . . . . . . . . . . . .
Net gain (loss) during 2014 . . . . . . . . . . . . . .
(55,790)
78,422
22,632
(18,114)
92,581
(81,287)
11,294
111,389
Defined
Benefit
Plans
(In thousands)
$(277,716)
945
(276,771)
178,589
(98,182)
(207,407)
Other
Total
$ (691)
407
$(356,441)
116,177
(284)
381
97
(2,703)
(240,264)
176,105
(64,159)
(116,835)
Balance at December 31, 2014 . . . . . . . . . . . .
$ 4,518
$122,683
$(305,589)
$(2,606)
$(180,994)
16. Other income and other expense
The following items, which exceeded 1% of total interest income and other income in the respective period,
were included in either “other revenues from operations” or “other costs of operations” in the consolidated
statement of income:
Year Ended December 31
2014
2013
2012
(In thousands)
Other income:
Bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,004
72,454
Credit-related fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letter of credit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56,708
Gains from loan securitization transactions . . . . . . . . . . . . . . . . . . . . .
$ 56,120
72,271
59,889
63,066
$ 51,199
68,596
58,496
Other expense:
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of capitalized servicing rights . . . . . . . . . . . . . . . . . . . . .
Advertising and promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401,946
68,410
335,794
65,354
56,597
248,544
59,555
52,388
International activities
17.
The Company engages in limited international activities including certain trust-related services in Europe
and the Cayman Islands, collecting Eurodollar deposits, engaging in foreign currency trading on behalf of
customers, providing credit to support the international activities of domestic companies and holding
certain loans to foreign borrowers. Revenues from providing international trust-related services were
approximately $31 million in 2014, $26 million in 2013 and $24 million in 2012. Net assets identified with
international activities amounted to $232 million and $226 million at December 31, 2014 and 2013,
respectively. Such assets included $213 million and $192 million, respectively, of loans to foreign borrowers.
Deposits at M&T Bank’s Cayman Islands office were $177 million and $323 million at December 31, 2014
and 2013, respectively. The Company uses such deposits to facilitate customer demand and as an alternative
to short-term borrowings when the costs of such deposits seem reasonable.
18. Derivative financial instruments
As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the
repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-
bearing liabilities. The Company designates interest rate swap agreements utilized in the management of
interest rate risk as either fair value hedges or cash flow hedges. Interest rate swap agreements are generally
entered into with counterparties that meet established credit standards and most contain master netting and
collateral provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and
the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in
these contracts was not significant as of December 31, 2014.
148
The net effect of interest rate swap agreements was to increase net interest income by $45 million in
2014, $41 million in 2013 and $36 million in 2012. The average notional amounts of interest rate swap
agreements impacting net interest income that were entered into for interest rate risk management purposes
were $1.4 billion in 2014, $1.2 billion in 2013 and $900 million in 2012.
Information about interest rate swap agreements entered into for interest rate risk management
purposes summarized by type of financial instrument the swap agreements were intended to hedge follows:
December 31, 2014
Fair value hedges:
Fixed rate long-term borrowings(a) . . . . . . . . . . . .
December 31, 2013
Fair value hedges:
Fixed rate long-term borrowings(a) . . . . . . . . . . . .
Notional
Amount
Average
Maturity
(In thousands)
(In years)
Weighted-Average
Rate
Fixed
Variable
Estimated Fair
Value Gain
(In thousands)
$1,400,000
2.7
4.42% 1.19% $ 73,251
$1,400,000
3.7
4.42% 1.20% $102,875
(a) Under the terms of these agreements, the Company receives settlement amounts at a fixed rate and pays at a
variable rate.
The notional amount of interest rate swap agreements entered into for risk management purposes that
were outstanding at December 31, 2014 mature as follows:
Year ending December 31:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 500,000
400,000
500,000
$1,400,000
The Company utilizes commitments to sell residential and commercial real estate loans to hedge the
exposure to changes in the fair value of real estate loans held for sale. Such commitments have generally
been designated as fair value hedges. The Company also utilizes commitments to sell real estate loans to
offset the exposure to changes in fair value of certain commitments to originate real estate loans for sale.
Derivative financial instruments used for trading account purposes included interest rate contracts,
foreign exchange and other option contracts, foreign exchange forward and spot contracts, and financial
futures. Interest rate contracts entered into for trading account purposes had notional values of $17.6 billion
and $17.4 billion at December 31, 2014 and 2013, respectively. The notional amounts of foreign currency
and other option and futures contracts entered into for trading account purposes aggregated $1.3 billion
and $1.4 billion at December 31, 2014 and 2013, respectively.
149
Information about the fair values of derivative instruments in the Company’s consolidated balance
sheet and consolidated statement of income follows:
Asset Derivatives
Fair Value
December 31
Liability Derivatives
Fair Value
December 31
2014
2013
2014
2013
(In thousands)
Derivatives designated and qualifying as hedging instruments
Fair value hedges:
Interest rate swap agreements(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,251 $102,875 $
Commitments to sell real estate loans(a) . . . . . . . . . . . . . . . . . . . . . .
6,957
728
73,979 109,832
— $
4,217
4,217
—
487
487
Derivatives not designated and qualifying as hedging instruments
Mortgage-related commitments to originate real estate loans for
sale(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to sell real estate loans(a) . . . . . . . . . . . . . . . . . . . . . .
Trading:
17,396
754
7,616
6,120
49
4,330
3,675
230
Interest rate contracts(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,614
31,112
Foreign exchange and other option and futures contracts(b) . . . .
274,864
15,831
173,513
29,950
234,455
15,342
264,876
304,431
207,842
253,702
Total derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $338,855 $414,263 $212,059 $254,189
(a) Asset derivatives are reported in other assets and liability derivatives are reported in other liabilities.
(b) Asset derivatives are reported in trading account assets and liability derivatives are reported in other liabilities.
Amount of Unrealized Gain (Loss) Recognized
Year Ended
December 31, 2014
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Derivative Hedged Item Derivative Hedged Item Derivative Hedged Item
(In thousands)
Derivatives in fair value hedging
relationships
Interest rate swap agreements:
Fixed rate long-term borrowings(a) . . . . . . . . $(29,624) $28,870 $(40,304) $38,986
$(4,123) $3,724
Derivatives not designated as hedging
instruments
Trading:
Interest rate contracts(b) . . . . . . . . . . . . . . . . . $ 3,398
Foreign exchange and other option and
futures contracts(b) . . . . . . . . . . . . . . . . . . .
(6,719)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,321)
(a) Reported as other revenues from operations.
(b) Reported as trading account and foreign exchange gains.
$ 9,824
$ 8,004
(3,369)
$ 6,455
(3,970)
$ 4,034
In addition, the Company also has commitments to sell and commitments to originate residential
and commercial real estate loans that are considered derivatives. The Company designates certain of the
commitments to sell real estate loans as fair value hedges of real estate loans held for sale. The Company also
utilizes commitments to sell real estate loans to offset the exposure to changes in the fair value of certain
commitments to originate real estate loans for sale. As a result of these activities, net unrealized pre-tax gains
related to hedged loans held for sale, commitments to originate loans for sale and commitments to sell loans
150
were approximately $28 million and $23 million at December 31, 2014 and 2013, respectively. Changes in
unrealized gains and losses are included in mortgage banking revenues and, in general, are realized in
subsequent periods as the related loans are sold and commitments satisfied.
The Company does not offset derivative asset and liability positions in its consolidated financial
statements. The Company’s exposure to credit risk by entering into derivative contracts is mitigated through
master netting agreements and collateral posting requirements. Master netting agreements covering interest
rate and foreign exchange contracts with the same party include a right to set-off that becomes enforceable
in the event of default, early termination or under other specific conditions.
The aggregate fair value of derivative financial instruments in a liability position, which are subject to
enforceable master netting arrangements, was $161 million and $194 million at December 31, 2014 and
2013, respectively. After consideration of such netting arrangements, the net liability positions with
counterparties aggregated $103 million and $107 million at December 31, 2014 and 2013, respectively. The
Company was required to post collateral relating to those positions of $90 million and $95 million at
December 31, 2014 and 2013, respectively. Certain of the Company’s derivative financial instruments
contain provisions that require the Company to maintain specific credit ratings from credit rating agencies
to avoid higher collateral posting requirements. If the Company’s debt rating were to fall below specified
ratings, the counterparties to the derivative financial instruments could demand immediate incremental
collateralization on those instruments in a net liability position. The aggregate fair value of all derivative
financial instruments with such credit risk-related contingent features in a net liability position on
December 31, 2014 was $22 million, for which the Company had posted collateral of $14 million in the
normal course of business. If the credit risk-related contingent features had been triggered on December 31,
2014, the maximum amount of additional collateral the Company would have been required to post with
counterparties was $8 million.
The aggregate fair value of derivative financial instruments in an asset position, which are subject to
enforceable master netting arrangements, was $104 million and $183 million at December 31, 2014 and
2013, respectively. After consideration of such netting arrangements, the net asset positions with
counterparties aggregated $46 million and $95 million at December 31, 2014 and 2013, respectively.
Counterparties posted collateral relating to those positions of $46 million and $93 million at December 31,
2014 and 2013, respectively. Trading account interest rate swap agreements entered into with customers are
subject to the Company’s credit risk standards and often contain collateral provisions.
In addition to the derivative contracts noted above, the Company clears certain derivative
transactions through a clearinghouse, rather than directly with counterparties. Those transactions cleared
through a clearinghouse require initial margin collateral and additional collateral for contracts in a net
liability position. The net fair values of derivative instruments cleared through clearinghouses at
December 31, 2014 was a net liability position of $35 million and at December 31, 2013 was a net asset
position of $5 million. Collateral posted with clearinghouses was $61 million and $14 million at
December 31, 2014 and December 31, 2013, respectively.
19. Variable interest entities and asset securitizations
During 2013, the Company securitized approximately $3.0 billion of one-to-four family residential
mortgage loans in guaranteed mortgage securitizations with Ginnie Mae. Approximately $1.3 billion of such
loans were formerly held in the Company’s loan portfolio, whereas the remaining loans were newly
originated. The Company recognized pre-tax gains of $42 million related to loans previously held for
investment, which were recorded in “other revenues from operations,” and pre-tax gains of $28 million on
newly originated loans, which were reflected in “mortgage banking revenues.” As a result of the
securitization structure, the Company does not have effective control over the underlying loans and expects
no material credit-related losses on the retained securities as a result of the guarantees by Ginnie Mae. In
similar transactions during 2014, the Company securitized $133 million of one-to-four family residential
real estate loans that had been originated for sale in guaranteed mortgage securitizations with Ginnie Mae
and retained the resulting securities in its investment securities portfolio. Pre-tax gains on such transactions
were not material. Additionally, in 2013 the Company securitized and sold approximately $1.4 billion of
automobile loans that had been held in its loan portfolio. The Company recognized a gain of $21 million
related to the sale, which was recorded in “other revenues from operations.” The Company continues to
service the automobile loans, but has no other financial interest in the securitization trust that the loans were
sold into. The Company has securitized loans to improve its regulatory capital ratios and strengthen its
liquidity and risk profile as a result of changing regulatory liquidity and capital requirements.
151
In accordance with GAAP, the Company determined that it was the primary beneficiary of a
residential mortgage loan securitization trust considering its role as servicer and its retained subordinated
interests in the trust. As a result, the Company has included the one-to-four family residential mortgage
loans that were included in the trust in its consolidated financial statements. At December 31, 2014 and
2013, the carrying values of the loans in the securitization trust were $98 million and $121 million,
respectively. The outstanding principal amount of mortgage-backed securities issued by the qualified special
purpose trust that was held by parties unrelated to M&T at December 31, 2014 and 2013 was $15 million
and $18 million, respectively. Because the transaction was non-recourse, the Company’s maximum
exposure to loss as a result of its association with the trust at December 31, 2014 is limited to realizing the
carrying value of the loans less the amount of the mortgage-backed securities held by third parties.
As described in note 9, M&T has issued junior subordinated debentures payable to various trusts that
have issued Capital Securities. M&T owns the common securities of those trust entities. The Company is not
considered to be the primary beneficiary of those entities and, accordingly, the trusts are not included in the
Company’s consolidated financial statements. At December 31, 2014 and 2013, the Company included the
junior subordinated debentures as “long-term borrowings” in its consolidated balance sheet. The Company
has recognized $34 million in other assets for its “investment” in the common securities of the trusts that
will be concomitantly repaid to M&T by the respective trust from the proceeds of M&T’s repayment of the
junior subordinated debentures associated with preferred capital securities described in note 9.
The Company has invested as a limited partner in various partnerships that collectively had total
assets of approximately $1.2 billion at December 31, 2014 and $1.3 billion at December 31, 2013. Those
partnerships generally construct or acquire properties for which the investing partners are eligible to receive
certain federal income tax credits in accordance with government guidelines. Such investments may also
provide tax deductible losses to the partners. The partnership investments also assist the Company in
achieving its community reinvestment initiatives. As a limited partner, there is no recourse to the Company
by creditors of the partnerships. However, the tax credits that result from the Company’s investments in
such partnerships are generally subject to recapture should a partnership fail to comply with the respective
government regulations. The Company’s maximum exposure to loss of its investments in such partnerships
was $243 million, including $56 million of unfunded commitments, at December 31, 2014 and $236 million,
including $45 million of unfunded commitments, at December 31, 2013. The Company has not provided
financial or other support to the partnerships that was not contractually required. Management currently
estimates that no material losses are probable as a result of the Company’s involvement with such entities.
The Company, in its position as limited partner, does not direct the activities that most significantly impact
the economic performance of the partnerships and, therefore, in accordance with the accounting provisions
for variable interest entities, the partnership entities are not included in the Company’s consolidated
financial statements.
20. Fair value measurements
GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value.
The Company has not made any fair value elections at December 31, 2014.
Pursuant to GAAP, fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. A three-
level hierarchy exists in GAAP for fair value measurements based upon the inputs to the valuation of an
asset or liability.
(cid:129) Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities.
(cid:129) Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in active
markets, quoted prices for identical or similar instruments in markets that are not active or by
model-based techniques in which all significant inputs are observable in the market.
(cid:129) Level 3 — Valuation is derived from model-based and other techniques in which at least one
significant input is unobservable and which may be based on the Company’s own estimates about
the assumptions that market participants would use to value the asset or liability.
When available, the Company attempts to use quoted market prices in active markets to determine
fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active markets are not
available, fair value is often determined using model-based techniques incorporating various assumptions
including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based
techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input
152
that is considered significant to the overall valuation. The following is a description of the valuation
methodologies used for the Company’s assets and liabilities that are measured on a recurring basis at
estimated fair value.
Trading account assets and liabilities
Trading account assets and liabilities consist primarily of interest rate swap agreements and foreign
exchange contracts with customers who require such services with offsetting positions with third parties to
minimize the Company’s risk with respect to such transactions. The Company generally determines the fair
value of its derivative trading account assets and liabilities using externally developed pricing models based
on market observable inputs and, therefore, classifies such valuations as Level 2. Mutual funds held in
connection with deferred compensation arrangements have been classified as Level 1 valuations. Valuations
of investments in municipal and other bonds can generally be obtained through reference to quoted prices
in less active markets for the same or similar securities or through model-based techniques in which all
significant inputs are observable and, therefore, such valuations have been classified as Level 2.
Investment securities available for sale
The majority of the Company’s available-for-sale investment securities have been valued by reference to
prices for similar securities or through model-based techniques in which all significant inputs are observable
and, therefore, such valuations have been classified as Level 2. Certain investments in mutual funds and
equity securities are actively traded and, therefore, have been classified as Level 1 valuations.
As discussed in note 3, the Company sold substantially all of its privately issued mortgage-backed
securities classified as available for sale during the second quarter of 2013. In prior periods, the Company
generally used model-based techniques to value such securities because the Company was significantly
restricted in the level of market observable assumptions that could be relied upon. Specifically, market
assumptions regarding credit adjusted cash flows and liquidity influences on discount rates were difficult to
observe at the individual bond level. Because of the inactivity in the markets and the lack of observable
valuation inputs, the Company classified the valuation of privately issued mortgage-backed securities as
Level 3.
Included in collateralized debt obligations are securities backed by trust preferred securities issued by
financial institutions and other entities. The Company could not obtain pricing indications for many of
these securities from its two primary independent pricing sources. The Company, therefore, performed
internal modeling to estimate the cash flows and fair value of its portfolio of securities backed by trust
preferred securities at December 31, 2014 and 2013. The modeling techniques included estimating cash
flows using bond-specific assumptions about future collateral defaults and related loss severities. The
resulting cash flows were then discounted by reference to market yields observed in the single-name trust
preferred securities market. In determining a market yield applicable to the estimated cash flows, a margin
over LIBOR, ranging from 5% to 10% with a weighted-average of 8% was used. Significant unobservable
inputs used in the determination of estimated fair value of collateralized debt obligations are included in the
accompanying table of significant unobservable inputs to Level 3 measurements. At December 31, 2014, the
total amortized cost and fair value of securities backed by trust preferred securities issued by financial
institutions and other entities were $30 million and $50 million, respectively, and at December 31, 2013
were $42 million and $63 million, respectively. Privately issued mortgage-backed securities and securities
backed by trust preferred securities issued by financial institutions and other entities constituted all of the
available-for-sale investment securities classified as Level 3 valuations.
The Company ensures an appropriate control framework is in place over the valuation processes and
techniques used for significant Level 3 fair value measurements. Internal pricing models used for significant
valuation measurements have generally been subjected to validation procedures including testing of
mathematical constructs, review of valuation methodology and significant assumptions used.
Real estate loans held for sale
The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in fair value of
real estate loans held for sale. The carrying value of hedged real estate loans held for sale includes changes in
estimated fair value during the hedge period. Typically, the Company attempts to hedge real estate loans
held for sale from the date of close through the sale date. The fair value of hedged real estate loans held for
sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell real
estate loans with similar characteristics and, accordingly, such loans have been classified as a Level 2
valuation.
153
Commitments to originate real estate loans for sale and commitments to sell real estate loans
The Company enters into various commitments to originate real estate loans for sale and commitments to
sell real estate loans. Such commitments are considered to be derivative financial instruments and, therefore,
are carried at estimated fair value on the consolidated balance sheet. The estimated fair values of such
commitments were generally calculated by reference to quoted prices in secondary markets for
commitments to sell real estate loans to certain government-sponsored entities and other parties. The fair
valuations of commitments to sell real estate loans generally result in a Level 2 classification. The estimated
fair value of commitments to originate real estate loans for sale are adjusted to reflect the Company’s
anticipated commitment expirations. The estimated commitment expirations are considered significant
unobservable inputs contributing to the Level 3 classification of commitments to originate real estate loans
for sale. Significant unobservable inputs used in the determination of estimated fair value of commitments
to originate real estate loans for sale are included in the accompanying table of significant unobservable
inputs to Level 3 measurements.
Interest rate swap agreements used for interest rate risk management
The Company utilizes interest rate swap agreements as part of the management of interest rate risk to
modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-bearing
liabilities. The Company generally determines the fair value of its interest rate swap agreements using
externally developed pricing models based on market observable inputs and, therefore, classifies such
valuations as Level 2. The Company has considered counterparty credit risk in the valuation of its interest
rate swap agreement assets and has considered its own credit risk in the valuation of its interest rate swap
agreement liabilities.
The following tables present assets and liabilities at December 31, 2014 and 2013 measured at estimated
fair value on a recurring basis:
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities available for sale:
U.S. Treasury and federal agencies . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . .
Mortgage-backed securities:
Government issued or guaranteed . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
Measurements at
December 31,
2014
$
308,175
161,947
8,198
8,731,123
103
50,316
121,488
83,757
Level 1(a)
Level 2(a)
Level 3
(In thousands)
51,416
256,759
—
—
161,947
8,198
—
—
—
—
— 8,731,123
—
—
103
— 50,316
—
—
—
—
64,841
121,488
18,916
9,156,932
64,841
9,041,672
50,419
Real estate loans held for sale . . . . . . . . . . . . . . . . . . . . . .
Other assets(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
742,249
92,129
—
—
742,249
74,733
—
17,396
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,299,485
116,257
10,115,413
67,815
Trading account liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
203,464
8,596
212,060
—
—
—
203,464
8,547
212,011
—
49
49
154
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities available for sale:
U.S. Treasury and federal agencies . . . . . . . . . . . . . . . . .
Obligations of states and political subdivisions . . . . . . .
Mortgage-backed securities:
Government issued or guaranteed . . . . . . . . . . . . . . .
Privately issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
Measurements at
December 31,
2013
$ 376,131
Level 1(a)
Level 2(a)
Level 3
(In thousands)
51,386
324,745
—
—
—
37,776
10,811
—
—
37,776
10,811
4,165,086
1,850
63,083
120,085
133,095
— 4,165,086
—
—
—
82,450
120,085
50,645
—
— 1,850
— 63,083
—
—
4,531,786
82,450
4,384,403
64,933
Real estate loans held for sale . . . . . . . . . . . . . . . . . . . . . . . .
Other assets(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
468,650
123,568
—
—
468,650
115,952
—
7,616
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,500,135
133,836
5,293,750
72,549
Trading account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 249,797
4,392
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 254,189
—
—
—
249,797
717
250,514
—
3,675
3,675
(a) There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended
December 31, 2014 and 2013.
(b) Comprised predominantly of interest rate swap agreements used for interest rate risk management (Level 2),
commitments to sell real estate loans (Level 2) and commitments to originate real estate loans to be held for sale
(Level 3).
The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis
during the year ended December 31, 2014 were as follows:
Balance — January 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gains realized/unrealized:
Included in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Included in other comprehensive income . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers in and/or out of Level 3(c) . . . . . . . . . . . . . . . . . . .
Investment Securities Available for Sale
Privately Issued
Mortgage-
backed
Securities
Collateralized
Debt
Obligations
(In thousands)
Other
Assets and
Other
Liabilities
$ 1,850
$ 63,083
$ 3,941
—
271(e)
(2,018)
—
—
8,209(e)
(20,976)
—
83,417(b)
—
—
(70,011)(d)
Balance — December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . .
$
103
$ 50,316
$ 17,347
Changes in unrealized gains included in earnings related to
assets still held at December 31, 2014 . . . . . . . . . . . . . . . . .
$ —
$
—
$ 18,196(b)
155
The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis
during the year ended December 31, 2013 were as follows:
Balance — January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Total gains (losses) realized/unrealized:
Included in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Included in other comprehensive income . . . . . . . . . . .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers in and/or out of Level 3(c) . . . . . . . . . . . . . . . . .
Balance — December 31, 2013 . . . . . . . . . . . . . . . . . . . . . .
Changes in unrealized gains included in earnings related
to assets still held at December 31, 2013 . . . . . . . . . . . .
Investment Securities Available for Sale
Privately
Issued
Mortgage-
backed
Securities
Collateralized
Debt
Obligations
(In thousands)
Other
Assets and
Other
Liabilities
$1,023,886
$61,869
$ 47,859
(56,102)(a)
116,359(e)
(978,608)
(103,685)
—
—
4,508(e)
—
(3,294)
—
1,850
$63,083
—
$ —
$
$
97,845(b)
—
—
—
(141,763)(d)
3,941
3,431(b)
$
$
The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis
during the year ended December 31, 2012 were as follows:
Balance — January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gains (losses) realized/unrealized:
Included in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Included in other comprehensive income . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers in and/or out of Level 3(c) . . . . . . . . . . . . . . . . . .
Investment Securities Available for Sale
Privately
Issued
Mortgage-
backed
Securities
Collateralized
Debt
Obligations
Other Assets
and Other
Liabilities
$1,151,285
(In thousands)
$52,500
$
6,923
(42,467)(a)
114,592(e)
(199,524)
—
—
12,214(e)
(2,845)
—
212,281(b)
—
—
(171,345)(d)
Balance — December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . .
$1,023,886
$61,869
$ 47,859
Changes in unrealized gains (losses) included in earnings
related to assets still held at December 31, 2012 . . . . . . .
$ (42,467)(a)
$ —
$ 47,859(b)
(a) Reported as an OTTI impairment loss or as gain (loss) on bank investment securities in the consolidated
statement of income.
(b) Reported as mortgage banking revenues in the consolidated statement of income and includes the fair value of
commitment issuances and expirations.
(c) The Company’s policy for transfers between fair value levels is to recognize the transfer as of the actual date of the
event or change in circumstances that caused the transfer.
(d) Transfers out of Level 3 consist of interest rate locks transferred to closed loans.
(e) Reported as net unrealized gains on investment securities in the consolidated statement of comprehensive income.
156
The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or
provide valuation allowances related to certain assets using fair value measurements. The more significant of
those assets follow.
Investment securities held to maturity
During 2012, other-than-temporary losses of $5 million were recorded related to certain mortgage-backed
securities. In accordance with GAAP, the carrying value of such securities was reduced to fair value, with
estimated credit losses recognized in earnings and any remaining unrealized loss recognized in accumulated
other comprehensive income. The determination of fair value included use of external and internal
valuation sources that were weighted and averaged when estimating fair value. Due to the presence of
significant unobservable inputs those valuations were classified as Level 3. The amortized cost, fair value and
impact on the Company’s financial statements of the modeling described herein were not material. No such
other-than-temporary losses were recorded in 2013 or 2014.
Loans
Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records
nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial
charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain
impairment amounts for collateral-dependent loans when establishing the allowance for credit losses. Such
amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a
result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the
fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value
based on recent comparable sales of similar properties or assumptions generally observable in the
marketplace and the related nonrecurring fair value measurement adjustments have generally been classified
as Level 2, unless significant adjustments have been made to the valuation that are not readily observable by
market participants. Non-real estate collateral supporting commercial loans generally consists of business
assets such as receivables, inventory and equipment. Fair value estimations are typically determined by
discounting recorded values of those assets to reflect estimated net realizable value considering specific
borrower facts and circumstances and the experience of credit personnel in their dealings with similar
borrower collateral liquidations. Such discounts were generally in the range of 15% to 90% at December 31,
2014. As these discounts are not readily observable and are considered significant, the valuations have been
classified as Level 3. Loans subject to nonrecurring fair value measurement were $173 million at
December 31, 2014, ($94 million and $79 million of which were classified as Level 2 and Level 3,
respectively), $222 million at December 31, 2013 ($173 million and $49 million of which were classified as
Level 2 and Level 3, respectively), and $335 million at December 31, 2012 ($207 million and $128 million of
which were classified as Level 2 and Level 3, respectively). Changes in fair value recognized during the years
ended December 31, 2014, 2013 and 2012 for partial charge-offs of loans and loan impairment reserves on
loans held by the Company at the end of each of those years were decreases of $55 million, $58 million and
$67 million, respectively.
Assets taken in foreclosure of defaulted loans
Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real
property and are generally measured at the lower of cost or fair value less costs to sell. The fair value of the
real property is generally determined using appraisals or other indications of value based on recent
comparable sales of similar properties or assumptions generally observable in the marketplace, and the
related nonrecurring fair value measurement adjustments have generally been classified as Level 2. Assets
taken in foreclosure of defaulted loans subject to nonrecurring fair value measurement were $19 million and
$29 million at December 31, 2014 and December 31, 2013, respectively. Changes in fair value recognized for
those foreclosed assets held by the Company were not material during each of 2014, 2013 and 2012.
157
Significant unobservable inputs to level 3 measurements
The following tables present quantitative information about significant unobservable inputs used in the fair
value measurements for Level 3 assets and liabilities at December 31, 2014 and 2013:
Fair Value at
December 31,
2014
(In thousands)
Valuation
Technique
Unobservable
Input/Assumptions
Range
(Weighted-
Average)
Recurring fair value
measurements:
Privately issued mortgage–
backed securities . . . . . . .
$
103
Two independent
pricing quotes
—
—
Collateralized debt
obligations . . . . . . . . . . .
50,316
Discounted cash flow Probability of default 12%-57% (36%)
Net other assets
(liabilities)(a) . . . . . . . . .
17,347
Discounted cash flow
Loss severity
Commitment
expirations
100%
0%-96% (17%)
(a) Other Level 3 assets (liabilities) consist of commitments to originate real estate loans.
Fair Value at
December 31,
2013
(In thousands)
Valuation
Technique
Unobservable
Input/Assumptions
Range
(Weighted-
Average)
Recurring fair value
measurements:
Privately issued mortgage–
backed securities . . . . . . .
$ 1,850
Two independent
pricing quotes
—
—
Collateralized debt
obligations . . . . . . . . . . .
63,083
Discounted cash flow Probability of default 17%-55% (39%)
Net other assets
(liabilities)(a) . . . . . . . . .
3,941
Discounted cash
flow
Loss severity
Commitment
expirations
100%
0%-90% (20%)
(a) Other Level 3 assets (liabilities) consist of commitments to originate real estate loans.
Sensitivity of fair value measurements to changes in unobservable inputs
An increase (decrease) in the probability of default and loss severity for collateralized debt securities would
generally result in a lower (higher) fair value measurement.
An increase (decrease) in the estimate of expirations for commitments to originate real estate loans
would generally result in a lower (higher) fair value measurement. Estimated commitment expirations are
derived considering loan type, changes in interest rates and remaining length of time until closing.
158
Disclosures of fair value of financial instruments
The carrying amounts and estimated fair value for financial instrument assets (liabilities) are presented in
the following table:
December 31, 2014
Carrying
Amount
Estimated
Fair Value
Level 1
Level 2
Level 3
(In thousands)
Financial assets:
Cash and cash equivalents . . . . . . . . . . $ 1,373,357 $ 1,373,357 $1,296,923 $
Interest-bearing deposits at banks . . .
Trading account assets
. . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . .
Loans and leases:
6,470,867
308,175
13,023,956
6,470,867
308,175
12,993,542
51,416
64,841
— 6,470,867
256,759
12,750,396
76,434 $
—
—
—
208,719
Commercial loans and leases . . . . .
Commercial real estate loans . . . . .
Residential real estate loans . . . . . . .
Consumer loans . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . .
19,461,292
27,567,569
8,657,301
10,982,794
(919,562)
19,188,574
27,487,818
8,729,056
10,909,623
—
—
—
307,667
— 5,189,086
—
—
— 19,188,574
27,180,151
3,539,970
— 10,909,623
—
—
Loans and leases, net . . . . . . . . . .
Accrued interest receivable . . . . . . . . .
65,749,394
227,348
66,315,071
227,348
— 5,496,753 60,818,318
—
—
227,348
Financial liabilities:
Noninterest-bearing deposits . . . . . . . $(26,947,880) $(26,947,880)
Savings deposits and NOW
accounts . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . .
Short-term borrowings . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . .
Accrued interest payable . . . . . . . . . . .
Trading account liabilities . . . . . . . . . .
(43,393,618) (43,393,618)
(3,086,126)
(3,063,973)
(176,582)
(176,582)
(192,676)
(192,676)
(9,139,789)
(9,006,959)
(63,372)
(63,372)
(203,464)
(203,464)
— $(26,947,880)
— (43,393,618)
— (3,086,126)
(176,582)
—
—
(192,676)
— (9,139,789)
(63,372)
—
(203,464)
—
—
—
—
—
—
—
—
—
Other financial instruments:
Commitments to originate real estate
loans for sale . . . . . . . . . . . . . . . . . . $
17,347 $
17,347
— $
— $
17,347
Commitments to sell real estate
loans . . . . . . . . . . . . . . . . . . . . . . . . .
Other credit-related commitments . . .
Interest rate swap agreements used for
interest rate risk management . . . . .
(7,065)
(119,079)
(7,065)
(119,079)
73,251
73,251
—
—
—
(7,065)
—
— (119,079)
73,251
—
159
Financial assets:
December 31, 2013
Carrying
Amount
Estimated
Fair Value
Level 1
Level 2
Level 3
(In thousands)
Cash and cash equivalents . . . . . . . . . . $ 1,672,934 $ 1,672,934 $1,596,877 $
Interest-bearing deposits at banks . . .
Trading account assets
. . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . .
Loans and leases:
1,651,138
376,131
8,796,497
1,651,138
376,131
8,690,494
51,386
82,450
— 1,651,138
324,745
8,384,106
76,057 $
—
—
—
223,938
Commercial loans and leases . . . . .
Commercial real estate loans . . . . .
Residential real estate loans . . . . . . .
Consumer loans . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . .
18,705,216
26,148,208
8,928,221
10,291,514
(916,676)
18,457,288
26,018,195
8,867,872
10,201,087
—
—
—
— 5,432,207
—
—
— 18,457,288
67,505 25,950,690
3,435,665
— 10,201,087
—
—
Loans and leases, net . . . . . . . . . .
Accrued interest receivable . . . . . . . . .
63,156,483
222,558
63,544,442
222,558
— 5,499,712 58,044,730
—
—
222,558
Financial liabilities:
Noninterest-bearing deposits . . . . . . . $(24,661,007) $(24,661,007)
Savings deposits and NOW
accounts . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . .
Deposits at Cayman Islands office . . .
Short-term borrowings . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . .
Accrued interest payable . . . . . . . . . . .
Trading account liabilities . . . . . . . . . .
(38,611,021) (38,611,021)
(3,542,789)
(3,523,838)
(322,746)
(322,746)
(260,455)
(260,455)
(5,244,902)
(5,108,870)
(43,419)
(43,419)
(249,797)
(249,797)
— $(24,661,007)
— (38,611,021)
— (3,542,789)
(322,746)
—
—
(260,455)
— (5,244,902)
(43,419)
—
(249,797)
—
—
—
—
—
—
—
—
—
Other financial instruments:
Commitments to originate real estate
loans for sale . . . . . . . . . . . . . . . . . . $
3,941 $
3,941
— $
— $
3,941
Commitments to sell real estate
loans . . . . . . . . . . . . . . . . . . . . . . . . .
Other credit-related commitments . . .
Interest rate swap agreements used for
interest rate risk management . . . . .
12,360
(118,886)
12,360
(118,886)
102,875
102,875
—
—
—
12,360
—
— (118,886)
102,875
—
With the exception of marketable securities, certain off-balance sheet financial instruments and one-
to-four family residential mortgage loans originated for sale, the Company’s financial instruments are not
readily marketable and market prices do not exist. The Company, in attempting to comply with the
provisions of GAAP that require disclosures of fair value of financial instruments, has not attempted to
market its financial instruments to potential buyers, if any exist. Since negotiated prices in illiquid markets
depend greatly upon the then present motivations of the buyer and seller, it is reasonable to assume that
actual sales prices could vary widely from any estimate of fair value made without the benefit of
negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial
instruments in a short period of time. The following assumptions, methods and calculations were used in
determining the estimated fair value of financial instruments not measured at fair value in the consolidated
balance sheet.
160
Cash and cash equivalents, interest-bearing deposits at banks, deposits at Cayman Islands office, short-term
borrowings, accrued interest receivable and accrued interest payable
Due to the nature of cash and cash equivalents and the near maturity of interest-bearing deposits at banks,
deposits at Cayman Islands office, short-term borrowings, accrued interest receivable and accrued interest
payable, the Company estimated that the carrying amount of such instruments approximated estimated fair
value.
Investment securities
Estimated fair values of investments in readily marketable securities were generally based on quoted market
prices. Investment securities that were not readily marketable were assigned amounts based on estimates
provided by outside parties or modeling techniques that relied upon discounted calculations of projected
cash flows or, in the case of other investment securities, which include capital stock of the Federal Reserve
Bank of New York and the Federal Home Loan Bank of New York, at an amount equal to the carrying
amount.
Loans and leases
In general, discount rates used to calculate values for loan products were based on the Company’s pricing at
the respective period end. A higher discount rate was assumed with respect to estimated cash flows
associated with nonaccrual loans. Projected loan cash flows were adjusted for estimated credit losses.
However, such estimates made by the Company may not be indicative of assumptions and adjustments that
a purchaser of the Company’s loans and leases would seek.
Deposits
Pursuant to GAAP, the estimated fair value ascribed to noninterest-bearing deposits, savings deposits and
NOW accounts must be established at carrying value because of the customers’ ability to withdraw funds
immediately. Time deposit accounts are required to be revalued based upon prevailing market interest rates
for similar maturity instruments. As a result, amounts assigned to time deposits were based on discounted
cash flow calculations using prevailing market interest rates based on the Company’s pricing at the
respective date for deposits with comparable remaining terms to maturity.
The Company believes that deposit accounts have a value greater than that prescribed by GAAP. The
Company feels, however, that the value associated with these deposits is greatly influenced by characteristics
of the buyer, such as the ability to reduce the costs of servicing the deposits and deposit attrition which often
occurs following an acquisition.
Long-term borrowings
The amounts assigned to long-term borrowings were based on quoted market prices, when available, or
were based on discounted cash flow calculations using prevailing market interest rates for borrowings of
similar terms and credit risk.
Other commitments and contingencies
As described in note 21, in the normal course of business, various commitments and contingent liabilities
are outstanding, such as loan commitments, credit guarantees and letters of credit. The Company’s pricing
of such financial instruments is based largely on credit quality and relationship, probability of funding and
other requirements. Loan commitments often have fixed expiration dates and contain termination and
other clauses which provide for relief from funding in the event of significant deterioration in the credit
quality of the customer. The rates and terms of the Company’s loan commitments, credit guarantees and
letters of credit are competitive with other financial institutions operating in markets served by the
Company. The Company believes that the carrying amounts, which are included in other liabilities, are
reasonable estimates of the fair value of these financial instruments.
The Company does not believe that the estimated information presented herein is representative of
the earnings power or value of the Company. The preceding analysis, which is inherently limited in
depicting fair value, also does not consider any value associated with existing customer relationships nor the
ability of the Company to create value through loan origination, deposit gathering or fee generating
activities.
Many of the estimates presented herein are based upon the use of highly subjective information and
assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates
161
may not be comparable between financial institutions due to the wide range of permitted valuation
techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value
amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or
settlement of the various financial instruments could be significantly different.
21. Commitments and contingencies
In the normal course of business, various commitments and contingent liabilities are outstanding. The
following table presents the Company’s significant commitments. Certain of these commitments are not
included in the Company’s consolidated balance sheet.
December 31
2014
2013
(In thousands)
Commitments to extend credit
Home equity lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,194,516
212,257
Commercial real estate loans to be sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,834,699
Other commercial real estate and construction . . . . . . . . . . . . . . . . . . . . . . . .
432,352
Residential real estate loans to be sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
524,399
Other residential real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,080,856
Commercial and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,706,888
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,965
Commercial letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,490,050
Financial guarantees and indemnification contracts . . . . . . . . . . . . . . . . . . . . . .
1,237,294
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to sell real estate loans
$ 6,218,823
62,386
3,919,545
469,869
384,617
10,419,545
3,600,528
53,284
2,457,633
854,656
Commitments to extend credit are agreements to lend to customers, generally having fixed
expiration dates or other termination clauses that may require payment of a fee. Standby and commercial
letters of credit are conditional commitments issued to guarantee the performance of a customer to a third
party. Standby letters of credit generally are contingent upon the failure of the customer to perform
according to the terms of the underlying contract with the third party, whereas commercial letters of credit
are issued to facilitate commerce and typically result in the commitment being funded when the underlying
transaction is consummated between the customer and a third party. The credit risk associated with
commitments to extend credit and standby and commercial letters of credit is essentially the same as that
involved with extending loans to customers and is subject to normal credit policies. Collateral may be
obtained based on management’s assessment of the customer’s creditworthiness.
Financial guarantees and indemnification contracts are oftentimes similar to standby letters of credit
and include mandatory purchase agreements issued to ensure that customer obligations are fulfilled,
recourse obligations associated with sold loans, and other guarantees of customer performance or
compliance with designated rules and regulations. Included in financial guarantees and indemnification
contracts are loan principal amounts sold with recourse in conjunction with the Company’s involvement in
the Fannie Mae DUS program. The Company’s maximum credit risk for recourse associated with loans sold
under this program totaled approximately $2.4 billion and $2.3 billion at December 31, 2014 and 2013,
respectively.
Since many loan commitments, standby letters of credit, and guarantees and indemnification
contracts expire without being funded in whole or in part, the contract amounts are not necessarily
indicative of future cash flows.
The Company utilizes commitments to sell real estate loans to hedge exposure to changes in the fair
value of real estate loans held for sale. Such commitments are considered derivatives and along with
commitments to originate real estate loans to be held for sale are generally recorded in the consolidated
balance sheet at estimated fair market value.
162
The Company occupies certain banking offices and uses certain equipment under noncancelable
operating lease agreements expiring at various dates over the next 24 years. Minimum lease payments under
noncancelable operating leases are summarized in the following table:
Year ending December 31:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 87,063
83,315
70,108
56,024
45,079
113,390
$454,979
The Company is contractually obligated to repurchase previously sold residential real estate loans
that do not ultimately meet investor sale criteria related to underwriting procedures or loan documentation.
When required to do so, the Company may reimburse loan purchasers for losses incurred or may
repurchase certain loans. The Company reduces residential mortgage banking revenues by an estimate for
losses related to its obligations to loan purchasers. The amount of those charges is based on the volume of
loans sold, the level of reimbursement requests received from loan purchasers and estimates of losses that
may be associated with previously sold loans. At December 31, 2014, management believes that any further
liability arising out of the Company’s obligation to loan purchasers is not material to the Company’s
consolidated financial position.
M&T and its subsidiaries are subject in the normal course of business to various pending and
threatened legal proceedings in which claims for monetary damages are asserted. On an on-going basis
management, after consultation with legal counsel, assesses the Company’s liabilities and contingencies in
connection with such legal proceedings. For those matters where it is probable that the Company will incur
losses and the amounts of the losses can be reasonably estimated, the Company records an expense and
corresponding liability in its consolidated financial statements. To the extent the pending or threatened
litigation could result in exposure in excess of that liability, the amount of such excess is not currently
estimable. Although not considered probable, the range of reasonably possible losses for such matters in the
aggregate, beyond the existing recorded liability, was between $0 and $40 million. Although the Company
does not believe that the outcome of pending litigations will be material to the Company’s consolidated
financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated
results of operations for a particular reporting period in the future.
Segment information
22.
Reportable segments have been determined based upon the Company’s internal profitability reporting
system, which is organized by strategic business unit. Certain strategic business units have been combined
for segment information reporting purposes where the nature of the products and services, the type of
customer and the distribution of those products and services are similar. The reportable segments are
Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential
Mortgage Banking and Retail Banking.
The financial information of the Company’s segments has been compiled utilizing the accounting
policies described in note 1 with certain exceptions. The more significant of these exceptions are described
herein. The Company allocates interest income or interest expense using a methodology that charges users
of funds (assets) interest expense and credits providers of funds (liabilities) with income based on the
maturity, prepayment and/or repricing characteristics of the assets and liabilities. The net effect of this
allocation is recorded in the “All Other” category. A provision for credit losses is allocated to segments in an
amount based largely on actual net charge-offs incurred by the segment during the period plus or minus an
amount necessary to adjust the segment’s allowance for credit losses due to changes in loan balances. In
contrast, the level of the consolidated provision for credit losses is determined using the methodologies
described in notes 1 and 5. Indirect fixed and variable expenses incurred by certain centralized support areas
are allocated to segments based on actual usage (for example, volume measurements) and other criteria.
163
Certain types of administrative expenses and bankwide expense accruals (including amortization of core
deposit and other intangible assets associated with acquisitions of financial institutions) are generally not
allocated to segments. Income taxes are allocated to segments based on the Company’s marginal statutory
tax rate adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the segments
based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated
with the business of the segment (including interest, credit and operating risk).
The management accounting policies and processes utilized in compiling segment financial
information are highly subjective and, unlike financial accounting, are not based on authoritative guidance
similar to GAAP. As a result, reported segment results are not necessarily comparable with similar
information reported by other financial institutions. Furthermore, changes in management structure or
allocation methodologies and procedures may result in changes in reported segment financial data.
Information about the Company’s segments is presented in the accompanying table. Income statement
amounts are in thousands of dollars. Balance sheet amounts are in millions of dollars.
Business Banking
Commercial Banking
Commercial Real Estate
Discretionary Portfolio
For the Years Ended December 31, 2014, 2013 and 2012
2014
2013
2012
2014
2013
2012
2014
2013
2012
2014
2013
2012
Net interest income(a) . . . . . . . . . . . . . . . $317,356 $325,521 $347,067 $ 745,218 $ 758,231 $ 753,678 $539,600 $570,786 $531,398 $ 74,204 $ 66,157 $ 66,303
(2,126) (76,113)
Noninterest income . . . . . . . . . . . . . . . . . 105,370 102,945 103,283
253,808 127,445 130,895 133,120
259,832
263,766
27,464
Provision for credit losses
Amortization of core deposit and other
. . . . . . . . . . . .
422,726 428,466 450,350 1,005,050 1,021,997 1,007,486 667,045 701,681 664,518 101,668
16,547
18,885
(6,476)
22,245
15,781
76,818
33,197
26,450
7,365
4,238
64,031
16,670
(9,810)
44,305
intangible assets . . . . . . . . . . . . . . . . . .
—
122
Depreciation and other amortization . . .
Other noninterest expense . . . . . . . . . . . . 200,802 214,043 179,428
—
405
—
198
—
588
274,697
—
564
288,842
—
567
—
11,004
262,820 207,757 214,246 190,879
—
14,296
—
16,278
—
891
33,934
—
1,330
30,431
—
2,065
31,006
Income (loss) before taxes . . . . . . . . . . . . 202,634 187,775 248,555
76,735 101,484
Income tax expense (benefit) . . . . . . . . . .
82,825
696,568
285,429
655,773
264,433
728,318 449,486 465,774 458,397
296,894 133,357 143,981 149,321
50,296
15,600 (87,186)
2,198 (14,368) (54,071)
Net income (loss) . . . . . . . . . . . . . . . . . . . $119,809 $111,040 $147,071 $ 411,139 $ 391,340 $ 431,424 $316,129 $321,793 $309,076 $ 48,098 $ 29,968 $(33,115)
Average total assets (in millions) . . . . . . . $ 5,281 $ 5,080 $ 4,909 $
22,892 $
21,655 $
19,946 $ 17,113 $ 17,150 $ 16,437 $ 20,798 $ 16,480 $ 16,583
Capital expenditures (in millions) . . . . . . $
2 $
1 $
— $
— $
— $
— $
— $
— $
— $
— $
— $
—
Residential Mortgage
Banking
For the Years Ended December 31, 2014, 2013 and 2012
Retail Banking
All Other
2014
2013
2012
2014
2013
2012
2014
2013
2012
2014
Total
2013
2012
Net interest income(a) . . . . . . . . $ 90,123 $ 98,496 $ 78,058 $ 741,109 $ 810,134 $ 902,906 $ 168,836 $ 43,904 $ (80,894)$2,676,446 $2,673,229 $2,598,516
Noninterest income . . . . . . . . . . 331,391 325,474 402,211
335,501
373,362
349,571
592,270 670,889
501,390 1,779,273 1,865,205 1,667,270
Provision for credit losses . . . . . .
(2,357) (11,711) 17,169
77,158
72,502
95,345
(12,954)
(3,094)
4,917
124,000
185,000
204,000
421,514 423,970 480,269 1,076,610 1,183,496 1,252,477
761,106 714,793
420,496 4,455,719 4,538,434 4,265,786
Amortization of core deposit
and other intangible assets . . .
—
—
—
—
—
— 33,824
46,912
60,631
33,824
46,912
60,631
Depreciation and other
amortization . . . . . . . . . . . . . .
47,108
48,716
46,902
37,788
34,599
32,734
61,848
57,120
50,536
164,906
156,823
143,930
Other noninterest expense . . . . . 222,396 225,794 195,604
759,569
768,644
751,916
844,972 690,150
693,046 2,544,127 2,432,150 2,304,699
Income (loss) before taxes . . . . . 154,367 161,171 220,594
202,095
307,751
372,482 (166,584) (76,295) (388,634) 1,588,862 1,717,549 1,552,526
Income tax expense (benefit) . . .
59,361
61,779
85,671
82,179
125,350
151,616 (122,733) (78,841) (207,887)
522,616
579,069
523,028
Net income (loss) . . . . . . . . . . . . $ 95,006 $ 99,392 $134,923 $ 119,916 $ 182,401 $ 220,866 $ (43,851)$ 2,546 $(180,747)$1,066,246 $1,138,480 $1,029,498
Average total assets (in
millions) . . . . . . . . . . . . . . . . . $ 3,333 $ 2,858 $ 2,451 $
10,449 $
10,997 $
11,705 $ 12,277 $ 9,442 $
7,952 $
92,143 $
83,662 $
79,983
Capital expenditures (in
millions) . . . . . . . . . . . . . . . . . $
— $
— $
1 $
14 $
40 $
15 $
57 $
89 $
76 $
73 $
130 $
92
(a) Net interest income is the difference between actual taxable-equivalent interest earned on assets and interest paid on
liabilities by a segment and a funding charge (credit) based on the Company’s internal funds transfer pricing
methodology. Segments are charged a cost to fund any assets (e.g. loans) and are paid a funding credit for any funds
provided (e.g. deposits). The taxable-equivalent adjustment aggregated $23,642,000 in 2014, $24,971,000 in 2013
and $26,391,000 in 2012 and is eliminated in “All Other” net interest income and income tax expense (benefit).
164
The Business Banking segment provides deposit, lending, cash management and other financial
services to small businesses and professionals through the Company’s banking office network and several
other delivery channels, including business banking centers, telephone banking, Internet banking and
automated teller machines. The Commercial Banking segment provides a wide range of credit products and
banking services to middle-market and large commercial customers, mainly within the markets the
Company serves. Among the services provided by this segment are commercial lending and leasing, letters of
credit, deposit products and cash management services. The Commercial Real Estate segment provides
credit services which are secured by various types of multifamily residential and commercial real estate and
deposit services to its customers. Activities of this segment include the origination, sales and servicing of
commercial real estate loans. The Discretionary Portfolio segment includes securities, residential mortgage
loans and other assets; short-term and long-term borrowed funds; brokered deposits; and Cayman Islands
branch deposits. This segment also provides foreign exchange services to customers. The Residential
Mortgage Banking segment originates and services residential real estate loans for consumers and sells
substantially all of those loans in the secondary market to investors or to the Discretionary Portfolio
segment. The segment periodically purchases servicing rights to loans that have been originated by other
entities. Residential real estate loans held for sale are included in the Residential Mortgage Banking segment.
The Retail Banking segment offers a variety of services to consumers through several delivery channels that
include banking offices, automated teller machines, telephone banking and Internet banking. The “All
Other” category includes other operating activities of the Company that are not directly attributable to the
reported segments; the difference between the provision for credit losses and the calculated provision
allocated to the reportable segments; goodwill and core deposit and other intangible assets resulting from
acquisitions of financial institutions; merger-related gains and expenses resulting from acquisitions; the net
impact of the Company’s internal funds transfer pricing methodology; eliminations of transactions between
reportable segments; certain nonrecurring transactions; the residual effects of unallocated support systems
and general and administrative expenses; and the impact of interest rate risk management strategies. The
amount of intersegment activity eliminated in arriving at consolidated totals was included in the “All Other”
category as follows:
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(49,800)
(12,014)
(15,375)
(22,411)
(In thousands)
$(50,128)
(16,235)
(13,791)
(20,102)
$(71,452)
(17,313)
(22,029)
(32,110)
Year Ended December 31
2014
2013
2012
The Company conducts substantially all of its operations in the United States. There are no
transactions with a single customer that in the aggregate result in revenues that exceed ten percent of
consolidated total revenues.
23. Regulatory matters
Payment of dividends by M&T’s banking subsidiaries is restricted by various legal and regulatory
limitations. Dividends from any banking subsidiary to M&T are limited by the amount of earnings of the
banking subsidiary in the current year and the preceding two years. For purposes of this test, at
December 31, 2014, approximately $1.5 billion was available for payment of dividends to M&T from
banking subsidiaries. Additionally, the Federal Reserve Board requires bank holding companies with $50
billion or more of total consolidated assets to submit annual capital plans. Such bank holding companies
may pay dividends and repurchase stock only in accordance with a capital plan which the Federal Reserve
Board has not objected to.
Banking regulations prohibit extensions of credit by the subsidiary banks to M&T unless
appropriately secured by assets. Securities of affiliates are not eligible as collateral for this purpose.
The bank subsidiaries are required to maintain reserves against certain deposit liabilities. During the
maintenance periods that included December 31, 2014 and 2013, cash and due from banks and interest-
earning deposits at banks included a daily average of $555,575,000 and $595,593,000, respectively, for such
purpose.
165
Federal regulators have adopted capital adequacy guidelines for bank holding companies and banks.
Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a material effect on the Company’s
financial statements. Under the capital adequacy guidelines in effect through December 31, 2014, the so-
called “Tier 1 capital” and “Total capital” as a percentage of risk-weighted assets and certain off-balance
sheet financial instruments were required to be at least 4% and 8%, respectively. In addition to these risk-
based measures, regulators also required banking institutions that met certain qualitative criteria to
maintain a minimum “leverage” ratio of “Tier 1 capital” to average total assets, adjusted for goodwill and
certain other items. As of December 31, 2014, M&T and each of its banking subsidiaries exceeded all
applicable capital adequacy requirements. To be considered “well capitalized” under that regulatory
framework, a banking institution had to maintain Tier 1 risk-based capital, total risk-based capital and
leverage ratios of at least 6%, 10% and 5%, respectively.
The capital ratios and amounts of the Company and its banking subsidiaries as of December 31, 2014
and 2013 are presented below:
M&T
(Consolidated)
M&T Bank
Wilmington
Trust, N.A.
(Dollars in thousands)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,644,765
$ 8,043,185
$435,558
December 31, 2014:
Tier 1 capital
Amount
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total capital
Amount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . . . . . .
Leverage
12.47%
10.46%
3,093,874
3,077,101
57.22%
30,447
11,767,308
10,048,277
439,867
15.21%
13.06%
6,187,747
6,154,201
57.79%
60,893
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
Ratio(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . . . . . .
9,644,765
8,043,185
435,558
10.17%
8.56%
9.98%
3,793,836
3,760,364
174,613
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,792,035
$ 7,341,506
$420,330
December 31, 2013:
Tier 1 capital
Amount
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total capital
Amount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . . . . . .
Leverage
12.00%
10.08%
2,930,925
2,914,246
73.79%
22,786
11,045,589
9,445,770
424,975
15.07%
12.96%
5,861,849
5,828,491
74.60%
45,573
Amount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum required amount(b) . . . . . . . . . . . . . . . . . . . . . . . . . .
8,792,035
7,341,506
420,330
10.78%
9.09%
2,446,476
2,422,096
19.80%
63,678
(a) The ratio of capital to risk-weighted assets, as defined by regulation.
(b) Minimum amount of capital to be considered adequately capitalized, as defined by regulation.
(c) The ratio of capital to average assets, as defined by regulation.
Beginning in 2015, new regulatory capital rules became effective. The new rules substantially revise
the risk-based capital requirements applicable to bank holding companies and banks. M&T and its
subsidiary banks expect to be able to comply with the revised capital adequacy requirements.
166
24. Relationship with Bayview Lending Group LLC and Bayview Financial Holdings, L.P.
M&T holds a 20% minority interest in Bayview Lending Group LLC (“BLG”), a privately-held commercial
mortgage company. M&T recognizes income or loss from BLG using the equity method of accounting. The
carrying value of that investment was $47 million at December 31, 2014.
Bayview Financial Holdings, L.P. (together with its affiliates, “Bayview Financial”), a privately-held
specialty mortgage finance company, is BLG’s majority investor. In addition to their common investment in
BLG, the Company and Bayview Financial conduct other business activities with each other. The Company
has obtained loan servicing rights for mortgage loans from BLG and Bayview Financial having outstanding
principal balances of $4.8 billion and $5.5 billion at December 31, 2014 and 2013, respectively. Revenues
from those servicing rights were $26 million, $31 million and $35 million during 2014, 2013 and 2012,
respectively. The Company sub-services residential real estate loans for Bayview Financial having
outstanding principal balances totaling $41.3 billion and $45.6 billion at December 31, 2014 and 2013,
respectively. Revenues earned for sub-servicing loans for Bayview Financial were $115 million in 2014, $33
million in 2013 and $10 million in 2012. In addition, the Company held $202 million and $220 million of
mortgage-backed securities in its held-to-maturity portfolio at December 31, 2014 and 2013, respectively,
that were securitized by Bayview Financial.
25. Parent company financial statements
Condensed Balance Sheet
Assets
Cash in subsidiary bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Due from consolidated bank subsidiaries
December 31
2014
2013
(In thousands)
11,306
$
10,729
Money-market savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,096,533
—
12
Total due from consolidated bank subsidiaries . . . . . . . . . . . . . . . . . . . . . .
1,096,545
968,274
1,914
1,894
972,082
Investments in consolidated subsidiaries
Banks and bank holding company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated subsidiaries (note 19) . . . . . . . . . . . . . . . . . . . . .
Investment in Bayview Lending Group LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,945,516
16,217
33,578
46,716
81,034
11,364,657
16,212
33,751
73,883
80,098
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,230,912
$12,551,412
Liabilities
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,950
835,066
$
62,817
1,183,063
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
895,016
12,335,896
1,245,880
11,305,532
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,230,912
$12,551,412
167
Condensed Statement of Income
Year Ended December 31
2014
2013
2012
(In thousands, except per share)
Income
Dividends from consolidated bank subsidiaries . . . . . . . . . . . . . . . . $ 480,000
(16,672)
Equity in earnings of Bayview Lending Group LLC . . . . . . . . . . . . .
7,755
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 700,000
(16,126)
9,992
$ 700,000
(21,511)
8,755
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
471,083
693,866
687,244
Expense
Interest on long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes and equity in undistributed income
of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,700
15,107
62,807
408,276
27,284
Income before equity in undistributed income of subsidiaries . . . . . . .
435,560
73,115
15,994
89,109
604,757
35,986
640,743
82,286
19,226
101,512
585,732
43,149
628,881
Equity in undistributed income of subsidiaries
Net income of subsidiaries
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,110,686
(480,000)
1,197,737
(700,000)
1,100,617
(700,000)
Equity in undistributed income of subsidiaries . . . . . . . . . . . . . . . .
630,686
497,737
400,617
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,066,246
$1,138,480
$1,029,498
Net income per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7.47
7.42
$
8.26
8.20
7.57
7.54
168
Condensed Statement of Cash Flows
Year Ended December 31
2014
2013
2012
(In thousands)
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,066,246
Adjustments to reconcile net income to net cash provided by
$1,138,480
$1,029,498
operating activities
Equity in undistributed income of subsidiaries . . . . . . . . . . . . . .
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . .
Net change in accrued income and expense . . . . . . . . . . . . . . . . .
(630,686)
(6,522)
23,419
(497,737)
1,535
31,979
(400,617)
1,724
6,798
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . .
452,457
674,257
637,403
Cash flows from investing activities
Proceeds from sales of investment securities . . . . . . . . . . . . . . . . . .
Investment in subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided (used) by investing activities . . . . . . . . . . . . .
Cash flows from financing activities
Payments on long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid — common . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid — preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of preferred stock . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
10,721
10,721
(350,010)
(371,199)
(70,234)
346,500
110,601
—
(140,000)
3,295
(136,705)
—
(365,349)
(53,450)
—
140,799
411
—
324
735
(300,000)
(357,717)
(53,450)
—
143,352
Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . .
(334,342)
(278,000)
(567,815)
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . .
128,836
979,003
259,552
719,451
70,323
649,128
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . $1,107,839
$ 979,003
$ 719,451
Supplemental disclosure of cash flow information
Interest received during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest paid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes received during the year . . . . . . . . . . . . . . . . . . . . . . .
2,094
47,003
24,588
$
2,224
71,090
45,237
$
1,970
80,090
21,878
169
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures. Based upon their evaluation of the effectiveness
of M&T’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)),
Robert G. Wilmers, Chairman of the Board and Chief Executive Officer, and René F. Jones, Executive Vice
President and Chief Financial Officer, concluded that M&T’s disclosure controls and procedures were
effective as of December 31, 2014.
(b) Management’s annual report on internal control over financial reporting. Included under the
heading “Report on Internal Control Over Financial Reporting” at Item 8 of this Annual Report on
Form 10-K.
(c) Attestation report of the registered public accounting firm. Included under the heading “Report
of Independent Registered Public Accounting Firm” at Item 8 of this Annual Report on Form 10-K.
(d) Changes in internal control over financial reporting. M&T regularly assesses the adequacy of its
internal control over financial reporting and enhances its controls in response to internal control
assessments and internal and external audit and regulatory recommendations. No changes in internal
control over financial reporting have been identified in connection with the evaluation of disclosure
controls and procedures during the quarter ended December 31, 2014 that have materially affected, or are
reasonably likely to materially affect, M&T’s internal control over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The identification of the Registrant’s directors is incorporated by reference to the caption “NOMINEES
FOR DIRECTOR” contained in the Registrant’s definitive Proxy Statement for its 2015 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission on or about March 5, 2015.
The identification of the Registrant’s executive officers is presented under the caption “Executive
Officers of the Registrant” contained in Part I of this Annual Report on Form 10-K.
Disclosure of compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, by
the Registrant’s directors and executive officers, and persons who are the beneficial owners of more than
10% of the Registrant’s common stock, is incorporated by reference to the caption “Section 16(a) Beneficial
Ownership Reporting Compliance” contained in the Registrant’s definitive Proxy Statement for its 2015
Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission on or
about March 5, 2015.
The other information required by Item 10 is incorporated by reference to the captions
“CORPORATE GOVERNANCE OF M&T BANK CORPORATION” and “STOCK OWNERSHIP
INFORMATION” contained in the Registrant’s definitive Proxy Statement for its 2015 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission on or about March 5, 2015.
Item 11.
Executive Compensation.
Incorporated by reference to the captions “DIRECTOR COMPENSATION,” “NOMINATION,
COMPENSATION AND GOVERNANCE COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION,” “NOMINATION, COMPENSATION AND GOVERNANCE COMMITTEE REPORT”
AND “EXECUTIVE COMPENSATION” contained in the Registrant’s definitive Proxy Statement for its
2015 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission on
or about March 5, 2015.
170
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Incorporated by reference to the caption “STOCK OWNERSHIP INFORMATION” contained in the
Registrant’s definitive Proxy Statement for its 2015 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission on or about March 5, 2015.
The information required by this item concerning Equity Compensation Plan information is filed as
part of this Annual Report on Form 10-K. See Part II, Item 5. “Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities.”
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Incorporated by reference to the captions “TRANSACTIONS WITH DIRECTORS AND EXECUTIVE
OFFICERS” and “CORPORATE GOVERNANCE OF M&T BANK CORPORATION” contained in the
Registrant’s definitive Proxy Statement for its 2015 Annual Meeting of Shareholders, which will be filed with
the Securities and Exchange Commission on or about March 5, 2015.
Item 14. Principal Accountant Fees and Services.
Incorporated by reference to the caption “PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM OF M&T BANK CORPORATION” contained in the Registrant’s definitive Proxy Statement for its
2015 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission on
or about March 5, 2015.
PART IV
Item 15.
Exhibits and Financial Statement Schedules.
(a) Financial statements and financial statement schedules filed as part of this Annual Report on
Form 10-K. See Part II, Item 8. “Financial Statements and Supplementary Data.” Financial statement
schedules are not required or are inapplicable, and therefore have been omitted.
(b) Exhibits required by Item 601 of Regulation S-K. The exhibits listed on the Exhibit Index of this
Annual Report on Form 10-K have been previously filed, are filed herewith or are incorporated herein by
reference to other filings.
(c) Additional financial statement schedules. None.
171
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the
20th day of February, 2015.
Signatures
M&T BANK CORPORATION
By:
/S/ ROBERT G. WILMERS
Robert G. Wilmers
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
Principal Executive Officer:
/S/ ROBERT G. WILMERS
Robert G. Wilmers
Principal Financial Officer:
/S/ RENÉ F. JONES
René F. Jones
Principal Accounting Officer:
/S/ MICHAEL R. SPYCHALA
Michael R. Spychala
A majority of the board of directors:
/S/ BRENT D. BAIRD
Brent D. Baird
/S/ C. ANGELA BONTEMPO
C. Angela Bontempo
Robert T. Brady
/S/ T. JEFFERSON CUNNINGHAM III
T. Jefferson Cunningham III
/S/ MARK J. CZARNECKI
Mark J. Czarnecki
/S/ GARY N. GEISEL
Gary N. Geisel
/S/ JOHN D. HAWKE, JR.
John D. Hawke, Jr.
/S/ PATRICK W.E. HODGSON
Patrick W.E. Hodgson
172
Chairman of the Board
and Chief Executive Officer
February 20, 2015
Executive Vice President
and Chief Financial Officer
February 20, 2015
Senior Vice President and
Controller
February 20, 2015
February 20, 2015
February 20, 2015
February 20, 2015
February 20, 2015
February 20, 2015
February 20, 2015
February 20, 2015
/S/ RICHARD G. KING
Richard G. King
Jorge G. Pereira
/S/ MELINDA R. RICH
Melinda R. Rich
/S/ ROBERT E. SADLER, JR.
Robert E. Sadler, Jr.
/S/ HERBERT L. WASHINGTON
Herbert L. Washington
/S/ ROBERT G. WILMERS
Robert G. Wilmers
February 20, 2015
February 20, 2015
February 20, 2015
February 20, 2015
February 20, 2015
173
EXHIBIT INDEX
Agreement and Plan of Merger, dated as of August 27, 2012, by and among M&T Bank
Corporation, Hudson City Bancorp, Inc. and Wilmington Trust Corporation. Incorporated by
reference to Exhibit 2.1 to the Form 8-K dated August 31, 2012 (File No. 1-9861).
Amendment No. 1, dated as of April 13, 2013, to the Agreement and Plan of Merger, dated as
of August 27, 2012, by and among M&T Bank Corporation, Hudson City Bancorp, Inc. and
Wilmington Trust Corporation. Incorporated by reference to Exhibit 2.1 to the Form 8-K
dated April 13, 2013 (File No. 1-9861).
Amendment No. 2, dated as of December 16, 2013, to the Agreement and Plan of Merger,
dated as of August 27, 2012, by and among M&T Bank Corporation, Hudson City Bancorp,
Inc. and Wilmington Trust Corporation. Incorporated by reference to Exhibit 2.1 to the Form
8-K dated December 17, 2013 (File No. 1-9861).
Amendment No. 3, dated as of December 8, 2014, to the Agreement and Plan of Merger, dated
as of August 27, 2012, by and among M&T Bank Corporation, Hudson City Bancorp, Inc. and
Wilmington Trust Corporation. Incorporated by reference to Exhibit 2.1 to the Form 8-K
dated December 8, 2014 (File No. 1-9861).
Restated Certificate of Incorporation of M&T Bank Corporation dated November 18, 2010.
Incorporated by reference to Exhibit 3.1 to the Form 8-K dated November 19, 2010 (File
No. 1-9861).
Amended and Restated Bylaws of M&T Bank Corporation, effective November 16, 2010.
Incorporated by reference to Exhibit 3.2 to the Form 8-K dated November 19, 2010 (File
No. 1-9861).
Certificate of Amendment to Certificate of Incorporation with respect to Perpetual 6.875%
Non-Cumulative Preferred Stock, Series D, dated May 26, 2011. Incorporated by reference to
Exhibit 3.1 of M&T Bank Corporation’s Form 8-K dated May 26, 2011 (File No. 1-9861).
Certificate of Amendment to Restated Certificate of Incorporation of M&T Bank Corporation,
dated April 19, 2013. Incorporated by reference to Exhibit 3.1 to the Form 8-K dated April 22,
2013 (File No. 1-9861).
Certificate of Amendment to Restated Certificate of Incorporation of M&T Bank Corporation,
dated February 11, 2014. Incorporated by reference to Exhibit 3.1 to the Form 8-K dated
February 11, 2014 (File No. 1-9861).
There are no instruments with respect to long-term debt of M&T Bank Corporation and its
subsidiaries that involve securities authorized under the instrument in an amount exceeding
10 percent of the total assets of M&T Bank Corporation and its subsidiaries on a consolidated
basis. M&T Bank Corporation agrees to provide the SEC with a copy of instruments defining
the rights of holders of long-term debt of M&T Bank Corporation and its subsidiaries on
request.
Warrant to purchase shares of M&T Bank Corporation Common Stock dated as of March 26,
2010. Incorporated by reference to Exhibit 4.2 to the Form 10-K for the year ended December
31, 2012 (File No. 1-9861).
Warrant to purchase shares of M&T Bank Corporation Common Stock effective May 16, 2011.
Incorporated by reference to Exhibit 4.1 to the Form 8-K dated May 19, 2011 (File No. 1-
9861).
Warrant Agreement (including Form of Warrant), dated as of December 11, 2012, between
M&T Bank Corporation and Registrar and Transfer Company. Incorporated by reference to
Exhibit 4.1 to the Form 8-A 12B dated December 12, 2012 (File No. 1-9861).
M&T Bank Corporation 2001 Stock Option Plan. Incorporated by reference to Appendix A to
the definitive Proxy Statement of M&T Bank Corporation dated March 6, 2001 (File No. 1-
9861).*
M&T Bank Corporation Annual Executive Incentive Plan. Incorporated by reference to
Exhibit No. 10.3 to the Form 10-Q for the quarter ended June 30, 1998 (File No. 1-9861).*
Supplemental Deferred Compensation Agreement between Manufacturers and Traders
Trust Company and Brian E. Hickey dated as of July 21, 1994. Incorporated by reference to
Exhibit 10.8 to the Form 10-K for the year ended December 31, 1995 (File No. 1-9861).*
2.1
2.2
2.3
2.4
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
10.1
10.2
10.3
174
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
First amendment, dated as of August 1, 2006, to the Supplemental Deferred Compensation
Agreement between Manufacturers and Traders Trust Company and Brian E. Hickey dated as of
July 21, 1994. Incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended
September 30, 2006 (File No. 1-9861).*
Consulting Agreement, dated as of June 16, 2014, between M&T Bank Corporation and Robert
E. Sadler, Jr. Incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended
June 30, 2014 (File No. 1-9861).*
M&T Bank Corporation Supplemental Pension Plan, as amended and restated. Incorporated by
reference to Exhibit 10.1 to the Form 8-K dated November 22, 2005 (File No. 1-9861).*
M&T Bank Corporation Supplemental Retirement Savings Plan. Incorporated by reference to
Exhibit 10.2 to the Form 8-K dated November 22, 2005 (File No. 1-9861).*
M&T Bank Corporation Deferred Bonus Plan, as amended and restated. Incorporated by
reference to Exhibit 10.12 to the Form 10-K for the year ended December 31, 2004 (File No. 1-
9861).*
M&T Bank Corporation 2008 Directors’ Stock Plan. Incorporated by reference to Exhibit 4.1 to
the Form S-8 dated April 7, 2008 (File No. 333-150122).*
M&T Bank Corporation 2008 Directors’ Stock Plan, as amended. Incorporated by reference to
Exhibit 4.1 to the Form S-8 dated October 19, 2012 (File No. 333-184504).*
Keystone Financial, Inc. 1992 Director Fee Plan. Incorporated by reference to Exhibit 10.11 to the
Form 10-K of Keystone Financial, Inc. for the year ended December 31, 1999 (File No. 000-
11460).*
M&T Bank Corporation Employee Stock Purchase Plan. Incorporated by reference to Exhibit
10.22 to the Form 10-K for the year ended December 31, 2012 (File No. 1-9861).*
M&T Bank Corporation 2005 Incentive Compensation Plan. Incorporated by reference to
Appendix A to the definitive Proxy Statement of M&T Bank Corporation dated March 4, 2005
(File No. 1-9861).*
M&T Bank Corporation 2009 Equity Incentive Compensation Plan. Incorporated by reference to
Appendix A to the Proxy Statement of M&T Bank Corporation dated March 6, 2009 (File No. 1-
9861).*
M&T Bank Corporation Form of Restricted Stock Award Agreement. Incorporated by reference
to Exhibit 10.25 to the Form 10-K for the year ended December 31, 2013 (File No. 1-9861).*
M&T Bank Corporation Form of Restricted Stock Unit Award Agreement. Incorporated by
reference to Exhibit 10.26 to the Form 10-K for the year ended December 31, 2013 (File No. 1-
9861).*
M&T Bank Corporation Form of Performance-Vested Restricted Stock Unit Award Agreement.
Incorporated by reference to Exhibit 10.27 to the Form 10-K for the year ended December 31,
2013 (File No. 1-9861).*
M&T Bank Corporation Form of Performance-Vested Restricted Stock Unit Award Agreement
(for named executive officers (“NEOs”) subject to Section 162 (m) of the Internal Revenue Code
of 1986, as amended from time to time). Incorporated by reference to Exhibit 10.1 to the Form
10-Q for the quarter ended March 31, 2014 (File No. 1-9861).*
M&T Bank Corporation Employee Severance Plan. Incorporated by reference to Exhibit 10.2 to
the Form 10-Q for the quarter ended March 31, 2005 (File No. 1-9861).*
Provident Bankshares Corporation Amended and Restated Stock Option Plan. Incorporated by
reference to Exhibit 4.1 to M&T Bank Corporation’s Registration Statement on Form S-8 dated
June 5, 2009 (File No. 333-159795).*
Provident Bankshares Corporation 2004 Equity Compensation Plan. Incorporated by reference
to Exhibit 4.2 to M&T Bank Corporation’s Registration Statement on Form S-8 dated June 5,
2009 (File No. 333-159795).*
Wilmington Trust Corporation Amended and Restated 2002 Long-Term Incentive Plan.
Incorporated by reference to Exhibit 10.64 to the Form 10-Q of Wilmington Trust
Corporation filed on November 9, 2004 (File No. 1-14659).*
Wilmington Trust Corporation Amended and Restated 2005 Long-Term Incentive Plan.
Incorporated by reference to Exhibit 10.21 to the Form 10-K of Wilmington Trust Corporation
filed on February 29, 2008 (File No. 1-14659).*
175
10.24
11.1
12.1
14.1
21.1
23.1
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
Wilmington Trust Corporation 2009 Long-Term Incentive Plan. Incorporated by reference to
Exhibit D to the definitive Proxy Statement of Wilmington Trust Corporation filed on
March 16, 2009 (File No. 1-14659).*
Statement re: Computation of Earnings Per Common Share. Incorporated by reference to
note 14 of Notes to Financial Statements filed herewith in Part II, Item 8, “Financial Statements
and Supplementary Data.”
Ratio of Earnings to Fixed Charges. Filed herewith.
M&T Bank Corporation Code of Ethics for CEO and Senior Financial Officers. Incorporated
by reference to Exhibit 14.1 to the Form 10-K for the year ended December 31, 2003 (File
No. 1-9861).
Subsidiaries of the Registrant. Incorporated by reference to the caption “Subsidiaries”
contained in Part I, Item 1 hereof.
Consent of PricewaterhouseCoopers LLP re: Registration Statement Nos. 333-63660, 333-
43175, 33-32044, 333-16077, 333-84384, 333-127406, 333-150122, 333-164015, 333-163992,
333-160769, 333-159795, 333-170740, 333-182348, 333-189099, 333-40640, 333-184504 and
333-189097. Filed herewith.
Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
Certification of Chief Executive Officer under 18 U.S.C. §1350 pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. Filed herewith.
Certification of Chief Financial Officer under 18 U.S.C. §1350 pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. Filed herewith.
XBRL Instance Document. Filed herewith.
XBRL Taxonomy Extension Schema. Filed herewith.
XBRL Taxonomy Extension Calculation Linkbase. Filed herewith.
XBRL Taxonomy Extension Label Linkbase. Filed herewith.
XBRL Taxonomy Extension Presentation Linkbase. Filed herewith.
XBRL Taxonomy Definition Linkbase. Filed herewith.
* Management contract or compensatory plan or arrangement.
176
D I R E C T S T O C K P U R C H A S E
A plan is available to common shareholders and the general public whereby
A N D D I V I D E N D
shares of M&T Bank Corporation’s common stock may be purchased directly
R E I N V E S T M E N T P L A N
through the transfer agent noted below and common shareholders may also
invest their dividends and voluntary cash payments in additional shares of
M&T Bank Corporation’s common stock.
I N Q U I R I E S
Requests for information about the Direct Stock Purchase and Dividend
Reinvestment Plan and questions about stock certificates, dividend checks or
other account information should be addressed to M&T Bank Corporation’s
transfer agent, registrar and dividend disbursing agent:
(First Class, Registered and Certified Mail)
(Overnight and Courier Mail)
Computershare
P.O. Box 30170
Computershare
211 Quality Circle, Suite 210
College Station, TX 77842-3170
College Station, TX 77845
866-293-3379
E-mail address: web.queries@computershare.com
Internet address: www.computershare.com/investor
Requests for additional copies of this publication or annual or quarterly reports
filed with the United States Securities and Exchange Commission (SEC Forms
10-K and 10-Q), which are available at no charge, may be directed to:
M&T Bank Corporation
Shareholder Relations Department
One M&T Plaza, 8th Floor
Buffalo, NY 14203-2399
716-842-5138
E-mail address: ir@mtb.com
All other general inquiries may be directed to: 716-635-4000
I N T E R N E T A D D R E S S
www.mtb.com
Q U O TAT I O N A N D T R A D I N G
M&T Bank Corporation’s common stock is traded under the
O F C O M M O N S T O C K
symbol MTB on the New York Stock Exchange (“NYSE”).
www.mtb.com
COVER:
NARRATIVE:
COVER & SEC 10-K:
10%
manufactured with windpower